<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): August 26, 1998
------------------
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 17th Street, Suite 2100, Denver, CO 80202
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code (303) 292-4973
---------------
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On August 26, 1998, Coram Healthcare Corporation (the "Company")
received initial funding under an agreement dated as of August 20, 1998
providing for a new senior credit facility (the "New Senior Credit Facility")
with the initial lenders being Foothill Income Trust, L.P., an affiliate of
Foothill Capital Corporation, Cerberus Partners L.P., Goldman Sachs Credit
Partners L.P. (collectively the "Lenders") and Foothill Capital Corporation
serving as agent for the Lenders. The New Senior Credit Facility provides the
Company availability of up to $60.0 million for acquisitions, working capital,
letters of credit and other corporate purposes. The New Senior Credit Facility
expires February 2001 and bears interest on outstanding principal at a per
annum rate equal to prime plus 1.5% (subject to increase of 0.25% in certain
circumstances). The terms of the New Senior Credit Facility include the
issuance, subject to customary anti-dilution adjustments, of warrants to
purchase 1.9 million shares of the Company's common stock, par value $0.001 per
share, which bear an $0.01 exercise price per share and the payment of an
upfront fee of 1.0%.
The foregoing description of the New Senior Credit Facility is
qualified in its entirety by reference to such exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
1. Credit Agreement dated as of August 20, 1998 among
the Company, Goldman Sachs Credit Partners L.P.,
Cerberus Partners, L.P., Foothill Partners III, L.P.
(collectively the "Lenders") and Foothill Capital
Corporation as agent for the Lenders. The exhibits
and schedules to the Credit Agreement are omitted
from this exhibit. The Company agrees to furnish
supplementally any omitted exhibit or schedule to the
Securities and Exchange Commission.
2. Warrant Agreement and Form of Warrant Certificate
dated August 20, 1998 among the Company, Cerberus
Partners, L.P., Goldman Sachs Credit Partners L.P.
and Foothill Income Trust L.P.
3. Form of press release dated August 21, 1998
<PAGE> 3
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CORAM HEALTHCARE CORPORATION
By /s/ WENDY L. SIMPSON
----------------------------------
Wendy L. Simpson,
Executive Vice President and Chief
Financial Officer
Dated: September 1, 1998
<PAGE> 4
EXHIBIT INDEX
1. Credit Agreement dated as of August 20, 1998 among
the Company, Goldman Sachs Credit Partners L.P.,
Cerberus Partners, L.P., Foothill Partners III, L.P.
(collectively the "Lenders") and Foothill Capital
Corporation as agent for the Lenders. The exhibits
and schedules to the Credit Agreement are omitted
from this exhibit. The Company agrees to furnish
supplementally any omitted exhibit or schedule to the
Securities and Exchange Commission.
2. Warrant Agreement and Form of Warrant Certificate
dated August 20, 1998 among the Company, Cerberus
Partners, L.P., Goldman Sachs Credit Partners L.P.
and Foothill Income Trust L.P.
3. Form of press release dated August 21, 1998
<PAGE> 1
EXHIBIT 1
========================
CREDIT AGREEMENT
Dated as of August 20, 1998
Among
CORAM, INC.
CORAM HEALTHCARE CORPORATION
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN
and
FOOTHILL CAPITAL CORPORATION, AS AGENT
========================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. DEFINITIONS................................................................................... 1
SECTION 1.1. Certain Defined Terms........................................................... 1
SECTION 1.2. Accounting Terms................................................................ 23
II. THE LOANS..................................................................................... 23
SECTION 2.1. Revolving Credit Commitments.................................................... 23
SECTION 2.2. Loans........................................................................... 24
SECTION 2.3. Notice of Loans................................................................. 25
SECTION 2.4. Notes: Repayment of Loans....................................................... 25
SECTION 2.5. Interest on Loans............................................................... 26
SECTION 2.6. Fees............................................................................ 26
SECTION 2.7. Termination and Reduction of Revolving Credit
Commitments..................................................................... 27
SECTION 2.8. Interest on Overdue Amounts; Alternate Rate of
Interest........................................................................ 27
SECTION 2.9. Prepayment of Loans............................................................. 28
SECTION 2.10. Reserve Requirements; Change in Circumstances................................... 30
SECTION 2.11. Monthly Statement of Account.....................................................32
SECTION 2.12. Indemnity....................................................................... 32
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation of
Authority to the Agent.......................................................... 33
SECTION 2.14. Sharing of Setoffs.............................................................. 35
SECTION 2.15. Payments and Computations....................................................... 36
SECTION 2.16. Taxes........................................................................... 38
SECTION 2.17. Letters of Credit............................................................... 40
III. COLLATERAL SECURITY........................................................................... 46
SECTION 3.1. Security Documents.............................................................. 46
SECTION 3.2. Filing and Recording............................................................ 46
IV. REPRESENTATIONS AND WARRANTIES................................................................ 46
SECTION 4.1. Organization, Legal Existence................................................... 47
SECTION 4.2. Authorization................................................................... 47
SECTION 4.3. Governmental Approvals.......................................................... 47
SECTION 4.4. Binding Effect.................................................................. 48
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 4.5. Material Adverse Change......................................................... 48
SECTION 4.6. Litigation; Compliance with Laws; Etc........................................... 48
SECTION 4.7. Financial Statements............................................................ 49
SECTION 4.8. Federal Reserve Regulations..................................................... 49
SECTION 4.9. Taxes........................................................................... 50
SECTION 4.10. Employee Benefit Plans.......................................................... 50
SECTION 4.11. No Material Misstatements....................................................... 52
SECTION 4.12. Investment Company Act; Public Utility Holding Company Act...................... 52
SECTION 4.13. Security Interest............................................................... 52
SECTION 4.14. Use of Proceeds................................................................. 52
SECTION 4.15. Subsidiaries.................................................................... 53
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks...................................................................... 53
SECTION 4.17. Solvency........................................................................ 53
SECTION 4.18. Permits, etc.................................................................... 54
SECTION 4.19. Compliance with Environmental Laws.............................................. 54
SECTION 4.20. No Change in Credit Criteria or Collection Policies............................. 56
SECTION 4.21. Employee Matters................................................................ 56
SECTION 4.22. Year 2000....................................................................... 56
SECTION 4.23. Subsidiaries and Joint Ventures................................................. 57
SECTION 4.24. Agreements...................................................................... 57
SECTION 4.25. Insurance....................................................................... 57
V. CONDITIONS OF CREDIT EVENTS................................................................... 57
SECTION 5.1. All Credit Events............................................................... 57
SECTION 5.2. First Borrowing................................................................. 58
VI. AFFIRMATIVE COVENANTS......................................................................... 62
SECTION 6.1. Legal Existence................................................................. 63
SECTION 6.2. Businesses and Properties....................................................... 63
SECTION 6.3. Insurance....................................................................... 63
SECTION 6.4. Taxes........................................................................... 64
SECTION 6.5. Financial Statements, Reports, Etc.............................................. 64
SECTION 6.6. Litigation and Other Notices.................................................... 67
SECTION 6.7. ERISA........................................................................... 68
SECTION 6.8. Maintaining Records; Access to Properties and
Inspections; Right to Audit..................................................... 69
SECTION 6.9. Use of Proceeds................................................................. 69
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 6.10. Fiscal Year-End................................................................. 70
SECTION 6.11. Further Assurances.............................................................. 70
SECTION 6.12. Additional Grantors and Guarantors.............................................. 70
SECTION 6.13. Environmental Laws.............................................................. 70
SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants....................................................................... 71
SECTION 6.15. Maintain Operating Accounts..................................................... 71
SECTION 6.16. Year 2000....................................................................... 71
SECTION 6.17. Collection of Receivables; Management of Collateral............................. 71
VII. NEGATIVE COVENANTS............................................................................ 71
SECTION 7.1. Indebtedness.................................................................... 72
SECTION 7.2. Liens........................................................................... 73
SECTION 7.3. Sale and Lease-Back Transactions................................................ 75
SECTION 7.4. Investments, Loans and Advances................................................. 76
SECTION 7.5. Mergers, Consolidations, Sales of Assets and
Acquisitions.................................................................... 77
SECTION 7.6. Dividends and Distribution...................................................... 78
SECTION 7.7. Transactions with Affiliates.................................................... 79
SECTION 7.8. Business of Borrower and Subsidiaries........................................... 80
SECTION 7.9. Other Agreements................................................................ 80
SECTION 7.10. Capital Expenditures............................................................ 80
SECTION 7.11. Rental Obligations.............................................................. 80
SECTION 7.12. Interest Coverage and Total Funded Debt Ratio; EBITDA........................... 81
SECTION 7.13. Sales of Receivables............................................................ 81
SECTION 7.14. Use of Proceeds................................................................. 81
SECTION 7.15. ERISA........................................................................... 82
SECTION 7.16. Accounting Changes.............................................................. 82
SECTION 7.17. Prepayment or Modification of Indebtedness;
Modification of Charter Documents............................................... 82
SECTION 7.18. Negative Pledges, Etc........................................................... 82
SECTION 7.19. Status of Receivables and Other Collateral...................................... 83
SECTION 7.20. Cash Disbursement Accounts...................................................... 83
VIII. EVENTS OF DEFAULT............................................................................. 83
IX. AGENT......................................................................................... 87
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
X. INTENTIONALLY OMITTED......................................................................... 91
XI. MISCELLANEOUS................................................................................. 91
SECTION 11.1. Notices........................................................................ 91
SECTION 11.2. Survival of Agreement.......................................................... 92
SECTION 11.3. Successors and Assigns: Participations......................................... 92
SECTION 11.4. Expenses; Indemnity............................................................ 96
SECTION 11.5. Applicable Law................................................................. 97
SECTION 11.6. Right of Setoff................................................................ 97
SECTION 11.7. Payments on Business Days...................................................... 98
SECTION 11.8. Waivers; Amendments............................................................ 98
SECTION 11.9. Severability................................................................... 99
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, Etc....................................100
SECTION 11.11. Confidentiality................................................................100
SECTION 11.12. Submission to Jurisdiction.....................................................101
SECTION 11.13. Interest Rate Limitation.......................................................101
SECTION 11.14. Counterparts; Facsimile Signature..............................................102
SECTION 11.15. Headings.......................................................................102
XII. GUARANTEES....................................................................................102
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Schedule 1 Receivables Grantors
Schedule 2.1 Lenders and Revolving Credit Commitments
Schedule 2.2 Domestic Lending Office
Schedule 4.1 Organization; Legal Existence
Schedule 4.3 Governmental Approvals
Schedule 4.6(a) Litigation; Compliance with Laws
Schedule 4.6(c) Violation of Physician Self-Referral Laws
Schedule 4.9 Tax Matters
Schedule 4.10 Plan Audits
Schedule 4.15 Non-Designated Subsidiaries; Designated Subsidiaries; Joint Ventures
Schedule 4.16 Title to Properties; Possession Under Leases; Trademarks; Obligations Under Leases
Schedule 4.19 Environmental Matters
Schedule 4.21 Employee Matters
Schedule 4.23 Existing Bank Warrants
Schedule 4.24 Agreements
Schedule 7.1 Indebtedness
Schedule 7.2 Existing Liens
Schedule 7.4(i)(c) Investments in Joint Ventures on or Prior to Closing Date
Schedule 7.4(i)(d) Investment in Joint Venture After Closing Date
Schedule 7.4(i)(e) Joint Ventures in Formation Process
Schedule 7.4(v) Loans to Subsidiaries
Schedule 7.7 Transactions With Affiliates
Schedule 7.11 Rental Obligations
Schedule 7.17 Existing Redemption Obligations
Exhibit A - Form of Administrative Questionnaire
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of New Warrant Agreement
Exhibit D - Form of Pledge Agreement
Exhibit E - Form of Revolving Credit Notes
Exhibit F - Form of Security Agreement
Exhibit G - Form of Security Agreement - Patents and Trademarks
</TABLE>
<PAGE> 7
CREDIT AGREEMENT dated as of August 20, 1998, among CORAM, INC., a
Delaware corporation (the "Borrower"), CORAM HEALTHCARE CORPORATION, a
Delaware corporation (the "Parent"), the Guarantors named herein and
signatory hereto, the financial institutions from time to time party
hereto, initially consisting of those financial institutions listed on
Schedule 2.1 annexed hereto (collectively, the "Lenders"), and FOOTHILL
CAPITAL CORPORATION, as agent for the Lenders (in such capacity, the
"Agent").
The Borrower has applied to the Lenders for Credits (such term
and all other capitalized terms used in this paragraph having the respective
meanings ascribed to such terms above or hereinafter) up to an aggregate
principal amount of $60,000,000 in the form of Revolving Credit Loans to the
Borrower at any time and from time to time prior to the Revolving Credit
Termination Date in an aggregate principal amount not in excess of $60,000,000
at any time outstanding, of which a portion thereof, subject to the applicable
sublimit set forth herein in the definition of Permitted Acquisitions, may be
utilized for Permitted Acquisitions and of which a portion thereof, subject to
the applicable sublimits set forth herein in Section 2.17, may be utilized to
support standby letters of credit issued for the Borrower's account. The
proceeds of the Revolving Credit Loans shall otherwise be used for general
working capital and corporate purposes. The Grantors will provide Collateral in
accordance with the provisions of this Agreement and the Security Documents. The
Lenders are severally, and not jointly, willing to extend such Loans and incur
such Letter of Credit Obligations to the Borrower subject to the terms and
conditions hereinafter set forth. Accordingly, the Borrower, the Lenders and the
Agent hereby agree as follows:
I. DEFINITIONS
SECTION I.1. Certain Defined Terms. For purposes hereof, the following
terms shall have the meanings specified below:
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in substantially the form of Exhibit A annexed hereto.
"Affiliate" of any person shall mean any other person which, directly
or indirectly, controls or is controlled by or is under common control with such
person. For the purposes of this definition, the term "control" (including, with
correlative meanings, the terms "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 such person, whether through the ownership of voting securities or
by contract or otherwise.
<PAGE> 8
"Aetna Letter of Credit" shall mean the letter or letters of credit
required to be issued to Aetna U.S. Healthcare, Inc. ("Aetna") pursuant to the
Master Agreement dated April 24, 1998 between Aetna and Parent.
"Agent" shall have the meaning assigned to such term in the preamble to
this Agreement.
"Applicable Lending Office" shall mean, with respect to each Lender,
such Lender's Domestic Lending Office.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee and accepted by the Agent, in
substantially the form of Exhibit B annexed hereto.
"Availability" shall mean at any time (i) the lesser at such time of
(x) the Total Revolving Credit Commitment and (y) the Borrowing Base minus (ii)
the sum at such time of (x) the unpaid principal balance of the Revolving Credit
Loans together with all reserves (without duplication of deductions taken in
determining Net Amount of Eligible Receivables) established by the Agent in its
reasonable exclusive judgment upon notice to the Borrower including, without
limitation, a 5% dilution reserve (as adjusted from time to time, but no more
frequently than weekly, in the Agent's sole discretion), and (y) the Letter of
Credit Obligations.
"Base Rate" shall mean, for any day, a rate per annum equal to the
Prime Rate in effect on such day plus the Interest Margin. "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time by The
Chase Manhattan Bank at its principal office in New York City as its prime rate
in effect at such time.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States.
"Borrower" shall have the meaning assigned to such term in the preamble
to this Agreement.
"Borrowing Base" shall have the meaning assigned to such term in
Section 2.1(b) hereof.
2
<PAGE> 9
"Bridge Notes" shall mean the secured promissory notes dated July 21,
1998 and made by the Borrower in favor of (i) Cerberus Partners, L.P., in the
principal amount of $2,147,760, (ii) Goldman Sachs Credit Partners L.P., in the
principal amount of $2,727,120 and (iii) Foothill Partners III, L.P., in the
principal amount of $1,125,120, and includes any replacement or additional
promissory notes made by the Borrower in substitution therefor.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which banks are open for substantially all their banking business in New York
City and Denver, Colorado.
"Capital Expenditures" shall mean, for any period, without duplication,
the sum of (a) the aggregate of all expenditures (whether paid in cash or
accrued as a liability) by the Parent and its Consolidated Subsidiaries during
such period determined on a Consolidated basis 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 (a)
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, or (b) expenditures by such Person to acquire by purchase or otherwise
the business, property or fixed assets, or stock or other evidence of beneficial
ownership of any other Person as to which no consent of the Required Lenders is
required under Section 7.4 hereof.
"Capitalized Lease Obligation" shall mean an obligation to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property which obligation is required to be classified
and accounted for as a capital lease on a balance sheet prepared in accordance
with GAAP, and for purposes hereof the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash Collateral Account" shall have the meaning ascribed to such term
in Section 2.17 hereof.
"Cash Equivalents" shall have the meaning ascribed to such term in
Section 2.17 hereof.
"Cash Interest Expense" shall mean, for any period, the Interest
Expense of the Parent and its Consolidated Subsidiaries on a Consolidated basis
for such period less all non-cash
3
<PAGE> 10
items constituting Interest Expense during such period (including, without
limitation, amortization of debt discounts and payments of interest on
Indebtedness by issuance of Indebtedness).
A "Change of Control" shall be deemed to have occurred if:
(a) any person or group (within the meaning of Rule 13d-5 of the U.S.
Securities and Exchange Commission as in effect on the date hereof) other than
(i) the initial holders of the Series A and Series B Subordinated Notes or any
Affiliate of any of them (such initial holders and Affiliates, the "Initial
Holder Parties"), or a group composed principally of one or more Initial Holder
Parties, shall acquire securities in a bona fide transaction from persons other
than the Initial Holder Parties, as a result of which such person or group owns
directly or indirectly, beneficially or of record, shares representing 30% or
more of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Parent;
(b) during any period of two consecutive calendar years, individuals
who at the beginning of such period constituted the Parent's Board of Directors
(together with any new directors whose elections to the Parent's Board of
Directors or whose nomination for election to the Parent's Board of Directors by
the Parent's shareholders was approved by a vote of at least two-thirds of the
Parent'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) together with any individual serving during such period
as a member of the Parent's Board of Directors designated by the initial holders
of the Series A and Series B Subordinated Notes pursuant to the Securities
Exchange Agreement cease for any reason to constitute a majority of the Parent's
directors then in office;
(c) any change in control with respect to the Parent, the Borrower or
any Subsidiary (or similar event, however denominated) shall occur under and as
defined in any agreement in respect of Indebtedness (other than Capitalized
Lease Obligations) to which the Parent, the Borrower or any Subsidiary is party;
(d) The Parent 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 as a result of the exercise of the
Existing Bank Warrants; or
(e) The Borrower shall cease to own and control directly, of record and
beneficially, 100% of each class of outstanding capital stock of each of its
Subsidiaries other than Curaflex Health Services, Inc. and the Designated
Subsidiaries.
4
<PAGE> 11
"Charges" shall have the meaning assigned to such term in Section 11.13
hereof.
"Closing Date" shall mean the date of the first Credits under this
Agreement, but in no event later than September 30, 1998.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended from time to time.
"Collateral" shall mean all collateral and security as described in the
Security Documents.
"Consolidated" shall mean, in respect of any person, as applied to any
financial or accounting term, such term determined on a consolidated basis in
accordance with GAAP (except as otherwise required herein) for the person and
all consolidated Subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all those
substances which are regulated by and considered a material health, safety or
environmental hazard under, or form the basis of liability under federal, state
or local jurisdiction environmental, health and safety statutes or regulations
or any other material or substance which constitutes a material health, safety
or environmental hazard to any person or property.
"Credit Event" shall mean each borrowing and each issuance of a Letter
of Credit hereunder.
"Credits" shall mean each Loan and each Letter of Credit.
"Cure Loans" shall have the meaning assigned to such term in Section
2.13(d) hereof.
"Customer" shall mean and include the account debtor or obligor with
respect to any Receivable.
"Date Data" shall have the meaning assigned to such term in Section
4.22 hereof.
"Date-Sensitive System" shall have the meaning assigned to such term in
Section 4.22 hereof.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
5
<PAGE> 12
"dollars" or the symbol "$" shall mean lawful currency of the United
States of America.
"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, in the good
faith estimation of the Parent, 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 4.15.
"Domestic Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite its
name in Schedule 2.2 annexed hereto, or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Agent.
"Earn-out Obligations" shall mean any obligations whether contingent or
matured, to pay additional consideration in connection with the acquisition by
the Parent, the Borrower or any Subsidiary of any capital stock or assets.
"EBITDA" shall mean for any period for the Parent and its Consolidated
Subsidiaries on a Consolidated basis the sum of (i) Net Income, (ii) Interest
Expense, (iii) depreciation and amortization expense, (iv) federal, state and
local income tax expense, (v) any extraordinary losses and (vi) any
restructuring charges (whether cash or non-cash) in such period in each case of
such person for such period minus to the extent added in computing Net Income,
any extraordinary gains, all computed and calculated in accordance with GAAP.
"Eligible Receivables" shall mean Receivables created by each
Receivables Grantor in the ordinary course of business arising out of the sale,
lease or rental of goods or rendition of services by such Receivables Grantor,
which are and at all times shall continue to be acceptable to the Agent in all
respects. Standards of eligibility may be fixed and revised from time to time
solely by the Agent in the Agent's exclusive reasonable judgment; provided,
however, that any such revisions shall be notified to the Borrower in writing at
least three Business Days prior to taking effect. In general, without limiting
the foregoing, a Receivable shall in no event be deemed to be an Eligible
Receivable unless: (a) all payments due on the Receivable have been invoiced and
the underlying goods (if any) shipped or services (if any) performed, as the
case may be; (b) the payment due on the Receivable is not more than 120
6
<PAGE> 13
days past the invoice date; (c) the Receivable arose from a completed and bona
fide transaction (and with respect to a sale of goods, a transaction in which
title has passed to the Customer) which requires no further act under any
circumstances on the part of the Receivables Grantor in order to cause such
Receivable to be payable in full by the Customer; (d) the Receivable is in full
conformity with the representations and warranties made by the Borrower or the
Receivables Grantor to the Agent and the Lenders with respect thereto and is
free and clear of all security interests and Liens of any nature whatsoever
other than any security interest deemed to be held by a Receivables Grantor or
any security interest created pursuant to the Security Documents or permitted by
Section 7.2 hereof; (e) the Receivable constitutes an "account" or "chattel
paper" within the meaning of the Uniform Commercial Code of the state in which
the Receivable is located; (f) the Customer has not asserted that the
Receivable, and neither the Borrower nor the Receivables Grantor is aware that
the Receivable, (i) arises out of a bill and hold (other than primary
voucherables), consignment or progress billing arrangement or (ii) is subject to
any setoff, contras, net-out contract, offset, deduction, dispute, credit,
counterclaim or other defense arising out of the transactions represented by the
Receivable or independently thereof (provided that such Receivable shall only be
ineligible to the extent thereof) and (iii) the Customer has finally accepted
the goods from the sale out of which the Receivable arose and has not objected
to its liability thereon or returned, rejected or repossessed any of such goods,
except for goods returned in the ordinary course of business provided that such
Receivable shall only be ineligible with respect to that portion thereof which
has been objected to or which relates to goods returned, rejected or
repossessed; (g) the Receivable arose in the ordinary course of business of the
Receivables Grantor; (h) the Customer is not (x) the United States government or
the government of any state or political subdivision thereof or therein, or any
agency or department of any thereof (other than Receivables from Medicare,
Medicaid, CHAMPUS, prison systems, universities and the Veterans Administration
or unless there has been full compliance to the satisfaction of the Agent with
any applicable assignment of claims statute), (y) an Affiliate of the Parent,
the Borrower or any Subsidiary of the Parent or (z) a natural person or self-pay
Customer; (i) the Customer is a qualifying United States or Puerto Rico person
or an obligor located in the United States or Puerto Rico, or an obligor located
in another jurisdiction if the applicable Receivable is covered by a letter of
credit or credit insurance in favor of, or assigned to, the Agent in form and
substance satisfactory to the Agent; (j) the Receivable complies with all
material requirements of all applicable laws and regulations, whether federal,
state or local (including, without limitation, usury laws and laws, rules and
regulations relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy); (k) to the knowledge of the Borrower, the Receivable is in full force
and effect and constitutes a legal, valid and binding obligation of the Customer
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights
7
<PAGE> 14
generally and by general equity principles; (l) the Receivable is denominated in
and provides for payment by the Customer in United States dollars; (m) the
Receivable has not been, and is not required to be charged off or written off as
uncollectible in accordance with GAAP or the customary business practices of the
Receivables Grantor; (n) the Agent on behalf of the Lenders possesses a valid,
perfected first priority security interest in such Receivable as security for
payment of the Obligations; (o) the Receivable is not with respect to a Customer
located in New Jersey, Minnesota, or any other state denying creditors access to
its courts in the absence of a Notice of Business Activities Report or other
similar filing, unless the Receivables Grantor has either qualified as a foreign
corporation authorized to transact business in such state or have filed a Notice
of Business Activities Report or similar filing with the applicable state agency
for the then current year; and (p) the Agent is satisfied with the credit
standing of the Customer in relation to the amount of credit extended.
Notwithstanding the foregoing, all Receivables of the following Customers which,
in the aggregate, exceed the percentages indicated of the total Eligible
Receivables at the time of any such determination shall be deemed not to be
Eligible Receivables to the extent of such excess:
<TABLE>
<CAPTION>
Customer Percentage
-------- ----------
<S> <C>
Medicare/Medicaid 35%
Any one Customer 15%
</TABLE>
"Environmental Claim" shall mean any written notice of violation,
claim, deficiency, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or deed or use restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any Contaminant at, in, by or from
any of the properties of the Borrower or its Subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of any of the properties of the
Borrower or its Subsidiaries or (iii) the violation, or alleged violation by
Borrower or any of its Subsidiaries, of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental authority, agency
or court relating to environmental matters connected with any of the properties
of the Borrower or its Subsidiaries, under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Material
8
<PAGE> 15
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Oil Pollution Act of 1990 (33
U.S.C. Section 2701 et seq.), the Safe Drinking Water Act (42 U.S.C. Section
300f, et seq.), the Clear Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and
the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as such
laws have been and hereafter may be amended or supplemented, and any related or
analogous present or future federal, state or local, statutes, rules having the
force of law, regulations, ordinances, licenses, permits and interpretations
having the force of law and orders of regulatory and administrative bodies to
the extent relating to the environment or natural resources.
"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 amended, and the rules and regulations promulgated thereunder, as in effect
from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary thereof would
be treated as a single employer under Section 414 (b) or (c) of the Code or,
with respect to any matters that relate to Section 302 of ERISA and Section 412
of the Code, under Section 414 (b), (c), (m) or (o) of the Code.
"Event of Default" shall have the meaning assigned to such term in
Article VIII hereof.
"Excluded Taxes" shall have the meaning assigned to such term in
Section 2.16 hereof.
"Existing Bank Warrants" shall mean the warrants issued to the lenders
under the credit agreement dated as of April 6, 1995 among the Borrower, Parent,
the lenders named therein and Chemical Bank as Agent, to purchase 2.5 million
shares of Common Stock of Parent or, at the option of such lenders, 6% of the
shares of the Borrower, exercisable at a nominal price over five years.
"Financial Officer" shall mean, with respect to any person, the chief
financial officer, vice president-finance, treasurer, assistant treasurer or
corporate controller of such person.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time.
9
<PAGE> 16
"Fiscal Year" shall mean the fiscal year of the Parent for accounting
purposes which in each case ends on December 31 of each year.
"GAAP" shall have the meaning assigned to such term in Section 1.2
hereof.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any agency, department, or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such terms are
defined in any of the Security Documents.
"Guarantee" shall mean, as to any person, any obligation of such person
guaranteeing any Indebtedness, lease, dividend, or other obligation ("primary
obligations") of any other person (the "primary obligor") in any manner
including, without limitation, any obligation or arrangement of such person (a)
to purchase or repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof;
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposits in the ordinary course of business.
"Guarantor" shall mean, collectively, the Parent with respect to the
Obligations of the Borrower, each Subsidiary of the Borrower in existence on the
Closing Date (other than the Designated Subsidiaries), and each Subsidiary which
becomes a guarantor of the Obligations after the date hereof.
"Hazardous Material" shall mean any pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous goods, waste, substance or
material, defined or regulated as such in (or for purposes of) any Environmental
Law and any other toxic, reactive, or flammable chemicals, including (without
limitation) any friable asbestos, any petroleum (including crude oil or any
fraction), any radioactive substance and any polychlorinated biphenyls;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment; and provided, further,
without limitation, to the extent that
10
<PAGE> 17
the applicable laws of any state establish a meaning for "hazardous material,"
"hazardous substance," "hazardous waste," "solid waste" or "toxic substance"
which is broader than that specified in any federal Environmental Law, such
broader meaning shall apply in the relevant state.
"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
Parent, the Borrower or any of their Subsidiaries, the conduct of the business
of Parent, the Borrower or any of their Subsidiaries, the provision of health
care services generally, or to any relationship among Parent, the Borrower and
their 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.
"Indebtedness" shall mean, with respect to any person, 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 other similar instruments or upon which
interest charges are customarily paid (excluding operating leases, trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms), (c) all obligations of such person
for the deferred purchase price of property or services (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms but including any Earn-out
Obligations), (d) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such person and all
Capitalized Lease Obligations, (e) all payment obligations of such person with
respect to interest rate or currency protection agreements, (f) all obligations
of such person as an account party under any letter of credit or in respect of
bankers' acceptances, (g) all Indebtedness of any third party secured by
property or assets of such person (regardless of whether or not such person is
liable for repayment of such Indebtedness), (h) all Guarantees of such person
and (i) all obligations in respect of Reverse Repurchase Agreements. The
Indebtedness of any person shall include the Indebtedness of any partnership
consolidated with such person for financial reporting purposes.
11
<PAGE> 18
"Indemnitees" shall have the meaning assigned to such term in Section
11.4(c) hereof.
"Information" shall have the meaning assigned to such term in Section
11.11 hereof.
"Initial Lenders" shall mean Goldman Sachs Credit Partners L.P.,
Cerberus Partners, L.P. and Foothill Income Trust, L.P.
"Interest Coverage Ratio" shall mean, the ratio for the Parent and its
Consolidated Subsidiaries on a Consolidated basis of (i) EBITDA less Capital
Expenditures for the four most recent consecutive fiscal quarters ending on or
prior to the date of determination to (ii) the Cash Interest Expense for such
four-quarter period.
"Interest Expense" shall mean, for any period, the interest expense for
the Parent and its Consolidated Subsidiaries on a Consolidated basis during such
period determined in accordance with GAAP, and shall in any event include,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense, (iv) all fixed
and all calculable dividend payments on preferred stock and (v) payments of
interest expense in kind.
"Interest Margin" shall mean, with respect to any Loan, 1.50% per
annum.
"Interest Payment Date" shall mean the first Business Day of each month
commencing on the first such date after the Closing Date.
"Interest Rate Protection Agreement" shall mean any interest rate cap,
swap, collar or floor agreement or other agreement or arrangement satisfactory
to the Required Lenders entered into by the Borrower designed to protect the
Borrower against fluctuations in interest rates.
"Joint Venture" shall mean the partnerships listed in Schedule 4.15 and
any other person that is not a Wholly Owned Subsidiary and in which Parent, the
Borrower or any of the Subsidiaries directly or indirectly holds an ownership
interest pursuant to a partnership agreement, LLC operating agreement or other
joint venture documents.
"L/C Issuer" shall have the meaning assigned to such term in Section
2.17 hereof.
"Lender" shall have the meaning assigned to such term in the preamble
to this Agreement.
12
<PAGE> 19
"Letter of Credit" shall have the meaning assigned to such term in
Section 2.17 hereof.
"Letter of Credit Fee" shall have the meaning ascribed to such term in
Section 2.17 hereof.
"Letter of Credit Obligations" shall mean all outstanding obligations
incurred by the Agent and/or the Lenders at the request of the Borrower, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of a reimbursement agreement or guaranty by the Agent and/or the
Lenders with respect to any Letter of Credit. The amount of such Letter of
Credit Obligations shall equal the maximum amount which may be payable by Agent
and/or the Lenders thereupon or pursuant thereto.
"Lien" shall mean, with respect to any asset, (i) any mortgage, lien,
pledge, encumbrance, charge or security interest in or on such asset, (ii) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset, (iii) in the
case of securities, any purchase option, call or similar right of a third party
with respect to such securities or (iv) any other right of or arrangement with
any creditor to have such creditor's claim satisfied out of such assets, or the
proceeds therefrom, prior to the general creditors of the owner thereof.
"Loan" shall mean any Revolving Credit Loan.
"Loan Account" shall mean the meaning ascribed to such term in Section
2.11 hereof.
"Loan Documents" shall mean this Agreement, each Security Document,
each Guarantee executed and delivered at any time with respect to the
Obligations, the New Warrant Agreement, the New Warrants, the Notes, the
Reimbursement Agreement and each other document, instrument or agreement now or
hereafter delivered by a Loan Party and constituting an agreement entered into
with the Agent or any Lender in connection herewith or therewith.
"Loan Party" shall mean Parent, Borrower, each Grantor and each
Guarantor.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, prospects, operations or financial or other condition of
the Parent and the other Loan Parties taken as a whole, (ii) the ability of the
Parent or the Borrower or the collective ability of the other Loan Parties to
perform its or their obligations under the Loan Documents, (iii)
13
<PAGE> 20
the rights of, or remedies available to, the Lenders or the Agent under the Loan
Documents or (iv) the Agent's Lien on any material portion of the Collateral or
the priority of such Lien.
"Maximum Rate" shall have the meaning assigned to such term in Section
11.13 to this Agreement.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Net Amount of Eligible Receivables" shall mean and include at any
time, without duplication, the gross amount of Eligible Receivables at such time
plus 75% of unapplied cash and credits greater than 90 days less returns,
chargebacks, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.
"Net Cash Proceeds" shall mean (a) the gross cash proceeds received
less (b) the sum of (i) the amount, if any, of all taxes (other than income
taxes) payable plus the good-faith best estimate of the amount of all income
taxes payable (to the extent such amount shall have been set aside), (ii) the
amount, if any, applied to repay any Indebtedness (other than the Loans)
including, without limitation, any premium, penalty, interest or other amount in
connection with such Indebtedness to the extent such Indebtedness is required by
its terms or by applicable law to be repaid (iii) reasonable and customary fees,
discounts, commissions and expenses (including, without limitation, reasonable
fees and expenses of attorneys, accountants, investment bankers and other
financial advisors) and other costs paid (other than those paid to any Affiliate
of the Parent) in connection with the applicable transaction, (iv) reserves, if
any, in connection with indemnification or similar obligations and (v) amounts
held in escrow, if any, in each case to the extent not already deducted in
arriving at the amount referred to in clause (a).
"Net Income" shall mean for any period, the aggregate income (or loss)
for the Parent and its Consolidated Subsidiaries on a Consolidated basis for
such period which shall be an amount equal to net revenues and other proper
items of income less the aggregate of any and all items that are treated as
expenses under GAAP, and less federal, state and local income taxes, all
computed and calculated in accordance with GAAP.
"New Warrant Agreement" shall mean that certain Warrant Agreement dated
as of the Closing Date, in substantially the form of Exhibit C hereto, duly
executed by Lenders and Parent, relating to the New Warrants.
14
<PAGE> 21
"New Warrants" shall mean the warrants to purchase 1,900,000 shares of
common stock of Parent exercisable at a nominal price of $0.01 at any time from
the Closing Date to the Revolving Credit Termination Date, issued to the
Lenders, pursuant to the New Warrant Agreement.
"Non Pro Rata Loans" shall have the meaning assigned to such term in
Section 2.13(d) hereof.
"Non-U.S. Lender" shall have the meaning assigned to such term in
Section 2.16(f) hereof.
"Notes" shall mean the Revolving Credit Notes.
"Obligations" shall mean all obligations, liabilities and Indebtedness
of any Loan Party to the Lenders and the Agent under the Loan Documents, whether
now existing or hereafter created, direct or indirect, due or not, whether
created directly or acquired by assignment, participation or otherwise and
arising in connection with the transactions contemplated hereby, including
without limitation all obligations, liabilities and Indebtedness of any Loan
Party with respect to the Security Documents and other Loan Documents, the
principal of and interest on the Revolving Credit Loans and the payment or
performance of all other obligations, liabilities, and Indebtedness of any Loan
Party to the Lenders and the Agent hereunder or under any one or more of the
other Loan Documents (including the payment of amounts which would become due
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, and interest that, but for the filing of a petition in
bankruptcy with respect to the Borrower or Parent, would accrue on such
obligations, whether or not a claim is allowed against the Borrower or Parent
for such interest in the related bankruptcy proceeding), including without
limitation all fees, costs, expenses and indemnity obligations hereunder and
thereunder.
"Other Taxes" shall have the meaning assigned to such term in Section
2.16(b) hereof.
"Parent" shall mean Coram Healthcare Corporation, a Delaware
corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Plan which is subject to the provisions
of Title IV of ERISA.
"Permits" shall have the meaning assigned to such term in Section 4.18
hereof.
15
<PAGE> 22
"Permitted Acquisition or Acquisitions" shall mean the acquisitions of
alternate site healthcare businesses or of businesses which are substantially
similar or complementary to that of the Borrower; provided that outstanding
Revolving Credit Loans the proceeds of which are utilized for a single Permitted
Acquisition shall not exceed $10,000,000 at any one time outstanding and for all
such Permitted Acquisitions shall not exceed $45,000,000 at any one time
outstanding; and provided further, that (i) the total consideration of any
single acquisition shall not exceed $10,000,000 unless approved in writing by
the Required Lenders; (ii) pro forma Availability after giving effect to the
proposed Permitted Acquisition (including all borrowings in connection
therewith) exceeds $10,000,000; (iii) the proposed Permitted Acquisition is not
hostile; and (iv) both before and immediately after giving effect to such
proposed Permitted Acquisition (including without limitation, compliance with
the financial covenants on a pro forma basis after giving effect to the proposed
Permitted Acquisition), no Default or Event of Default has or will occur or be
continuing. The Borrower shall give the Agent ten (10) days' prior written
notice of each proposed Permitted Acquisition, and together with such notice and
also on the date of such proposed Permitted Acquisition, the Borrower shall
furnish the Agent with a certificate of the Borrower regarding compliance with
the terms of this definition of "Permitted Acquisition" and such other evidence
of compliance with this definition of "Permitted Acquisition" as the Agent shall
reasonably request.
"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;
(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
16
<PAGE> 23
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; and
(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), including, without
limitation, the shares of common stock (the "IHS Shares") of Integrated
Health Services, Inc. ("IHS") issued to the Parent as consideration for
the sale to IHS of the Parent's interest in South Georgia Lithotripsy
Partners.
"Permitted Overadvances" shall mean (i) involuntary overadvances that
may result from time to time due to the fact that any borrowing formulas set
forth in the Loan Documents were unintentionally exceeded (whether at the time
of any Loan or at the time of the issuance of any Letter of Credit or otherwise)
for any reason (other than the Agent's gross negligence or willful misconduct),
including Collateral believed to be eligible in fact being or becoming
ineligible and the return of uncollected checks or other items applied to the
reduction of the Loans, Letters of Credit or other Obligations, and overadvances
made by the Agent without the Lenders' consent for up to two weeks after
discovering the unintentional overadvance, provided that the Agent does not
during that period voluntarily increase the amount by which the borrowing
formulas had been exceeded as of the start of that period, and (ii) voluntary
overadvances made by the Agent in its sole discretion which shall (x) not cause
the Obligations to exceed Availability by an amount in excess of $3,000,000 at
any one time outstanding, and (y) not be made on a date which is beyond ten (10)
days after the first voluntary overadvance is made during such overadvance
period, or (z) be with the consent of all Lenders. To the extent any Permitted
Overadvances are made, each Lender shall bear its pro rata (based on its
Revolving Credit Commitment) share thereof.
"person" or "Person" shall mean any natural person, corporation,
business trust, limited liability company, association, company, joint venture,
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 Parent, the Borrower or any of their
Subsidiaries to bill any Governmental Authority if the physician ordering the
applicable service has an ownership, investment or other regulated financial
interest in Parent, the Borrower or any their Subsidiaries or receives
compensation from Parent, the Borrower or
17
<PAGE> 24
any of their 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 benefit plan within the meaning of
Section 3(3) of ERISA and subject thereto and which is maintained (in whole, or
in part) for employees of the Borrower, any Subsidiary or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the date
hereof, between the Grantor(s) referred to therein and the Agent, for its own
benefit and for the benefit of the Lenders, in substantially the form of Exhibit
D annexed hereto, as amended, modified or supplemented from time to time.
"Pledged Stock" shall have the meaning assigned to such term in the
Pledge Agreement.
"Prepayment Fee" shall have the meaning assigned to such term in
Section 2.6(c) hereof.
"Receivables" shall mean and include, with respect to each Receivables
Grantor, all of such Receivable Grantor's accounts, instruments, documents,
chattel paper and general intangibles related thereto, whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically assigned to the Agent for its own benefit and/or the ratable
benefit of the Lenders.
"Receivables Grantor" shall mean the Borrower and each other person set
forth on Schedule 1 annexed hereto (other than Coram Healthcare Limited and
Coram International Holdings Ltd.).
"Register" shall have the meaning assigned to such term in Section
11.3(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as the same is
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 the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
18
<PAGE> 25
"Regulation X" shall mean Regulation X of the Board, as the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Reimbursement Agreement" shall mean each letter of credit
reimbursement agreement in the form provided by an L/C Issuer executed by the
Borrower in favor of each L/C Issuer prior to the issuance by such L/C Issuer of
any Letter of Credit.
"Release" shall mean any releasing, spilling, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Law,
and shall include any "Threatened Release," as defined in Environmental Law;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment.
"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.
"Reportable Event" shall mean a Reportable Event as defined in Section
4043(c) of ERISA with respect to which the notice requirements have not been
waived.
"Required Lenders" shall mean, at any time, Lenders holding Loans,
exposure under the Letter of Credit Obligations and unused Revolving Credit
Commitments representing at least 51% of the aggregate of (a) the aggregate
principal amount of Loans at such time, (b) the Letter of Credit Obligations at
such time and (c) the aggregate unused Revolving Credit Commitments at such
time, all after giving effect to the terms of Section 2.13(d)(v).
"Responsible Officer" shall mean, with respect to any person, chief
executive officer, any vice president or president, or the chief financial
officer or corporate controller, or treasurer or assistant treasurer designated
by the chief financial officer of such person.
"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.
19
<PAGE> 26
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the commitment of such Lender to make Revolving Credit Loans hereunder and/or
incur Letter of Credit Obligations in an aggregate amount at any time
outstanding not in excess of the amount opposite the name of such Lender in the
column entitled "Revolving Credit Commitment" in the table appearing in Schedule
2.1, or if applicable, the amount set forth in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder, as such amount may be
(a) reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.7 hereof and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.3 hereof.
"Revolving Credit Commitment Fee" shall have the meaning set forth in
Section 2.6(a) hereof.
"Revolving Credit Loan" shall mean a revolving credit loan made
pursuant to Section 2.1 hereof.
"Revolving Credit Notes" shall mean the Revolving Credit Notes of the
Borrower, executed and delivered as provided in Section 2.4 hereof, in
substantially the form of Exhibit E annexed hereto, as amended, modified or
supplemented from time to time.
"Revolving Credit Termination Date" shall mean the earlier to occur of
(i) thirty (30) months from the Closing Date and (ii) such earlier date on which
the Revolving Credit Commitment shall terminate, expire or be canceled in
accordance with the terms of this Agreement.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
"Security Agreement" shall mean the Security Agreement dated as of the
date hereof, between the Grantor(s), referred to therein and the Agent, for its
own benefit and for the benefit of the Lenders, substantially in the form of
Exhibit F annexed hereto, as amended, modified or supplemented from time to
time.
"Security Agreement - Patents and Trademarks" shall mean the Security
Agreement - Patents and Trademarks, dated as of the date hereof, between the
Debtor(s), as such term is defined therein, referred to therein and the Agent,
for its own benefit and for the benefit of the Lenders, substantially in the
form Exhibit G annexed hereto, as amended, modified or supplemented from time to
time.
20
<PAGE> 27
"Security Documents" shall mean the Pledge Agreement, the Security
Agreement, the Security Agreement Patents and Trademarks, and each other
agreement now existing or hereafter created providing collateral security for
the payment or performance of any of the Obligations.
"Securities Exchange Agreement" shall mean the Securities Exchange
Agreement dated as of May 6, 1998, as amended, by and between the Borrower, the
Parent and the initial holders of the Series A and Series B Subordinated Notes,
as in effect on the Closing Date.
"Series A and Series B Subordinated Notes" shall mean the $150,000,000
Series A Subordinated Notes of the Borrower and $87,922,213 Series B
Subordinated Convertible Notes of the Borrower issued to the Subordinated
Noteholders pursuant to the Securities Exchange Agreement, as the principal
amount of such notes may change pursuant to the terms of the Securities Exchange
Agreement.
"Settlement Date" shall have the meaning assigned to such term in
Section 2.15(c) hereof.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subordinated Indebtedness" shall mean Indebtedness subordinated in
right of payment to such person's monetary obligations under this Agreement or
the other Loan Documents (as applicable) upon terms satisfactory to and approved
in writing by the Required Lenders and in any event shall include the Series A
and Series B Subordinated Notes.
"Subordinated Noteholders" shall mean the holders from time to time of
the Series A and Series B Subordinated Notes of the Borrower.
"Subsidiary" shall mean, with respect to any person, any corporation,
partnership, association or other business entity of which securities or other
ownership interests representing more than 50% of the equity or more than 50% of
the ordinary voting power are, at the time as of which any determination is
being made, owned or controlled, directly or indirectly, by such person and/or
one or more Subsidiaries of such person. When used in the
21
<PAGE> 28
context of the Parent or the Borrower, it shall mean a Subsidiary of the Parent
or the Borrower.
"Taxes" shall have the meaning assigned to such term in Section 2.16(a)
hereof.
"Total Funded Debt" shall mean as of the date of determination thereof,
all Indebtedness upon which interest charges are customarily paid of the Parent
and its Consolidated Subsidiaries on a Consolidated basis outstanding at such
time which matures more than one year after the date of calculation, and any
such Indebtedness maturing within one year from such date of calculation which
is renewable or extendable at the option of the obligor to a date more than one
year from such date and including in any event any outstanding Revolving Credit
Loans.
"Total Funded Debt Ratio" shall mean for the Parent and its
Consolidated Subsidiaries on a Consolidated basis the ratio of (i) the average
monthly Total Funded Debt outstanding for the four most recent consecutive
fiscal quarters ending on or prior to the date of determination to (ii) EBITDA
for the four most recent consecutive fiscal quarters ending on or prior to the
date of determination.
"Total Revolving Credit Commitment" shall mean the sum of the Lenders'
Revolving Credit Commitments.
"Transactions" shall have the meaning assigned to such term in Section
4.2 hereof.
"Transferee" shall have the meaning assigned to such term in Section
2.16 hereof.
"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial
Code as the same may, from time to time, be enacted and in effect in the State
of New York; provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of
Lender's security interest in any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State
of New York, the term "Code" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"Wholly Owned Subsidiary" shall mean any Subsidiary (other than the
Designated Subsidiaries) in which any combination of the Borrower and the other
Wholly Owned Subsidiaries shall own 100% of the outstanding Stock.
22
<PAGE> 29
SECTION I.2. Accounting Terms. Unless otherwise expressly provided
herein, each accounting term used herein shall have the meaning given it under
generally accepted accounting principles in effect from time to time in the
United States ("GAAP"); provided, however, that for purposes of determining
compliance with the covenants contained in Article VII, all accounting or
financial terms herein shall be interpreted and all accounting determinations
shall be made in accordance with GAAP as in effect on the date of this Agreement
and applied on a basis consistent with that used in the audited financial
statements referred to in Section 4.7
II. THE LOANS
SECTION II.1. Revolving Credit Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender, severally and not jointly, agrees to make Revolving Credit Loans to
the Borrower, at any Business Day and from time to time from the date hereof to
the Revolving Credit Termination Date, in an aggregate principal amount at any
time outstanding not to exceed the amount of such Lender's Revolving Credit
Commitment. Notwithstanding the foregoing, the aggregate principal amount of
Revolving Credit Loans outstanding at any time to the Borrower (not including
any Permitted Overadvances voluntarily made by the Agent in accordance with
clause (ii) of the definition thereof) shall not exceed (1) the lesser of (a)
the Total Revolving Credit Commitment (as such amount may be reduced pursuant to
this Agreement including, without limitation, Section 2.7 hereof) and (b) an
amount equal to the sum of (i) up to eighty-five percent (85%) of the Net Amount
of Eligible Receivables, plus (ii) 100% of cash balances maintained with the
Agent which secure the Obligations but no other obligations of the Borrower
(such sum referred to herein as the "Borrowing Base") minus (2) the Letter of
Credit Obligations at such time (not to exceed the limitations set forth in
Section 2.17 hereof at any time). The Borrowing Base and Availability will be
computed monthly (or more frequently if requested by the Agent at any time that
Availability shall be less than $10,000,000) and a compliance certificate from a
Responsible Officer of the Borrower presenting its computation will be delivered
to the Agent in accordance with Section 6.5 hereof.
Subject to the foregoing and within the foregoing limits, the Borrower
may borrow, repay (or, subject to the provisions of Section 2.9 hereof, prepay)
and reborrow Revolving Credit Loans, on and after the date hereof and prior to
the Revolving Credit Termination Date, subject to the terms, provisions and
limitations set forth herein, including, without limitation, the requirement
that no Revolving Credit Loan shall be made hereunder if the amount thereof
exceeds the Availability at such time.
23
<PAGE> 30
SECTION II.2. Loans. (a) The Revolving Credit Loans made by the Lenders
on any date shall be in integral multiples of $100,000.
(b) Loans shall be made ratably by the Lenders in accordance with their
Revolving Credit 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. The initial Revolving Credit Loans shall be made by the
Lenders against delivery of Revolving Credit Notes, payable to the order of the
Lenders, as referred to in Section 2.4 hereof.
(c) Each Lender may fulfill its obligations under this Agreement by
causing its Applicable Lending Office to make such Loan; provided, however, that
the exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of the applicable Note.
(d) Each Lender shall make Revolving Credit Loans on the proposed dates
thereof by paying the amount required to the Agent at the account specified by
the Agent from time to time in New York, New York in immediately available funds
not later than 12:00 noon, New York City time, and the Agent shall as soon as
practicable, credit the amounts so received to the general funding account of
the Borrower maintained with Harris Trust & Savings Bank, or such other account
as may be designated from time to time by the Borrower which is acceptable to
the Agent (the "Funding Account") in immediately available funds or, if Loans
are not to be made on such date because any condition precedent to a borrowing
herein specified is not met, return the amounts so received to the respective
Lenders. The Agent shall use its reasonable efforts to notify the Borrower not
later than 4.00 p.m., New York City time, on the proposed date of any Revolving
Credit Loan if the Agent believes that amounts will not be credited to the
Funding Account on the proposed date of borrowing.
SECTION II.3. Notice of Loans. The Borrower shall, through a
Responsible Officer of the Borrower, give the Agent irrevocable written,
facsimile or telephonic notice (promptly confirmed by written or facsimile
notice) of each borrowing not later than 11:00 a.m., New York City time, one
Business Day before any borrowing hereunder. Such notice shall specify the date
of such borrowing (which shall be a Business Day) and amount thereof. The Agent
shall promptly advise the Lenders of any notice given pursuant to this Section
2.3 and of each Lender's portion of the requested borrowing.
SECTION II.4. Notes; Repayment of Loans. (a) All Revolving Credit Loans
made by a Lender to the Borrower shall be evidenced by a single Revolving Credit
Note, duly executed on behalf of the Borrower, dated the Closing Date, in
substantially the form of Exhibit E annexed hereto, delivered and payable to
such Lender in a principal amount equal to its
24
<PAGE> 31
Revolving Credit Commitment. The outstanding balance of each Revolving Credit
Loan, as evidenced by any such Revolving Credit Note, shall mature and be due
and payable on the Revolving Credit Termination Date.
(b) Each Revolving Credit Note shall bear interest from its date on the
outstanding principal balance thereof, as provided in Section 2.5 hereof.
(c) Each Lender, or the Agent on its behalf, shall, and is hereby
authorized by the Borrower to, endorse on the schedule attached to the Revolving
Credit Note of such Lender (or on a continuation of such schedule attached to
such Note and made a part thereof) an appropriate notation evidencing the date
and amount of each Loan to the Borrower from such Lender, as well as the date
and amount of each payment and prepayment with respect thereto; provided,
however, that the failure of any person to make such a notation on a Note shall
not affect any obligations of the Borrower under such Note. Any such notation
shall be conclusive and binding as to the date and amount of such Loan or
portion thereof, or payment or prepayment of principal or interest thereon,
absent manifest error.
SECTION II.5. Interest on Loans. (a) Subject to the provisions of
Section 2.5(b) and Section 2.8 hereof, each Loan shall bear interest at a rate
per annum equal to the Base Rate except that with respect to any such Loans
which constitute Permitted Overadvances the Interest Margin shall be increased
to 1.75%.
(b) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date and the Revolving Credit Termination Date.
Interest shall be computed based on the number of days elapsed in a year of 360
days. The Agent shall determine each interest rate applicable to the Loans and
shall promptly advise the Borrower and the Lenders of the interest rate so
determined.
SECTION II.6. Fees. (a) The Borrower shall pay each Lender, through the
Agent, (i) on the first Business Day of each January, April, July and October
commencing October 1, 1998, (ii) on the date of any reduction of the Total
Revolving Credit Commitment pursuant to this Agreement including, without
limitation, Section 2.7 hereof and (iii) on the Revolving Credit Termination
Date, in immediately available funds, a commitment fee (the "Revolving Credit
Commitment Fee") of three eighths of one percent (3/8 of 1%) per annum on the
average daily unused amount of the Revolving Credit Commitment of such Lender,
during the preceding quarter (or such longer or shorter period commencing with
the Closing Date or the date of the immediately preceding payment of the
Revolving Credit Commitment Fee and ending with the Revolving Credit Termination
Date) ending immediately prior to such date. The Revolving Credit Commitment Fee
due to each Lender under this Section 2.6 shall
25
<PAGE> 32
commence to accrue on the date hereof and cease to accrue on the earlier of (i)
the Revolving Credit Termination Date and (ii) the termination of the Revolving
Credit Commitment of such Lender pursuant to this Agreement including, without
limitation, pursuant to Section 2.7 hereof. The Revolving Credit Commitment Fee
shall be calculated on the basis of the actual number of days elapsed in a year
of 360 days.
(b) The Borrower shall pay the Agent, for its own account, a fee (the
"Administrative Fee") in an amount equal to fifty thousand dollars ($50,000) per
annum. Such Administrative Fee shall be payable in advance on the Closing Date
and on each anniversary of the Closing Date thereafter.
(c) The Borrower shall pay the Agent, for the pro rata benefit of the
Lenders, a fee (the "Upfront Fee") in an amount equal to one percent (1%) of the
Total Revolving Credit Commitment. Such Upfront Fee shall be payable on or prior
to the Closing Date.
(d) Immediately upon the termination or permanent reduction of all or a
portion of the Total Revolving Credit Commitments pursuant to Section 2.7, at
any time on or prior to the second-year anniversary of the Closing Date, the
Borrower shall pay the Agent, for the pro rata benefit of the Lenders, a fee
(the "Prepayment Fee") in an amount equal to (x) one percent (1%) of the amount
of such termination or reduction on or prior to the first anniversary of the
Closing Date and (y) one-half percent (1/2%) of the amount of such termination
or reduction after the first anniversary of the Closing Date but on or prior to
the second anniversary of the Closing Date.
SECTION II.7. Termination and Reduction of revolving Credit
Commitments. (a) Upon at least three (3) Business Days' prior irrevocable
written, facsimile or telephonic notice (promptly confirmed by written or
facsimile notice) to the Agent, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Total Revolving Credit Commitment, ratably among the Lenders in accordance with
the amounts of their Revolving Credit Commitments, subject to payment of the
Prepayment Fee on the amount of such termination or reduction, if applicable;
provided, however, that the Total Revolving Credit Commitment shall not be
reduced at any time to an amount less than the Revolving Credit Loans
outstanding under the Revolving Credit Commitments and the Letter of Credit
Obligations at such time. Each partial reduction of the Total Revolving Credit
Commitment shall be in a minimum of $100,000 or an integral multiple of
$100,000.
(b) The Revolving Credit Commitment of each Lender shall automatically
and permanently terminate on the Revolving Credit Termination Date, and all
Revolving Credit
26
<PAGE> 33
Loans still outstanding on such date shall be due and payable in full together
with accrued interest thereon.
SECTION II.8. Interest on Overdue Amounts; Alternate Rate of 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, (i) in the case of a default in the payment of interest
which is cured within three days of the date on which such payment was due, on
the amount of such defaulted interest, or (ii) in the case of a default in the
payment of interest which is not so cured or any default in the payment of
principal, on all Obligations outstanding up to the date of actual payment of
such defaulted amount (after as well as before judgment), at a rate per annum
equal to two percent (2%) in excess of the rates otherwise applicable to the
Obligations outstanding pursuant to Section 2.5 in the case of Loans or Section
2.17 in the case of the Letter of Credit Fees with respect to Letters of Credit,
together in each case, with interest on unpaid interest or fees at such default
rate.
SECTION II.9. Prepayments of Loans (a) Subject to the terms and
conditions contained in this Section 2.9 and elsewhere in this Agreement, the
Borrower shall have the right to prepay any Loan at any time in whole or from
time to time in part without penalty (except as otherwise provided for herein);
provided, however, that each such partial prepayment of a Loan shall be in an
integral multiple of $100,000.
(b) On the date of any termination or reduction of the Total Revolving
Credit Commitment pursuant to Section 2.7 hereof or elsewhere in this Agreement,
the Borrower shall pay or prepay so much of the Revolving Credit Loans as shall
be necessary in order that the Availability equals or exceeds zero following
such termination or reduction.
(c) Within three days of the receipt of Net Cash Proceeds from (i) the
sale or other disposition of any assets of any of the Loan Parties or their
Subsidiaries (excluding sales permitted by Section 7.5) or (ii) the consummation
of the issuance of any debt securities of any of the Loan Parties not permitted
by Section 7.1, the Borrower, unless otherwise consented to by the Required
Lenders, shall make a mandatory prepayment of the Loans in an amount equal to
100% of the Net Cash Proceeds received, which proceeds shall be applied as set
forth in paragraph (e) below. Nothing contained in this paragraph (c) shall be
or be deemed to be a consent to the sale of any assets or the issuance of any
debt securities.
(d) (i) Except as provided in clause (ii) below, promptly and in any
event not more than three Business Days following the receipt by the Agent or
the Borrower or any Subsidiary of any (x) net proceeds in excess of $250,000
(or, if there shall be continuing a Default or
27
<PAGE> 34
Event of Default, of the full amount of net proceeds) of any casualty insurance
required to be maintained pursuant to Section 6.3 hereof on account of each
separate loss, damage or injury (each, a "Casualty Event") to any asset of the
Borrower or any Subsidiary (including, without limitation, any Collateral), or
(y) net proceeds in excess of $250,000 (or, if there shall be continuing a
Default or Event of Default, of the full amount of net proceeds) of any business
interruption insurance required to be maintained pursuant to Section 6.3 hereof
on account of any business interruption event (each, a "BI Event"), the
applicable party receiving such proceeds shall notify the other of such receipt
in writing, by fax or by telephone (promptly confirmed by written or facsimile
notice), and not later than three Business Days following receipt by the Agent
or the Borrower or Subsidiary of any such proceeds, there shall become due and
payable a prepayment of the Loans in an amount equal to 100% of such proceeds.
Prepayments from such net proceeds shall be applied as set forth in paragraph
(e) below.
(ii) In the case of the receipt of net proceeds described in
clause (i) above with respect to a Casualty Event or BI Event, the Borrower may
elect, by written notice delivered to the Agent not later than the day on which
a prepayment would otherwise be required under clause (i), (x) in the case of
proceeds received with respect to a BI Event, to use such proceeds in the
ordinary course of Borrower's business and (y) in the case of proceeds received
with respect to any Casualty Event, to apply all or a portion of such net
proceeds for the purpose of replacing, repairing, restoring or rebuilding
(referred to herein as a "Rebuilding") the relevant tangible property, and, in
any such event, any required prepayment under clause (i) above shall be reduced
dollar for dollar by the amount of such election under clause (x) or clause (y)
of this sentence. An election under this clause (ii) shall not be effective
unless: (x) at the time of such election there is no continuing Default or Event
of Default; (y) the Borrower shall have certified to the Agent that: (i) the net
proceeds of the insurance adjustment with respect to a Casualty Event, together
with other funds available to the Borrower shall be sufficient to complete such
Rebuilding in accordance in all material respects with all applicable laws,
regulations and ordinances; and (ii) no Default or Event of Default has arisen
or will arise as a result of such BI Event, Casualty Event or Rebuilding; and
(z) if the amount of net proceeds in question exceeds $500,000, the Borrower
shall provide to the Agent evidence reasonably satisfactory to the Agent that
the replacement tangible property will have a value to the operation of the
Borrower's or their Subsidiary's business comparable to the replaced tangible
property.
(iii) In the event of an election under clause (ii) above,
pending application of the net proceeds to business operations with respect to a
BI Event or to Rebuilding with respect to a Casualty Event, the Borrower shall
not later than the time at which prepayment would have been, in the absence of
such election, required under clause (i) above, apply such net proceeds to the
prepayment of the outstanding principal balance, if any, of the Revolving
28
<PAGE> 35
Credit Loans (not in permanent reduction of the Revolving Credit Commitment),
and deposit (the "Special Deposit") with the Agent, the balance, if any, of such
net proceeds remaining after such application, pursuant to agreements in form,
scope and substance reasonably satisfactory to the Agent. The Special Deposit,
together with all earnings on such Special Deposit, shall be available to the
Borrower solely for the applicable Rebuilding or ordinary course business
operations, as the case may be; provided, however, that at such time as a
Default or Event of Default shall occur, the balance of the Special Deposit and
earnings thereon may be applied by the Agent to repay the Obligations in such
order as the Agent shall elect. The Agent shall be entitled to require proof, as
a condition to the making of any withdrawal from the Special Deposit, that the
proceeds of such withdrawal are being applied for the purposes permitted
hereunder and, in the case of Rebuilding, that the withdrawal is equivalent to
the value of the improvements being rebuilt.
(e) When making a prepayment, pursuant to paragraph (a) above, the
Borrower shall furnish to the Agent, not later than 12:00 noon (New York City
time) one (1) Business Day's prior to the date of such prepayment, written,
facsimile or telephonic notice (promptly confirmed by written or facsimile
notice) of prepayment which shall specify the prepayment date and the principal
amount of each Loan (or portion thereof) to be prepaid, which notice shall be
irrevocable and shall commit the Borrower to prepay such Loan by the amount
stated therein on the date stated therein. All prepayments shall be accompanied
by accrued interest on the principal amount being prepaid to the date of
prepayment; provided, however, that if at the time of the making of any such
prepayment, there are outstanding Letter of Credit Obligations, and there has
occurred and is continuing an Event of Default, then in the discretion of the
Agent, all or a portion of any such prepayment (not to exceed an amount equal to
the aggregate undrawn amount of all outstanding Letters of Credit) shall be
deposited by the Borrower in the Cash Collateral Account to be held by the Agent
for its own benefit and for the benefit of the Lenders for application by the
Agent to the payment to the L/C Issuer of any drawing made under any such
Letters of Credit.
(f) All prepayments under this Section 2.9 shall be subject to Section
2.12 hereof.
(g) Except as otherwise expressly provided in this Section 2.9,
payments with respect to any paragraph of this Section 2.9 are in addition to
payments made or required to be made under any other paragraph of this Section
2.9.
SECTION II.10. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
(or in the case of any assignee of any Lender, the date of assignment) any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority
29
<PAGE> 36
charged with the interpretation or administration thereof (whether or not having
the force of law), shall: (i) subject the Agent or any Lender (which shall for
the purpose of this Section 2.10 include any lending office of any Lender) to
any charge, fee, deduction or withholding of any kind or to any tax with respect
to any amount paid or to be paid to either the Agent or any Lender with respect
to the obligations of any Lender under Sections 2.17 hereof or under any Letter
of Credit Obligation (other than (x) taxes imposed on the overall net income of
the Agent or such Lender, (y) franchise or capital taxes imposed on the Agent or
such Lender, in either case by the jurisdiction in which such Lender or the
Agent has its principal office or any political subdivision or taxing authority
of either thereof and (z) taxes imposed by reason of any connection between the
jurisdiction imposing such tax and the Agent, such Lender or such Applicable
Lending Office other than a connection arising solely from this Agreement); (ii)
change the basis of taxation of payments to any Lender or the Agent of the
principal of or interest on any other fees or amounts payable with respect to
any Letter of Credit Obligation or otherwise hereunder (other than (x) taxes
imposed on the overall net income of such Lender or the Agent, (y) franchise or
capital taxes imposed on the Agent or such Lender, in either case by the
jurisdiction in which such Lender or the Agent has its principal office or any
political subdivision or taxing authority of either thereof and (z) taxes
imposed by reason of any connection between the jurisdiction imposing such tax
and the Agent, such Lender or such Applicable Lending Office other than a
connection arising solely from this Agreement); (iii) impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of, or loans or loan commitments extended
by, or Letters of Credit Obligations incurred by such Lender (except any such
reserve requirement reflected in the Base Rate); or (iv) impose on any Lender,
any other condition affecting this Agreement; and the result of any of the
foregoing shall be to increase the cost to any such Lender of incurring any
Letter of Credit Obligation, or to reduce the amount of any payment (whether of
principal, interest, fee, compensation or otherwise) receivable by such Lender,
then the Borrower shall pay to such Lender or the Agent, as the case may be,
upon such Lender's or the Agent's demand, such additional amount or amounts as
will compensate such Lender or the Agent for such additional costs or reduction.
The Agent and each Lender agree to give notice to the Borrower of any such
change in law, regulation, interpretation or administration with reasonable
promptness after becoming actually aware thereof and of the applicability
thereof to the Transactions. Notwithstanding anything contained herein to the
contrary, nothing in clause (i) or (ii) of this Section 2.10(a) shall be deemed
to (x) permit the Agent or any Lender to recover any amount thereunder which
would not be recoverable under Section 2.16 hereof or (y) require the Borrower
to make any payment of any amount to the extent that such payment would
duplicate any payment made by the Borrower pursuant to Section 2.16 hereof.
30
<PAGE> 37
(b) If at any time and from time to time any Lender shall determine
that the adoption after the date of this Agreement of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change after the date
of this Agreement in any applicable law, rule, regulation or guideline regarding
capital adequacy, including, without limitation, the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or any
change after the date of this Agreement in the interpretation or administration
of any thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by such
Lender (or its lending office) with any request or directive regarding capital
adequacy issued or adopted after the date hereof (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
will have the effect of reducing the rate of return on such Lender's capital or
on the capital of such Lender's holding company, if any, as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies and the policies of such Lender's holding company with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction. Each Lender
agrees to give notice to the Borrower of any adoption of, change in, or change
in interpretation or administration of any such law, rule, regulation or
guideline with reasonable promptness after becoming actually aware thereof and
of the applicability thereof to the Transactions.
(c) A statement of any Lender or the Agent setting forth such amount or
amounts, supported by calculations in reasonable detail, as shall be necessary
to compensate such Lender (or the Agent) as specified in paragraphs (a) and (b)
above shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay each Lender or the Agent the amount shown as due
on any such statement within ten (10) days after its receipt of the same.
(d) Failure on the part of any Lender or the Agent to demand
compensation for any increased costs, reduction in amounts received or
receivable with respect to any Letter of Credit or reduction in the rate of
return earned on such Lender's capital, shall not constitute a waiver of such
Lender's or the Agent's rights to demand compensation pursuant to this Section
2.10 for any increased costs or reduction in amounts received or receivable or
reduction in rate of return with respect to any Letter of Credit. The protection
under this Section 2.10 shall be available to each Lender and the Agent
regardless of any possible contention of the invalidity or inapplicability of
any law, regulation or other condition which shall give rise to any demand by
such Lender or the Agent for compensation.
31
<PAGE> 38
(e) Any Lender claiming any additional amounts payable pursuant to this
Section 2.10 agrees to use reasonable efforts (consistent with legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, any such additional amounts and would not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to such Lender.
SECTION II.11. Monthly Statement of Account. The Agent shall render to
the Borrower each month a statement of the Borrower's loan account (the "Loan
Account"), which shall constitute an account stated and, in the absence of
manifest error, shall be deemed to be correct and accepted by and be binding
upon the Borrower unless the Agent receives a written statement of the
Borrower's exceptions within 30 days after such statement was rendered to the
Borrower.
SECTION II.12. Indemnity. The Borrower shall indemnify the Agent and
each Lender against any loss or reasonable expense which the Agent or such
Lender may sustain or incur as a consequence of the following events (regardless
of whether such events occur as a result of the occurrence of an Event of
Default or the exercise of any right or remedy of the Agent or the Lenders under
this Agreement or any other agreement, or at law): (a) any failure of the
Borrower to fulfill on the date of any Credit Event the applicable conditions
set forth in Article V hereof applicable to it and not otherwise waived by the
Lenders; (b) any failure of the Borrower to borrow hereunder after irrevocable
notice of borrowing pursuant to Section 2.3 hereof has been given; or (c) any
default in payment or prepayment of the principal amount of any Loan or any part
thereof or interest accrued thereon, or with respect to any Letter of Credit
Obligation, in each case as and when due and payable (at the due date thereof,
by irrevocable notice of prepayment or otherwise). Any such Lender shall provide
to the Borrower a statement, signed by an officer of such Lender, explaining any
loss or expense, and such statement shall be conclusive absent manifest error.
The Borrower shall pay such Lender the amount shown as due on any such statement
within ten (10) days after the receipt of the same. The indemnities contained
herein shall survive the expiration or termination of this Agreement and of the
Letter of Credit Obligations.
SECTION II.13. Pro Rata Treatment; Assumption by and Delegation of
Authority to the Agent. (a) Except as permitted under Sections 2.10, 2.12,
2.15(c) and 2.16 hereof, or as described in subsection (d) below, each
borrowing, each payment or prepayment of principal of the Notes, each payment of
interest on the Notes, each payment of Letter of Credit Fee, each payment of any
other fee or other amount payable hereunder and each reduction of the Total
Revolving Credit Commitment shall be made pro rata among the Lenders in the
proportions that their Revolving Credit Commitments bear to the Total Revolving
Credit Commitment.
32
<PAGE> 39
(b) Notwithstanding the occurrence or continuance of a Default or Event
of Default or other failure of any condition to the making of Loans or
occurrence of other Credit Events hereunder subsequent to the Credit Events on
the Closing Date, unless the Agent shall have been notified in writing by any
Lender in accordance with the provisions of paragraph (c) below prior to the
date of a proposed Credit Event that such Lender will not make the amount that
would constitute its pro rata share of the applicable Credits on such date
available to the Agent, the Agent may assume that such Lender has made such
amount available to the Agent on such date, and the Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If such
amount is made available to the Agent on a date after such Credit Event date,
such Lender shall pay to the Agent on demand an amount equal to the product of
(i) the daily average Federal funds rate during such period as quoted by the
principal office in New York City of The Chase Manhattan Bank, times (ii) the
amount of such Lender's pro rata share of such Credits, times (iii) a fraction
the numerator of which is the number of days that elapse from and including such
Credit Event date to the date on which such Lender's pro rata share of such
Credits shall have become immediately available to the Agent and the denominator
of which is 360. A certificate of the Agent submitted to any Lender with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's pro rata share of such Credits is not in fact
made available to the Agent by such Lender within three Business Days of such
Credit Event date, the Agent shall be entitled to recover such amount with
interest thereon at the rate per annum applicable to the Loans hereunder on
demand from the Borrower.
(c) Unless and until the Agent shall have received notice from the
Required Lenders as to the existence of a Default, an Event of Default or some
other circumstance which would relieve the Lenders of their respective
obligations to extend Credits hereunder, which notice shall be in writing and
shall be signed by the Required Lenders and shall expressly state that the
Required Lenders do not intend to make available to the Agent such Lenders'
ratable share of Credits extended after the effective date of such notice, the
Agent shall be entitled to continue to make the assumptions described in Section
2.13(b) above. After receipt of the notice described in the preceding sentence,
which shall become effective on the third Business Day after receipt of such
notice by the Agent (unless otherwise agreed by the Agent), the Agent shall be
entitled to make the assumptions described in Section 2.13(b) above as to any
Credits as to which it has not received a written notice to the contrary prior
to 11:00 a.m. (New York time) on the Business Day next preceding the day on
which such Credits are to be extended. The Agent shall not be required to extend
a Lender's ratable portion of any Credit if it shall have received notice from
such Lender of such Lender's intention not to make its ratable portion of such
Credits available to the Agent. Any withdrawal of authorization as
33
<PAGE> 40
described under this Section 2.13(c) shall not affect the validity of any
Credits extended prior to the effectiveness thereof.
(d) In the event that any Lender fails to fund its ratable portion
(based on its Revolving Credit Commitment) of any Revolving Credit Loan which
such Lender is obligated to fund under the terms of this Agreement (the funded
portion of such borrowing being hereinafter referred to as a "Non Pro Rata
Loan"), until the earlier of such Lender's cure of such failure or the
termination of the Total Revolving Credit Commitment, in the Agent's sole
discretion, the proceeds of all amounts thereafter repaid to Agent for the
benefit of the Lenders by the Borrower and otherwise required to be applied to
such Lender's share of any other Obligation pursuant to the terms of this
Agreement, may be advanced to the Borrower by Agent on behalf of such Lender to
cure, in full or in part, such failure by such Lender, but shall nevertheless be
deemed to have been paid to such Lender in satisfaction of such other
Obligation. Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions to this subsection (d) shall
apply only with respect to the proceeds of payments of Obligations and
shall not affect the continuation of Loans pursuant to Section 2.2;
(ii) any such Lender shall be deemed to have cured its failure
to fund at such time as an amount equal to such Lender's ratable
portion (based on its applicable Revolving Credit Commitment) of the
requested principal portion of such Revolving Credit Loan is fully
funded to the Borrower whether made by such Lender itself or by
operation of the terms of this subsection (d) and whether or not the
Non Pro Rata Loan with respect thereto has been continued;
(iii) amounts advanced to the Borrower to cure, in full or in
part, any such Lender's failure to fund its Revolving Credit Loans
("Cure Loans") shall bear interest at the rate applicable to Loans
under Section 2.5 in effect from time to time;
(iv) Regardless of whether or not an Event of Default has
occurred and is continuing, and notwithstanding the instructions of the
Borrower as to their desired application, all repayments of principal
which would be applied to the outstanding Revolving Credit Loans shall
be applied first, ratably to Revolving Credit Loans constituting Non
Pro Rata Loans, second, ratably to Revolving Credit Loans other than
those constituting Non Pro Rata Loans or Cure Loans and, third, ratably
to Revolving Credit Loans constituting Cure Loans;
34
<PAGE> 41
(v) for so long as, and until the earlier of any such Lender's
cure of the failure to fund its ratable portion (based on its
applicable Revolving Credit Commitment) of any Revolving Credit Loan
and the termination of the Total Revolving Credit Commitment, the term
"Required Lenders" for all purposes of this Agreement shall exclude all
Lenders whose failure to fund their ratable portion (based on their
respective applicable Revolving Credit Commitments) of any Revolving
Credit Loan have not been cured; and
(vi) for so long as, and until any such Lender's failure to
fund its ratable portion (based on its applicable Revolving Credit
Commitment) of any Revolving Credit Loan is cured in accordance with
this subsection (d), such Lender shall not be entitled to any Revolving
Credit Commitment Fee with respect to its Revolving Credit Commitment.
SECTION II.14. Sharing of Setoffs. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or from
time to time, without notice to any Loan Party or to any other person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all balances held by it at any of its offices for the account of
Borrower or any Guarantor (regardless of whether such balances are then due to
Borrower or any Guarantor) and any other properties or assets any time held or
owing by that Lender or that holder to or for the credit or for the account of
Borrower or any Guarantor against and on account of any of the Obligations which
are not paid when due. Any Lender or holder of any Note exercising a right to
set off or otherwise receiving any payment on account of the Obligations in
excess of its pro rata share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender's
or holder's pro rata share of the Obligations as would be necessary to cause
such Lender to share the amount so set off or otherwise received with each other
Lender or holder in accordance with their respective pro rata shares. Borrower
and each Guarantor agrees, to the fullest extent permitted by law, that (a) any
Lender or holder may exercise its right to set off with respect to amounts in
excess of its pro rata share of the Obligations and may sell participations in
such amount so set off to other Lenders and holders and (b) any Lender or
holders so purchasing a participation in the Loans made or other Obligations
held by other Lenders or holders may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participations. Notwithstanding the foregoing,
if all or any portion of the set-off amount or payment otherwise received is
thereafter recovered from the Lender that has
35
<PAGE> 42
exercised the right of set-off, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.
SECTION II.15. Payments and Consumptions. (a) The Borrower shall make
each payment hereunder and under any instrument delivered hereunder not later
than 2:00 p.m. (New York City time) on the day when due in lawful money of the
United States (in freely transferable dollars) to the Agent at the account
designated by it at The Chase Manhattan Bank (or such other account designated
by it) for the account of the Lenders, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may,
in the discretion of the Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. The Agent
shall distribute any such payments received by it for the account of any other
person to the appropriate recipient promptly following receipt thereof. The
Agent may charge, when due and payable, any of the Borrower's accounts
(including, without limitation, the Loan Account) with the Agent for all
interest, principal and Revolving Credit Commitment Fees or other fees owing to
the Agent or the Lenders on or with respect to this Agreement and/or the Loans
and other Loan Documents. If at any time there is not sufficient availability to
cover any of the payments referred to in the prior sentence, and in any event
upon the occurrence of any Event of Default, the Borrower shall make any such
payments upon demand.
(b) If Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Agent from the Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without setoff,
counterclaim or deduction of any kind. If Agent determines at any time that any
amount received by Agent under this Agreement must be returned to the Borrower
or paid to any other person pursuant to any solvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to the Borrower or such other person, without setoff,
counterclaim or deduction of any kind.
(c) The outstanding principal balance of Revolving Credit Loans may
fluctuate from day to day, through Agent's disbursement of funds to, and receipt
of funds from the Borrower. In order to minimize the frequency of transfers of
funds between Agent and each Lender, Revolving Credit Loans and payments may be
settled according to the following procedures. On the third Business Day of each
week, or more frequently (including daily), if Agent so elects (each such day
being a "Settlement Date"), Agent will advise each Lender by telephone, telex or
telecopy of the amount of each such Lender's actual dollar investment and its
ratable
36
<PAGE> 43
portion (based on its applicable Revolving Credit Commitment) of the outstanding
principal balance of Revolving Credit Loans as of the close of business on the
third Business Day immediately preceding the Settlement Date. In the event that
payments are necessary to adjust the amount of such Lender's actual dollar
investment in the outstanding principal balance of Revolving Credit Loans to
such Lender's ratable portion (based on its applicable Revolving Credit
Commitment) of the outstanding principal balance of Revolving Credit Loans as of
any Settlement Date (based on the outstanding balances as of the close of
business on the third Business Day immediately preceding such Settlement Date),
the party from which such payment is due will pay the other, in immediately
available funds, by wire transfer to the other's account not later than 2:00
p.m. (New York time) on the Settlement Date. Notwithstanding the foregoing, if
Agent so elects, Agent may require that each Lender make its ratable portion
(based on its applicable Revolving Credit Commitment) of any requested Revolving
Credit Loan available to Agent for disbursement on the date of funding
applicable to such Revolving Credit Loan in accordance with Sections 2.2(d) and
2.3 hereof. Notwithstanding these procedures, each Lender's obligation to fund
its portion of each Revolving Credit Loan made by Agent to Borrower will
commence on the date such advance is made by Agent.
SECTION II.16. Taxes. (a) Any and all payments by the Borrower for the
account of the Agent or any Lender hereunder shall be made, in accordance with
Section 2.15 hereof, free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings in
any such case imposed by the United States or any political subdivision thereof,
excluding:
(i) in the case of the Agent and each Lender (or any
transferee or assignee thereof (any such entity, a "Transferee")), (A)
taxes imposed or based on its net income, and franchise or capital
taxes imposed on it (including withholding with respect to taxes
imposed or based on its net income or with respect to franchise or
capital taxes), or (B) taxes payable under laws (including, without
limitation, any treaty, ruling, determination or regulation) in effect
on the date hereof (or in effect on the date (i) a Transferee becomes a
party to this Agreement or (ii) a new Applicable Lending Office is
designated), but not any increase in withholding tax resulting from any
subsequent change in such laws,
(ii) taxes (including withholding taxes) imposed by reason of
the failure of the Agent or any Lender or any Transferee, in each case
that is organized outside the United States, to comply with Section
2.16(f) hereof (or the inaccuracy at any time of the certificates,
documents and other evidence delivered thereunder), and
37
<PAGE> 44
(iii) taxes imposed by reason of any connection between the
jurisdiction imposing such tax and the Agent, such Lender or such
Applicable Lending Office, other than a connection arising solely from
this Agreement and the other Loan Documents (the taxes referred to in
the foregoing clauses (i), (ii) and (iii) individually or collectively
being called "Excluded Taxes" and all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required
by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders or the Agent, (x) the sum payable shall be
increased by the amount necessary so that after making all required
deductions (including without limitation deductions applicable to
additional sums payable under this Section 2.16) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (y) the Borrower shall
make such deductions and (z) the Borrower shall pay the full amount
deducted to the relevant tax authority or other authority in accordance
with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant government
authority in accordance with applicable United States law any present or future
stamp or documentary or similar taxes or any other excise or property taxes,
charges or similar levies which arise from the execution, delivery or
registration of, or otherwise with respect to, this Agreement (hereinafter
referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Agent for the full
amount of Taxes or Other Taxes paid directly by such Lender or the Agent (as the
case may be) and any liability (including penalties, interest and expenses other
than those resulting solely from a failure by the Lender or the Agent to pay any
Taxes or Other Taxes which it is required to pay and for which it received an
indemnity payment) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender or the
Agent (as the case may be) makes written demand therefor. If any Lender shall
become aware that it is entitled to receive a refund in respect of any Taxes or
Other Taxes, it shall promptly notify the Borrower thereof and shall promptly
apply for such refund. If any Lender receives a refund in respect of any Taxes
or Other Taxes for which such Lender has received payment from the Borrower
hereunder, such Lender shall promptly notify the Borrower of such refund and
such Lender shall promptly repay such refund to the Borrower, provided that the
Borrower, upon the request of such Lender, agrees to return such refund (plus
any penalties, interest or other charges) to such Lender in the event such
Lender is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrower in respect of any payment to any Lender, the
Borrower will furnish to the Agent,
38
<PAGE> 45
at its address referred to in Section 11.1 hereof, such certificates, receipts
and other documents as may be reasonably required to evidence payment thereof.
(e) Without prejudice to the survival of any other agreement hereunder,
the agreements and obligations contained in this Section 2.16 shall survive the
payment in full of principal and interest hereunder.
(f) Each Lender or Transferee that is organized outside of the United
States (a "Non-U.S. Lender") shall deliver to the Borrower or any Guarantor, as
the case may be, (with copies to the Agent) on the date hereof (or, in the case
of a Transferee, on the date of the assignment) and from time to time as
required for renewal under applicable law duly completed copies of such
certificates, documents or other evidence, as required by the Code or Treasury
Regulations issued pursuant thereto, including without limitation Internal
Revenue Service Form 4224, Form 1001 or any subsequent version thereof,
indicating in each case that such Lender is entitled to receive payments under
this Agreement without any deduction or withholding of any United States federal
income taxes. The Agent (if the Agent is an entity organized outside the United
States) and each Non-U.S. Lender shall promptly notify the Borrower and the
Agent of any change in its Applicable Lending Office and such Non-U.S. Lender
shall on or before the date such Non-U.S. Lender changes its Applicable Lending
Office, deliver to the Borrower or such Guarantor, as the case may be (with
copies to the Agent) such forms described in the preceding sentence revised as
necessary to reflect the change in such Non-U.S. Lender's Applicable Lending
Office. The Borrower shall be entitled to rely on such forms in their possession
until receipt of any revised or successor form pursuant to this Section 2.16(f).
If the Agent or a Lender fails to provide a certificate, document or other
evidence required pursuant to this Section 2.16(f), then (i) the Borrower shall
be entitled to deduct or withhold on payments to the Agent or such Lender as a
result of such failure, as required by law, and (ii) the Borrower shall not be
required to make payments of additional amounts with respect to such withheld
Taxes pursuant to clause (x) of Section 2.16(a) to the extent such withholding
is required by reason of the failure of the Agent or such Lender to provide the
necessary certificate, document or other evidence.
(g) Each Lender and the Agent shall use reasonable efforts to avoid or
minimize any amounts which might otherwise be payable pursuant to this Section
2.16 (including, without limitation, changing its Applicable Lending Office,
transferring Loans to an Affiliate and seeking refunds of any amounts that are
reasonably believed not to have been correctly or legally asserted); provided,
however, that such efforts shall not include the taking of any actions by such
Lender or the Agent that would result in any tax, cost or other expense to such
Lender or the Agent (other than a tax, cost or other expense for which such
Lender or the Agent shall have been reimbursed or indemnified by the Borrower
pursuant to this Agreement
39
<PAGE> 46
or otherwise) or any action which would or might in the reasonable opinion of
such Lender or the Agent have an adverse effect upon its business, operations or
financial condition or otherwise be disadvantageous to such Lender or the Agent.
SECTION II.17. Letters of Credit. (a) Issuance of Letters of Credit.
Subject to the conditions set forth in Article V hereof and such other
conditions to the opening of letters of credit as the L/C Issuer (as defined
below) requires from its customers generally, the Agent and the Lenders agree to
incur, from time to time prior to the Revolving Credit Termination Date, upon
the request of the Borrower and for the Borrower's account, Letter of Credit
Obligations by causing Letters of Credit to be issued (by a bank or other
legally authorized person selected by or acceptable to the Agent in its sole
discretion (each, an "L/C Issuer")) for the Borrower's account and guaranteed by
Agent; provided, however, that if the L/C Issuer is a Lender, then such Letters
of Credit shall not be guaranteed by Agent but rather each Lender shall, subject
to the terms and conditions hereinafter set forth, purchase (or be deemed to
have purchased) risk participations in all such Letters of Credit issued with
the written consent of the Agent, as more fully described in paragraph (b)(ii)
below. The aggregate amount of all such Letter of Credit Obligations shall not
at any time exceed $25,000,000; provided, however, that the Borrower may not
request the Agent and the Lenders to incur Letter of Credit Obligations if after
giving effect thereto (measured by the face amount of such Letter of Credit)
Availability would be less than zero. No such Letter of Credit shall have an
expiry date which is more than one year following the date of issuance thereof,
and neither Agent nor Lenders shall be under any obligation to incur Letter of
Credit Obligations in respect of, or purchase risk participations in, any Letter
of Credit having an expiry date which is later than the Revolving Credit
Termination Date.
(b) Payments; Participations. (i) In the event that the Agent
or any Lender shall make any payment on or pursuant to any Letter of Credit
Obligation, such payment shall then be deemed automatically to constitute a
Revolving Credit Loan to the Borrower under Section 2.1 of the Agreement
regardless of whether a Default or Event of Default shall have occurred and be
continuing and notwithstanding the Borrower's failure to satisfy the conditions
of Credit Events set forth in Article V, and each Lender shall be obligated to
pay its pro rata share thereof in accordance with this Agreement. The failure of
any Lender to make available to the Agent for the Agent's own account its pro
rata share of any such Revolving Credit Loans or payment by the Agent under or
in respect of a Letter of Credit shall not relieve any other Lender of its
obligation hereunder to make available to the Agent its pro rata share thereof,
but no Lender shall be responsible for the failure of any other Lender to make
available such other Lender's pro rata share of any such payment.
40
<PAGE> 47
(ii) If it shall be illegal or unlawful for the Borrower to incur
Revolving Credit Loans as contemplated by paragraph (b)(i) above because of an
Event of Default described in Article VIII (e) or (f) or otherwise or if it
shall be illegal or unlawful for any Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C issuer is a Lender, then (i) immediately and without further action
whatsoever, each Lender shall be deemed to have irrevocably and unconditionally
purchased from the Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Lender's pro rata share (based on the
Revolving Credit Commitments) of the Letter of Credit Obligations in respect of
all Letters of Credit then outstanding and (ii) thereafter, immediately upon
issuance of any Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased from the Agent (or such L/C Issuer, as
the case may be) an undivided interest and participation in such Lender's pro
rata share (based on the Revolving Credit Commitments) of the Letter of Credit
Obligations with respect to such Letter of Credit on the date of such issuance.
Each Lender shall fund its participation in all payments or disbursements made
under the Letters of Credit in the same manner as provided in this Agreement
with respect to Revolving Credit Loans.
(c) Cash Collateral. If the Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to this Agreement prior
to the Revolving Credit Termination Date, the Borrower will pay to the Agent for
the benefit of Lenders cash or cash equivalents acceptable to the Agent ("Cash
Equivalents") in an amount equal to 100% of the maximum amount then available to
be drawn under each applicable Letter of Credit outstanding for the benefit of
the Borrower. Such funds or Cash Equivalents shall be held by the Agent in a
cash collateral account (the "Cash Collateral Account") maintained at a bank or
financial institution acceptable to the Agent. The Cash Collateral Account shall
be in the name of the Borrower and shall be pledged to, and subject to the
control of, the Agent, for the benefit of the Agent and the Lenders, in a manner
satisfactory to the Agent. The Borrower hereby pledges and grants to the Agent,
on behalf of Lenders, a security interest in all such funds and Cash Equivalents
held in the Cash Collateral Account from time to time and all proceeds thereof,
as security for the payment of all amounts due in respect of the Letter of
Credit Obligations and other Obligations, whether or not then due. This
Agreement, shall constitute a security agreement under applicable law.
If any Letter of Credit Obligations, whether or not then due and
payable, shall for any reason be outstanding on the Revolving Credit Termination
Date, the Borrower shall either (i) provide cash collateral therefor in the
manner described above, or (ii) cause all such Letters of Credit and guaranties
thereof to be cancelled and returned, or (iii) deliver a stand-by letter (or
letters) of credit in guaranty of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like tenor and duration (plus
thirty (30) additional days) as, and in an amount equal to 100% of, the
aggregate amount then available to be drawn
41
<PAGE> 48
under, the Letters of Credit to which such outstanding Letter of Credit
Obligations relate and shall be issued by a person, and shall be subject to such
terms and condition, as are satisfactory to the Agent in its sole discretion.
From time to time after funds are deposited in the Cash Collateral
Account by the Borrower, whether before or after the Revolving Credit
Termination Date, the Agent may apply such funds or Cash Equivalents then held
in the Cash Collateral Account to the payment of any amounts, in such order as
the Agent may elect, as shall be or shall become due and payable by the Borrower
to Lenders with respect to such Letter of Credit Obligations of the Borrower and
upon the satisfaction in full of all Letter of Credit Obligations of the
Borrower, to any other Obligations of the Borrower then due and payable.
Neither the Borrower nor any person claiming on behalf of or through
the Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by the Borrower to Lenders in respect thereof, any funds remaining in
the Cash Collateral Account shall be applied to other Obligations when due and
owing and upon payment in full of such Obligations, any remaining amount shall
be paid to the Borrower or as otherwise required by law.
(d) Fees and Expenses. The Borrower agrees to pay to the Agent for the
benefit of Lenders, as compensation to such Lenders for Letter of Credit
Obligations incurred hereunder, (x) all costs and expenses incurred by the Agent
or any Lender on account of such Letter of Credit Obligations, and (y) for each
month during which any letter of Credit Obligation shall remain outstanding, a
fee (the "Letter of Credit Fee") in an amount equal to one percent (1.00%) per
annum) multiplied by the maximum amount available from time to time to be drawn
under the applicable Letter of Credit. Such fee shall be paid to the Agent for
the benefit of the Lenders in arrears, on each Interest Payment Date. In
addition, the Borrower shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.
(e) Request for Incurrence of Letter of Credit Obligations. The
Borrower shall give the Agent at least two (2) Business Days prior written
notice requesting the incurrence of any Letter of Credit Obligation, specifying
the date such Letter of Credit Obligation is to be incurred, describing the
nature of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) to be guarantied and, to the extent not previously delivered to
the
42
<PAGE> 49
Agent, copies of the Reimbursement Agreement in favor of such L/C issuer and
all other agreements between the Borrower and the L/C Issuer pertaining to the
issuance of Letters of Credit. Notwithstanding anything contained herein to the
contrary, Letter of Credit applications by the Borrower and approvals by the
Agent and the L/C Issuer may be made and transmitted pursuant to electronic
codes and security measures mutually agreed upon and established by and among
the Borrower, the Agent and the L/C Issuer.
(f) Obligation Absolute. The obligation of the Borrower to reimburse
the Agent and Lenders for payments made with respect to any Letter of Credit
Obligation shall be absolute, unconditional and irrevocable, without necessity
of presentment, demand, protest or other formalities, and the obligations of
each Lender to make payments to Agent with respect to Letters of Credit shall be
unconditional and irrevocable. Such obligations of the Borrower and Lenders
shall be paid strictly in accordance with the terms hereof under all
circumstances including the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit, this Agreement, any other Loan Documents or any other
agreement;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower or any of its respective Affiliates or any
Lender may at any time have against a beneficiary or any transferee of
any Letter of Credit (or any persons or entities for whom any such
transferee may be acting), the Agent, any Lender, or any other person,
whether in connection with this Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated
transaction (including any underlying transaction between the Borrower
or any of its respective Affiliates and the beneficiary for which the
Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by the Agent (except as otherwise expressly
provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guaranty thereof against presentation of a demand,
draft or certificate or other document which does not comply with the
terms of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
43
<PAGE> 50
(vi) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(g) Indemnification; Nature of Lenders' Duties. (i) In addition to
amounts payable elsewhere provided in this Agreement, the Borrower hereby agrees
to pay and to protect, indemnify, and save harmless the Agent and each lender
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including attorneys' fees and allocated costs of
internal counsel) which the Agent or any Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of Credit or
guaranty thereof, or (B) the failure of the Agent or any Lender seeking
indemnification or of any L/C Issuer to honor a demand for payment under any
Letter of Credit or guaranty therefor as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority, in each case other than to the extent
solely as a result of the gross negligence or willful misconduct of the Agent or
such Lender (as finally determined by a court of competent jurisdiction).
(ii) As between the Agent and any Lender and the
Borrower, the Borrower assumes all risks of the acts and omissions
of, or misuse of any Letter of Credit by beneficiaries of any
Letter of Credit. In furtherance and not in limitation of the
foregoing, to the fullest extent permitted by law neither the
Agent nor any Lender shall be responsible: (A) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of
any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any
reason; (C) for failure of the beneficiary of any Letter of Credit
to comply fully with conditions required in order to demand
payment under such Letter of Credit or, in the case of any payment
by the Agent under any Letter of Credit or guaranty thereof, in
determining that the demand for payment under such Letter of
Credit or guaranty thereof complies on its face with any
applicable requirements for a demand for payment under such Letter
of Credit or guaranty thereof; (D) for errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) for errors, omissions, interruptions
or delay in transmission or otherwise of any document required in
order to make a payment under any Letter of Credit or guaranty
thereof or of the proceeds thereof; (G) for the credit of the
proceeds of any drawing under any Letter of Credit or guaranty
thereof; and (H) for any consequences arising from causes beyond
the control of Agent
44
<PAGE> 51
or any Lender; provided that, in the case of any payment by the
Agent under any Letter of Credit or guaranty thereof, the Agent
shall be liable to the extent such payment was made solely as a
result of its gross negligence or willful misconduct (as finally
determined by a court of competent jurisdiction). None of the
above shall affect, impair, or prevent the vesting of any of
Agent's or any Lender's rights or powers hereunder or under the
Agreement.
(iii) Nothing contained herein shall be deemed to
limit or to expand any waivers, covenants or indemnities made by
the Borrower in favor of any L/C Issuer in any Letter of credit
application, reimbursement agreement or similar document,
instrument or agreement between the Borrower and such L/C Issuer.
III. COLLATERAL SECURITY
SECTION III.1. Security Documents. The Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof. The Borrower shall duly execute and deliver, or cause
each other Grantor to duly execute and deliver, the Security Documents, all
consents of third parties necessary to permit the effective granting of the
Liens created in such agreements, financing statements pursuant to the Uniform
Commercial Code and other documents, all in form and substance satisfactory to
the Agent, as may be reasonably required by the Agent to grant to the Lenders a
valid, perfected and enforceable first priority Lien on and security interest in
(subject only to the Liens permitted under Section 7.2 hereof) the Collateral.
SECTION III.2. Filing and Recording. The Borrower shall, at its
sole cost and expense, cause all instruments and documents given as evidence of
security pursuant to this Agreement to be duly recorded, registered and/or filed
or otherwise perfected in all places necessary, in the opinion of the Agent, and
take such other actions as the Agent may reasonably request, in order to perfect
and protect the Liens of the Agent and Lenders in the Collateral. The Borrower,
to the extent permitted by law, hereby authorize the Agent to file any financing
statement in respect of any Lien created pursuant to the Security Documents
which may at any time be required or which, in the opinion of the Agent, may at
any time be desirable although the same may have been executed only by the Agent
or, at the option of the Agent, to sign such financing statement on behalf of
the Borrower and file the same, and the Borrower hereby irrevocably designate
the Agent, its agents, representatives and designees as its agent and
attorney-in-fact for this purpose. In the event that any re-recording or
refiling thereof (or the filing of any statements of continuation or assignment
of any financing statement) is required to protect and preserve such Lien, the
Borrower shall, at the Borrower'
45
<PAGE> 52
cost and expense, cause the same to be recorded and/or refiled at the time and
in the manner requested by the Agent.
IV. REPRESENTATIONS AND WARRANTIES
Each of the Parent and the Borrower represents and warrants for itself
and its Subsidiaries to each of the Lenders that both before and after giving
effect to the consummation of the Transactions:
SECTION IV.1. Organization, Legal Existence. Each of the Loan
Parties and their Subsidiaries is a legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has the requisite power and authority to own its property and
assets and to carry on its business as now conducted and as currently proposed
to be conducted and is qualified to do business in every jurisdiction where the
nature of its business so requires (all such jurisdictions being listed in
Schedule 4.1 annexed hereto) except where the failure to so qualify or be in
good standing would not result in a Material Adverse Effect. Each of the Loan
Parties has the corporate or other power to execute, deliver and perform its
obligations under this Agreement and the other Loan Documents to which it is a
party, and with respect to the Borrower to borrow hereunder and to execute and
deliver the Notes.
SECTION IV.2. Authorization. The execution, delivery and
performance by each of the Loan Parties of this Agreement and each of the other
Loan Documents to which it is a party, the borrowings hereunder by the Borrower,
the execution and delivery by the Borrower of the Notes and the grant of
security interests in the Collateral created by the Security Documents
(collectively, the "Transactions") (a) have been duly authorized by all
requisite corporate or other and, if required, stockholder action on the part of
the applicable Loan Party and (b) will not (i) violate (A) any provision of law,
statute, rule or regulation or the certificate or articles of incorporation or
other applicable constitutive documents or the by-laws of the Loan Parties, or
their respective Subsidiaries, as the case may be, (B) any order of any court,
or any rule, regulation or order of any other agency of government binding upon
the Loan Parties, or their respective Subsidiaries, or (C) any provision of any
material indenture, agreement or other instrument to which the Loan Parties, or
their respective Subsidiaries, or any of their respective properties or assets
are or may be bound, (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
material indenture, agreement or other instrument referred to in (b)(i)(C) above
except where any such conflict, violation, breach or default referred to in (i)
or (ii) would not result in a Material Adverse Effect or (iii) result in the
creation or imposition of any Lien of any nature whatsoever (other than in favor
of the Agent, for its own benefit and for the benefit of the
46
<PAGE> 53
Lenders or as permitted pursuant to Section 7.2) upon any property or assets of
the Loan Parties, or their respective Subsidiaries.
SECTION IV.3. Governmental Approvals. No registration or filing with
consent or approval of, or other action by, any Federal, state or other
governmental agency, authority or regulatory body is or will be required by a
Loan Party in connection with the Transactions, except for (a) such
registrations, filings, consents, approvals or actions the failure of which to
obtain or make would not have a Material Adverse Effect or (b) those set forth
in Schedule 4.3 or (c) such as have been made or obtained on or prior to the
Closing Date and are or will on the Closing Date be in full force and effect or
(d) the filings necessary to perfect the Liens created by the Security
Documents.
SECTION IV.4. Binding Effect. This Agreement and each of the other Loan
Documents to which it is a party constitutes, and each of the Notes when duly
executed and delivered by the Borrower will constitute, a legal, valid and
binding obligation of the applicable Loan Party enforceable against such Loan
Party in accordance with its terms subject (a) as to enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally, from time to time
in effect and (b) to general principles of equity.
SECTION IV.5. Material Adverse Change. There has been no material
adverse change in the business, assets, operations or financial condition of the
Parent and its Subsidiaries taken as a whole since December 31, 1997.
SECTION IV.6. Litigation; Compliance with Laws; Etc. (a) Except as set
forth in Schedule 4.6(a) annexed hereto, 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 any Responsible Officer of the Borrower,
threatened against or affecting any of the Loan Parties or any of their
Subsidiaries or the businesses, assets or rights of any of the Loan Parties or
any of their Subsidiaries (i) which involve any of the Transactions or (ii) as
to which there is a reasonable likelihood of an adverse determination and which,
if adversely determined, could, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(b) No Loan Parties, their Subsidiaries or 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.
47
<PAGE> 54
(c) Except as set forth on Schedule 4.6(c), there currently exists (i)
no assertion of any claim of material violation by the Loan Parties or any of
their Subsidiaries of the Physician Self-Referral Laws, and (ii) to the
knowledge of the any Loan Party, no active inquiry, investigation or audit with
respect to the compliance of the Loan Parties or Subsidiaries thereof 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 IV.7. Financial Statements. (a) The Borrower has heretofore
furnished to the Agent Consolidated balance sheets and statements of income and
cash flows of the Parent (i) dated as of December 31, 1995, December 31, 1996
and December 31, 1997 and audited by and accompanied by the opinion of
independent public accountants and (ii) dated as of June 30, 1998 for the six
month period then ended and prepared by management. Such balance sheets and
statements of income and cash flows present fairly in all material respects the
Consolidated financial condition and results of operations of the Parent and its
Consolidated Subsidiaries as of the dates and for the periods indicated, and
such audited balance sheets and the notes thereto disclose all material
liabilities, direct or contingent, of the Parent and its Subsidiaries, as of the
dates thereof.
(b) The Borrower has heretofore furnished to the Agent projected income
statements, balance sheets and cash flows of the Parent on a Consolidated basis
for a four year period (quarterly for the remainder of 1998 and quarterly for
1999 and annually for the following two years), such projections disclosing all
material assumptions made by Borrower in formulating such projections and giving
effect to the Transactions. The projections are based upon estimates and
assumptions, all of which were believed by management to be reasonable in light
of the conditions which existed at the time the projections were made and have
been prepared on the basis of the assumptions stated therein.
(c) The financial statements referred to in this Section 4.7(a) have
been prepared in accordance with GAAP, except that the unaudited statements do
not contain footnotes and are subject to year-end audit adjustments.
SECTION IV.8. Federal Reserve Regulations. (a) No Loan Parties or
Subsidiary thereof are 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 the Loans will be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, (i) to
purchase or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund
48
<PAGE> 55
indebtedness originally incurred for such purpose, or (ii) for any purpose which
entails a violation of, or which is inconsistent with, the provisions of the
Regulations of the Board, including, without limitation, Regulation T, U or X
thereof. If requested by any Lender, and if required by applicable law, the
Borrower or any Subsidiary shall furnish to such Lender a statement on Federal
Reserve Form U-1 referred to in said Regulation U.
SECTION IV.9. Taxes. The Loan Parties and each of their respective
Subsidiaries has filed or caused to be filed all material federal, state, local
and foreign tax returns which are required to be filed by it, on or prior to the
date hereof. Each of the Loan Parties and each of their Subsidiaries have paid
or caused to be paid all taxes shown to be due and payable on such filed returns
or on any assessments received by it, in writing, except as permitted by Section
6.4, except to the extent that the nonpayment of such taxes would not result in
a Material Adverse Effect or otherwise materially adversely affect the rights,
remedies and benefits available to the Lenders under the Loan Documents. As of
the Closing Date except as set forth on Schedule 4.9 annexed hereto, no federal
income tax returns of any Loan Parties or any of their Subsidiaries are being
audited by the United States Internal Revenue Service and no Loan Parties or
Subsidiary thereof have as of the date hereof requested or been granted any
extension of time to file any federal, state, local or foreign tax return.
Except as set forth on Schedule 4.9 annexed hereto, none of the Loan Parties or
their Subsidiaries are party to or have any obligation under any tax sharing
agreement.
SECTION IV.10. Employee Benefit Plans. Except where the incorrectness
of any of the following will not have a Material Adverse Effect:
(i) No Reportable Event has occurred or is continuing with
respect to any Pension Plan.
(ii) No non-exempt prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect
to any Plan subject to Part 4 of Subtitle B of Title I of ERISA.
(iii) None of the Loan Parties or any ERISA Affiliate is
obligated to contribute to a Pension Plan or a Multiemployer Plan. None of the
Loan Parties or any ERISA Affiliate has (A) ceased operations at a facility so
as to become subject to the provisions of Section 4062(e) of ERISA, (B)
withdrawn as a substantial employer so as to become subject to the provisions of
Section 4063 of ERISA, (C) ceased making contributions to any Pension Plan
subject to the provisions of Section 4064(a) of ERISA to which the Loan Parties,
any Subsidiary or any ERISA Affiliate made contributions, (D) incurred or caused
to occur a "complete withdrawal" (within the meaning of Section 4203 of ERISA)
or a "partial
49
<PAGE> 56
withdrawal" (within the meaning of Section 4205 of ERISA) from a Multiemployer
Plan that is a Pension Plan so as to incur withdrawal liability under Section
4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under Section 4207 or 4208 of ERISA), or (E) been a party to any
transaction or agreement under which the provisions of Section 4204 of ERISA
were applicable.
(iv) No notice of intent to terminate a Pension Plan has been
filed, nor has any Plan been terminated pursuant to the provisions of Section
4041(e) of ERISA.
(v) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Plan and no event has occurred or
condition exists which might constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of a trustee to
administer) any such Plan.
(vi) With respect to each Pension Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such Plan is acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Plan
satisfy the requirements of Section 302 of ERISA. The assets of each such
Pension Plan (other than the Multiemployer Plans) are at least equal to the
present value of the greater of (i) accrued benefits (both vested and
non-vested) under such Plan, or (ii) "benefit liabilities" (within the meaning
of Section 4001(a)(16) of ERISA) under such Plan, in each case as of the latest
actuarial valuation date for such Plan (determined in accordance with the same
actuarial assumptions and methods as those used by the Plan's actuary in its
valuation of such Plan as of such valuation date). No such Pension Plan has
incurred any "accumulated funding deficiency" (as defined in Section 412 of the
Code), whether or not waived.
(vii) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the Borrower or any
ERISA Affiliate, which could reasonably be expected to be asserted, against any
Plan or the assets of any such Plan. No civil or criminal action brought
pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending or
threatened against any fiduciary or any Plan. Except as set forth on Schedule
4.10 hereto, none of the Plans or any fiduciary thereof (in its capacity as
such) has been the direct or indirect subject of any audit, investigation or
examination by any governmental or quasi-governmental agency.
(viii) All of the Plans comply currently, and have complied in
the past, both as to form and operation, with their terms and with the
provisions of ERISA and the Code, and all other applicable laws, rules and
regulations; all necessary governmental approvals for the Plans have been
obtained and a favorable determination as to the qualification under Section
50
<PAGE> 57
401(a) of the Code of each of the Plans which is an employee pension benefit
plan (within the meaning of Section 3(2) of ERISA) that is intended to qualify
under Section 401 of the Code has been made by the Internal Revenue Service and
a recognition of exemption from federal income taxation under Section 501(c) of
the Code of each of the funded employee welfare benefit plans (within the
meaning of Section 3(1) of ERISA) that is intended to be tax-exempt has been
made by the Internal Revenue Service, and nothing has occurred since the date of
each such determination or recognition letter that would adversely affect such
qualification.
SECTION IV.11. No Material Misstatements. The information, reports,
financial statements, exhibits or schedules, taken as a whole, furnished by or
on behalf of the Loan Parties to the Agent or any Lender in connection with any
of the Transactions or this Agreement, the Security Documents, the Notes or any
other Loan Documents or included therein, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading in any material respect; provided, however, 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 used reasonable assumptions based on
information available to it at the time of preparation thereof and due care in
the preparation of such information, report, financial statement, exhibit or
schedule.
SECTION IV.12. Investment Company Act; Public Utility Holding Company
Act. No Loan Parties or Subsidiary thereof is an "investment company" as defined
in, or is otherwise subject to regulation under, the Investment Company Act of
1940. No Loan Parties or Subsidiary thereof is a "holding company" as that term
is defined in or is otherwise subject to regulation under, the Public Utility
Holding Company Act of 1935.
SECTION IV.13. Security Interest. Upon the due filing of UCC-1
financing statements, the delivery of the Collateral under the Pledge Agreement
and the filing of assignments for security with the United States Patent and
Trademark Office, each of the Security Documents creates and grants to the
Agent, for its own benefit and for the benefit of the Lenders, a legal, valid
and perfected first priority (except as permitted pursuant to Section 7.2
hereof) Lien in the collateral identified therein to the extent a Lien can be
perfected in such Collateral by the taking of the foregoing actions. Such
collateral or property is not subject to any other Liens whatsoever, except
Liens permitted by Section 7.2 hereof.
SECTION IV.14. Use of Proceeds. All proceeds of each borrowing under
the Revolving Credit Commitment shall be used to provide for working capital
requirements and
51
<PAGE> 58
for general corporate purposes (including, without limitation Permitted
Acquisitions) and the repayment of the Bridge Notes of the Borrower.
SECTION IV.15. Subsidiaries. As of the Closing Date, Schedule 4.15
annexed hereto sets forth each Subsidiary of the Parent, its jurisdiction of
incorporation, its capitalization and ownership of capital stock of each such
Subsidiary.
SECTION IV.16. Title to Properties; Possession Under Leases;
Trademarks. (a) Each of the Loan Parties and each Subsidiary thereof has good
and marketable title to, or valid leasehold interest in, all of its respective
properties and assets shown on the most recent balance sheet referred to in
Section 4.7(a) hereof and all assets and properties acquired since the date of
such balance sheet, except for such properties as have been disposed of in the
ordinary course of business, as permitted by this Agreement or as set forth on
Schedule 4.16, and except where lack of title or a valid leasehold interest does
not materially interfere with the ability of any of the Loan Parties or any
Subsidiary thereof to conduct its business as now conducted. All interests of
such persons in such assets and properties are free and clear of all Liens other
than those permitted by Section 7.2 hereof.
(b) Except as disclosed in Schedule 4.16 hereto, each of the Loan
Parties and each of their Subsidiaries has complied with all obligations under
all leases to which it is a party and under which it is in occupancy, 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 and each of the Loan Parties and each of
their Subsidiaries enjoys peaceful and undisturbed possession under all such
material leases.
(c) Each of the Loan Parties and each of their respective Subsidiaries
owns or controls all material trademarks, trademark rights, trade names, trade
name rights, copyrights, patents, patent rights and licenses which are necessary
for the conduct of the business of such Loan Parties and such Subsidiary. To its
knowledge, no Loan Parties or Subsidiary thereof is infringing upon or otherwise
acting adversely to any of such trademarks, trademark rights, trade names, trade
name rights, copyrights, patent rights or licenses owned by any other person or
persons. Except as set forth on Schedule 4.6(a) annexed hereto, there is no
claim or action by any such other person pending, or to the knowledge of any
Responsible Officer of any of the Loan Parties or any Subsidiary thereof,
threatened, against any of the Loan Parties or any Subsidiary thereof with
respect to any of the rights or property referred to in this Section 4.16(c).
52
<PAGE> 59
SECTION IV.17. Solvency. (a) (i) By the incurrence of the Indebtedness
hereunder, the Borrower will not have incurred debts beyond its ability to pay
such debts as they become absolute and mature. The cash available to the
Borrower, after taking into account the obligations of the Borrower under the
Loan Documents, is sufficient to pay all amounts on or in respect of the debts
of the Borrower when such amounts become due and payable.
(ii) In incurring the Indebtedness hereunder, the Borrower is not
acting with the intent to hinder, delay or defraud present or future creditors
of the Borrower.
(b) The assets of the Parent and its Consolidated Subsidiaries do not
constitute unreasonably small capital for the Parent and its Consolidated
Subsidiaries to carry out their business as now conducted and as proposed to be
conducted.
(c) Neither the Parent nor any Subsidiary thereof intends to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be received by the Parent and such Subsidiary,
and of amounts to be payable on or in respect of debt of the Parent and such
Subsidiary).
(d) Neither the Parent nor any Subsidiary thereof believes that final
judgments against it in actions for money damages presently pending will be
rendered at a time when, or in an amount such that, it will be unable to satisfy
any such judgments promptly in accordance with their terms (taking into account
the maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered).
SECTION IV.18. Permits, etc. Each of the Loan Parties and each of their
Subsidiaries possesses all licenses, permits, approvals and consents, including,
without limitation, all environmental, health and safety licenses, permits,
approvals and consents of all Federal, state and local governmental authorities
except where failure to so possess does not materially interfere with the
ability of such Loan Party or Subsidiary to conduct its business as currently
conducted ("Permits"), each such Permit is in full force and effect, each of the
Loan Parties and each Subsidiary is in compliance in all material respects with
all such Permits, and no event (including, without limitation, any violation of
any law, rule or regulation) has occurred which allows the revocation or
termination of any such Permit or any restriction thereon.
SECTION IV.19. Compliance with Environmental Laws. Except as disclosed
in Schedule 4.19 hereto: (a) The properties owned or operated by the Parent, 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
53
<PAGE> 60
reasonably be expected to result in a liability to the Parent, the Borrower and
the Subsidiaries in excess of $5,000,000.
(b) The Properties and all operations of the Parent, 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 liability to the Parent, 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 the Parent, the Borrower or the Subsidiaries, which Releases or
threatened Releases, in the aggregate, could reasonably be expected to result in
a liability to the Parent, the Borrower and the Subsidiaries in excess of
$5,000,000.
(d) None of the Parent, 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 Parent, the Borrower or the
Subsidiaries or with regard to any person whose liabilities for environmental
matters the Parent, 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 the Parent,
the Borrower and the Subsidiaries in excess of $5,000,000, nor do the Parent,
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 under any of the Properties in a manner that could
reasonably be expected to give rise to liability under any Environmental Law
that could reasonably be expected to result in a liability to the Parent, the
Borrower and the Subsidiaries in excess of $5,000,000, nor have any of the
Parent, 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 the
Parent, the Borrower and the Subsidiaries in excess of $5,000,000.
SECTION IV.20. No Change in Credit Criteria or Collections Policies. There
has been no material change adverse to the Loan Parties in credit criteria or
collection policies concerning account receivables of the Borrower since
December 31, 1997.
54
<PAGE> 61
SECTION IV.21. Employee Matters. Except as disclosed in Schedule 4.21
hereto, (a) neither the Loan Parties nor any of their Subsidiaries nor any of
such person's employees are subject to any collective bargaining agreement, (b)
to the knowledge of the Borrower, no petition for certification or union
election is pending with respect to the employees of the Loan Parties or any of
their Subsidiaries and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of the Loan Parties
or any of their Subsidiaries, (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the knowledge of Borrower threatened
between the Loan Parties or any of their respective Subsidiaries and their
respective employees, other than employee grievances arising in the ordinary
course of business none of which would have, either individually or in the
aggregate, a Material Adverse Effect and (d) 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 Company or any Subsidiary or for which any claim may be
made against the Company 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 Company 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. The Loan Parties are in compliance with all employment
laws applicable to each of such Loan Parties except where the failure to so
comply would not have a Material Adverse Effect.
SECTION IV.22. Year 2000. The cost to the Loan Parties and their respective
Subsidiaries to implement the necessary changes to make all material Date Data
and Date- Sensitive Systems Year 2000 Compliant will not have a Material Adverse
Effect. "Date Data" means any data of any type that encodes date information or
which is otherwise derived from, dependent on or related to date information.
"Date-Sensitive System" means any software, microcode or hardware system or
component, including any electronic or electronically controlled system or
component, that processes any Date Data and that is installed, in development or
on order by the Loan Parties and their Subsidiaries for their internal use, or
which the Loan Parties and their Subsidiaries sell, lease, license, assign or
otherwise provide, or the provision or operation of which the Loan Parties and
their Subsidiaries provide the benefit, to its customer, vendors, suppliers,
affiliates or any other third party. "Year 2000 Compliant" means (i) with
respect to Date Data, that such data is in proper format and accurate for all
dates in the twentieth and twenty-first centuries, and (ii) with respect to
Date-Sensitive Systems, that each such system accurately processes all Date
Data, including for the twentieth and twenty-first centuries, without loss of
any functionality or performance, including but not limited to calculating,
comparing, sequencing, storing and displaying such Date Data
55
<PAGE> 62
(including all leap year considerations), when used as a stand-alone system or
in combination with other software or hardware.
SECTION IV.23. Subsidiaries and Joint Ventures. (a) Except as may result
from the exercise of the Existing Bank Warrants by the holders thereof for
shares of the Borrower and as set forth on Schedule 4.23, Parent directly owns
100% of the capital stock of the Borrower and does not and shall not own
directly any equity interest in any other person and (b Schedule 4.15 sets forth
as of the Closing Date a list of all the Subsidiaries and Joint Ventures and the
direct or indirect percentage ownership interest of the Borrower therein.
SECTION IV.24. Agreements. (a) Except as set forth on Schedule 4.24 hereto,
none of the Loan Parties or any of their respective 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.
(b) None of the Loan Parties or any of their respective
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.
SECTION IV.25. Insurance. The Loan Parties and their Subsidiaries have
insurance in such amounts and covering such risks and liabilities as are in
accordance with normal industry practice.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and incur Letter of Credit
Obligations hereunder shall be subject to the following conditions precedent:
SECTION V.1. All Credit Events . On each date on which a Credit Event is to
occur:
(a) The Agent shall have received a notice of borrowing as required by
Section 2.3 hereof or a request for the incurrence of a Letter of Credit
Obligations pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in Article IV hereof and
in any documents delivered herewith, including, without limitation, the Loan
Documents, shall be
56
<PAGE> 63
true and correct in all material respects with the same effect as though made on
and as of such date (except insofar as such representations and warranties
relate expressly to an earlier date, in which case such representations and
warranties were correct on and as of such earlier date, it being understood and
agreed that the Parent and the Borrower may update any Schedules delivered to
the Agent and the Lenders pursuant to Article IV hereof for the purpose of
making such representations and warranties true and correct as of such later
date).
(c) The Borrower shall be in compliance with all the terms and provisions
contained herein on its part to be observed or performed, and at the time of and
immediately after such Credit Event no Default or Event of Default shall have
occurred and be continuing.
(d) The Agent shall have received a certificate signed by the Financial
Officer of the Borrower (i) as to the compliance with (b) and (c) above and (ii)
with respect to each Revolving Credit Loan and the incurrence of each Letter of
Credit Obligations, demonstrating that after giving effect thereto the
Availability is zero or greater.
SECTION V.2. First Borrowing. The obligations of the Lenders in respect of
the first Credit Event hereunder is subject to the following additional
conditions precedent:
(a) The Lenders shall have received the favorable written opinions of Paul,
Hastings, Janofsky & Walker LLP, counsel for the Loan Parties, and of special
Colorado and Illinois counsel for the Loan Parties, each dated the Closing Date,
addressed to the Lenders and in form and substance reasonably satisfactory to
the Agent.
(b) The Lenders shall have received (i) a copy of the certificate or
articles of incorporation or constitutive documents, in each case as amended to
date, of each of the Borrower, the Grantors and the Guarantors, certified as of
a recent date by the Secretary of State or other appropriate official of the
state of its organization, and a certificate as to the good standing of each
from such Secretary of State or other official, in each case dated as of a
recent date; (ii) a certificate of the Secretary of the Borrower, each Grantor
and Guarantor, dated the Closing Date and certifying (A) that attached thereto
is a true and complete copy of such person's By-laws as in effect on the date of
such certificate and at all times since a date prior to the date of the
resolutions described in item (B) below, (B) that attached thereto is a true and
complete copy of resolutions adopted by such person's Board of Directors
authorizing the execution, delivery and performance of this Agreement, the
Security Documents, the Notes, the other Loan Documents and the Credit Events
hereunder, as applicable, and that such resolutions have not been modified,
rescinded or amended and is in full force and effect, (C) that such person's
certificate or articles of incorporation or constitutive documents have not been
amended since the date of the last amendment thereto shown on the certificate of
good
57
<PAGE> 64
standing furnished pursuant to (i) above, and (D) as to the incumbency and
specimen signature of each of such person's officers executing this Agreement,
the Notes, each Security Document or any other Loan Document delivered in
connection herewith or therewith, as applicable; (iii) a certificate of another
of such person's officers as to incumbency and signature of its Secretary; and
(iv) such other documents as the Agent or any Lender may reasonably request.
(c) The Agent shall have received a certificate, dated the Closing Date
and signed by the Financial Officer of the Borrower, confirming compliance with
the conditions precedent set forth in paragraphs (b) and (c) of Section 5.1
hereof and the conditions set forth in this Section 5.2.
(d) Each Lender shall have received its Revolving Credit Note duly
executed by the Borrower, payable to its order and otherwise complying with the
provisions of Section 2.4 hereof.
(e) The Agent shall have received the Security Documents in form, scope
and amount satisfactory in all respects to the Agent and certificates evidencing
the Pledged Stock, together with undated stock powers executed in blank, each
duly executed by the applicable Grantors.
(f) The Agent shall have received certified copies of requests for
copies or information on Form UCC-11 or certificates satisfactory to the Lenders
of a UCC Reporter Service, listing all effective financing statements which name
as debtor the Borrower, any Guarantor or any Grantor and which are filed in the
appropriate offices in the states or other applicable jurisdictions in which are
located the chief executive office and other operating offices of such person,
together with copies of such financing statements or of the security agreements
to which such filings relate. With respect to any Liens not permitted pursuant
to Section 7.2 hereof, the Agent shall have received termination statements in
form and substance satisfactory to it.
(g) Each document (including, without limitation, each Uniform
Commercial Code financing statement) required by law or reasonably requested by
the Agent to be filed, registered or recorded in order to create in favor of the
Agent for its own benefit and for the benefit of the Lenders a first priority
perfected Lien in the Collateral (subject to the Liens permitted by Section 7.2)
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested. The Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation.
58
<PAGE> 65
(h) The Agent shall have received the results of a search of tax and
other Liens, and judgments and of the Uniform Commercial Code filings made with
respect to the Borrower and each Grantor in the jurisdictions in which the
Borrower and each Grantor are doing business and/or in which any Collateral is
located, and in which Uniform Commercial Code filings have been made against the
Borrower, each Guarantor and each Grantor pursuant to paragraph (g) above.
(i) The Lenders and the Agent shall have received and determined to be
in form and substance satisfactory to them:
(i) a schedule and aging of accounts receivable of the
Borrower dated as of the most recent end of month prior to the Closing
Date;
(ii) evidence that the Borrower has Availability after giving
effect to the Revolving Credit Loans made on the Closing Date of not
less than $25,000,000 (without giving effect to the Aetna Letters of
Credit and that the reimbursement exposure under such Aetna Letters of
Credit does not exceed $21,000,000);
(iii) a copy of a field examination of the Borrower's books
and records;
(iv) a copy of, or a certificate as to coverage under, the
insurance policies required by Section 6.3 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 Agent as additional insured,
in form and substance satisfactory to the Agent;
(v) the financial statements described in Section 4.7 hereof;
(vi) evidence of payment of all fees owed to the Agent, the
Lenders by the Borrower under this Agreement, the Securities Exchange
Agreement or otherwise;
(vii) evidence that all requisite third party consents
(including, without limitation, consents with respect to each of the
Borrower and each of the Grantors and Guarantors) to the Transactions
have been received;
(viii) copies of all material customer, supplier contracts and
employment and non-compete agreements with respect to the Parent, the
Borrower and the Subsidiaries which are material to the Parent's, the
Borrower's and such Subsidiaries' business taken as a whole;
59
<PAGE> 66
(ix) a certificate of the Chief Financial Officer of the
Borrower, dated the Closing Date, stating that there has been no
material adverse change in the business, assets, operations or
financial condition of the Parent and its Subsidiaries since December
31, 1997; and
(x) evidence of the repayment in full of existing senior
credit arrangements and the termination of all commitments to lend
thereunder, and the termination of all security interests securing such
indebtedness (other than the Bridge Notes) as required under paragraph
(f) above.
(j) The Agent and the Lenders shall have had the opportunity, if they
so choose, to examine the books of account and other records and files of the
Borrower, its Subsidiaries, the Grantors and the Guarantors and to make copies
thereof, to conduct customer, payor and supplier checkings and to conduct a
pre-closing audit which shall include, without limitation, verification of
Eligible Receivables, payment of payroll taxes and accounts payable and
formulation of an opening Borrowing Base, and the results of such examination,
checkings and audit shall have been satisfactory to the Agent and Lenders in all
material respects.
(k) The Agent shall have received and had the opportunity to review and
determine to be in form and substance satisfactory to it:
(i) a schedule of litigation and contingent liabilities and an
analysis of the expected disposition thereof;
(ii) a schedule of all real property lease agreements entered
into by the Borrower and Guarantors, and, if requested by the Agent, a
copy of any such lease agreements;
(iii) copies of all loan agreements, notes and other
documentation evidencing Indebtedness for borrowed money of the
Borrower, its Subsidiaries, Grantors or Guarantors which is to remain
outstanding after consummation of the Transactions; and
(iv) copies of all material contracts with third-party payors.
(1) evidence that Weil, Gotshal & Manges LLP, counsel to the Agent,
shall receive payment in full on the Closing Date for all reasonable legal fees
charged, and all reasonable costs and expenses incurred, by such counsel through
the Closing Date in connection with the transactions contemplated under this
Agreement, the Security Documents, the other Loan
60
<PAGE> 67
Documents, the Securities Exchange Agreement and the other documents and
instruments in connection herewith and therewith (to the extent billed on or
before such date).
(m) The corporate structure and capitalization of the Loan Parties
shall be satisfactory to the Lenders in all material respects.
(n) All legal matters in connection with the Transactions shall be
satisfactory to the Agent, the Lenders and their respective counsel in their
sole discretion.
(o) The Borrower shall have executed and delivered to the Agent a
disbursement authorization letter with respect to the disbursement of the
proceeds of the Credit Events made on the Closing Date, in form and substance
satisfactory to the Agent.
(p) The Borrower and the Agent (or another financial institution
acceptable to the Agent) shall have entered into lockbox and cash management
arrangements pursuant to documentation satisfactory in form and substance to the
Agent.
(q) The Agent shall have received such other documents as the Lenders
or the Agent or Agent's counsel shall reasonably deem necessary.
(r) The Agent shall have received the New Warrant Agreement, duly
executed by Parent, and the New Warrants shall have been delivered to the
Lenders on or prior to the Closing Date.
VI. AFFIRMATIVE COVENANTS
Each of the Parent and the Borrower covenants and agrees with each
Lender that, so long as this Agreement shall remain in effect or the principal
of or interest on any Note, any amount under any Letter of Credit Obligation or
any fee, expense or other Obligation payable hereunder shall be unpaid, it will,
and will cause each of its Subsidiaries and, with respect to Section 6.7 hereof,
each ERISA Affiliate, to:
SECTION VI.1. Legal Existence. 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 permitted by Section 7.5.
SECTION VI.2. Business and Properties. At all times do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
the rights, licenses, Permits, franchises, patents, copyrights, trademarks and
trade names material to the conduct of its businesses; maintain and operate such
businesses in the same general manner in which they
61
<PAGE> 68
are presently conducted and operated; comply in all material respects with all
applicable laws, rules, regulations and governmental orders (whether federal,
state or local in all applicable jurisdictions) applicable to the operation of
such businesses whether now in effect or hereafter enacted (including, without
limitation, all applicable laws, rules, regulations and governmental orders
relating to any Health Care Law, any zoning of building law, employment matters,
public and employee health and safety and all Environmental Laws) and with any
and all other applicable laws, rules, regulations and governmental orders, the
lack of compliance of any of which would have a Material Adverse Effect; and at
all times maintain, preserve and protect all property material to the conduct of
such businesses and keep such property in good repair, working order and
condition (reasonable wear and tear excepted), other than sales of worn out,
obsolete, scrap or surplus equipment permitted by Section 7.5, 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 in all
material respects at all times.
SECTION VI.3. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers, (b) 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
similarly situated and in the same or similar businesses, provided, however,
that such insurance shall in no event at any time in an amount less than the
replacement value of the Collateral, (c) maintain in full force and effect
public liability insurance against claims for bodily injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by the Borrower or any of its Subsidiaries, as is
customary with companies similarly situated and in the same or similar
businesses, (d) maintain business interruption and product liability insurance
to such extent as is customary with companies similarly situated and in the same
or similar businesses, and (e) maintain such other insurance as may be required
by law or as may be reasonably requested by the Agent for purposes of assuring
compliance with this Section 6.3. All insurance covering tangible personal
property subject to a Lien in favor of the Agent for its own benefit and for the
benefit of the Lenders granted pursuant to the Security Documents shall provide
that, in the case of each separate loss the full amount of insurance proceeds
shall be payable to the Agent and shall further provide for at least 30 days'
prior written notice to the Agent of the cancellation or substantial
modification thereof.
SECTION VI.4. Taxes. Pay and discharge promptly when due 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, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to Liens upon such
properties or any part thereof; provided, however, that such payment and
discharge
62
<PAGE> 69
shall not be required with respect to (i) any such tax, assessment, charge, levy
or claim so long as the validity or amount thereof shall be contested in good
faith by appropriate proceedings and the applicable party, shall have set aside
on its books adequate reserves with respect thereto in accordance with GAAP and
such contest operates to suspend collection of the contested tax, assessment,
charge, levy or claims and enforcement of a Lien or (ii) any tax, assessment,
charge, levy or claims, the failure to pay and discharge when due which,
individually or in the aggregate would not have a Material Adverse Effect.
SECTION VI.5. Financial Statements, Reports, Etc. Furnish to the Agent,
with copies for each of the Lenders:
(a) within 90 days after the end of each Fiscal Year, (i) Consolidated
and consolidating balance sheets and Consolidated and consolidating income
statements showing the Consolidated financial condition of the Parent and its
Consolidated Subsidiaries as of the close of such Fiscal Year and the results of
their Consolidated operations during such year, (ii) a Consolidated statement of
shareholders' equity, and (iii) a Consolidated statement of cash flow, as of the
close of such Fiscal Year, comparing such financial condition and results of
operations to such financial condition and results of operations for the
comparable period during the immediately preceding Fiscal Year, all the
foregoing Consolidated financial statements to be audited by Ernst & Young LLP
or other independent public accountants of recognized national standing or any
other independent public accountants acceptable to the Agent and accompanied by
an opinion of such accountants (which opinion shall not contain any
qualification with respect to a departure from GAAP or a limitation on the scope
of the auditor's engagement), and to be in form and substance acceptable to the
Agent;
(b) within 45 days after the end of each of the first three (3) fiscal
quarters of the Parent, (i) unaudited Consolidated and consolidating balance
sheets and Consolidated and consolidating income statements showing the
Consolidated financial condition and results of operations of the Parent and its
Consolidated Subsidiaries as of the end of each such quarter and during such
quarter, (ii) a Consolidated statement of shareholders' equity and (iii) a
Consolidated statement of cash flow, in each case for the fiscal quarter just
ended and for the period commencing at the end of the immediately preceding
Fiscal Year and ending with the last day of such quarter, and comparing such
financial condition and results of operations to the projections for the
applicable period provided under paragraph (h) below and to the results for the
comparable period during the immediately preceding Fiscal Year, in each case
prepared and certified by the Financial Officer of the Parent as presenting
fairly in all material respects the Consolidated financial condition and results
of operations of the Parent and its Consolidated Subsidiaries and as having been
prepared in accordance with GAAP (except the absence of footnote disclosure), in
each case subject to normal year-end audit adjustments;
63
<PAGE> 70
(c) within 30 days after the end of each month (i) unaudited
Consolidated and consolidating balance sheets and income statements showing the
Consolidated financial condition and results of operations of the Parent and its
Consolidated Subsidiaries as of the end of each such month and during such
month, (ii) a Consolidated statement of shareholders' equity and (iii) a
Consolidated statement of cash flow, in each case for the month just ended and
for the period commencing at the end of the immediately preceding Fiscal Year
and ending with the last day of such month, and comparing such financial
condition and results of operations to the projections for the applicable period
provided under paragraph (h) below and to the results for the comparable period
during the immediately preceding Fiscal Year, prepared and certified by the
Financial Officer of the Borrower as presenting fairly in all material respects
its Consolidated financial condition and results of operations of the Borrower
and their Consolidated Subsidiaries and as having been prepared in accordance
with GAAP (except the absence of footnote disclosures), in each case subject to
normal year-end audit adjustments;
(d) promptly after the same become publicly available, copies of such
registration statements, annual, periodic and other reports, and such proxy
statements and other information, if any, as shall be filed by the Parent or any
Subsidiaries with the Securities and Exchange Commission pursuant to the
requirements of applicable securities legislation, including the Securities Act
of 1933 or the Securities Exchange Act of 1934;
(e) (i) concurrently with any delivery under (a) or (b) above, a
certificate of the firm or person referred to therein (x) which certificate
shall, in the case of the certificate of the Financial Officer of the Borrower,
certify that to the best of his or her knowledge no Default or Event of Default
has occurred (including calculations demonstrating compliance, as of the dates
of the financial statements being furnished, with the covenants set forth in
Sections 7.10, 7.11 and 7.12 hereof) and, if such a Default or Event of Default
has occurred, specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto and (y) which certificate, in
the case of the certificate furnished by the independent public accountants
referred in paragraph (a) above, may be limited to accounting matters and
disclaim responsibility for legal interpretations, but shall in any event
certify that to the best of such accountants' knowledge, as of the dates of the
financial statements being furnished no Default or Event of Default has occurred
under any of the covenants set forth in Sections 7.10, 7.11 and 7.12 hereof
(such certificate to include calculations demonstrating compliance with such
covenants) and, if such a Default or Event of Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed to be
taken with respect thereto, and shall in addition certify that in the course of
preparing the audit and the certificate referred to herein, such accountants
have not become aware of the occurrence of any other Default or
64
<PAGE> 71
Event of Default and, if such a Default or Event of Default has occurred,
specifying the nature thereof; provided, however, that any certificate delivered
concurrently with (a) above shall be accompanied by a supplemental certificate
confirming the accuracy of the accountants' certificate and signed by the
Financial Officer of the Borrower;
(f) as soon as the same becomes available, a management letter prepared
by the independent public accountants who reported on the financial statements
delivered under (a) above, with respect to the internal audit and financial
controls of the Borrower and its Subsidiaries;
(g) within 15 days of the end of each month (or more frequently at the
request of the Agent at any time that Availability is less than $10,000,000), an
aging schedule of the Receivables and payables of the Borrower in the form of
the aging schedule of Receivables dated July 31, 1998 previously furnished to
the Agent and a certificate executed by the Financial Officer of the Borrower
with respect to current inventory;
(h) prior to the beginning of each Fiscal Year, a summary of business
plans and financial projections (including, without limitation, with respect to
Capital Expenditures) for the Parent and its Subsidiaries for such Fiscal Year
(including monthly Consolidated and consolidating balance sheets, statements of
income and of Consolidated cash flow) and annual projections through the next
two Fiscal Years thereafter prepared by management and in form and detail
(including, without limitation, principal assumptions, projected Borrowing Bases
and projected covenant compliance) satisfactory to the Required Lenders;
(i) as soon as practicable, copies of all non-routine reports, forms,
filings, loan documents and financial information submitted to governmental
agencies and/or its shareholders;
(j) within 15 days of the end of each fiscal month (or more frequently
at the request of the Agent at any time that Availability is less than
$10,000,000) sales, collections, debit and credit adjustments and a certificate,
in form and substance satisfactory to the Agent, executed by the Financial
Officer of the Borrower demonstrating compliance as at the end of such
applicable period with the Availability requirements; and
(k) such other information as the Agent or any Lender may reasonably
request.
SECTION VI.6. Litigation and Other Notices. Give the Agent prompt
written notice of the following:
65
<PAGE> 72
(a) the issuance by any court or governmental agency or authority of
any injunction, order, decision or other restraint prohibiting, or having the
effect of prohibiting, the making of the Loans or occurrence of other Credit
Events, or invalidating, or having the effect of invalidating, any provision of
this Agreement, the Notes or the other Loan Documents, or the initiation of any
litigation or similar proceeding seeking any such injunction, order, decision or
other restraint;
(b) the filing or commencement of any action, suit or proceeding
against the Parent or any of its Subsidiaries, whether at law or in equity or by
or before any court or any Federal, state, municipal or other governmental
agency or authority, (i) which is material and is brought by or on behalf of any
governmental agency or authority, or in which injunctive or other equitable
relief is sought or (ii) as to which there is a reasonable likelihood of an
adverse determination and which, if adversely determined, could reasonably be
expected, individually or in the aggregate, to materially impair the ability of
any of the Loan Parties to conduct business substantially as now conducted, or
result in a Material Adverse Effect, or (B) materially impair the right of the
Parent or a Subsidiary thereof to perform its obligations under this Agreement,
any Note or any other Loan Document to which it is a party;
(c) immediately upon becoming aware thereof, notice to the Agent of the
breach by any party of any material agreement with any of the Loan Parties which
could result in a Material Adverse Effect;
(d) any Default or Event of Default, specifying the nature and extent
thereof and the action (if any) taken or which is proposed to be taken with
respect thereto;
(e) immediately upon becoming aware thereof, notice to the Agent of any
loss or destruction of, or substantial damage to, any material portion of the
Collateral, and any other matters materially affecting the value, enforceability
or collectibility of any material portion of the Collateral; and
(f) any development in the business or affairs of the Parent or any of
its Subsidiaries which has had or which could reasonably be expected to have a
Material Adverse Effect.
SECTION VI.7. ERISA. (a) Pay and discharge promptly any material
liability imposed upon it pursuant to the provisions of Title IV of ERISA;
provided, however, that neither the Borrower nor any ERISA Affiliate shall be
required to pay any such liability if (1) the amount, applicability or validity
thereof shall be diligently contested in good faith by appropriate proceedings,
and (2) such person shall have set aside on its books reserves which,
66
<PAGE> 73
in the opinion of the independent certified public accountants of such person,
are adequate with respect thereto.
(b) Deliver to the Agent, promptly, and in any event within 5 days,
after (i) the occurrence of any Reportable Event, a copy of the materials that
are filed with the PBGC, (ii) Borrower or any ERISA Affiliate or an
administrator of any Pension Plan files with participants, beneficiaries or the
PBGC a notice of intent to terminate any such Plan, a copy of any such notice,
(iii) the receipt of notice by the Borrower or any ERISA Affiliate or an
administrator of any Pension Plan from the PBGC of the PBGC's intention to
terminate any Pension Plan or to appoint a trustee to administer any such Plan,
a copy of such notice, (iv) upon request, the filing thereof with the Internal
Revenue Service, copies of each annual report that is filed on Treasury Form
5500 with respect to any Plan, together with certified financial statements (if
any) for the Plan and any actuarial statements on Schedule B to such Form 5500,
(v) the Borrower or any ERISA Affiliate knows or has reason to know of any event
or condition which might constitute grounds under the provisions of Section 4042
of ERISA for the termination of (or the appointment of a trustee to administer)
any Pension Plan, an explanation of such event or condition, (vi) the receipt by
the Borrower or any ERISA Affiliate of an assessment of withdrawal liability
under Section 4201 of ERISA from a Multiemployer Plan, a copy of such
assessment, (vii) the Borrower or any ERISA Affiliate knows or has reason to
know of any event or condition which might cause any one of them to incur a
liability under Section 4062,4063,4064 or 4069 of ERISA or Section 412(n) or
4971 of the Code, an explanation of such event or condition, and (viii) the
Borrower or any ERISA Affiliate knows or has reason to know that an application
is to be, or has been, made to the Secretary of the Treasury for a waiver of the
minimum funding standard under the provisions of Section 412 of the Code, a copy
of such application, and in each case described in clauses (i) through (iii) and
(v) through (vii) together with a statement signed by the Financial Officer
setting forth details as to such Reportable Event, notice, event or condition
and the action which the Borrower or such ERISA Affiliate proposes to take with
respect thereto.
SECTION VI.8. Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), at all reasonable times and as often as the Agent may request (but
except following an Event of Default which is continuing, not more than once in
any 30 day period), permit any authorized representative designated by the Agent
to visit and inspect the properties and financial records of the Borrower, the
other Loan Parties and their Subsidiaries and to make extracts from such
financial records at the Agent's expense, unless the disclosure of such
information is prohibited by law, and permit any authorized representative
designated by the Agent to discuss the affairs, finances and condition of the
Borrower, the other Loan Parties and their Subsidiaries with the appropriate
Financial Officer
67
<PAGE> 74
and such other officers as the Borrower shall deem appropriate and the
Borrower's independent public accountants, as applicable. The Agent agrees that
it shall schedule any meeting with any such independent public accountant
through the Borrower and a Responsible Officer of the Borrower shall have the
right to be present at any such meeting. Any Lender may accompany the Agent on
any visit and inspection and participate in any discussion and upon the
occurrence and continuance of an Event of Default any Lender in its own right
may visit and inspect to the same extent and on the same terms as the Agent, all
expenses of the Agent or any Lender after the occurrence and continuance of an
Event of Default to be paid by the Borrower. Nothing in this Agreement shall
require the Parent, the Borrower or any of their Subsidiaries to provide or
permit access to or for any person who is or could reasonably be expected to
become in the foreseeable future a competitor of the Parent, the Borrower or any
of their Subsidiaries, other than any information that is generally available to
the public. At the Borrower's expense, the Agent shall have the right to audit,
as often as it may request, the existence and condition of the accounts
receivables, inventory, books and records of the Borrower and its Subsidiaries
and to review their compliance with the terms and conditions of this Agreement
and the other Loan Documents.
SECTION VI.9. Use of Proceeds. Use the proceeds of the Credits only for
the purposes set forth in Section 4.14 hereof.
SECTION VI.10. Fiscal Year-End. Cause its Fiscal Year to end on
December 31 in each year.
SECTION VI.11. Further Assurances. Execute any and all further
documents and take all further actions which may be required under applicable
law, or which the Agent may reasonably request, to grant, preserve, protect and
perfect the first priority security interest (subject to the Liens permitted by
Section 7.2) created by the Security Documents in the Collateral.
SECTION VI.12. Additional Grantors and Guarantors. Promptly inform the
Agent of (i) the creation or acquisition of any direct or indirect Subsidiary
(subject to the provisions of Section 7.4 hereof) of any Loan Party and (ii) any
Subsidiary which ceases to be a Designated Subsidiary (whether as a result of
recommencement of operations, revaluation of assets or otherwise), and cause
each such Subsidiary to enter into a Guarantee of the Obligations in form and
substance satisfactory to the Agent, and to execute the Security Documents, as
applicable, as a Grantor, and cause the direct parent of each such Subsidiary to
pledge all of the capital stock of such Subsidiary pursuant to the Pledge
Agreement and cause each such Subsidiary to pledge its accounts receivable and
all other assets pursuant to the Security Agreement.
68
<PAGE> 75
SECTION VI.13. Environmental Laws. (a) 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 the Parent, the Borrower and the
Subsidiaries in excess of $5,000,000.
(b) If a default caused by reason of a breach of Section 4.19 or
Paragraph (a) above shall have occurred and be continuing, at the request of the
Required Lenders, provide to the 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 Lenders,
indicating the presence or absence of Hazardous Materials and a good faith
estimate at the cost of any compliance or Remedial Action in connection with
such Properties.
SECTION VI.14. Pay Obligations to Lenders and Perform Other Covenants.
(a) Make full and timely payment of the Obligations, whether now existing or
hereafter arising, (b) duly comply with all the terms and covenants contained in
this Agreement (including, without limitation, the borrowing limitations and
mandatory prepayments in accordance with Article II hereof) and in each of the
other Loan Documents, all at the times and places and in the manner set forth
therein, subject to applicable cure and grace periods, and (c) except for the
filing of continuation statements and the making of other filings by the Agent
as secured party or assignee, at all times take all actions necessary to
maintain the Liens and security interests provided for under or pursuant to this
Agreement and the Security Documents as valid and perfected first Liens on the
property intended to be covered thereby (subject only to Liens expressly
permitted hereunder) and supply all information to the Agent necessary for such
maintenance.
SECTION VI.15. Maintain Operating Accounts. Maintain all of its
operating accounts and cash management arrangements with financial institutions
approved by the Agent and on terms (which shall include obtaining blocked
account agreements) satisfactory to the Agent in its sole discretion
SECTION VI.16. Year 2000. Take all actions necessary to make all
material Date Data and Date-Sensitive Systems Year 2000 Compliant, unless the
failure to take such actions would not have a Material Adverse Effect.
69
<PAGE> 76
SECTION VI.17. Collection of Receivables; Management of Collateral. (a)
At the Borrower's own cost and expense, (i) arrange for remittances on
Receivables of the Receivables Grantors to be made directly to lockboxes
designated by the Agent or in such other manner as the Agent may direct, and
(ii) promptly deposit, or cause to be deposited, all payments received by the
Receivables Grantors on account of Receivables, whether in the form of cash,
checks, notes, drafts, bills of exchange, money orders or otherwise, in one or
more accounts designated by the Agent in the Security Documents in precisely the
form received (but with any endorsements necessary for deposit or collection),
subject to withdrawal by the Agent only, as provided in the Security Documents,
and until such payments are deposited, such payments shall be deemed to be held
in trust by the Receivables Grantors for and as the Lenders' property.
VII. NEGATIVE COVENANTS
Each of the Parent and the Borrower covenants and agrees with each
Lender that, so long as this Agreement shall remain in effect or the principal
of or interest on any Note, any amount under any Letter of Credit Obligation, or
any fee, expense or other Obligation payable hereunder shall be unpaid, it will
not and will not cause or permit any of its Subsidiaries and, in the case of
Section 7.15 hereof, any ERISA Affiliate to, either directly or indirectly:
SECTION VII.1. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:
(i) in the case of Parent, 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 7.1 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 Indebtedness shall be a
market interest rate as of the time of such extension, renewal or
replacement;
(ii) Subordinated Indebtedness;
(iii) in the case of the Guarantors the Guarantees;
(iv) in the case of the Borrower, Interest Rate Protection
Agreements, entered into in order to hedge the interest payable on up
to 100% of the aggregate principal amount outstanding hereunder as of
the date on which the most recent such Interest
70
<PAGE> 77
Rate Protection Agreement is entered into, in the form approved by the
Required Lenders;
(v) in the case of the Borrower, Indebtedness created
hereunder;
(vi) intercompany Indebtedness between (a) the Borrower and
any of the Wholly Owned Subsidiaries, (b) any Wholly Owned Subsidiaries
of the Borrower and (c) between Parent and the Borrower or any Wholly
Owned Subsidiary, in an aggregate amount not exceeding at any time
$2,000,000;
(vii) Indebtedness consisting of Earn-out Obligations not in
excess of $5,000,000 at any time outstanding;
(viii) 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;
(ix) Reverse Repurchase Agreements permitted under Section
7.4(vi);
(x) 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) (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 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 acquisition;
(xi) Indebtedness of any Joint Venture owing to Parent, the
Borrower or any other Subsidiary to the extent permitted by Section
7.4(v);
(xii) in the case of any Joint Venture or any Subsidiary that
is not a Wholly Owned Subsidiary, Indebtedness for borrowed money and
Capitalized Lease Obligations existing on the date hereof and set forth
in Schedule 7.1 (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,
71
<PAGE> 78
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);
(xiii) Capitalized Lease Obligations entered into in the
ordinary course of business not exceeding in the aggregate $5,000,000
at any time (exclusive of any sale and leaseback transactions permitted
by Section 7.3).
SECTION VII.2. 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, on any income
or revenues or rights in respect of any thereof, except:
(i) Liens on property or assets of the Borrower and its
Subsidiaries existing on the date hereof as set forth in Schedule 7.2
thereto, provided that (subject to the provisions of subsection (xii)
below) such Liens shall secure only those obligations that they secure
on the date hereof;
(ii) Liens created in favor of the Agent for its own benefit
and the benefit of the Lenders pursuant to the Loan Documents;
(iii) 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;
(iv) Liens for taxes not yet due or that are being contested
in compliance with Section 6.4;
(v) 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 6.4;
(vi) 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;
72
<PAGE> 79
(vii) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capitalized
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(viii) 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;
(ix) any Lien existing or arising by operation of law in the
ordinary course of business of Parent, the Borrower and its
Subsidiaries, such as banker's Liens or similar rights of offset;
(x) (a) 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 (b)
liens incurred in connection with Capitalized Lease Obligations, so
long as the aggregate principal amount of Indebtedness secured by the
Liens permitted pursuant to this paragraph (x) is permitted pursuant to
Section 7.1(xii);
(xi) 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 (provided that no foreclosure action has been commenced with
respect to such Liens that has not been stayed or discharged within
thirty (30) days); and
(xii) Liens incurred in connection with the extension, renewal
or refinancing of the Indebtedness secured by the Liens described in
paragraphs (i), (iii) and (x) above, provided that (a) 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 7.1.
73
<PAGE> 80
SECTION VII.3. 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 for the sale and
lease-back of the Sabratek pumps or any similar arrangements entered into
amending or in replacement of such arrangement and 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 VII.4. Investments, Loans and Advance, 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:
(i)(a) Investments by the Borrower or any Guarantor permitted
by Section 7.4(iv) in any Guarantor or in any Person that, immediately
after the making of such Investment, is a Guarantor, (b) Investments by
Parent in the capital stock of the Borrower, (c) Investments by the
Borrower or any 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 7.4(i)(c), (d) Investments by the Borrower or any Guarantor
made after the Closing Date in any Joint Venture that is in existence
as of the Closing Date and described on Schedule 7.4(i)(d) 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
$5,000,000 for the period following the date hereof and (e) Investments
by the Borrower or any Guarantor (A) made after the Closing Date in any
Joint Venture that is described on Schedule 7.4(i)(e) (other than
Investments made pursuant to clause (d) above), (B) in any Joint
Venture acquired after the Closing Date in connection with any
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 (e) shall not
exceed $5,000,000 for the period following the date hereof;
(ii) Permitted Investments;
(iii) in the case of the Borrower, Interest Rate Protection
Agreements permitted pursuant to Section 7.1(iii);
74
<PAGE> 81
(iv) Permitted Acquisitions;
(v) Investments by Parent, the Borrower or any of the
Subsidiaries consisting of loans at arms' length terms to any Person in
which Parent, 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 7.4(v), and any extensions,
renewals or replacements of the same, provided that the aggregate
principal amount of such loans are not at any time increased;
(vi) 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 Parent, the Borrower and the Subsidiaries;
(vii) other Investments not exceeding $5,000,000 in the
aggregate at any time outstanding;
(viii) 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.
(ix) Employee Loans not exceeding $2,000,000 in aggregate
principal amount at any time outstanding; and
(x) acquisitions constituting a transaction permitted by
Section 7.5(iv) or 7.5(vi).
SECTION VII.5. 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:
75
<PAGE> 82
(i) the Borrower and any Subsidiary may (a) purchase and sell
inventory and other property and services in the ordinary course of
business and (b) dispose of obsolete, scrap or surplus equipment which
is no longer necessary or useful in the reasonable judgment of the
Borrower or such Subsidiary for the conduct of its business;
(ii) the Borrower may sell (a) readily marketable securities
(A) in the ordinary course of business and (B) in connection with
Reverse Repurchase Agreements permitted pursuant to Section 7.4(vi) and
(b) 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 $25,000,000
for the period following the date hereof, 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;
(iii) the Borrower may sell, transfer, dissolve, liquidate or
otherwise dispose of shares of stock or securities of any Designated
Subsidiary;
(iv) 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 7.4;
(v) the Borrower and any Subsidiary may lease and sublease
assets in the ordinary course of business;
(vi) any Subsidiary may sell, assign, pledge or otherwise
transfer any of its assets to the Borrower or any Guarantor;
76
<PAGE> 83
(vii) 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); and
(viii) the Parent may sell, assign, pledge or otherwise
transfer the IHS Shares, subject to any Net Cash Proceeds from any such
sale or transfer being applied as required by Section 2.9 hereof.
SECTION VII.6. Dividends and Distribution. 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:
(i) Parent may declare or distribute dividends payable solely
in its common stock;
(ii) any Subsidiary may declare and pay dividends or make
other distributions to (i) the Borrower and (ii) any Guarantor;
(iii) so long as no Event of Default or Default shall have
occurred and be continuing, the Borrower may (i) declare and pay
dividends or make other distributions to Parent in order to enable
Parent to pay any taxes or expenses required to be paid by Parent 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 7.1(v)(c), does not exceed $2,000,000 in any fiscal year;
(iv) any Joint Venture may make distributions to its owners,
and
(v) any prepayment, redemption or similar payment on or in
respect of the Notes.
SECTION VII.7. 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
77
<PAGE> 84
the foregoing transactions in the ordinary course of business at prices and on
terms and conditions not less favorable to the Borrower or 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 Parent, 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 Parent, the Borrower or any Subsidiary
may engage in any transaction described on Schedule 7.7.
SECTION VII.8. 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 businesses currently conducted by it or them
or a business substantially similar thereto and business activities reasonably
incidental thereto and (b) in the case of Parent, the ownership of all the
outstanding common stock of the Borrower and business activities reasonably
incidental hereto.
SECTION VII.9. Other Agreements. (i) Take or omit to take any action,
which act or omission would constitute a default or event of default under any
agreement, document or instrument to which it is a party.
(ii) Permit any 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 the Borrower or any
Subsidiary that is a direct or indirect parent of such Subsidiary.
SECTION VII.10. Capital Expenditures. Permit the aggregate cumulative
amount of payments made for Capital Expenditures (other than Capital
Expenditures made with proceeds of insurance as permitted pursuant to Section
2.9(e) or sales of assets as permitted pursuant to exception (b) of Section
7.5), including Capitalized Lease Obligations and Indebtedness secured by Liens
permitted under Section 7.2 hereof, for each of the periods indicated to exceed
the following amounts for the Parent and its Subsidiaries:
<TABLE>
<CAPTION>
Period Maximum Amount
- ------ --------------
<S> <C>
Twelve months ending December 31, 1998 $62,000,000
Twenty-four months ending December 31, 1999 $72,000,000
</TABLE>
78
<PAGE> 85
<TABLE>
<S> <C>
Thirty-six months ending December 31, 2000 $82,000,000
Thirty-eight months ending February 28, 2001 $84,000,000
</TABLE>
SECTION VII.11. Rental Obligations. Incur, create, assume or permit to
exist, in respect of leases of real and personal property (other than finance
leases), monetary rental obligations or other commitments thereunder to make any
direct or indirect payment, whether as rent or otherwise, for fixed or minimum
rentals, percentage rentals, property taxes, or insurance premiums, other than
(x) those set forth on Schedule 7.11 annexed hereto and any renewal or
replacement thereof and (y) other such obligations incurred in the ordinary
course of business or representing increased rental costs in replacing existing
rental facilities in an aggregate amount for the Parent and its Subsidiaries not
to exceed $2,000,000 in any Fiscal Year.
SECTION VII.12. Interest Coverage and Total Funded Debt Ratios; EBITDA.
(a) Permit the Interest Coverage Ratio at the end of any fiscal quarter,
commencing with the fiscal quarter ending December 31, 1998, to be less than
1.50:1.00.
(b) Permit the Total Funded Debt Ratio at the end of any fiscal
quarter, commencing with the fiscal quarter ending December 31, 1998, to be
greater than 6.00:1.00.
(c) Permit EBITDA of the Parent and its Consolidated Subsidiaries on a
Consolidated basis to be less than (i) $20,000,000 for the nine months ending
September 30, 1998 and (ii) thereafter, the respective amounts set forth below
for the trailing 12 month periods ending on each date set forth below:
<TABLE>
<CAPTION>
Period Amount
- ------ ------
<S> <C>
December 31, 1998 $ 31,000,000
March 31, 1999 $ 37,500,000
June 30,1999 $ 43,000,000
September 30, 1999 $ 45,000,000
December 31, 1999 $ 47,000,000
March 31, 2000 $ 49,000,000
June 30, 2000 $ 51,000,000
September 30, 2000 $ 53,000,000
December 31, 2000 $ 55,000,000
</TABLE>
79
<PAGE> 86
SECTION VII.13. Sales of Receivables. Sell, assign, discount, transfer,
or otherwise dispose of any accounts receivable, promissory notes, drafts or
trade acceptances or other rights to receive payment held by it, with or without
recourse, except for the purpose of collection or settlement in the ordinary
course of business.
SECTION VII.14. Use of Proceeds. Permit the proceeds of any Credit
Event to be used for any purpose which entails a violation of, or is
inconsistent with, Regulation T, U or X of the Board, or for any purpose other
than those set forth in Section 2.17 or Section 4.14 hereof.
SECTION VII.15. ERISA. (a) Engage in any transaction in connection with
which any Borrower or any ERISA Affiliate could be subject to either a material
civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a
material tax imposed under the provisions of Section 4975 of the Code.
(b) Terminate any Pension Plan in a "distress termination" under
Section 4041 of ERISA, or take any other action which could result in a material
liability of any Borrower or any ERISA Affiliate to the PBGC.
(c) Fail to make payment when due of all material amounts which, under
the provisions of any Plan, the Borrower or any ERISA Affiliate are required to
pay as contributions thereto, or, with respect to any Pension Plan, permit to
exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or not waived, with
respect thereto.
(d) Adopt an amendment to any Pension Plan requiring the provision of
security under Section 307 of ERISA or Section 401 (a)(29) of the Code.
SECTION VII.16. Accounting Changes. Make any change in their accounting
treatment or financial reporting practices except as required or permitted by
GAAP.
SECTION VII.17. Prepayment or Modification of Indebtedness;
Modification of Charter Documents. (a) Directly or indirectly prepay, redeem,
purchase or retire any Indebtedness, including, without limitation, any
Subordinated Indebtedness, other than (i) Indebtedness incurred hereunder, (ii)
Capitalized Lease Obligations, (iii) Earn-Out Obligations and (iv) pursuant to
redemption obligations existing on the date hereof and set forth on Schedule
7.17.
80
<PAGE> 87
(b) Modify, amend or alter their certificates or articles of
incorporation or other constitutive documents or preferred stock/certificates of
designations to the extent such would be adverse to the Lenders in any material
respect.
SECTION VII.18. Negative Pledges, Etc. Enter into any agreement (other
than the Securities Exchange Agreement, this Agreement or any other Loan
Document or any agreement relating to any Indebtedness permitted pursuant to
Sections 7.1(i) and (xiii) but only with respect to the property securing such
Indebtedness) which (a) prohibits the creation or assumption of any Lien upon
any of the Collateral, including, without limitation, any hereafter acquired
property, or (b) specifically prohibits the amendment or other modification of
this Agreement or any other Loan Document.
SECTION VII.19. Status of Receivables and Other Collateral. (a) Seek to
qualify, or maintain the qualification of, a Receivable as an Eligible
Receivable unless such Receivable shall be a good and valid account representing
an undisputed bona fide indebtedness incurred or an amount indisputably owed by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to an absolute sale and delivery upon the specified terms
of goods sold by such Receivable Grantor, or work, labor and/or services
theretofore rendered by such Receivable Grantor; or (b) seek to qualify, or
maintain the qualification of, a Receivable as an Eligible Receivable unless to
the best of its knowledge, all signatures and endorsements that appear on all
documents and agreements relating to such Receivable shall be genuine and all
signatories and endorsers with respect thereto shall have full capacity to
contract.
SECTION VII.20. Cash Disbursement Accounts. Permit any disbursement or
funding account (including, without limitation, the Funding Account) at any time
to contain a balance in excess of that reasonably required to meet disbursements
actually incurred, to make payments on the Obligations and to pay benefits,
payroll or other recurring expenses of the Borrower on the due date therefor.
VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events (herein called
"Events of Default"):
(a) any representation or warranty made or deemed made by any Loan
Party or Subsidiary thereof in or in connection with this Agreement, any of the
Security Documents, the Notes or other Loan Documents or any Credit Events
hereunder, shall prove to have been incorrect in any material respect when made
or deemed to be made;
81
<PAGE> 88
(b) default shall be made in the payment of any principal of any Note
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 Note,
or any fee or any other amount payable hereunder, or under the Notes, Letter of
Credit Obligations, or any other Loan Document or in connection with any other
Credit Event when and as the same shall become due and payable, and such default
shall continue for a period of five days;
(d) default shall be made in the due observance or performance of any
covenant, condition or agreement to be observed or performed on the part of any
Loan Party pursuant to (i) Sections 6.1, 6.3, 6.5 (other than subsections (a),
(b) and (e)), 6.8 (with respect to inspection, visitation and audits), 6.9,
6.10, 6.14, and 6.15 or Article VII hereof, any of the Notes, Security Documents
or other Loan Documents, (ii) the provisions of subsections (a), (b) and (e) of
Section 6.5 and such default shall continue for a period of three Business Days
(provided that such grace period shall only be available a maximum of three
times) or (iii) any other terms of this Agreement (other than as specified in
(a), (b), (c) or (d)(i) or (d)(ii) above) and such default with respect to any
such other terms shall continue for a period of 15 days;
(e) any Loan Party or Subsidiary thereof shall (i) voluntarily commence
any proceeding or file any petition seeking relief under Title 11 of the United
States Code, or any other Federal, state or foreign bankruptcy, insolvency,
liquidation or similar law, (ii) consent to the institution of, or fail to
contravene in a timely and appropriate manner, any such proceeding or the filing
of any such petition, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official for any Loan
Party or Subsidiary thereof or for a substantial part of its property or assets,
(iv) file an answer admitting the material 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 corporate action for
the purpose of effecting any of the foregoing;
(f) 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 any Loan Party or Subsidiary thereof, or of a substantial part of
the property or assets of any Loan Party or Subsidiary thereof, under Title 11
of the United States Code or any other Federal state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any Loan Party or
Subsidiary thereof or for a substantial part of the property of any Loan Party
or Subsidiary thereof, or (iii) the winding-up or liquidation of any Loan Party
or Subsidiary thereof; and such proceeding or
82
<PAGE> 89
petition shall continue undismissed for 30 days or an order or decree approving
or ordering any of the foregoing shall continue unstayed and in effect for 30
days;
(g) default shall be made with respect to any Indebtedness of any Loan
Party or Subsidiary thereof (excluding Indebtedness outstanding hereunder) which
either individually or taken together with other Indebtedness as to which a
default has occurred shall exceed $1,000,000 if the effect of any such default
shall be to accelerate, or to permit the holder or obligee of any such
Indebtedness (or any trustee on behalf of such holder or obligee) at its option
to accelerate, the maturity of such Indebtedness;
(h) (i) a Reportable Event shall have occurred with respect to a
Pension Plan, (ii) the filing by any Loan Party or Subsidiary thereof, any ERISA
Affiliate, or an administrator of any Plan of a notice of intent to terminate
such a Plan in a "distress termination" under the provisions of Section 4041 of
ERISA, (iii) the receipt of notice by any Loan Party or Subsidiary thereof, any
ERISA Affiliate, or an administrator of a Plan that the PBGC has instituted
proceedings to terminate (or appoint a trustee to administer) such a Pension
Plan, (iv) any other event or condition exists which might, in the opinion of
the Agent, constitute grounds under the provisions of Section 4042 of ERISA for
the termination of (or the appointment of a trustee to administer) any Pension
Plan by the PBGC, (v) a Pension Plan shall fail to maintain the minimum funding
standard required by Section 412 of the Code for any plan year or a waiver of
such standard is sought or granted under the provisions of Section 412(d) of the
Code, (vi) any Loan Party or Subsidiary thereof or any ERISA Affiliate has
incurred, or is likely to incur, a liability under the provisions of Section
4062, 4063, 4064 or 4201 of ERISA, (vii) any Loan Party or Subsidiary thereof or
any ERISA Affiliate fails to pay the full amount of an installment required
under Section 412(m) of the Code, (viii) a non-exempt prohibited transaction (as
described in Code Section 4975 or ERISA Section 406) shall occur with respect to
any Plan, (ix) the occurrence of any other event or condition with respect to
any Plan which would constitute an event of default under any other agreement
entered into by any Loan Party or Subsidiary thereof or any ERISA Affiliate, and
in each case in clauses (i) through (ix) of this subsection (h), such event or
condition, together with all other such events or conditions, if any, could
subject any Loan Party or Subsidiary thereof or any ERISA Affiliate to any
taxes, penalties or other liabilities which, in the reasonable opinion of the
Agent, would have a Material Adverse Effect;
(i) any Loan Party or Subsidiary thereof or any ERISA Affiliate shall
have made a complete or partial withdrawal from a Multiemployer Plan or any
Multiemployer Plan to which any Loan Party or ERISA Affiliate has an obligation
to contribute becomes insolvent, and the payment of any resulting withdrawal or
other liability would, in the reasonable opinion of the Agent, have a Material
Adverse Effect;
83
<PAGE> 90
(j) a judgment (not reimbursed by insurance policies of any Loan Party
or Subsidiary thereof) or decree for the payment of money, a fine or penalty
which when taken together with all other outstanding judgments, decrees, fines
and penalties shall exceed $5,000,000 shall be rendered by a court or other
tribunal against any Loan Party or Subsidiary thereof and (i) shall remain
undischarged or unbonded for a period of 30 consecutive days during which the
execution of such judgment, decree, fine or penalty shall not have been stayed
effectively or (ii) any judgment creditor or other person shall legally commence
actions to levy upon assets or properties to enforce such judgment, decree, fine
or penalty;
(k) this Agreement, any Note, any of the Security Documents or other
Loan Documents shall for any reason cease to be, or shall be asserted by any
Loan Party or Subsidiary thereof not to be, a legal, valid and binding
obligation of any Loan Party or Subsidiary thereof, enforceable in accordance
with its terms (subject as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally from time to time in effect and to
general principles of equity), or a Lien affecting a material portion of the
Collateral purported to be created by any of the Security Documents shall for
any reason cease to be, or be asserted by any Loan Party or Subsidiary thereof
not to be, a valid, first priority perfected Lien (except to the extent
otherwise permitted under this Agreement or any of the Security Documents);
(l) a Change of Control shall occur;
(m) any material damage to, or loss, theft or destruction of, any
material Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other casualty
which causes, for more than thirty (30) consecutive days beyond the coverage
period of any applicable business interruption insurance, the cessation or
substantial curtailment of revenue producing activities at any facility of a
Loan Party or Subsidiary thereof if, in the case of any of the foregoing, such
event or circumstance would have a Material Adverse Effect; or
(n) a Lien or Liens, individually or in the aggregate exceeding
$1,000,000 arising from unpaid Federal, state or local taxes shall be filed
against any Loan Party's or Subsidiary's properties or assets (other than any
such Liens which are being contested in good faith in accordance with Section
6.4 hereof);
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event, the
Agent may, and upon the written request of the Required Lenders shall, by
written notice (or facsimile notice promptly confirmed in writing) to the
Borrower, take any or all of the following actions at the same or
84
<PAGE> 91
different times: (i) terminate forthwith all or any portion of the Total
Revolving Credit Commitment and the obligations of the Lenders to incur Letter
of Credit Obligations hereunder; (ii) declare the Notes and any amounts then
owing to the Lenders on account of any Letter of Credit Obligations to be
forthwith due and payable, and (iii) require that the Letter of Credit
Obligations be cash collateralized as provided in Section 2.17; provided,
however, that with respect to a default described in paragraph (e) or (f) above,
the Total Revolving Credit Commitment and the obligation of the Lenders to incur
Letter of Credit Obligations shall automatically terminate and the principal of
the Notes, together with accrued interest and fees thereon and any amounts then
owing to the Lenders on account of any Letters of Credit Obligation and any
other liabilities of the Borrower accrued hereunder shall automatically become
due and payable, both as to principal and interest, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrower, anything contained herein or in the Notes to the contrary
notwithstanding.
IX. AGENT
In order to expedite the transactions contemplated by this Agreement,
Foothill Capital Corporation is hereby appointed to act as Agent on behalf of
the Lenders. Each of the Lenders and each subsequent holder of any Note by its
acceptance thereof, irrevocably authorizes the Agent to take such action on its
behalf and to exercise such powers hereunder and under the Security Documents
and other Loan Documents as are specifically delegated to or required of the
Agent by the terms hereof and the terms thereof together with such actions and
powers as are reasonably incidental thereto. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable as such for any action
taken or omitted to be taken by it or them hereunder or under any of the
Security Documents and other Loan Documents or in connection herewith or
therewith (a) at the request or with the approval of the Required Lenders (or,
if otherwise specifically required hereunder or thereunder, the consent of all
the Lenders) or (b) in the absence of its or their own gross negligence or
willful misconduct. For its services as Agent, the Borrower has agreed to pay
Foothill Capital Corporation the administration fee set forth in Section 2.6.
The Agent is hereby expressly authorized on behalf of the Lenders,
without hereby limiting any implied authority, (a) to receive on behalf of each
of the Lenders any payment of principal of or interest on the Notes outstanding
hereunder and all other amounts accrued hereunder which are paid to the Agent,
and promptly to distribute to each Lender its proper share of all payments so
received, (b) to distribute to each Lender copies of all notices, agreements and
other material as provided for in this Agreement or in the Security Documents
and other Loan Documents as received by such Agent and (c) to take all actions
with respect to
85
<PAGE> 92
this Agreement and the Security Documents and other Loan Documents as are
specifically delegated to the Agent.
In the event that (a) the Borrower fails to pay when due the principal
of or interest on any Note, any amount payable with respect to any Letter of
Credit Obligation, or any fee payable hereunder or (b) the Agent receives
written notice of the occurrence of a Default or an Event of Default (the Agent
being deemed not to have knowledge of any Default or Event of Default unless and
until written notice thereof is given to the Agent by any Borrower or a Lender),
the Agent within a reasonable time shall give written notice thereof to the
Lenders, and shall take such action with respect to such Event of Default or
other condition or event as it shall be directed to take by the Required
Lenders; provided, however, that, unless and until the Agent shall have received
such directions, the Agent may take such action or refrain from taking such
action hereunder or under the Security Documents or other Loan Documents with
respect to a Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
The Agent shall not be responsible in any manner to any of the Lenders
for the effectiveness, enforceability, perfection, value, genuineness, validity
or due execution of this Agreement, the Notes or any of the other Loan Documents
or Collateral or any other agreements or certificates, requests, financial
statements, notices or opinions of counsel or for any recitals, statements,
warranties or representations contained herein or in any such instrument or be
under any obligation to ascertain or inquire as to the performance or observance
of any of the terms, provisions, covenants, conditions, agreements or
obligations of this Agreement or any of the other Loan Documents or any other
agreements on the part of the Borrower and, without limiting the generality of
the foregoing, the Agent shall, in the absence of knowledge to the contrary, be
entitled to accept any certificate furnished pursuant to this Agreement or any
of the other Loan Documents as conclusive evidence of the facts stated therein
and shall be entitled to rely on any note, notice, consent, certificate,
affidavit, letter, telegram, teletype message, statement, order or other
document which it believes in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. It is understood and agreed
that the Agent may exercise its rights and powers under other agreements and
instruments to which it is or may be a party, and engage in other transactions
with the Borrower, as though it were not Agent of the Lenders hereunder.
The Agent shall promptly give notice to the Lenders of the receipt or
sending of any notice, schedule, report, projection, financial statement or
other document or information pursuant to this Agreement or any of the other
Loan Documents and shall promptly forward a copy thereof to each Lender.
86
<PAGE> 93
Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrower on account of the failure
or delay in performance or breach by any Lender other than the Agent of any of
its obligations hereunder or to any Lender on account of the failure of or delay
in performance or breach by any other Lender or the Borrower of any of their
respective obligations hereunder or in connection herewith.
The Agent may consult with legal counsel selected by it in connection
with matters arising under this Agreement or any of the other Loan Documents and
any action taken or suffered in good faith by it in accordance with the opinion
of such counsel shall be full justification and protection to it. The Agent may
exercise any of its powers and rights and perform any duty under this Agreement
or any of the other Loan Documents through agents or attorneys.
The Agent and the Borrower may deem and treat the payee of any Note as
the holder thereof until written notice of transfer shall have been delivered as
provided in Section 11.3 by such payee to the Agent and the Borrower and such
transfer is otherwise in accordance with Section 11.3.
With respect to the Loans made hereunder, the Notes issued to it and
any other Credit Event applicable to it, the Agent in its individual capacity
and not as an Agent shall have the same rights, powers and duties hereunder and
under any other agreement executed in connection herewith as any other Lender
and may exercise the same as though it were not the Agent, and the Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or other affiliate thereof as if it were not
the Agent. Each of the Lenders hereby acknowledges that the Agent and/or one or
more Affiliates of the Agent may at any time and from time to time be a holder
of equity interests in a Loan Party.
Each Lender agrees (i) to reimburse the Agent in the amount of such
Lender's pro rata share (based on its Commitment hereunder) of any expenses
incurred for its own benefit and/or for the benefit of the Lenders by the Agent,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, not reimbursed by the Borrower and
(ii) to indemnify and hold harmless the Agent and any of its directors,
officers, employees or agents, on demand, in the amount of its pro rata share,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as the Agent or any of them in any way relating to or
arising out of this Agreement or any of the other Loan Documents or any action
taken or omitted by it or any of them under this Agreement or any of the other
Loan Documents, to the extent not
87
<PAGE> 94
reimbursed by the Borrower; provided, however, that no Lender shall be liable to
the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgment, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Agent or any of its
directors, officers, employees or agents.
With respect to the release of Collateral, Lenders hereby irrevocably
authorize the Agent, at its option and in its discretion, to release any Lien
granted to or held by the Agent upon any property covered by this Agreement or
the other Loan Documents (i) upon termination of the Total Revolving Credit
Commitment and payment and satisfaction of all Obligations; (ii) constituting
property being sold or disposed of in compliance with the provisions of this
Agreement (and the Agent may rely in good faith conclusively on any certificate,
without further inquiry); or (iii) constituting property leased to the Borrower
or any Subsidiary under a lease which has expired or been terminated or is about
to expire and which has not been, and is not intended by the Borrower or such
Subsidiary to be, renewed or extended; provided, however, that (x) the Agent
shall not be required to execute any release on terms which, in the Agent's
opinion, would expose the Agent to liability or create any obligation or entail
any consequence other than the release of such Liens without recourse or
warranty, and (y) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Loan Party, in
respect of), all interests retained by any Loan Party, including (without
limitation) the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
With respect to perfecting the Lenders' security interest in Collateral
which, in accordance with Article 9 of the Uniform Commercial Code or any
comparable provision of any Lien perfection statute in any applicable
jurisdiction, can be perfected only by possession, each Lender hereby appoints
each other Lender for the purpose of perfecting such interest. Should any Lender
(other than the Agent) obtain possession of any such Collateral, such Lender
shall notify the Agent, and, promptly upon the Agent's request, shall deliver
such Collateral to the Agent or in accordance with the Agent's instructions.
Each Lender agrees that it will not have any right individually to enforce or
seek to enforce this Agreement or any Loan Document or to realize upon any
Collateral for the Loans, it being understood and agreed that such rights and
remedies may be exercised only by the Agent.
In the event that a petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law is filed by or against any Loan Party,
the Agent is authorized to file a proof of claim on behalf of itself and the
Lenders in such proceeding for the total amount of Obligations owed by such Loan
Party. With respect to any such proof of claim which the Agent may file, each
Lender
88
<PAGE> 95
acknowledges that without reliance on such proof of claim, such Lender shall
make its own evaluation as to whether an individual proof of claim must be filed
in respect of such Obligations owed to such Lender and, if so, take the steps
necessary to prepare and timely file such individual claim.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent 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 and any other Loan Document to which such
Lender is party. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document, any related agreement or any document furnished
hereunder.
Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
such Lenders and shall have accepted such appointment within 30 days after the
retiring Agent gives notice of its resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent which shall be a financial
institution with an office in New York, New York having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor financial institution, such successor shall
thereupon 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 and under each of the other Loan Documents.
After any Agent's resignation hereunder, the provisions of this Article 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.
The Lenders hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by the Agent pursuant to the
provisions of this Agreement or any of the other Loan Documents unless it shall
be requested in writing to do so by the Required Lenders. The Lenders further
hereby acknowledge that the Agent is not acting as the fiduciary of, or the
trustee for, any of the Lenders and except as expressly set forth herein, the
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information communicated to the Agent by or relating to
the Borrower or any of its Subsidiaries.
X. INTENTIONALLY OMITTED
89
<PAGE> 96
XI. MISCELLANEOUS
SECTION XI.1. Notices. Notices, consents and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service or mailed by certified or registered mail or sent by
telecopy addressed,
(a) if to the Borrower, Guarantors, or Grantors, c/o Parent, at 1125
Seventeenth Street, Suite 2100, Denver, CO 80202, Attention: Wendy L. Simpson
(Telecopy No. 303-672-8799) with a copy to General Counsel, (Telecopy No.
303-298-0047);
(b) if to the Agent or any Lender, at the address or telecopy number
set forth below its name in Schedule 2.1 annexed hereto or in the Assignment and
Acceptance pursuant to which such Lender became a party hereto with a copy to
Weil, Gotshal & Manges LLP, at 767 Fifth Avenue, New York, New York 10153,
Attention: Ted S. Waksman, Esq. (Telecopy No. 212-310-8007).
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 hand delivered or sent by overnight courier service or five
days after being sent by registered or certified mail, postage prepaid, return
receipt requested, if by mail, or when receipt is acknowledged if sent by
telecopy, in each case addressed to such party as provided in this Section 11.1
or in accordance with the latest unrevoked direction from such party.
SECTION XI.2. 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 this
Agreement, any of the Security Documents, or any other Loan Document, shall be
considered to have been relied upon by the Lenders and shall survive the making
by the Lenders of the Loans, the incurrence of the Letter of Credit Obligations
and the execution and delivery to the Lenders of the Notes and the occurrence of
any other Credit Event and shall continue in full force and effect as long as
the principal of or any accrued interest on the Notes or any other fee or amount
payable under the Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Total Commitment has not been
terminated.
SECTION XI.3. Successors and Assigns; Participations. (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 any Loan Party, the Agent
or the Lenders, that are contained in this
90
<PAGE> 97
Agreement shall bind and inure to the benefit of their respective successors and
assigns. Without limiting the generality of the foregoing, the Borrower
specifically confirms that any Lender may at any time and from time to time
pledge or otherwise grant a security interest in any Loan or any Note (or any
part thereof) to any Federal Reserve Bank. No Borrower may assign or transfer
any of its rights or obligations hereunder without the written consent of all
the Lenders.
(b) Each Lender, without the consent of the Borrower or the Agent, may
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Revolving Credit Commitment and the Loans
owing to it and the Notes held by it and outstanding Letter of Credit
Obligations); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Revolving Credit Commitment) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the banks or other
entities buying participations shall be entitled to the cost protection
provisions contained in Sections 2.10, 2.12 and 2.16 (provided such participant
shall have complied with the terms thereof) hereof, but only to the extent any
of such Sections would be available to the Lender which sold such participation,
and shall not be entitled to receive any greater amount than the selling Lender
would be entitled to receive and (iv) the Borrower, the Guarantors, the Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement; provided, further, however, that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Loan Parties relating
to the Loans, including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement, other than
amendments, modifications or waivers with respect to decreasing any fees payable
hereunder or the amount of principal or the rate of interest payable on the
Loans, or extending the dates fixed for any payment of principal pursuant to
Section 2.4(c) or interest on the Loans, or increasing or extending the
Revolving Credit Commitments or the release of all Collateral.
(c) Each Lender may assign by novation, to any one or more banks or
other entities with the prior written consent of the Agent (not to be
unreasonably withheld), all or a portion of its interests, rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Revolving Credit Commitment and the
same portion of the Loans and outstanding Letter of Credit Obligations at the
time owing to it and the Notes held by it), provided, however, that (i) each
such assignment shall be of a constant, and not a varying, percentage of all of
the assigning Lender's rights and obligations under this Agreement, which shall
include the same percentage interest in the Loans, Letter of Credit Obligations
and Notes, (ii) the amount of the Revolving Credit Commitment of the
91
<PAGE> 98
assigning Lender being assigned pursuant to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Agent) shall be in an aggregate minimum principal amount of
$5,000,000, the amount of the Revolving Credit Commitment retained by such
Lender shall not be less than $10,000,000 or shall be zero and the aggregate
amount of the Revolving Credit Commitment to be held by such assignee from all
sources shall not be less than $10,000,000, (iii) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register (as defined below), an Assignment and Acceptance,
together with the Notes subject to such assignment and a processing and
recordation fee of $5,000 and (iv) the Assignee, if it shall not be a Lender,
shall deliver to the Agent an Administrative Questionnaire in the form provided
to such Assignee by the Agent. Upon such execution, delivery, acceptance and
recording and after receipt of the written consent of the Agent and the
Borrower, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (x) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and under the other Loan Documents and (y) the
Lender which is assignor thereunder shall, to the extent provided in 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 party hereto but shall continue to be entitled
to the benefits of Sections 2.10, 2.12, 2.16 and 11.4, as well as any fees
accrued for its account hereunder and not yet paid).
(d) By executing and delivering an Assignment and Acceptance, the
Lender which is assignor thereunder and the assignee thereunder confirm to, and
agree with, each other and the other parties hereto as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereunder free and clear of any adverse claim, and that
its Revolving Credit Commitment and the outstanding balance of its Loans and
participations in Letter of Credit Obligations, in each case without giving
effect to assignments thereof which have not become effective, are as set forth
in such Assignment and Acceptance, such 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, legally, validity, enforceability, perfection, genuineness,
sufficiency or value of this Agreement, the other Loan Documents or any
Collateral or any other instrument or document furnished pursuant hereto or
thereto; (ii) such Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of their respective
obligations under this Agreement, or any of the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and
92
<PAGE> 99
warrants that it is legally authorized to enter into such Assignment and
Acceptance and confirms that it has received a copy of this Agreement and of the
other Loan Documents, together with copies of financial statements 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; (iv)
such assignee will, independently and without reliance upon the Agent, such
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; (v) such assignee appoints and
authorizes the Agent to take such action as the Agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.
(e) The Agent shall maintain at its address referred to in Section 11.1
hereof 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 Revolving
Credit Commitment of, and principal amount of the Loans owing to, each Lender
from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the other Loan
Parties, the Agent and the Lenders may treat each person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower, the other Loan
Parties or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee together with the Notes subject to such
assignment, any processing and recordation fee and, if required, an
Administrative Questionnaire and the written consents to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is
substantially in the form of Exhibit B annexed hereto, (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 Borrower.
Within five (5) Business Days after receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Agent in exchange for the
surrendered Notes new Notes to the order of such assignee in an amount equal to
its portion of the Revolving Credit Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained any
Revolving Commitment hereunder, new Notes to the order of the assigning Lender
in an amount equal to the Revolving Credit Commitment retained by it hereunder.
Such new Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in
93
<PAGE> 100
substantially the form of Exhibit E. Notes surrendered to the Borrower shall be
canceled by the Borrower.
(g) Notwithstanding any other provision herein, any Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 11.3, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any information, relating to the Borrower furnished to such
Lender by or on behalf of the Borrower in connection with this Agreement;
provided, however, that prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any information relating to the Borrower received from such
Lender to the extent required pursuant to Section 11.11.
SECTION XI.4. Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable and documented out-of-pocket expenses incurred by the Agent and the
Initial Lenders in connection with the preparation of this Agreement and the
other Loan Documents or with any amendments, modifications, waivers, extensions,
renewals, renegotiations or "workouts" of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall be consummated) or
incurred by the Agent or any of the Lenders in connection with the enforcement
or protection of its rights in connection with this Agreement or any of the
other Loan Documents or with the Loans made or the Notes or Letter of Credit
Obligations incurred hereunder, or in connection with any pending or threatened
action, proceeding, or investigation relating to the enforcement or protection
of its rights, including but not limited to the reasonable and documented fees
and disbursements of counsel for the Agent and ongoing field examination
expenses and charges, and, in connection with such enforcement or protection,
the reasonable fees and disbursements of counsel for the Lenders. The Borrower
further indemnifies the Lenders from and agrees to hold them harmless against
any documentary taxes, assessments or charges made by any governmental authority
by reason of the execution and delivery of this Agreement or the Notes.
(b) The Borrower indemnifies the Agent and each Lender and their
respective directors, officers, employees and agents against, and agrees to hold
the Agent, each Lender and each such person harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable and
documented counsel fees and expenses, incurred by or asserted against the Lender
or any such person arising out of, in any way connected with, or as a result of
any claim, litigation, investigation or proceedings, whether or not the Agent,
any Lender or any such person is a party thereto, relating to (i) the use of any
of the proceeds of the Loans, (ii) this Agreement, any of the other Loan
Documents or the other documents contemplated hereby or thereby, (iii) the
performance by the parties hereto and thereto of their respective obligations
hereunder and thereunder (including but not limited to the making of the
94
<PAGE> 101
Total Revolving Credit Commitment) and consummation of the transactions
contemplated hereby and thereby or (iv) breach of any representation or
warranty; provided, however, that such indemnity shall not, as to the Agent or
any Lender or such person, apply to any such losses, claims, damages,
liabilities or related expenses to the extent that they result from the gross
negligence or willful misconduct of the Agent or any Lender or such person.
(c) The Borrower indemnifies, and agrees to defend and hold harmless
the Agent and the Lenders and their respective officers, directors,
shareholders, agents and employees (collectively, the "Indemnitees") from and
against any loss, cost, damage, liability, lien, deficiency, fine, penalty or
expense (including, without limitation reasonable attorneys' fees and reasonable
expenses for investigation, removal, cleanup and remedial costs and modification
costs incurred to permit, continue or resume normal operations of any property
or assets or business of the Borrower or any Subsidiary thereof) arising from a
violation of, or failure to comply with any Environmental Law and to remove any
Lien arising therefrom except to the extent caused by the gross negligence or
willful misconduct of any Indemnitee, which any of the Indemnitees may incur or
which may be claimed or recorded against any of the Indemnitees by any person.
(d) The provisions of this Section 11.4 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 invalidity or unenforceability of any term or
provision of this Agreement or the Notes, or any investigation made by or on
behalf of the Agent or any Lender. All amounts due under this Section 11.4 shall
be payable on written demand therefor.
SECTION XI.5. APPLICABLE LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
(OTHER THAN THE CONFLICT OF LAWS PRINCIPLES THEREOF).
SECTION XI.6. Right of Setoff. If an Event of Default shall have
occurred and be continuing, upon the request of the Agent each Lender shall and
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 any of the
Borrower or Guarantors against any and all of the obligations of such Borrower
or Guarantor now or hereafter existing under this Agreement and the Notes held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement or the Notes and although such obligations may be
unmatured. Each Lender agrees to notify
95
<PAGE> 102
promptly the Agent and the Borrower after any such setoff and application made
by such Lender, but the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which may be available to such Lender.
SECTION XI.7. Payments on Business Days. (a) Should the principal of or
interest on the Notes or any fee or other amount payable hereunder become due
and payable on other than a Business Day, payment in respect thereof may be made
on the next succeeding Business Day (except as otherwise specified in the
definition of "Interest Period"), and such extension of time shall in such case
be included in computing interest, if any, in connection with such payment.
(b) All payments by the Borrower hereunder and all Loans made by the
Lenders hereunder shall be made in lawful money of the United States of America
in immediately available funds at the office of the Agent set forth in Section
11.1 hereof.
SECTION XI.8. Waivers; Amendments. (a) No failure or delay of any
Lender in exercising any power or right hereunder 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 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 Lenders hereunder are cumulative
and not exclusive of any rights or remedies which they may otherwise have. No
waiver of any provision of this Agreement or the Notes nor consent to any
departure by any of the Borrower or Guarantors therefrom shall in any event be
effective unless the same shall be authorized as provided in 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 to or demand on the
Borrower in any case shall entitle it 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 interest on,
any Note or reduce the rate of interest on any Note, (ii) increase the Revolving
Credit Commitment of any Lender, extend the Revolving Credit Termination Date,
increase any percentage or amount contained in the definition of Borrowing Base
or make overadvances other than Permitted Overadvances or amend or modify the
provisions of this Section, Section 2.6 with respect to decreasing any fee or
extending the time for payment thereof, Section 2.13, Section 4.14 or Section
11.4 hereof or the definition of
96
<PAGE> 103
"Required Lenders," or (iii) release any Guarantee or any material portion of
Collateral (except as may be expressly permitted by the Loan Documents), in each
case without the prior written consent of each Lender affected thereby and
provided, further, however, that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agent under this Agreement or the
other Loan Documents without the written consent of the Agent. Each Lender and
holder of any Note shall be bound by any modification, amendment or waiver
authorized in accordance with this Section regardless of whether its Notes shall
be marked to make reference thereto, and any consent by any Lender or holder of
a Note pursuant to this Section shall bind any person subsequently acquiring a
Note from it, whether or not such Note shall be so marked.
(c) In the event that the Borrower requests, with respect to this
Agreement or any other Loan Document, an amendment, modification or waiver and
such amendment, modification or waiver would require the unanimous consent of
all of the Lenders in accordance with Section 11.8(b) above, and such amendment,
modification or waiver is agreed to in writing by the Borrower and the Required
Lenders but not by all of the Lenders, then notwithstanding anything to the
contrary in Section 11.8(b) above, with the written consent of the Borrower and
such Required Lenders, the Borrower and Required Lenders may, but shall not be
obligated to, amend this Agreement without the consent of the Lender or Lenders
who did not agree to the proposed amendment, modification or waiver (the
"Minority Lenders") solely to provide for (i) the termination of the Revolving
Credit Commitment of each Minority Lender, (ii) the assignment in accordance
with Section 11.3 hereof to one or more persons of each Minority Lender's
interests, rights and obligations under this Agreement (including, without
limitation, all of such Minority Lender's Revolving Credit Commitment as well as
its portion of all outstanding Loans and the Note or Notes held by such Minority
Lender) and the other Loan Documents and/or increase the Revolving Credit
Commitment of one or more Required Lenders, in each case so that after giving
effect thereto the Total Revolving Credit Commitment shall be in the same
amounts as prior to the events described in this paragraph, (iii) the repayment
to the Minority Lenders in full of all Loans outstanding and accrued interest
thereon at the time of the assignment and/or increase in Revolving Credit
Commitments described in clause (ii) above with the proceeds of Loans made by
such persons who are to become Lenders by assignment or with the proceeds of
Loans made by Required Lenders who have agreed to increase their Revolving
Credit Commitment, (iv) the payment to the Minority Lenders by the Borrower of
all fees (other than the Prepayment Fee which shall not be owing) and other
compensation due and owing such Minority Lenders under the terms of this
Agreement and the other Loan Documents and (v) such other modifications as the
Required Lenders and Borrower shall deem necessary in order to effect the
changes specified in clauses (i) through (iv) hereof.
97
<PAGE> 104
SECTION XI.9. Severability. In the event any one or more of the
provisions contained in this Agreement or in the Notes or any of the other Loan
Documents should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby.
SECTION XI.10. Entire Agreement; Waiver of Jury Trial, Etc. (a) This
Agreement, the Notes and the other Loan Documents constitute the entire contract
between the parties hereto relative to the subject matter hereof. Any previous
agreement among the parties hereto with respect to the transactions hereunder is
superseded by this Agreement, the Notes and the other Loan Documents. Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, the Notes or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby waives 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, the
Notes, any of the other Loan Documents or the transactions hereunder.
(c) Except as prohibited by law, each party hereto hereby waives any
right it may have to claim or recover in any litigation referred to in paragraph
(b) of this Section 11.10 any special, exemplary, punitive or consequential
damages or any damages other than, or in addition to, actual damages.
(d) Each party hereto (i) certifies that no representative, agent or
attorney of any Lender has represented, expressly or otherwise, that such Lender
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that it has been induced to enter into this Agreement, the
Notes or the other Loan Documents, as applicable, by, among other things, the
mutual waivers and certifications herein.
SECTION XI.11. Confidentiality. The Agent and each of the Lenders
agrees to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agent or any Lender (the
"Information").
Notwithstanding the foregoing, the Agent and each Lender shall be permitted to
disclose Information (i) to such of its officers, directors, employees, agents
and representatives as need
98
<PAGE> 105
to know such Information (who will be informed of and required to be bound by
the confidential nature thereof) in connection with its participation in the
transactions hereunder or the administration of this Agreement or the other Loan
Documents; (ii) to the extent required by applicable laws and regulations or by
any subpoena or similar legal process, or requested by any governmental agency
or authority (in any which case notice will be provided to the Parent and any
other applicable Loan Party to the extent not prohibited by law to give the
Parent or such Loan Party the opportunity to contest such disclosure); (iii) to
the extent such Information (A) becomes publicly available other than as a
result of a breach of this Agreement, (B) becomes available to the Agent or such
Lender on a non-confidential basis from a source other than any Loan Party or
any of their respective Subsidiaries (and such source was not prohibited from
transmitting the information by reason of being party to a confidentiality
agreement) or (C) was available to the Agent or such Lender on a
non-confidential basis prior to its disclosure to the Agent or such Lender by
any Loan Party or any of their respective Subsidiaries; (iv) to the extent any
Loan Party shall have consented to such disclosure in writing; (v) in connection
with the sale of any Collateral pursuant to the provisions of any of the other
Loan Documents; or (vi) pursuant to Section 11.3(g) hereof.
SECTION XI.12. Submission to Jurisdiction. (a) Any legal action or
proceeding with respect to this Agreement or the Notes or any other Loan
Document may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, each of the Loan Parties hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts.
(b) Each of the Loan Parties hereby irrevocably waives, in connection
with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(c) Each of the Loan Parties hereby irrevocably consents to the service
of process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to each such person, as the case may be, at its address set forth in
Section 11.1 hereof.
(d) Nothing herein shall affect the right of the Agent or any Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Loan Party in any other
jurisdiction.
99
<PAGE> 106
SECTION XI.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively, the "Charges"), shall exceed
the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan 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 but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon, at the Federal Funds Rate (as determined by the
Agent) to the date of repayment, shall have been received by such Lender.
SECTION XI.14. Counterparts; Facsimile Signature. This Agreement may be
executed in counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective when copies hereof which, when taken together, bear the signatures of
each of the parties hereto shall be delivered to the Agent.
SECTION XI.15. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.
XII. GUARANTEES
Each Guarantor (including Parent) unconditionally guarantees, as a
primary obligor and not merely as a surety, jointly and severally with each
other Guarantor, the due and punctual payment of the principal of and interest
on each of the Notes, when and as due, whether at maturity, by acceleration, by
notice of prepayment or otherwise, and the due and punctual performance of all
other Obligations. Each Guarantor further agrees that the obligations may be
extended and renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligations.
Each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
any Lender or the Agent to assert any claim or demand or to
100
<PAGE> 107
enforce any right or remedy against the Borrower or any other Guarantor under
provisions of this Agreement, the Notes or any of the other Loan Documents or
otherwise; (b) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement, the Notes, any of the other Loan
Documents, any guarantee or any other agreement; (c) the release of any security
held by the Agent for the Obligations or any of them; or (d) the failure of any
Lender to exercise any right or remedy against any other Guarantor of the
Obligations.
Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by any lender to any security (including, without
limitation, any Collateral) held for payment of the Obligations or to any
balance of any deposit account or credit on the books of any Lender in favor of
the Borrower or any other person.
The obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the Agent
or any Lender to assert any claim or demand or to enforce any remedy under this
Agreement, the Notes or under any other Loan Document, any guarantee or any
other agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might in any manner or
to any extent vary the risk of such Guarantor or otherwise operate as a
discharge of such Guarantor as a matter of law or equity.
Each Guarantor further agrees that its guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be returned by the Agent or any Lender upon the bankruptcy or
reorganization of the Borrower or otherwise.
Each Guarantor hereby subordinates until all Obligations have been
indefeasibly paid in cash all rights of subrogation against the Borrower and its
property and all rights of indemnification, contribution and reimbursement from
the Borrower and its property, in each case in connection with this guarantee
and any payments made hereunder, and regardless of whether such rights arise by
operation of law, pursuant to contract or otherwise.
101
<PAGE> 108
To the extent that any Guarantor other than the Parent (each, a
"Subsidiary Guarantor") shall make a payment of all or any of the Obligations (a
"Subsidiary Guarantor Payment") which, taking into account all other Subsidiary
Guarantor Payments then previously or concurrently made by the other Subsidiary
Guarantors, exceeds the amount which such Subsidiary Guarantor would otherwise
have paid if each Subsidiary Guarantor had paid the aggregate Obligations
satisfied by such Subsidiary Guarantor Payment in the same proportion as such
Subsidiary Guarantor's "Allocable Amount" (as defined below) (in effect
immediately prior to such Subsidiary Guarantor Payment), then, following
indefeasible payment in full in cash of the Obligations, such Subsidiary
Guarantor shall be entitled to receive contribution and indemnification payments
from, and be reimbursed by, each of the other Subsidiary Guarantors for the
amount of such excess pro rata based upon their respective Allocable Amounts in
effect immediately prior to such Subsidiary Guarantor Payment.
As of any date of determination, the "Allocable Amount" of any
Subsidiary Guarantor shall be equal to the maximum amount of the claim which
could then be recovered from such Subsidiary Guarantor hereunder without
rendering such claim voidable or avoidable under Section 548 of Chapter 11 of
the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law.
The preceding two paragraphs are intended only to define the relative
rights of the Subsidiary Guarantors and nothing therein is intended to or shall
impair the obligations of the Subsidiary Guarantors, jointly and severally, to
pay any amounts as and when the same shall become due and payable in accordance
with the terms of this Article XII.
Notwithstanding any provision herein to the contrary, each Subsidiary
Guarantor's liability hereunder shall be limited to an amount not to exceed as
of any date of determination the amount which could be claimed by the Lenders
from such Subsidiary Guarantor hereunder without rendering such claim voidable
or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Subsidiary Guarantor's right of contribution and indemnification
from each other Subsidiary Guarantor.
102
<PAGE> 109
IN WITNESS WHEREOF, the Borrower, the Parent, the Guarantors, the Agent
and the Lenders have caused this Agreement to be duly executed by their
respective duly authorized officers as of the day and year first above written.
BORROWER:
CORAM, INC.
By:
----------------------------------
Name:
Title:
PARENT
CORAM HEALTHCARE CORPORATION
By:
----------------------------------
Name:
Title:
AGENT
FOOTHILL CAPITAL CORPORATION
By:
----------------------------------
Name:
Title:
103
<PAGE> 110
GUARANTORS:
- -----------
CORAM ALTERNATE SITE SERVICES, INC.
CORAM HEALTHCARE CORPORATION
CORAM HEALTHCARE CORPORATION OF
ALABAMA
CORAM HEALTHCARE CORPORATION OF
FLORIDA
CORAM HEALTHCARE CORPORATION OF
GREATER D.C.
CORAM HEALTHCARE CORPORATION OF
GREATER NEW YORK
CORAM HEALTHCARE CORPORATION OF
ILLINOIS
CORAM HEALTHCARE CORPORATION OF
INDIANA
CORAM HEALTHCARE CORPORATION OF
KENTUCKY
CORAM HEALTHCARE CORPORATION OF
MASSACHUSETTS
CORAM HEALTHCARE CORPORATION OF
MICHIGAN
CORAM HEALTHCARE CORPORATION OF
MISSISSIPPI
CORAM HEALTHCARE CORPORATION OF
NEVADA
CORAM HEALTHCARE CORPORATION OF
NEW HAMPSHIRE
CORAM HEALTHCARE CORPORATION OF
NEW YORK
CORAM HEALTHCARE CORPORATION OF
NORTH TEXAS
CORAM HEALTHCARE CORPORATION OF
NORTHERN CALIFORNIA
CORAM HEALTHCARE CORPORATION OF
RHODE ISLAND
CORAM HEALTHCARE CORPORATION OF
SOUTH CAROLINA
104
<PAGE> 111
CORAM HEALTHCARE CORPORATION OF
SOUTHERN CALIFORNIA
CORAM HEALTHCARE CORPORATION OF
SOUTHERN FLORIDA
CORAM HEALTHCARE CORPORATION OF
UTAH
CORAM HOMECARE OF ILLINOIS, INC.
CORAM HOMECARE OF MINNESOTA, INC.
CORAM HOMECARE OF NORTHERN
CALIFORNIA, INC.
CORAM HOMECARE OF SOUTH CAROLINA,
INC.
CORAM INDEPENDENT PRACTICE
ASSOCIATION, INC.
CORAM MANAGEMENT OF HAWAII, INC.
CORAM RESOURCE NETWORK, INC.
CORAM SERVICE CORPORATION
CURAFLEX HEALTH SERVICES, INC.
HEALTHINFUSION, INC.
T2 MEDICAL, INC.
By:
-------------------------------
Name:
Title:
CORAM HEALTHCARE LIMITED
CORAM INTERNATIONAL HOLDINGS LTD.
By:
-------------------------------
Name:
Title:
CORAM HEALTHCARE OF WYOMING,
L.L.C.
By:
-------------------------------
Name:
Title:
105
<PAGE> 112
LENDERS:
CERBERUS PARTNERS, L.P.
By:
-------------------------------
Name:
Title:
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:
-------------------------------
Name:
Title:
FOOTHILL INCOME TRUST, L.P.
By:
-------------------------------
Name:
Title:
106
<PAGE> 1
EXHIBIT 2
WARRANT AGREEMENT
BETWEEN
CORAM HEALTHCARE CORPORATION
AND
CERBERUS PARTNERS, L.P.
GOLDMAN SACHS CREDIT PARTNERS L.P.
FOOTHILL INCOME TRUST, L.P.
------------------------------
DATED AS OF AUGUST 20, 1998
------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Warrant Certificates....................................................................... 1
SECTION 2. Execution of Warrant Certificates.......................................................... 1
SECTION 3. Registration............................................................................... 2
SECTION 4. Registration of Transfers and Exchanges.................................................... 2
SECTION 5. Warrants; Exercise of Warrants............................................................. 3
SECTION 6. Payment of Taxes........................................................................... 4
SECTION 7. Mutilated or Missing Warrant Certificates.................................................. 5
SECTION 8. Reservation of Warrant Shares.............................................................. 5
SECTION 9. Obtaining Stock Exchange Listings.......................................................... 5
SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable........................ 5
(a) Adjustment for Change in Capital Stock.................................................... 6
(b) Adjustment for Rights Issue............................................................... 6
(c) Adjustment for Other Distributions........................................................ 7
(d) Adjustment for Common Stock Issue......................................................... 8
(e) Adjustment for Convertible Securities Issue............................................... 10
(f) Current Market Price...................................................................... 11
(g) Consideration Received.................................................................... 12
(h) When De Minimis Adjustment May Be Deferred................................................ 12
(i) When No Adjustment Required............................................................... 12
(j) Notice of Adjustment...................................................................... 13
(k) Voluntary Reduction....................................................................... 13
(l) Notice of Certain Transactions............................................................ 13
(m) Reorganization of Company................................................................. 14
(n) Company Determination Final............................................................... 14
(o) When Issuance or Payment May Be Deferred.................................................. 14
(p) Adjustment in Number of Shares............................................................ 14
(q) Form of Warrants.......................................................................... 15
SECTION 11. No Impairment............................................................................. 15
SECTION 12. Fractional Interests...................................................................... 15
SECTION 13. Notices to Warrant Holders................................................................ 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 14. Registration Rights....................................................................... 17
(a) Demand Registration....................................................................... 17
(b) Piggy-Back Registration................................................................... 18
(c) Registration Procedures................................................................... 19
(d) Indemnification........................................................................... 21
(1) Indemnification by Holdings...................................................... 21
(2) Indemnification by Holder of Registrable Securities.............................. 22
(3) Contribution..................................................................... 22
(e) Certain Definitions....................................................................... 23
SECTION 15. Holders' Representations.................................................................. 24
(a) Investment Intention...................................................................... 24
(b) Accredited Investor....................................................................... 24
SECTION 16. Notices to Company and Warrant Holder..................................................... 24
SECTION 17. Warrant Agent............................................................................. 25
SECTION 18. Supplements and Amendments................................................................ 25
SECTION 19. Successors................................................................................ 25
SECTION 20. Termination............................................................................... 25
SECTION 21. Governing Law............................................................................. 26
SECTION 22. Benefits of This Agreement................................................................ 26
SECTION 23. Counterparts.............................................................................. 26
</TABLE>
<PAGE> 4
WARRANT AGREEMENT dated as of August 20, 1998 between CORAM
HEALTHCARE CORPORATION, a Delaware corporation ("Holdings"), CERBERUS PARTNERS,
L.P., GOLDMAN SACHS CREDIT PARTNERS L.P. and FOOTHILL INCOME TRUST, L.P.
(collectively, the "Initial Holders" and including their respective successors
and assigns, the "Holders" or "Warrant Holders").
Terms defined in the Credit Agreement (the "Credit Agreement")
dated as of August 20, 1998 between Coram, Inc. (the "Borrower"), Holdings, the
Guarantors named therein, the Initial Holders and Foothill Capital Corporation,
as Agent, unless defined herein are used as therein defined.
WHEREAS, it is a condition precedent to the Initial Holders'
obligation to make loans to and to incur Letter of Credit Obligations on behalf
of the Borrower under the Credit Agreement that Holdings issue Warrants, as
hereinafter described (the "Warrants"), to purchase up to 1,900,000 shares of
Common Stock (the "Common Stock") of Holdings, subject to adjustment as provide
herein (the Common Stock issuable on exercise of the Warrants being referred to
herein as the "Warrant Shares"), each Warrant entitling the holder thereof to
purchase one Warrant Share.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificates. The certificates evidencing
the Warrants (the "Warrant Certificates") to be delivered pursuant to this
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 2. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of Holdings by its Chairman of the Board
or its President or a Vice President and by its Secretary or an Assistant
Secretary under its corporate seal. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose Holdings may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be delivered or disposed of he or she
shall have ceased to hold such office. The seal of Holdings may be in the form
of a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates.
In case any officer of Holdings who shall have signed any of
the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by Holdings, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of Holdings; and any Warrant Certificate may
be signed on behalf of Holdings by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of Holdings to
sign such
1
<PAGE> 5
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
SECTION 3. Registration. Holdings shall number and register
the Warrant Certificates in a register as they are issued. Holdings may deem and
treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and shall not be affected by any
notice to the contrary. Holdings shall act as the registrar for the Warrants.
SECTION 4. Registration of Transfers and Exchanges. Holdings
shall from time to time register the transfer of any outstanding Warrant
Certificates in a Warrant register to be maintained by Holdings upon surrender
thereof accompanied by a written instrument or instruments of transfer in form
satisfactory to Holdings, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be cancelled and disposed of by Holdings.
The Warrant Holders agree that prior to any proposed transfer
of the Warrant or of the Warrant Shares, if such transfer is not made pursuant
to an effective Registration Statement under the Securities Act, pursuant to
Rule 144 or Rule 144A under the Securities Act, or an opinion of counsel,
reasonably satisfactory in form and substance to Holdings, that the Warrant or
Warrant Shares may be sold publicly without registration under the Securities
Act, the Warrant holder will, if requested by Holdings, deliver to Holdings:
(1) an investment covenant reasonably satisfactory to Holdings
signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that Holdings may place a
notation in the stock books of Holdings or a "stop transfer order" with
any transfer agent or registrar with respect to the Warrant Shares; and
(4) an agreement by such transferee to be bound by the
provisions of this Section 4 relating to the transfer of such Warrant
or Warrant Shares.
The Warrant Holders agree that each Warrant Certificate and
any certificate representing the Warrant Shares will bear the following legend:
"THE SECURITY REPRESENTED BY THIS CERTIFICATE (AND ANY
PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
2
<PAGE> 6
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER
OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
CORAM HEALTHCARE CORPORATION THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (W) INSIDE
THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR PURSUANT TO ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF CORAM HEALTHCARE
CORPORATION HOLDINGS, INC. SO REQUESTS), (X) TO CORAM
HEALTHCARE CORPORATION, (Y) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (Z) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
Subject to the foregoing provisions, Warrant Certificates may
be exchanged at the option of the holder(s) thereof, when surrendered to
Holdings at its office for another Warrant Certificate or other Warrant
Certificates of like tenor and representing in the aggregate a like number of
Warrants. Warrant Certificates surrendered for exchange shall be cancelled and
disposed of by Holdings.
Each Warrant holder will have registration rights with respect
to the Warrant Shares set forth in Section 14 hereof.
SECTION 5. Warrants; Exercise of Warrants. Subject to the
terms of this Agreement, each Warrant Holder shall have the right, which may be
exercised commencing on the Closing Date and until the Revolving Credit
Termination Date (as defined in the Credit Agreement) to receive from Holdings
the number of fully paid and nonassessable Warrant Shares which the holder may
at the time be entitled to receive on exercise of such Warrants and payment of
the Exercise Price then in effect for such Warrant Shares. Each Warrant not
exercised prior to the Revolving Credit Termination Date, shall become void and
all rights thereunder and all rights in respect thereof under this agreement
shall cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants.
A Warrant may be exercised upon surrender to Holdings at its
office designated for such purpose the address of which is set forth in Section
15 hereof of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the
3
<PAGE> 7
reverse thereof duly filled in and signed, which signature shall be guaranteed
by a bank or trust company having an office or correspondent in the United
States or a broker or dealer which is a member of a registered securities
exchange or the National Association of Securities Dealers, Inc., and upon
payment to Holdings of the exercise price (the "Exercise Price") which is set
forth in the form of Warrant Certificate attached hereto as Exhibit A, as
adjusted as herein provided, for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the aggregate Exercise Price
shall be made in cash or by certified or official bank check to the order of
Holdings. In lieu of exercising the Warrants represented by the Warrant
Certificates by paying in full the Exercise Price of such Warrants exercised
plus transfer taxes (if applicable pursuant to Section 6), if any, the holder of
such Warrants may, from time to time, convert such Warrants, in whole or in
part, into a number of shares of Common Stock determined by dividing (a) the
aggregate Current Market Price of the number of shares represented by the
Warrants converted, minus the aggregate Exercise Price for such shares, plus
transfer taxes, if any, by (b) the Current Market Price of one Share. The
Current Market Price shall be determined pursuant to Section 10(f).
Subject to the provisions of Section 6 hereof, upon such
surrender of Warrants and payment of the Exercise Price, Holdings shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the holder and in such name or names as the Warrant holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 12;
The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part (provided that
Warrants shall be exercisable in multiples of 100 Warrants unless all of the
Warrants evidenced by a particular certificate are being exercised) and, in the
event that a certificate evidencing Warrants is exercised in respect of fewer
than all of the Warrant Shares issuable on such exercise at any time prior to
the date of expiration of the Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be issued and delivered pursuant to the
provisions of this Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled and disposed of by Holdings. Holdings shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the holders during normal business hours at its office.
SECTION 6. Payment of Taxes. Holdings will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that Holdings shall not be required to
pay any tax or taxes which may be payable in respect of any transfer involved in
the issue of any Warrant Certificates or any certificates for Warrant Shares in
a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and Holdings shall not be required
to issue or deliver such Warrant Certificates unless or until the person or
persons requesting the issuance thereof shall have paid to Holdings the amount
of such tax or shall have established to the satisfaction of Holdings that such
tax has been paid.
4
<PAGE> 8
SECTION 7. Mutilated or Missing Warrant Certificates. In case
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
Holdings may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to Holdings
of such loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, also reasonably satisfactory to it. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges as Holdings may prescribe.
SECTION 8. Reservation of Warrant Shares. Holdings will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
Holdings or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of Holdings' capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
Holdings will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of Holdings' capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. Holdings will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each holder
pursuant to Section 15 hereof.
Holdings covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 9. Obtaining Stock Exchange Listings. Holdings will
from time to time use its best efforts to take all action which may be necessary
so that the Warrant Shares, immediately upon their issuance upon the exercise of
Warrants, will be listed on the principal securities exchanges and markets
within the United States of America, if any, on which other shares of Common
Stock are then listed.
SECTION 10. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section. For purposes of
this Section 10, "Common Stock" means shares now or hereafter authorized of any
class of common stock of Holdings and any other stock of Holdings, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of Holdings without limit as to per share amount.
5
<PAGE> 9
(a) Adjustment for Change in Capital Stock.
If Holdings:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock or preferred stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock;
then the Exercise Price and the number and kind of shares of capital stock of
Holdings issuable upon the exercise of a Warrant as in effect immediately prior
to such action shall be proportionately adjusted so that the holder of any
Warrant thereafter exercised may receive the aggregate number and kind of shares
of capital stock of Holdings which he or she would have owned immediately
following such action if such Warrant had been exercised immediately prior to
such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a Warrant Holder upon exercise may
receive shares of two or more classes of capital stock of Holdings, Holdings
shall determine the allocation of the adjusted Exercise Price between the
classes of capital stock. After such allocation, the exercise privilege and the
Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 10.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If Holdings distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 60 days
after the record date mentioned below to purchase shares of Common Stock at a
price per share less than the current market price per share on that record
date, the Exercise Price shall be adjusted in accordance with the formula:
6
<PAGE> 10
O + N x P
-----
E' = E x M
---------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding
on the record date.
N = the number of additional shares of Common Stock
offered pursuant to such rights issuance.
P = the offering price per share of the additional
shares.
M = the current market price per share of Common Stock
on the record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions.
If Holdings distributes to all holders of its Common Stock any
of its assets (including but not limited to cash, but excluding ordinary
dividends), debt securities, preferred stock, or any rights or warrants to
purchase debt securities, preferred stock, assets or other securities of
Holdings, the Exercise Price shall be adjusted in accordance with the formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock
on the record date mentioned below.
7
<PAGE> 11
F = the fair market value on the record date of the
assets, securities, rights or warrants applicable
to one share of Common Stock. The Board of
Directors shall determine the fair market value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options or warrants
referred to in subsection (b) of this Section 10.
(d) Adjustment for Common Stock Issue.
If Holdings issues shares of Common Stock for a consideration
per share less than the current market price per share on the date Holdings
fixes the offering price of such additional shares, the Exercise Price shall be
adjusted in accordance with the formula:
E' = E x O + P
---
M
-----
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the current market price per share on the date of
issuance of such additional shares.
A = the number of shares outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and
(c) of this Section 10,
8
<PAGE> 12
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(3) Common Stock issued (i) pursuant to earn-out obligations
(or other obligations relating to the deferred purchase price of
property) existing on the date hereof or (ii) to Holdings employees
under bona fide employee benefit plans (being employee benefit plans in
respect of which employees of Holdings generally are able to
participate) adopted by the Board of Directors and approved by the
holders of Common Stock when required by law, if such Common Stock
would otherwise be covered by this subsection (d),
(4) Common Stock issued upon the exercise of rights or
warrants issued to the holders of Common Stock,
(5) Common Stock issued to shareholders of any person which
merges into Holdings in proportion to their stock holdings of such
person immediately prior to such merger, upon such merger,
(6) Common Stock issued in a bona fide public offering
pursuant to a firm commitment underwriting or
(7) Common Stock issued in a bona fide private placement
through a placement agent which is a member firm of the National
Association of Securities Dealers, Inc. (except to the extent that any
discount from the current market price attributable to restrictions on
transferability of the Common Stock, as determined in good faith by the
Board of Directors and described in a Board resolution, shall exceed
20%).
(8) Common Stock issued upon the exercise of any Series B
Senior Subordinated Convertible Note of the Borrower issued pursuant to
that certain Securities Exchange Agreement dated May 6, 1998 by and
between the Borrower, Holdings, Cerberus Partners, L.P., Goldman Sachs
Credit Partners L.P. and Foothill Capital Corporation.
(e) Adjustment for Convertible Securities Issue.
If Holdings issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 10) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the current market price per share on the date of issuance
of such securities, the Exercise Price shall be adjusted in accordance with this
formula:
E' = E x O + P
---
M
-----
O + D
9
<PAGE> 13
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior
to the issuance of such securities.
P = the aggregate consideration received for the
issuance of such securities.
M = the current market price per share on the date of
issuance of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for such securities at
the initial conversion or exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities have not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities;
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of any
person which merges into Holdings, or with a subsidiary of Holdings, in
proportion to their stock holdings of such person immediately prior to
such merger, upon such merger,
(2) convertible securities issued in a bona fide public
offering pursuant to a firm commitment underwriting or
(3) convertible securities issued in a bona fide private
placement through a placement agent which is a member firm of the
National Association of Securities Dealers, Inc. (except to the extent
that any discount from the current market price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a Board resolution, shall exceed 20% of the then current
market price).
10
<PAGE> 14
(f) Current Market Price.
In subsections (b), (c), (d) and (e) of this Section 10 the
current market price per share of Common Stock on any date shall be the average
of the current market value, determined as set forth below, of the Common Stock
for the 20 Business Days prior to the date in question.
(i) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges
on such an exchange, the current market value shall be the
last reported sale price of the Common Stock on such exchange
on such Business Day or if no such sale is made on such day,
the mean of the closing bid and asked prices for such day on
such exchange; or
(ii) if the Common Stock is not so listed or admitted
to unlimited trading privileges, the current market value
shall be the mean of the last bid and asked prices reported on
such Business Day (A) by the National Association of
Securities Dealers, Inc. Automatic Quotation System or (B) if
reports are unavailable under clause (A) above by the National
Quotation Bureau Incorporated; or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked
prices are not so reported, the current market value shall be
such value as agreed upon by Holdings and the Warrant Holder
or, if Holdings and the Warrant Holder cannot otherwise agree,
the current market value shall be determined by an independent
nationally recognized investment banking firm experienced in
valuing businesses (an "Appraiser") jointly chosen by the
Warrant Holder and Holdings or, if the Warrant Holder and
Holdings cannot agree on the selection of an Appraiser within
10 Business Days, then each of Holdings and the Warrant Holder
shall choose an Appraiser within 10 Business Days of the end
of such first 10-day period, and the current market value
shall be the value agreed upon by such Appraisers or, if the
two Appraisers cannot so agree, the value of a third
Appraiser, which third Appraiser shall be chosen by the two
Appraisers; provided that if neither an Initial Holder nor any
of its affiliates is a Holder of such Warrant, then Holdings
shall have the sole right to select an Appraiser. If there is
only one Appraiser, all expenses of the Appraiser shall be
paid by Holdings. If there are two Appraisers, the Holders and
Holdings shall pay all expenses of the Appraiser chosen by it.
(g) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d) and (e) of this Section 10, the following
shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that
in no case shall any
11
<PAGE> 15
deduction be made for any commissions, discounts or other expenses
incurred by Holdings for any underwriting of the issue or otherwise in
connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors, (irrespective of
the accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution;
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by Holdings
for the issuance of such securities plus the additional minimum
consideration, if any, to be received by Holdings upon the conversion
or exchange thereof (the consideration in each case to be determined in
the same manner as provided in clauses (1) and (2) of this subsection).
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this Section shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
subsections (a), (b), (c), (d) or (e) of this Section 10 if Warrant Holders are
to participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, Holdings shall
provide the notices required by Section 13 hereof.
12
<PAGE> 16
(k) Voluntary Reduction.
Holdings from time to time may reduce the Exercise Price by
any amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period; provided, however, that in no event
may the Exercise Price be less than the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, Holdings shall mail to
Warrant Holders a notice of the reduction. Holdings shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price does not change or adjust
the Exercise Price otherwise in effect for purposes of subsections (a), (b),
(c), (d) and (e) of this Section 10.
(l) Notice of Certain Transactions.
If:
(1) Holdings takes any action that would require an adjustment
in the Exercise Price pursuant to subsections (a), (b), (c), (d) or (e)
of this Section 10 and if Holdings does not arrange for Warrant Holders
to participate pursuant to subsection (i) of this Section 10;
(2) Holdings takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (m) of this
Section 10; or
(3) there is a liquidation or dissolution of Holdings,
Holdings shall mail to Warrant Holders a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. Holdings shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
13
<PAGE> 17
(m) Reorganization of Company.
If Holdings consolidates or merges with or into, or transfers
or leases all or substantially all its assets to, any person, upon consummation
of such transaction Holdings shall as a condition precedent to such transaction,
cause effective provisions to be made so that the Warrants shall be exercisable
for the kind and amount of securities, cash or other assets which the holder of
a Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than Holdings, or the person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section.
The successor Company shall mail to Warrant Holders a notice describing the
supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (m) applies, subsections (a), (b), (c), (d)
and (e) of this Section 10 do not apply.
(n) Company Determination Final.
Any determination that Holdings or the Board of Directors must
make pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this Section
10 is conclusive.
(o) When Issuance or Payment May Be Deferred.
In any case in which this Section 10 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, Holdings may elect to defer until the occurrence of such event
(i) issuing to the holder of any Warrant exercised after such record date the
Warrant Shares and other capital stock of Holdings, if any, issuable upon such
exercise over and above the Warrant Shares and other capital stock of Holdings,
if any, issuable upon such exercise on the basis of the Exercise Price and (ii)
paying to such holder any amount in cash in lieu of a fractional share pursuant
to Section 12; provided, however, that Holdings shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 10, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted Exercise Price that number of shares of Common Stock (calculated
to the nearest hundredth) obtained from the following formula:
14
<PAGE> 18
N'= N x E
-
E'
where:
N = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted
Exercise Price.
N = the number or Warrant Shares previously issuable
upon exercise of a Warrant by payment of the
Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(q) Form of Warrants
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 11. No Impairment. Holdings will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants, but will at all times in reasonable good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holders of the Warrants against impairment. Without limiting the generality of
the foregoing, Holdings (1) will take all such action as may be necessary or
appropriate in order that Holdings may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding, including taking such action as is necessary for the then
Exercise Price to be not less than the par value of the Warrant Shares and (2)
will not take any action which results in any adjustment of the Exercise Price
if the total number of Warrant Shares issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock then authorized by Holdings' certificate of incorporation and
available for the purposes of issue upon such exercise.
SECTION 12. Fractional Interests. Holdings shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 12,
be issuable on the exercise of any Warrants (or specified portion thereof),
Holdings shall pay an amount in
15
<PAGE> 19
cash equal to the Exercise Price on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
SECTION 13. Notices to Warrant Holders. Upon any adjustment of
the Exercise Price pursuant to Section 10, Holdings shall promptly thereafter
(i) cause to be filed with Holdings a certificate setting forth the Exercise
Price after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Warrant Shares (or portion thereof) issuable after such
adjustment in the Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered holders of the Warrant Certificates at his or her address
appearing on the Warrant register written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 13.
In case:
(a) Holdings shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or
(b) Holdings shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or distributions
referred to in subsection (a) of Section 10 hereof); or
(c) of any consolidation or merger to which Holdings is a
party and for which approval of any shareholders of Holdings is required, or of
the conveyance or transfer of the properties and assets of Holdings
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (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), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of Holdings; or
(e) Holdings proposes to take any action (other than actions
of the character described in Section 10(a)) which would require an adjustment
of the Exercise Price pursuant to Section 10; then Holdings shall cause to be
given to each of the registered holders of the Warrant Certificates at his
address appearing on the Warrant register, at least 30 days (or 20 days in any
case specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender
16
<PAGE> 20
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section 13 or any defect therein shall not affect the legality
or validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of Holdings or any other
matter, or any rights whatsoever as shareholders of Holdings.
SECTION 14 Registration Rights.
(a) Demand Registration.
(1) Request for Registration. If a Shelf Registration with
respect to the Warrant Shares is not effective under the Securities Act, the
Holder or Holders of 25% of the then outstanding Warrant Shares may make a
written request for registration under the Securities Act ("Demand
Registration") of all or part of its or their Registrable Securities; provided
that Holdings shall not be obligated to effect more than one Demand Registration
in respect of the Warrants. Such request will specify the aggregate principal
amount of Registrable Securities proposed to be sold and will also specify the
intended method of disposition thereof. Within 10 days after receipt of such
request, Holdings will give written notice of such registration request to all
other Holders of the Warrants and include in such registration all Registrable
Securities with respect to which Holdings has received written requests for
inclusion therein from the Holders thereof within 15 Business Days after receipt
by the applicable Holder of Holdings' notice. Each such request will also
specify the aggregate principal amount of Registrable Securities to be
registered and the intended method of disposition thereof.
(2) Effective Registration and Expenses. A registration will
not count as a Demand Registration until it has become effective (unless the
Holders demanding such registration withdraw the Registrable Securities, in
which case such demand will count as a Demand Registration unless the Holders of
such Warrants agree to pay all Registration Expenses (as hereinafter defined)).
Except as provided above, Holdings will pay all Registration Expenses in
connection with the one registration initiated as a Demand Registration, whether
or not it becomes effective.
(b) Piggy-Back Registration.
(1) If Holdings proposes to file a registration statement
under the Securities Act with respect to an offering by Holdings for its own
account or for the account of any of its security holders (provided that, in the
case of a registration on demand of such security
17
<PAGE> 21
holders, the holders of a majority in aggregate principal amount or number of
shares of any such debt securities or equity securities, as the case may be,
consent in writing) of any class of equity security (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission) or a registration statement in connection with an exchange offer or
offering to Holdings existing security holders), then Holdings shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event less than ten days before the
anticipated filing date), and such notice shall offer such Holders the
opportunity to register such principal amount of Registrable Securities as each
such Holder may request (a "Piggy-Back Registration").
(2) Holdings shall use its reasonable best efforts to cause
the managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in the registration
statement for such offering to be included on the same terms and conditions as
any similar securities of Holdings or of such other security holders included
therein. Notwithstanding the foregoing, if the managing Underwriter or
Underwriters of such offering deliver a written opinion to Holdings that either
because of (i) the kind or combination of securities which the Holders, Holdings
and any other persons or entities intend to include in such offering or (ii) the
size of the offering which the Holders, Holdings and such other persons intend
to make, are such that the success of the offering would be materially and
adversely affected by inclusion of the Registrable Securities requested to be
included, then (a) in the event that the size of the offering is the basis of
such managing Underwriter's opinion, the amount of securities to be offered for
the accounts of Holders shall be reduced pro rata (according to the Registrable
Securities proposed for registration) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing Underwriter or Underwriters; provided that if
securities are being offered for the account of other persons or entities as
well as Holdings, then with respect to the Registrable Securities intended to be
offered by Holders, the proportion by which the amount of such class of
securities intended to be offered by Holders is reduced shall not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other persons or entities is reduced; and (b) in the event that
the kind (or combination) of securities to be offered is the basis of such
managing Underwriter's opinion, (x) the Registrable Securities to be included in
such offering shall be reduced as described in clause (a) above (subject to the
proviso in clause (a)) or, (y) if the actions described in clause (x) would, in
the judgment of the managing Underwriter, be insufficient to substantially
eliminate the adverse effect that inclusion of the Registrable Securities
requested to be included would have on such offering, such Registrable
Securities will be excluded from such offering.
Holdings will pay all Registration Expenses (as defined
herein) in connection with each registration of Registrable Securities.
(c) Registration Procedures.
If and whenever Holdings is required to use its best efforts
to effect the registration of any Registrable Securities under the Securities
Act. Holdings will promptly:
18
<PAGE> 22
(1) prepare and file with the Commission a registration
statement with respect to such securities, make all required filings with the
NASD and use its best efforts to cause such registration statement to become
effective;
(2) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement, but in no event for a period of more than six
months after such registration statement becomes, effective;
(3) furnish to counsel (if any) elected by holders of a
majority (by number of shares) of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed with the
Commission in connection with such registration, which documents will be subject
to the review of such counsel;
(4) furnish to each seller of such securities such number of
conformed copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits, except that Holdings
shall not be obligated to furnish any seller of securities with more than two
copies of such exhibits), such number of copies of the prospectus included in
such registration statement (including such preliminary prospectus and any
summary prospectus), in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request in order to
facilitate the disposition of the securities owned by such seller;
(5) use its best efforts to register or qualify such
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller shall request, and do any and
all other acts and things which may be necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the securities
owned by such seller, except that Holdings shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, or to consent to general service of
process in any such jurisdiction;
(6) furnish to each seller a signed counterpart, addressed to
the sellers, of
(i) an opinion of counsel for Holdings, dated the
effective date of the registration statement, and
(ii) subject to the accountants obtaining the
necessary representations as specified in Statement on Auditing
Standards No. 72, a "comfort" letter signed by the independent public
accountants who have certified Holdings' financial statements included
in the registration statement, covering substantially the same matters
with respect to the registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
changes subsequent to the date of such financial statements, as are
customarily covered in opinions of
19
<PAGE> 23
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities;
(7) notify each seller of any securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and at the request of any such seller prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(8) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(9) use its best efforts to list such securities on any
securities exchange on which the Common Stock is then listed, if such securities
are not already so listed and if such listing is then permitted under the rules
of such exchange, and to provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such registration
statement.
Holdings may require each seller of any securities as to which any registration
is being effected to furnish to Holdings such information regarding such seller
and the distribution of such securities as Holdings may from time to time
reasonably request in writing and as shall be required by law in connection
therewith. Each such holder agrees to furnish promptly to Holdings all
information required to be disclosed in order to make the information previously
furnished to Holdings by such holder not materially misleading.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from Holdings of the happening of any event of the kind described in
Section 14(c)(7) hereof, such holder will promptly discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 14(c)(7)
hereof. If so directed by Holdings, each holder of Registrable Securities will
deliver to Holdings (at Holdings' expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event Holdings shall give any such notice, the period mentioned in Section
14(c)(2) hereof shall be extended by the number of days during the period from
and including the date of the giving of such notice to and excluding the date
when each seller of any
20
<PAGE> 24
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 14(c)(7) hereof.
(d) Indemnification.
(1) Indemnification by Holdings.
Holdings agrees to indemnify and hold harmless each holder of
Registrable Securities (a "Holder"), its officers, directors, employees and
agents and each Person who controls such Holder within the meaning of either
Section 15 of the Securities Act or Section 20(a) of the Exchange Act (each such
person being sometimes hereinafter referred to as an "Indemnified Holder") from
and against all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation and legal expenses) arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon any such untrue statement or omission or allegation thereof based upon
information relating to such Indemnified Holder and furnished in writing to
Holdings by such Indemnified Holder expressly for use therein. This indemnity
will be in addition to any liability which Holdings may otherwise have.
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Holder in respect of which indemnity may be sought from Holdings, such
Indemnified Holder shall promptly notify Holdings in writing, and Holdings shall
assume the defense thereof, including the employment of counsel satisfactory to
such Indemnified Holder and the payment of all expenses. Such Indemnified Holder
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Holder unless (a) Holdings has
agreed to pay such fees and expenses or (b) Holdings shall have failed to assume
the defense of such action or proceeding and has failed to employ counsel
satisfactory to such Indemnified Holder in any such action or proceeding or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both such Indemnified Holder and Holdings, and there are one or
more legal defenses available to such Indemnified Holder which are different
from or additional to those available to Holdings (in which case, if such
Indemnified Holder notifies Holdings in writing that it elects to employ
separate counsel at the expense of Holdings, Holdings shall not have the right
to assume the defense of such action or proceeding on behalf of such Indemnified
Holder, it being understood, however, that Holdings 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 liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for such
Indemnified Holder and any other Indemnified Holders, which firm shall be
designated in writing by such Indemnified Holders). Holdings shall not be liable
for any settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding,
21
<PAGE> 25
Holdings agrees to indemnify and hold harmless such Indemnified Holders from and
against any loss or liability by reason of such settlement or judgment.
(2) Indemnification by Holder of Registrable Securities.
Each Holder of Registrable Securities agrees to indemnify and
hold harmless Holdings, its directors and officers and each Person, if any, who
controls Holdings within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from Holdings to such Holders, but only with respect to information relating to
such Holders furnished in writing by such Holders expressly for use in any
registration statement or prospectus, or any amendment or supplement thereto, or
any preliminary prospectus. In case any action or proceeding shall be brought
against Holdings or its directors or officers or any such controlling person, in
respect of which indemnity may be sought against a Holder of Registrable
Securities, such Holder shall have the rights and duties given to Holdings and
Holdings or its directors or officers or such controlling person shall have the
rights and duties given to each Holder by the preceding paragraph. In no event
shall the liability of any Holder of Registrable Securities hereunder be greater
in amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(3) Contribution.
If the indemnification provided for in this Section 14(f) is
unavailable to an indemnified party under Section 14(f)(1) or Section 14(f)(2)
hereof (other than by reason of exceptions provided in those Sections) in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative benefits
received by Holdings on the one hand and the Holders on the other hand from
their sale of Registrable Securities or if such allocation is not permitted by
applicable law, the relative fault of Holdings on the one hand and of the
Indemnified Holder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of Holdings
on the one hand and of the Indemnified Holder on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Holdings or by the Indemnified
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 14(f)(1), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
Holdings and each Holder of Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this Section
14(f)(3) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
22
<PAGE> 26
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 14(f)(3), an Indemnified Holder
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Registrable Securities sold by such Indemnified
Holder or its affiliated Indemnified Holders and distributed to the public were
offered to the public exceeds the amount of any damages which such Indemnified
Holder, or its affiliated Indemnified Holder, has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. 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.
(e) Certain Definitions.
(1) The term "Registrable Securities" shall mean the Warrant
Shares and any securities issued or issuable upon exercise of the Warrants. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (A) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (B) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (C) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
Holdings and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, or (D) they shall have ceased to be outstanding.
(2) The term "Registration Expenses" shall mean all expenses
incident to Holdings' performance of or compliance with Section 14 hereof,
including, without limitation, all registration and filing fees, all fees and
expenses of complying with securities or blue sky laws, fees and other expenses
associated with filings with the NASD (including, if required, the fees and
expenses of any "qualified independent underwriter" and its counsel), all
printing expenses, the fees and disbursements of counsel for Holdings and of its
independent public accountants, the fees and disbursements of one counsel
retained by the holders of Registrable Securities, the expenses of any special
audits made by such accountants required by or incident to such performance and
compliance, but not including (a) fees and disbursements of more than one
counsel retained by the holders of Registrable Securities, or (b) such holders'
proportionate share of underwriting discounts and commissions.
SECTION 15. Holders' Representations
Each Initial Holder severally makes the following
representations and warranties as to itself only to Holdings:
(a) Investment Intention. Each Initial Holder is holding the
Warrants or the Warrant Shares for its own account, for investment purposes and
not with a view to the distribution thereof. Each Initial Holder will not,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of the Warrants or the Warrant Shares (or solicit any offers
to buy, purchase, or otherwise acquire the Warrants or the Warrant Shares),
23
<PAGE> 27
except in compliance with the Securities Act of 1933, as amended, and all rules
and regulations promulgated thereunder (the "Securities Act").
(b) Accredited Investor. Each Initial Holder is an "accredited
investor" (as that term is defined in Rule 501 of Regulation D under the
Securities Act) and by reason of its business and financial experience, it has
such knowledge, sophistication and experience in business and financial matters
as to be capable of evaluating the merits and risks of the prospective
investment, is able to bear the economic risk of such investment and is able to
afford a complete loss of such investment.
SECTION 16. Notices to Company and Warrant Holder. Any notice
or demand authorized by this Agreement to be given or made by the registered
holder of any Warrant Certificate to or on Holdings shall be sufficiently given
or made when and if deposited in the mail, first class or registered, postage
prepaid, addressed to the office of Holdings expressly designated by Holdings at
its office for purposes of this Agreement (until the Warrant Holders are
otherwise notified in accordance with this Section by Holdings), as follows:
Coram Healthcare Corporation
Bank One Building
1125 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Wendy L. Simpson
Telecopy: (303) 672-8799
with a copy to:
General Counsel
Telecopy: (303) 298-0047
Any notice pursuant to this Agreement to be given by Holdings
to the registered holder(s) of any Warrant Certificate shall be sufficiently
given when and if deposited in the mail, first class or registered, postage
prepaid, addressed (until Holdings is otherwise notified in accordance with this
Section by such holder) to such holder at the address appearing on the Warrant
register of Holdings.
SECTION 17 Warrant Agent. (a) Each Holder and Holdings hereby
agree that Holdings shall serve as warrant agent under this agreement (the
"Warrant Agent"). Upon 30 days' notice to holders of Warrants, Holdings and the
Holders may appoint a new warrant agent. Such new warrant agent shall be a
corporation doing business under the laws of the United States or any state
thereof, in good standing and having a combined capital and surplus of not less
than $50,000,000. The combined capital and surplus of any such new Warrant Agent
shall be deemed to be the combined capital and surplus as set forth in the most
recent annual report of its condition published by such Warrant Agent prior to
its appointment, provided that such reports are published at least annually
pursuant to law or to the requirements of a federal or state supervising or
examining authority. After acceptance in writing of such appointment by the new
Warrant Agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any
24
<PAGE> 28
further assurance, conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further assurance, conveyance,
act or deed, the same shall be done at the expense of Holdings and shall be
legally and validly executed and delivered by Holdings.
(b) Any corporation into which Holdings or any new Warrant
Agent may be merged or any corporation resulting from any consolidation to which
Holdings or any new warrant agent shall be a party or any corporation to which
Holdings transfers substantially all of its corporate trust or shareholders
series business shall be a successor Warrant Agent under this Agreement without
any further act, provided that such corporation (i) would be eligible for
appointment as successor to the Warrant Agent under the provisions of this
Section 16 or (ii) is a wholly owned subsidiary of the Warrant Agent. Any such
successor Warrant Agent shall promptly cause notice of its succession as Warrant
Agent to be mailed (by first class mail, postage prepaid) to each Holder at such
Holder's last address as shown on the register maintained by the Warrant Agent
pursuant to this Agreement.
SECTION 18 Supplements and Amendments. Holdings may from time
to time supplement or amend this Agreement without the approval of any holders
of Warrant Certificates in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which Holdings may deem necessary or
desirable and which shall not in any way adversely affect the interests of the
holders of Warrant Certificates.
SECTION 19 Successors. All the covenants and provisions of
this Agreement by or for the benefit of Holdings shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 20 Termination. This Agreement shall terminate at 5:00
p.m., New York City time on the Revolving Credit Termination Date.
Notwithstanding the foregoing, this Agreement will terminate on any earlier date
if all Warrants have been exercised.
SECTION 21 Governing Law. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
SECTION 22 Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
Holdings and the registered holders of the Warrant Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of Holdings and the registered holders of
the Warrant Certificates.
25
<PAGE> 29
SECTION 23 Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
26
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
CORAM HEALTHCARE CORPORATION
By:
-------------------------------------
Name:
Title:
CERBERUS PARTNERS, L.P.
By:
-------------------------------------
Name:
Title:
GOLDMAN SACHS CREDIT
PARTNERS L.P.
By:
-------------------------------------
Name:
Title:
FOOTHILL INCOME TRUST, L.P.
By:
-------------------------------------
Name:
Title:
27
<PAGE> 31
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR) WERE
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF CORAM
HEALTHCARE CORPORATION THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (A) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, OR IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR
PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF CORAM HEALTHCARE
CORPORATION SO REQUESTS), (B) TO CORAM HEALTHCARE CORPORATION, (C) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
No._____ _________ Warrants
Warrant Certificate
Coram Healthcare Corporation
This Warrant Certificate certifies that ___________, or
registered assigns, is the registered holder of Warrants expiring on the
Revolving Credit Termination Date as defined in the Warrant Agreement referred
to on the reverse hereof (the "Warrants") to purchase Common Stock, $.001 par
value (the "Common Stock"), of Coram Healthcare Corporation, a Delaware
corporation ("Holdings"). Each Warrant entitles the holder upon exercise to
receive
A-1
<PAGE> 32
from Holdings on or before 5:00 p.m. New York City Time on the Revolving Credit
Termination Date, one fully paid and nonassessable share of Common Stock (a
"Warrant Share") at the initial exercise price (the "Exercise Price") of $0.01
per share payable in lawful money of the United States of America upon surrender
of this Warrant Certificate and payment of the Exercise Price at the office of
Holdings designated for such purpose, but only subject to the conditions set
forth herein and in the Warrant Agreement referred to on the reverse hereof. In
lieu of exercising the Warrants evidenced by this Warrant Certificate by paying
in full the Exercise Price of each Warrant exercised plus transfer taxes (if
applicable pursuant to Section 6 of the Warrant Agreement), if any, the holder
of such Warrant may, from time to time, convert this Warrant, in whole or in
part, into a number of shares of Common Stock determined by dividing (a) the
aggregate Current Market Price of the number of Warrant Shares represented by
the Warrants converted, minus the aggregate Exercise Price for such shares, plus
transfer taxes, if any, by (b) the Current Market Price of one Share. The
Current Market Price shall be determined pursuant to Section 10(f) of the
Warrant Agreement.
The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time on the Revolving Credit Termination Date, and to the extent not exercised
by such time such Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by Holdings, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, Coram Healthcare Corporation has caused
this Warrant Certificate to be signed by its Vice President and by its
Secretary, each by a facsimile of his signature, and has caused a facsimile of
its corporate seal to be affixed hereunto or imprinted hereon.
Dated:
CORAM HEALTHCARE CORPORATION
By:
-------------------------------------
Vice President
By:
-------------------------------------
Secretary
A-2
<PAGE> 33
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring on the Revolving Credit Termination
Date, entitling the holder on exercise to receive shares of Common Stock, $.001
par value, of Holdings (the "Common Stock"), and are issued or to be issued
pursuant to a Warrant Agreement dated as of _____, 1998 (the "Warrant
Agreement"), duly executed and delivered by Holdings, which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of Holdings and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to Holdings.
Warrants may be exercised at any time on or before the
Revolving Credit Termination Date. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon properly completed and
executed, together with payment of the Exercise Price in cash at the office of
Holdings designated for such purpose. In lieu of exercising such Warrants by
paying in full the Exercise Price for each such Warrant plus transfer taxes (if
applicable pursuant to Section 6 of the Warrant Agreement), if any, the holder
of such Warrants may, from time to time, convert such Warrants, in whole or in
part, into a number of shares of Common Stock determined by dividing (a) the
aggregate Current Market Price of the number of Warrant Shares represented by
the Warrants converted, minus the aggregate Exercise Price for such shares, plus
transfer taxes, if any, by (b) the Current Market Price of one Share. The
Current Market Price shall be determined pursuant to Section 10(f) of the
Warrant Agreement. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but Holdings will pay the
cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain
registration rights with respect to the Common Stock purchasable upon exercise
thereof. Said registration rights are set forth in Section 14 of the Warrant
Agreement.
A-3
<PAGE> 34
Warrant Certificates, when surrendered at the office of
Holdings by the registered holder thereof in person or by its legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of Holdings a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
Holdings may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and Holdings shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of Holdings.
A-4
<PAGE> 35
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive ___________ shares of
Common Stock and herewith (check item)
(i) tenders payment for such shares to the order of Coram
Healthcare Corporation in the amount of $_______ in accordance with the terms
hereof; or
(ii) converts this Warrant, in whole or in part, into a number
of shares of Common Stock determined by dividing (a) the aggregate Current
Market Price of the number of shares represented by this Warrant, minus the
aggregate Exercise Price for such shares, plus transfer taxes, if any, by (b)
the Current Market Price of one Share.
The undersigned requests that a certificate for such shares be
registered in the name of _________________________, whose address is
_____________________________ and that such shares be delivered to
____________________ whose address is _________________________________________.
A-5
<PAGE> 36
If said number of shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of _________________, whose address is _______________________________,
and that such Warrant Certificate be delivered to _________________________,
whose address is ____________________ .
Signature:
Date:
Signature Guaranteed:
A-6
<PAGE> 1
EXHIBIT 3
[CORAM HEALTHCARE LETTERHEAD]
FOR IMMEDIATE RELEASE
- ---------------------
Contacts: Wendy L. Simpson
Executive V.P. and Chief Financial Officer
303-672-8722
Harriet B. Albery
Director, Investor Relations
303-672-8875
CORAM OBTAINS SENIOR CREDIT FACILITY
DENVER, COLORADO, August 21, 1998 - Coram Healthcare Corporation (NYSE:CRH)
announced today that it had entered into a definitive agreement for a senior
credit facility that would make up to $60 million available to the Company for
acquisitions, working capital, letters of credit and other corporate purposes.
The new senior credit facility has a 2.5 year term and an interest rate of prime
plus 1.5%. The terms of the facility include the issuance of warrants to
purchase 1.9 million shares of Coram stock at $.01 per share (subject to
customary adjustments). Foothill Capital Corporation will be serving as the
agent for the credit facility, with the initial lenders being Foothill Income
Trust, L.P., an affiliate of Foothill Capital Corporation, Cerberus Partners
L.P. and Goldman Sachs Credit Partners L.P.
On June 30, 1998 the Company completed the restructuring of its rollover notes,
which should reduce interest expense by approximately $17 million annually and
strengthen the balance sheet. "The debt restructuring, combined with our new
line of credit, will allow Coram to identify and make a series of strategic
acquisitions throughout the remainder of this year and next," said Donald J.
Amaral, Chief Executive Officer. "Our plan for growth includes acquisitions of
complementary home infusion, respiratory therapy and mail order pharmacy
companies."
Coram Healthcare is a leading provider of high quality home infusion therapy
with operations in 44 states and Ontario, Canada. Through its Resource Network
division, the company manages networks of home health care providers on behalf
of managed care plans and other payers. Coram Prescription Services provides
mail order prescription drugs for chronically ill patients and pharmacy benefit
management services.
Note: Except for historical information, all other statements provided in this
press release are "forward-looking" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may vary
materially from the forward-looking statements made above due to important
factors such as: recent operating losses and uncertainties associated with
future operating results; substantial leverage and the need for additional
financing to complete acquisitions; dependence on relationships with third
parties; and government regulation of the home health care industry. These and
other risk factors that could materially affect Coram's financial results are
further described in the Company's Form 10-K and Form 10-Qs on file with the
Securities and Exchange Commission.
