<PAGE>
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): October 18, 1996
TOTAL RENAL CARE HOLDINGS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-4034 51-0354549
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
21250 HAWTHORNE BOULEVARD, SUITE 800, TORRANCE, CALIFORNIA 90503-5517
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 792-2600
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS.
On October 17, 1996, the Company refinanced its prior bank credit facility
with a new bank credit facility to permit borrowings of up to $400 million. A
copy of the Credit Agreement is filed as an exhibit hereto.
The Company recently completed the following acquisitions, for which it is
filing financial statements and pro forma financial information as exhibits
hereto:
(i) Burbank Dialysis Group, Inc.;
(ii) Pasadena Dialysis Center, Inc.;
(iii) Piedmont Dialysis, Inc. and Peralta Renal Center;
(iv) Houston Kidney Center, Northwest Kidney Center, LLP, North Houston
Kidney Center LLP and Houston Kidney Center--Southeast, LLP; and
(v) Bertha Sirk Dialysis Center, Inc. and Greenspring Dialysis Center,
Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a)(i) Financial Statements of Burbank Dialysis Group, Inc.;
(ii) Financial Statements of Pasadena Dialysis Center, Inc.;
(iii) Combined Financial Statements of Piedmont Dialysis, Inc. and Peralta
Renal Center;
(iv) Combined Financial Statements of Houston Kidney Center, Northwest
Kidney Center, LLP, North Houston Kidney Center, LLP and Houston Kidney
Center--Southeast, LLP; and
(v) Combined Financial Statements of Bertha Sirk Dialysis Center, Inc. and
Greenspring Dialysis Center, Inc.
(b)(i) Unaudited Pro Forma Combined Balance Sheet of Total Renal Care
Holdings, Inc. as of June 30, 1996;
(ii) Unaudited Pro Forma Combined Statement of Income of Total Renal Care
Holdings, Inc. for the six months ended June 30, 1996;
(iii) Unaudited Pro Forma Combined Statement of Income of Total Renal Care
Holdings, Inc. for the seven months ended December 31, 1995; and
(iv) Unaudited Pro Forma Combined Statement of Income of Total Renal Care
Holdings, Inc. for the year ended May 31, 1995.
(c) Credit Agreement dated October 11, 1996 among the Company, the Lenders
party thereto, BNY Capital Markets, Inc., and Donaldson, Lufkin & Jenrette
Securities Corporation, as Arrangers, DLJ Capital Funding, Inc., as
Documentation Agent, and The Bank of New York, as Administrative Agent (the
"Credit Agreement").
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOTAL RENAL CARE HOLDINGS, INC.
(Registrant)
Dated: October 18, 1996 By: /s/ John E. King
John E. King
Vice President and Chief
Financial Officer
2
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
------- ---------------------- ------
<C> <S> <C>
99.1 Financial Statements
BURBANK DIALYSIS GROUP, INC.
Report of Independent Accountants of Price Waterhouse LLP.... F-2
Balance Sheet................................................ F-3
Statement of Operations and Retained Earnings (Deficit)...... F-4
Statement of Cash Flows...................................... F-5
Notes to Financial Statements................................ F-6
PASADENA DIALYSIS CENTER, INC.
Report of Independent Accountants of Price Waterhouse LLP.... F-10
Balance Sheet................................................ F-11
Statement of Operations and Retained Earnings................ F-12
Statement of Cash Flows...................................... F-13
Notes to Financial Statements................................ F-14
PIEDMONT DIALYSIS, INC.; PERALTA RENAL CENTER
Report of Independent Accountants of Price Waterhouse LLP.... F-17
Combined Balance Sheet....................................... F-18
Combined Statement of Income and Retained Earnings........... F-19
Combined Statement of Cash Flows............................. F-20
Notes to Combined Financial Statements....................... F-21
HOUSTON KIDNEY CENTER; NORTHWEST KIDNEY CENTER, LLP; NORTH
HOUSTON KIDNEY CENTER, LLP; HOUSTON KIDNEY CENTER--
SOUTHEAST, LLP
Report of Independent Accountants of Price Waterhouse LLP.... F-25
Combined Balance Sheet....................................... F-26
Combined Statement of Income and Partners' Equity............ F-27
Combined Statement of Cash Flows............................. F-28
Notes to Combined Financial Statements....................... F-29
BERTHA SIRK DIALYSIS CENTER, INC.; GREENSPRING DIALYSIS
CENTER, INC.
Report of Independent Accountants of Price Waterhouse LLP.... F-33
Combined Balance Sheet....................................... F-34
Combined Statement of Income and Retained Earnings........... F-35
Combined Statement of Cash Flows............................. F-36
Notes to Combined Financial Statements....................... F-37
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Balance Sheet................... F-41
Notes to Unaudited Pro Forma Combined Balance Sheet.......... F-42
Unaudited Pro Forma Combined Statements of Income............ F-43
Notes to Unaudited Pro Forma Combined Statements of Income... F-46
99.2 Credit Agreement dated October 11, 1996 among the Company,
Lenders party thereto, BNY Capital Markets, Inc., and
Donaldson, Lufkin & Jenrette Securities Corporation, as
Arrangers, DLJ Capital Funding, Ind., as Documentation
Agent, and The Bank of New York, as Administrative Agent
(The "Credit Agreement").
99.3 Guaranty by Total Renal Care, Inc. to The Bank of New York,
as Administrative Agent.
</TABLE>
3
<PAGE>
EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BURBANK DIALYSIS GROUP, INC.
Report of Independent Accountants of Price Waterhouse LLP................ F-2
Balance Sheet............................................................ F-3
Statement of Operations and Retained Earnings (Deficit).................. F-4
Statement of Cash Flows.................................................. F-5
Notes to Financial Statements............................................ F-6
PASADENA DIALYSIS CENTER, INC.
Report of Independent Accountants of Price Waterhouse LLP................ F-10
Balance Sheet............................................................ F-11
Statement of Operations and Retained Earnings............................ F-12
Statement of Cash Flows.................................................. F-13
Notes to Financial Statements............................................ F-14
PIEDMONT DIALYSIS, INC.; PERALTA RENAL CENTER
Report of Independent Accountants of Price Waterhouse LLP................ F-17
Combined Balance Sheet................................................... F-18
Combined Statement of Income and Retained Earnings....................... F-19
Combined Statement of Cash Flows......................................... F-20
Notes to Combined Financial Statements................................... F-21
HOUSTON KIDNEY CENTER; NORTHWEST KIDNEY CENTER, LLP; NORTH HOUSTON KIDNEY
CENTER, LLP; HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
Report of Independent Accountants of Price Waterhouse LLP................ F-25
Combined Balance Sheet................................................... F-26
Combined Statement of Income and Partners' Equity........................ F-27
Combined Statement of Cash Flows......................................... F-28
Notes to Combined Financial Statements................................... F-29
BERTHA SIRK DIALYSIS CENTER, INC.; GREENSPRING DIALYSIS CENTER, INC.
Report of Independent Accountants of Price Waterhouse LLP................ F-33
Combined Balance Sheet................................................... F-34
Combined Statement of Income and Retained Earnings....................... F-35
Combined Statement of Cash Flows......................................... F-36
Notes to Combined Financial Statements................................... F-37
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Balance Sheet............................... F-41
Notes to Unaudited Pro Forma Combined Balance Sheet...................... F-42
Unaudited Pro Forma Combined Statements of Income........................ F-43
Notes to Unaudited Pro Forma Combined Statements of Income............... F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Total Renal Care Holdings, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and retained earnings (deficit) and of cash flows present fairly,
in all material respects, the financial position of Burbank Dialysis Group,
Inc. at December 31, 1995, and the results of its operations and its cash
flows for the year in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Seattle, Washington
July 3, 1996
F-2
<PAGE>
BURBANK DIALYSIS GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current assets
Cash.............................................................. $ 29,000
Accounts receivable, net of allowance for doubtful accounts of
$239,000......................................................... 410,000
Inventories....................................................... 32,000
Amount due from related party..................................... 82,000
---------
Total current assets............................................ 553,000
Property and equipment, net......................................... 46,000
Other assets........................................................ 2,000
---------
$ 601,000
=========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
<S> <C>
Current liabilities
Current portion of long-term obligations.......................... $ 63,000
Accounts payable and other liabilities............................ 245,000
Employee compensation and benefits................................ 50,000
Amount due to former shareholder.................................. 185,000
Amount due to related party....................................... 28,000
---------
Total current liabilities....................................... 571,000
---------
Long-term obligations............................................... 212,000
---------
Commitments (Notes 4 and 5)......................................... --
---------
Shareholders' deficit
Common stock, no par value, 1,000 shares authorized, 200 shares
issued and outstanding........................................... 90,000
Accumulated deficit............................................... (272,000)
---------
Total shareholders' deficit..................................... (182,000)
---------
$ 601,000
=========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
BURBANK DIALYSIS GROUP, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Net operating revenue.............................................. $3,044,000
----------
Operating expenses
Facilities....................................................... 2,643,000
General and administrative....................................... 627,000
Provision for doubtful accounts.................................. 93,000
Depreciation and amortization.................................... 30,000
----------
Total operating expenses....................................... 3,393,000
----------
Loss from operations............................................... (349,000)
Interest expense................................................... 26,000
----------
Net loss........................................................... (375,000)
Retained earnings at beginning of year............................. 103,000
----------
Accumulated deficit at end of year................................. $ (272,000)
==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
BURBANK DIALYSIS GROUP, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss.......................................................... $(375,000)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization................................... 30,000
Provision for doubtful accounts................................. 93,000
Changes in operating assets and liabilities:
Accounts receivable........................................... 75,000
Other assets.................................................. 5,000
Accounts payable and other liabilities........................ 157,000
Employee compensation and benefits............................ (1,000)
Amount due to related party................................... 67,000
---------
Net cash provided by operating activities................... 51,000
---------
Cash flows from investing activities
Purchases of property and equipment............................... (5,000)
---------
Net cash used in investing activities....................... (5,000)
---------
Cash flows from financing activities
Payments of long-term obligations................................. (51,000)
Payments to former shareholder.................................... (171,000)
---------
Net cash used in financing activities....................... (222,000)
---------
Net decrease in cash................................................ (176,000)
Cash at the beginning of year....................................... 205,000
---------
Cash at the end of year............................................. $ 29,000
=========
Supplemental disclosure of cash flow information
Cash paid for interest.............................................. $ 26,000
=========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BURBANK DIALYSIS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Burbank Dialysis Group, Inc. (d/b/a Valley Dialysis Associates, the
"Company") was incorporated in 1985 to provide kidney dialysis and related
medical services through one clinic located in Van Nuys, California. As of
December 31, 1995, the Company had seven shareholders.
As discussed in Note 6, effective January 1, 1996, Total Renal Care, Inc.
("TRC"), which operates kidney dialysis facilities throughout the country,
acquired certain of the assets and liabilities of the Company which were
placed into a newly formed partnership as well as the rights to serve all of
its patients. TRC is wholly owned by Total Renal Care Holdings, Inc.
Operating revenues and accounts receivable allowances
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and private third-party payors, patients and others
for services provided. Receivables which are deemed uncollectible are
reflected in the provision for doubtful accounts as a component of operating
expenses in the statement of operations.
Medicare and Medicaid programs funded by the U.S. Government generally
reimburse the Company under prospective payment systems at amounts different
from the Company's established private rates. Revenues under these programs
are generally recognized at prospective rates which are subject to periodic
adjustment by federal and state agencies. The Company bills nongovernment
third-party payors at established private rates. The Company has contracted
discounts with some of these payors.
During the year ended December 31, 1995, the Company received approximately
64% of its dialysis revenues from Medicare and Medicaid reimbursement
programs. Medicare customarily pays 80% of U.S. Government established rates
for services provided by the Company. The remaining 20% is paid by State of
California Medicaid programs, private insurance companies, or directly by the
patients receiving the services. The State of California Medicaid program
provides coverage as primary payor for dialysis services in certain instances.
The Company has contracts for the provision of dialysis services to members of
certain managed care organizations.
Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Company. Furthermore, management adjusts its
reserves associated with these receivables as necessary.
Inventories
Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.
F-6
<PAGE>
BURBANK DIALYSIS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment
Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight-
line method over the estimated useful lives of the assets which range from
seven to ten years. Leasehold improvements are carried at cost. Depreciation
is recognized on the straight-line method over the lesser of the estimated
useful lives of the assets or the lease term.
Fair value of financial instruments
Financial instruments of the Company primarily consist of cash, receivables
and payables. The carrying value of these financial instruments approximated
fair value at December 31, 1995.
Income taxes
The Company has elected to be taxed as an S Corporation for federal income
tax purposes. As an S Corporation, ordinary corporate income is not taxed at
the corporate level but is passed through and taxed at the shareholder level.
Accordingly, no provision for income taxes is included in the statement of
operations.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<S> <C>
Medical equipment................................................. $ 323,000
Furniture, fixtures and office equipment.......................... 100,000
Leasehold improvements............................................ 175,000
---------
598,000
Less: accumulated depreciation and amortization................... (552,000)
---------
Net property and equipment...................................... $ 46,000
=========
</TABLE>
3. DEBT
At December 31, 1995, the Company had an 8.5% note payable to Saint Joseph
Hospital (the "Saint Joseph Loan"). Principal and interest payments totalling
approximately $7,000 are due monthly and extend into 1999. The note is secured
by the Company's accounts receivable and fixed assets. Annual principal
payments due under the note are as follows:
<TABLE>
<S> <C>
Years ending December 31,
1996............................................................. $ 63,000
1997............................................................. 69,000
1998............................................................. 75,000
1999............................................................. 68,000
--------
$275,000
========
</TABLE>
F-7
<PAGE>
BURBANK DIALYSIS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In connection with the transaction described in Note 6, the Saint Joseph
Loan was paid in full subsequent to December 31, 1995 and an equal amount was
borrowed from TRC.
4. RELATED PARTY TRANSACTIONS
The Company conducts certain business transactions with Burbank Acute
Dialysis Services ("BADS") and Valley Internal Medicine ("VIM"), both related
parties through the commonality of certain owners. In addition, the Company
operated under an interim management agreement with TRC during the month of
December 1995 (see Note 6). All payments to shareholders during 1995 have been
classified as compensation expense in the statement of operations.
Transactions with BADS include cooperative purchases of medical and other
supplies, consulting services and occasional noninterest bearing cash advances
between the two companies for general operating purposes. At the beginning of
1995, BADS owed the Company approximately $38,500 on which no interest was
accrued. During 1995, BADS advanced $206,000 to the Company and used
approximately $30,000 of dialysis supplies belonging to the Company. The
dollar amount related to such supplies represented the Company's original cost
and was charged to BADS without any mark-up or discount. In addition, $110,000
of compensation expense paid to the owners of the Company was charged to BADS
for consulting services provided. The dollar amount of this charge represented
management's best estimate of the fair value of the services provided.
During 1993 and 1994, the Company advanced $82,000 to VIM which has been
classified as a current asset. The loan is unsecured, does not bear interest
and is due on demand. No interest has been imputed on these advances due to
the immateriality of the amounts involved.
In 1994, the Company purchased a former shareholder's interest in the
Company and distributed the shares to the other owners. The Company paid the
former shareholder with a noninterest bearing note of $511,000. The note,
which matures in January 1997, is payble in 36 equal installments of
approximately $14,200. This note, repaid in full at the time of the
transaction described in Note 6, was classified as a current liability as of
December 31, 1995.
5. COMMITMENTS
The Company leases its dialysis facility under a noncancelable operating
lease expiring in 2000. During the year ended December 31, 1995, $256,000 was
expensed and paid relating to this rental agreement. Future minimum lease
payments as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Years ending December 31,
1996........................................................... $ 262,000
1997........................................................... 262,000
1998........................................................... 262,000
1999........................................................... 262,000
2000........................................................... 218,000
----------
$1,266,000
==========
</TABLE>
6. SUBSEQUENT EVENTS
Effective January 1, 1996, TRC acquired a 50.1% interest in certain assets
and liabilities of the Company. Under the terms of the purchase agreement, TRC
contributed its 50.1% share into a general partnership, the other partners of
which are the seven shareholders of the Company who contributed the remaining
assets and liabilities.
F-8
<PAGE>
BURBANK DIALYSIS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Additionally, TRC paid the Saint Joseph Loan in full and loaned an equal
amount to the partnership under identical interest and payment terms. The
partnership has entered into a management services agreement with TRC as well
as covenants-not-to-compete with the Company's shareholders. No accounts in
the accompanying financial statements have been adjusted for the effects of
this transaction.
During December 1995, the Company was subject to a one month interim
operating services agreement with TRC for which it owed approximately $66,000
as of December 31, 1995. This amount, included in the December 31, 1995
financial statements as a liability and expense, was subsequently paid to TRC
in January 1996.
F-9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Total Renal Care Holdings, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and retained earnings and of cash flows present fairly, in all
material respects, the financial position of Pasadena Dialysis Center, Inc. at
December 31, 1995, and the results of its operations and its cash flows for
the year in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Seattle, Washington
July 3, 1996
F-10
<PAGE>
PASADENA DIALYSIS CENTER, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash................................................ $ 434,000 $ 122,000
Accounts receivable, less allowance for doubtful
accounts of $277,000 and $285,000 (unaudited),
respectively....................................... 1,061,000 1,149,000
Inventories......................................... 40,000 40,000
Prepaid expenses and other current assets........... 8,000 13,000
---------- ----------
Total current assets.............................. 1,543,000 1,324,000
Property and equipment, net........................... 114,000 94,000
---------- ----------
$1,657,000 $1,418,000
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable and accrued expenses............... $ 49,000 $ 65,000
Employee compensation and benefits.................. 449,000 348,000
Dividends payable................................... 42,000 --
---------- ----------
Total current liabilities......................... 540,000 413,000
---------- ----------
Commitments (Note 3).................................. -- --
---------- ----------
Shareholder's equity
Common stock, no par value, 15,000 shares
authorized, issued and outstanding................. 150,000 150,000
Less amount due from shareholder.................... (53,000) (53,000)
Retained earnings................................... 1,020,000 908,000
---------- ----------
Shareholder's equity.............................. 1,117,000 1,005,000
---------- ----------
$1,657,000 $1,418,000
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
PASADENA DIALYSIS CENTER, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net operating revenue...................... $4,746,000 $ 856,000 $1,200,000
---------- ---------- ----------
Operating expenses
Facilities............................... 2,645,000 631,000 769,000
General and administrative............... 2,050,000 516,000 514,000
Provision for doubtful accounts.......... 122,000 82,000 8,000
Depreciation and amortization............ 85,000 18,000 21,000
---------- ---------- ----------
Total operating expenses............... 4,902,000 1,247,000 1,312,000
---------- ---------- ----------
Net loss................................... (156,000) (391,000) (112,000)
Retained earnings at beginning of period... 1,218,000 1,218,000 1,020,000
Dividends.................................. (42,000) -- --
---------- ---------- ----------
Retained earnings at end of period......... $1,020,000 $ 827,000 $ 908,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
PASADENA DIALYSIS CENTER, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.................................. $(156,000) $(391,000) $(112,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:..............................
Depreciation and amortization........... 85,000 18,000 21,000
Provision for doubtful accounts......... 122,000 82,000 8,000
Changes in operating assets and
liabilities:
Accounts receivable................... 92,000 295,000 (96,000)
Inventories, prepaid expenses and
other assets......................... 16,000 13,000 (5,000)
Accounts payable and accrued expenses. (20,000) 28,000 16,000
Employee compensation and benefits.... 421,000 73,000 (101,000)
--------- --------- ---------
Net cash provided by (used in)
operating activities............... 560,000 118,000 (269,000)
--------- --------- ---------
Cash flows from investing activities
Purchases of property and equipment....... (26,000) (2,000) (1,000)
--------- --------- ---------
Net cash used in investing
activities......................... (26,000) (2,000) (1,000)
--------- --------- ---------
Cash flows from financing activities
Net advances to shareholder............... (110,000) (78,000) --
Dividends................................. (84,000) (84,000) (42,000)
--------- --------- ---------
Net cash used in financing
activities......................... (194,000) (162,000) (42,000)
--------- --------- ---------
Net increase (decrease) in cash............. 340,000 (46,000) (312,000)
Cash at beginning of period................. 94,000 94,000 434,000
--------- --------- ---------
Cash at end of period....................... $ 434,000 $ 48,000 $ 122,000
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
PASADENA DIALYSIS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Pasadena Dialysis Center, Inc. (the "Company"), known as Eaton Canyon
Dialysis Center, was incorporated in 1985 to provide kidney dialysis and
related medical services through one clinic. The Company is owned by a single
shareholder.
As described in Note 5, effective June 1, 1996, Total Renal Care, Inc.
("TRC"), which operates kidney dialysis facilities throughout the country,
acquired certain of the assets and liabilities of the Company which were
placed into a newly formed partnership as well as the rights to serve all of
its patients. TRC is wholly owned by Total Renal Care Holdings, Inc.
Operating revenues and accounts receivable allowances
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and private third-party payors, patients and others
for services provided. Receivables which are deemed uncollectible are
reflected in the provision for doubtful accounts as a component of operating
expenses in the statement of operations.
Medicare and Medicaid programs funded by the U.S. Government generally
reimburse the Company under prospective payment systems at amounts different
from the Company's established private rates. Revenues under these programs
are generally recognized at prospective rates which are subject to periodic
adjustment by federal and state agencies. The Company bills nongovernment
third-party payors at established private rates. The Company has contracted
discounts with some of these payors.
During the year ended December 31, 1995, the Company received approximately
58% of its dialysis revenues from Medicare and Medicaid reimbursement
programs. Medicare customarily pays 80% of U.S. Government established rates
for services provided by the Company. The remaining 20% is paid by State of
California Medicaid programs, private insurance companies, or directly by the
patients receiving the services. The State of California Medicaid program
provides coverage as primary payor for dialysis services in certain instances.
The Company has contracts for the provision of dialysis services to members of
certain managed care organizations.
Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Company. Furthermore, management adjusts its
reserves associated with these receivables as necessary.
Inventories
Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.
F-14
<PAGE>
PASADENA DIALYSIS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment
Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight-
line method over the estimated useful lives of the assets which range from
five to ten years. Leasehold improvements are carried at cost. Depreciation is
recognized on the straight-line method over the lesser of the estimated useful
lives of the assets or the lease term.
Fair value of financial instruments
Financial instruments of the Company primarily consist of cash, receivables
and payables. The carrying value of these financial instruments approximated
fair value at December 31, 1995.
Income taxes
The Company has elected to be taxed as an S Corporation for federal income
tax purposes. As an S Corporation, ordinary corporate income is not taxed at
the corporate level but is passed through and taxed at the shareholder level.
Accordingly, no provision for income taxes is included in the statement of
operations.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Unaudited interim financial statements
The information presented as of March 31, 1996 and the quarters ended March
31, 1995 and 1996 has not been audited. In the opinion of management, the
unaudited interim financial statements include all adjustments consisting
solely of normal recurring adjustments necessary to present fairly the
Company's financial position as of March 31, 1996 and the results of
operations and cash flows for the quarters ended March 31, 1995 and 1996. The
interim results of operations are not necessarily indicative of results which
may occur for the full fiscal year.
2. PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<S> <C>
Medical equipment................................................. $ 349,000
Furniture, fixtures and office equipment.......................... 48,000
Leasehold improvements............................................ 472,000
---------
869,000
Less: accumulated depreciation and amortization................... (755,000)
---------
Net property and equipment...................................... $ 114,000
=========
</TABLE>
F-15
<PAGE>
PASADENA DIALYSIS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. COMMITMENTS
The Company leases its dialysis facility from its shareholder under a
noncancelable operating lease expiring in 2006. During the year ended December
31, 1995, $129,000 was expensed and paid relating to this rental agreement.
Future minimum lease payments as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Years ending December 31,
1996........................................................... $ 125,000
1997........................................................... 135,000
1998........................................................... 135,000
1999........................................................... 135,000
2000........................................................... 135,000
Thereafter..................................................... 765,000
----------
$1,430,000
==========
</TABLE>
4. RELATED PARTY TRANSACTIONS
In addition to dividends and rental payments, the Company paid its
shareholder and his family approximately $2,220,000 as compensation for
administrative services, directorship fees and management services during 1995
and such amounts have been recorded as expenses. The Company periodically
receives cash advances from or advances cash to its shareholder based upon the
respective party's liquidity needs. Such advances are usually settled within
one year. At December 31, 1995, the Company had an advance due from
shareholder in the amount of $53,000 included in shareholder's equity.
5. SUBSEQUENT EVENTS
Effective June 1, 1996, TRC acquired an 87.5% interest in certain assets and
liabilities of the Company. Under the terms of the purchase agreement, TRC
contributed its 87.5% share into a general partnership, the other partner of
which is the Company's sole shareholder who contributed the remaining assets
and liabilities. No accounts in the accompanying financial statements have
been adjusted for the effects of this transaction. In conjunction with the
acquisition, TRC retained the services of the Company's sole shareholder as
medical director, the duties of which include the supervision of the overall
clinical care provided by the Company. Effective June 1, 1996, the partnership
entered into a Management Services Agreement with TRC. The Management Services
Agreement provides TRC with control over the management functions of the
partnership.
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Total Renal Care Holdings, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the financial position of Piedmont Dialysis,
Inc. and Peralta Renal Center, a California Professional Medical Corporation,
(collectively "the Companies") at December 31, 1995, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Seattle, Washington
September 24, 1996
F-17
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and equivalents................................ $ 167,061 $ 628,046
Accounts receivable, net of allowance for doubtful
accounts of $35,000 and $35,000 (unaudited),
respectively....................................... 1,088,713 1,006,301
Inventories......................................... 184,601 232,773
Other assets........................................ 4,929 8,845
---------- ----------
Total current assets.............................. 1,445,304 1,875,965
Property and equipment, net........................... 379,734 336,306
---------- ----------
$1,825,038 $2,212,271
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 93,452 $ 111,096
Accrued employee compensation....................... 240,433 250,600
Other liabilities................................... 24,600 24,600
Notes payable to stockholder........................ 168,865 145,000
---------- ----------
Total current liabilities......................... 527,350 531,296
---------- ----------
Stockholders' equity:
Common stock........................................ 410,000 410,000
Retained earnings................................... 887,688 1,270,975
---------- ----------
Total stockholders' equity........................ 1,297,688 1,680,975
---------- ----------
Total liabilities and stockholders' equity........ $1,825,038 $2,212,271
========== ==========
</TABLE>
See accompanying notes to the combined financial statements.
F-18
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
<S> <C> <C> <C>
Net operating revenues...................... $6,954,031 $3,288,910 $3,864,930
---------- ---------- ----------
Operating expenses:
Facilities................................ 5,627,193 2,697,040 3,034,536
General and administrative................ 803,289 405,370 405,461
Depreciation and amortization............. 157,886 60,612 43,812
---------- ---------- ----------
Total operating expenses................ 6,588,368 3,163,022 3,483,809
---------- ---------- ----------
Income from operations...................... 365,663 125,888 381,121
Interest expense, net....................... (17,051) (3,248) 2,166
---------- ---------- ----------
Net income.................................. 348,612 122,640 383,287
Retained earnings, at beginning of period... 669,076 669,076 887,688
Distributions to stockholders............... (130,000) (80,000)
---------- ---------- ----------
Retained earnings, at end of period......... $ 887,688 $ 711,716 $1,270,975
========== ========== ==========
</TABLE>
See accompanying notes to the combined financial statements.
F-19
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -------------------
1995 1995 1996
------------ --------- --------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 348,612 $ 122,640 $383,287
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization............. 157,886 60,612 43,812
Changes in operating assets and
liabilities:
Accounts receivable..................... (229,685) (51,548) 82,412
Inventories............................. (55,364) (24,750) (48,172)
Other assets............................ 800 800 (4,300)
Accounts payable........................ 67,498 14,294 17,644
Accrued employee compensation and other
benefits............................... 18,320 104,822 10,167
--------- --------- --------
Net cash provided by operating
activities........................... 308,067 226,870 484,850
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (25,653) (25,653) --
--------- --------- --------
Net cash used by investing activities. (25,653) (25,653) --
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable to stockholder.. (100,983) (55,930) (23,865)
Distributions to stockholders............. (130,000) (80,000) --
--------- --------- --------
Net cash used by financing activities. (230,983) (135,930) (23,865)
--------- --------- --------
Net increase in cash and equivalents........ 51,431 65,287 460,985
Cash and equivalents at beginning of period. 115,630 115,630 167,061
--------- --------- --------
Cash and equivalents at end of period....... $ 167,061 $ 180,917 $628,046
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest...................... $ 20,265 $ 4,069 $ 442
========= ========= ========
</TABLE>
See accompanying notes to the combined financial statements.
F-20
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Piedmont Dialysis, Inc. ("Piedmont") and Peralta Renal Center, a California
Professional Medical Corporation ("Peralta"), collectively referred to as "the
Companies," were organized to operate kidney dialysis centers and to provide
related medical services in and around Oakland, California. Piedmont and
Peralta each have one free standing facility. Piedmont also has a contact to
provide services to patients of one hospital in the Oakland area.
Effective August 1, 1996, Total Renal Care, Inc. ("TRC"), a wholly owned
subsidiary of Total Renal Care Holdings, Inc. ("TRCH"), which operates kidney
dialysis facilities throughout the country, purchased an 80% interest in the
assets and liabilities of the Companies as discussed in Note 6.
BASIS OF PRESENTATION
The combined financial statements include the accounts of Piedmont and
Peralta. The Companies' financial statements are combined as a result of
common ownership interests. However, each company is a separate legal entity.
All significant intercompany transactions and balances have been eliminated in
combination.
OPERATING REVENUES AND ACCOUNTS RECEIVABLE ALLOWANCES
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and third-party payors, patients and others for
services provided. Receivables which are deemed uncollectible are reflected in
provision for doubtful accounts as a component of operating expenses in the
statement of income.
Medicare and Medicaid programs funded by the U.S. Government generally
reimburse the Companies under prospective payment systems at amounts different
from the Companies' established private rates. Revenues under these programs
are generally recognized at prospective rates which are subject to periodic
adjustment by Federal and state agencies. The Companies bill nongovernment
third-party payors at established private rates. The Companies have contracts
for the provision of dialysis services to members of certain managed care
organizations.
The Companies provide credit, in the normal course of business, to patients
from (i) the federal and state governments under the Medicare and Medicaid
programs representing approximately 76% of their dialysis revenue in 1995, and
(ii) private pay payors including insurance companies, private carriers and
other third-party payors.
Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Companies. Furthermore, management adjusts
reserves associated with these receivables as necessary.
CASH AND EQUIVALENTS
For the purpose of reporting cash flows, cash and equivalents include cash
on hand and other cash equivalents having an initial maturity of three months
or less.
F-21
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight
line method over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
ASSET LIFE
----- ----------
<S> <C>
Medical equipment................................................. 5-7 years
Furniture, fixtures and office equipment.......................... 5-7 years
Leasehold improvements............................................ 5-14 years
</TABLE>
OTHER LIABILITIES
Reimbursements in excess of realizable billings have been reported as other
liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments primarily consist of cash, receivables, payables, and
debt obligations. The carrying value of these financial instruments
approximated fair value at December 31, 1995.
INCOME TAXES
The Companies are incorporated under Subchapter S (Sub-S) of the Internal
Revenue Code and are not subject to tax at the corporate level for Federal and
state income taxes because the owners include their corresponding income or
loss in their respective federal and state income tax returns.
STOCKHOLDERS' EQUITY
Retained earnings represent undistributed earnings of the Companies, which
are all Sub-S corporations.
Common stock comprises the following:
Peralta Renal Center--no par value, 100,000 shares authorized; 200 shares
issued and outstanding; and
Piedmont Dialysis, Inc.--no par value, 1,000 shares authorized; 100 shares
issued and outstanding.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. One of the most difficult in terms of accurate estimation
relates to the allowance for doubtful receivables. Actual amounts could differ
from estimated amounts.
F-22
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<S> <C>
Medical equipment............................................... $ 806,486
Furniture, fixtures and office equipment........................ 102,386
Leasehold improvements.......................................... 521,269
-----------
1,430,141
Less: accumulated depreciation and amortization................. (1,050,407)
-----------
$ 379,734
===========
</TABLE>
3. LEASES
The Piedmont facility is leased under an operating lease expiring April 30,
1999. The lease agreement covers a period of five years and provides a renewal
option for one additional five year term. The Peralta facility is leased under
an operating lease expiring February 16, 1997. This lease agreement also
covers a period of five years but does not provide a renewal option.
Future minimum lease payments under this lease are as follows:
<TABLE>
<S> <C>
Years ending December 31:
1996............................................................. $166,748
1997............................................................. 139,602
1998............................................................. 137,663
1999............................................................. 46,754
--------
$490,767
========
</TABLE>
Rental expense under all operating leases amounted to $170,600 for 1995.
4. RETIREMENT PROGRAMS
The Companies have a 401(k) defined contribution plan which is available to
all employees meeting certain eligibility requirements. Under the plan,
employees can elect to defer a portion of their salaries. The Companies do not
match any portion of the participants' contributions. However, the Companies
have an option to make profit sharing contributions to the plan each fiscal
year. No matching contributions were made by the Companies during 1995.
5. RELATED PARTY TRANSACTIONS
Peralta is indebted under a secured note payable from one of its
stockholders in the principal amount of $135,000, which bears an annual
interest rate of 8.0%. The loan was entered into during October 1993 and
beginning November 1, 1993 payments were due the first of every month for 30
months. As of December 31, 1995, the net balance outstanding on the note is
$23,865.
Piedmont is indebted under an unsecured demand note payable from one of its
stockholders in the amount of $145,000. The agreement stipulates a 10% monthly
interest payment.
F-23
<PAGE>
PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
6. SUBSEQUENT EVENT
Effective June 1, 1996, the Companies entered into an Interim Operating
Services Agreement whereby TRC agreed to provide the Companies with purchasing
services, financial services, and other operating services. The Interim
Operating Services Agreement remained in effect for a two month period ceasing
August 1, 1996. TRC received a fee equal to 80% of the operating income of the
Companies for the effective period. In addition, effective July 31, 1996, the
Companies entered into a General Partnership Agreement with TRC who will act
as general partner with the Companies retaining a 20% minority interest in the
partnership. Furthermore, effective August 1, 1996, the Companies'
stockholders entered into an Asset Purchase Agreement to sell 80% of the
assets, excluding cash, of the Companies to TRC. Effective August 1, 1996, the
Partnerships entered into a Management Services Agreement with TRC. The
Management Services Agreement provides TRC with control over the management
functions of the Partnerships.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Total Renal Care Holdings, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income and partners' equity and of cash flows present
fairly, in all material respects, the financial position of Houston Kidney
Center (a Texas general partnership), Northwest Kidney Center, LLP, North
Houston Kidney Center, LLP and Houston Kidney Center--Southeast, LLP
(collectively, the Centers) at December 31, 1995 and the results of their
operations and cash flows for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Centers' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
September 6, 1996
F-25
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash................................................. $ 348,956 $ 838,930
Accounts receivable, net of allowance for doubtful
accounts of $289,900 and $335,992 (unaudited),
respectively........................................ 1,701,246 1,514,005
Inventories.......................................... 127,222 143,156
Other assets......................................... 34,067 19,560
---------- ----------
Total current assets............................... 2,211,491 2,515,651
Property and equipment, net............................ 545,340 514,820
Other assets........................................... 10,185 9,883
---------- ----------
Total assets....................................... $2,767,016 $3,040,354
========== ==========
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities............. $ 208,391 $ 258,116
Current portion of notes payable..................... 102,000 373,785
Notes payable to partners............................ 155,000 155,000
Accrued employee compensation and benefits........... 348,743 186,655
---------- ----------
Total current liabilities.......................... 814,134 973,556
Notes payable.......................................... 895,642 403,480
---------- ----------
Total liabilities.................................. 1,709,776 1,377,036
Partners' equity....................................... 1,057,240 1,663,318
---------- ----------
Total liabilities and partners' equity............. $2,767,016 $3,040,354
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-26
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
COMBINED STATEMENT OF INCOME AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net operating revenues..................... $7,975,817 $3,666,722 $4,851,309
---------- ---------- ----------
Operating expenses:
Facilities............................... 5,480,773 2,535,054 3,412,961
General and administrative............... 547,435 226,907 239,567
Provision for doubtful accounts.......... 512,462 402,738 244,238
Depreciation and amortization............ 221,863 80,251 75,703
Interest expense......................... 91,455 37,908 29,762
---------- ---------- ----------
Total operating expenses............... 6,853,988 3,282,858 4,002,231
---------- ---------- ----------
Net income................................. 1,121,829 383,864 849,078
Partners' equity, beginning of period...... 582,411 582,411 1,057,240
Distributions to partners.................. (647,000) (196,000) (243,000)
---------- ---------- ----------
Partners' equity, end of period............ $1,057,240 $ 770,275 $1,663,318
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-27
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $1,121,829 $ 383,864 $ 849,078
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization........... 221,863 80,251 75,703
Loss on sale of equipment............... 5,216
Changes in operating assets and
liabilities:
Accounts receivable, net................ (727,683) (241,969) 187,241
Inventories............................. (49,352) (2) (15,934)
Other current assets.................... (2,963) (22,901) 14,507
Accounts payable and accrued
liabilities............................ 19,326 75,941 49,725
Accrued employee compensation and
benefits............................... 92,128 (81) (162,088)
---------- --------- ---------
Net cash provided by operating
activities........................... 680,364 275,103 998,232
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (71,266) (19,002) (44,880)
Proceeds from sale of property and
equipment................................ 4,000
---------- --------- ---------
Net cash used by investing activities... (67,266) (19,002) (44,880)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of partner notes
payable.................................. 155,000
Proceeds from issuance of notes payable... 260,276 344,295 307,000
Payments on notes payable................. (83,366) (197,222) (527,378)
Distributions to partners................. (647,000) (196,000) (243,000)
---------- --------- ---------
Net cash used by financing activities... (315,090) (48,927) (463,378)
---------- --------- ---------
Net increase in cash........................ 298,008 207,174 489,974
Cash at beginning of period................. 50,948 50,948 348,956
---------- --------- ---------
Cash at end of period....................... $ 348,956 $ 258,122 $ 838,930
========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFOR-
MATION:
Cash paid for interest.................... $ 84,536 $ 37,908 $ 29,762
========== ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-28
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Houston Kidney Center ("HKC"), a Texas general partnership, Northwest Kidney
Center, LLP ("NKC"), North Houston Kidney Center, LLP ("NHKC") and Houston
Kidney Center-Southeast, LLP ("HKCSE") (collectively, "the Centers") provide
kidney dialysis and related medical services in Houston, Texas.
Effective July 1, 1996, Total Renal Care Holdings, Inc. ("TRCH"), which
operates kidney dialysis facilities throughout the country acquired control of
the partnerships from the partners, as discussed in Note 6.
BASIS OF PRESENTATION
The combined financial statements include the accounts of Houston Kidney
Center, a Texas general partnership, Northwest Kidney Center, LLP, North
Houston Kidney Center, LLP and Houston Kidney Center--Southeast, LLP. The
Centers' financial statements are combined as a result of common ownership.
However, each of the four partnerships are separate legal entities. All
significant intercompany transactions and balances have been eliminated in
combination.
REVENUE RECOGNITION AND CREDIT RISK
Revenues, consisting primarily of dialysis and ancillary fees, are
recognized when services and related products are provided to patients in need
of ongoing, life sustaining kidney dialysis treatment. These amounts are
reported at the amounts expected to be realized from governmental and third-
party payors, patients and others for services provided. Receivables which are
deemed uncollectible are reflected in the provision for doubtful accounts as a
component of operating expenses.
Medicare and Medicaid programs, funded by the U.S. Government and state
government, respectively, generally reimburse the Centers under prospective
payment systems at amounts different from the Centers' established private
rates. Revenues under these programs are generally recognized at prospective
rates which are subject to periodic adjustment by Federal and state agencies.
The Centers bill nongovernment third-party payors at established private
rates. The Centers have contracts for the provision of dialysis services to
members of certain managed care organizations.
During 1995, the Centers received approximately 80% of their dialysis
revenues from Medicare and Medicaid reimbursement programs. Medicare
customarily pays approximately 80% of Government established rates for
services provided by the Centers. The remaining 20% is paid by the State of
Texas Medicaid programs, private insurance companies, or directly by the
patients receiving the services. The State of Texas Medicaid program provides
coverage as primary payor for dialysis services in certain instances. At
December 31, 1995, approximately 35% of the accounts receivable balance was
due from the Medicare and Medicaid programs.
Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Centers. Furthermore, management adjusts its
reserves associated with these receivables as necessary.
F-29
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand and other cash equivalents having an initial maturity of three
months or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation for leasehold improvements and
other property and equipment is recognized on the straight line and double
declining balance methods, respectively, over the estimated useful lives of
the assets as follows:
<TABLE>
<CAPTION>
ASSET LIFE
----- ---------
<S> <C>
Medical and office equipment....................................... 3-5 years
Furniture and fixtures............................................. 7 years
Leasehold improvements............................................. 10 years
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments primarily consist of cash, receivables, payables, and
debt obligations. Due to this current nature or market interest rates,
management believes that the carrying value of these financial instruments
approximated fair value at December 31, 1995.
INCOME TAXES
The Centers are partnerships which are pass through entities for income tax
reporting purposes and, accordingly, earnings are not subject to federal and
state income taxes because the partners include the Centers' income or loss in
their respective federal and state income tax returns.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from estimated amounts.
F-30
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<S> <C>
Medical equipment................................................ $ 831,122
Furniture, fixtures and office equipment......................... 241,881
Automobiles...................................................... 3,599
Leasehold improvements........................................... 363,609
----------
1,440,211
Less: accumulated depreciation and amortization.................. (894,871)
----------
$ 545,340
==========
</TABLE>
3. NOTES PAYABLE
Long-term obligations consist of the following:
<TABLE>
<S> <C>
Term note payable to bank, bearing interest at one-half percent
over prime (8.5% at December 31, 1995), due in monthly principal
payments of $6,826 through April 1, 1999)....................... $ 242,102
Term note payable to bank, bearing interest at one percent over
prime (8.5% at December 31, 1995), due in monthly principal
payments of $5,304 through January 15, 2000..................... 215,627
Revolving line of credit payable to bank, bearing interest at one
half percent over prime (8.5% at December 31, 1995), due in
total at June 1, 1997........................................... 200,000
Revolving line of credit payable to bank, bearing interest at one
percent over prime (8.5% at December 31, 1995), due in total in
May 1, 1997..................................................... 115,913
Revolving line of credit payable to bank, bearing interest at
one-half percent over prime (8.5% at December 31, 1995), due in
total at June 1, 1997........................................... 125,000
Revolving line of credit payable to bank, bearing interest at one
percent over prime (8.5% at December 31, 1995), due in July
1997............................................................ 99,000
---------
997,642
Less: current maturities......................................... (102,000)
---------
$ 895,642
=========
</TABLE>
Future maturities of notes payable are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1996.............................................................. $102,000
1997.............................................................. 865,496
1998.............................................................. 130,996
1999.............................................................. 94,761
Thereafter........................................................ 616
</TABLE>
F-31
<PAGE>
HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. LEASES
Operating leases for the facilities expire between 1997 and 2002. The lease
agreements cover periods of 5 to 8.5 years and provide renewal options for one
to three additional one-year terms.
The Centers also lease 24 dialysis machines. The leases are for 48 months
each and expire between July 1998 and April 1999.
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<S> <C>
Years ending December 31,
1996........................................................... $ 356,200
1997........................................................... 321,708
1998........................................................... 214,861
1999........................................................... 99,099
2000........................................................... 50,625
Thereafter..................................................... 66,825
----------
$1,109,318
==========
</TABLE>
Rental expense under all operating leases amounted to $257,000 for 1995.
5. RELATED PARTY TRANSACTIONS
In 1995, certain partners loaned $155,000 to the Centers. The loans bear
interest at 9.5% and are payable upon demand. Accrued interest on the loans at
December 31, 1995 was $6,919.
6. SUBSEQUENT EVENT
Effective July 1, 1996, the Centers entered into an Interim Operating
Services Agreement whereby Total Renal Care, Inc. (TRC) agreed to provide the
Centers with purchasing services, financial services, and other operating
services. The Interim Operating Services Agreement remained in effect for a
one month period ceasing July 31, 1996. TRC received a fee equal to 80% of the
operating income of the Companies for the effective period.
Effective July 1, 1996, the Centers' partners, pursuant to a Partners
Interest, Purchase and Sale Agreement, caused the Centers to contribute all of
their respective assets and certain liabilities to Houston Kidney Center/Total
Renal Care Integrated Service Network Limited Partnership (New Partnership),
in exchange for all of the general and limited partner interests in the New
Partnership and simultaneously distributed all of the general and limited
partnership interest to the Centers' partners. In addition, effective July 31,
1996, the Centers' partners consummated an agreement to sell a one-percent
interest as the sole general partner of the New Partnership to TRC and an
aggregate of seventy-nine percent interest as a limited partner in the New
Partnership to TRC West, Inc. TRC and TRC West, Inc. are subsidiaries of Total
Renal Care Holdings, Inc.
F-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Total Renal Care Holdings, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the financial position of Bertha Sirk
Dialysis Center, Inc. and Greenspring Dialysis Center, Inc. (collectively "the
Companies") at December 31, 1995, and the results of their operations and
their cash flows for the year then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
September 6, 1996
F-33
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash................................................ $ 19,026 $ 153,039
Accounts receivable, net of allowance for doubtful
accounts of $134,912 and $154,312 (unaudited),
respectively....................................... 935,428 920,581
Inventories......................................... 74,648 57,882
Prepaid expenses.................................... 37,237 63,943
Other current assets................................ 9,417 18,581
---------- ----------
Total current assets............................ 1,075,756 1,214,026
Property and equipment, net........................... 516,919 885,951
Other non-current assets.............................. 2,510 2,657
---------- ----------
Total assets.................................... $1,595,185 $2,102,634
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 106,691 $ 284,597
Accrued expenses.................................... 162,256 132,300
Current maturities of long term debt and lease
obligations........................................ 61,965 182,487
Due to officer...................................... 109,022 47,877
Other liabilities................................... 27,144 45,305
---------- ----------
Total current liabilities....................... 467,078 692,566
Note payable to officer............................... 123,000 310,332
Other non-current liabilities......................... 1,940
Stockholders' equity
Common stock........................................ 1,000 1,000
Retained earnings................................... 1,002,167 1,098,736
---------- ----------
Total stockholders' equity........................ 1,003,167 1,099,736
---------- ----------
Total liabilities and stockholders' equity...... $1,595,185 $2,102,634
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net operating revenues..................... $5,088,160 $2,449,888 $2,674,571
---------- ---------- ----------
Operating expenses
Facilities............................... 3,671,716 1,736,651 2,001,042
General and administrative............... 769,672 373,121 487,759
Provision for doubtful accounts.......... 39,602 19,400
Depreciation and amortization............ 112,205 51,377 64,119
---------- ---------- ----------
Total operating expenses............... 4,593,195 2,161,149 2,572,320
---------- ---------- ----------
Income from operations..................... 494,965 288,739 102,251
Other income............................... 8,993 3,228 5,495
Interest expense........................... (54,253) (21,839) (11,177)
---------- ---------- ----------
Net income................................. 449,705 270,128 96,569
Retained earnings at beginning of period... 552,462 552,462 1,002,167
---------- ---------- ----------
Retained earnings at end of period......... $1,002,167 $ 822,590 $1,098,736
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................... $ 449,705 $ 270,128 $ 96,569
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization............ 112,205 51,377 64,119
Changes in operating assets and
liabilities:
Accounts receivable.................... 6,789 145,548 14,847
Inventories............................ (25,530) 5,419 16,766
Prepaid expenses....................... (19,114) 6,485 (26,706)
Other assets........................... (8,191) (4,838) 8,850
Accounts payable....................... (190,036) (93,228) 177,906
Accrued employee compensation and other
benefits.............................. 18,954 (43,988) (30,256)
--------- --------- ---------
Net cash provided by operating
activities.......................... 344,782 336,903 322,095
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment...... (49,769) (11,026) (432,846)
--------- --------- ---------
Net cash used by investing
activities.......................... (49,769) (11,026) (432,846)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable to officer..... (246,963) (141,420)
Payments on leases and other notes....... (57,542) (23,459) (67,945)
Proceeds from issuance of notes payable
to officer.............................. 157,764
Proceeds from issuance of other notes.... 154,945
--------- --------- ---------
Net cash used by financing
activities.......................... (304,505) (164,879) 244,764
--------- --------- ---------
Net decrease in cash....................... (9,492) 160,998 134,013
Cash at beginning of period................ 28,518 28,518 19,026
--------- --------- ---------
Cash at end of period...................... $ 19,026 $ 189,516 $ 153,039
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest..................... $ 20,265 $ 21,839 $ 11,177
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bertha Sirk Dialysis Center, Inc. ("Bertha Sirk") and Greenspring Dialysis
Center, Inc. ("Greenspring"), collectively referred to as "the Companies,"
were organized to operate kidney dialysis centers and to provide related
medical services in and around Baltimore, Maryland. Bertha Sirk has one free
standing facility while Greenspring operates at a local hospital. Bertha Sirk
also contracts with two hospitals to perform acute dialysis treatments to
admitted patients.
Effective July, 1996, Total Renal Care, Inc. ("TRC"), which operates kidney
dialysis facilities throughout the country, purchased assets and liabilities
of the Companies as discussed in Note 7. TRC is a wholly owned subsidiary of
Total Renal Care Holdings , Inc. ("TRCH").
BASIS OF PRESENTATION
The accompanying combined financial statements are prepared using the
accrual basis of accounting in accordance with generally accepted accounting
principles.
The combined financial statements include the accounts of Bertha Sirk and
Greenspring due to common ownership of both entities. All significant
intercompany transactions and balances have been eliminated in the
combination.
OPERATING REVENUES AND ACCOUNTS RECEIVABLE ALLOWANCES
Revenues are recognized when services and related products are provided to
patients in need of on-going life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and third-party payors, patients and others for
services provided. Receivables which are deemed uncollectible are reflected in
the provision for doubtful accounts as a component of operating expenses in
the statement of income.
Medicare and Medicaid programs funded by the U.S. Government generally
reimburse the Companies under prospective payment systems at amounts different
from the Companies' established private rates. Revenues under these programs
are generally recognized at prospective rates which are subject to periodic
adjustment by Federal and state agencies. The Companies bill nongovernment
third-party payors at established private rates. The Companies have contracts
for the provision of dialysis services to members of certain managed care
organizations.
The Companies provide credit, in the normal course of business, to patients
from (i) the federal and state governments under the Medicare and Medicaid
programs representing approximately 60% of their dialysis revenue and net
accounts receivable in fiscal year 1995, respectively, and (ii) private pay
payors including insurance companies, private carriers and other third-party
payors.
Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Companies. Furthermore, management adjusts
reserves associated with these receivables as necessary.
CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand and other cash equivalents having an initial maturity of three
months or less.
F-37
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight-
line (mid-year convention) method over the estimated useful lives (or lesser
of the lease terms or useful lives for leasehold improvements) of the assets
as follows:
<TABLE>
<CAPTION>
ASSET LIFE
----- ---------
<S> <C>
Medical equipment................................................. 5-7 years
Furniture, fixtures and office equipment.......................... 5-7 years
Leasehold improvements............................................ various
</TABLE>
OTHER LIABILITIES
Reimbursements in excess of realizable billings have been reported as other
liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments primarily consist of cash, receivables, payables, and
debt obligations. The carrying value of these financial instruments
approximated fair value at December 31, 1995.
INCOME TAXES
The Companies are incorporated under Subchapter S (Sub-S) of the Internal
Revenue Code and are not subject to tax at the corporate level for Federal and
state income taxes because the owners include their corresponding income or
loss in their respective federal and state income tax returns.
STOCKHOLDERS' EQUITY
Retained earnings represent undistributed earnings of the Companies, which
are all Sub-S corporations.
Common stock comprises the following:
Bertha Sirk--$1 par value, 100,000 shares authorized; 500 shares issued and
outstanding; and
Greenspring--$1 par value, 100,000 shares authorized; 500 shares issued and
outstanding
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. One of the most difficult in terms of accurate estimation
relates to the allowance for doubtful receivables. Actual amounts could differ
from estimated amounts.
F-38
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<S> <C>
Medical equipment................................................. $ 635,654
Furniture, fixtures and office equipment.......................... 95,854
Leasehold improvements............................................ 176,783
---------
Total property and equipment.................................... 908,291
Less: accumulated depreciation and amortization................... (391,372)
---------
Net............................................................. $ 516,919
=========
</TABLE>
3. LEASES
The Greenspring Facility is leased under two operating leases which expire
on August 31, 2000 and February 28, 2003. Both lease agreements cover a period
of seven years and provide a renewal option for one additional five year term.
The Bertha Sirk facility is leased under two operating leases which both
expire on January 31, 1998. One lease has a term of five years and the other
has a term of seven years and both provide a renewal option for one additional
five year term.
Future minimum lease payments under these leases are as follows:
<TABLE>
<S> <C>
Years ending December 31:
1996............................................................. $135,890
1997............................................................. 152,341
1998............................................................. 156,568
1999............................................................. 165,479
2000............................................................. 158,194
--------
$768,472
========
</TABLE>
Rental expense under all operating leases amounted to $127,374 for 1995.
The Companies have approximately $92,000 of capitalized leased medical
equipment recorded in property, plant and equipment. Accumulated amortization
of $67,000 on this equipment is included in accumulated depreciation. The
lease expires on January 1, 1997.
Future minimum lease payments under this lease are as follows:
<TABLE>
<S> <C>
Years ended December 31:
1996............................................................... $20,965
1997............................................................... 1,940
-------
$22,905
=======
</TABLE>
4. UNUSED BANK CREDIT FACILITIES
As of December 31, 1995 the Companies have unused revolving note facilities
of $140,000 and $100,000 for Greenspring and Bertha Sirk, respectively. The
interest rate for both notes is the prime rate plus one percentage point and
the notes are secured by assets of the Companies. As of July 11, 1996, both
notes were cancelled.
F-39
<PAGE>
BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. RETIREMENT PROGRAMS
The Companies have a 401(k) defined contribution plan which is available to
all employees meeting certain eligibility requirements. Under the plan,
employees can elect to defer of up to 10% of their salaries. The Companies
match 50% up to 3% of the employees salary. The Companies have an option to
make profit sharing contributions to the plan each fiscal year. Matching and
profit sharing contributions of approximately $40,000 were accrued by the
Companies during 1995.
6. RELATED PARTY TRANSACTIONS
As of December 31, 1995, Greenspring owes its President $164,000 in the form
of a note payable, which bears an annual interest rate of 10.75%. The loan was
entered into in May of 1994 and the first of 60 monthly payments was in
January of 1995. The note matures on January 1, 2000.
As of December 31, 1995, Bertha Sirk owes its President $39,971 in the form
of a note payable. The note was entered into in 1994, bears interest at 5.7%
and has no due date. Payments are made upon demand from the President.
As of December 31, 1995, Greenspring owes its President $69,051 in the form
of a note payable. The note has no stated interest rate and no due date.
Payments are made upon demand from the President.
7. SUBSEQUENT EVENTS
Effective June 1, 1996, the Companies entered into an Interim Operating
Management Agreement (the "Management Agreement") whereby TRCH agreed to
provide the Companies with management, consulting and advisory services with
respect to personnel, operational policies, equipment and improvements,
billing, bookkeeping, accounting, funds management and other advice as agreed
between TRCH and the Companies. The Management Agreement remained in effect
until the date that TRCH acquired substantially all of the Companies' assets.
TRCH received a fee equal to the operating income of the Companies for the
period the Management Agreement was in effect. In addition, in July, 1996, the
stockholders of the Companies entered into an Asset Purchase Agreement
("Purchase Agreement") to sell all of the assets (except cash), properties,
and rights of the Companies to Total Renal Care, Inc. (TRC). Under the
Purchase Agreement, TRC did not assume, and is not liable for, any debt,
obligations, or liabilities of the Companies incurred prior to the Management
Agreement.
F-40
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
COMBINED
THE COMPANY DEBT ACQUISITIONS PRO FORMA
(HISTORICAL) RETIREMENT(e) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 39,969 $(28,499) $ 2,295 $(16,486)(a)
(1,830)(b)
4,551 (f)
Accounts receivable,
net.................... 82,375 8,485 (1,734)(b) $ 89,126
Other current assets.... 9,075 724 (73)(b) 9,726
-------- -------- ------- -------- --------
Total current assets.. 131,419 (28,499) 11,504 (15,572) 98,852
Property and equipment,
net.................... 44,456 4,954 (302)(b) 49,108
Intangible assets, net.. 111,611 (1,866) 821 57,784 (a) 168,350
Other assets............ 3,560 259 (77)(b) 3,742
-------- -------- ------- -------- --------
$291,046 $(30,365) $17,538 $ 41,833 $320,052
======== ======== ======= ======== ========
Current liabilities..... $ 23,366 $ (5,139) $ 4,276 $ (1,197)(b) $ 25,857
4,551 (f)
Long-term debt.......... 59,101 (17,503) 3,207 (3,207)(b) 90,578
48,980 (a)
Other long-term
liabilities............ 523 25 (25)(b) 523
Minority interest....... 4,541 -- 931 (c) 5,472
Common stock............ 26 472 (472)(d) 26
Additional paid-in
capital................ 234,369 1,283 547 (a)(d) 236,199
Notes receivable from
stockholders........... (2,727) -- -- (2,727)
Retained earnings
(deficit).............. (28,153) (7,723) 8,275 (8,275)(d) (35,876)
-------- -------- ------- -------- --------
$291,046 $(30,365) $17,538 $ 41,833 $320,052
======== ======== ======= ======== ========
</TABLE>
F-41
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Balance sheet of Total Renal Care Holdings,
Inc. as of June 30, 1996 gives effect to the acquisition of the Insignificant
Acquisitions, in each case as if such acquisitions were consummated on June
30, 1996. The pro forma adjustments are based on consideration exchanged,
including the estimated fair value of assets acquired, liabilities assumed and
common stock issued. The actual adjustments, which will be based on valuations
of fair value as of the date of acquisition, may differ from those made
herein.
2. PRO FORMA ADJUSTMENTS
(a) To record the Insignificant Acquisitions as follows (in thousands):
<TABLE>
<S> <C>
Purchase price...................................................... $67,296
Net book value of assets acquired................................... 9,512
-------
Purchase price allocated to intangible assets....................... $57,784
=======
</TABLE>
The purchase prices of the Insignificant Acquisitions were paid with cash of
$16,486,000, borrowings of $48,980,000 and common stock of Total Renal Care
Holdings, Inc. valued at $1,830,000.
(b) To reflect assets and liabilities not acquired by the Company.
(c) The Company purchased a less than 100% interest in five partnerships
which are consolidated for financial reporting purposes. This entry is to
record the minority interest in such partnerships.
(d) To eliminate the equity of the acquired businesses.
(e) To reflect the repurchase of $27.4 million in debt for $28.4 million and
the completion of a tender offer pursuant to which the Company purchased its
remaining 12% Senior Subordinated Discount Notes for $40.1 million, $40.0
million of which was financed using the senior credit facility. These
repurchases resulted in an extraordinary loss of $7.7 million.
(f) To reclassify book overdraft to current liabilities.
F-42
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SOUTH
CAREMARK CAROLINA
THE COMPANY FACILITIES FACILITIES
6 MONTHS 2 MONTHS 2 MONTHS
ENDED ENDED ENDED OTHER
JUNE 30, FEBRUARY 28, FEBRUARY 28, COMBINED
1996 DEBT 1996 1996 ACQUISITIONS PRO FORMA
(HISTORICAL) RETIREMENT(a) (HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------- ------------ ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating revenues.. $114,820 $7,805 $1,133 $26,415 $ (797)(b) $149,376
Operating expenses...... 93,713 8,250 1,055 22,786 2,429 (c) 128,233
-------- ------ ------ ------- ------- --------
Operating income........ 21,107 (445) 78 3,629 (3,226) 21,143
Interest expense, net... 2,537 $(536) 127 (1) 127 (253)(d) 4,167
2,166 (e)
-------- ----- ------ ------ ------- ------- --------
Income before income
taxes, minority
interests and
extraordinary item..... 18,570 536 (572) 79 3,502 (5,139) 16,976
Income taxes............ 7,151 (232) 26 (408)(f) 6,537
-------- ----- ------ ------ ------- ------- --------
Income before minority
interest and
extraordinary item..... 11,419 536 (340) 79 3,476 (4,731) 10,439
Minority interest in
income of consolidated
subsidiaries........... 1,417 233 (g) 1,650
-------- ----- ------ ------ ------- ------- --------
Income before
extraordinary item..... $ 10,002 $ 536 $ (340) $ 79 $ 3,476 $(4,964) $ 8,789
======== ===== ====== ====== ======= ======= ========
Income per share before
extraordinary item..... $ 0.40 $ 0.34
======== ========
Weighted average number
of common shares and
equivalents
outstanding............ 24,837 728 (h) 25,565
======== ======= ========
</TABLE>
F-43
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SEVEN MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SOUTH
MIAMI SOUTHWEST CAREMARK CAROLINA
THE COMPANY FACILITIES FACILITIES FACILITIES FACILITIES
7 MONTHS 1 MONTH 6 MONTHS 7 MONTHS 7 MONTHS
ENDED ENDED ENDED ENDED ENDED OTHER
DECEMBER 31, INITIAL JUNE 30, NOVEMBER 30, DECEMBER 31, DECEMBER 31, COMBINED
1995 PUBLIC DEBT 1995 1995 1995 1995 ACQUISITIONS
(HISTORICAL) OFFERING(i) RETIREMENT(j) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ ----------- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating
revenues....... $89,711 $526 $2,224 $27,340 $3,957 $37,255
Operating
expenses....... 71,245 $ (64) 449 2,071 29,657 3,682 32,324
------- ------- ---- ------ ------- ------ -------
Operating
income......... 18,466 64 77 153 (2,317) 275 4,931
Interest
expense, net... 5,584 (2,505) $(587) -- 41 452 -- 256
------- ------- ----- ---- ------ ------- ------ -------
Income before
income taxes,
minority
interests and
extraordinary
item........... 12,882 2,569 587 77 112 (2,769) 275 4,675
Income taxes.... 4,631 1,028 -- -- -- (1,140) -- 87
------- ------- ----- ---- ------ ------- ------ -------
Income before
minority
interest and
extraordinary
item........... 8,251 1,541 587 77 112 (1,629) 275 4,588
Minority
interest in
income of
consolidated
subsidiaries... 1,784 -- -- -- -- -- -- --
------- ------- ----- ---- ------ ------- ------ -------
Income before
extraordinary
item........... $ 6,467 $ 1,541 $ 587 $ 77 $ 112 $(1,629) $ 275 $ 4,588
======= ======= ===== ==== ====== ======= ====== =======
Income per share
before
extraordinary
item........... $ 0.36
=======
Weighted average
number of
common shares
and equivalents
outstanding.... 17,824
=======
<CAPTION>
PRO FORMA
ADJUSTMENTS COMBINED
------------- --------
<S> <C> <C>
Net operating
revenues....... $ (351)(b) $160,662
Operating
expenses....... 4,478 (c) 143,842
--------- --------
Operating
income......... (4,829) 16,820
Interest
expense, net... (628)(d) 5,256
2,643 (e)
--------- --------
Income before
income taxes,
minority
interests and
extraordinary
item........... (6,844) 11,564
Income taxes.... (214)(f) 4,392
--------- --------
Income before
minority
interest and
extraordinary
item........... (6,630) 7,172
Minority
interest in
income of
consolidated
subsidiaries... 190 (g) 1,974
--------- --------
Income before
extraordinary
item........... $ (6,820) $ 5,198
========= ========
Income per share
before
extraordinary
item........... $ 0.19
========
Weighted average
number of
common shares
and equivalents
outstanding.... 9,654 (k) 27,478
========= ========
</TABLE>
F-44
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED MAY 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SOUTH
CHICAGO MIAMI CAREMARK CAROLINA
FACILITIES FACILITIES FACILITIES FACILITIES
THE COMPANY 11 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS
YEAR ENDED ENDED ENDED ENDED ENDED
MAY 31, AUGUST 1, INITIAL APRIL 30, MAY 31, MAY 31, MAY 31,
1995 1994 PUBLIC DEBT 1995 1995 1995 1995
(HISTORICAL) TRANSACTION(l) OFFERING(m) RETIREMENT(n) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ -------------- ----------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating
revenues....... $ 98,968 $ 9,691 $ 6,311 $ 45,599 $ 6,306
Operating
expenses....... 81,809 $ 772 $ (100) 8,587 5,385 45,456 5,746
-------- ------- ------- ------- ------- -------- -------
Operating
income......... 17,159 (772) 100 1,104 926 143 560
Interest
expense, net... 7,203 1,811 (3,141) $(1,116) 28 -- 866 --
-------- ------- ------- ------- ------- ------- -------- -------
Income before
income taxes,
minority
interests and
extraordinary
item........... 9,956 (2,583) 3,241 1,116 1,076 926 (723) 560
Income taxes.... 3,511 (1,032) 1,329 115 (298)
-------- ------- ------- ------- ------- ------- -------- -------
Income before
minority
interest and
extraordinary
item........... 6,445 (1,551) 1,912 1,116 961 926 (425) 560
Minority
interest in
income of
consolidated
subsidiaries... 1,593
-------- ------- ------- ------- ------- ------- -------- -------
Income before
extraordinary
item........... $ 4,852 $(1,551) $ 1,912 $ 1,116 $ 961 $ 926 $ (425) $ 560
======== ======= ======= ======= ======= ======= ======== =======
Income per share
before
extraordinary
item........... $ 0.22
========
Weighted average
number of
common shares
and equivalents
outstanding.... 15,316
========
<CAPTION>
OTHER
COMBINED
ACQUISITIONS PRO FORMA
(HISTORICAL) ADJUSTMENTS COMBINED
------------ -------------- ---------
<S> <C> <C> <C>
Net operating
revenues....... $ 71,902 $ (209)(b) $ 238,568
Operating
expenses....... 65,955 9,129 (c) 222,739
-------- --------- ---------
Operating
income......... 5,947 (9,338) 15,829
Interest
expense, net... 534 (1,159)(d) 9,249
4,223 (e)
-------- --------- ---------
Income before
income taxes,
minority
interests and
extraordinary
item........... 5,413 (12,402) 6,580
Income taxes.... 120 (1,425)(f) 2,320
-------- --------- ---------
Income before
minority
interest and
extraordinary
item........... 5,293 (10,977) 4,260
Minority
interest in
income of
consolidated
subsidiaries... 161 (g) 1,754
-------- --------- ---------
Income before
extraordinary
item........... $ 5,293 $ (11,138) $ 2,506
======== ========= =========
Income per share
before
extraordinary
item........... $ 0.09
=========
Weighted average
number of
common shares
and equivalents
outstanding.... 11,404(o) 26,720
========= =========
</TABLE>
F-45
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Statement of Income for the six months
ended June 30, 1996 gives effect of the acquisition by the Company of the
Nephrology Services Business of Caremark International Inc. on March 15, 1996
(the "Caremark Facilities"), two facilities located in South Carolina on March
15, 1996 (the "South Carolina Facilities") and individually insignificant
acquisitions consummated during the period January 1, 1996 through September
30, 1996, and individually insignificant acquisitions which were probable as
of October 18, 1996, in each case as if such acquisitions were consummated on
January 1, 1996. The Unaudited Pro Forma Combined Statement of Income for the
six months ended June 30, 1996 also gives effect to the retirement of all
outstanding Senior Subordinated Discount Notes in July and September 1996 (the
"Debt Retirement") as if it occurred on January 1, 1996.
The Unaudited Pro Forma Combined Statement of Income for the seven months
ended December 31, 1995 gives effect to the acquisition by the Company of
three facilities located in the Miami area on July 17, 1995 (the "Miami
Facilities"), two facilities located in Texas on December 1, 1995 (the
"Southwest Facilities"), the Caremark Facilities, the South Carolina
Facilities and individually insignificant acquisitions consummated during the
period June 1, 1995 through September 30, 1996, and individually insignificant
acquisitions which were probable as of October 18, 1996, in each case as if
such acquisitions were consummated on June 1, 1995. The Unaudited Pro Forma
Combined Statement of Income for the seven months ended December 31, 1995 also
gives effect to the Company's initial public offering on October 30, 1995 (the
"Initial Public Offering"), the Company's secondary offering on April 3, 1996
(the "Secondary Offering") and the Debt Retirement as if such transactions
occurred on June 1, 1995.
The Unaudited Pro Forma Combined Statement of Income for the fiscal year
ended May 31, 1995 gives effect to the acquisition by the Company of five
facilities located in the Chicago area on May 1, 1995 (the "Chicago
Facilities"), the Miami Facilities, the Caremark Facilities, the South
Carolina Facilities and individually insignificant acquisitions consummated
during the period June 1, 1994 through September 30, 1996, and individually
insignificant acquisitions which were probable as of October 18, 1996, in each
case as if such acquisitions were consummated on June 1, 1994. The Southwest
Facilities, which commenced operations in April 1995, had de minimis
operations during the twelve months ended May 31, 1995 and, therefore, are not
included in the Unaudited Pro Forma Combined Statement of Income for the
fiscal year ended May 31, 1995. The Unaudited Pro Forma Combined Statement of
Income for the fiscal year ended May 31, 1995 also gives effect to the sale by
Tenet Healthcare Corporation of approximately 75% of its ownership interest in
the Company to DLJ Merchant Banking Partners, L.P. and certain of its
affiliates in August 1994 (the "August 1994 Transaction"), the Initial Public
Offering, the Secondary Offering and the Debt Retirement as if such
transactions occurred on June 1, 1994.
The pro forma adjustments are based on consideration exchanged, including
the estimated fair value of assets acquired, liabilities assumed and common
stock issued. The actual adjustments, which will be based on valuations of
fair value as of the date of acquisition, may differ from those made herein.
Net income per common share data and weighted average number of shares and
equivalents outstanding for the six months ended June 30, 1996, for the seven
months ended December 31, 1995 and for the fiscal year ended May 31, 1995
assume that any shares issued in connection with the acquisitions were
outstanding from January 1, 1996 and June 1, 1995 and 1994, respectively.
2. PRO FORMA ADJUSTMENTS
(a) To reflect the Debt Retirement as if it occurred on January 1, 1996 by
recording the pro forma effect of the reduction in interest expense assuming
the Debt Retirement described in note (e) in the notes to the Unaudited Pro
Forma Combined Balance Sheet offset by interest income foregone.
F-46
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME--(CONTINUED)
(b) To eliminate management fees earned by the combined entities.
(c) To amortize goodwill, non-compete agreements and patient charts
resulting from the acquisitions on a straight-line basis over 25, 10 or 5
years, respectively.
(d) To eliminate interest expense on borrowings not assumed by the Company.
(e) To record interest expense resulting from acquisitions funded in whole
or in part by borrowings from the senior credit facility.
(f) To record income tax effects related to the pro forma adjustments.
(g) To record the minority interest income from five partnerships acquired
(see note (c) to the Unaudited Pro Forma Combined Balance Sheet).
(h) Income per share and weighted average number of common shares and
equivalents outstanding assume 62,000 shares and share equivalents issued to
purchase the individually insignificant acquisitions were outstanding for the
entire six-month period ended June 30, 1996.
Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Secondary
Offering to the extent that cash generated from such shares were used to
purchase facilities and were outstanding from January 1, 1996 to the date of
the Secondary Offering as follows:
<TABLE>
<S> <C>
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 926,000
</TABLE>
(i) To reflect the Initial Public Offering and subsequent use of proceeds to
redeem subordinated debt as if it occurred on June 1, 1995. Specifically, to
reduce interest expense assuming paydown of a portion of the 12% senior
subordinated debt and amounts outstanding under the line of credit. On
December 7, 1995 the Company redeemed 35% of the accreted value of the 12%
senior subordinated debt equaling $28,749,000 at a redemption premium of 111%
for a redemption price of $31,912,000. An extraordinary loss of $2,555,000
(net of income tax effect) resulted from this transaction which is not
included on the Unaudited Pro Forma Combined Statement of Income. The
additional reduction in interest expense incurred under the line of credit
assumes that cash generated by the stock offering was used to purchase all
facilities acquired and that the line of credit was not drawn for these
acquisitions.
(j) To reflect the Debt Retirement as if it occurred on June 1, 1995. See
note (e) to the Unaudited Pro Forma Combined Balance Sheet.
(k) Income per share and weighted average number of common shares and
equivalents outstanding assume the following shares and share equivalents
issued to purchase facilities were outstanding for the entire seven month
period ended December 31, 1995:
<TABLE>
<S> <C>
Miami Facilities..................................................... 333,000
Southwest Facilities................................................. 35,000
All other acquisitions............................................... 471,000
</TABLE>
Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Initial Public
Offering and Secondary Offering to the extent that cash generated from
F-47
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME--(CONTINUED)
such shares (instead of the senior credit facility) would have been used to
purchase facilities were outstanding from June 1, 1995 to the date of the
Initial Public Offering or December 31, 1995, respectively, as follows:
<TABLE>
<S> <C>
Chicago Facilities................................................. 505,000
Miami Facilities................................................... 345,000
South Carolina Facilities.......................................... 803,000
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 2,630,000
</TABLE>
Income per share and weighted average number of common shares and
equivalents also assume that 2,233,000 shares issued in the Initial Public
Offering to redeem the 12% senior subordinated debt were outstanding from June
1, 1995 to the date of the Initial Public Offering.
(l) To reflect the August 1994 Transaction as if it occurred on June 1,
1994. Specifically, to reflect an increase in general and administrative
expenses ($625,000) for estimated incremental costs of the Company as a stand-
alone entity, increases in interest expense ($1,811,000), amortization
expenses ($105,000) and bank fees ($42,000) related to the issuance of the 12%
senior subordinated debt, and a corresponding decrease in income taxes
($1,032,000) for the tax effect of the pro forma adjustments.
(m) To reflect the Initial Public Offering and subsequent use of proceeds to
redeem subordinated debt as if it occurred on June 1, 1994. See note (j)
above.
(n) To reflect the Debt Retirement as if it occurred on June 1, 1994. See
note (e) in the notes to the Unaudited Pro Forma Combined Balance Sheet.
(o) Income per share in the audited financial statements for the year ended
May 31, 1995 was computed as if the August 1994 Transaction had occurred on
June 1, 1994. Income per common share and weighted average numbered of common
shares and equivalents outstanding computed using such assumptions were $0.22
and 15,316,000, respectively.
Income per share and weighted average number of common shares and
equivalents outstanding assume the following shares and share equivalents
issued to purchase facilities were outstanding for the entire year:
<TABLE>
<S> <C>
Chicago Facilities................................................. 515,000
Miami Facilities................................................... 333,000
All other acquisitions............................................. 1,029,000
</TABLE>
Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Initial Public
Offering and Secondary Offering to the extent that cash generated from such
shares (instead of the senior credit facility) would have been used to
purchase facilities were outstanding for the entire year as follows:
<TABLE>
<S> <C>
Chicago Facilities................................................. 707,000
Miami Facilities................................................... 483,000
South Carolina Facilities.......................................... 803,000
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 2,991,000
</TABLE>
Income per share and weighted average number of common shares and
equivalents also assume that 2,233,000 shares issued in the Initial Public
Offering to redeem the 12% senior subordinated debt were outstanding for the
entire period.
F-48
<PAGE>
EXHIBIT 99.2
CREDIT AGREEMENT
BY AND AMONG
TOTAL RENAL CARE HOLDINGS, INC.,
THE LENDERS PARTY HERETO,
BNY CAPITAL MARKETS, INC. AND DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION,
AS ARRANGERS,
DLJ CAPITAL FUNDING, INC.,
AS DOCUMENTATION AGENT,
AND
THE BANK OF NEW YORK,
AS ADMINISTRATIVE AGENT
----------------
$400,000,000
----------------
DATED AS OF OCTOBER 11, 1996
<PAGE>
CREDIT AGREEMENT, dated as of October 11, 1996, by and among TOTAL RENAL
CARE HOLDINGS, INC., a Delaware corporation (the "Borrower"), the lenders
party hereto (together with the Swing Line Lender) and their respective
successors and assigns, the "Lenders", each a "Lender"), BNY CAPITAL MARKETS,
INC. and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION (the "Arrangers",
each an "Arranger"), DLJ CAPITAL FUNDING, INC., as Documentation Agent, and
THE BANK OF NEW YORK, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent").
I. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
A. Definitions
As used in this Agreement, terms defined in the preamble have the meanings
therein indicated, and the following terms have the following meanings:
"ABR Advances": the Revolving Credit Loans (or any portions thereof) at such
time as they (or such portions) are made and/or being maintained at a rate of
interest based upon the Alternate Base Rate.
"Accountants": Price Waterhouse LLP (or any successor thereto), or such
other firm of certified public accountants of recognized national standing
selected by the Borrower.
"Accumulated Funding Deficiency": as defined in Section 302 of ERISA.
"Acquisition": the acquisition by the Borrower or any Subsidiary of the
Borrower of 50% or more of the capital Stock of or other equity interests in
another Person (such that, after giving effect thereto, such Person shall
qualify as a Subsidiary of the Borrower) or assets of another Person, which
Person is in an ESRD-Related Business or which assets have been and are to be
used in an ESRD-Related Business.
"Advance": an ABR Advance or a Eurodollar Advance, as the case may be.
"Affected Advance": as defined in Section 2.11.
"Affected Principal Amount": in the event that (i) the Borrower shall fail
for any reason to borrow, convert or continue after it shall have notified the
Administrative Agent of its intent to do so in any instance in which it shall
have requested a Eurodollar Advance, an amount equal to the principal amount
of such Eurodollar Advance; (ii) the Borrower shall fail for any reason to
borrow a Swing Line Loan after it shall have agreed to a Negotiated Rate with
respect thereto in accordance with Section 2.3, an amount equal to the
principal amount of such Swing Line Loan; (iii) a Eurodollar Advance or Swing
Line Loan bearing interest at a Negotiated Rate shall terminate for any reason
prior to the last day of the Interest Period applicable thereto, an amount
equal to the principal amount of such Eurodollar Advance or Swing Line Loan,
as the case may be; and (iv) the Borrower shall prepay or repay all or any
part of the principal amount of a Eurodollar Advance or Swing Line Loan
bearing interest at a Negotiated Rate prior to the last day of the Interest
Period applicable thereto, an amount equal to the principal amount of such
Eurodollar Advance or Swing Line Loan, as the case may be, so prepaid or
repaid.
"Affiliate": as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (i) to vote 20% or more of the securities
or other interests having ordinary voting power for the election of directors
or other managing Persons thereof or (ii) to direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.
"Aggregate Credit Exposure": at any time, the sum at such time of (i) the
outstanding principal balance of the Revolving Credit Loans of all Lenders,
(ii) the outstanding principal balance of the Swing Line Loans, and (iii) the
Letter of Credit Exposure of all Lenders.
"Aggregate Revolving Credit Commitments": on any date, the sum of the
Revolving Credit Commitments of all Lenders on such date.
2
<PAGE>
"Agreement": this Credit Agreement, as the same may be further amended,
supplemented or otherwise modified from time to time.
"Alternate Base Rate": on any date, a rate of interest per annum equal to
the higher of (i) the Federal Funds Rate in effect on such date plus 1/2 of 1%
or (ii) the BNY Rate in effect on such date.
"Ancillary Services": services relating to the needs of patients with "End
Stage Renal Disease" and ancillary to the provision of Dialysis Services,
including, but not limited to, the administration of erythropoietin,
intradialytic parenteral nutrition, bone densimetry studies, EKGs, nerve
conduction studies, Doppler Flow Testing, blood transfusions, pharmacy and
laboratory services, technical services with respect to equipment used in
connection with the provision of Dialysis Services and management services
with respect to the provision of Dialysis Services.
"Applicable Lending Office": in respect of any Lender, (i) in the case of
such Lender's ABR Advances, its Domestic Lending Office, (ii) in the case of
such Lender's Eurodollar Advances, its Eurodollar Lending Office and (iii) in
the case of the Swing Line Lender with respect to its Swing Line Loans, its
Domestic Lending Office.
"Applicable Margin": (a) at all times, with respect to the unpaid principal
amount of Eurodollar Advances, and based on the most recently delivered
Compliance Certificate of the Borrower, in accordance with the following:
<TABLE>
<CAPTION>
APPLICABLE MARGIN
FOR EURODOLLAR
PERIOD RATE OPTION
<S> <C>
When the Leverage Ratio is equal to or greater than
3.00:1.00............................................. 1.25%
When the Leverage Ratio is less than 3.00:1.00 but
equal to or greater than 2.50:1.00.................... 0.90%
When the Leverage Ratio is less than 2.50:1.00 but
equal to or greater than 2.00:1.00.................... 0.80%
When the Leverage Ratio is less than 2.00:1.00 but
equal to or greater than 1.50:1.00.................... 0.75%
When the Leverage Ratio is less than 1.50:1.00 but
equal to or greater than 1.00:1.00.................... 0.55%
When the Leverage Ratio is less than 1.00:1.00......... 0.45%
</TABLE>
(b) Changes in the Applicable Margin resulting from a change in the
Leverage Ratio, as evidenced by a Compliance Certificate delivered to the
Administrative Agent pursuant to Section 7.1(c) evidencing such a change,
shall become effective upon delivery of such Compliance Certificate. If the
Borrower shall fail to deliver a Compliance Certificate in accordance with
Section 7.1(c) (each a "certificate delivery date"), for purposes of
calculating the Applicable Margin, the Leverage Ratio from and including
such certificate delivery date to the date of delivery by the Borrower to
the Administrative Agent of such Compliance Certificate shall be
conclusively presumed to be greater than 3.00:1.0.
(c) Notwithstanding the foregoing, until the Compliance Certificate for
the fiscal year ending December 31, 1996 shall have been delivered to the
Administrative Agent, the Applicable Margin shall be 0.75% and any change
in the Applicable Margin resulting from a change in the Leverage Ratio, as
evidenced by such Compliance Certificate, shall become effective upon
delivery of such Compliance Certificate.
"Assignment and Acceptance Agreement": an assignment and acceptance
agreement executed by an assignor and an assignee pursuant to which the
assignor assigns to the assignee all or any portion of such assignor's Notes
and Commitment, substantially in the form of Exhibit E.
"Assignment Fee": as defined in Section 11.7(b).
3
<PAGE>
"Authorized Signatory": as to (i) any Person that is a corporation, the
chairman of the board, the president, any vice president, the chief financial
officer or any other duly authorized officer (acceptable to the Administrative
Agent) of such Person and (ii) any Person that is not a corporation, the
general partner or other managing Person thereof.
"Benefited Lender": as defined in Section 11.9.
"BNY": The Bank of New York.
"BNY Rate": a rate of interest per annum equal to the rate of interest
publicly announced in New York City by BNY from time to time as its prime
commercial lending rate, such rate to be adjusted automatically (without
notice) on the effective date of any change in such publicly announced rate.
"Borrowing Date": any Business Day specified in (i) a Borrowing Request as a
date on which the Borrower requests the Lenders to make Revolving Credit
Loans, (ii) a Borrowing Request as a date on which the Borrower requests the
Swing Line Lender to make a Swing Line Loan, or (iii) a Letter of Credit
Request as a date on which the Borrower requests the Letter of Credit Issuer
to issue a Letter of Credit.
"Borrowing Request": a request for Revolving Credit Loans or a Swing Line
Loan in the form of Exhibit C.
"Business Day": for all purposes other than as set forth in clause (ii)
below, (i) any day other than a Saturday, a Sunday or a day on which
commercial banks located in New York City are authorized or required by law or
other governmental action to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Advances, any day that is a Business Day described in clause (i)
above and that is also a day on which dealings in foreign currency and
exchange and Eurodollar funding between banks may be carried on in London,
England.
"Capital Lease Obligations": with respect to any Person, obligations of such
Person with respect to leases that, in accordance with GAAP, are required to
be capitalized on the financial statements of such Person.
"Change of Control": any of the following:
(i) the acquisition, directly or indirectly, by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act) of 33% (40% in
the case of the Original Principal Stockholders and the Related Parties,
collectively) or more of the voting power of the Stock of the Borrower by
way of merger, consolidation or otherwise; or
(ii) the Continuing Directors cease for any reason to constitute a
majority of the directors of the Borrower then in office.
"Code": the Internal Revenue Code of 1986, as the same may be amended from
time to time, or any successor thereto, and the rules and regulations issued
thereunder, as from time to time in effect.
"Commitment": a Revolving Credit Commitment or the Swing Line Commitment, as
the case may be.
"Commitment Fee": as defined in Section 3.1.
"Commitment Percentage": as to any Lender, the percentage equal to such
Lender's Revolving Credit Commitment divided by the Aggregate Revolving Credit
Commitments.
"Compensatory Interest Payment": as defined in Section 2.10(c).
"Compliance Certificate": a certificate substantially in the form of Exhibit
D.
"Consolidated": the Borrower and its Subsidiaries that are consolidated for
financial reporting purposes.
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"Consolidated EBITDA": EBITDA of the Borrower and its Subsidiaries on a
Consolidated basis determined in accordance with GAAP.
"Consolidated Pre-Minority EBITDA": Consolidated EBITDA plus minority
interests in income of consolidated Subsidiaries of the Borrower to the extent
deducted in determining net income of the Borrower and its Subsidiaries on a
Consolidated basis in the calculation of Consolidated EBITDA.
"Contingent Obligation": as to any Person (the "secondary obligor"), any
obligation of such secondary obligor (i) guaranteeing or in effect
guaranteeing any return on any Investment made in another Person, or
(ii) guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend
or other obligation ("primary obligation") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such secondary obligor, whether contingent, (A)
to purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (B) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (C) to purchase Property,
securities or services primarily for the purpose of assuring the beneficiary
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, (D) otherwise to assure or hold harmless
the beneficiary of such primary obligation against loss in respect thereof,
and (E) in respect of the liabilities of any partnership in which such
secondary obligor is a general partner, except to the extent that such
liabilities of such partnership are nonrecourse to such secondary obligor and
its separate Property, provided, however, that the term "Contingent
Obligation" shall not include the indorsement of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such
Person in good faith.
"Continuing Directors": means any member of the Board of Directors of the
Borrower who (i) is a member of that Board of Directors on the Effective Date
or (ii) has been nominated for election by the Board of Directors a majority
of whom were directors at the Effective Date or whose election or nomination
for election has been previously approved by a majority of such directors.
"Conversion/Continuation Date": the date on which (i) a Eurodollar Advance
is converted to an ABR Advance, (ii) the date on which an ABR Advance is
converted to a Eurodollar Advance or (iii) the date on which a Eurodollar
Advance is continued as a new Eurodollar Advance.
"Credit Exposure": with respect to any Lender as at any time, the sum at
such time of (i) the outstanding principal balance of such Lender's Revolving
Credit Loans, (ii) the Swing Line Exposure of such Lender and (iii) the Letter
of Credit Exposure of such Lender.
"Credit Party": the Borrower, TRC and each other party (other than the
Administrative Agent, the Arrangers, the Documentation Agent, the Letter of
Credit Issuer and the Lenders) that is a signatory to a Loan Document.
"Default": any event or condition that constitutes an Event of Default or
that, with the giving of notice, the lapse of time, or any other condition,
would, unless cured or waived, become an Event of Default.
"Dialysis Services": hemodialysis services and peritoneal dialysis services,
hemoperfusion, plasmapheresis, continuous arteriovenous hemofiltration and
bio-medical services related to the foregoing.
"Dollars" and "$": lawful currency of the United States of America.
"Domestic Lending Office": in respect of any Lender, initially, the office
or offices of such Lender designated as such on Schedule 1.1; thereafter, such
other office of such Lender through which it shall be making or maintaining
ABR Advances or Swing Line Loans, as reported by such Lender to the
Administrative Agent and the Borrower.
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"EBITDA": for any period, for any Person, net income of such Person for such
period, determined in accordance with GAAP, plus the sum of, without
duplication, (i) Interest Expense of such Person, (ii) provision for income
taxes of such Person and (iii) depreciation, amortization and all other non-
cash charges (except minority interests in income of consolidated
Subsidiaries) of such Person, each to the extent deducted in determining net
income of such Person for such period. EBITDA shall be calculated without
taking into account (x) extraordinary gains and losses and (y) gains and
losses on the sale, transfer or other disposition of assets (other than
inventory and cash management investments sold in the ordinary course of
business) ((x) and (y), collectively, the "Gains and Losses"), provided that
this sentence shall not be applicable with respect to any fiscal quarter if
the net aggregate amount of Gains and Losses for such fiscal quarter is
between ($100,000) and $100,000.
"Effective Date": the date that the Administrative Agent shall have received
executed counterparts hereof from all parties hereto and the conditions set
forth in Sections 5 and 6 have been or simultaneously will be satisfied,
provided that this Agreement shall not become effective or be binding on any
party hereto unless all such conditions are satisfied not later than October
25, 1996.
"Employee Benefit Plan": an employee benefit plan within the meaning of
Section 3(3) of ERISA maintained, sponsored or contributed to by the Borrower,
any of its Subsidiaries or any ERISA Affiliate.
"Environmental Laws": any and all federal, state and local laws relating to
the environment, the use, storage, transporting, manufacturing, handling,
discharge, release, disposal or recycling of hazardous substances, materials
or pollutants or industrial hygiene, and including, without limitation, (i)
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 USCA (S)9601 et seq.; (ii) the Resource Conservation and Recovery
Act of 1976, as amended, 42 USCA (S)6901 et seq.; (iii) the Toxic Substance
Control Act, as amended, 15 USCA (S)2601 et seq.; (iv) the Water Pollution
Control Act, as amended, 33 USCA (S)1251 et seq.; (v) the Clean Air Act, as
amended, 42 USCA (S)7401 et seq.; (vi) the Hazardous Materials Transportation
Authorization Act of 1994, 49 U.S.C. 5101 et seq. and (vii) all rules,
regulations, judgments, decrees, injunctions and restrictions thereunder and
any analogous state law.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations issued thereunder, as from
time to time in effect.
"ERISA Affiliate": when used with respect to an Employee Benefit Plan,
ERISA, the PBGC or a provision of the Code pertaining to employee benefit
plans, any Person that is a member of any group of organizations within the
meaning of Sections 414(b), (c), (m) or (o) of the Code of which the Borrower
or any of its Subsidiaries is a member.
"ESRD-Related Business": the business of providing Dialysis Services and/or
Ancillary Services.
"Eurodollar Advances": collectively, the Revolving Credit Loans (or any
portions thereof) at such time as they (or such portions) are made and/or
being maintained at a rate of interest based upon the Eurodollar Rate.
"Eurodollar Lending Office": in respect of any Lender, initially, the
office, branch or affiliate of such Lender designated as such on Schedule 1.1
(or, if no such office branch or affiliate is specified, its Domestic Lending
Office); thereafter, such other office, branch or affiliate of such Lender
through which it shall be making or maintaining Eurodollar Advances, as
reported by such Lender to the Administrative Agent and the Borrower.
"Eurodollar Rate": with respect to the Interest Period applicable to any
Eurodollar Advance, a rate of interest per annum, as determined by the
Administrative Agent, obtained by dividing (and then rounding to the nearest
1/16 of 1% or, if there is no nearest 1/16 of 1%, then to the next higher 1/16
of 1%):
(a) the rate, as reported by BNY to the Administrative Agent, quoted by
BNY to leading banks in the interbank eurodollar market as the rate at
which BNY is offering Dollar deposits in an amount equal approximately to
the Eurodollar Advance of BNY to which such Interest Period shall apply for
a period equal to such Interest Period, as quoted at approximately 11:00
A.M. two Business Days prior to the first day of such Interest Period, by
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(b) a number equal to 1.00 minus the aggregate of the then stated maximum
rates during such Interest Period of all reserve requirements (including,
without limitation, marginal, emergency, supplemental and special
reserves), expressed as a decimal, established by the Board of Governors of
the Federal Reserve System and any other banking authority to which BNY and
other major United States money center banks are subject, in respect of
eurocurrency funding (currently referred to as "Eurocurrency liabilities"
in Regulation D of the Board of Governors of the Federal Reserve System) or
in respect of any other category of liabilities including deposits by
reference to which the interest rate on Eurodollar Advances is determined
or any category of extensions of credit or other assets that includes loans
by non-domestic offices of any Lender to United States Residents. Such
reserve requirements shall include, without limitation, those imposed under
such Regulation D. Eurodollar Advances shall be deemed to constitute
Eurocurrency liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of credits for proration, exceptions
or offsets that may be available from time to time to any Lender under such
Regulation D. The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in any such reserve requirement.
"Event of Default": any of the events specified in Section 9.1, provided
that any requirement for the giving of notice, the lapse of time, or any other
condition has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Excluded Contingent Obligations": all Contingent Obligations of the
Borrower and its Subsidiaries on a Consolidated basis in accordance with GAAP
that are not in respect of Indebtedness described in items (i), (ii), (iii),
(iv), (v) or (vi) of the definition of Indebtedness.
"Existing Pension Plans": as defined in Section 4.12.
"Existing Indebtedness": collectively, the Indebtedness of TRC under the
Amended and Restated Credit Agreement, dated as of March 15, 1996, by and
among TRC, the lenders party thereto and BNY, as agent, as amended, including,
without limitation, all outstanding principal, unpaid and accrued interest,
unpaid and accrued fees and other unpaid sums thereunder, but excluding the
Existing Letters of Credit.
"Existing Letters of Credit": the letters of credit set forth on Schedule
1.1(E).
"Federal Funds Rate": for any day, a rate per annum (expressed as a decimal,
rounded upwards, if necessary, to the next higher 1/100 of 1%), equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (i) if the day for which such rate
is to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average of the quotations for such day on such transactions received by BNY as
determined by BNY and reported to the Administrative Agent.
"Financial Statements": as defined in Section 4.13.
"Funded Current Liability Percentage": as defined in Section 401(a)(29) of
the Code.
"GAAP": generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession, that are
applicable to the circumstances as of the date of determination, consistently
applied. If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in this Agreement, and either the
Borrower or the Required Lenders shall
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so request, the Administrative Agent, the Lenders and the Borrower shall
negotiate in good faith to amend such ratio or requirement to reflect such
change in GAAP (subject to the approval of the Required Lenders), provided
that, until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (ii) the
Borrower shall provide to the Administrative Agent, and the Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of
such ratio or requirement made before and after giving effect to such change
in GAAP.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government and any court or arbitrator.
"Guarantor": TRC.
"Hazardous Substance": any hazardous or toxic substance, material or waste,
including, but not limited to, (i) those substances, materials, and wastes
listed in the United States Department of Transportation Hazardous Materials
Table (49 CFR 172.101) or by the Environmental Protection Agency as hazardous
substances (40 CFR Part 302) and amendments thereto and replacements therefor
and (ii) any substance, pollutant or material defined as, or designated in,
any Environmental Law as a "hazardous substance," "toxic substance,"
"hazardous material," "hazardous waste," "restricted hazardous waste,"
"pollutant," "toxic pollutant" or words of similar import.
"Highest Lawful Rate": with respect to any Lender, the maximum rate of
interest, if any, that at any time or from time to time may be contracted for,
taken, charged or received by such Lender on its Notes or that may be owing to
such Lender pursuant to this Agreement under the laws applicable to such
Lender and this Agreement.
"Immediate Family Member": with respect to any individual, such individual's
spouse (past or current), descendants (natural or adoptive, of the whole or
half blood) of the parents of such individual, such individual's grandparents
and parents (natural or adoptive), and the grandparents, parents and
descendants of parents (natural or adoptive, of the whole or half blood) of
such individual's spouse (past or current).
"Indebtedness": as to any Person, at a particular time, all items that
constitute, without duplication, (i) indebtedness for borrowed money or the
deferred purchase price of Property (other than trade payables incurred in the
ordinary course of business), (ii) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (iii) obligations with respect to any
conditional sale or title retention agreement, (iv) indebtedness arising under
acceptance facilities and the amount available to be drawn under all letters
of credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder to the extent such Person shall not have reimbursed
the issuer in respect of the issuer's payment of such drafts, (v) all
liabilities secured by any Lien on any Property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof (other than carriers', warehousemen's, mechanics', repairmen's or
other like non-consensual statutory Liens arising in the ordinary course of
business), (vi) the principal portion of obligations under Capital Lease
Obligations and (vii) Contingent Obligations.
"Indemnified Person": as defined in Section 11.11.
"Intellectual Property": all copyrights, trademarks, servicemarks, patents,
trade names and service names.
"Interest Coverage Ratio": at any date of determination, the ratio of (i)
Consolidated Pre-Minority EBITDA to (ii) Consolidated Interest Expense, in
each case for the immediately preceding four complete fiscal quarters of the
Borrower (or in the event that the date of determination is a fiscal quarter
ending date, the four fiscal quarter period then ended).
"Interest Expense": for any Person, with respect to any period, without
duplication, the sum of all interest, including (whether in the form of cash
or Property) whether paid or required to be accrued (including, without
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limitation, paid-in-kind or PIK interest) in respect of all Indebtedness of
such Person for such period determined in accordance with GAAP less
capitalized financing costs, each to the extent included in Interest Expense
of such Person for such period.
"Interest Payment Date": (i) as to any ABR Advance, the last day of each
March, June, September and December commencing on the first of such days to
occur after such ABR Advance is made or any Eurodollar Advance is converted to
an ABR Advance, (ii) as to any Swing Line Loan, the date on which the
outstanding principal balance of such Swing Line Loan shall become due and
payable in accordance with Section 2.3, (iii) as to any Eurodollar Advance in
respect of which the Borrower has selected an Interest Period of one, two or
three months, the last day of such Interest Period, and (iv) as to any
Eurodollar Advance in respect of which the Borrower has selected an Interest
Period of six months, the day that is three months after the first day of such
Interest Period and the last day of such Interest Period.
"Interest Period": (a) with respect to any Eurodollar Advance requested by
the Borrower, the period commencing on, as the case may be, the Borrowing Date
or Conversion/Continuation Date with respect to such Eurodollar Advance and
ending one, two, three or six months thereafter, as selected by the Borrower
in its irrevocable Borrowing Request or its irrevocable Notice of
Conversion/Continuation, provided, however, that (i) if any Interest Period
would otherwise end on a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day, (ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month, and
(iii) the Borrower shall select Interest Periods so as not to have more than
five different Interest Periods outstanding at any one time for all Revolving
Credit Loans.
(b) with respect to any Swing Line Loan requested by the Borrower, the
period commencing on the Borrowing Date with respect to such Swing Line Loan
and ending on or between one and seven days thereafter, as selected by the
Borrower in its irrevocable Borrowing Request, provided, however, that (i) if
any Interest Period would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding Business Day,
and (ii) the Borrower shall select Interest Periods so as not to have more
than three different Interest Periods outstanding at any one time for all
Swing Line Loans.
"Interest Rate Protection Agreements": collectively, all interest rate
hedging arrangements entered into by the Borrower with any financial
institution.
"Investments": as defined in Section 8.5.
"LC Rate": a rate per annum equal to the Applicable Margin with respect to
Eurodollar Advances plus, after the occurrence and during the continuance of a
Default or Event of Default under Section 9.1(a), (b) (with respect to
interest, the Commitment Fee, the LC Fronting Fee or the Letter of Credit
Fee), (h) or (i), 2%.
"LC Fronting Fee": as defined in Section 3.2.
"Letter of Credit": as defined in Section 2.19.
"Letter of Credit Fee": as defined in Section 3.2.
"Letter of Credit Exposure": at any time, (i) in respect of all the Lenders,
the sum, without duplication, of (x) the aggregate undrawn face amount of the
outstanding Letters of Credit at such time, (y) the aggregate amount of unpaid
drafts drawn on all Letters of Credit at such time, and (z) the aggregate
unpaid reimbursement obligations in respect of the Letters of Credit at such
time (after giving effect to any Loans made at such time to pay any such
reimbursement obligations), and (ii) in respect of any Lender, an amount equal
to such Lender's Commitment Percentage at such time multiplied by the amount
determined under clause (i) of this definition at such time.
"Letter of Credit Issuer": BNY (or any successor thereto).
"Letter of Credit Request": a request in the form of Exhibit J.
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"Leverage Ratio": at any date of determination, the ratio of:
(a) for purposes of determining the Applicable Margin and the Commitment
Fee, (i) Total Debt to (ii) Consolidated Pre-Minority EBITDA for the two
fiscal quarter period of the Borrower ending on the date of determination
multiplied by two; and
(b) for all other purposes, (i) Total Debt to (ii) Consolidated Pre-
Minority EBITDA for the immediately preceding fiscal quarter of the
Borrower multiplied by four (or in the event that the date of determination
is a fiscal quarter ending date, the fiscal quarter period then ended
multiplied by four).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit or
preferential arrangement, encumbrance, lien (statutory or other), or other
security agreement or security interest of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement and any capital or financing lease having substantially the same
economic effect as any of the foregoing.
"Loan Documents": collectively, this Agreement, the Notes, the Reimbursement
Agreements and the TRC Guaranty.
"Loan": a Revolving Credit Loan or a Swing Line Loan, as the case may be.
"Loans": the Revolving Credit Loans and/or the Swing Line Loans, as the case
may be.
"Mandatory Borrowing": as defined in Section 2.3(c).
"Margin Stock": any "margin stock", as defined in Regulation U of the Board
of Governors of the Federal Reserve System, as the same may be amended or
supplemented from time to time.
"Material Adverse Change": a material adverse change in (i) the financial
condition, operations, business, prospects or Property of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Borrower or the
Guarantor to perform its obligations under the Loan Documents to which it is a
party or (iii) the ability of the Administrative Agent and the Lenders to
enforce the Loan Documents.
"Material Adverse Effect": a material adverse effect on (i) the financial
condition, operations, business, prospects or Property of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Borrower or the
Guarantor to perform its obligations under the Loan Documents to which it is a
party or (iii) the ability of the Administrative Agent and the Lenders to
enforce the Loan Documents.
"Maturity Date": September 30, 2003, or such earlier date on which the Notes
shall become due and payable, whether by acceleration or otherwise.
"Minority Investment": as defined in Section 8.5(i).
"Multiemployer Plan": a Pension Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Negotiated Rate": with respect to each Swing Line Loan, the rate per annum
agreed to in writing by the Borrower and the Swing Line Lender as the interest
rate that such Swing Line Loan shall bear.
"New Subsidiary": as defined in Section 8.11.
"Note": a Revolving Credit Note or the Swing Line Note, as the case may be.
"Notes": the Revolving Credit Notes and/or the Swing Line Note, as the case
may be.
"Notice of Conversion/Continuation": a notice substantially in the form of
Exhibit H.
"Original Principal Stockholders": means DLJ Merchant Banking Partners,
L.P., DLJ International Partners, C.V., DLJ Offshore Partners, C.V., and DLJ
Merchant Banking Funding, Inc., Tenet Healthcare
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Corporation, THC Properties Corp. (a wholly owned Subsidiary of Tenet
Healthcare Corporation), Victor M.G. Chaltiel, the executive officers and
directors of the Borrower and/or TRC, the Borrower's equity compensation
plans, employee stock option plans, employee stock purchase plans and all
other similar plans, and all participants therein and beneficiaries thereof.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA, or any Governmental Authority succeeding to
the functions thereof.
"Pension Plan": at any date of determination, any employee pension benefit
plan (including a Multiemployer Plan) that is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code, the
funding requirements of which (under Section 302 of ERISA or Section 412 of
the Code) are, or at any time within the five years immediately preceding such
date, were in whole or in part, the responsibility of the Borrower, any of its
Subsidiaries or any ERISA Affiliate, provided that the term Pension Plan shall
not include the employee benefit pension plans listed on Schedule 1.1(P).
"Permitted Acquisitions": Acquisitions permitted by Section 8.5(h).
"Permitted Lien": any Lien permitted under Section 8.2.
"Person": any individual, firm, partnership, joint venture, corporation,
association, business enterprise, joint stock company, unincorporated
association, trust, Governmental Authority or any other entity, whether acting
in an individual, fiduciary, or other capacity, and for the purpose of the
definition of "ERISA Affiliate", a trade or business.
"Process Administrative Agent": as defined in Section 11.17.
"Prohibited Transaction": a transaction that is prohibited under Section
4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of
the Code or Section 408 of ERISA.
"Property": all types of real, personal, tangible, intangible or mixed
property.
"Real Property": all real property owned or leased by the Borrower or any of
its Subsidiaries.
"Reimbursement Agreement": as defined in Section 2.19(b).
"Related Party": with respect to any Original Principal Stockholder means
(i) any 80% (or more) owned Subsidiary or Immediate Family Member (in the case
of an individual) of such Original Principal Stockholder or (ii) any Person,
the beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such Original
Principal Stockholder or an Immediate Family Member, or (iii) any Person
employed by the Borrower or TRC in a management capacity as of the Effective
Date.
"Remaining Interest Period": (i) in the event that the Borrower shall fail
for any reason to borrow a Revolving Credit Loan in respect of which it shall
have requested a Eurodollar Advance or convert an Advance to, or continue an
Advance as, a Eurodollar Advance after it shall have notified the
Administrative Agent of its intent to do so, a period equal to the Interest
Period that the Borrower elected in respect of such Eurodollar Advance; or
(ii) in the event that the Borrower shall fail for any reason to borrow a
Swing Line Loan after it shall have agreed to a Negotiated Rate with respect
thereto in accordance with Section 2.3, a period equal to the Interest Period
that the Borrower elected in respect of such Swing Line Loan; or (iii) in the
event that a Eurodollar Advance or a Swing Line Loan bearing interest at a
Negotiated Rate shall terminate for any reason prior to the last day of the
Interest Period applicable thereto, a period equal to the remaining portion of
such Interest Period if such Interest Period had not been so terminated; or
(iv) in the event that the Borrower shall prepay or repay all or any part of
the principal amount of a Eurodollar Advance or a Swing Line Loan bearing
interest at a Negotiated Rate prior to the last day of the Interest Period
applicable thereto, a period equal to the period from and including the date
of such prepayment or repayment to but excluding the last day of such Interest
Period.
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"Reportable Event": with respect to any Pension Plan, (i) any event set
forth in Sections 4043(b) (other than a Reportable Event as to which the 30
day notice requirement is waived by the PBGC under applicable regulations),
4062(c) or 4063(a) of ERISA or the regulations thereunder or (ii) an event
requiring the Borrower, any of its Subsidiaries or any ERISA Affiliate to
provide security to a Pension Plan under Section 401(a)(29) of the Code.
"Required Lenders": Lenders having Revolving Credit Commitments equal to at
least 51% of the Aggregate Revolving Credit Commitments, provided that if the
Revolving Credit Commitments have expired or otherwise been terminated,
Lenders with Credit Exposure equal to at least 51% of the Aggregate Credit
Exposure.
"Restricted Payment": as to any Person (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Stock or other equity interest in such Person now or hereafter outstanding
(other than a dividend payable solely in shares of such Stock to the holders
of such shares), (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition, direct or indirect, of any shares of
any class of Stock or other equity interest in such Person now or hereafter
outstanding and (iii) any tax sharing or similar payment payable by such
Person to another Person.
"Revolving Credit Commitment": as to any Lender, such Lender's undertaking
during the Revolving Credit Commitment Period to make Revolving Credit Loans,
subject to the terms and conditions hereof, in an aggregate outstanding
principal amount not exceeding the amount set forth next to the name of such
Lender in Exhibit A under the heading "Revolving Credit Commitments", as the
same may be reduced pursuant to Section 2.6.
"Revolving Credit Commitment Period": the period from the Effective Date
until the day preceding the Maturity Date.
"Revolving Credit Loan" and "Revolving Credit Loans": as defined in Section
2.1.
"Revolving Credit Note" and "Revolving Credit Notes": as defined in Section
2.2.
"SEC": the Securities and Exchange Commission or any Governmental Authority
succeeding to the functions thereof.
"Special Counsel": Emmet, Marvin & Martin, LLP, special counsel to the
Administrative Agent and the Documentation Agent.
"Stock": any and all shares, rights, interests, participations, warrants or
other equivalents (however designated) of corporate stock.
"Subsidiary": as to any Person, any corporation, association, partnership,
joint venture or other business entity of which such Person or any Subsidiary
of such Person, directly or indirectly, either (i) in respect of a
corporation, owns or controls 50% or more of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors or similar
managing body, irrespective of whether a class or classes shall or might have
voting power by reason of the happening of any contingency, or (ii) in respect
of an association, partnership, joint venture or other business entity, is
entitled to share in 50% or more of the profits and losses, however
determined.
"Swing Line Commitment": the undertaking of the Swing Line Lender during the
Swing Line Commitment Period to make Swing Line Loans, subject to the terms
and conditions hereof, in an aggregate outstanding principal amount not in
excess of $15,000,000, and the commitment of the Lenders to participate
therein as set forth in Section 2.8, as the same may be reduced pursuant to
Section 2.6.
"Swing Line Commitment Period": the period from the Effective Date to, but
excluding, the Swing Line Termination Date.
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"Swing Line Exposure": at any time, in respect of any Lender, an amount
equal to the aggregate outstanding principal amount of the Swing Line Loans at
such time multiplied by such Lender's Commitment Percentage at such time.
"Swing Line Lender": BNY (or any successor thereto).
"Swing Line Loan" and "Swing Line Loans": as defined in Section 2.3.
"Swing Line Note": as defined in Section 2.4.
"Swing Line Participation Amount": as defined in Section 2.8.
"Swing Line Termination Date": the date which is five Business Days prior to
the Maturity Date.
"Tax": any present or future tax, levy, impost, duty, charge, fee, deduction
or withholding of any nature and whatever called, by a Governmental Authority,
imposed, levied, collected, withheld or assessed with respect to any payment
by the Borrower pursuant to this Agreement or any other Loan Document, and all
liabilities with respect thereto.
"Tax on the Overall Net Income": as to any Person, a Tax imposed by the
jurisdiction under the laws of which that Person is organized or in which that
Person's principal office (and/or, in the case of a Lender, its Applicable
Lending Office) is located or by any political subdivision or taxing authority
thereof or in which that Person is deemed to be doing business on (or
determined on the basis of) all or part of the net income, profits or gains of
that Person (whether worldwide, or only insofar as such income, profits or
gains are considered to arise in or to relate to a particular jurisdiction, or
otherwise).
"Termination Event": with respect to any Pension Plan, (i) a Reportable
Event, (ii) the termination of a Pension Plan, or the filing of a notice of
intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination, in each case under Section 4041(c) of ERISA, (iii)
the institution of proceedings to terminate a Pension Plan under Section 4042
of ERISA, or (iv) the appointment of a trustee to administer any Pension Plan
under Section 4042 of ERISA.
"Total Debt": the difference between (i) all Indebtedness (less Excluded
Contingent Obligations) and (ii) cash and cash equivalents, in each case, of
the Borrower and its Subsidiaries on a Consolidated basis in accordance with
GAAP.
"TRC": Total Renal Care, Inc., a California corporation.
"TRC Guaranty": the Guaranty, made by TRC in favor of the Administrative
Agent, substantially in the form of Exhibit I, as the same may be amended,
supplemented or otherwise modified from time to time.
"Unfunded Pension Liabilities": with respect to any Pension Plan, at any
date of determination, the amount determined by taking the accumulated benefit
obligation, as disclosed in accordance with Statement of Accounting Standards
No. 87, "Employers' Accounting for Pensions", over the fair market value of
Pension Plan assets.
"United States": the United States of America (including the States thereof
and the District of Columbia).
"Unqualified Amount": as defined in Section 2.10(c).
"Unrecognized Retiree Welfare Liability": with respect to any Employee
Benefit Plan that provides postretirement benefits other than pension
benefits, the amount of the transition obligation, as determined in accordance
with Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," as of the most
recent valuation date, that has not been recognized as an expense in an income
statement of the Borrower and its Subsidiaries, provided that (i) prior to the
date such Statement is applicable to the Borrower, such amount shall be based
on an estimate made in good faith of such transition obligation, and (ii) for
purposes of determining the aggregate amount of the Unrecognized Retiree
Welfare Liability, Plans maintained by a Subsidiary that is not otherwise an
ERISA Affiliate shall be included.
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B. Principles of Construction
(a) All terms defined in a Loan Document shall have the meanings given such
terms therein when used in the other Loan Documents or any certificate,
opinion or other document made or delivered pursuant thereto, unless otherwise
defined therein.
(b) As used in the Loan Documents and in any certificate, opinion or other
document made or delivered pursuant thereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and similar words
when used in a Loan Document shall refer to such Loan Document as a whole and
not to any particular provision thereof, and Section, schedule and exhibit
references contained therein shall refer to Sections thereof or schedules or
exhibits thereto unless otherwise expressly provided therein.
(f) The phrase "may not" is prohibitive and not permissive.
(d) Unless the context otherwise requires, words in the singular number
include the plural, and words in the plural include the singular.
(e) Unless specifically provided in a Loan Document to the contrary,
references to a time shall refer to New York City time.
(f) Unless specifically provided in a Loan Document to the contrary, in the
computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each mean "to but excluding".
(g) Effective as of January 1, 1996, the Borrower and each of its
Subsidiaries changed its fiscal year end from May 31 to December 31 unless its
fiscal year was already December 31. For purposes of calculating the Leverage
Ratio and determining compliance with Sections 7.11, 7.12, 7.13 and 7.14, all
references to fiscal quarters shall mean calendar quarters.
II. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS AND LETTERS OF CREDIT
A. Revolving Credit Loans
Subject to the terms and conditions hereof, each Lender severally agrees to
make revolving credit loans (each a "Revolving Credit Loan" and, as the
context may require, collectively with all other Revolving Credit Loans of
such Lender and with the Revolving Credit Loans of all other Lenders, the
"Revolving Credit Loans") to the Borrower from time to time during the
Revolving Credit Commitment Period, provided, however, that immediately after
giving effect thereto (a) such Lender's Credit Exposure shall not exceed such
Lender's Revolving Credit Commitment, and (b) the Aggregate Credit Exposure of
all Lenders shall not exceed the Aggregate Revolving Credit Commitments.
During the Revolving Credit Commitment Period, the Borrower may borrow, prepay
in whole or in part and reborrow under the Revolving Credit Commitments, all
in accordance with the terms and conditions of this Agreement.
B. Revolving Credit Notes
(a) The Revolving Credit Loans made by a Lender shall be evidenced by a
promissory note of the Borrower, substantially in the form of Exhibit B-1,
with appropriate insertions therein as to date and principal amount (each, as
indorsed or modified from time to time, a "Revolving Credit Note" and,
collectively with the Revolving Credit Notes of all other Lenders, the
"Revolving Credit Notes"), payable to the order of such Lender for the account
of its Applicable Lending Office and representing the obligation of the
Borrower to pay the lesser of (a) the original amount of the Revolving Credit
Commitment of such Lender and (b) the aggregate unpaid principal balance of
all Revolving Credit Loans made by such Lender, with interest thereon as
prescribed in
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Section 2.10. Each Revolving Credit Note shall (i) be dated the Effective
date, (ii) be stated to mature on the Maturity Date and (iii) bear interest
from the date thereof on the unpaid principal balance thereof at the
applicable interest rate or rates per annum determined as provided in Section
2.10. Interest on each Revolving Credit Note shall be payable as specified in
Section 2.10.
(b) The Revolving Credit Loans shall be due and payable on September 30,
2003 (the "Maturity Date").
C. Swing Line Loans
(a) Subject to the terms and conditions of this Agreement, the Swing Line
Lender agrees to make swing line loans (each a "Swing Line Loan" and,
collectively, the "Swing Line Loans") to the Borrower from time to time during
the Swing Line Commitment Period in an aggregate principal amount at any one
time outstanding not to exceed the Swing Line Commitment, provided that
immediately after making each Swing Line Loan, (i) the Swing Line Lender's
Credit Exposure would not exceed the Swing Line Lender's Revolving Credit
Commitment, (ii) the aggregate unpaid balance of the Swing Line Loans would
not exceed the Swing Line Commitment, and (iii) the Aggregate Credit Exposure
of all Lenders, would not exceed the Aggregate Revolving Credit Commitments.
During the Swing Line Commitment Period, the Borrower may borrow, prepay in
whole or in part and reborrow under the Swing Line Commitment, all in
accordance with the terms and conditions of this Agreement. Each Swing Line
Loan shall mature and be due and payable on the last day of the Interest
Period therefor. No Swing Line Loan shall be made prior to the making of the
first Revolving Credit Loans on the first Borrowing Date.
(b) The Swing Line Lender shall not be obligated to make any Swing Line Loan
at a time when any Lender shall be in default of its obligations under this
Agreement unless the Swing Line Lender has entered into arrangements
satisfactory to it and the Borrower to eliminate the Swing Line Lender's risk
with respect to such defaulting Lender's participation in such Swing Line
Loan. The Swing Line Lender will not make a Swing Line Loan if the
Administrative Agent, or any Lender by notice to the Swing Line Lender and the
Borrower no later than one Business Day prior to the Borrowing Date with
respect to such Swing Line Loan, shall have determined that the conditions set
forth in Section 6 have not been satisfied and such conditions remain
unsatisfied as of the requested time of the making such Loan. Each Swing Line
Loan shall be due and payable on the day being the earliest of the last day of
the Swing Line Interest Period applicable thereto, the date on which the Swing
Line Commitment shall have been voluntarily terminated by the Borrower in
accordance with Section 2.6, and the date on which the Swing Line Loans shall
become due and payable pursuant to the provisions hereof, whether by
acceleration or otherwise.
(c) On any Business Day on which a Swing Line Loan shall be due and payable
and shall remain unpaid, the Swing Line Lender may, in its sole discretion,
give notice to the Lenders and the Borrower that such outstanding Swing Line
Loan shall be funded with a borrowing of Revolving Credit Loans (provided that
such notice shall be deemed to have been automatically given upon the
occurrence of a Default or an Event of Default under Sections 9.1(h) or (i)),
in which case a borrowing of Revolving Credit Loans made as ABR Advances (each
such borrowing, a "Mandatory Borrowing"), shall be made by all Lenders pro
rata based on each such Lender's Commitment Percentage on the Business Day
immediately succeeding the giving of such notice. The proceeds of each
Mandatory Borrowing shall be remitted directly to the Swing Line Lender to
repay such outstanding Swing Line Loan. Each Lender irrevocably agrees to make
a Revolving Credit Loan pursuant to each Mandatory Borrowing in the amount and
in the manner specified in the preceding sentence and on the date specified in
writing by the Swing Line Lender notwithstanding: (i) the amount of such
Mandatory Borrowing may not comply with the minimum amount for Loans otherwise
required hereunder, (ii) whether any condition specified in Section 6 is then
unsatisfied, (iii) whether a Default or an Event of Default then exists, (iv)
the Borrowing Date of such Mandatory Borrowing, (v) the aggregate principal
amount of all Loans then outstanding, (vi) the Aggregate Credit Exposure at
such time and (vii) the amount of the Commitments at such time.
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D. Swing Line Note
The Swing Line Loans made by the Swing Line Lender shall be evidenced by a
promissory note of the Borrower, substantially in the form of Exhibit B-2,
with appropriate insertions therein as to date and principal amount (as
indorsed or modified from time to time, including all replacements thereof and
substitutions therefor, the "Swing Line Note"), payable to the order of the
Swing Line Lender and representing the obligation of the Borrower to pay the
lesser of (i) the amount of the Swing Line Commitment and (ii) the aggregate
unpaid principal balance of all Swing Line Loans with interest thereon as set
forth in Section 2.10. The Swing Line Note shall be stated to mature on the
Swing Line Termination Date, and bear interest for the period from and
including the date thereof on the unpaid principal balance thereof from time
to time outstanding at the applicable interest rate or rates per annum
determined as provided in Section 2.10. Interest on the Swing Line Note shall
be payable as specified in Section 2.10.
E. Procedure for Borrowing
(a) Revolving Credit Loans. The Borrower may borrow under the Aggregate
Revolving Credit Commitments on any Business Day during the Revolving Credit
Commitment Period, provided, however, that the Borrower shall notify the
Administrative Agent (by telecopy or other written notice) no later than: 2:00
P.M., three Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Advances, and 2:00 P.M., one Business Day prior to the requested
Borrowing Date, in the case of ABR Advances, specifying (i) the aggregate
principal amount to be borrowed under the Aggregate Revolving Credit
Commitments, (ii) the requested Borrowing Date, (iii) whether such borrowing
is to consist of one or more Eurodollar Advances, ABR Advances, or a
combination thereof and (iv) if the borrowing is to consist of one or more
Eurodollar Advances, the length of the Interest Period for each such
Eurodollar Advance, provided, however, that no Interest Period selected in
respect of any Revolving Credit Loan shall end after the Maturity Date. If the
Borrower fails to give timely notice in connection with a request for a
Eurodollar Advance, the Borrower shall be deemed to have elected that such
Advance shall be made as an ABR Advance. Each such notice shall be irrevocable
and confirmed immediately by delivery to the Administrative Agent of a
Borrowing Request. Each ABR Advance shall be in an aggregate principal amount
equal to $1,000,000 or such amount plus a whole multiple of $250,000 in excess
thereof (or, if less, the unused amount of the Aggregate Revolving Credit
Commitments) and each Eurodollar Advance shall be in an aggregate principal
amount equal to $5,000,000 or such amount plus a whole multiple of $500,000 in
excess thereof.
(d) Swing Line Loans. The Borrower may borrow under the Swing Line
Commitment on any Business Day during the Swing Line Commitment Period,
provided, however, that the Borrower shall notify the Administrative Agent and
the Swing Line Lender (by telephone or fax) no later than 3:00 P.M. on the
requested Borrowing Date, specifying (i) the amount to be borrowed under the
Swing Line Commitment, (ii) the length of the Interest Period for each such
Swing Line Loan, provided, however, that no Interest Period selected in
respect of any Swing Line Loan shall end after the Swing Line Termination
Date, and (iii) the requested Borrowing Date. Each borrowing of Swing Line
Loans shall be in an aggregate principal amount equal to $250,000 or such
amount plus an integral multiple of $100,000 in excess thereof or, if less,
the unused amount of the Swing Line Commitment. The Swing Line Lender will
then, subject to its determination that the terms and conditions of this
Agreement have been satisfied, make the requested amount available promptly on
that same day, to the Administrative Agent who, thereupon, will promptly make
such amount available to the Borrower at the office of the Administrative
Agent specified in Section 11.2 by crediting the account of the Borrower on
the books of such office of the Administrative Agent.
(b) Upon receipt of each notice of borrowing of Revolving Credit Loans from
the Borrower, the Administrative Agent shall promptly notify each Lender
thereof. Subject to its receipt of the notice referred to in the preceding
sentence, (i) each Lender will make the amount of its Commitment Percentage of
each Revolving Credit Loan available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent set forth in
Section 11.2 not later than 12:00 Noon on the relevant Borrowing Date
requested by the Borrower, in funds immediately available to the
Administrative Agent at such office. The amounts so made available to the
Administrative Agent on such Borrowing Date will then, subject to the
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satisfaction of the terms and conditions of this Agreement, as determined by
the Administrative Agent, be made available on such date to the Borrower by
the Administrative Agent at the office of the Administrative Agent specified
in Section 11.2 by crediting the account of the Borrower on the books of such
office with the aggregate of said amounts received by the Administrative
Agent.
(c) Unless the Administrative Agent shall have received prior notice from a
Lender (by telephone or otherwise, such notice to be promptly confirmed by fax
or other writing) that such Lender will not make available to the
Administrative Agent such Lender's Commitment Percentage of the Revolving
Credit Loans requested by the Borrower, the Administrative Agent may assume
that such Lender has made such share available to the Administrative Agent on
the Borrowing Date in accordance with this Section, provided that such Lender
received notice of the proposed borrowing from the Administrative Agent, and
the Administrative Agent may, in reliance upon such assumption, make available
to the Borrower on the Borrowing Date a corresponding amount. If and to the
extent such Lender shall not have so made its Commitment Percentage of such
Revolving Credit Loans available to the Administrative Agent, such Lender and
the Borrower severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount (to the extent not previously paid by the
other), together with interest thereon for each day from the date such amount
is made available to the Borrower to the date such amount is paid to the
Administrative Agent, at a rate per annum equal to, in the case of the
Borrower, the applicable interest rate set forth in Section 2.10 for ABR
Advances, and, in the case of such Lender, the Federal Funds Rate in effect on
each such day (as determined by the Administrative Agent) plus any processing
fee per the interbank compensation rules as then in effect. Such payment by
the Borrower, however, shall be without prejudice to its rights against such
Lender. If such Lender shall pay to the Administrative Agent such
corresponding amount, such amount so paid shall constitute such Lender's
Revolving Credit Loan as part of the Revolving Credit Loans for purposes of
this Agreement, which Revolving Credit Loan shall be deemed to have been made
by such Lender on the Borrowing Date applicable to such Revolving Credit
Loans.
(d) If a Lender makes a new Revolving Credit Loan on a Borrowing Date on
which the Borrower is to repay a Revolving Credit Loan from such Lender, such
Lender shall apply the proceeds of such new Revolving Credit Loan to make such
repayment, and only the excess of the proceeds of such new Revolving Credit
Loan over the Revolving Credit Loan being repaid need be made available to the
Administrative Agent.
(e) Notices of borrowing given by telecopy shall be deemed given when
received by telecopy and shall be promptly confirmed in writing within five
Business Days. The Administrative Agent and the Lenders may rely on a
telecopied notice of borrowing whether or not such notice is confirmed by the
delivery of a Borrowing Request.
F. Termination or Reduction of Aggregate Revolving Credit Commitments and
Swing Line Commitment.
(a) Voluntary Reductions. (i) The Borrower shall have the right, upon at
least three Business Days' prior written notice to the Administrative Agent,
at any time, to terminate the Aggregate Revolving Credit Commitments or from
time to time to reduce permanently the Aggregate Revolving Credit Commitments
to an amount not less than the sum of (A) the aggregate principal balance of
the Revolving Credit Loans then outstanding (after giving effect to any
contemporaneous prepayment thereof), (B) the Letter of Credit Exposure and (C)
the Swing Line Exposure, provided, however, that any such reduction shall be
in the amount of $5,000,000 or such amount plus a whole multiple of $1,000,000
in excess thereof.
(ii) The Borrower shall have the right, upon at least one Business Day's
prior written notice to the Administrative Agent and the Swing Line Lender, at
any time, to reduce permanently the Swing Line Commitment in whole at any
time, or in part from time to time, to an amount not less than the aggregate
principal balance of the Swing Line Loans then outstanding (after giving
effect to any contemporaneous prepayment thereof), provided, however, that
each partial reduction of the Swing Line Commitment shall be in an amount
equal to $1,000,000 or such amount plus a whole multiple of $1,000,000 in
excess thereof.
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(b) Mandatory Periodic Reductions. The Aggregate Revolving Credit
Commitments shall be reduced on each of the following dates by the amount set
forth next to such date:
<TABLE>
<CAPTION>
AGGREGATE REVOLVING
CREDIT COMMITMENT
DATES REDUCTION
<S> <C>
September 30, 2000.................................... $50,000,000
September 30, 2001.................................... $75,000,000
September 30, 2002.................................... $75,000,000
</TABLE>
(b) Mandatory Reductions Relating to a Change of Control. Upon the
occurrence of a Change of Control, the Aggregate Revolving Credit Commitments
and the Swing Line Commitment shall be reduced to $0.
(c) In General. Reductions of the Aggregate Revolving Credit Commitments
shall be applied pro rata according to the Revolving Credit Commitments of
each Lender. Simultaneously with each reduction of the Aggregate Revolving
Credit Commitments under this Section, the Borrower shall pay the Commitment
Fee accrued on the amount by which the Aggregate Revolving Credit Commitments
have been reduced and prepay the Revolving Credit Loans and the Swing Line
Loans as required by Section 2.7(b).
G. Prepayments of the Revolving Credit Loans
(a) Voluntary Prepayments. The Borrower may, at its option, prepay the
Revolving Credit Loans without premium or penalty, in full at any time or in
part from time to time by notifying the Administrative Agent in writing at
least one Business Day prior to the proposed prepayment date, in the case of
Revolving Credit Loans consisting of ABR Advances and at least three Business
Days prior to the proposed prepayment date, in the case of Revolving Credit
Loans consisting of Eurodollar Advances, specifying the Revolving Credit Loans
to be prepaid, whether such Revolving Credit Loans consist of ABR Advances,
Eurodollar Advances, or a combination thereof, the amount to be prepaid and
the date of prepayment. Such notice shall be irrevocable and the amount
specified in such notice shall be due and payable on the date specified,
together with accrued interest to the date of such payment on the amount
prepaid. Upon receipt of such notice, the Administrative Agent shall promptly
notify each Lender thereof. Each partial prepayment of the Revolving Credit
Loans pursuant to this subsection shall be in an aggregate principal amount of
$1,000,000 or such amount plus a whole multiple of $250,000 in excess thereof
(or, if less, the outstanding principal balance of the Revolving Credit
Loans). After giving effect to any partial prepayment with respect to
Eurodollar Advances that were made (whether as the result of a borrowing or a
conversion) on the same date and that had the same Interest Period, the
outstanding principal amount of such Eurodollar Advances shall equal (subject
to Section 2.9) $5,000,000 or such amount plus a whole multiple of $500,000 in
excess thereof.
(b) Mandatory Prepayments of Revolving Credit Loans and Swing Line Loans
Relating to Reductions of the Aggregate Revolving Credit Commitments and the
Swing Line Commitment. Simultaneously with each reduction of the Aggregate
Revolving Credit Commitments or the Swing Line Commitment under Section 2.6,
the Borrower shall prepay the Revolving Credit Loans or the Swing Line Loans,
as the case may be, by the amount, if any, by which (i) in the case of a
reduction of the Aggregate Revolving Credit Commitments, the Aggregate Credit
Exposure exceeds the amount of the Aggregate Revolving Credit Commitments
after giving effect to such reduction and (ii) in the case of a reduction of
the Swing Line Commitment, the outstanding principal balance of the Swing Line
Loans exceeds the amount of the Swing Line Commitment after giving effect to
such reduction.
(c) Mandatory Prepayments of Revolving Credit Loans and Swing Line Loans
Relating to a Change of Control. Upon the occurrence of a Change of Control,
the Borrower shall (i) prepay in full the outstanding principal balance of the
Revolving Credit Loans and the Swing Line Loans, together with accrued and
unpaid interest thereon, (ii) pay in full all fees and other amounts payable
under the Loan Documents and (iii) deposit an amount equal to the Letter of
Credit Exposure in a cash collateral account with and under the exclusive
control of the Administrative Agent.
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(d) In General. Each prepayment of Revolving Credit Loans shall first be
applied to ABR Advances. If any prepayment is made in respect of any
Eurodollar Advance or Swing Line Loan, in whole or in part, prior to the last
day of the applicable Interest Period, the Borrower agrees to indemnify the
Lenders in accordance with Section 2.15.
H. Participation in Swing Line Loans
(a) Upon each receipt by a Lender of notice of an Event of Default from the
Administrative Agent pursuant to Section 10.5, such Lender shall purchase
unconditionally, irrevocably, and severally (and not jointly) from the Swing
Line Lender a participation in the outstanding Swing Line Loans (including
accrued interest thereon) in an amount equal to the product of its Commitment
Percentage and the outstanding amount of the Swing Line Loans (the "Swing Line
Participation Amount"). Each Lender shall also be liable for an amount equal
to the product of its Commitment Percentage and any amounts paid by the
Borrower pursuant to this subsection (a) that are subsequently rescinded or
avoided, or must otherwise be restored or returned. Such liabilities shall be
unconditional and without regard to the occurrence of any Default or Event of
Default or the compliance by the Borrower with any of its obligations under
the Loan Documents.
(b) In furtherance of subsection (a), upon each receipt by a Lender of
notice of an Event of Default from the Administrative Agent pursuant to
Section 10.5, such Lender shall promptly make available to the Administrative
Agent for the account of the Swing Line Lender its Swing Line Participation
Amount at the office of the Administrative Agent specified in Section 11.2, in
lawful money of the United States and in immediately available funds. The
Administrative Agent shall deliverthe payments made by each Lender pursuant to
the immediately preceding sentence to the Swing Line Lender promptly upon
receipt thereof in like funds as received. Each Lender shall indemnify and
hold harmless the Administrative Agent and the Swing Line Lender from and
against any and all losses, liabilities (including liabilities for penalties),
actions, suits, judgments, demands, costs and expenses resulting from any
failure on the part of such Lender to pay, or from any delay in paying the
Administrative Agent any amount such Lender is required to pay in accordance
with this Section 2.8(b) upon receipt of notice of Event of Default from the
Administrative Agent pursuant to Section 10.5 (except in respect of losses,
liabilities or other obligations suffered by the Administrative Agent or the
Swing Line Lender, as the case may be, resulting from the gross negligence or
willful misconduct of the Administrative Agent or the Swing Line Lender, as
the case may be), and such Lender shall be required to pay interest to the
Administrative Agent for the account of the Swing Line Lender from the date
such amount was due until paid in full, on the unpaid portion thereof, at a
rate of interest per annum equal to (i) from the date such amount was due
until the third day therefrom, the Federal Funds Rate, and (ii) thereafter,
the Federal Funds Rate plus 2%, payable upon demand by the Swing Line Lender.
The Administrative Agent shall distribute such interest payments to the Swing
Line Lender upon receipt thereof in like funds as received.
(c) Whenever the Administrative Agent is reimbursed by the Borrower, for the
account of the Swing Line Lender, for any payment in connection with Swing
Line Loans and such payment relates to an amount previously paid by a Lender
pursuant to this Section, the Administrative Agent will promptly pay over such
payment to such Lender.
I. Conversions and Continuations
(a) The Borrower may elect from time to time to convert Eurodollar Advances
to ABR Advances by giving the Administrative Agent at least one Business Day's
prior irrevocable notice of such election (confirmed by the delivery of a
Notice of Conversion/Continuation), specifying the amount to be so converted.
In addition, the Borrower may elect from time to time to (i) convert ABR
Advances to Eurodollar Advances and (ii) to continue Eurodollar Advances by
selecting a new Interest Period therefor, in each case by giving the
Administrative Agent irrevocable notice no later than 2:00 P.M. at least three
Business Days' prior to such election (confirmed by the delivery of a Notice
of Conversion/Continuation), in the case of a conversion to, or continuation
of, Eurodollar Advances, specifying the amount to be so converted and the
initial Interest Period relating thereto, provided that any such conversion of
ABR Advances to Eurodollar Advances shall only be made on a Business Day and
any
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<PAGE>
such continuation of Eurodollar Advances shall only be made on the last day of
the Interest Period applicable to the Eurodollar Advances that are to be
continued as such new Eurodollar Advances. The Administrative Agent shall
promptly provide the Lenders with a copy of each such Notice of
Conversion/Continuation. ABR Advances and Eurodollar Advances may be converted
or continued pursuant to this Section in whole or in part, provided that
conversions of ABR Advances to Eurodollar Advances, or continuations of
Eurodollar Advances shall be in an aggregate principal amount of $5,000,000 or
such amount plus a whole multiple of $500,000 in excess thereof.
(b) Notwithstanding anything in this Section to the contrary, no ABR Advance
may be converted to a Eurodollar Advance and no Eurodollar Advance may be
continued, if the Borrower or the Administrative Agent has knowledge that a
Default or Event of Default has occurred and is continuing either (i) at the
time the Borrower shall notify the Administrative Agent of its election to
convert or continue or (ii) on the requested Conversion/Continuation Date. In
such event, such ABR Advance shall be automatically continued as an ABR
Advance, or such Eurodollar Advance shall be automatically converted to an ABR
Advance on the last day of the Interest Period applicable to such Eurodollar
Advance.
(j) No Interest Period selected in respect of conversion or continuation of
any Eurodollar Advance shall end after the Maturity Date. Notwithstanding
anything herein to the contrary, the Borrower shall select Interest Periods
such that, on each date that a mandatory principal payment is required to be
made pursuant to Section 2.7(b) in connection with a mandatory scheduled
Commitment reduction required to be made pursuant to Section 2.6(b), the
outstanding principal balance of all ABR Advances, when added to the aggregate
principal amount of each Eurodollar Advance, the applicable Interest Period of
which shall end on such date, shall equal or exceed the aggregate principal
amount of the Revolving Credit Loans required to be paid on such date pursuant
to Section 2.7(b).
(c) Each conversion or continuation shall be effected by each Lender by
applying the proceeds of its new ABR Advance or Eurodollar Advance, as the
case may be, to its Advances (or portion thereof) being converted (it being
understood that such conversion shall not constitute a borrowing for purposes
of Sections 4 or 6).
(d) Notices in respect of a conversion or continuation given by telecopy
shall be deemed given when received by telecopy and shall be promptly
confirmed in writing within five Business Days. The Administrative Agent and
the Lenders may rely on a telecopied notice of conversion or continuation
whether such notice is confirmed by the delivery of a Notice of
Conversion/Continuation.
J. Interest Rate and Payment Dates
(a) Prior to Maturity. Except as otherwise provided in Section 2.10(b),
prior to maturity, the Loans shall bear interest on the outstanding principal
balance thereof at the applicable interest rate or rates per annum set forth
below:
<TABLE>
<CAPTION>
ADVANCES/LOANS RATE
<C> <S>
Each ABR Advance Alternate Base Rate.
Each Eurodollar Advance Eurodollar Rate applicable to such Eurodollar
Advance for the applicable Interest Period plus
the Applicable Margin.
Each Swing Line Loan Either the Negotiated Rate applicable to such
Swing Line Loan for the applicable Interest
Period or, if the Borrower and the Swing Line
Lender shall not have agreed to a Negotiated
Rate with respect to such Swing Line Loan, the
Alternate Base Rate for such Swing Line Loan for
the applicable Interest Period.
</TABLE>
(b) Event of Default. After the occurrence and during the continuance of an
Event of Default under Section 9.1(a), (b) (with respect to interest, the
Commitment Fee, the LC Fronting Fee or the Letter of Credit Fee), (h) or (i),
the outstanding principal balance of the Loans shall bear interest at a rate
per annum equal to 2% plus the rate that would otherwise be applicable under
Section 2.10(a) until, in the case of Eurodollar Advances and Swing Line
Loans, the end of the applicable Interest Period therefor, and, thereafter, at
the Alternate Base Rate
20
<PAGE>
plus 2%. Any overdue interest or other amount payable under the Loan Documents
shall bear interest at a rate per annum equal to the Alternate Base Rate plus
2% and shall be payable on demand. If all or any portion of any reimbursement
obligation in respect of a Letter of Credit shall not be paid when due
(whether at the stated maturity thereof, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum equal to the Alternate
Base Rate plus 2%, from the date of such nonpayment until paid in full
(whether before or after the entry of a judgment thereon) and shall be payable
on demand.
(c) In General. Interest on (i) ABR Advances and Swing Line Loans, in each
case to the extent based on the BNY Rate, shall be calculated on the basis of
a 365 or 366-day year (as the case may be), (ii) ABR Advances and Swing Line
Loans, in each case to the extent based on the Federal Funds Rate, and on
Eurodollar Advances shall be calculated on the basis of a 360-day year, in
each case for the actual number of days elapsed, including the first day but
excluding the last, and (iii) Swing Line Loans to the extent based on a
Negotiated Rate shall be calculated on the basis of a 360-day year for the
actual number of days elapsed, including the first day but excluding the last.
Except as otherwise provided in Section 2.10(b), interest shall be payable in
arrears on each Interest Payment Date, upon each payment (including
prepayment) or conversion of the Loans and, with respect to each ABR Advance,
on each date that is three months after the immediately preceding Interest
Payment Date with respect to ABR Advances. Any change in the interest rate on
the Loans resulting from a change in the Alternate Base Rate or reserve
requirements shall become effective as of the opening of business on the day
on which such change shall become effective. The Administrative Agent shall,
as soon as practicable, notify the Borrower and the Lenders of the effective
date and the amount of each such change in the BNY Rate, but any failure to so
notify shall not in any manner affect the obligation of the Borrower to pay
interest on the Loans in the amounts and on the dates required. Each
determination of the Alternate Base Rate or a Eurodollar Rate by the
Administrative Agent pursuant to this Agreement shall be conclusive and
binding on the Borrower absent manifest error. At no time shall the interest
rate payable on the Loans, together with the Commitment Fee, the Letter of
Credit Fee, the LC Fronting Fee, and all other amounts payable under the Loan
Documents, to the extent the same are construed to constitute interest, exceed
the Highest Lawful Rate. If in respect of any period during the term of this
Agreement, any amount paid hereunder, to the extent the same shall (but for
the provisions of this Section) constitute or be deemed to constitute
interest, would exceed the maximum amount of interest permitted by the Highest
Lawful Rate during such period (such amount being hereinafter referred to as
an "Unqualified Amount"), then (i) such Unqualified Amount shall be applied or
shall be deemed to have been applied as a prepayment of the Loans, and (ii) if
in any subsequent period during the term of this Agreement, all amounts
payable hereunder in respect of such period that constitute or shall be deemed
to constitute interest shall be less than the maximum amount of interest
permitted by the Highest Lawful Rate during such period, then the Borrower
shall pay to the Lender in respect of such period an amount (each a
"Compensatory Interest Payment") equal to the lesser of (x) a sum that, when
added to all such amounts, would equal the maximum amount of interest
permitted by the Highest Lawful Rate during such period, and (y) an amount
equal to the Unqualified Amount less all other Compensatory Interest Payments
made in respect thereof. The Borrower acknowledges that to the extent interest
payable on ABR Advances or Swing Line Loans is based on the BNY Rate, such
Rate is only one of the bases for computing interest on loans made by the
Lenders, and by basing interest payable on ABR Advances or Swing Line Loans on
the BNY Rate, the Lenders have not committed to charge, and the Borrower has
not in any way bargained for, interest based on a lower or the lowest rate at
which the Lenders may now or in the future make loans to other borrowers.
K. Substituted Interest Rate
In the event that (i) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that by
reason of circumstances affecting the interbank eurodollar market either
adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate applicable pursuant to Section 2.10 or (ii) the Required Lenders shall
have notified the Administrative Agent that they have determined (which
determination shall be conclusive and binding on the Borrower) that the
applicable Eurodollar Rate will not adequately and fairly reflect the cost to
such Lenders of maintaining or funding loans bearing interest based on such
Eurodollar Rate, with respect to any portion of the Loans that the Borrower
has requested
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<PAGE>
be made as Eurodollar Advances or Eurodollar Advances that will result from
the requested conversion or continuation of any portion of the Advances into
or as Eurodollar Advances (each, an "Affected Advance"), the Administrative
Agent shall promptly notify the Borrower and the Lenders (by telephone or
otherwise, to be promptly confirmed in writing) of such determination and the
reasons therefor, on or, to the extent practicable, prior to the requested
Borrowing Date or Conversion/Continuation Date for such Affected Advances. If
the Administrative Agent shall give such notice, (a) any Affected Advances
shall be made as ABR Advances, (b) the Advances (or any portion thereof) that
were to have been converted to or continued as Affected Advances shall be
converted to or continued as ABR Advances and (c) any outstanding Affected
Advances shall be converted, on the last day of the then current Interest
Period with respect thereto, to ABR Advances. Until any notice under clauses
(i) or (ii), as the case may be, of this Section has been withdrawn by the
Administrative Agent (by notice to the Borrower promptly upon either (x) the
Administrative Agent having determined that such circumstances affecting the
interbank eurodollar market no longer exist and that adequate and reasonable
means do exist for determining the Eurodollar Rate pursuant to Section 2.10 or
(y) the Administrative Agent having been notified by such Required Lenders
that circumstances no longer render the Advances (or any portion thereof)
Affected Advances), no further Eurodollar Advances shall be required to be
made by the Lenders, nor shall the Borrower have the right to convert or
continue all or any portion of the Loans to Eurodollar Advances.
L. Taxes
(a) Payments to Be Free and Clear. Provided that all documentation, if any,
then required to be delivered by any Lender or the Administrative Agent
pursuant to subsection (c) has been delivered, all sums payable by the
Borrower under the Loan Documents shall be paid free and clear of and (except
to the extent required by law) without any deduction or withholding on account
of any Tax (other than a Tax on the Overall Net Income of any Lender or the
Administrative Agent, as the case may be (for which payment need not be free
and clear but no deduction or withholding shall be made unless then required
by applicable law) imposed, levied, collected, withheld or assessed by or
within the United States or any political subdivision in or of the United
States or any other jurisdiction from or to which a payment is made by or on
behalf of the Borrower or by any federation or organization of which the
United States or any such jurisdiction is a member at the time of payment.
(b) Grossing-up of Payments. If the Borrower or any other Credit Party is
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by the Borrower or such Credit Party to the
Administrative Agent or any Lender under any of the Loan Documents:
(i) The Borrower shall notify the Administrative Agent and such Lender of
any such requirement or any change in any such requirement as soon as the
Borrower becomes aware of it;
(ii) The Borrower shall pay any such Tax in accordance with applicable
law, such payment to be made (if the liability to pay is imposed on the
Borrower) for its own account or (if that liability is imposed on the
Administrative Agent or such Lender, as the case may be) on behalf of and
in the name of the Administrative Agent or such Lender;
(iii) the sum payable by the Borrower to the Administrative Agent or a
Lender in respect of which the relevant deduction, withholding or payment
is required shall be increased to the extent necessary to ensure that,
after the making of that deduction, withholding or payment, the
Administrative Agent or such Lender, as the case may be, receives on the
due date therefor a sum equal to what it would have received had no such
deduction, withholding or payment been required or made; and
(iv) the Borrower shall at the request of the Lender or the
Administrative Agent in respect of which such Tax was imposed deliver to
the Administrative Agent the original or certified copy of a receipt or
other satisfactory document evidencing payment thereof and the applicable
Lender evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the
relevant Governmental Authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (iii) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof)
or after the date of the Assignment and Acceptance Agreement pursuant to which
such Lender became a Lender
22
<PAGE>
(in the case of each other Lender) in any such requirement for a deduction,
withholding or payment as is mentioned therein shall result in an increase in
the rate of such deduction, withholding or payment from that in effect at the
date of this Agreement or at the date of such Assignment and Acceptance, as
the case may be, in respect of payments to such Lender.
(c) U.S. Tax Certificates. Each Lender that is organized under the laws of
any jurisdiction other than a jurisdiction within the United States shall
deliver to the Administrative Agent for transmission to the Borrower, on or
prior to the Effective Date (in the case of each Lender listed on the
signature pages hereof) or on the effective date of the Assignment and
Acceptance Agreement pursuant to which it becomes a Lender (in the case of
each other Lender), and from time to time thereafter, as required by law and
at such other times as may be necessary in the determination of the Borrower
or the Administrative Agent (each in the reasonable exercise of its
discretion), properly completed and duly executed Internal Revenue Service
Form 1001 or Form 4224 or any other certificate or statement of exemption
required by Treasury Regulations Section 1.1441-4(a) or Section 1.1441-6(c) or
any successor thereto to establish that such Lender is entitled to benefits
under an income tax treaty to which the United States is a party that exempts
such Lender from United States withholding tax or certifying that the income
receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States. The Borrower shall not be
required to pay any additional amount to any such Lender under subsection
(b)(iii) above if such Lender shall have failed to satisfy the requirements of
the immediately preceding sentence; provided that if such Lender shall have
satisfied such requirements on the Effective Date (in the case of each Lender
listed on the signature pages hereof) or on the effective date of the
Assignment and Acceptance Agreement pursuant to which it became a Lender (in
the case of each other Lender), nothing in this subsection shall relieve the
Borrower of its obligation to pay any additional amounts pursuant to
subsection (b)(iii) in the event that, as a result of any change in applicable
law, such Lender is no longer properly entitled to deliver certificates,
documents or other evidence at a subsequent date establishing the fact that
such Lender is not subject to withholding as described in the immediately
preceding sentence.
(d) Upon the reasonable request of the Borrower, and at the Borrower's
expense, the Lender shall cooperate with the Borrower in seeking to obtain
refunds of Taxes paid by the Borrower. If a Lender shall receive a refund (or
a refund in the form of a credit) from a taxing authority (as a result of any
error in the imposition of Tax by such taxing authority) of any Taxes paid by
the Borrower pursuant to subsection (a) or (b) above, such Lender, so long as
no Event of Default shall then exist, shall promptly pay to the Borrower the
amount so received.
M. Illegality
Notwithstanding any other provisions herein, if any law, regulation, treaty
or directive, or any change therein or in the interpretation or application
thereof, in each case enacted, adopted, promulgated, approved or issued after
the date hereof, shall make it unlawful for any Lender to make or maintain its
Eurodollar Advances as contemplated by this Agreement, (i) the commitment of
such Lender hereunder to make Eurodollar Advances or convert ABR Advances to
Eurodollar Advances shall forthwith be suspended and (ii) such Lender's Loans
then outstanding as Eurodollar Advances affected hereby, if any, shall be
converted automatically to ABR Advances on the last day of the then current
Interest Period applicable thereto or within such earlier period as required
by law. If the commitment of any Lender with respect to Eurodollar Advances is
suspended pursuant to this Section and such Lender shall notify the
Administrative Agent and the Borrower that it is once again legal for such
Lender to make or maintain Eurodollar Advances, such Lender's commitment to
make or maintain Eurodollar Advances shall be reinstated.
N. Increased Costs
In the event that any law, regulation, treaty or directive hereafter
enacted, adopted, promulgated, approved or issued or any change in any
presently existing law, regulation, treaty or directive therein or in the
interpretation or application thereof by any Governmental Authority charged
with the administration thereof or compliance by any Lender (or any
corporation directly or indirectly owning or controlling such Lender) with any
request or directive from any central bank or other Governmental Authority
made or issued after the date hereof:
23
<PAGE>
(h) does or shall subject any Lender to any Taxes of any kind whatsoever
with respect to any Eurodollar Advances or its obligations under this
Agreement to make Eurodollar Advances, or change the basis of taxation of
payments to any Lender of principal, interest or any other amount payable
hereunder in respect of its Eurodollar Advances, including any Taxes
required to be withheld from any amounts payable under the Loan Documents
(except for imposition of, or change in the rate of, Tax on the Overall Net
Income of such Lender or its Applicable Lending Office for any of such
Advances by the jurisdiction in which such Lender is incorporated or has
its principal office or such Applicable Lending Office, including, in the
case of Lenders incorporated in any State of the United States, such tax
imposed by the United States); or
(a) does or shall impose, modify or make applicable any reserve, special
deposit, compulsory loan, assessment, increased cost or similar requirement
against assets held by, or deposits of, or advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of
such Lender in respect of its Eurodollar Advances that is not otherwise
included in the determination of a Eurodollar Rate;
and the result of any of the foregoing is to increase the cost to such Lender
of making, renewing, converting, continuing or maintaining its Eurodollar
Advances or its commitment to make such Eurodollar Advances, or to reduce any
amount receivable hereunder in respect of its Eurodollar Advances, then, in
any such case, the Borrower shall pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such additional
cost or reduction in such amount receivable that such Lender deems to be
material as determined by such Lender; provided, however, that nothing in this
Section shall require the Borrower to indemnify the Lenders with respect to
Taxes for which the Borrower has no obligation under Section 2.12. No failure
by any Lender to demand compensation for any increased cost during any
Interest Period shall constitute a waiver of such Lender's right to demand
such compensation at any time. A statement setting forth the calculations of
any additional amounts payable pursuant to the foregoing sentence submitted by
a Lender to the Borrower shall be conclusive absent manifest error.
O. Indemnification for Loss
Notwithstanding anything contained herein to the contrary, if (i) the
Borrower shall fail to borrow or convert or continue a Eurodollar Advance on a
Borrowing Date or Conversion/Continuation Date after it shall have given
notice to do so in which it shall have requested a Eurodollar Advance, or if
the Borrower shall fail to borrow a Swing Line Loan after it shall have agreed
to a Negotiated Rate with respect thereto, (ii) a Eurodollar Advance or Swing
Line Loan bearing interest at a Negotiated Rate shall be terminated for any
reason prior to the last day of the Interest Period applicable thereto, or
(iii) while a Eurodollar Advance or Swing Line Loan bearing interest at a
Negotiated Rate is outstanding, any repayment or prepayment of such Eurodollar
Advance or Swing Line Loan is made for any reason (including, without
limitation, as a result of acceleration or illegality) on a date which is
prior to the last day of the Interest Period applicable thereto, the Borrower
agrees to indemnify each Lender against, and to pay on demand directly to such
Lender, any loss or expense suffered by such Lender as a result of such
failure to borrow, convert or continue, termination, repayment or prepayment,
including, without limitation, an amount, if greater than zero, equal to:
A x (B-C) x D/360
where:
"A" equals, in the case of a Eurodollar Advance, such Lender's Commitment
Percentage of the Affected Principal Amount or, in the case of a Swing Line
Loan bearing interest at a Negotiated Rate, the Affected Principal Amount;
"B" equals the Eurodollar Rate or Negotiated Rate, as the case may be
(expressed as a decimal) applicable to such Eurodollar Advances or Swing
Line Loan;
"C" equals the applicable Eurodollar Rate (expressed as a decimal) in
effect on or about the first day of the applicable Remaining Interest
Period, based on the applicable rates offered or bid, as the case may be,
on or about such date, for deposits in an amount equal approximately to
such Lender's Commitment
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<PAGE>
Percentage of the Affected Principal Amount, or the rate (expressed as a
decimal), as determined by the Swing Line Lender, which the Swing Line
Lender in good faith would have offered as a Negotiated Rate on or about
the first day of the applicable remaining Interest Period with respect to
an amount equal approximately to the Affected Principal Amount, as the case
may be, in each case, with an Interest Period equal approximately to the
applicable Remaining Interest Period, as determined by such Lender;
"D" equals the number of days from and including the first day of the
applicable Remaining Interest Period to but excluding the last day of such
Remaining Interest Period;
and any other out-of-pocket loss or expense (including any internal processing
charge customarily charged by such Lender) suffered by such Lender in
connection with such Eurodollar Advance or Swing Line Loan bearing interest at
a Negotiated Rate to the extent based on a Negotiated Rate, as the case may
be, including, without limitation, in liquidating or employing deposits
acquired to fund or maintain the funding of its Commitment Percentage of the
Affected Principal Amount, or redeploying funds prepaid or repaid, in amounts
that correspond to its Commitment Percentage of the Affected Principal Amount
or, in the case of a Swing Line Loan bearing interest at a Negotiated Rate,
the amount of such Swing Line Loan. Each determination by the Administrative
Agent or a Lender pursuant to this Section shall be conclusive and binding on
the Borrower absent manifest error.
P. Option to Fund
Each Lender has indicated that, if the Borrower requests a Eurodollar
Advance or Swing Line Loan, such Lender may wish to purchase one or more
deposits in order to fund or maintain its funding of such Eurodollar Advance
or Swing Line Loan during the Interest Period in question; it being understood
that the provisions of this Agreement relating to such funding are included
only for the purpose of determining the rate of interest to be paid on such
Eurodollar Advance or Swing Line Loan and for purposes of determining amounts
owing under Sections 2.14, 2.15 and 2.18. Each Lender shall be entitled to
fund and maintain its funding of all or any part of each Eurodollar Advance or
Swing Line Loan made by it in any manner it sees fit, but all such
determinations shall be made as if such Lender had actually funded and
maintained its funding of such Eurodollar Advance or Swing Line Loan during
the applicable Interest Period through the purchase of deposits in an amount
equal to such Eurodollar Advance or Swing Line Loan and having a maturity
corresponding to such Interest Period. The obligations of the Borrower under
Sections 2.11, 2.12, 2.13, 2.14, 2.15, 2.18 and 2.22 shall survive the
termination of the Aggregate Revolving Credit Commitments, the payment of the
Notes, the reimbursement obligations in respect of drawings under Letters of
Credit and all other amounts payable under the Loan Documents.
Q. Use of Proceeds
The proceeds of the Loans shall be used (i) initially, to make a capital
contribution to TRC to enable TRC to pay in full the Existing Indebtedness and
cancel all commitments thereunder, and (ii) thereafter, for general corporate
purposes of the Borrower and its Subsidiaries. Notwithstanding anything to the
contrary contained in any Loan Document, the Borrower agrees that no part of
the proceeds of any Loan will be used, directly or indirectly, for a purpose
that violates any law, including, without limitation, the provisions of
Regulations G, U or X of the Board of Governors of the Federal Reserve System,
as amended.
R. Capital Adequacy
If (i) the enactment or promulgation of, or any change or phasing in of, any
United States or foreign law or regulation or in the interpretation thereof by
any Governmental Authority charged with the administration thereof after the
date hereof or (ii) compliance with any directive or guideline from any
central bank or United States or foreign Governmental Authority (whether
having the force of law) promulgated or made after the date hereof, affects or
would affect the amount of capital required to be maintained by a Lender (or
any lending office of such Lender) or any corporation directly or indirectly
owning or controlling such Lender, or imposes any
25
<PAGE>
restriction on or otherwise adversely affects such Lender (or any lending
office of such Lender) or any corporation directly or indirectly owning or
controlling such Lender, and such Lender shall have determined that such
enactment, promulgation, change or compliance has the effect of reducing the
rate of return on such Lender's capital or the asset value to such Lender of
any Loan made by such Lender as a consequence, directly or indirectly, of its
obligations to make and maintain the funding of its Loans and Letters of
Credit at a level below that which such Lender could have achieved but for
such enactment, promulgation, change or compliance (after taking into account
such Lender's policies regarding capital adequacy) by an amount deemed by such
Lender to be material, then, upon demand by such Lender, the Borrower shall
promptly pay to such Lender such additional amount or amounts as shall be
sufficient to compensate such Lender for such reduction in such rate of return
or asset value. A certificate in reasonable detail as to such amounts
submitted to the Borrower and the Administrative Agent setting forth the
determination of such amount or amounts that will compensate such Lender for
such reductions shall be presumed correct absent manifest error.
S. Letter of Credit Sub-Facility
(a) Subject to the terms and conditions of this Agreement, BNY agrees, in
reliance on the agreement of the other Lenders set forth in Section 2.20, to
issue standby letters of credit (the "Letters of Credit"; each, individually,
a "Letter of Credit") during the Revolving Credit Commitment Period for the
account of the Borrower. The Letter of Credit Exposure of all Lenders at any
one time shall not exceed $50,000,000. Each Letter of Credit issued pursuant
to this Section shall have a termination date that shall be not later than the
earlier of one year from the date of issuance or 5 days prior to the Maturity
Date. At the request of the Borrower, and upon 3 Business Days' prior written
notice to the Administrative Agent, and provided that no Default or Event of
Default shall then exist, each Letter of Credit termination date may be
extended, from time to time, for a period not to exceed the earlier of (i) one
year or (ii) the 5th day prior to the Maturity Date. No Letter of Credit shall
be issued if the Administrative Agent, or any Lender by notice to the
Administrative Agent no later than 1:00 P.M. one Business Day prior to the
requested date of issuance of such Letter of Credit, shall have determined
that the conditions set forth in Section 6 have not been satisfied.
(b) Each Letter of Credit shall be issued for the account of the Borrower in
support of an obligation of the Borrower or a Subsidiary of the Borrower in
favor of a beneficiary who has requested the issuance of such Letter of Credit
as a condition to a transaction entered into in connection with the Borrower's
ordinary course of business. The Borrower shall give the Administrative Agent
a Letter of Credit Request for the issuance of each Letter of Credit by 2:00
P.M., three Business Days prior to the requested date of issuance. Such Letter
of Credit Request shall be accompanied by BNY's standard Application and
Agreement for Standby Letter of Credit (each, a "Reimbursement Agreement")
executed by an Authorized Signatory of the Borrower, and shall specify (i) the
beneficiary of such Letter of Credit and the obligations of the Borrower or a
Subsidiary of the Borrower in respect of which such Letter of Credit is to be
issued, (ii) the Borrower's proposal as to the conditions under which a
drawing may be made under such Letter of Credit and the documentation to be
required in respect thereof, (iii) the maximum amount to be available under
such Letter of Credit, and (iv) the requested date of issuance. Upon receipt
of such Letter of Credit Request from the Borrower, the Administrative Agent
shall promptly notify BNY and each other Lender thereof. BNY shall, on the
proposed date of issuance and subject to the other terms and conditions of
this Agreement, issue the requested Letter of Credit. Each Letter of Credit
shall be in form and substance reasonably satisfactory to BNY, with such
provisions with respect to the conditions under which a drawing may be made
thereunder and the documentation required in respect of such drawing as BNY
shall reasonably require. Each Letter of Credit shall be used solely for the
purposes described therein.
(c) Each payment by BNY of a draft drawn under a Letter of Credit shall give
rise to an obligation on the part of the Borrower to reimburse BNY immediately
for the amount thereof.
T. Letter of Credit Participation and Funding Commitments
(a) Each Lender hereby unconditionally and irrevocably, severally for itself
only and without any notice to or the taking of any action by such Lender,
takes an undivided participating interest in the obligations of BNY
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<PAGE>
under and in connection with each Letter of Credit in an amount equal to such
Lender's Commitment Percentage of the amount of such Letter of Credit. Each
Lender shall be liable to BNY for its Commitment Percentage of the
unreimbursed amount of any draft drawn and honored under each Letter of
Credit. Each Lender shall also be liable for an amount equal to the product of
its Commitment Percentage and any amounts paid by the Borrower pursuant to
Section 2.21 that are subsequently rescinded or avoided, or must otherwise be
restored or returned. Such liabilities shall be unconditional and without
regard to the occurrence of any Default or Event of Default or the compliance
by the Borrower with any of its obligations under the Loan Documents.
(b) The Administrative Agent will promptly notify each Lender (which notice
shall be promptly confirmed in writing) of the date and the amount of any
draft presented under any Letter of Credit with respect to which full
reimbursement of payment is not made by the Borrower as provided in Section
2.19(c), and forthwith upon receipt of such notice, such Lender (other than
BNY) shall make available to the Administrative Agent for the account of BNY
its Commitment Percentage of the amount of such unreimbursed draft at the
office of the Administrative Agent specified in Section 11.2, in lawful money
of the United States and in immediately available funds, before 4:00 P.M., on
the day such notice was given by the Administrative Agent, if the relevant
notice was given by the Administrative Agent at or prior to 1:00 P.M., on such
day, or before 12:00 Noon, on the next Business Day, if the relevant notice
was given by the Administrative Agent after 1:00 P.M., on such day. The
Administrative Agent shall distribute the payments made by each Lender (other
than BNY) pursuant to the immediately preceding sentence to BNY promptly upon
receipt thereof in like funds as received. Each Lender shall indemnify and
hold harmless the Administrative Agent and BNY from and against any and all
losses, liabilities (including liabilities for penalties), actions, suits,
judgments, demands, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) resulting from any failure on the
part of such Lender to provide, or from any delay in providing, the
Administrative Agent with such Lender's Commitment Percentage of the amount of
any payment made by BNY under a Letter of Credit in accordance with this
clause (b) above (except in respect of losses, liabilities or other
obligations suffered by BNY resulting from the gross negligence or willful
misconduct of BNY). If a Lender does not make available to the Administrative
Agent when due such Lender's Commitment Percentage of any unreimbursed payment
made by BNY under a Letter of Credit (other than payments made by BNY by
reason of its gross negligence or willful misconduct), such Lender shall be
required to pay interest to the Administrative Agent for the account of BNY on
such Lender's Commitment Percentage of such payment at a rate of interest per
annum equal to the Federal Funds Rate plus 1% from the date such Lender's
payment is due until the date such payment is received by the Administrative
Agent. The Administrative Agent shall distribute such interest payments to BNY
upon receipt thereof in like funds as received.
(c) Whenever the Administrative Agent is reimbursed by the Borrower, for the
account of BNY, for any payment under a Letter of Credit and such payment
relates to an amount previously paid by a Lender in respect of its Commitment
Percentage of the amount of such payment under such Letter of Credit, the
Administrative Agent will pay over such payment to such Lender (i) before 4:00
P.M. on the day such payment from the Borrower is received, if such payment is
received at or prior to 1:00 P.M. on such day, or (ii) before 12:00 Noon on
the next succeeding Business Day, if such payment from the Borrower is
received after 1:00 P.M. on such day.
U. Absolute Obligation with respect to Letter of Credit Payments
The Borrower's obligation to reimburse the Administrative Agent for the
account of BNY in respect of a Letter of Credit for each payment under or in
respect of such Letter of Credit shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment that the Borrower may have or have had against the beneficiary of
such Letter of Credit, the Administrative Agent, BNY as issuer of such Letter
of Credit, any Lender or any other Person, including, without limitation, any
defense based on the failure of any drawing to conform to the terms of such
Letter of Credit, any drawing document proving to be forged, fraudulent or
invalid, or the legality, validity, regularity or enforceability of such
Letter of Credit; provided, however, that the Borrower shall not be obligated
to reimburse the Administrative Agent for
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<PAGE>
the account of BNY as issuer of a Letter of Credit for any wrongful payment
under such Letter of Credit made as a result of BNY's gross negligence or
willful misconduct.
V. Increased Costs Based on Letters of Credit
Without limiting the provisions of Section 2.14, if any law or regulation
adopted or enacted after the date hereof or any change after the date hereof
in the interpretation or application thereof by any Governmental Authority
charged with the administration thereof shall either (a) impose, modify or
make applicable any reserve, special deposit, assessment or similar
requirement against letters of credit issued or participated in by any Lender,
or (b) impose on the Administrative Agent or such Lender any other condition
regarding the Letters of Credit (except for imposition of, or changes in the
rate of, Tax on the Overall Net Income of the Administrative Agent or such
Lender) and the result of any event referred to in clause (a) or (b) above
shall be to increase the cost to BNY (or any successor thereto as issuer of
Letters of Credit) of issuing or maintaining the Letters of Credit or its
obligations pursuant to Section 2.20, or the cost to the Administrative Agent
of performing its functions hereunder with respect to the Letters of Credit,
in any case by an amount that the Administrative Agent, BNY, or any Lender, as
the case may be, deems material, then, upon demand by the Administrative
Agent, BNY or such Lender, as the case may be, the Borrower shall immediately
pay to the Administrative Agent, BNY or such Lender, as the case may be, from
time to time as specified by the Administrative Agent, BNY or such Lender,
additional amounts that shall be sufficient to compensate the Administrative
Agent, BNY or such Lender, as the case may be, for such increased cost. A
statement in reasonable detail as to such increased cost incurred by the
Administrative Agent, BNY or such Lender, as the case may be, as a result of
any event mentioned in clauses (a) or (b) above, submitted by the
Administrative Agent, BNY or such Lender, as the case may be, to the Borrower
shall be conclusive, absent manifest error, as to the amount thereof.
W. Administrative Agent's Records
The Administrative Agent's records regarding the amount of each Loan and
Letter of Credit, each payment by the Borrower of principal and interest on
the Loans and reimbursement obligations in respect of Letters of Credit and
other information relating to the Loans shall be presumptively correct absent
manifest error.
III. FEES; PAYMENTS
A. Commitment Fee
(a) The Borrower agrees to pay to the Administrative Agent, for the account
of the Lenders in accordance with each Lender's Commitment Percentage, a fee
(the "Commitment Fee") for each day during the period from and including the
Effective Date to, but excluding, the Maturity Date, equal to (a) the excess
of, for each day during the Revolving Credit Commitment Period, the Aggregate
Revolving Credit Commitments on such day over the sum of the aggregate
outstanding principal balance of the Revolving Credit Loans and the Letter of
Credit Exposure of all Lenders on such day (excluding the outstanding
principal balance of the Swing Line Loans, if any) multiplied by (b) the
percentage set forth below for the applicable pricing level in effect on such
day:
<TABLE>
<CAPTION>
COMMITMENT
FEE
PRICING LEVEL PERCENTAGE
<S> <C>
When the Leverage Ratio is equal to or greater than 3.00:1.00. 0.375%
When the Leverage Ratio is less than 3.00:1.00 but equal to or
greater than 2.50:1.00....................................... 0.250%
When the Leverage Ratio is less than 2.50:1.00 but equal to or
greater than 2.00:1.00....................................... 0.250%
When the Leverage Ratio is less than 2.00:1.00 but equal to or
greater than 1.50:1.00....................................... 0.200%
When the Leverage Ratio is less than 1.50:1.00 but equal to or
greater than 1.00:1.00....................................... 0.175%
When the Leverage Ratio is less than 1.00:1.00................ 0.150%
</TABLE>
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(b) Changes in the Commitment Fee resulting from a change in the Leverage
Ratio, as evidenced by a Compliance Certificate delivered to the
Administrative Agent pursuant to Section 7.1(c) evidencing such a change,
shall become effective upon delivery of such Compliance Certificate. If the
Borrower shall fail to deliver a Compliance Certificate in accordance with
Section 7.1(c) (each a "certificate delivery date"), for purposes of
calculating the Commitment Fee, the Leverage Ratio from and including such
certificate delivery date to the date of delivery by the Borrower to the
Administrative Agent of such Compliance Certificate shall be conclusively
presumed to be greater than 3.00:1.00.
(c) The Commitment Fee shall be payable quarterly in arrears on the last day
of each March, June, September and December of each year, commencing on the
first such day following the Effective Date, on any date the Aggregate
Revolving Credit Commitments are reduced pursuant to Section 2.7(b), and on
the Maturity Date. The Commitment Fee shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
(d) Notwithstanding the foregoing, until such time as the Compliance
Certificate for the fiscal year ending December 31, 1996 shall have been
delivered to the Administrative Agent, the Commitment Fee percentage shall be
equal to 0.200%.
B. Letter of Credit Fees
(a) The Borrower agrees to pay to the Administrative Agent, for the account
of the Lenders in accordance with each Lender's Commitment Percentage, a fee
(the "Letter of Credit Fee") with respect to each Letter of Credit for the
period from and including the date of issuance thereof to and including the
expiration date thereof, at the LC Rate on the maximum amount available to be
drawn (under any contingency) under such Letter of Credit on such day.
(b) The Borrower further agrees to pay to BNY, for its own account, a fee
(the "LC Fronting Fee") with respect to each Letter of Credit for each day
during the period from and including the date of issuance thereof to and
including the expiration date thereof, at a rate per annum equal to 0.075% on
the maximum amount available to be drawn (under any contingency) under such
Letter of Credit on such day.
(c) The Letter of Credit Fee and the LC Fronting Fee shall be (i) calculated
on the basis of a 360-day year for the actual number of days elapsed, (ii)
payable quarterly in arrears on the last day of each March, June, September
and December of each year and on the Maturity Date and (iii) nonrefundable. In
addition to the Letter of Credit Fee and the LC Fronting Fee , the Borrower
agrees to pay to BNY, for its own account, its standard fees and charges
customarily charged to customers similar to the Borrower with respect to any
Letter of Credit.
C. Pro Rata Treatment and Application of Principal Payments
Each payment, including each prepayment, of principal and interest on the
Loans and of the Commitment Fee shall be made by the Borrower to the
Administrative Agent at its office set forth in Section 11.2 in funds
immediately available to the Administrative Agent at such office by 1:30 P.M.
on the due date for such payment, and, promptly upon receipt thereof by the
Administrative Agent, shall be remitted by the Administrative Agent, in like
funds as received, (i) to the Lenders according to the Commitment Percentage
of each Lender, in the case of the Commitment Fee, (ii) to the Lenders pro
rata according to the aggregate outstanding principal balance of the Revolving
Credit Loans, in the case of principal and interest due on the Revolving
Credit Loans and (iii) to the Swing Line Lender in the case of principal and
interest due on the Swing Line Loan. The failure of the Borrower to make any
such payment by such time shall not constitute a default hereunder, provided
that such payment is made on such due date, but any such payment made after
1:30 P.M. on such due date shall be deemed to have been made on the next
Business Day for the purpose of calculating interest on amounts outstanding on
the Loans. If any payment hereunder or under the Notes shall be due and
payable on a day that is not a Business Day, the due date thereof (except as
otherwise provided in the definition of Interest Period) shall be extended to
the next Business Day and (except with respect to payments in respect of the
Commitment Fee) interest shall be payable at the applicable rate specified
herein during such extension. If any payment is made with respect to any
Eurodollar Advance prior to the last day of the applicable Interest Period,
the Borrower shall indemnify each Lender in accordance with Section 2.15.
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<PAGE>
IV. REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Revolving Credit Loans, BNY to issue the
Letters of Credit and the Lenders to participate therein, and the Swing Line
Lender to make the Swing Line Loans and the Lenders to participate therein,
the Borrower makes the following representations and warranties to the
Administrative Agent and each Lender:
A. Subsidiaries; Capitalization
The Borrower has only the Subsidiaries permitted by this Agreement. Schedule
4.1 sets forth the Subsidiaries of the Borrower as of the Effective Date. The
shares of each corporate Subsidiary are duly authorized, validly issued, fully
paid and nonassessable and are owned free and clear of any Liens. The interest
of the Borrower in each non-corporate Subsidiary is owned free and clear of
any Liens. The outstanding capital Stock of each corporate Subsidiary of the
Borrower on the Effective Date and the ownership interest in each non-
corporate Subsidiary are as set forth on Schedule 4.1. As of the Effective
Date, the owner of each issue of capital Stock listed on Schedule 4.1 is the
registered and beneficial owner thereof. No Subsidiary has issued any
securities convertible into Stock (or other equity interest) of such
Subsidiary and there are no outstanding options or warrants to purchase Stock
of such Subsidiary of any class or kind, and there are no voting trusts or
similar agreements with respect thereto or other agreements or understandings
with respect thereto which would restrict or limit the sale, pledge,
assignment or other disposition thereof, including, without limitation, any
right of first refusal, option, redemption, call or other rights with respect
thereto, whether similar or dissimilar to any of the foregoing, or which would
dilute the interest of the Borrower therein.
B. Existence and Power
Each of the Borrower, its Subsidiaries and the Credit Parties is duly
organized or formed and validly existing in good standing under the laws of
the jurisdiction of its incorporation or formation, has all requisite power
and authority to own its Property and to carry on its business as now
conducted, and is in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the nature of the business conducted
therein or the Property owned therein makes such qualification necessary,
except in each case where such failure so to qualify could not reasonably be
expected to have a Material Adverse Effect.
CC. Authority
Each of the Borrower, its Subsidiaries and the Credit Parties has full legal
power and authority to enter into, execute, deliver and perform the terms of
the Loan Documents to which it is a party, and the transactions contemplated
thereby and, in the case of the Borrower, to make the borrowings contemplated
hereby and by the Notes, to execute, deliver and carry out the terms of the
Notes and to incur the obligations provided for herein and therein, all of
which have been duly authorized by all proper and necessary corporate or other
applicable action and are in full compliance with its Certificate of
Incorporation or By-Laws or its other organization documents.
C. Binding Agreement
The Loan Documents (other than the Notes) constitute, and the Notes, when
issued and delivered pursuant hereto for value received, will constitute, the
valid and legally binding obligations of the Credit Parties in each case, to
the extent it is a party thereto, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except, with
respect to the TRC Guaranty, as such enforcement may be limited by fraudulent
conveyance or other similar laws affecting the enforcement of creditors'
rights generally.
D. Litigation
Except as set forth on Schedule 4.5, there are no actions, suits or
proceedings at law or in equity or by or before any Governmental Authority
(whether purportedly on behalf of the Borrower, any of its Subsidiaries or
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<PAGE>
any Credit Party) pending or, to the knowledge of the Borrower, threatened
against the Borrower, any of its Subsidiaries or any Credit Party or any of
their respective Properties or rights, that (i) if adversely determined, could
reasonably be expected to have a Material Adverse Effect, (ii) expressly call
into question the validity or enforceability of any of the Loan Documents, or
(iii) could reasonably be expected to result in the rescission, termination or
cancellation of any material franchise, right, license, permit or similar
authorization held by the Borrower or any of its Subsidiaries or any Credit
Party.
E. Required Consents
Except for information filings required to be made in the ordinary course of
business that are not a condition to the Borrower's performance under the Loan
Documents, no consent, authorization or approval of, filing with, notice to,
or exemption by, stockholders, any Governmental Authority or any other Person
is required to authorize, or is required in connection with the execution,
delivery and performance of the Loan Documents and the transactions
contemplated thereby, or is required as a condition to the validity or
enforceability of the Loan Documents.
F. No Conflicting Agreements
Neither the Borrower, any of its Subsidiaries nor any Credit Party is in
default under any mortgage, indenture, contract or agreement to which it is a
party, or by which it or any of its Property is bound, the effect of which
default could reasonably be expected to have a Material Adverse Effect. The
execution, delivery or carrying out of the terms of the Loan Documents and the
transactions contemplated hereby and thereby, will not constitute a default
under, or result in the creation or imposition of, or obligation to create,
any Lien upon any Property of the Borrower or any of its Subsidiaries or
result in a breach of or require the mandatory repayment of or other
acceleration of payment under or pursuant to the terms of any such mortgage,
indenture, contract or agreement.
G. Compliance with Applicable Laws
Neither the Borrower, any of its Subsidiaries nor any Credit Party is in
default with respect to any judgment, order, writ, injunction, decree or
decision of any Governmental Authority the effect of which default could
reasonably be expected to have a Material Adverse Effect. The Borrower, each
of its Subsidiaries and each Credit Party is complying in all material
respects with all statutes, regulations, rules and orders applicable to
Borrower, such Subsidiary or such Credit Party of all Governmental
Authorities, including, without limitation, Environmental Laws and ERISA, the
violation of which could reasonably be expected to have a Material Adverse
Effect, provided that this sentence shall not extend to matters relating to
compliance with federal Medicaid and Medicare statutes or the regulations
promulgated pursuant to such statutes or related state or local statutes or
regulations to the extent such matters are covered by Sections 4.20 and 4.21.
H. Taxes
Except as provided on Schedule 4.9, all tax returns required to be filed by
or on behalf of the Borrower, its Subsidiaries and each Credit Party have been
filed and payment, and adequate provision for the payment, has been made for
all taxes shown to be due and payable on said returns or in any assessments
made against the Borrower, its Subsidiaries or any Credit Party (other than
those being contested as required under Section 7.4) that would be material to
the Borrower or its Subsidiaries taken as a whole, and no tax liens (other
than a Permitted Lien described in Section 8.2(i)) have been filed with
respect to the Borrower, its Subsidiaries or any Credit Party. The charges,
accruals and reserves on the books of the Borrower, each of its Subsidiaries
and each Credit Party with respect to all federal, state, local and other
taxes are, to the best knowledge of the Borrower, adequate for the payment of
all such material taxes, and the Borrower knows of no unpaid assessment that
is due and payable against it, any of its Subsidiaries or any Credit Party or
any claims being asserted that could reasonably be expected to have a Material
Adverse Effect, except such thereof as are being contested as required under
Section 7.4, and for which adequate reserves have been set aside in accordance
with GAAP.
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<PAGE>
I. Governmental Regulations
Neither the Borrower, any of its Subsidiaries nor any Credit Party is
subject to regulation under the Public Utility Holding Company Act of 1935, as
amended, the Federal Power Act or the Investment Company Act of 1940, as
amended, and neither the Borrower, any of its Subsidiaries nor any Credit
Party is subject to any statute or regulation that prohibits or restricts the
incurrence of Indebtedness under the Loan Documents, including, without
limitation, statutes or regulations relative to common or contract carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
KK. Federal Reserve Regulations; Use of Loan Proceeds
Neither the Borrower, any of its Subsidiaries nor any Credit Party is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock.
No part of the proceeds of the Loans will be used, directly or indirectly, for
a purpose that violates any law, Rule or regulation of any Governmental
Authority, including, without limitation, the provisions of Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System, as amended. No
part of the proceeds of the Loans will be used, directly or indirectly, to
purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock.
J. Plans
The only Pension Plans in effect as of the Effective Date (the "Existing
Pension Plans") are listed on Schedule 4.12. Each Employee Benefit Plan of the
Borrower, its Subsidiaries, the Credit Parties and the ERISA Affiliates is in
compliance with ERISA and the Code, where applicable, in all material
respects. As of the Effective Date (i) the amount of all Unfunded Pension
Liabilities under the Pension Plans, excluding any plan that is a
Multiemployer Plan, does not exceed $0, and (ii) the amount of the aggregate
Unrecognized Retiree Welfare Liability under all applicable Employee Benefit
Plans does not exceed $100,000. Each of the Borrower, its Subsidiaries, the
Credit Parties and the ERISA Affiliates has complied with the requirements of
Section 515 of ERISA with respect to each Pension Plan that is a Multiemployer
Plan. As of the Effective Date, the aggregate potential annual withdrawal
liability payments, as determined in accordance with Title IV of ERISA, of the
Borrower, its Subsidiaries, the Credit Parties and the ERISA Affiliates with
respect to all Pension Plans that are Multiemployer Plans is approximately $0.
Each of the Borrower, its Subsidiaries, the Credit Parties and/or any ERISA
Affiliate has, as of the Effective Date, made all material contributions or
payments to or under each such Pension Plan required by law or the terms of
such Pension Plan or any contract or agreement with respect thereto. No
material liability to the PBGC has been, or is expected by the Borrower, any
of its Subsidiaries, any Credit Party or any ERISA Affiliate to be, incurred
by the Borrower, such Subsidiary, such Credit Party or any ERISA Affiliate.
Liability, as referred to in this Section includes any joint and several
liability. Each Employee Benefit Plan that is a group health plan within the
meaning of Section 5000(b)(1) of the Code is in material compliance with the
continuation of health care coverage requirements of Section 4980B of the
Code.
K. Financial Statements
The Borrower has heretofore delivered to the Administrative Agent and the
Lenders copies of the audited consolidated balance sheet of the Borrower as of
December 31, 1995 and the related consolidated statements of income, retained
earnings and cash flows for the fiscal year then ended (with the related notes
and schedules, the "Financial Statements"). The Financial Statements fairly
present the consolidated financial condition and results of the operations of
the Borrower and its Subsidiaries, as the case may be, as of the dates and for
the periods indicated therein and have been prepared in conformity with GAAP.
As of the Effective Date, except as reflected in the Financial Statements or
in the notes thereto, neither the Borrower nor any of its Subsidiaries has any
obligation or liability of any kind (whether fixed, accrued, contingent,
unmatured or otherwise) that, in accordance with GAAP, should have been shown
on the Financial Statements and was not. Since the date of the Financial
Statements there has been no Material Adverse Change.
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L. Property
Each of the Borrower, its Subsidiaries and each Credit Party has good and
marketable title to all of its Property, title to which is material to the
Borrower and its Subsidiaries taken as a whole, subject to no Liens, except
for Permitted Liens.
M. Franchises, Intellectual Property, Etc.
Each of the Borrower, its Subsidiaries and each Credit Party possesses or
has the right to use all franchises, Intellectual Property, licenses and other
rights as are material and necessary for the conduct of its business, and with
respect to which it is in compliance, with no known conflict with the valid
rights of others that would reasonably be expected to have a Material Adverse
Effect. No event has occurred that permits or, to the best knowledge of the
Borrower, after notice or the lapse of time or both, or any other condition,
could reasonably be expected to permit, the revocation or termination of any
such franchise, Intellectual Property, license or other right which revocation
or termination could reasonably be expected to have a Material Adverse Effect.
N. Environmental Matters
(a) The Borrower, each of its Subsidiaries and each Credit Party is in
material compliance with the requirements of all applicable Environmental
Laws.
(b) No Hazardous Substances have been generated or manufactured on,
transported to or from, treated at, stored at or discharged from any Real
Property in material violation of any Environmental Laws; no Hazardous
Substances have been discharged into subsurface waters under any Real Property
in material violation of any Environmental Laws; no Hazardous Substances have
been discharged from any Real Property on or into Property or waters
(including subsurface waters) adjacent to any Real Property in material
violation of any Environmental Laws; and there are not now, nor ever have
been, on any Real Property any underground or above ground storage tanks in
material violation of any Environmental Laws.
(c) Neither the Borrower, nor any of its Subsidiaries or any Credit Party
(i) has received notice (written or oral) or otherwise learned of any claim,
demand, suit, action, proceeding, event, condition, report, directive, Lien,
violation, non-compliance or investigation indicating or concerning any
potential or actual material liability (including, without limitation,
potential material liability for enforcement, investigatory costs, cleanup
costs, government response costs, removal costs, remedial costs, natural
resources damages, Property damages, personal injuries or penalties) arising
in connection with: (x) any non-compliance with or violation of the
requirements of any applicable Environmental Laws, or (y) the presence of any
Hazardous Substance on any Real Property (or any Real Property previously
owned by the Borrower, any of its Subsidiaries or any Credit Party) or the
release or threatened release of any Hazardous Substance into the environment,
(ii) has knowledge of any threatened or actual material liability in
connection with the presence of any Hazardous Substance on any Real Property
(or any Real Property previously owned by the Borrower, any of its
Subsidiaries or any Credit Party) or the release or threatened release of any
Hazardous Substance into the environment, (iii) has received notice of any
federal or state investigation evaluating whether any material remedial action
is needed to respond to the presence of any Hazardous Substance on any Real
Property (or any Real Property previously owned by the Borrower, any of its
Subsidiaries or any Credit Party) or a release or threatened release of any
Hazardous Substance into the environment for which the Borrower, any of its
Subsidiaries or any Credit Party is or may be liable, or (iv) has received
notice that the Borrower, any of its Subsidiaries or any Credit Party is or
may be liable for a material amount to any Person under any Environmental Law.
(d) For purposes of subsections (a), (b) and (c) of this Section 4.16
"material" shall mean any liability or potential liability of the Borrower and
its Subsidiaries on a consolidated basis for an aggregate amount in excess of
$1,000,000.
O. Labor Relations
There are no material controversies pending between the Borrower, any of
its Subsidiaries or any Credit Party and any of their respective employees,
that could reasonably be expected to have a Material Adverse Effect.
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P. Burdensome Obligations
Neither the Borrower, nor any of its Subsidiaries or any Credit Party is a
party to or bound by any franchise, agreement, deed, lease or other
instrument, or subject to any restriction that, in the opinion of the
management of the Borrower, is so unusual or burdensome, in the context of its
business, as in the foreseeable future might materially and adversely affect
or impair the revenue or cash flow of the Borrower and its Subsidiaries taken
as a whole, or the ability of the Borrower or its Subsidiaries taken as a
whole to perform its, or their, obligations under the Loan Documents to which
it is, or they are, a party. The Borrower does not presently anticipate that
future expenditures by the Borrower, any of its Subsidiaries or any Credit
Party needed to meet the provisions of federal or state statutes, orders,
rules or regulations will be so burdensome as to result in a Material Adverse
Effect or Material Adverse Change.
Q. Medicare Participation/Accreditation
The facilities operated by the Borrower and its Subsidiaries (the
"Facilities") are qualified for participation in the Medicare and Medicaid
programs (together with their respective intermediaries or carriers, the
"Government Reimbursement Programs") and are entitled to reimbursement under
the Medicare program for services rendered to qualified Medicare
beneficiaries, and comply in all material respects with the conditions of
participation in all Government Reimbursement Programs. There is no pending
or, to Borrower's knowledge, threatened proceeding or investigation by any of
the Government Reimbursement Programs, or for reimbursement of amounts due or
to become due to the facilities from the Government Reimbursement Programs.
R. Fraud and Abuse
Neither the Borrower nor any of its Subsidiaries, nor any of their
respective officers or directors has on behalf of the Borrower or any of its
Subsidiaries, knowingly or wilfully violated the federal Medicare and Medicaid
statutes, 42 U.S.C. (S)1320a-7b, or the regulations promulgated pursuant to
such statutes or related state or local statutes or regulations, including but
not limited to the following: (i) knowingly and willfully making or causing to
be made a false statement or representation of a material fact in any
applications for any benefit or payment; (ii) knowingly and willfully making
or causing to be made any false statement or representation of a material fact
for use in determining rights to any benefit or payment; (iii) failing to
disclose knowledge by a claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to secure such benefit or payment fraudulently;
(iv) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay such remuneration (a) in
return for referring an individual to a Person for the furnishing or arranging
for the furnishing of any item or service for which payment may be made in
whole or in part by Medicare, Medicaid or other applicable third-party payers,
or (b) in return for purchasing, leasing or ordering or arranging for or
recommending the purchasing, leasing or ordering of any good, facility,
service or item for which payment may be made in whole or in part by Medicare,
Medicaid or other applicable third-party payers. With respect to this Section,
knowledge of an individual director or officer of the Borrower or a Subsidiary
of any of the events described in this Section shall not be imputed to the
Borrower or such Subsidiary unless such knowledge was obtained or learned by
the director or officer in his or her official capacity as a director or
officer of the Borrower or such Subsidiary.
S. No Misrepresentation
The information provided by the Borrower, any of its Subsidiaries or any
Credit Party in connection with the transactions contemplated hereby, taken as
a whole does not contain a misstatement of material fact, or, to the best
knowledge of the Borrower, omit to state a material fact required to be stated
in order to make the statements therein contained not misleading in the light
of the circumstances under which made. All financial projections, if any,
delivered by the Borrower to the Administrative Agent and the Lenders were
based on good faith estimates and assumptions believed by the Borrower to be
reasonable at the time made.
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V. CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FIRST LOANS
The effectiveness of this Agreement and the obligation of each Lender to
make its first Revolving Credit Loan on the first Borrowing Date shall be
subject to the fulfillment of the conditions precedent set forth in Section 6
and the following conditions precedent:
A. Evidence of Action
(a) The Borrower. The Administrative Agent shall have received a
certificate, dated the first Borrowing Date, of the Secretary or Assistant
Secretary of the Borrower (i) attaching a true and complete copy of the
resolutions of its Board of Directors and of all documents evidencing other
necessary corporate action (in form and substance satisfactory to the
Administrative Agent) taken by it to authorize the Loan Documents to which it
is a party and the transactions contemplated thereby, (ii) attaching a true
and complete copy of its Certificate of Incorporation and By-Laws, (iii)
setting forth the incumbency of its officer or officers who may sign such
Documents, including therein a signature specimen of such officer or officers
and (iv) attaching a certificate of good standing of the Secretary of State of
the States of Delaware and California.
(b) The Guarantor. The Administrative Agent shall have received a
certificate, dated the first Borrowing Date, of the Secretary or Assistant
Secretary of the Guarantor (i) attaching a true and complete copy of the
resolutions of its Board of Directors and of all documents evidencing other
necessary corporate action (in form and substance satisfactory to the
Administrative Agent) taken by it to authorize the Loan Documents to which it
is a party and the transactions contemplated thereby, (ii) attaching a true
and complete copy of its Articles of Incorporation and By-Laws, (iii) setting
forth the incumbency of its officer or officers who may sign such Documents,
including therein a signature specimen of such officer or officers and (iv)
attaching a certificate of good standing of the Secretary of State of the
States of California, Florida and Minnesota.
B. This Agreement
The Administrative Agent shall have received counterparts of this Agreement
signed by each of the parties hereto (or receipt by the Administrative Agent
from a party hereto of a fax signature page signed by such party which shall
have agreed to promptly provide the Administrative Agent with originally
executed counterparts hereof).
C. Notes
The Administrative Agent shall have received the Revolving Credit Notes and
the Swing Line Note, duly executed by an Authorized Signatory of the Borrower.
D. TRC Guaranty
The Administrative Agent shall have received the TRC Guaranty, duly executed
by an Authorized Signatory of TRC.
E. Litigation
There shall be no injunction, writ, preliminary restraining order or other
order of any nature issued by any Governmental Authority in any respect
affecting the transactions provided for herein and no action or proceeding by
or before any Governmental Authority shall have been commenced and be pending
or, to the knowledge of the Borrower, threatened, seeking to prevent or delay
the transactions contemplated by the Loan Documents or challenging any other
terms and provisions thereof or seeking any damages in connection therewith,
and the Administrative Agent shall have received a certificate of an
Authorized Signatory of the Borrower to the foregoing effects.
F. Existing Indebtedness
Prior to or simultaneously with the making of the first Loans, the Existing
Indebtedness shall have been repaid in full and all commitments thereunder
cancelled pursuant to Section 2.17.
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G. Opinion of Counsel to the Borrower and the Guarantor
The Administrative Agent shall have received opinions of counsel to the
Borrower and the Guarantor, addressed to the Administrative Agent, the
Arrangers, the Documentation Agent, the Lenders, and Special Counsel, and
dated the first Borrowing Date, substantially in the form of Exhibit F. It is
understood that such opinions are being delivered to the Administrative Agent,
the Arrangers, the Documentation Agent and the Lenders upon the direction of
the Borrower and the Guarantor and that the Administrative Agent, the
Arrangers, the Documentation Agent and the Lenders may and will rely upon such
opinions.
G. Opinion of Special Counsel
The Administrative Agent shall have received an opinion of Special Counsel,
addressed to the Administrative Agent, the Arrangers, the Documentation Agent
and the Lenders and dated the first Borrowing Date substantially in the form
of Exhibit G.
H. Fees
All fees payable to the Administrative Agent, the Arrangers, the
Documentation Agent and the Lenders on or before the first Borrowing date
shall have been paid.
I. Fees and Expenses of Special Counsel
The fees and expenses of Special Counsel in connection with the preparation,
negotiation and closing of the Loan Documents shall have been paid.
VI. CONDITIONS OF LENDING--ALL LOANS AND LETTERS OF CREDIT
The obligation of each Lender to make any Revolving Credit Loan, the Swing
Line Lender to make a Swing Line Loan or BNY to issue any Letter of Credit on
a Borrowing Date and each Lender to participate therein is subject to the
satisfaction of the following conditions precedent as of the date of such Loan
or the issuance of such Letter of Credit, as the case may be:
A. Compliance
On each Borrowing Date and after giving effect to the Loans to be made or
the Letters of Credit to be issued thereon, (a) each Credit Party shall be in
compliance with all of the terms, covenants and conditions thereof, (b) there
shall exist no Default or Event of Default, (c) the representations and
warranties contained in the Loan Documents shall be true and correct with the
same effect as though such representations and warranties had been made on
such Borrowing Date, (d) the aggregate outstanding principal balance of the
Loans and the Letter of Credit Exposure of all Lenders will not exceed the
Aggregate Revolving Credit Commitments and (e) the aggregate outstanding
principal balance of the Swing Line Loans will not exceed the Swing Line
Commitment. Each borrowing by the Borrower and each request by the Borrower
for the issuance of a Letter of Credit shall constitute a certification by the
Borrower as of such Borrowing Date that each of the foregoing matters is true
and correct in all respects.
B. Loan Closings
All documents required by the provisions of the Loan Documents to be
executed or delivered to the Administrative Agent on or before the applicable
Borrowing Date shall have been executed and shall have been delivered at the
office of the Administrative Agent set forth in Section 11.2 on or before such
Borrowing Date.
C. Borrowing Request
With respect to the making of each Loan, the Administrative Agent shall have
received a Borrowing Request duly executed by an Authorized Signatory of the
Borrower.
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D. Letter of Credit Request
With respect to the issuance of each Letter of Credit, the Administrative
Agent shall have received a Letter of Credit Request and a Reimbursement
Agreement, in each case duly executed by an Authorized Signatory of the
Borrower.
E. Documentation and Proceedings
All corporate or other organizational and legal proceedings and all
documents and papers in connection with the transactions contemplated by the
Loan Documents shall be satisfactory in form and substance to the
Administrative Agent and the Administrative Agent shall have received all
information and copies of all documents that the Administrative Agent or the
Required Lenders may reasonably have requested in connection therewith, such
documents (where appropriate) to be certified by an Authorized Signatory of
the Borrower or proper Governmental Authorities.
F. Required Acts and Conditions
All acts, conditions and things (including, without limitation, the
obtaining of any necessary regulatory approvals and the making of any filings,
recordings or registrations) required to be done, performed and to have
happened on or prior to such Borrowing Date and that are necessary for the
continued effectiveness of the Loan Documents, shall have been done and
performed and shall have happened in due compliance with all applicable laws.
G. Approval of Special Counsel
All legal matters in connection with the making of each Loan shall be
reasonably satisfactory to Special Counsel.
H. Supplemental Opinions
If requested by the Administrative Agent with respect to the applicable
Borrowing Date, there shall have been delivered to the Administrative Agent
favorable supplementary opinions of counsel to the Borrower or the Guarantor,
addressed to the Administrative Agent, the Arrangers, the Documentation Agent,
the Lenders and Special Counsel and dated such Borrowing Date, covering such
matters incident to the transactions contemplated herein as the Administrative
Agent may reasonably request.
I. Other Documents
The Administrative Agent shall have received such other documents as the
Administrative Agent or the Lenders shall reasonably request.
VII. AFFIRMATIVE COVENANTS
The Borrower agrees that, so long as this Agreement is in effect, any Loan
or reimbursement obligations (contingent or otherwise) in respect of any
Letter of Credit remains outstanding and unpaid, or any other amount is owing
under any Loan Document to any Lender or the Administrative Agent, the
Borrower shall:
A. Financial Statements
Maintain a standard system of accounting in accordance with sound business
practices sufficient to permit preparation of financial statements in
conformity with GAAP, and furnish or cause to be furnished to the
Administrative Agent and each Lender:
(a) As soon as available, but in any event within 90 days after the end
of each fiscal year, (i) a copy of the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, together
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with the related consolidated statements of income, retained earnings and
cash flows as of and through the end of such fiscal year, setting forth in
each case in comparative form the figures for the preceding fiscal year,
and (ii) a copy of the letter (such letter to conform to the then existing
AICPA reporting guidelines) of the Accountants addressed to the board of
directors of the Borrower to the effect that, in connection with the
procedures performed in obtaining a basis for certification of the audited
consolidated financial statements of the Borrower, the Accountants obtained
no knowledge, in the course of performing their audit, that would indicate
that the Borrower was in violation of any financial covenant contained in
this Agreement or of the existence of any Default by the Borrower under
this Agreement. The consolidated balance sheet and consolidated statements
of income, retained earnings and cash flows shall be audited and certified
without qualification by the Accountants, which certification shall (i)
state that the examination by such Accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, included such tests
of the accounting records and such other auditing procedures as were
considered necessary in the circumstances, and (ii) include the opinion of
such Accountants that such consolidated financial statements have been
prepared in accordance with GAAP in a manner consistent with prior fiscal
periods, except as otherwise specified in such opinion.
(b) As soon as available, but in any event within 45 days after the end
of each fiscal quarter, a copy of the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of each such quarterly period,
together with the related consolidated statements of income, retained
earnings and cash flows for such period and for the elapsed portion of the
fiscal year through such date, setting forth in each case in comparative
form the figures for the corresponding periods of the preceding fiscal
year, certified by the chief financial officer of the Borrower (or such
other officer acceptable to the Administrative Agent), as being complete
and correct in all material respects and as presenting fairly the
consolidated financial condition and the consolidated results of operations
of the Borrower and its Subsidiaries.
(c) Within 45 days after the end of each of the first three fiscal
quarters and within 90 days after the end of the last fiscal quarter, a
Compliance Certificate, certified by the chief financial officer of the
Borrower (or such other officer as shall be acceptable to the
Administrative Agent) to the effect that (i) the Borrower is in compliance
with Sections 7.11 through 7.14, (ii) no Default or Event of Default exists
as of such date, and (iii) all representations and warranties contained in
the Loan Documents are true and correct as of such date.
(d) Such other information as the Administrative Agent, the Documentation
Agent or any Lender may reasonably request from time to time.
B. Certificates; Other Information
Furnish to the Administrative Agent and each Lender:
(a) Prompt written notice if: (i) any Indebtedness of the Borrower or any
of its Subsidiaries in excess of $500,000 on an aggregate consolidated
basis is declared or shall become due and payable prior to its stated
maturity, or is called and not paid when due, (ii) a default shall have
occurred under any note (other than the Notes) or the holder of any such
note, or other evidence of Indebtedness, certificate or security evidencing
any such Indebtedness or any obligee with respect to any other Indebtedness
of the Borrower or any of its Subsidiaries in excess of $500,000 on an
aggregate consolidated basis has the right to declare any such Indebtedness
due and payable prior to its stated maturity, or (iii) there shall occur
and be continuing a Default or an Event of Default;
(b) Prompt written notice of: (i) any citation, summons, subpoena, order
to show cause or other document naming the Borrower or any of its
Subsidiaries a party to any proceeding before any Governmental Authority
that could reasonably be expected to have a Material Adverse Effect or that
expressly calls into question the validity or enforceability of any of the
Loan Documents, and include with such notice a copy of such citation,
summons, subpoena, order to show cause or other document, (ii) any lapse or
other termination of any material Intellectual Property, license, permit,
franchise or other
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authorization issued to the Borrower or any of its Subsidiaries by any
Person or Governmental Authority, or (iii) any refusal by any Person or
Governmental Authority to renew or extend any such material Intellectual
Property, license, permit, franchise or other authorization, which lapse,
termination, refusal or dispute could reasonably be expected to have a
Material Adverse Effect;
(c) Promptly upon becoming available, copies of all (i) regular, periodic
or special reports, schedules and other material that the Borrower or any
of its Subsidiaries may now or hereafter be required to file with or
deliver to any securities exchange or the SEC, or any other Governmental
Authority succeeding to the functions thereof and (ii) material news
releases and annual reports relating to the Borrower or any of its
Subsidiaries;
(d) Prompt written notice in the event that the Borrower, any of its
Subsidiaries or any ERISA Affiliate knows, or has reason to know, that (i)
any Termination Event with respect to a Pension Plan has occurred or will
occur, (ii) any condition exists with respect to a Pension Plan that
presents a material risk of termination of the Pension Plan, imposition of
an excise tax, requirement to provide security to the Pension Plan or other
liability on the Borrower, any of its Subsidiaries or any ERISA Affiliate,
(iii) the Borrower, any of its Subsidiaries or any ERISA Affiliate has
applied for a waiver of the minimum funding standard under Section 412 of
the Code with respect to a Pension Plan, (iv) the aggregate amount of the
Unfunded Pension Liabilities under all Pension Plans is in excess of
$250,000, (v) the aggregate amount of Unrecognized Retiree Welfare
Liability under all applicable Employee Benefit Plans is in excess of
$250,000, (vi) the Borrower, any of its Subsidiaries or any ERISA Affiliate
has engaged in a Prohibited Transaction with respect to an Employee Benefit
Plan in which the aggregate "amount involved" (as defined in Section
4975(f) of the Code) is in excess of $250,000, (vii) the imposition of any
tax in excess of $250,000 in the aggregate on the Borrower, its
Subsidiaries and ERISA Affiliates under Section 4980B(a) of the Code or
(viii) the assessment of a civil penalty under Section 502(c) of ERISA in
excess of $250,000 in the aggregate on the Borrower, its Subsidiaries and
ERISA Affiliates, together with a certificate of the president or chief
financial officer of the Borrower (or such other officer as shall be
acceptable to the Administrative Agent) setting forth the details of such
event and the action that the Borrower, such Subsidiary or such ERISA
Affiliate proposes to take with respect thereto, together with a copy of
all notices and filings with respect thereto.
(e) Prompt written notice in the event that Borrower, any of its
Subsidiaries or any ERISA Affiliate shall receive a demand letter from the
PBGC notifying the Borrower, such Subsidiary or such ERISA Affiliate of any
final decision finding liability in an aggregate amount in excess of
$250,000 and the date by which such liability must be paid, together with a
copy of such letter and a certificate of the president or chief financial
officer of the Borrower (or such other officer as shall be acceptable to
the Administrative Agent) setting forth the action that the Borrower, such
Subsidiary or such ERISA Affiliate proposes to take with respect thereto.
(f) Promptly upon the same becoming available, and in any event by the
date such amendment is adopted, a copy of any Pension Plan amendment that
the Borrower, any of its Subsidiaries or any ERISA Affiliate proposes to
adopt that would require the posting of security under Section 401(a)(29)
of the Code, together with a certificate of the president or chief
financial officer of the Borrower (or such other officer as shall be
acceptable to the Administrative Agent) setting forth the reasons for the
adoption of such amendment and the action that the Borrower, such
Subsidiary or such ERISA Affiliate proposes to take with respect thereto.
(g) As soon as possible and in any event by the tenth Business Day after
any required installment or other payment under Section 412 of the Code
owed to a Pension Plan shall have become due and owing and remain unpaid a
copy of the notice of failure to make required contributions provided to
the PBGC by the Borrower, any of its Subsidiaries or any ERISA Affiliate
under Section 412(n) of the Code, together with a certificate of the
president or chief financial officer of the Borrower (or such other officer
as shall be acceptable to the Administrative Agent) setting forth the
action that the Borrower, such Subsidiary or such ERISA Affiliate proposes
to take with respect thereto.
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(h) Prompt written notice of any order, notice, claim or proceeding
received by, or brought against, the Borrower or any of its Subsidiaries,
or with respect to any of the Real Property, under any Environmental Law
that could have a Material Adverse Effect.
(i) Prompt written notice of any loss, forfeiture, non-renewal or
termination, or the commencement of any action or proceeding or the
issuance of any notice to effect any of the foregoing, with respect to any
license, agreement or authorization that could reasonably be expected to
have a Material Adverse Effect.
C. Legal Existence
Maintain, and cause each of its Subsidiaries so to maintain, its corporate
or partnership existence, as the case may be, in good standing in the
jurisdiction of its incorporation or formation and in each other jurisdiction
in which it is required to do so, except, in each case, where the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
D. Taxes
Pay and discharge when due, and cause each of its Subsidiaries so to do, all
Taxes, assessments and governmental charges, license fees and levies upon, or
with respect to the Borrower or such Subsidiary and all Taxes upon the income,
profits and Property of the Borrower and its Subsidiaries, that, if unpaid,
could reasonably be expected to have a Material Adverse Effect or become a
Lien on the Property of the Borrower or such Subsidiary (other than a Lien
described in Section 8.2(i)), unless and to the extent only that such Taxes,
assessments, charges, license fees and levies shall be contested in good faith
and by appropriate proceedings diligently conducted by the Borrower or such
Subsidiary provided that the Borrower shall give the Administrative Agent
prompt notice of such contest and that such reserve or other appropriate
provision as shall be required by the Accountants in accordance with GAAP
shall have been made therefor.
E. Insurance
Maintain, and cause each of its Subsidiaries to maintain, insurance with
financially sound insurance carriers on such of its Property, against at least
such risks, and in at least such amounts, as are usually insured against by
similar businesses, including, without limitation, public liability (bodily
injury and property damage), fidelity, and workers' compensation, and file
with the Administrative Agent within ten Business Days after request therefor
a detailed list of such insurance then in effect, stating the names of the
carriers thereof, the policy numbers, the insureds thereunder, the amounts of
insurance, dates of expiration thereof, and the Property and risks covered
thereby, together with a certificate of the chief financial officer of the
Borrower (or such other officer as shall be acceptable to the Administrative
Agent) certifying that in the opinion of such officer such insurance is
adequate in nature and amount, complies with the obligations of the Borrower
under this Section, and is in full force and effect.
O. Payment of Indebtedness and Performance of Obligations
Pay and discharge when due, and cause each of its Subsidiaries to pay and
discharge, all lawful Indebtedness, obligations and claims for labor,
materials and supplies or otherwise that, if unpaid, could reasonably be
expected to (i) have a Material Adverse Effect or (ii) become a Lien upon
Property of the Borrower or any of its Subsidiaries in excess of $500,000 on
an aggregate consolidated basis for the Borrower and its Subsidiaries, other
than a Permitted Lien, unless and to the extent only that the validity of such
Indebtedness, obligation or claim shall be contested in good faith and by
appropriate proceedings diligently conducted by it, provided that the Borrower
shall give the Administrative Agent prompt notice of any such contest and that
such reserve or other appropriate provision as shall be required by the
Accountants in accordance with GAAP shall have been made therefor.
F. Condition of Property
At all times, maintain, protect and keep in good repair, working order and
condition (ordinary wear and tear excepted), and cause each of its
Subsidiaries so to do, all Property necessary to the operation of the
Borrower's or such Subsidiary's business.
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G. Observance of Legal Requirements
Observe and comply in all respects, and cause each of its Subsidiaries so to
do, with all laws, ordinances, orders, judgments, rules, regulations,
certifications, franchises, permits, licenses, directions and requirements of
all Governmental Authorities, that now or at any time hereafter may be
applicable to it, including, without limitation, ERISA and all Environmental
Laws, a violation of which could reasonably be expected to have a Material
Adverse Effect, except such thereof as shall be contested in good faith and by
appropriate proceedings diligently conducted by it, provided that the Borrower
shall give the Administrative Agent prompt notice of such contest and that
such reserve or other appropriate provision as shall be required by the
Accountants in accordance with GAAP shall have been made therefor.
H. Inspection of Property; Books and Records; Discussions
Keep proper books of record and account in which full, true and correct
entries sufficient to permit preparation of financial statements in conformity
with GAAP and all requirements of law shall be made of all dealings and
transactions in relation to its business and activities and permit
representatives of the Administrative Agent, the Documentation Agent and any
Lender to visit its offices, to inspect any of its Property and examine and
make copies or abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired, and to discuss the business,
operations, prospects, licenses, Property and financial condition of the
Borrower and its Subsidiaries with the officers thereof and the Accountants
(provided that the Borrower is given reasonable notice and an opportunity to
attend or participate in any such discussion).
I. Licenses, Intellectual Property
Maintain, and cause each of its Subsidiaries to maintain, in full force and
effect, all licenses, franchises, Intellectual Property, permits, licenses,
authorizations and other rights as are necessary for the conduct of its
business, the failure to maintain which could reasonably be expected to have a
Material Adverse Effect.
J. Interest Coverage Ratio
Maintain at all times an Interest Coverage Ratio of not less than 2.25:1.00.
K. Minimum Net Worth
Maintain at all times a Consolidated net worth of not less than $190,000,000
plus the sum of 85% of Consolidated net income (excluding net losses) and 85%
of the net cash proceeds received by the Borrower from its issuance of Stock,
in each case determined on a cumulative basis for the period commencing July
1, 1996. For purposes of this Section 7.12, the calculation of net worth and
net income shall not include charges resulting from the repayment and
termination of the Existing Indebtedness and the purchase by the Borrower on
and after July 1, 1996 of any of its Senior Subordinated Notes.
L. Minimum Consolidated EBITDA Ratio
Maintain at all times a ratio of (i) Consolidated EBITDA plus management
fees paid to the Borrower or TRC by non-wholly owned Subsidiaries of the
Borrower to the extent not reflected in Consolidated EBITDA to (ii)
Consolidated Pre-Minority EBITDA plus management fees paid to the Borrower or
TRC by non-wholly owned Subsidiaries of the Borrower to the extent not
reflected in Consolidated Pre-Minority EBITDA, in each case for the
immediately preceding four fiscal quarters (or, in the event that the date of
determination is a fiscal quarter ending date, the four fiscal quarter period
then ended) of not less than 0.70:1.00.
M. Leverage Ratio
Maintain at all times a Leverage Ratio not greater than 3.50:1.00.
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VIII. NEGATIVE COVENANTS
The Borrower agrees that, so long as this Agreement is in effect, any Loan
or reimbursement obligations (contingent or otherwise) in respect of any
Letter of Credit remains outstanding and unpaid, or any other amount is owing
under any Loan Document to any Lender or the Administrative Agent, the
Borrower shall not, directly or indirectly:
A. Indebtedness
Create, incur, assume or suffer to exist any liability for Indebtedness, or
permit any of its Subsidiaries so to do, except (i) Indebtedness due under the
Loan Documents, (ii) Indebtedness of the Borrower or any of its Subsidiaries
existing on the date hereof as set forth on Schedule 8.1, as the same may be
refinanced from time to time, containing repayment terms and conditions no
less favorable to the Borrower or such Subsidiary than the Indebtedness being
refinanced, (iii) purchase money Indebtedness and Capital Lease Obligations of
the Borrower or its Subsidiaries, as the case may be, incurred after the
Effective Date in connection with the purchase or lease of Property (including
Permitted Acquisitions), in an aggregate outstanding principal amount not to
exceed $10,000,000 at any one time, in the case of the Borrower, and
$15,000,000 at any one time, in the case of TRC and its Subsidiaries taken as
a whole, as the same may be refinanced from time to time, containing repayment
terms and conditions no less favorable to the Borrower or its Subsidiaries, as
the case may be, than the Indebtedness being refinanced, (iv) other Contingent
Obligations of the Borrower or TRC in an aggregate amount not exceeding
$5,000,000 at any one time, (v) other Contingent Obligations of the Borrower,
TRC and their Subsidiaries for the benefit of one or more of the Borrower, TRC
or their Subsidiaries in an aggregate outstanding amount not exceeding
$6,000,000, (vi) unsecured Indebtedness of the Subsidiaries of the Borrower
provided that the aggregate outstanding principal amount of such Indebtedness
shall not exceed $7,500,000 at any one time, (vii) Indebtedness of the
Borrower (excluding Indebtedness incurred under clause (iii)) incurred in
connection with a Permitted Acquisition, provided that the aggregate
outstanding principal amount of such Indebtedness shall not exceed $10,000,000
at any one time , (viii) Indebtedness under Interest Rate Protection
Agreements of the Borrower, (ix) unsecured Indebtedness of the Borrower in an
aggregate outstanding principal amount not to exceed $15,000,000 at any one
time, provided that immediately before and after giving effect to the
incurrence thereof no Default or Event of Default shall exist, (x) unsecured
Indebtedness of the Borrower to one or more investors under an indenture
subject to the Trust Indenture Act of 1939, as amended, provided that
(A) immediately before and after giving effect to the incurrence thereof no
Default or Event of Default shall exist, (B) such Indebtedness shall require
no payment or prepayment prior to one year after the Maturity Date and (C) the
terms, conditions and covenants of such Indebtedness shall be less restrictive
as to the Borrower and its Subsidiaries than the terms covenants and
conditions of this Agreement and the terms, covenants and conditions of such
Indebtedness shall be reasonably satisfactory to the Required Lenders, and
(xi) Indebtedness permitted under Section 8.5(e).
B. Liens
Create, incur, assume or suffer to exist any Lien upon any of its Property,
whether now owned or hereafter acquired, or permit any of its Subsidiaries so
to do, or enter into any agreement, other than this Agreement and secured
purchase money Indebtedness and Capital Lease Obligations permitted by this
Agreement (in which cases, any prohibition or limitation shall only be
effective against the Property acquired or leased thereby), or permit any
Subsidiary so to do, which prohibits or limits the ability of the Borrower or
such Subsidiary to create, incur, assume or suffer to exist any Lien upon any
of its Property or revenues, whether now owned or hereafter acquired, except
(i) Liens for Taxes, assessments or similar charges incurred in the ordinary
course of business that are not delinquent or that are being contested in
accordance with Section 7.4, provided that enforcement of such Liens is stayed
pending such contest, (ii) Liens in connection with workers' compensation,
unemployment insurance or other social security obligations (but not ERISA),
(iii) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary
course of business, (iv) zoning ordinances, easements, rights of way, minor
defects, irregularities, and other similar restrictions affecting real
Property that do not
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adversely affect the value of such real Property or the financial condition of
the Borrower or such Subsidiary or impair its use for the operation of the
business of the Borrower or such Subsidiary, (v) Liens arising by operation of
law such as mechanics', materialmen's, carriers', warehousemen's liens
incurred in the ordinary course of business that are not delinquent or that
are being contested in accordance with Section 7.6, provided that enforcement
of such Liens is stayed pending such contest, (vi) Liens arising out of
judgments or decrees that are being contested in accordance with Section 7.6,
provided that enforcement of such Liens is stayed pending such contest, (vii)
purchase money Liens and Liens arising out of Capitalized Lease Obligations on
Property of the Borrower or any of its Subsidiaries acquired after the date
hereof to secure Indebtedness (and replacement Liens on such Property to
secure refinancings of such Indebtedness in accordance with Section 8.1(iii))
of the Borrower or its Subsidiaries permitted by Section 8.1(iii), incurred in
connection with the acquisition or lease of such Property, provided that each
such Lien is limited to such Property so acquired or leased, (viii) Liens on
Property of the Borrower and its Subsidiaries existing on the Effective Date
as set forth on Schedule 8.2, (ix) Liens to secure Indebtedness permitted by
Section 8.1(vii) provided that such Liens shall be limited to Liens on the
Property acquired in connection with such Permitted Acquisition and (x) Liens
that are otherwise permitted by Section 7.6.
C. Merger, Consolidation and Certain Dispositions of Property
Consolidate with, be acquired by, or merge into or with any Person, or sell,
lease or otherwise dispose of all or substantially all of its Property, or
permit any of its Subsidiaries so to do, except (i) as permitted by Section
8.7 and (ii) any wholly owned Subsidiary of the Borrower (other than TRC) may
merge into the Borrower, TRC or another wholly owned Subsidiary of the
Borrower provided that (a) no Event of Default shall exist immediately before
or after giving effect thereto, (b) the representations and warranties
contained herein shall be true and correct immediately before and after giving
effect hereto, (c) the Borrower, TRC or such wholly owned Subsidiary is the
survivor of such merger, (d) the Borrower is the survivor in the case of any
such merger involving the Borrower and TRC is the survivor in the case of any
such merger involving TRC, and (e) the Borrower shall have delivered a
certificate to the Administrative Agent on the day of the merger as to its
compliance with each of the requirements set forth in clauses (a) through (d)
above.
D. Restricted Payments
Declare or pay any Restricted Payments payable in cash or otherwise or apply
any of its Property thereto or set apart any sum therefor, or permit any of
its Subsidiaries so to do, except that: (i) a wholly owned Subsidiary of the
Borrower may declare and pay Restricted Payments to the Borrower, (ii)
provided that no Default or Event of Default exists immediately before or
after giving effect thereto, a non-wholly owned Subsidiary of the Borrower may
declare and pay Restricted Payments in cash provided that such Restricted
Payments are ratable in accordance with the respective equity ownership
interests in such Subsidiary, (iii) each Subsidiary may pay Restricted
Payments in the form of tax sharing payments to the Borrower, and (iv)
provided that no Default or Event of Default exists immediately before and
after giving effect thereto, the Borrower may repurchase its capital Stock
owned by management or employees and physicians under contract with the
Borrower or its Subsidiaries, such payments under this clause not to exceed
$2,500,000 in the aggregate (net of cash received by the Borrower from
management or employees and physicians under contract with the Borrower or its
Subsidiaries in exchange for capital Stock of the Borrower) in any twelve
month period.
E. Investments, Loans, Etc.
At any time, purchase or otherwise acquire, hold or invest in the Stock of,
or any other interest in, any Person, or make any loan or advance to, or enter
into any arrangement for the purpose of providing funds or credit to, or make
any other investment, whether by way of capital contribution, time deposit or
otherwise, in or with any Person, including, without limitation, an
Acquisition or permit any of its Subsidiaries so to do, (all of which are
sometimes referred to herein as "Investments") except:
(a) Investments in short-term domestic and eurodollar time deposits with
any Lender, or any other commercial bank, trust company or national banking
association incorporated under the laws of the United
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States or any State thereof and having combined capital, surplus and
undivided profits exceeding $500,000,000;
(b) Investments in short-term direct obligations of the United States or
agencies thereof whose obligations are guaranteed by the United States and
in commercial paper carrying one of the two highest ratings of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or
Moody's Investors Services, Inc.;
(c) Investments (i) existing on the date hereof as set forth on Schedule
8.5, and (ii) acquired after the Effective Date and approved by the Board
of Directors of the Borrower and reasonably acceptable to the
Administrative Agent, the Documentation Agent and the Required Lenders;
(d) normal business banking accounts and short-term certificates of
deposit and time deposits in, or issued by, federally insured institutions
in amounts not exceeding the limits of such insurance;
(e) Investments of the Borrower in the form of demand loans to
Subsidiaries of the Borrower for the working capital and capital
expenditure purposes of such Subsidiary, provided that (i) the aggregate
outstanding principal amount of such demand loans to its non-wholly owned
Subsidiaries shall not exceed $5,000,000 at any one time and (ii) the
aggregate outstanding principal amount of such demand loans to its wholly
owned Subsidiaries shall not exceed $10,000,000 at any one time;
(f) Investments by the Borrower in short-term cash management investments
permitted under subsections (a), (b) and (d) above or constituting other
high quality, short-term investments offered by the Administrative Agent as
part of its normal cash management services;
(g) Investments by the Borrower in ESRD-Related Businesses in an
aggregate amount not exceeding $7,500,000 at any one time, provided that
immediately before and after giving effect thereto no Event of Default
shall exist;
(h) Acquisitions by TRC or any wholly owned Subsidiary of TRC, provided
that (a) no Event of Default shall exist immediately before or after giving
effect to such Acquisition, (b) each such Acquisition was initially
approved by the board of directors (or other Person performing similar
functions) of each of the parties thereto, and (c) the following conditions
shall have been satisfied:
(A) in the case of stock Acquisitions, the Person whose stock is to
be acquired shall not be a publicly held Person,
(B) upon the consummation of each stock Acquisition, at least 50% of
the Stock or other equity interest of the Person so acquired shall be
owned by TRC or its Subsidiaries,
(C) in the case of Acquisitions of Stock or Property of a Person that
is not organized under the laws of, or whose Property is not located
in, a jurisdiction within the United States, the total consideration to
be paid in connection with all such acquisitions made after the
Effective Date shall not exceed $40,000,000 in the aggregate,
(D) within fifteen Business Days after the consummation of any
Acquisition in respect of which the total consideration therefor
exceeds $30,000,000, the Administrative Agent and the Lenders shall
have received (x) a sources and uses analysis, an equity interest
breakdown and a copy of the historical and pro-forma EBITDA analysis as
provided to the Board of Directors of the Borrower, all of which shall
be reasonably satisfactory to the Administrative Agent, the
Documentation Agent and the Required Lenders, and (y) a certificate
signed by the chief financial officer of the Borrower (or such other
officer as shall be acceptable to the Administrative Agent) to the
effect that, immediately before and after giving effect to such
Acquisition, no Event of Default shall exist and setting forth
calculations on a pro-forma basis showing compliance with Sections 7.11
through 7.14,
(E) if the Borrower plans to finance the Acquisition with proceeds of
Loans, prior to the making of such Loans, the Administrative Agent and
the Lenders shall have received a Borrowing Request, duly executed by
an Authorized Signatory of the Borrower, containing calculations, on a
pro-forma basis, that set forth the Leverage Ratio and demonstrate
compliance with Section 7.14, in each case after giving effect to such
Loans,
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(F) in the event the total consideration to be paid in connection
with any one Acquisition shall exceed $50,000,000, the Required Lenders
shall have consented thereto,
(G) in the case of stock Acquisitions, TRC shall have full control
over all bank accounts of the Person so acquired, and
(H) the Administrative Agent shall have received such other
information or documents as the Administrative Agent shall have
reasonably requested;
(i) Investments by the Borrower or the Guarantor in 50% or less of the
voting Stock or other equity interest in another Person (the "Minority
Investment"), provided that (i) the Borrower or the Guarantor owns at least
20% of the issued and outstanding Stock or other equity interest in such
Person, (ii) the aggregate outstanding amount of Minority Investments made
by the Borrower and the Guarantoron and after the Effective Date shall not
exceed $40,000,000 at any one time, (iii) the Borrower or the Guarantor
shall have full control over all bank accounts of such Person if the
Borrower or the Guarantor is the largest holder of voting Stock or other
equity interests in such Person, (iv) the Borrower or the Guarantor shall
control or act as the managing general partner of such Person if such
Person is a partnership and if the Borrower or the Guarantor is the largest
holder of equity interests in such Person, and (v) immediately before and
after giving effect thereto, no Event of Default shall exist; and
(j) Investments in notes permitted by Section 8.7(iii).
E. Business Change
Materially change the nature of the business of the Borrower and its
Subsidiaries as conducted on the Effective Date.
F. Sale of Property
Sell, exchange, lease, transfer or otherwise dispose of any Property, or
permit any of its Subsidiaries so to do, except, provided immediately before
and after giving effect thereto, no Event of Default shall exist, (a) sales or
dispositions of Property in the ordinary course of business (which shall not
include the sale or disposition of any Subsidiary, any ESRD-Related Business
or any interest therein), (b) inventory sold in the ordinary course of
business, (c) as permitted by Section 8.5 and (d) sales of other Property by
the Borrower or any of its Subsidiaries as to which the following conditions
have been satisfied:
(i) the Administrative Agent and all of the Lenders shall have consented
thereto if the sale consideration shall exceed $5,000,000 with respect to
any single sale or $15,000,000 in the aggregate for all such sales made
pursuant to this Section 8.7(d),
(ii) no Event of Default shall exist immediately before or after giving
effect thereto,
(iii) the consideration received or to be received therefor by the
Borrower or any of its Subsidiaries shall be payable (x) at least 85% in
cash on or before the closing thereof, and (y) not greater than 15% in
senior notes, provided that each such note shall be due and payable within
three years and the aggregate outstanding amount of all such notes under
this subsection shall not exceed $5,000,000 at any one time, and shall not
be less than the fair market value thereof as reasonably determined by the
Board of Directors of the Borrower, and
(iv) within fifteen Business Days after each such sale, the
Administrative Agent and the Lenders shall have received a certificate with
respect thereto signed by an Authorized Signatory of the Borrower
identifying the Property sold and stating (x) that immediately before and
after giving effect thereto, no Event of Default existed, (y) that the
consideration received or to be received by the Borrower or such Subsidiary
for such Property has been determined by the Board of Directors thereof to
be not less than the fair market value of such Property and (z) the total
consideration to be paid in respect of such sale.
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H. Subsidiaries
Create or acquire any other Subsidiary, or permit any of its Subsidiaries so
to do, unless the provisions of Section 8.11 are satisfied.
G. Certificate of Incorporation and By-laws
Amend or otherwise modify its Articles of Incorporation or By-Laws in any
way that would adversely affect the interests of the Administrative Agent and
the Lenders under any of the Loan Documents, or permit any of its Subsidiaries
so to do.
H. ERISA
Permit any Pension Plan to have a Funded Current Liability Percentage of
less than 60 percent.
I. Acquisition or Issuance of Additional Capital Stock
Create or acquire the Stock or other equity or ownership in, or Property of,
any Person that shall thereupon become a Subsidiary (each, a "New
Subsidiary"), or issue any additional Stock or other equity or ownership
interest, or permit any Subsidiary so to do, except as follows:
(a) in connection with a Permitted Acquisition;
(b) any Subsidiary may issue additional Stock to the Borrower or TRC;
(c) a non-wholly owned Subsidiary of the Borrower may issue additional
Stock to its management or to physicians under contract, provided that
after giving effect to such issuance, such Subsidiary shall remain a
Subsidiary of the Borrower;
(d) TRC may create new wholly owned Subsidiaries; and
(e) all Stock issued pursuant to this Section shall constitute common
stock with no mandatory dividend, redemption or similar requirement.
J. Limitation on Upstream Dividends and Advances by Subsidiaries
Permit any Subsidiary to enter into or agree, or otherwise become subject,
to any agreement, contract or other arrangement with any Person pursuant to
the terms of which (a) such Subsidiary is or would be prohibited from or
otherwise restricted in declaring or paying any cash dividends or
distributions on or on account of any class of its stock or other equity
interest owned directly or indirectly by the Borrower or (b) such Subsidiary
is or would be prohibited from or otherwise restricted in making advances to
the Borrower.
K. Fiscal Year
Change its fiscal year from that in effect on the Effective Date, or permit
any of its Subsidiaries so to do.
N. Transactions with Affiliates
Become a party to any transaction with any Person owning 5% or more of the
voting Stock or other voting equity interests of the Borrower or with any
Affiliate of the Borrower (other than a wholly owned Subsidiary of the
Borrower) unless the terms and conditions relating thereto are as favorable to
the Borrower as those that would be obtainable at the time in a comparable
arms-length transaction with a Person other than an Affiliate, or permit any
of its Subsidiaries so to do, except that the Borrower and its Subsidiaries
may make Restricted Payments in accordance with Section 8.4.
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IX. DEFAULT
A. Events of Default
The following shall each constitute an "Event of Default" hereunder:
(a) The failure of the Borrower to pay any installment of principal on
any Note or reimbursement obligations in respect of any Letter of Credit on
the date when due and payable; or
(b) The failure of the Borrower to pay any installment of interest, fees,
expenses or other amounts payable under any Loan Document or otherwise to
the Administrative Agent with respect to the loan facilities established
hereunder within three Business Days of the date when due and payable; or
(c) The use of the proceeds of any Loan in a manner inconsistent with or
in violation of Section 2.17; or
(d) The failure of the Borrower to observe or perform any covenant or
agreement contained in Sections 7.3, 7.11, 7.12, 7.13, 7.14 or Section 8;
or
(e) The failure to observe or perform any other term, covenant, or
agreement contained in any Loan Document and such failure shall have
continued unremedied for a period of 30 days after the Borrower shall have
obtained knowledge thereof; or
(f) Any representation or warranty made in any Loan Document or in any
certificate, report, opinion (other than an opinion of counsel) or other
document delivered or to be delivered pursuant thereto, shall prove to have
been incorrect or misleading (whether because of misstatement or omission)
in any material respect when made; or
(g) Any obligation or obligations in an aggregate Consolidated amount of
$1,000,000 or more of the Borrower (other than its obligations under the
Notes) or any of its Subsidiaries, whether as principal, guarantor, surety,
lessee or other obligor, for the payment of any Indebtedness or operating
leases (i) shall become or shall be declared to be due and payable prior to
the expressed maturity or expiry thereof, or (ii) shall not be paid when
due or within any grace period for the payment thereof, or (iii) any holder
of any such obligation shall have the right, immediately or with the
passage of time or the giving of notice, to declare such obligation due and
payable prior to the expressed maturity thereof;
(h) The Borrower or any of its Subsidiaries shall (i) make a general
assignment for the benefit of creditors, (ii) generally not be paying its
debts as such debts become due, (iii) admit in writing its inability to pay
its debts as they become due, (iv) file a voluntary petition in bankruptcy,
(v) file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment of debt, liquidation or dissolution
or similar relief under any present or future statute, law or regulation of
any jurisdiction, (vi) petition or apply to any tribunal for any receiver,
custodian or any trustee for any substantial part of its Property, (vii) be
the subject of any such proceeding filed against it that remains
undismissed for a period of 45 days, (viii) file any answer admitting or
not contesting the material allegations of any such petition filed against
it or any order, judgment or decree approving such petition in any such
proceeding, (ix) seek, approve, consent to, or acquiesce in any such
proceeding, or in the appointment of any trustee, receiver, sequestrator,
custodian, liquidator, or fiscal agent for it, or any substantial part of
its Property, or an order is entered appointing any such trustee, receiver,
custodian, liquidator or fiscal agent and such order remains in effect for
45 days, or (x) take any formal action for the purpose of effecting any of
the foregoing; or
(i) An order for relief is entered under the United States bankruptcy
laws or any other decree or order is entered by a court having jurisdiction
(i) adjudging the Borrower or any of its Subsidiaries bankrupt or
insolvent, (ii) approving as properly filed a petition seeking
reorganization, liquidation, arrangement, adjustment or composition of or
in respect of the Borrower or any of its Subsidiaries under the United
States bankruptcy laws or any other applicable Federal or state law, (iii)
appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Borrower or any of its
Subsidiaries or of any substantial part of the Property thereof, or (iv)
ordering the winding up or liquidation of the affairs of the
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Borrower or any of its Subsidiaries, and any such decree or order continues
unstayed and in effect for a period of 45 days; or
(j) Judgments or decrees against the Borrower or any of its Subsidiaries
aggregating in excess of $1,000,000 on a Consolidated basis shall remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a
period of 30 days; or
(k) The occurrence of an Event of Default under and as defined in the TRC
Guaranty; or
(l) Any Loan Document shall cease, for any reason, to be in full force
and effect, or any Credit Party shall so assert in writing or shall disavow
any of its obligations thereunder; or
(m) (i) any Termination Event (other than an event which constitutes a
Termination Event solely because it is a Reportable Event) shall occur that
could reasonably be expected to result in a liability to the Borrower, any
of its Subsidiaries or any ERISA Affiliate in excess of $1,000,000 in the
aggregate; (ii) any Accumulated Funding Deficiency in excess of $1,000,000
in the aggregate, whether waived, shall exist with respect to any Pension
Plan; (iii) the Borrower, any of its Subsidiaries or any ERISA Affiliate
shall fail to pay when due an amount in excess of $1,000,000 in the
aggregate that is payable by it to the PBGC or to a Pension Plan under
Title IV of ERISA; or
(n) the Borrower shall not own 100% of the issued and outstanding Stock
of TRC free and clear of all Liens or if TRC shall not be the sole first-
tier Subsidiary of the Borrower; or
(o) The Borrower or any Subsidiary, in each case to the extent it is
engaged in the business of providing services for which Medicare or
Medicaid reimbursement is sought, shall for any reason, including, without
limitation, as the result of any finding, designation or decertification,
lose its right or authorization, or otherwise fail to be eligible, to
participate in Medicaid or Medicare programs or to accept assignments or
rights to reimbursements under Medicaid regulations or Medicare
regulations, and such loss or failure shall continue for 20 Business Days.
Upon the occurrence of an Event of Default or at any time thereafter during
the continuance thereof, (a) if such event is an Event of Default specified in
clause (h) or (i) above, the Aggregate Revolving Credit Commitments and the
Swing Line Commitment shall immediately and automatically terminate and the
Loans, all accrued and unpaid interest thereon, any reimbursement obligations
owing in respect of all outstanding Letters of Credit and all other amounts
owing under the Loan Documents shall immediately become due and payable, and
the Borrower shall forthwith deposit an amount equal to the Letter of Credit
Exposure in a cash collateral account with and under the exclusive control of
the Administrative Agent, and the Administrative Agent may, and, upon the
direction of the Required Lenders shall, exercise any and all remedies and
other rights provided in the Loan Documents, and (b) if such event is any
other Event of Default, any or all of the following actions may be taken: (i)
with the consent of the Required Lenders, the Administrative Agent may, and
upon the direction of the Required Lenders shall, by notice to the Borrower,
declare the Aggregate Revolving Credit Commitments and the Swing Line
Commitment to be terminated forthwith, whereupon the Aggregate Revolving
Credit Commitments and the Swing Line Commitment shall immediately terminate,
and (ii) with the consent of the Required Lenders, the Administrative Agent
may, and upon the direction of the Required Lenders shall, by notice of
default to the Borrower, declare the Loans, all accrued and unpaid interest
thereon, any reimbursement obligations owing in respect of all outstanding
Letters of Credit and all other amounts owing under the Loan Documents to be
due and payable forthwith, whereupon the same shall immediately become due and
payable and the Borrower shall forthwith deposit an amount equal to the Letter
of Credit Exposure in a cash collateral account with and under the exclusive
control of the Administrative Agent, and the Administrative Agent may, and
upon the direction of the Required Lenders shall, exercise any and all
remedies and other rights provided pursuant to the Loan Documents. Except as
otherwise provided in this Section, presentment, demand, protest and all other
notices of any kind are hereby expressly waived. To the extent permitted by
applicable law, each Credit Party hereby further expressly waives and
covenants not to assert any appraisement, valuation, stay, extension,
redemption or similar laws, now or at any time hereafter in force that might
delay, prevent or otherwise impede the performance or enforcement of any Loan
Document.
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In the event that the Aggregate Revolving Credit Commitments and the Swing
Line Commitment shall have been terminated or the Notes shall have been
declared due and payable pursuant to the provisions of this Section, any funds
received by the Administrative Agent and the Lenders from or on behalf of the
Borrower shall be applied by the Administrative Agent and the Lenders in
liquidation of the Loans and the obligations of the Borrower under the Loan
Documents in the following manner and order: (i) first, to the payment of
interest on, and then the principal portion of, any Loans that the
Administrative Agent may have advanced on behalf of any Lender for which the
Administrative Agent has not then been reimbursed by such Lender or the
Borrower; (ii) second, to the payment of any fees or expenses due the
Administrative Agent from the Borrower, (iii) third, to reimburse the
Administrative Agent and the Lenders for any expenses (to the extent not paid
pursuant to clause (ii) above) due from the Borrower pursuant to the
provisions of Section 11.5; (iv) fourth, to the payment of accrued Commitment
Fees, Letter of Credit Fees, LC Fronting Fees and all other fees, expenses and
amounts due under the Loan Documents (other than principal and interest on the
Notes); (v) fifth, pro rata according to the outstanding principal amount of
the Notes, to the payment of interest due on the Notes; (vi) sixth, pro rata
according to the outstanding principal amount of the Notes and the outstanding
amount owing under the Reimbursement Agreements to the payment of principal
outstanding on the Notes and under the Reimbursement Agreements; and (vii)
seventh, to the payment of any other amounts owing to the Administrative Agent
and the Lenders under any Loan Document.
X. THE ADMINISTRATIVE AGENT
A. Appointment
Each Lender hereby irrevocably designates and appoints BNY as the
Administrative Agent of such Lender under the Loan Documents and each such
Lender hereby irrevocably authorizes BNY, as the Administrative Agent for such
Lender, to take such action on its behalf under the provisions of the Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of the Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in any Loan Document,
the Administrative Agent shall not have any duties or responsibilities other
than those expressly set forth therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Loan Documents or otherwise
exist against the Administrative Agent.
B. Delegation of Duties
The Administrative Agent may execute any of its duties under the Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
rely upon the advice of counsel concerning all matters pertaining to such
duties.
C. Exculpatory Provisions
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except the Administrative Agent for its
own gross negligence or willful misconduct), or (ii) responsible in any manner
to any of the Lenders for any recitals, statements, representations or
warranties made by any Credit Party or any officer thereof contained in the
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with, the Loan Documents or for the value, validity,
effectiveness, genuineness, perfection, enforceability or sufficiency of any
of the Loan Documents or for any failure of any Credit Party or any other
Person to perform its obligations thereunder. The Administrative Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, the Loan Documents, or to inspect the properties, books or records of any
Credit Party. The Administrative Agent shall not be under any liability or
responsibility whatsoever, as Administrative
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Agent, to any Credit Party or any other Person as a consequence of any failure
or delay in performance, or any breach, by any Lender of any of its
obligations under any of the Loan Documents.
D. Reliance by Administrative Agent
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, opinion, letter, cablegram, telegram, fax, telex or
teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to any Credit Party), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may treat each Lender, or the Person designated in the
last notice filed with it under this Section, as the holder of all of the
interests of such Lender in its Loans and in its Notes until written notice of
transfer, signed by such Lender (or the Person designated in the last notice
filed with the Administrative Agent) and by the Person designated in such
written notice of transfer, in form and substance satisfactory to the
Administrative Agent, shall have been filed with the Administrative Agent. The
Administrative Agent shall not be under any duty to examine or pass upon the
validity, effectiveness, enforceability, perfection or genuineness of the Loan
Documents or any instrument, document or communication furnished pursuant
thereto or in connection therewith, and the Administrative Agent shall be
entitled to assume that the same are valid, effective and genuine, have been
signed or sent by the proper parties and are what they purport to be. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under the Loan Documents unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under the Loan Documents in accordance with a request
or direction of the Required Lenders, and such request or direction and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
E. Notice of Default
The Administrative Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default unless the Administrative
Agent has received written notice thereof from a Lender or the Borrower. In
the event that the Administrative Agent receives such a notice, the
Administrative Agent shall promptly give notice thereof to the Lenders and the
Borrower. The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be directed by the Required Lenders,
provided, however, that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem to be in the best
interests of the Lenders.
F. Non-Reliance on Administrative Agent and Other Lenders
Each Lender expressly acknowledges that neither the Administrative Agent nor
any of its respective officers, directors, employees, agents, attorneys-in-
fact or affiliates has made any representations or warranties to it and that
no act by the Administrative Agent hereinafter, including any review of the
affairs of any Credit Party, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents
to the Administrative Agent that it has, independently and without reliance
upon the Administrative Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own evaluation of and
investigation into the business, operations, Property, financial and other
condition and creditworthiness of the Credit Parties and made its own decision
to enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative 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 credit analysis, evaluations
and decisions in taking or not taking action under any Loan Document, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, Property, financial and other condition and
creditworthiness of the Credit Parties. Except for notices, reports and other
documents
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expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, Property, financial and other condition or
creditworthiness of the Credit Parties that may come into the possession of
the Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
G. Indemnification
Each Lender agrees to indemnify and reimburse the Administrative Agent in
its capacity as such (to the extent not promptly reimbursed by the Borrower
and without limiting the obligation of any Credit Party to do so), according
to its Commitment Percentage, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever including, without
limitation, any amounts paid to the Lenders (through the Administrative Agent)
by the Borrower pursuant to the terms of the Loan Documents, that are
subsequently rescinded or avoided, or must otherwise be restored or returned,
that may at any time (including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of the Loan
Documents or any other documents contemplated by or referred to therein or the
transactions contemplated thereby or any action taken or omitted to be taken
by the Administrative Agent under or in connection with any of the foregoing;
provided, however, that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent resulting
solely from the finally adjudicated gross negligence or willful misconduct of
the Administrative Agent. The agreements in this Section shall survive the
payment of all amounts payable under the Loan Documents.
H. Administrative Agent in Its Individual Capacity
BNY and its respective affiliates may make loans to, accept deposits from,
issue letters of credit for the account of, and generally engage in any kind
of business with, any Credit Party as though BNY were not Administrative Agent
hereunder. With respect to the Commitment made or renewed by BNY and the Notes
issued to BNY, BNY shall have the same rights and powers under the Loan
Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall in each case
include BNY.
I. Successor Administrative Agent
If at any time the Administrative Agent deems it advisable, in its sole
discretion, it may submit to each of the Lenders a written notice of its
resignation as Administrative Agent under the Loan Documents, such resignation
to be effective upon the earlier of (i) the written acceptance of the duties
of the Administrative Agent under the Loan Documents by a successor
Administrative Agent and (ii) on the 30th day after the date of such notice.
Upon any such resignation, the Required Lenders shall have the right to
appoint from among the Lenders a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders and accepted such appointment in writing within 30 days after the
retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent, which successor Administrative Agent shall be
a commercial bank organized under the laws of the United States or any State
thereof and having a combined capital, surplus, and undivided profits of at
least $100,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent's rights, powers, privileges and duties
as Administrative Agent under the Loan Documents shall be terminated. The
Borrower and the Lenders shall execute such documents as shall be necessary to
effect such appointment. After any retiring Administrative Agent's resignation
as Administrative Agent, the provisions of the Loan Documents shall inure to
its benefit as to any actions taken or omitted to be
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taken by it while it was Administrative Agent under the Loan Documents. If at
any time there shall not be a duly appointed and acting Administrative Agent,
the Borrower agrees to make each payment due under the Loan Documents directly
to the Lenders entitled thereto during such time.
J. The Arrangers
The Arrangers shall have no duties or obligations under the Loan Documents
in their capacity as Arrangers.
K. The Documentation Agent
The Documentation Agent shall have no duties or obligations under the Loan
Documents in its capacity as Documentation Agent.
XI. OTHER PROVISIONS
A. Amendments and Waivers
With the written consent of the Required Lenders, the Administrative Agent
and the appropriate Credit Parties may, from time to time, enter into written
amendments, supplements or modifications of the Loan Documents and, with the
consent of the Required Lenders, the Administrative Agent on behalf of the
Lenders may execute and deliver to any such parties a written instrument
waiving or a consent to a departure from, on such terms and conditions as the
Administrative Agent may specify in such instrument, any of the requirements
of the Loan Documents or any Default or Event of Default and its consequences;
provided that:
(a) no such amendment, supplement, modification, waiver or consent shall,
without the consent of all of the Lenders, (i) increase the Commitments of
any Lender or the Aggregate Revolving Credit Commitments, (ii) extend the
Maturity Date; (iii) decrease the rate, or extend the time of payment, of
the Commitment Fee or the Letter of Credit Fee or of interest of, or change
or forgive the principal amount of, or change the pro rata allocation of
payments under, any Note, (iv) release or discharge the Guarantor;
(vi) change the provisions of Sections 2.12, 2.14, 2.15, 2.16, 2.18, 2.22,
11.1 or 11.7(a), (vii) change the definition of Required Lenders, (viii)
change the several nature of the obligations of the Lenders or (ix) extend
the date or decrease the amount of any required Commitment reduction
pursuant to Section 2.6(b); and
(b) without the written consent of BNY, no such amendment, supplement,
modification or waiver shall change the amount or the time of payment of
the Letter of Credit Fee or the LC Fronting Fee or change any other term or
provision that relates to the Letters of Credit; and
(c) without the written consent of the Swing Line Lender, no such
amendment, supplement, modification or waiver shall change the Swing Line
Commitment or change any other term or provision that relates to the Swing
Line Commitment or the Swing Line Loans; and
(d) without the written consent of BNY, no such amendment, supplement,
modification or waiver shall amend, modify or waive any provision of
Section 10 or otherwise change any of the rights or obligations of the
Administrative Agent hereunder or under the Loan Documents.
Any such amendment, supplement, modification or waiver shall apply equally
to each of the Lenders and shall be binding upon the parties to the applicable
Loan Document, the Lenders, the Administrative Agent and all future holders of
the Notes. In the case of any waiver, the parties to the applicable Loan
Document, the Lenders and the Administrative Agent shall be restored to their
former position and rights hereunder and under the outstanding Notes and other
Loan Documents to the extent provided for in such waiver, and any Default or
Event of Default waived shall not extend to any subsequent or other Default or
Event of Default, or impair any right consequent thereon. The Loan Documents
may not be amended orally or by any course of conduct.
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N. Notices
All notices, requests and demands to or upon the respective parties to the
Loan Documents to be effective shall be in writing and, unless otherwise
expressly provided therein, shall be deemed to have been duly given or made
when delivered by hand, or when deposited in the mail, first-class postage
prepaid, or, in the case of notice by fax, when sent, addressed as follows in
the case of the Borrower or the Administrative Agent, at the Domestic Lending
Office, in the case of each Lender, and to the address of a Credit Party set
forth in a Loan Document, or to such other addresses as to which the
Administrative Agent may be hereafter notified by the respective parties
thereto or any future holders of the Notes:
The Borrower:
Total Renal Care Holdings, Inc.
21250 Hawthorne Blvd., Ste. 800
Torrance, CA 90503-5517
Attention: John E. King
Vice President, Finance
Telephone: (310) 792-2600
Fax: (310) 792-8928
The Administrative Agent:
The Bank of New York
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Kalyani Bose
Telephone: (212) 635-4693
Fax: (212) 635-6365 or 6366 or 6367
with a copy to:
The Bank of New York
10990 Wilshire Blvd., Suite 1125
Los Angeles, California 90024
Attention: Rebecca K. Levine
Assistant Vice President
Telephone: (310) 996-8659
Fax: (310) 996-8667
except that any notice, request or demand by the Borrower to or upon the
Administrative Agent or the Lenders pursuant to Sections 2.5 or 2.9 shall not
be effective until received. Any party to a Loan Document may rely on
signatures of the parties thereto that are transmitted by fax or other
electronic means as fully as if originally signed.
O. No Waiver; Cumulative Remedies
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers
and privileges under the Loan Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
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A. Survival of Representations and Warranties
All representations and warranties made under the Loan Documents and in any
document, certificate or statement delivered pursuant thereto or in connection
therewith shall survive the execution and delivery of the Loan Documents.
B. Payment of Expenses and Taxes
The Borrower agrees, promptly upon presentation of a statement or invoice
therefor, and whether any Loan is made (i) to pay or reimburse the
Administrative Agent, the Documentation Agent and the Arrangers for all their
out-of-pocket costs and expenses reasonably incurred in connection with the
development, preparation and execution of, the Loan Documents and any
amendment, supplement or modification thereto (whether or not executed), any
documents prepared in connection therewith and the consummation of the
transactions contemplated thereby, including, without limitation, the
reasonable fees and disbursements of Special Counsel, (ii) to pay or reimburse
the Administrative Agent, the Documentation Agent, the Arrangers, the Letter
of Credit Issuer, and the Lenders for all of their respective costs and
expenses, including, without limitation, reasonable fees and disbursements of
counsel (including allocated costs of internal counsel), incurred in
connection with (A) any Default or Event of Default and any enforcement or
collection proceedings resulting therefrom or in connection with the
negotiation of any restructuring or "work-out" (whether consummated or not) of
the obligations of the Credit Parties under any of the Loan Documents and (B)
the enforcement of this Section, (iii) to pay, indemnify, and hold the
Administrative Agent, the Documentation Agent, the Arrangers, the Letter of
Credit Issuer and each Lender harmless from and against, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other similar taxes, if any, that may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under
or in respect of, the Loan Documents and any such other documents, and (iv) to
pay, indemnify and hold the Administrative Agent, the Documentation Agent, the
Arrangers, the Letter of Credit Issuer and each Lender, and each of their
respective officers, directors and employees, harmless from and against any
and all other liabilities, obligations, claims, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, reasonable counsel fees and
disbursements) with respect to the enforcement and performance of the Loan
Documents, the use of the proceeds of the Loans and the enforcement and
performance of the provisions of any subordination agreement in favor of the
Administrative Agent and the Lenders (all the foregoing, collectively, the
"indemnified liabilities") and, if and to the extent that the foregoing
indemnity may be unenforceable for any reason, the Borrower agrees to make the
maximum payment permitted or not prohibited under applicable law; provided,
however, that the Borrower shall have no obligation hereunder to pay
indemnified liabilities to the Administrative Agent, the Documentation Agent,
the Arrangers, the Letter of Credit Issuer or any Lender arising from its
gross negligence or willful misconduct or claims between one indemnified party
and another indemnified party. The agreements in this Section shall survive
the termination of the Aggregate Revolving Credit Commitments and the Swing
Line Commitment and the payment of all amounts payable under the Loan
Documents.
C. Lending Offices
(a) Each Lender shall have the right at any time and from time to time to
transfer its Loans to a different office, provided that such Lender shall
promptly notify the Administrative Agent and the Borrower of any such change
of office. Such office shall thereupon become such Lender's Domestic Lending
Office or Eurodollar Lending Office, as the case may be, provided, however,
that no such Lender shall be entitled to receive any greater amount under
Sections 2.12, 2.14 and 2.15 as a result of a transfer of any such Loans to a
different office of such Lender than it would be entitled to immediately prior
thereto unless such claim would have arisen even if such transfer had not
occurred.
(b) Each Lender agrees that, upon the occurrence of any event giving rise to
any increased cost or indemnity under Sections 2.12, 2.14 and 2.15 with
respect to such Lender, it will, if requested by the Borrower,
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use reasonable efforts (subject to overall policy considerations of such
Lender) to designate another lending office for any Loans affected by such
event, provided that such designation is made on such terms that such Lender
and its lending office suffer no economic, legal or regulatory disadvantage,
with the object of avoiding the consequence of the event giving rise to the
operation of any such Section. Nothing in this Section shall affect or
postpone any of the obligations of the Borrower or the right of any Lender
provided in Sections 2.14, 2.18 and 2.22.
D. Assignments and Participations
(a) The Loan Documents shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, all future holders of the
Notes and their respective successors and assigns, except that no Credit Party
may assign, delegate or transfer any of its rights or obligations under the
Loan Documents without the prior written consent of the Administrative Agent
and each Lender.
(b) Lender shall have the right at any time, upon written notice to the
Administrative Agent of its intent to do so, to sell, assign, transfer or
negotiate all or any part of such Lender's rights and obligations under the
Loan Documents (i) to one or more of the other Lenders, (ii) with the prior
written consent of the Swing Line Lender and the Letter of Credit Issuer
(which consents shall not be unreasonably withheld or delayed), to one or more
of its affiliates or the affiliates of one or more of the other Lenders, or
(iii) with the prior written consent of the Borrower, the Administrative
Agent, the Swing Line Lender and the Letter of Credit Issuer (which consents
shall not be unreasonably withheld or delayed, or with respect to the
Borrower, required during the continuance of an Event of Default), to any
other bank, insurance company, pension fund, mutual fund or other financial
institution, provided that (A) each such sale, assignment, transfer or
negotiation (other than sales, assignments, transfers or negotiations (x) to
affiliates of such Lender or (y) of a Lender's entire interest) shall be in a
minimum amount of $10,000,000 and (B) there shall be paid to the
Administrative Agent by the assigning or assignee Lender a fee (the
"Assignment Fee") of $3,000. For each assignment, the parties to such
assignment shall execute and deliver to the Administrative Agent for its
acceptance and recording an Assignment and Acceptance Agreement. Upon such
execution, delivery, acceptance and recording by the Administrative Agent,
from and after the effective date specified in such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance Agreement, the assignor Lender
thereunder shall be released from its obligations under the Loan Documents.
The Borrower agrees upon written request of the Administrative Agent and at
the Borrower's expense to execute and deliver (i) to such assignee, a Note,
dated the effective date of such Assignment and Acceptance Agreement, in an
aggregate principal amount equal to the Loans assigned to, and Commitment
assumed by, such assignee and (ii) to such assignor Lender, Notes, dated the
effective date of such Assignment and Acceptance Agreement, in an aggregate
principal amount equal to the balance of such assignor Lender's Loans and
Commitment, if any, and each assignor Lender shall cancel and return to the
Borrower its existing Note. Upon any such sale, assignment or other transfer,
the Commitments and the Commitment Percentages set forth in Exhibit A shall be
adjusted accordingly by the Administrative Agent.
(c) Lender may grant participations in all or any part of its Loans, its
Note and its Commitment to one or more banks, insurance companies, financial
institutions, pension funds or mutual funds, provided that (i) such Lender's
obligations under the Loan Documents shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties to the Loan Documents for
the performance of such obligations, (iii) the Borrower, the Administrative
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 the
Loan Documents, (iv) no sub-participations shall be permitted and (v) the
voting rights of any holder of any participation shall be limited to decisions
that require the consent of all Lenders as set forth in Section 11.1(a). The
Borrower acknowledges and agrees that any such participant shall for purposes
of Sections 2.12, 2.14, 2.15, 2.18 and 2.22 be deemed to be a "Lender";
provided, however, the Borrower shall not, at any time, be obligated to pay
any participant in any interest of any Lender hereunder any sum in excess of
the sum that the Borrower would have been obligated to pay to such Lender in
respect of such interest had such Lender not sold such participation.
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(d) If any (i) assignment is made pursuant to subsection (b) above or (ii)
any participation is granted pursuant to subsection (c) above, shall be made
to any Person that is not a U.S. Person, such Person shall furnish such
certificates, documents or other evidence to the Borrower and the
Administrative Agent, in the case of clause (i) and to the Borrower and the
Lender that sold such participation in the case of clause (ii), as shall be
required by Section 2.12(c).
(e) No Lender shall, as between and among the Borrower, the Administrative
Agent, the Documentation Agent, the Swing Line Lender, the Letter of Credit
Issuer and such Lender, be relieved of any of its obligations under the Loan
Documents as a result of any sale, assignment, transfer or negotiation of, or
granting of participations in, all or any part of its Loans, its Commitment or
its Note, except that a Lender shall be relieved of its obligations to the
extent of any such sale, assignment, transfer, or negotiation of all or any
part of its Loans, its Commitment or its Note pursuant to subsection (b)
above.
(f) Notwithstanding anything to the contrary contained in this Section, any
Lender may at any time or from time to time assign all or any portion of its
rights under the Loan Documents to a Federal Reserve Bank, provided that any
such assignment shall not release such assignor from its obligations
thereunder.
E. Counterparts
Each Loan Document (other than the Notes) may be executed by one or more of
the parties thereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
document. It shall not be necessary in making proof of any Loan Document to
produce or account for more than one counterpart signed by the party to be
charged. A counterpart of any Loan Document or to any document evidencing, and
of any an amendment, modification, consent or waiver to or of any Loan
Document transmitted by fax shall be deemed to be an originally executed
counterpart. A set of the copies of the Loan Documents signed by all the
parties thereto shall be deposited with each of the Borrower and the
Administrative Agent. Any party to a Loan Document may rely upon the
signatures of any other party thereto that are transmitted by fax or other
electronic means to the same extent as if originally signed.
F. Adjustments; Set-off
(a) If any Lender shall at any time receive any payment of all or any part
of its Loans, or interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events
or proceedings of the nature referred to in Section 9.1 (h) or (i), or
otherwise) in a greater proportion than any such payment to and collateral
received by any other Lender in respect of such other Lender's Loans, or
interest thereon (each a "Benefited Lender"), such Benefited Lender shall
purchase for cash from each of the other Lenders such portion of each such
other Lender's Loans, and shall provide each of such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders,
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefited Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest. The Borrower agrees that each
Lender so purchasing a portion of another Lender's Loans may exercise all
rights of payment (including, without limitation, rights of set-off, to the
extent not prohibited by law) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by law,
upon the occurrence of an Event of Default and the acceleration of the
obligations owing in connection with the Loan Documents, or at any time upon
the occurrence and during the continuance of an Event of Default, under
Section 9.1(a) or (b), each Lender shall have the right, without prior notice
to the Borrower, any such notice being expressly waived by each Credit Party
to the extent not prohibited by applicable law, to set-off and apply against
any indebtedness, whether matured or unmatured, of such Credit Party to such
Lender, any amount owing from such Lender to such Credit Party, at, or at any
time after, the happening of any of the above-mentioned events. To the extent
not prohibited by applicable law, the aforesaid right of set-off may be
exercised by such Lender against such Credit Party or against any trustee in
bankruptcy, custodian, debtor in possession, assignee for the benefit of
creditors, receiver,
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or execution, judgment or attachment creditor of such Credit Party, or against
anyone else claiming through or against such Credit Party or such trustee in
bankruptcy, custodian, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the making, filing or issuance, or service
upon such Lender of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the applicable Credit Party and the Administrative
Agent after any such set-off and application made by such Lender, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
G. Construction
Each Credit Party represents that it has been represented by counsel in
connection with the Loan Documents and the transactions contemplated thereby
and that the principle that agreements are to be construed against the
draftsman shall be inapplicable.
H. Indemnity
The Borrower agrees to indemnify and hold harmless the Administrative Agent,
the Documentation Agent, the Arrangers, the Letter of Credit Issuer and each
Lender and their respective affiliates, directors, officers, employees,
attorneys and agents (each an "Indemnified Person") from and against any loss,
cost, liability, damage or expense (including the reasonable fees and
disbursements of counsel of such Indemnified Person, including all local
counsel hired by any such counsel) incurred by such Indemnified Person in
investigating, preparing for, defending against, or providing evidence,
producing documents or taking any other action in respect of, any commenced or
threatened litigation, administrative proceeding or investigation under any
federal securities law or any other statute of any jurisdiction, or any
regulation, or at common law or otherwise, alleged to arise out of or is based
upon (i) any untrue statement or alleged untrue statement of any material fact
by any Credit Party in any document or schedule executed or filed with any
Governmental Authority by or on behalf of any Credit Party; (ii) any omission
or alleged omission to state any material fact required to be stated in such
document or schedule, or necessary to make the statements made therein, in
light of the circumstances under which made, not misleading; (iii) any acts,
practices or omissions or alleged acts, practices or omissions of any Credit
Party or its agents relating to the use of the proceeds of any or all
borrowings made by the Borrower alleged to be in violation of Section 2.17, or
in violation of any federal securities law or of any other statute, regulation
or other law of any jurisdiction applicable thereto; or (iv) any acquisition
or proposed acquisition by any Credit Party of all or a portion of the Stock,
or all or a portion of the assets, of any Person whether such Indemnified
Person is a party thereto, provided that the Borrower shall have no obligation
under this Section to an Indemnified Person with respect to any of the
foregoing to the extent any such loss, cost, liability, damage or expense
resulted from or arose out of the gross negligence or wilful misconduct of
such Indemnified Person or arose from claims between one such Indemnified
Person and another such Indemnified Person. The indemnity set forth herein
shall be in addition to any other obligations or liabilities of the Borrower
to each Indemnified Person under the Loan Documents or at common law or
otherwise, and shall survive any termination of the Loan Documents, the
expiration of the Commitments and the payment of all indebtedness of the
Borrower under the Loan Documents.
I. GOVERNING LAW
THE LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
J. Headings Descriptive
Section headings have been inserted in the Loan Documents for convenience
only and shall not be construed to be a part thereof.
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K. Severability
Every provision of the Loan Documents is intended to be severable, and if
any term or provision thereof shall be invalid, illegal or unenforceable for
any reason, the validity, legality and enforceability of the remaining
provisions thereof shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not
affect the validity, legality or enforceability of any such term or provision
in any other jurisdiction.
L. Integration
All exhibits to a Loan Document shall be deemed to be a part thereof. Except
for agreements between the Administrative Agent and the Borrower with respect
to certain fees, the Loan Documents embody the entire agreement and
understanding among the Credit Parties, the Administrative Agent and the
Lenders with respect to the subject matter thereof and supersede all prior
agreements and understandings among the Credit Parties, the Administrative
Agent and the Lenders with respect to the subject matter thereof.
M. Consent to Jurisdiction
Each Credit Party hereby irrevocably submits to the jurisdiction of any New
York State or Federal court sitting in the City of New York over any suit,
action or proceeding arising out of or relating to the Loan Documents. Each
Credit Party hereby irrevocably waives, to the fullest extent permitted or not
prohibited by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in such a
court and any claim that any such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum. Each Credit Party hereby
agrees that a final judgment in any such suit, action or proceeding brought in
such a court, after all appropriate appeals, shall be conclusive and binding
upon it.
CC. Service of Process
Each Credit Party hereby agrees that service of process in any such suit,
action or proceeding brought in the State of New York may be made upon CT
Corporation at its offices at 1633 Broadway, New York, New York 10019 (the
"Process Administrative Agent") and each Credit Party hereby irrevocably
appoints the Process Administrative Agent its authorized agent to accept such
service of process, and agrees that the failure of the Process Administrative
Agent to give any notice of any such service shall not impair or affect the
validity of such service or of any judgment rendered in any action or
proceeding based thereon. Each Credit Party hereby further irrevocably
consents to the service of process in any suit, action or proceeding by
sending the same by first class mail, return receipt requested or by overnight
courier service, to the address of such Credit Party set forth in or referred
to in Section 11.2 or in the applicable Loan Document executed by such Credit
Party. Each Credit Party hereby agrees that any such service (i) shall be
deemed in every respect effective service of process upon it in any such suit,
action, or proceeding, and (ii) shall to the fullest extent enforceable by
law, be taken and held to be valid personal service upon and personal delivery
to it.
N. No Limitation on Service or Suit
Nothing in the Loan Documents or any modification, waiver, consent or
amendment thereto shall affect the right of the Administrative Agent or any
Lender to serve process in any manner permitted by law or limit the right of
the Administrative Agent or any Lender to bring proceedings against any Credit
Party in the courts of any jurisdiction or jurisdictions in which such Credit
Party may be served.
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O. WAIVER OF TRIAL BY JURY
THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AGENT, THE ARRANGERS, THE
LENDERS, THE LETTER OF CREDIT ISSUER AND EACH CREDIT PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, EACH CREDIT
PARTY HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE ADMINISTRATIVE
AGENT, THE DOCUMENTATION AGENT, THE ARRANGERS, THE LETTER OF CREDIT ISSUER OR
THE LENDERS, OR COUNSEL TO THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AGENT,
THE ARRANGERS , THE LETTER OF CREDIT ISSUER OR THE LENDERS, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT, THE DOCUMENTATION
AGENT, THE ARRANGERS, THE LETTER OF CREDIT ISSUER OR THE LENDERS WOULD NOT, IN
THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION. EACH CREDIT PARTY ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT,
THE DOCUMENTATION AGENT, THE ARRANGERS, THE LETTER OF CREDIT ISSUER AND THE
LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE
PROVISIONS OF THIS SECTION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
TOTAL RENAL CARE HOLDINGS, INC.
/s/ John E. King
By: _________________________________
Name: John E. King
Title: VP Finance and CFO
THE BANK OF NEW YORK,
Individually, as the Letter of
Credit Issuer, as the Swing Line
Lender and as Administrative Agent
/s/ Rebecca K. Levine
By: _________________________________
Name: Rebecca K. Levine
Title: Assistant Vice President
DLJ CAPITAL FUNDING, INC.,
Individually and as Documentation
Agent
/s/ Eric Swanson
By: _________________________________
Name: Eric Swanson
Title: Managing Director
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EXHIBIT 99.3
TRC GUARANTY
GUARANTY, dated as of October 11, 1996, made by TOTAL RENAL CARE, INC. (the
"Guarantor") to THE BANK OF NEW YORK, as Administrative Agent (in such
capacity, the "Administrative Agent") (i) for itself and for the ratable
benefit of the Lenders, the Swing Line Lender and the Letter of Credit Issuer
and (ii) for each Lender and any affiliate of a Lender which from time to time
shall have entered into an Interest Rate Protection Agreement with Total Renal
Care Holdings, Inc. (the "Borrower").
A. The Borrower is party to a Credit Agreement, dated as of October 11,
1996, by and among the Borrower, the lenders party thereto, BNY Capital
Markets, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, as
Arrangers, DLJ Capital Funding, Inc., as Documentation Agent, and the
Administrative Agent (as the same may be amended, extended, increased,
modified, refunded or refinanced from time to time, the "Credit Agreement").
The Credit Agreement provides that the Guarantor shall execute and deliver
this Guaranty.
B. The Guarantor expects to derive substantial benefit from the Credit
Agreement and the making of the Loans and the issuance of the Letters of
Credit thereunder. The Guarantor acknowledges that the Administrative Agent,
the Documentation Agent, the Arrangers, the Swing Line Lender, the Letter of
Credit Issuer and the Lenders are relying on this Guaranty in entering into
and agreeing to make the Loans and issue the Letters of Credit and that the
Administrative Agent, the Documentation Agent, the Arrangers, the Swing Line
Lender, the Letter of Credit Issuer and the Lenders would not enter into the
Credit Agreement without the execution and delivery of this Guaranty.
C. The Guarantor wishes to guarantee the obligations of the Borrower under
the Loan Documents and each Interest Rate Protection Agreement entered into
with any Lender or any affiliate of a Lender.
In consideration of the premises and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Administrative Agent, the
Documentation Agent, the Arrangers, the Swing Line Lender, the Letter of
Credit Issuer and the Lenders to enter into the Credit Agreement and to make
and maintain the Loans and to induce BNY to issue the Letters of Credit, the
Guarantor covenants and agrees as follows:
1. Definitions
Except as otherwise provided herein, capitalized terms that are defined in
the Credit Agreement and are not defined herein shall have the meanings
assigned to such terms therein. For purposes hereof, the following terms shall
have the following meanings:
"Borrower Obligations": all obligations and liabilities, whether now
existing or hereafter arising, of the Borrower under the Loan Documents and
each Interest Rate Protection Agreement entered into with any Lender or any
affiliate of a Lender, whether direct, indirect or contingent, incurred as
primary obligor or otherwise, secured or unsecured, including all principal
and interest thereon (whether arising or accruing before or after the
occurrence of any Event of Default set forth in Section 9.1(h) or (i) of the
Credit Agreement and whether allowed as a claim), and all reasonable costs and
expenses of the Lender Parties in enforcing, preserving and protecting any
thereof, whether or not suit is instituted (as the same may be amended,
increased, modified, renewed, refinanced, refunded or extended from time to
time).
"Consideration": as of any date of determination, an amount equal to the
lesser of (a) the total "value" (within the meaning of Section 548 of the
Bankruptcy Code as in effect on the date hereof) given, directly or
indirectly, to the Guarantor during the period commencing on the date hereof
and ending on such date of determination, in exchange for its execution and
delivery of this Guaranty, and (b) the amount of "fair consideration" (within
the meaning of Article 10 of the New York Debtor Creditor Law as in effect on
the date hereof) given, directly or indirectly, to the Guarantor during the
period commencing on the date hereof and ending on such date of determination
in exchange for its execution and delivery of this Guaranty.
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"Guarantor Obligations": all of the obligations and liabilities of the
Guarantor hereunder, whether fixed, contingent, now existing or hereafter
arising, created, assumed, incurred or acquired.
"Lender Parties": the Administrative Agent, the Documentation Agent, the
Arrangers, the Letter of Credit Issuer and the Swing Line Lender.
"Lender Party": any of the Lender Parties.
"Net Worth": as of any date, the lesser of the following:
(a) (i) all of the Guarantor's "property, at a fair valuation" (within
the meaning of Section 101(32) of the Bankruptcy Code as in effect on the
date hereof) on such date, less (ii) the sum of the Guarantor's "debts"
(within the meaning of Section 101(12) of the Bankruptcy Code as in effect
on the date hereof) on such date (exclusive of such "debts" in respect of
this Guaranty), or
(b) (i) the "fair salable value of the assets" (within the meaning of
Article 10 of the New York Debtor Creditor Law as in effect on the date
hereof) of the Guarantor on such date, less (ii) "the amount that will be
required to pay the Guarantor's probable liability on its existing debts as
they become absolute and matured" (as such phrase would be construed under
Article 10 of the New York Debtor Creditor Law as in effect on the date
hereof) on such date (exclusive of such "debts" in respect of this
Guaranty).
2. Guaranty
(a) Subject to Section 2(b) hereof, the Guarantor hereby absolutely,
irrevocably and unconditionally guarantees the full and prompt payment when
due (whether at stated maturity, by acceleration or otherwise) of the Borrower
Obligations. This Guaranty constitutes a guaranty of payment, and no Lender
Party shall have any obligation to enforce any Loan Document or any Interest
Rate Protection Agreement or exercise any right or remedy with respect to any
collateral security thereunder by any action, including, without limitation,
making or perfecting any claim against any Person or any collateral security
for any of the Borrower Obligations prior to being entitled to the benefits of
this Guaranty. The Administrative Agent may, at its option, proceed against
the Guarantor in the first instance to enforce the Guarantor Obligations
without first proceeding against the Borrower or any other Person, and without
first resorting to any other rights or remedies, as the Administrative Agent
may deem advisable. In furtherance hereof, if any Lender Party is prevented by
law from collecting or otherwise hindered from collecting or otherwise
enforcing any Borrower Obligation in accordance with its terms, the
Administrative Agent, on behalf of such Lender Party, shall be entitled to
receive hereunder from the Guarantor after demand therefor, the sums which
would have been otherwise due had such collection or enforcement not been
prevented or hindered.
(b) Notwithstanding anything to the contrary contained in this Guaranty, the
maximum liability of the Guarantor hereunder shall not, as of any date of
determination, exceed the lesser of (i) the highest amount that is valid and
enforceable against the Guarantor under principles of New York State contract
law, and (ii) the sum of (1) all Consideration received by the Guarantor as of
such date of determination, plus (2) 95% of the Net Worth of the Guarantor on
such date of determination. In calculating the maximum liability of the
Guarantor hereunder, full effect shall be given to any provision in any other
Indebtedness of or guaranteed by the Guarantor which for purposes of
applicable fraudulent transfer or similar laws provides that indebtedness
incurred under the Credit Agreement or under this Guaranty shall be deemed to
have been incurred prior to such other Indebtedness.
(c) The Guarantor agrees that its Guarantor Obligations may at any time and
from time to time exceed the maximum liability of the Guarantor hereunder
without impairing this Guaranty or affecting the rights and remedies of any
Lender Party hereunder.
3. Absolute Obligation
Subject to Section 8, the Guarantor shall not be released from liability
hereunder unless and until the Revolving Credit Commitments and the Swing Line
Commitment have been terminated and either (a) the Borrower Obligations shall
have been indefeasibly paid in full, in cash, or (b) the Guarantor Obligations
shall
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have been paid in full, in cash. The Guarantor acknowledges and agrees that
(1) no Lender Party has made any representation or warranty to the Guarantor
with respect to the Borrower, its Subsidiaries, any Loan Document, any
Interest Rate Protection Agreement, or any agreement, instrument or document
executed or delivered in connection therewith or any other matter whatsoever,
and (2) the Guarantor shall be liable hereunder, and such liability shall not
be affected or impaired, irrespective of (A) the validity or enforceability of
any Loan Document, any Interest Rate Protection Agreement, or any agreement,
instrument or document executed or delivered in connection therewith, or the
collectability of any of the Borrower Obligations, (B) the preference or
priority ranking with respect to any of the Borrower Obligations, (C) the
existence, validity, enforceability or perfection of any security interest or
collateral security under any Loan Document, or any Interest Rate Protection
Agreement, or the release, exchange, substitution or loss or impairment of any
such security interest or collateral security, (D) any failure, delay, neglect
or omission by any Lender Party to realize upon any direct or indirect
collateral security, indebtedness, liability or obligation, any Loan Document,
any Interest Rate Protection Agreement, or any agreement, instrument or
document executed or delivered in connection therewith, or any of the Borrower
Obligations, (E) the existence or exercise of any right of set-off by any
Lender Party, (F) the existence, validity or enforceability of any other
guaranty with respect to any of the Borrower Obligations, the liability of any
other Person in respect of any of the Borrower Obligations, or the release of
any such Person or any other guarantor of any of the Borrower Obligations, (g)
any act or omission of any Lender Party in connection with the administration
of any Loan Document, any Interest Rate Protection Agreement, or any of the
Borrower Obligations, (h) the bankruptcy, insolvency, reorganization or
receivership of, or any other proceeding for the relief of debtors commenced
by or against, any Person, (i) the disaffirmance or rejection, or the
purported disaffirmance or purported rejection, of any of the Borrower
Obligations, any Loan Document, any Interest Rate Protection Agreement, or any
agreement, instrument or document executed or delivered in connection
therewith, in any bankruptcy, insolvency, reorganization or receivership, or
any other proceeding for the relief of debtors, relating to any Person, (j)
any law, regulation or decree now or hereafter in effect that might in any
manner affect any of the terms or provisions of any Loan Document, any
Interest Rate Protection Agreement, or any agreement, instrument or document
executed or delivered in connection therewith or any of the Borrower
Obligations, or which might cause or permit to be invoked any alteration in
the time, amount, manner or payment or performance of any of the Borrower's
obligations and liabilities (including, without limitation, the Borrower
Obligations), (k) the merger or consolidation of the Borrower into or with any
Person, (L) the sale by the Borrower of all or any part of its assets, (M) the
fact that at any time and from time to time none of the Borrower Obligations
may be outstanding or owing to any Lender Party, (N) any amendment or
modification of, or supplement to, any Loan Document or any Interest Rate
Protection Agreement or (O) any other reason or circumstance that might
otherwise constitute a defense available to or a discharge of the Borrower in
respect of its obligations or liabilities (including, without limitation, the
Borrower Obligations) or of the Guarantor in respect of any of the Guarantor
Obligations (other than by the performance in full thereof).
4. Representations and Warranties
The Guarantor hereby makes the following representations and warranties to
the Administrative Agent on behalf of each Lender Party:
(a) Existence and Power. The Guarantor is duly organized or formed and
validly existing in good standing under the laws of the jurisdiction of its
incorporation or formation, has all requisite power and authority to own
its Property and to carry on its business as now conducted, and is in good
standing and authorized to do business as a foreign corporation in each
jurisdiction in which the nature of the business conducted therein or the
Property owned therein makes such qualification necessary, except where
such failure to qualify could not reasonably be expected to have a Material
Adverse Effect.
(b) Authority. The Guarantor has full legal power and authority to enter
into, execute, deliver and perform the terms of the Loan Documents to which
it is a party and the transactions contemplated thereby and to incur the
obligations provided for therein, all of which have been duly authorized by
all proper and necessary corporate or other applicable action and are in
full compliance with its Certificate of Incorporation or By-Laws or its
other organization documents.
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(c) Binding Agreement. The Loan Documents to which the Guarantor is a
party constitute the valid and legally binding obligations of the
Guarantor, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally and except that
the remedy of specific performance is within the discretion of the
applicable court.
(d) Required Consents. No consent, authorization or approval of, filing
with, notice to, or exemption by, stockholders, any Governmental Authority
or any other Person is required to authorize, or is required in connection
with the execution, delivery and performance of the Loan Documents to which
the Guarantor is a party and the transactions contemplated thereby, or is
required as a condition to the validity or enforceability of such Loan
Documents.
(e) No Conflicting Agreements. The Guarantor is not in default under any
mortgage, indenture, contract or agreement to which it is a party, or by
which it or any of its Property is bound, the effect of which default could
reasonably be expected to have a Material Adverse Effect. The execution,
delivery or carrying out of the terms of the Loan Documents to which it is
a party and the transactions contemplated hereby and thereby, will not
constitute a default under, or result in the creation or imposition of, or
obligation to create, any Lien upon any Property of the Guarantor or result
in a breach of or require the mandatory repayment of or other acceleration
of payment under or pursuant to the terms of any such mortgage, indenture,
contract or agreement.
5. Events of Default
Each of the following shall constitute an "Event of Default" hereunder:
(a) The Guarantor shall fail to observe or perform any term, covenant or
agreement contained in Section 2 of this Guaranty; or
(b) The Guarantor shall fail to perform or observe any other term,
covenant or agreement on its part to be performed or observed pursuant to
this Guaranty and such failure shall have continued unremedied for a period
of 30 days after the Guarantor shall become aware of such failure; or
(c) Any representation or warranty of the Guarantor contained herein or
in any certificate, report or notice delivered or to be delivered by the
Guarantor pursuant hereto shall prove to have been incorrect or misleading
in any material respect when made; or
(d) This Guaranty shall cease to be in full force and effect or the
Guarantor shall so assert or shall disavow any of its obligations
hereunder; or
(e) The occurrence of an "Event of Default" under and as defined in the
Credit Agreement.
6. Notices
Except as otherwise specifically provided herein, all notices, requests,
consents, demands, waivers and other communications hereunder shall be given
in the manner provided in Section 11.2 of the Credit Agreement and, if to the
Administrative Agent, at its address set forth therein or, if to the
Guarantor, at the following address or to such other addresses as to which the
Administrative Agent may be hereafter notified by the Guarantor:
c/o Total Renal Care, Inc.
21250 Hawthorne Blvd., Ste. 800
Torrance, CA 90503-5517
Attention: John E. King
Vice President, Finance
Telephone: (310) 792-2600
Fax: (310) 792-8928
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7. Expenses
The Guarantor will upon demand pay to each of the Administrative Agent and
the Documentation Agent any and all reasonable sums, costs and expenses which
it may pay or incur pursuant to the provisions of this Guaranty or in
negotiating, executing or enforcing this Guaranty or in enforcing payment of
its Guarantor Obligations, including, but not limited to court costs,
reasonable collection charges, reasonable travel expenses, and reasonable
attorneys' fees and disbursements. All sums, costs and expenses which are due
and payable pursuant to this Section 7 shall bear interest, payable on demand,
at the highest rate then payable on the Borrower Obligations.
8. Repayment in Bankruptcy, etc.
If, at any time or times subsequent to the payment of all or any part of the
Borrower Obligations or the Guarantor Obligations, any Lender Party shall be
required to repay any amounts previously paid by or on behalf of the Borrower
or the Guarantor in reduction thereof by virtue of an order of any court
having jurisdiction in the premises, including, without limitation, as a
result of an adjudication that such amounts constituted preferential payments
or fraudulent conveyances, the Guarantor unconditionally agrees to pay to the
Administrative Agent (on behalf of such Lender Party) within 5 days after
demand a sum in cash equal to the amount of such repayment, together with
interest on such amount from the date of such repayment by such Lender Party
to the date of payment to the Administrative Agent at the applicable after-
maturity rate set forth in the Credit Agreement.
9. Other Provisions
(a) This Guaranty is the "TRC Guaranty" referred to in the Credit Agreement.
Each of the Administrative Agent and the Guarantor acknowledges that certain
provisions of the Credit Agreement, including, without limitation, Sections
11.1 (Amendments and Waivers), 11.3 (No Waiver; Cumulative Remedies), 11.4
(Survival of Representations and Warranties), 11.7 (Assignments and
Participations), 11.8 (Counterparts), 11.9 (Adjustments; Set-off), 11.12
(Governing Law), 11.13 (Headings Descriptive), 11.14 (Severability), 11.15
(Integration), 11.16 (Consent to Jurisdiction), 11.17 (Service of Process),
11.18 (No Limitation on Service or Suit) and 11.19 (WAIVER OF TRIAL BY JURY)
thereof, are made applicable to this Guaranty and all such provisions are
incorporated by reference herein as if fully set forth herein.
(b) No failure by the Administrative Agent to exercise, and no delay by the
Administrative Agent in exercising, any right or remedy hereunder shall
operate as a waiver thereof.
(c) Each and every right, remedy and power granted to the Administrative
Agent hereunder or allowed at law, in equity or by other agreement shall be
cumulative and not exclusive, and may be exercised by the Administrative Agent
from time to time.
(d) The Guarantor hereby waives presentment, demand for payment, notice of
default, nonperformance and dishonor, protest and notice of protest of or in
respect of this Guaranty, the Loan Documents and the Borrower Obligations,
notice of acceptance of this Guaranty and reliance hereupon by each Lender
Party, and the incurrence of any of the Borrower Obligations, notice of any
sale of collateral security or any default of any sort and notice of any
amendment, modification, increase or waiver of any Loan Document.
(e) The Guarantor is not relying upon any Lender Party to provide to the
Guarantor any information concerning the Borrower or any Subsidiary of the
Borrower, and the Guarantor has made arrangements satisfactory to the
Guarantor to obtain from the Borrower on a continuing basis such information
concerning the Borrower and its Subsidiaries as the Guarantor may desire.
(f) The Guarantor agrees that any statement of account with respect to the
Borrower Obligations from any Lender Party to the Borrower that binds the
Borrower shall also be binding upon the Guarantor, and that copies of said
statements of account maintained in the regular course of such Lender Party's
business may be used in evidence against the Guarantor in order to establish
its Guarantor Obligations.
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(g) The Guarantor acknowledges that it has received a copy of the Loan
Documents. In addition, the Guarantor acknowledges having read each Loan
Document and having had the advice of counsel in connection with all matters
concerning its execution and delivery of this Guaranty, and, accordingly,
waives any right it may have to have the provisions of this Guaranty strictly
construed against the Lender Parties.
(h) The Guarantor may not assign any right, or delegate any duty, it may
have under this Guaranty.
The Guarantor has caused this Guaranty to be duly executed and delivered by
its duly authorized officer as of the date first above written.
TOTAL RENAL CARE, INC.
/s/ John E. King
By: _________________________________
Name: John E. King
Title: VP Finance and CFO
Accepted and Agreed to:
THE BANK OF NEW YORK, as Administrative Agent
/s/ Rebecca K. Levine
By: _________________________________
Name: Rebecca K. Levine
Title: Assistant Vice President
6
