<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) December 19, 1997
-----------------------------
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 File Number) Identification No.)
of 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 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Financial Statements of the Nephrology Services Business of
Caremark International, Inc. F-1
Audited Financial Statements of New West Dialysis Clinics, Inc. F-12
Audited Combined Financial Statements of Southfield Dialysis
Facility, P.C., North Oakland Dialysis Facility, P.C., Macomb
Kidney Center, P.C., and Novi Kidney Center, P.C. F-23
Audited Financial Statements of Dialysis Care of North Carolina F-34
Audited Financial Statements of the Renal Dialysis Business of
The Rogosin Institute, Inc. F-42
(b) PRO FORMA FINANCIAL INFORMATION.
Unaudited Pro Forma Financial Statements F-53
</TABLE>
2
<PAGE>
(c) EXHIBITS.
10.1 Revolving Credit Agreement, dated as of October 24, 1997, by and
among Total Renal Care Holdings, Inc., the lenders party thereto, DLJ Capital
Funding, Inc., as Syndication Agent, First Union National Bank, as Documentation
Agent, and The Bank of New York, as Administrative Agent (the "Revolving Credit
Agreement").*
10.2 Amendment No. 1 and Consent No. 1, dated as of December 1, 1997,
to the Revolving Credit Agreement.
10.3 Term Loan Agreement, dated as of October 24, 1997, by and among Total
Renal Care Holdings, Inc., the lenders party thereto, DLJ Capital Funding, Inc.,
as Syndication Agent, First Union National Bank, as Documentation Agent, and The
Bank of New York, as Administrative Agent (the "Term Loan Agreement").*
10.4 First Amendment, Dated December 1, 1997, to the Term Loan
Agreement.
10.5 Subsidiary Guaranty dated as of October 24, 1997 by Total Renal
Care, Inc., TRC West, Inc. and Total Renal Care Acquisition Corp. in favor of
and for the benefit of The Bank of New York, as Collateral Agent, the lenders to
the Revolving Credit Agreement, the lenders to the Term Loan Agreement, the
Term Agent (as defined therein), the Acknowledging Interest Rate Exchangers (as
defined therein) and the Acknowledging Currency Exchangers (as defined therein).
10.6 Borrower Pledge Agreement dated as of October 24, 1997 and entered
into by and between Total Renal Care Holdings, Inc., and The Bank of New York,
as Collateral Agent, the lenders to the Revolving Credit Agreement, the lenders
to the Term Loan Agreement, the Term Agent (as defined therein), the
Acknowledging Interest Rate Exchangers (as defined therein) and the
Acknowledging Currency Exchangers (as defined therein).
10.7 Form of Subsidiary Pledge Agreement dated as of October 24, 1997 by
Total Renal Care, Inc., TRC West, Inc. and Total Renal Care Acquisition Corp.,
and The Bank of New York, as Collateral Agent, the lenders to the Revolving
Credit Agreement, the lenders to the Term Loan Agreement, the Term Agent (as
defined therein), the Acknowledging Interest Rate Exchangers (as defined
therein) and the Acknowledging Currency Exchangers (as defined therein).
23.1 Consent of Price Waterhouse LLP.
3
<PAGE>
- ------------
* The registrant agrees to furnish supplementally a copy of any schedule thereto
to the Commission upon its request.
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: December 19, 1997 By:/s/ John E. King
-----------------------------
John E. King
Vice President and Chief Financial Officer
4
<PAGE>
Nephrology Services Business of
Caremark International Inc.
Financial Statements
Years Ended December 31, 1995 and 1994 and the
Month Ended December 31, 1993
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Caremark International Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations and business equity and of cash flows present fairly, in all
material respects, the financial position of Nephrology Services Business,
comprising the businesses of Caremark International Inc. as described in the
description of the business in Note 1 to the financial statements, at December
31, 1995 and 1994, and the results of its operations and its cash flows for
the years ended December 31, 1995 and 1994 and for the month ended December
31, 1993, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Caremark International Inc.'s
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 28, 1996
F-2
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
DECEMBER 31, 1994 AND 1995
BALANCE SHEETS (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
ASSETS
Cash........................................................... $ 1 $ 1
Accounts receivable, net of allowance for doubtful accounts of
$1,005 and $1,504 respectively................................ 10,378 14,516
Inventories.................................................... 1,040 666
Prepaid expenses and other current assets...................... 23 536
------- -------
Total current assets....................................... 11,442 15,719
Property and equipment, net.................................... 8,066 9,097
Goodwill and other intangibles................................. 15,462 17,683
Other assets................................................... 143 423
------- -------
$35,113 $42,922
======= =======
LIABILITIES AND BUSINESS EQUITY
Current portion of long-term obligations....................... $ 3,841 $ 1,910
Accounts payable and other liabilities......................... 3,531 4,465
------- -------
Total current liabilities.................................. 7,372 6,375
------- -------
Long-term obligations.......................................... 8,052 1,104
Other long-term liabilities.................................... 260 55
Commitments and contingencies (Note 9)......................... -- --
Business equity................................................ 19,429 35,388
------- -------
$35,113 $42,922
======= =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
MONTH ENDED DECEMBER 31, 1993 AND YEARS ENDED DECEMBER 31, 1994 AND 1995
STATEMENTS OF OPERATIONS AND BUSINESS EQUITY (IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE MONTH FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995
<S> <C> <C> <C>
Net revenue............................ $2,677 $38,742 $46,832
------ ------- -------
Operating expenses:
Cost of goods and services sold...... 1,957 29,101 35,796
General and administrative........... 665 5,524 9,809
Provision for doubtful accounts...... 144 1,096 1,331
Depreciation and amortization........ 105 2,089 2,562
------ ------- -------
Total operating expenses........... 2,871 37,810 49,498
------ ------- -------
Income (loss) from operations.......... (194) 932 (2,666)
Sundry expense......................... -- 840 762
------ ------- -------
Income (loss) before income taxes...... (194) 92 (3,428)
Income tax expense (benefit)........... (80) 43 (1,394)
------ ------- -------
Net income (loss)...................... (114) 49 (2,034)
Business equity at beginning of period. -- 6,227 19,429
Net advances from Caremark
International Inc..................... 6,341 13,153 17,993
------ ------- -------
Business equity at end of period....... $6,227 $19,429 $35,388
====== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
MONTH ENDED DECEMBER 31, 1993 AND YEARS ENDED DECEMBER 31, 1994 AND 1995
STATEMENTS OF CASH FLOWS (IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE MONTH FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $ (114) $ 49 $(2,034)
Adjustments for non-cash items:
Depreciation and amortization....... 105 2,089 2,562
Provision for doubtful accounts..... 144 1,096 1,331
Changes in balance sheet items:
Accounts receivable................ (369) (4,514) (5,269)
Inventories........................ (102) (377) 374
Prepaid expenses and other current
assets............................ (2) (932) (1,608)
Accounts payable and other
liabilities....................... 291 1,533 708
------- -------- -------
Net cash used in operating
activities....................... (47) (1,056) (3,936)
------- -------- -------
Cash flows from investing activities:
Purchases of property and equipment.. (20) (2,171) (3,354)
Acquisitions, net of cash received... (6,274) (8,741) (1,845)
------- -------- -------
Net cash used in investing
activities....................... (6,294) (10,912) (5,199)
------- -------- -------
Cash flows from financing activities:
Net changes in debt and lease
obligations......................... -- 866 522
Payments of acquisition notes........ -- (2,050) (9,380)
Net advances from Caremark
International Inc................... 6,341 13,153 17,993
------- -------- -------
Net cash provided by financing
activities....................... 6,341 11,969 9,135
------- -------- -------
Net increase in cash.................. -- 1 --
Cash at beginning of period........... -- -- 1
------- -------- -------
Cash at the end of period............. $ -- $ 1 $ 1
======= ======== =======
Supplemental disclosure of cash flow
information:
Cash paid for interest................ $ -- $ 813 $ 724
Non-cash items:
Notes issued for acquisitions......... $ 8,906 $ 4,671 $ --
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
NOTES TO FINANCIAL STATMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the business
The accompanying financial statements comprise Caremark International Inc.'s
("Caremark" or the "Company") Nephrology Services Business ("Nephrology
Services" or the "business") consisting of the Regional Kidney Disease Program
("RKDP") (purchased on December 1, 1993) and Chabot Dialysis Clinic ("Chabot")
(purchased on May 31, 1994). Nephrology Services operates kidney dialysis
centers and provides related dialysis services in and around Minnesota, South
Dakota, North Dakota and Oakland, California.
Basis of presentation
The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of Nephrology Services for the
periods presented. The financial statements have been prepared as if
Nephrology Services had operated as a stand-alone entity for all periods
presented, and include those assets, liabilities, revenues and expenses
directly attributable to the Nephrology Services operations. Certain corporate
general and administrative expenses of Caremark International Inc. have been
allocated to the business on various bases which, in the opinion of
management, are reasonable. However, such expenses are not necessarily
indicative of, and it is not practical for management to estimate, the nature
and level of expenses which might have been incurred had the business been
operating as a separate company. The financial information included herein
does not necessarily reflect what the financial position or results of
operations of Nephrology Services would have been had it operated as a stand-
alone entity during the periods covered, and may not be indicative of future
operations or financial position.
The summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the financial statements. These
policies are in conformity with generally accepted accounting principles and
have been consistently applied in all material respects. 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Principles of consolidation
The financial statements include the accounts of the Nephrology Services
businesses. All material intercompany accounts and transactions have been
eliminated in consolidation.
Net revenues and accounts receivable allowances
Revenues are recognized when services and related products are provided to
patients.
Net revenues consist primarily of dialysis patient care revenues which are
reported at the amounts expected to be realized from patients, third-party
payors and others for services provided. Receivables which are deemed
uncollectible are reflected in bad debt expense as a component of operating
expenses in the statements of operations and business equity.
Medicare and Medicaid programs generally reimburse the business under
prospective payment systems at amounts different from the business'
established rates. Revenues under these programs are generally recognized at
prospective rates which are subject to annual adjustments by Federal and state
agencies. The business bills all other nongovernment third-party payors at
established rates, many of which are discounted.
F-6
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The business provides credit, in the normal course of business, to patients
from (i) the federal and state governments under the Medicare and Medicaid
programs representing approximately 64% and 69% of their dialysis revenue in
fiscal years 1994 and 1995, respectively, and approximately 50% and 54% of
their net accounts receivable at December 31, 1994 and 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 do not represent any concentrated credit
risks to the business. Furthermore, management continually monitors and
adjusts its reserves and allowances 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.
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.
Depreciable lives of property and equipment are as follows:
<TABLE>
<CAPTION>
ASSET LIFE
<S> <C>
Leasehold improvements........................................ 5-10 years
Equipment..................................................... 5-7 years
Furniture and fixtures........................................ 5-7 years
</TABLE>
Goodwill and other intangibles
Goodwill represents the excess of consideration paid for businesses acquired
in purchase transactions over the fair value of net assets acquired and is
amortized substantially over 40 years. Other intangible assets of $652,000 and
$1,724,000 as of December 31, 1994 and 1995, respectively, are amortized on a
straight-line basis over the lesser of their legal or estimated useful lives.
As of December 31, 1994 and 1995, intangible assets, including goodwill, are
stated net of accumulated amortization of $400,000 and $867,000, respectively.
The Company reviews the carrying value of intangibles and other long-lived
assets for impairment when events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable. This review is
performed by comparing estimated undiscounted future cash flows from use or
sale of the asset to the recorded value of the asset.
Fair value of financial instruments
Financial instruments of the business primarily consist of receivables,
payables, and debt obligations. The carrying value of these financial
instruments approximated fair value at year-end.
Sundry expense
Sundry expense primarily consists of interest expense.
F-7
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income taxes
Nephrology Services' operations have been included in Caremark International
Inc.'s consolidated U.S. federal and state income tax returns. The provision
for income taxes shown in the accompanying financial statements has been
determined as if the business had filed separate tax returns under its
existing legal structure for the periods presented. All U.S. income taxes,
including deferred taxes, are settled with Caremark on a current basis through
the "Net advances from Caremark International Inc." account.
Income tax expense is based on pre-tax income for financial reporting
purposes, adjusted for the effects of permanent differences between such
income and that reported for tax return purposes. Deferred tax assets and
liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities as measured by the enacted tax rates
which are expected to be in effect when these differences reverse. Deferred
tax expense is the result of changes in deferred tax assets and liabilities.
2. ACQUISITIONS
During 1995, the business acquired 100% interest in an acute dialysis
service partnership. On May 31, 1994, the business acquired substantially all
of the assets of Chabot Dialysis Clinic, Inc., San Leandro Dialysis Inc., East
Bay Peritoneal Dialysis, Inc., Dublin Dialysis Center and Union City Dialysis
Center (collectively "Chabot"). Regional Kidney Disease Program ("RKDP") was
acquired by the business on December 1, 1993. All acquisitions have been
accounted for using the purchase method of accounting and, accordingly, the
aggregate purchase price was allocated to assets and liabilities acquired
based on their fair values at the date of acquisition.
The results of operations of these clinics have been included in the results
of operations from the effective date of the acquisition. The following
unaudited pro forma results of operations of the business give effect to the
acquisitions as if the Chabot acquisition had occurred on January 1, 1994 and
the RKDP acquisition had occurred on January 1, 1993 (in thousands):
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Net revenues............................................. $31,006 $44,357
Income before income taxes............................... 3,059 637
Net income............................................... 1,799 375
</TABLE>
The above pro forma information is not necessarily indicative of the results
of operations that would have occurred had the acquisition been made as of
January 1, 1994 or of the results which may occur in the future.
Information with respect to the clinics acquired in 1993 and 1994 was as
follows (in thousands):
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Cash paid (net of cash acquired).......................... $ 6,774 $ 8,029
Notes issued.............................................. 8,906 4,671
Liabilities assumed....................................... 1,578 391
------- -------
17,258 13,091
Fair value of assets acquired............................. 10,453 2,486
------- -------
Cost in excess of fair value of net assets acquired....... $ 6,805 $10,605
======= =======
</TABLE>
F-8
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment comprise the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Buildings and leasehold improvements.................... $ 2,816 $ 3,762
Machinery and other equipment........................... 6,470 7,950
Software................................................ 23 40
Construction in progress................................ 541 1,385
------- -------
9,850 13,137
Less accumulated depreciation and amortization.......... (1,784) (4,040)
------- -------
Net property and equipment............................ $ 8,066 $ 9,097
======= =======
</TABLE>
4. LONG-TERM DEBT
Long-term debt comprise the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Promissory notes........................................ $11,893 $ 3,014
Less current portion.................................... (3,841) (1,910)
------- -------
Long-term debt.......................................... $ 8,052 $ 1,104
======= =======
</TABLE>
Promissory notes in the face amount of $10,000,000 were executed pursuant to
the acquisition of RKDP on December 1, 1993. Interest is calculated at 10% per
annum. The promissory notes were due 1994 through 1998 in annual installments
of $2,000,000. On October 16, 1995, the business voluntarily prepaid the
outstanding principal amount, together with accrued and unpaid interest, of
$7,300,000.
Promissory notes in the face amount of $5,269,000 were executed pursuant to
the acquisition of Chabot on May 31, 1994. Interest is calculated at 7% per
annum. As of December 31, 1995, the notes are due $2,107,000 on May 31, 1996
and $1,053,800 on May 31, 1997.
Interest expense of $813,000 and $724,000 for fiscal years 1994 and 1995,
respectively.
5. LEASES
The business leases certain facilities and equipment under operating leases
expiring at various dates. Most of the operating leases contain renewal
options. Total rent expense under operating leases approximated $71,000,
$2,005,000 and $2,610,000 for the month ended December 31, 1993 and for fiscal
years 1994 and 1995, respectively.
Future minimum lease payments under noncancelable leases as of December 31,
1995 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1996.............................................................. $1,339
1997.............................................................. 1,250
1998.............................................................. 1,197
1999.............................................................. 887
2000.............................................................. 907
Thereafter........................................................ 2,588
------
Total obligations and commitments................................. $8,168
======
</TABLE>
F-9
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. PROFIT SHARING PROGRAMS
The employees of Chabot are eligible to participate in a qualified 401(k)
and profit sharing plan sponsored by Chabot. Participants may contribute up to
15% of their annual compensation to the plan and Chabot matches the
participants' contributions up to 2.5% of compensation. In addition, Chabot
can make a discretionary profit sharing contribution.
The employees of RKDP are eligible to participate in a qualified profit
sharing plan sponsored by the clinic. Participants may make pre-tax
contributions of up to 12% of their eligible compensation to the plan and RKDP
matches the participants' contributions up to 3% of compensation. In addition,
RKDP will make a contribution of up to 3% of compensation based on years of
service to all eligible employees.
Profit sharing expense of $389,000 and $379,000 was recorded for fiscal
years 1994 and 1995.
7. INCOME TAXES
Income tax expense for the indicated years consists of the following (in
thousands):
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Current:
Federal........................................... $(205) $(66) $ (991)
State and local................................... (36) (11) (175)
----- ---- -------
Current income tax benefit......................... (241) (77) (1,166)
----- ---- -------
Deferred:
Federal........................................... 137 102 (194)
State and local................................... 24 18 (34)
----- ---- -------
Deferred income tax expense (benefit).............. 161 120 (228)
----- ---- -------
Income tax expense (benefit)....................... $ (80) $ 43 $(1,394)
===== ==== =======
</TABLE>
Income tax expense applicable to pre-tax income for financial reporting
purposes differs from income tax expense calculated by using the U.S. federal
income tax rate primarily due to state and local taxes.
All income taxes related to the business have been paid by Caremark.
8. RELATED PARTY TRANSACTIONS
The business participates in a centralized cash management program
administered by Caremark. Advances from Caremark International Inc. or excess
cash sent to Caremark have been treated as an adjustment to Business Equity.
No interest has been charged on this balance. Intercompany receivables and
payables have historically been settled in the normal course of business,
usually within 90 days, and are not interest bearing. The net intercompany
balance has been included in the balance sheet as "Business Equity".
Caremark has provided to Nephrology Services certain legal, treasury,
regulatory and insurance benefits. Charges for these services to Nephrology
Services have been based on allocation of Caremark's actual direct and
indirect costs using varying allocation methods designed to estimate the
actual costs incurred by Caremark to render these services to the business.
The allocation methods used are as follows:
LEGAL--Estimated internal payroll and other direct costs of employees
directly performing services on behalf of the business as well as external
legal fees incurred on behalf of the business.
F-10
<PAGE>
CAREMARK INTERNATIONAL INC.
NEPHROLOGY SERVICES BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
TREASURY--Bank fees based on estimated units of activity.
INSURANCE--Estimated based on the business' historical loss ratios.
BENEFITS--Estimated based on the business' payroll as a percentage of
Caremark's total payroll.
FACILITIES AND ADMINISTRATIVE SERVICES--The cost of shared facilities and
related administrative services are allocated based on the percentage of
square footage occupied by the business.
The allocation methodology is consistent with the method used by Caremark to
allocate the cost of similar services to its other business units. No costs
were allocated for the month ended December 31, 1993. The allocated costs of
these services as reflected as general and administrative expenses in the
statements of operations and business equity were $172,000 and $722,000 in
fiscal years 1994 and 1995, respectively. No provisions have been made for
possible incremental costs that may have been incurred had Nephrology Services
operated as a stand-alone entity for the periods presented.
9. CONTINGENCIES
The business is subject to various commitments, claims and routine
litigation arising in the ordinary course of business. Based on the advice of
counsel, management does not believe that the ultimate resolution of these
matters individually or in the aggregate will have a material adverse effect
on the business or its income, cash flows or financial condition.
10. SUBSEQUENT EVENTS
Subsequent to December 31, 1995, Caremark has entered into an agreement to
sell substantially all of the assets, other than cash, and certain liabilities
of its Nephrology Services Business to Total Renal Care, Inc., a subsidiary of
Total Renal Care Holdings, Inc. for cash consideration. The transaction is
expected to close in March 1996.
F-11
<PAGE>
- --------------------------------------------------------------------------------
NEW WEST DIALYSIS CLINICS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1996
F-12
<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
income and retained earnings and of cash flows present fairly, in all material
respects, the financial position of New West Dialysis Clinics, Inc. at December
31, 1996 and the results of its operations and cash flows for the year then
ended, 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
June 18, 1997
F-13
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31,
1996 1997
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 65,980 $ 4,036
Patient accounts receivables, less allowance for
doubtful accounts of $184,000 and $196,000,
respectively 3,791,884 4,011,791
Other receivables 255,233 163,959
Inventory 457,420 517,415
Prepaid expenses 41,067 14,958
---------- ----------
Total current assets 4,611,584 4,712,159
Property and equipment 2,971,653 3,088,714
Notes receivable from stockholders 61,386 61,386
Other assets 42,147 41,772
---------- ----------
$7,686,770 $7,904,031
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 857,509 $ 970,951
Accrued employee compensation and benefits 632,733 636,904
Other accrued liabilities 422,293 379,000
Line of credit 622,000 625,000
---------- ----------
Total current liabilities 2,534,535 2,611,855
---------- ----------
Long-term debt 166,685 66,686
---------- ----------
Stockholders' equity
Common stock, no par value, 600 shares authorized,
issued and outstanding 15,434 15,434
Retained earnings 4,970,116 5,210,056
---------- ----------
Total stockholders' equity 4,985,550 5,225,490
Commitments and contingencies (Note 8)
$7,686,770 $7,904,031
========== ==========
</TABLE>
SEE THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-14
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
Net operating revenues $22,883,133 $5,484,845 $5,990,377
----------- ---------- ----------
Operating expenses
Facilities 17,643,061 4,067,291 4,841,401
General and administrative 2,282,023 602,074 712,644
Provision for doubtful accounts 59,335 14,372 15,537
Depreciation and amortization 683,435 183,183 161,258
----------- ---------- ----------
Total operating expenses 20,667,854 4,866,920 5,730,840
----------- ---------- ----------
Operating income 2,215,279 617,925 259,537
Interest expense 65,248 18,176 16,191
Interest income 16,540 2,125 594
----------- ---------- ----------
Income before income taxes 2,166,571 601,874 243,940
Provision for income taxes 34,000 9,000 4,000
----------- ---------- ----------
Net income 2,132,571 592,874 239,940
Retained earnings, at beginning of period 4,397,545 4,397,545 4,970,116
Dividends paid (1,560,000)
----------- ---------- ----------
Retained earnings, at end of period $ 4,970,116 $4,990,419 $5,210,056
=========== ========== ==========
</TABLE>
SEE THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-15
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,132,571 $ 592,874 $ 239,940
Adjustments to reconcile net income
to net cash provided from operating
activities
Depreciation and amortization 683,435 183,183 161,258
Provision for doubtful accounts 59,335 14,372 15,537
Change in operating assets and liabilities
Patient accounts receivable (517,683) (29,607) (235,444)
Other receivables (17,834) 59,885 90,002
Inventory (21,590) (33,912) (59,995)
Prepaid expenses (6,071) 21,541 26,109
Other assets (33,500) 375 375
Accounts payable (139,862) (288,351) 113,442
Accrued employee compensation
and benefits (157,075) (246,488) 4,171
Other accrued liabilities 122,293 84,000 (43,293)
----------- ----------- ---------
Net cash provided by operating
activities 2,104,019 357,872 312,102
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments received on notes receivable 60,656 1,146 1,272
Purchase of property and equipment (808,179) (25,796) (278,319)
----------- ----------- ---------
Net cash used by investing
activities (747,523) (24,650) (277,047)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
SEE THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F-16
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Principal payments on long-term debt (399,996) (99,999) (99,999)
Proceeds from bank credit facility 6,903,000 1,300,000 777,000
Payments on bank credit facility (6,281,000) (1,300,000) (774,000)
Distribution to stockholders (1,560,000)
----------- ----------- ---------
Net cash used by financing
activities (1,337,996) (99,999) (96,999)
----------- ----------- ---------
Net increase (decrease) in cash 18,500 233,223 (61,944)
Cash, beginning of period 47,480 47,480 65,980
----------- ----------- ---------
Cash, end of period $ 65,980 $ 280,703 $ 4,036
=========== =========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during period for interest $ 65,248 $ 18,176 $ 16,191
Cash paid during period for income taxes $ 34,000 $ - $ -
</TABLE>
SEE THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-17
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
New West Dialysis Clinics, Inc. (the Company), a California corporation,
operates kidney dialysis facilities and provides related medical services
in Medicare certified dialysis facilities in Northern California.
Effective April 1, 1997, Total Renal Care, Inc. ("TRC"), a wholly owned
subsidiary of Total Renal Care Holdings, Inc. ("TRCH"), which operates
kidney dialysis facilities throughout the United States, its possessions
and the United Kingdom, purchased all of the assets (except cash and
accounts receivable), properties, and rights of the Company as discussed in
Note 10.
NET OPERATING REVENUES
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatments.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amount 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 Company under prospective payment systems at amounts
different from the Company's established private rate. Revenues under these
programs are generally recognized at prospective rates which are subject to
periodic adjustment by federal and state agencies. The Company bills non-
government third-party payors at established private rates. The Company has
contracts for the provision of dialysis services to members of certain
managed care organizations.
The Company provides credit, in the normal course of business, to patients
from (i) the federal and state government under the Medicare and Medicaid
programs representing approximately 70% of its dialysis revenue in 1996,
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 Company. Furthermore, management adjusts
reserves associated with these receivables as necessary.
INVENTORY
Inventory, consisting of medical supplies, is stated at the lower of cost
or market. Cost is determined by the first-in, first-out method.
F-18
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The policy of the Company is to
provide the depreciation over the estimated useful lives of the assets or
leasehold term, if shorter using the straight-line method. The estimated
useful lives range from 5 to 10 years.
INCOME TAXES
The Company, with the consent of its stockholders, elected under the
Internal Revenue and California tax codes to be an S corporation effective
December 1, 1986. For federal income tax purposes, in lieu of corporate
income taxes, the shareholders of an S corporation are taxed on their
proportionate share of the Company's taxable income. Accordingly, no
provision or liability for federal income taxes has been included in the
financial statements. The State of California taxes S corporations at a
rate of 1.5% of taxable income, which has been provided in the financial
statements.
CONCENTRATION OF CREDIT RISK
The Company is potentially subject to credit risk due to the concentration
of accounts receivable from patients covered by Medicare and MediCal. The
amounts due from these sources represented approximately 75% of the total
accounts receivable at December 31, 1996.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, notes receivable, accounts payable, employee compensation and
benefits, and other accrued liabilities. These balances, as presented in
the financial statements at December 31, 1996, approximate their fair
value. The Company's $1,000,000 credit facility, of which $622,000 was
outstanding as of December 31, 1996, and notes payable reflect fair value
as they are subject to fees and rates competitively determined in the
marketplace.
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 FINANCIAL STATEMENTS
The information presented as of March 31, 1997, and for the three months
ended March 31, 1997 and 1996, has not been audited. In the opinion of
management, the unaudited balance sheet and the unaudited statements of
income and cash flows include all adjustments, consisting solely of normal
recurring adjustments, necessary to present fairly the Company's balance
sheet as of March 31, 1997, and the Company's results of operations and
cash flows for the three months ended March 31, 1997 and 1996. The interim
results of operations are not necessarily indicative of results which may
occur for the full fiscal year.
F-19
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
2. OTHER RECEIVABLES
Other receivables at December 31, 1996 consist of the following:
<TABLE>
<S> <C>
Rebates receivable 238,368
Advances to stockholders 2,865
Current portion of notes receivable from stockholders 14,000
-----------
$ 255,233
===========
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consists of the following:
Medical equipment $ 3,843,571
Leasehold improvements 2,969,479
Office furniture and equipment 1,278,454
Vehicles 105,615
Construction in progress 611,448
-----------
8,808,567
Less: Accumulated depreciation (5,836,914)
-----------
$ 2,971,653
===========
4. NOTES RECEIVABLE FROM STOCKHOLDERS
Notes receivable from stockholders at December 31, 1996 consist of the following:
Note receivable from stockholder, quarterly
instalments of $2,840, including interest at
10%, maturing January 2000, unsecured $ 29,130
Notes receivable from stockholder, in varying
instalments with interest ranging from 10% to
10.5%, due dates ranging from on demand
through 2000, unsecured 46,256
-----------
75,386
Less: Current portion (14,000)
---- ------------
$ 61,386
============
</TABLE>
F-20
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
5. LINE OF CREDIT
The Company has available a line-of-credit agreement for borrowing up to
$1,000,000. Interest is .5% above prime rate and amounts borrowed are due
on demand. The agreement is secured by trade receivables, inventory,
property and equipment, and is guaranteed by the stockholders of the
Company. The Company had borrowings outstanding of $622,000 at December 31,
1996.
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1996 consist of the following:
Accrued profit-sharing contribution $300,000
Refunds due patients or payors 122,293
--------
$422,293
========
7. LONG-TERM DEBT
Long-term debt consists of a note payable of $166,685 at December 31, 1996.
The note is payable at $33,333 per month plus interest at .75% above the
bank prime rate, and is due August 1998. The Company has made advanced
payments in excess of the amount due during 1997, therefore, the balance is
classified as long-term on the balance sheet. The note is secured by trade
receivables, inventory, property and equipment, and personal guarantees of
the stockholders.
8. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
The Company is obligated under equipment, office and clinical facility
leases which have been classified as operating leases. The terms of the
leases require monthly payments ranging from $1,091 to $19,872, are
noncancellable and expire at various dates ranging from March 1997 through
June 2005. The Company is responsible for substantially all costs
associated with maintenance, taxes, insurance and utilities for the
facility leases.
Minimum rentals under these leases are as follows for the years ending
December 31:
1997 $ 811,189
1998 776,271
1999 637,391
2000 529,201
2001 176,410
Thereafter 295,357
----------
$3,225,819
==========
F-21
<PAGE>
NEW WEST DIALYSIS CLINICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Total rent expense under these leases was $859,049 for the year ended
December 31, 1996.
The stockholders of the Company have a minority interest in a limited
partnership which owns one of the primary office facilities leased by the
Company. Rents paid to this partnership were $277,532 for the year ended
December 31, 1996.
The Company is subject to various claims and lawsuits in the ordinary
course of business. In the opinion of management, the ultimate resolution
of these matters will not have a material adverse effect on the Company's
financial condition, results of operations, or cash flows.
9. RETIREMENT PLAN
The Company has established a profit-sharing plan covering substantially
all full-time employees. Contributions are made to the plan at the
discretion of the Company's Board of Directors up to a maximum of 15% of
eligible compensation. The Company contribution for the year ended December
31, 1996 was $300,000.
10. SUBSEQUENT EVENTS
Effective February 1, 1997, the Company entered into an Interim Operating
Management Agreement (the Management Agreement) whereby Total Renal Care
Holdings, Inc. (TRCH) agreed to provide the Company with management,
consulting and advisory services with respect to personnel, operational
policies, equipment and improvements, billing, accounting, funds management
and other advice as agreed between TRCH and the Company. The Management
Agreement remained in effect until the date that TRCH acquired
substantially all of the Company's assets. TRCH received a fee equal to the
operating income of the Company for the period the Management Agreement was
in effect. In April 1997, the Company entered into an Asset Purchase
Agreement (Purchase Agreement) to sell all of the assets (except cash and
accounts receivable), properties and rights of the Company to Total Renal
Care, Inc. (TRC), a subsidiary of TRCH. Under the Purchase Agreement, TRC
assumed only accounts payable and contracts incurred within the ordinary
course of business. TRC did not assume, and is not liable for any other
debt, obligations, or liabilities of the Company.
F-22
<PAGE>
MICHIGAN KIDNEY CENTERS
THE COMBINED FINANCIAL STATEMENTS OF
SOUTHFIELD DIALYSIS FACILITY, P.C.,
NORTH OAKLAND DIALYSIS FACILITY, P.C.,
MACOMB KIDNEY CENTER, P.C., and
NOVI KIDNEY CENTER, P.C.
DECEMBER 31, 1996
F-23
<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 Michigan Kidney Centers (the
combined financial statements of Southfield Dialysis Facility, P.C., North
Oakland Dialysis Facility, P.C., Macomb Kidney Center, P.C., and Novi Kidney
Center, P.C.; collectively the Company) at December 31, 1996 and the results of
its operations and cash flows for the year then ended, 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
November 20, 1997
F-24
<PAGE>
<TABLE>
<CAPTION>
MICHIGAN KIDNEY CENTERS
COMBINED BALANCE SHEET
- ------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31,
1996 1997
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 392,744 $ 490,518
Patient accounts receivable, less allowance for
doubtful accounts of $321,417 and $307,536,
respectively 2,921,250 2,572,152
Due from related parties 40,618 423,829
Other receivables 83,337 27,347
Inventory 245,987 176,413
Prepaid expenses 114,821 66,074
---------- -----------
Total current assets 3,798,757 3,756,333
Property and equipment, net 3,225,415 3,193,525
Deposits 32,202 32,202
Other assets 136,280 181,549
---------- -----------
$7,192,654 $ 7,163,609
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 413,511 $ 869,392
Accrued employee compensation and benefits 258,114 166,067
Other accrued liabilities 60,890 30,819
Line of credit 248,570 248,570
Current portion of long-term debt 602,485 710,636
Current portion of note payable to stockholders 230,000
Current portion of capital lease obligations 31,002
---------- -----------
Total current liabilities 1,614,572 2,255,484
---------- -----------
Long-term debt, less current portion 1,354,384 1,194,047
Note payable to stockholders 230,000
Capital lease obligations, less current portion 58,753
---------- -----------
1,643,137 1,194,047
---------- -----------
Stockholders' equity
Common stock 627,000 627,000
Retained earnings 3,307,945 3,087,078
---------- -----------
Total stockholders' equity 3,934,945 3,714,078
Commitments and contingencies (Note 8)
---------- -----------
$7,192,654 $7,163,609
========== ==========
</TABLE>
SEE THE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
F-25
<PAGE>
<TABLE>
<CAPTION>
MICHIGAN KIDNEY CENTERS
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
- ---------------------------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
Net operating revenues $13,729,945 $3,099,373 $3,599,803
----------- ---------- ----------
Operating expenses
Facilities 10,829,118 2,496,104 2,770,576
General and administrative 681,278 156,607 174,590
Provision for doubtful accounts 26,940 9,659 9,305
Depreciation and amortization 606,487 130,501 139,369
----------- ---------- ----------
Total operating expenses 12,143,823 2,792,871 3,093,840
----------- ---------- ----------
Operating income 1,586,122 306,502 505,963
Interest expense (265,195) (46,284) (57,453)
Interest income 56,204 9,012 7,820
Other income (expense) 184,689 3,482 (1,268)
----------- ---------- ----------
Income before income taxes 1,561,820 272,712 455,062
Provision for income taxes 47,154 11,789 15,929
----------- ---------- ----------
Net income 1,514,666 260,923 439,133
Retained earnings, beginning of period 3,693,279 3,693,279 3,307,945
Dividends paid (1,900,000) (200,000) (660,000)
----------- ---------- ----------
Retained earnings, end of period $ 3,307,945 $3,754,202 $3,087,078
=========== ========== ==========
</TABLE>
SEE THE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
F-26
<PAGE>
<TABLE>
<CAPTION>
MICHIGAN KIDNEY CENTERS
COMBINED STATEMENT OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,514,666 $ 260,923 $ 439,133
Adjustments to reconcile net income
to net cash provided from operating
activities
Depreciation and amortization 606,487 130,501 139,369
Change in operating assets and liabilities
Patient accounts receivable (365,470) 410,182 349,098
Due from related parties 11,328 9,773 (383,211)
Other receivables (8,553) (24,878) 55,990
Inventory (121,383) (5,299) 69,574
Prepaid expenses (32,755) 22,504 48,747
Other assets (56,074) (91,427) (45,269)
Deposits 3,262
Accounts payable 172,324 763,104 455,881
Accrued employee compensation
and benefits 59,941 (62,220) (92,047)
Other accrued liabilities (5,223) (66,349) (30,071)
----------- ---------- ----------
Net cash provided by operating
activities 1,778,550 1,346,814 1,007,194
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (951,040) (655,341) (107,479)
----------- ---------- ----------
Net cash used by investing
activities (951,040) (655,341) (107,479)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (583,514) (81,657) (141,941)
Proceeds from bank credit facility 110,419
Proceeds from long-term notes payable 1,046,419 673,412
Distribution to shareholders (1,900,000) (200,000) (660,000)
----------- ---------- ----------
Net cash used by financing
activities (1,326,676) 391,755 (801,941)
----------- ---------- ----------
Net increase (decrease) in cash (499,166) 1,083,228 97,774
Cash, beginning of period 891,910 891,910 392,744
----------- ---------- ----------
Cash, end of period $ 392,744 $1,975,138 $ 490,518
=========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during period for interest $ 242,892 $ 47,920 $ 67,599
Cash paid during period for income taxes $ 46,621 $ $ 16,061
</TABLE>
SEE THE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
F-27
<PAGE>
MICHIGAN KIDNEY CENTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Michigan Kidney Centers (the Company) operates kidney dialysis facilities
and provides related medical services in Medicare certified dialysis
facilities in the Detroit Metropolitan area. The Company comprises the
following entities: Southfield Dialysis Facility, P.C., North Oakland
Facility, P.C., Macomb Kidney Center, P.C. and Novi Kidney Centers, P.C.
Effective April 30, 1997, Total Renal Care, Inc. (TRC), a wholly owned
subsidiary of Total Renal Care Holdings, Inc. (TRCH), which operates kidney
dialysis facilities throughout the United States, its possessions and the
United Kingdom, purchased certain assets and liabilities of the Company as
discussed in Note 8.
BASIS OF PRESENTATION
The combined financial statements include the accounts of Southfield
Dialysis Facility, P.C., North Oakland Dialysis Facility, P.C., Macomb
Kidney Center, P.C. and Novi Kidney Center, P.C. The Center's financial
statements are combined as a result of common ownership. However, each of
the four facilities are separate legal entities. All significant
intercompany transactions and balances between these entities have been
eliminated upon combination.
NET OPERATING REVENUES
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatments.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amount 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 Company under prospective payment systems at amounts
different from the Company's established private rate. 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 contracts for the provision of dialysis services to members of certain
managed care organizations.
The Company provides credit, in the normal course of business, to patients
from (i) federal and state governments under Medicare and Medicaid programs
representing approximately 85% of its dialysis revenue in 1996, 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 Company. Furthermore, management adjusts
reserves associated with these receivables as necessary.
F-28
<PAGE>
MICHIGAN KIDNEY CENTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVENTORY
Inventory, consisting of medical supplies, is stated at the lower
of cost or market. Cost is determined by the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The policy of the Company is to
provide depreciation over the lesser of the estimated useful lives of the
assets or the lease term using an accelerated method. The estimated useful
lives range from five to seven years.
INCOME TAXES
The Company, with the consent of its stockholders, elected under the
Internal Revenue and Michigan tax codes to be an S corporation effective
December 1, 1986. For federal income tax purposes, in lieu of corporation
income taxes, the shareholders of an S corporation are taxed on their
proportionate share of the Company's taxable income. Accordingly, no
provision or liability for federal income taxes has been included in the
financial statements. The Company provides for the single business tax
imposed by the state of Michigan.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, accrued liabilities, stockholder loans and
other debt obligations. These balances, as presented in the financial
statements at December 31, 1996, approximate their fair value. The
Company's credit facility and long-term debt reflect fair value as they are
subject to fees and rates competitively determined in the marketplace.
STOCKHOLDERS' EQUITY
Retained earnings represent undistributed earnings of
the companies, which are all S corporations. The following summarizes the
capital structure of the combined entities:
<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND
AUTHORIZED OUTSTANDING PAR VALUE AMOUNT
<S> <C> <C> <C> <C>
Southfield Dialysis Facility, P.C. 50,000 1,000 $ 1.00 $ 1,000
North Oakland Dialysis Facility, P.C. 50,000 1,000 1.00 1,000
Macomb Kidney Center, P.C. 10,000 2,000 112.50 225,000
Novi Kidney Center, P.C. 10,000 4,000 400,000
------- ----- --------
120,000 8,000 $627,000
======= ===== ========
</TABLE>
F-29
<PAGE>
MICHIGAN KIDNEY CENTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 FINANCIAL STATEMENTS
The information presented as of March 31, 1997, and for the three months
ended March 31, 1997 and 1996, has not been audited. In the opinion of
management, the unaudited financial statements include all adjustments,
consisting solely of normal recurring adjustments, necessary to present
fairly the Company's financial position as of March 31, 1997, and the
Company's results of operations and cash flows for the three months ended
March 31, 1997 and 1996.
2. OTHER RECEIVABLES
Other receivables at December 31, 1996 consist of the following:
Rebates receivable $ 76,850
Other 6,487
--------
$ 83,337
========
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consists of the following:
Medical equipment $ 1,736,602
Leasehold improvements 3,152,384
Office equipment 199,220
Furniture and fixtures 437,463
Vehicles 21,087
-----------
5,546,756
Less: Accumulated depreciation (2,321,341)
-----------
$ 3,225,415
===========
Assets under capital lease were $160,187 with accumulated depreciation of
$97,560 at December 31, 1996.
F-30
<PAGE>
MICHIGAN KIDNEY CENTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. LINE OF CREDIT
The Company has available a line-of-credit agreement for borrowing up to
$1,350,000. The borrowings bear interest at .5% over prime (8.25% at
December 31, 1996) and are payable on demand. The agreement is secured by
patient receivables, inventory, property and equipment, and is guaranteed
by the stockholders of the Company. The Company had borrowings outstanding
of $248,570 at December 31, 1996.
5. OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1996 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Interest $ 51,393
Payroll taxes 3,425
City and state taxes 6,072
----------
$ 60,890
==========
</TABLE>
6. LONG-TERM DEBT
Long-term debt at December 31, 1996 consists of the following:
<TABLE>
<S> <C>
Notes payable - Bank, payable in monthly instalments,
bearing interest ranging from 8.91% to 10.5% per annum,
maturing October 1997 through October 2001. The notes
are secured by equipment. $1,440,377
Notes payable - Bank, payable in monthly instalments,
bearing interest at 9.19% per annum, maturing March
through May of 2000. The notes are secured by leasehold
improvements. 506,840
Note payable - Bank, payable in monthly instalments,
bearing interest at 9.75% per annum, maturing May 1998.
The loan is secured by a vehicle (Note 3). 9,652
----------
1,956,869
Less: Current portion (602,485)
----------
Long-term debt $1,354,384
==========
</TABLE>
F-31
<PAGE>
MICHIGAN KIDNEY CENTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Principal maturities of long-term debt are as follows for the years ending
December 31:
<TABLE>
<S> <C>
1997 $ 602,485
1998 448,662
1999 417,946
2000 313,778
2001 173,998
----------
$1,956,869
==========
</TABLE>
7. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company is obligated under equipment, office and clinical facility
leases which have been classified as operating leases. The leases are
noncancellable and expire at various dates ranging from December 1997
through June 2006. The Company is responsible for substantially all costs
associated with maintenance, taxes, insurance and utilities for the
facility leases. The Company is also obligated under various capital leases
for equipment.
Minimum payments under these leases are as follows for the years ending
December 31:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1997 $ 30,998 $ 448,667
1998 34,226 307,133
1999 35,629 300,199
2000 6,886 306,030
2001 314,832
Thereafter 1,049,543
-------- ----------
Total minimum lease payments 107,739 $2,726,404
==========
Amounts representing interest (17,984)
--------
Present value of minimum payments 89,755
Current portion (31,002)
--------
$ 58,753
========
</TABLE>
Total rent expense was $859,049 for the year ended December 31, 1996.
F-32
<PAGE>
MICHIGAN KIDNEY CENTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has a minority interest in a limited partnership which owns one
of the facilities leased by the Company. The investment of $68,771 is
accounted for using the equity method and is included in other assets.
Income from distributions was $51,858 for the year ended December 31, 1996.
Rents paid to this partnership were $24,686 for the year ended December 31,
1996.
In 1995, certain stockholders loaned $230,000 to the Company. The loans are
unsecured and bear interest at 12% interest and are payable in full in
February 1998. Accrued interest on the loans at December 31, 1996 was
$6,938. These loans were paid in full during April 1997. As of December 31,
1997, the Company had a receivable balance of $40,618 due from a related
party, Michigan Kidney Consultants, P.C., the physician's practice which
refers dialysis patients to the facilities. The amount represents charges
for general and administrative services.
As of March 31, 1997, the Company had a receivable balance of $365,000 due
from a related company, Brighton, P.C., which is another dialysis facility
still under construction at the time. This amount was incurred during the
first three months of 1997 relating to the construction and other start-up
costs paid by the Michigan Kidney Centers on behalf of Brighton. This
amount was paid in full during April 1997.
8. SUBSEQUENT EVENTS
Effective March 1, 1997, the Company entered into an Interim Operating
Management Agreement (the Management Agreement) whereby Total Renal Care
Holdings, Inc. (TRCH) agreed to provide the Company with management,
consulting and advisory services with respect to personnel, operational
policies, equipment and improvements, billing, accounting, funds management
and other advice as agreed between TRCH and the Company. The Management
Agreement remained in effect until the date TRCH acquired certain assets of
the Company. TRCH received a fee equal to the operating income of the
Company for the period the Management Agreement was in effect.
Effective April 30, 1997, the stockholders and the Company entered into an
Asset Purchase Agreement to sell all of the assets (except cash, accounts
receivable, prepaid expenses, insurance policies and rebates due from
vendors), properties and rights of the Company to TRC. Under the purchase
agreement, TRC assumed only accounts payable and contracts incurred within
the ordinary course of business. TRC did not assume and is not liable for
any other debt, obligations, or liabilities of the Company.
F-33
<PAGE>
DIALYSIS CARE
OF NORTH CAROLINA
FINANCIAL STATEMENTS
DECEMBER 31, 1996
F-34
<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
income and retained earnings and of cash flows present fairly, in all material
respects, the financial position of Dialysis Care of North Carolina at December
31, 1996 and the results of its operations and cash flows for the year then
ended, 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
Phoenix, Arizona
December 12, 1997
F-35
<PAGE>
DIALYSIS CARE OF NORTH CAROLINA
BALANCE SHEET
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
(unaudited)
<S> <C> <C>
Assets
Cash $ 145,964 $ 72,215
Patient accounts receivables, less allowance for
doubtful accounts of $355,813 and $80,813 2,767,954 2,635,939
Other receivables 35,000 -
Inventory 30,000 452,202
Prepaid expenses 19,094 35,785
---------- ----------
Total current assets 2,998,012 3,196,141
Property and equipment, net 4,945,508 4,875,999
Receivables from stockholders 612,484 612,484
Other assets - 13,577
---------- ----------
$8,556,004 $8,698,201
---------- ----------
Liabilities and Stockholders' Equity
Current portion of long-term debt $1,017,144 $1,848,927
Accounts payable 2,055,408 2,095,354
Patient refunds payable 132,000 -
Accrued employee compensation and benefits 208,446 26,202
Other accrued liabilities 65,150 -
---------- ----------
Total current liabilities 3,478,148 3,970,483
Obligations to related parties 1,453,522 1,483,395
Long-term debt 1,554,151 303,514
---------- ----------
Total liabilities 6,485,821 5,757,392
---------- ----------
Stockholders' equity
Common stock,no par value, 1,000 shares authorized
issued and outstanding
Retained earnings 2,070,183 2,940,809
---------- ----------
Total stockholders' equity 2,070,183 2,940,809
---------- ----------
$8,556,004 $8,698,201
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
DIALYSIS CARE OF NORTH CAROLINA
STATEMENT OF INCOME AND RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Nine months ended
December 31, September 30,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
Net operating revenues $17,301,269 $15,020,122 $16,484,806
----------- ----------- -----------
Operating expenses
Facilities 12,072,359 9,635,415 10,441,439
General and administrative 2,030,866 1,454,227 3,070,133
Provision for doubtful accounts 275,000 203,770 383,269
Depreciation and amortization 1,800,420 1,796,203 1,558,817
----------- ----------- -----------
Total operating expenses 16,178,645 13,089,615 15,453,658
----------- ----------- -----------
Operating income 1,122,624 1,930,507 1,031,148
Interest expense (215,234) (216,034) (165,000)
Other income - - 4,478
----------- ----------- -----------
Net income 907,390 1,714,473 870,626
Retained earnings, at beginning of period 1,162,793 1,162,793 2,070,183
----------- ----------- -----------
Retained earnings, at end of period $ 2,070,183 $ 2,877,266 $ 2,940,809
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
DIALYSIS CARE OF NORTH CAROLINA
Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 907,390 $ 1,714,473 $ 870,626
Adjustment to reconcile net income
to net cash provided from operating activities
Depreciation and amortization 1,800,420 1,796,203 1,558,817
Provision for doubtful accounts 275,000 203,770 383,269
Change in operating assets and liabilities
Patient accounts receivable 350,585 203,605 (119,254)
Other receivables (31,407) (14,125) 35,000
Inventory - (378,541) (422,202)
Prepaid expenses (6,974) 56,570 (16,690)
Other assets 5,534 (2,400) (13,577)
Accounts payable 454,846 139,240 39,872
Patient refunds payable 132,000 - (132,000)
Accrued employee compensation
and benefits 43,222 35,103 (182,244)
Other accrued liabilities 42,826 28,288 (65,150)
----------- ----------- -----------
Net cash provided by operating activities 3,973,442 3,782,186 1,936,467
----------- ----------- -----------
Cash flows used from investing activities
Purchase of property and equipment (3,211,533) (3,376,503) (1,591,362)
----------- ----------- -----------
Cash flows used from financing activities
Principal payments on long-term debt (615,945) (405,683) (448,727)
Obligations to related parties - - 29,873
----------- ----------- -----------
Net cash used by financing activities (615,945) (405,683) (418,854)
----------- ----------- -----------
Net increase (decrease) in cash 145,964 - (73,749)
Cash, beginning of period - - 145,964
----------- ----------- -----------
Cash, end of period $ 145,964 $ - $ 72,215
----------- ----------- -----------
Supplemental disclosure of cash flow information
Cash paid during period for interest $ 219,559 $ 200,000 $ 180,000
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
DIALYSIS CARE OF NORTH CAROLINA
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Dialysis Care of North Carolina (the Company), a North Carolina
corporation, operates kidney dialysis facilities and provides related
medical services in Medicare certified dialysis facilities in North
Carolina.
Effective December, 1997, Total Renal Care, Inc. ("TRC"), a wholly owned
subsidiary of Total Renal Care Holdings, Inc. ("TRCH"), which operates
kidney dialysis facilities throughout the United States, its possessions
and the United Kingdom and Italy, purchased all of the assets (except
cash, accounts receivable, and personal property disposed of prior to
closing date), properties, and rights of the Company as discussed in Note
6.
NET OPERATING REVENUES
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatments.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amount 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 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 non-government third-party payors at established private rates. The
Company has contracts for the provision of dialysis services to members of
certain managed care organizations.
The Company provides credit, in the normal course of business, to patients
from (i) the federal and state government under the Medicare and Medicaid
programs representing approximately 90% of its dialysis revenue in 1996,
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 Company. Furthermore, management adjusts
reserves associated with these receivables as necessary.
INVENTORY
Inventory, consisting of medical supplies, is stated at the lower of cost
or market. Cost is determined by the first-in, first-out method.
F-39
<PAGE>
DIALYSIS CARE OF NORTH CAROLINA
Notes to Financial Statements
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The policy of the Company is to
provide depreciation over the estimated useful lives of the assets using
the straight-line method. The estimated useful lives range from 3 to 10
years.
INCOME TAXES
The Company, with the consent of its stockholders, elected under the
Internal Revenue and North Carolina tax codes to be an S corporation. For
federal and state income tax purposes, in lieu of corporate income taxes,
the shareholders of an S corporation are taxed on their proportionate share
of the Company's taxable income. Accordingly, no provision or liability
for federal or state income taxes has been included in the financial
statements.
CONCENTRATION OF CREDIT RISK
The Company is potentially subject to credit risk due to the concentration
of accounts receivable from patients covered by Medicare and Medicaid. The
amounts due from these sources represented approximately 90% of the total
accounts receivable at December 31, 1996.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, accrued employee compensation and benefits,
and other accrued liabilities. These balances, as presented in the
financial statements at December 31, 1996, approximate their fair value.
The Company's notes payable reflect fair value as they are subject to fees
and rates competitively determined in the marketplace.
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 FINANCIAL STATEMENTS
The information presented as of September 30, 1997, and for the nine months
ended September 30, 1997 and 1996, has not been audited. In the opinion of
management, the unaudited balance sheet and the unaudited statements of
income and cash flows include all adjustments, consisting solely of normal
recurring adjustments, necessary to present fairly the Company's balance
sheet as of September 30, 1997, and the Company's results of operations and
cash flows for the nine months ended September 30, 1997 and 1996. The
interim results of operations are not necessarily indicative of results
which may occur for the full fiscal year.
F-40
<PAGE>
DIALYSIS CARE OF NORTH CAROLINA
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consists of the following:
<TABLE>
<S> <C>
Land $ 363,871
Buildings 2,434,662
Equipment 5,501,570
----------
8,300,103
Less: Accumulated depreciation 3,354,595
----------
$4,945,508
==========
</TABLE>
3. RECEIVABLES FROM STOCKHOLDERS
Receivables from stockholders of $612,484 at December 31, 1996 included
$348,500 from Robert Hill, Sr. and $217,500 from Stephen Hill. These
amounts are non-interest bearing and are due upon demand. The Company does
not intend to collect during the next twelve months.
4. OBLIGATIONS TO RELATED PARTIES
Obligations to related parties of $1,453,522 at December 31, 1996, consist
of payables to other companies related due to common shareholders,
including approximately $1.4 million payable to Robert Hill Construction.
These amounts are non-interest bearing and are due upon demand. Based on
the related parties' representations, the Company does not expect to pay
these obligations during the next twelve months.
5. LONG-TERM DEBT
Long-term debt consists of various notes payable aggregating $2,571,295 at
December 31, 1996. The aggregate monthly payments of principal and
interest for the notes payable approximate $149,000 per month. Interest
rates are generally variable rates ranging from prime (8.25%) to prime +1%
(9.25%). The terms of the notes vary from 35 to 83 months. Substantially
all of the notes will expire during 1998 and 1999. The notes are secured
by a building and medical equipment.
6. SUBSEQUENT EVENTS
Effective November 1, 1997, the Company entered into an Asset Purchase
Agreement (Purchase Agreement) to sell all of the assets (except cash,
accounts receivable and personal property disposed of prior to closing
date), properties and rights of the Company to TRC, a subsidiary of TRCH.
Under the Purchase Agreement, TRC assumed only accounts payable and
contracts incurred within the ordinary course of business. TRC did not
assume, and is not liable for any other debt, obligations, or liabilities
of the Company.
F-41
<PAGE>
THE RENAL DIALYSIS
BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1996
F-42
<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
income and retained earnings and of cash flows present fairly, in all material
respects, the financial position of The Renal Dialysis Business of The Rogosin
Institute, Inc. at December 31, 1996 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 The Renal
Dialysis Business' 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
New York, New York
December 18, 1997
F-43
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 2,858 $ 3,688
Patient accounts receivables, less
allowance for doubtful accounts of
$1,396,589 and $1,390,167, respectively 4,731,588 5,518,400
Inventory 210,394 169,585
Other assets 62,460 49,522
---------- ----------
Total current assets 5,007,300 5,741,195
Property and equipment (Note 3) 1,965,458 2,911,344
---------- ----------
$6,972,758 $8,652,539
========== ==========
LIABILITIES AND BUSINESS EQUITY
Current portion of long term lease (Note 4) $ 84,393 $ 115,881
Accounts payable and accrued expenses 1,886,790 1,790,370
Accrued employee compensation and benefits 333,083 283,374
---------- ----------
Total current liabilities 2,304,266 2,189,625
Deferred rent (Note 4) 486,675 488,403
Long term lease payable (Note 4) 131,005 325,258
---------- ----------
Total liabilities 2,921,946 3,003,286
---------- ----------
Commitments and contingencies (Note 4)
Business equity (Note 5) 4,050,812 5,649,253
---------- ----------
$6,972,758 $8,652,539
========== ==========
</TABLE>
See accompanying notes to the financial statements
F-44
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
STATEMENT OF OPERATIONS AND BUSINESS EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
Net operating revenues $16,816,175 $12,493,092 $13,254,309
----------- ----------- -----------
Operating expenses
Facilities 9,590,165 6,933,167 7,389,936
General and administrative 4,919,339 3,597,538 4,917,597
Provision for doubtful accounts 732,125 547,320 712,648
Depreciation and amortization 234,961 199,300 331,280
----------- ----------- -----------
Total expenses 15,476,590 11,277,325 13,351,461
----------- ----------- -----------
Net income (loss) 1,339,585 1,215,767 (97,152)
Net (withdrawals) advances from Rogosin (1,323,005) (1,600,141) 1,695,593
Business equity, at beginning of period 4,043,232 4,043,232 4,050,812
----------- ----------- -----------
Business equity, at end of period $ 4,050,812 $ 3,658,858 $ 5,649,253
=========== =========== ===========
</TABLE>
See accompanying notes to the financial statements
F-45
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,339,585 $ 1,215,767 $ (97,152)
Adjustments to reconcile net income
to net cash provided from operating
activities
Depreciation and amortization 234,961 199,300 331,280
Deferred rent escalation 2,316 1,731 1,728
Change in operating assets and liabilities
Patient accounts receivable 137,981 347,969 (786,812)
Inventory 191,680 27,617 40,809
Other assets (6,891) (5,166) 12,938
Accounts payable and accrued expenses 155,890 163,202 (96,420)
Accrued employee compensation
and benefits (16,291) (53,227) (49,709)
----------- ----------- ----------
Net cash provided (used) by operating
activities 2,039,211 1,897,193 (643,338)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (697,372) (7,264) (898,841)
----------- ----------- ----------
Net cash used by investing
activities (697,372) (7,264) (898,841)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on capitalized leases (78,258) (58,136) (152,584)
Net (withdrawals) advances from Rogosin (1,332,005) (1,900,141) 1,695,593
----------- ----------- ----------
Net cash (used) provided by financing
activities (1,410,263) (1,958,277) 1,543,009
----------- ----------- ----------
Net (decrease) increase in cash (68,404) (68,348) 830
Cash, beginning of period 71,262 71,262 2,858
----------- ----------- ----------
Cash, end of period $ 2,858 $ 2,914 $ 3,688
=========== =========== ==========
Supplemental disclosure of cash flow
information
Cash paid during period for interest $ 19,555 $ 15,223 $ 24,877
</TABLE>
See accompanying notes to the financial statements
F-46
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying financial statements comprise The Rogosin Institute Inc.'s
("Rogosin") Dialysis Business - The Renal Dialysis Business, (the
"Business"), a division of The Rogosin Institute. The Business operates
three kidney dialysis facilities and provides related medical services in
Medicare and Medicaid certified dialysis facilities in New York City.
Prior to December 2, 1997, The Renal Dialysis Business represented the
dialysis business of The Rogosin Institute, Inc. and its operations were
included in Rogosin's financial statements. Effective December 2, 1997, TRC
of New York ("TRC"), a wholly owned subsidiary of Total Renal Care
Holdings, Inc. ("TRCH"), which operates kidney dialysis facilities
throughout the United States, its possessions, the United Kingdom and
Italy, purchased 80% of the assets, properties and the rights of The Renal
Dialysis Business as discussed in Note 8. In connection with this
acquisition, the Business will be contributed to a limited partnership
where TRC will be the general partner (80% ownership interest) and The
Rogosin Institute, Inc. will be the sole limited partner (20% ownership
interest).
BASIS OF PRESENTATION
The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of The Renal Dialysis
Business for the year ended December 31, 1996. The financial statements
have been prepared as if The Renal Dialysis Business had operated as a
stand-alone entity for all periods presented, and include those assets,
liabilities, revenues and expenses directly attributable to The Renal
Dialysis Business operations. Certain expenses incurred by Rogosin have
been allocated to the Business on a basis which management believes
represents a reasonable allocation in order to present The Renal Dialysis
Business as a stand-alone entity. These allocations consist of corporate
general and administrative expenses, facilities expense, and insurance
expense. Corporate general and administrative expenses have been allocated
based on an estimate of Rogosin personnel time dedicated to the operations
and management of the Business. Facilities expense has been allocated based
on square footage of space utilized. Revenues for the year represent
revenues from specific treatment provided by the dialysis centers of
Rogosin. Rogosin's funding of The Renal Dialysis Business' operations prior
to January 1, 1996 is shown as divisional equity in the accompanying
balance sheet.
The Renal Dialysis Business financial statements represent the "carve-out"
financial position, results of operations and cash flows for the periods
presented. The financial information of The Renal Dialysis Business
presented herein does not necessarily reflect what the financial position
and results of operations of the Business would have been had it operated
as a stand alone entity during the periods covered and may not be
indicative of future operations or financial position.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies is presented below to assist
the reader in understanding and evaluating the financial statements.
F-47
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
NET OPERATING REVENUES
Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatments.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amount 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 Business under prospective payment systems at amounts
different from the Business' established private rate. Revenues under these
programs are generally recognized at prospective rates which are subject to
periodic adjustment by federal and state agencies. The Business bills non-
government third-party payors at established private rates. The Business
has contracts for the provision of dialysis services to members of certain
managed care organizations.
The Business provides credit, in the normal course of business, to patients
from (i) the federal and state government under the Medicare and Medicaid
programs which represent approximately 81% of its dialysis revenue in 1996
and approximately 44% of its net accounts receivable at December 31, 1996,
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 Business. Furthermore, management adjusts
reserves associated with these receivables as necessary.
CASH
Cash represents an imprest account used for minor disbursements (petty
cash).
INVENTORY
Inventory, consisting of medical supplies, is stated at the lower of cost
(determined using first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Capitalized leased assets are
recorded at the present value of the minimum lease payments at the
inception of the lease. Maintenance and repairs are charged to expense as
incurred. Depreciation and amortization are calculated and recorded using
the straight-line method over the estimated useful lives of the assets and
for capitalized leases over the lesser of the estimated useful life or
lease term. The useful lives of the property and equipment are:
Leasehold improvements 5 to 15 years
Machinery 5 to 15 years
Furniture and fixtures 5 years
F-48
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
BENEFITS AND INSURANCE
Estimated amounts are accrued for claims incurred but not reported (IBNR),
based on Rogosin's specific experience, relative to the self insured
medical and hospitalization benefit plans and the workers' compensation
retrospective premium arrangement.
INCOME TAXES
The Business' operations have been included in The Rogosin Institute Inc.'s
federal and state informational returns. The Institute is exempt from
income taxes under Section 501(c)(3) of the Internal Revenue Code. As such
no provision for income taxes has been recorded for the Business.
CONCENTRATION OF CREDIT RISK
The Business is potentially subject to credit risk due to the concentration
of accounts receivable from patients covered by Medicare and Medicaid and
Blue Cross/Blue Shield. The amounts due from these sources represented
approximately 44% and 22%, respectively, of the total accounts receivable
at December 31, 1996.
FINANCIAL INSTRUMENTS
The Business' financial instruments consist primarily of cash, accounts
receivable, other receivables, accounts payable, accrued employee
compensation and benefits, and other accrued liabilities. Those balances,
as presented in the financial statements at December 31, 1996, approximate
their fair value.
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 amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the periods presented. Actual results could differ from those
estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The information presented as of September 30, 1997 and for the nine months
ended September 30, 1996 and 1997 has not been audited. In the opinion of
management, the unaudited interim financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Business' financial position as of September 30, 1997
and the results of the Business' operations and cash flows for the nine
months ended September 30, 1996 and 1997, respectively. The interim results
of operations are not necessarily indicative of results which may occur for
the full fiscal year.
F-49
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consists of the following:
Medical equipment $ 2,046,223
Leasehold improvements 1,319,976
Office furniture 253,312
Construction in progress 709,362
-----------
4,328,873
Less: Accumulated depreciation (2,363,415)
---- -----------
$ 1,965,458
===========
4. LEASE COMMITMENTS, DEFERRED RENT AND CONTINGENCIES
The Business is obligated under equipment leases which have been classified
as capital leases. The Business also acquired $337,000 of medical equipment
via capital lease in March 1997. The Business is also obligated under
facilities leases for the space in the Helmsely medical tower and Brooklyn
locations. These leases are classified as operating and expire at various
dates ranging from December 31, 2001 through December 31, 2011. The
Business is responsible for substantially all costs associated with
maintenance, taxes, insurance and utilities for the facility leases.
Future minimum payments, by year and in the aggregate, under a capitalized
lease and non-cancelable operating leases for the years ending December 31
are as follows:
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
----------- ----------
<S> <C> <C>
1997 $ 97,813 $ 848,471
1998 97,813 896,407
1999 40,755 911,942
2000 927,631
2001 892,773
Thereafter 3,967,474
-------- ----------
Total minimum lease payments 236,381 $8,444,698
==========
Less amount representing imputed interest at 7.6% 20,983
--------
Present value of minimum lease payments
reflected as long-term debt $215,398
--------
</TABLE>
Total rent expense under these leases was $748,109 for the year ended
December 31, 1996. One of the rental agreements provides for reduced rent
in the early years and an escalation in the later years. The Business
records the rent expense on a straight line basis, therefore, the deferred
balance which is created relates to rent expense which has been recorded in
excess of the amounts paid.
F-50
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
The Business is subject to various claims and lawsuits in the ordinary
course of business. In the opinion of management, the ultimate resolution
of these matters will not have a material adverse effect on the Business'
financial condition, results of operations, or cash flows.
5. RELATED PARTY TRANSACTIONS
The business participates in a centralized cash management program
administered by Rogosin. Advances from Rogosin or excess cash sent to
Rogosin has been treated as an adjustment to business equity. No interest
has been charged on this balance. Intercompany receivables and payables
have historically been settled in the normal course of business and are not
interest bearing. The net intercompany balance has been included in the
balance sheet as "Business Equity".
Rogosin has provided to The Renal Dialysis Business certain legal, general
and administrative services (regulatory, cash management, and insurance).
Charges for these services have been based on allocation of Rogosin's
actual direct and indirect costs incurred by Rogosin to render these
services to the business. The allocation methods used are as follows:
Legal - Estimated cost of legal fees is based on a percentage of
historical use of the legal fees incurred on behalf of the business.
Employee Benefits - Estimated based on business' payroll as a percentage of
Rogosin's total payroll.
Facilities - The cost of the shared facilities are allocated based on a
percentage of square footage occupied by Rogosin.
General and Administrative - Estimated based on wages and benefits of
employees and related time incurred working with each facility of Rogosin.
The allocation methodology is consistent with the method used by Rogosin to
allocate the cost of similar services to its other "programs". Total
allocated costs for the year ended December 31, 1996 were $7,182,100. No
provisions have been made for possible incremental costs that may have been
incurred had The Renal Dialysis Business operated as a stand-alone entity
for the period presented.
F-51
<PAGE>
THE RENAL DIALYSIS BUSINESS OF
THE ROGOSIN INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
6. PROFESSIONAL LIABILITIES INSURANCE
Rogosin purchases professional liabilities and general liabilities
insurance through a related party which participates in a captive insurance
company. The premiums are based on a modified claims made coverage and are
actuarially determined based on the actual experience of the captive,
Institute specific experience, and estimated current expense. Rogosin
allocated a portion of the premiums to the Business, in the amount of
$31,250 for the year ended December 31, 1996. The premium has been fully
funded in each fiscal year. For the period November 1, 1983 through
December 31, 1996, Rogosin's professional liabilities coverage has been
provided on a modified claims made basis and Rogosin, based on historical
and current information, estimates that incurred but not reported claims
are minimal and, accordingly, has recorded no liability nor allocated such
liability to The Renal Dialysis Business for such possible claims.
7. RETIREMENT PLAN
The Business' defined contribution retirement plan, which covers
substantially all of its employees, provides for the Institute to make
regular contributions based on the percentage of salaried employees to
total employees. Payments upon retirement or termination of employment are
based on amounts credited to individual accounts. The contribution
allocated to The Renal Dialysis Business for the year ended December 31,
1996 was $260,450.
8. SUBSEQUENT EVENTS
Effective December 2, 1997, Rogosin entered into an Asset Purchase
Agreement (Purchase Agreement) to sell 80% of the assets (except "Operating
Licenses", cash and accounts receivable), properties and rights of The
Renal Dialysis Business to TRC. Under the Purchase Agreement, TRC assumed
only designated liabilities identified within the Purchase agreement
(accounts payable, lease obligations, employees compensation and benefits).
TRC did not assume, and is not liable for any other debt, obligations, or
liabilities of Rogosin.
F-52
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Balance Sheet of Total Renal Care
Holdings, Inc. as of September 30, 1997 gives effect to the acquisition by the
Company of the following businesses as if such businesses were acquired on
September 30, 1997: Dialysis Care of North Carolina, which was acquired on
November 1, 1997 (the "North Carolina Facilities"); the Renal Dialysis Business
of The Rogosin Institute Inc., which was acquired on December 2, 1997 (the
"Rogosin Facilities"); and certain other individually insignificant acquisitions
consummated during the period from October 1, 1997 through December 19, 1997,
and individually insignificant acquisitions which were probable as of December
19, 1997.
The Unaudited Pro Forma Combined Statement of Income for the nine months
ended September 30, 1997 gives effect to the acquisition by the Company of the
following businesses as if such businesses were acquired on January 1, 1997: New
West Dialysis Clinics, Inc., which was acquired on April 1, 1997 (the "New West
Facilities"); Michigan Kidney Centers, which was acquired on May 1, 1997 (the
"Michigan Facilities"); the North Carolina Facilities; the Rogosin Facilities;
and other individually insignificant acquisitions consummated during the period
January 1, 1997 through December 19, 1997, and individually insignificant
acquisitions which were probable as of December 19, 1997.
The Unaudited Pro Forma Combined Statement of Income for the nine months
ended September 30, 1996 gives effect to the acquisition by the Company of the
following businesses as if such businesses were acquired on January 1, 1996: the
Nephrology Services Business of Caremark International Inc., which was acquired
on March 15, 1996 (the "Caremark Facilities"); Upstate Dialysis, Inc., which was
acquired on March 15, 1996, and Greer Kidney Center, Inc., which was acquired on
November 1, 1996 (the "South Carolina Facilities"); the New West Facilities; the
Michigan Facilities; the North Carolina Facilities; the Rogosin Facilities; and
other individually insignificant acquisitions consummated during the period
January 1, 1997 through December 19, 1997, and individually insignificant
acquisitions which were probable as of December 19, 1997. The Unaudited Pro
Forma Combined Statement of Income for the nine months ended September 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 year ended
December 31, 1996 gives effect to the acquisition by the Company of the
following businesses as if such businesses were acquired on January 1, 1996: the
Caremark Facilities; the South Carolina Facilities; the New West Facilities; the
Michigan Facilities; the North Carolina Facilities; the Rogosin Facilities; and
other individually insignificant acquisitions consummated during the period
January 1, 1997 through December 19, 1997, and individually insignificant
acquisitions which were probable as of December 19, 1997. The Unaudited Pro
Forma Combined Statement of Income for the year ended December 31, 1996 also
gives effect to the Debt Retirement as if it occurred on January 1, 1996.
The Unaudited Pro Forma Combined Financial Statements are presented for
informational purposes only and do not purport to represent what the Company's
financial position as of September 30, 1997 or the Company's results of
operations for the nine month periods ended September 30, 1997 and 1996 or for
the year ended December 31, 1996 would actually have been had the applicable
acquisitions and Debt Retirement, in fact, occurred on September 30, 1997,
January 1, 1997 or January 1, 1996, respectively, or what the Company's
financial position or results of operations will be for any future period. The
Unaudited Pro Forma Information should be read in conjunction with the
consolidated financial statements and related notes thereto included elsewhere
in this Prospectus and the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company"
included in the Total Renal Care Holdings, Inc. Form 10-K for the year ended
December 31, 1996.
F-53
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
Unaudited Pro Forma Combined Balance Sheet
September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
The North Other
Company Carolina Rogosin Insignificant Pro Forma
(Historical) Facilities Facilities Acquisitions Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 15,455 $ 72 $ 4 $ 2,050 $ (2,126)(b) $ 15,455
Accounts receivable, net 131,744 2,636 5,519 3,925 (11,049)(b) 132,775
Other current assets 24,778 488 219 603 (1,060)(b) 25,028
-------- ------ ------ ------- -------- --------
Total current assets 171,977 3,196 5,742 6,578 (14,235) 173,258
Property & equipment, net 84,846 4,876 2,911 3,371 (1,680)(b) 94,324
Intangible assets, net 286,210 - - - 131,686 (a) 417,896
Other assets 11,784 626 - 231 (857)(b) 11,784
-------- ------ ------ ------- -------- --------
$554,817 $8,698 $8,653 $10,180 $114,914 $697,262
======== ====== ====== ======= ======== ========
Current liabilities $ 28,784 $3,970 $2,190 $ 1,995 $ (7,940)(b) $ 28,999
Long-term debt 253,880 304 - 1,848 (2,152)(b) 393,464
139,584 (a)
Other long-term liabilities 2,856 1,483 814 100 (2,397)(b) 2,856
Minority interest 7,640 - - - 2,646 (c) 10,286
Common stock 44 - - 120 (120)(d) 44
Additional paid-in capital 260,157 - - 1,510 (1,510)(d) 260,157
Notes receivable from
stockholders (2,975) - - - - (2,975)
Retained earnings 4,431 2,941 5,649 4,607 (13,197)(d) 4,431
-------- ------ ------ ------- -------- --------
$554,817 $8,698 $8,653 $10,180 $114,914 $697,262
======== ====== ====== ======= ======== ========
</TABLE>
F-54
<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 September 30, 1997 gives effect to the acquisition of the North
Carolina Facilities, the Rogosin Facilities and other Insignificant
Acquisitions, in each case as if such acquisitions were consummated on
September 30, 1997. The pro forma adjustments are based on consideration
exchanged, including the estimated fair value of assets acquired and
liabilities assumed. The actual adjustments, which will be based on
valuations of fair value as of the date of acquisition, may differ from those
made herein. The Company does not believe the effect of any adjustments would
be material.
2. PRO FORMA ADJUSTMENTS
a) To record the acquisition of the North Carolina Facilities, the Rogosin
Facilities and the other Insignificant Acquisitions as follows (in
thousands):
<TABLE>
<CAPTION>
NORTH OTHER
CAROLINA ROGOSIN INSIGNIFICANT
FACILITIES FACILITIES ACQUISITIONS TOTAL
<S> <C> <C> <C> <C>
Purchase Price $49,300 $18,290 $71,994 $139,584
Net book value of assets acquired 3,000 1,912 2,986 7,898
------- ------- ------- --------
Purchase price allocated to intangible assets $46,300 $16,378 $69,008 $131,686
======= ======= ======= ========
</TABLE>
The purchase prices of the North Carolina Facilities, the Rogosin Facilities
and the other Insignificant Acquisitions were assumed to be borrowed under
the Senior Credit Facility (or will be borrowed, in the case of those
acquisitions which are considered probable at December 19, 1997).
b) To reflect assets and liabilities not acquired by the Company.
c) The Company purchased a less than 100% interest in two 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.
F-55
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
Unaudited Pro Forma Combined Statement of Income
Nine months ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
New West Michigan North Carolina
The Company Facilities Facilities Facilities
Nine months ended Three months ended Four months ended Nine months ended
September 30, 1997 March 31, 1997 April 30, 1997 September 30, 1997
(Historical) (Historical) (Historical) (Historical)
<S> <C> <C> <C> <C>
Net operating revenues $307,450 $5,990 $4,800 $16,485
Operating expenses 251,703 5,730 4,125 15,454
-------- ------ ------ -------
Operating income 55,747 260 675 1,031
Interest expense, net 7,738 16 68 160
-------- ------ ------ -------
Income before income taxes,
minority interests and extraordinary item 48,009 244 607 871
Income taxes 18,255 4 21 -
-------- ------ ------ -------
Income before minority interest and
extraordinary item 29,754 240 586 871
Minority interest in income of
consolidated subsidiaries 3,193 - - -
-------- ------ ------ -------
Income before extraordinary item $ 26,561 $ 240 $ 586 $ 871
======== ====== ====== =======
Income per share before extraordinary item $ 0.59
========
Weighted average number of common shares and
equivalents outstanding 45,146
========
<CAPTION>
Rogosin Facilities Other
Nine months ended Insignificant
September 30, 1997 Acquisitions Pro Forma
(Historical) (Historical) Adjustments Combined
<S> <C> <C> <C> <C>
Net operating revenues $13,254 $39,005 $ (1,534)(b) $385,450
Operating expenses 13,351 33,567 5,153 (c) 329,083
------ ------- -------- --------
Operating income (97) 5,438 (6,687) 56,367
Interest expense, net - (40) (604)(d) 19,375
12,037 (e)
------ ------- -------- --------
Income before income taxes,
minority interests and extraordinary item (97) 5,478 (18,120) 36,992
Income taxes - 512 (5,033)(f) 13,759
------ ------- -------- --------
Income before minority interest and
extraordinary item (97) 4,966 (13,087) 23,233
Minority interest in income of
consolidated subsidiaries - - (17)(g) 3,176
------ ------- -------- --------
Income before extraordinary item $ (97) $ 4,966 $(13,070) $ 20,057
====== ======= ======== ========
Income per share before extraordinary item $ 0.44
========
Weighted average number of common shares and
equivalents outstanding 45,146
========
</TABLE>
F-56
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
Unaudited Pro Forma Combined Statement of Income
Nine months ended September 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Caremark South Carolina New West
The Company Facilities Facilities Facilities
9 months ended 2 months ended 2 months ended 9 months ended
September 30, 1996 Debt February 28, 1996 February 28, 1996 September 30, 1996
(Historical) Retirement (a) (Historical) (Historical) (Historical)
<S> <C> <C> <C> <C> <C>
Net operating revenues $188,153 $ -- $7,805 $1,133 $17,162
Operating expenses 153,920 -- 8,250 1,055 15,501
-------- ------ ------ ------ -------
Operating income 34,233 -- (445) 78 1,661
Interest expense, net 3,862 (804) 127 (1) 37
-------- ------ ------ ------ -------
Income before income taxes,
minority interests and
extraordinary item 30,371 804 (572) 79 1,624
Income taxes 11,537 -- (232) -- 26
-------- ------ ------ ------ -------
Income before minority interest
and extraordinary item 18,834 804 (340) 79 1,598
Minority interest in income of
consolidated subsidiaries 2,296 -- -- -- --
-------- ------ ------ ------ -------
Income before extraordinary item $ 16,538 $ 804 $ (340) $ 79 $ 1,598
======== ====== ====== ====== =======
Income per share before
extraordinary item $ 0.39
========
Weighted average number of common
shares and equivalents outstanding 42,348
========
</TABLE>
<TABLE>
<CAPTION>
Michigan North Carolina Rogosin
Facilities Facilities Facilities Other
9 months ended 9 months ended 9 months ended Insignificant
September 30, 1996 September 30, 1996 September 30, 1996 Acquisitions Pro Forma
(Historical) (Historical) (Historical) (Historical) Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $10,298 $15,020 $12,493 $49,864 $ (66) (b) $301,862
Operating expenses 9,108 13,090 11,277 44,275 7,410 (c) 263,886
------- ------- ------- ------- -------- --------
Operating income 1,190 1,930 1,216 5,589 (7,476) 37,976
Interest expense, net 18 216 -- (3) (605) (d) 18,558
15,711 (e)
------- ------- ------- ------- -------- --------
Income before income taxes,
minority interests and
extraordinary item 1,172 1,714 1,216 5,592 (22,582) 19,418
Income taxes 35 -- -- 370 (4,697) (f) 7,039
------- ------- ------- ------- -------- --------
Income before minority interest
and extraordinary item 1,137 1,714 1,216 5,222 (17,885) 12,379
Minority interest in income of
consolidated subsidiaries -- -- -- -- (2) (g) 2,294
------- ------- ------- ------- -------- --------
Income before extraordinary item $ 1,137 $ 1,714 $ 1,216 $ 5,222 $(17,883) $ 10,085
======= ======= ======= ======= ======== ========
Income per share before
extraordinary item $ 0.23
========
Weighted average number of common
shares and equivalents outstanding 800 43,148
======== ========
</TABLE>
F-57
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
Unaudited Pro Forma Combined Statement of Income
Year ended December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Caremark South Carolina
Facilities Facilities
The Company Two months ended Two months ended
December 31, 1996 Debt February 28, 1996 February 28, 1996
(Historical) Retirement(a) (Historical) (Historical)
<S> <C> <C> <C> <C>
Net operating revenues $272,947 $ - $7,805 $1,133
Operating expenses 224,118 - 8,250 1,055
-------- ----- ------ ------
Operating income 48,829 - (445) 78
Interest expense, net 5,175 (804) 127 (1)
-------- ----- ------ ------
Income before income taxes,
minority interests and extraordinary item 43,654 804 (572) 79
Income taxes 16,351 - (232) -
-------- ----- ------ ------
Income before minority interest and
extraordinary item 27,303 804 (340) 79
Minority interest in income of
consolidated subsidiaries 3,578 - - -
-------- ----- ------ ------
Income before extraordinary item $ 23,725 $ 804 $ (340) $ 79
======== ===== ====== ======
Income per share before extraordinary item $ .55
========
Weighted average number of common shares and
equivalents outstanding 42,988
========
<CAPTION>
New West Michigan North Carolina
Facilities Facilities Facilities
December 31, 1996 December 31, 1996 December 31, 1996
(Historical) (Historical) (Historical)
<S> <C> <C> <C>
Net operating revenues $22,883 $13,730 $17,301
Operating expenses 20,668 12,144 16,179
------- ------- -------
Operating income 2,215 1,586 1,122
Interest expense, net 48 24 215
------- ------- -------
Income before income taxes,
minority interests and extraordinary item 2,167 1,562 907
Income taxes 34 47 -
------- ------- -------
Income before minority interest and
extraordinary item 2,133 1,515 907
Minority interest in income of
consolidated subsidiaries - - -
------- ------- -------
Income before extraordinary item $ 2,133 $ 1,515 $ 907
======= ======= =======
Income per share before extraordinary item
Weighted average number of common shares and
equivalents outstanding
<CAPTION>
Rogosin Other
Facilities Insignificant
December 31, 1996 Acquisitions Pro Forma
(Historical) (Historical) Adjustments Combined
<S> <C> <C> <C> <C>
Net operating revenues $16,816 $66,485 $ (66)(b) $419,034
Operating expenses 15,476 59,033 9,710 (c) 366,633
------- ------- -------- --------
Operating income 1,340 7,452 (9,776) 52,401
Interest expense, net - (4) (765)(d) 24,964
20,949 (e)
------- ------- -------- --------
Income before income taxes,
minority interests and extraordinary item 1,340 7,456 (29,960) 27,437
Income taxes - 493 (6,955)(f) 9,738
------- ------- -------- --------
Income before minority interest and
extraordinary item 1,340 6,963 (23,005) 17,699
Minority interest in income of
consolidated subsidiaries - - (8)(g) 3,570
------- ------- -------- --------
Income before extraordinary item $ 1,340 $ 6,963 $(22,997) $ 14,129
====== ======= ======== ========
Income per share before extraordinary item $ 0.32
========
Weighted average number of common shares and
equivalents outstanding 800 43,788
======= ========
</TABLE>
F-58
<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 nine months ended
September 30, 1997 gives effect to the acquisition by the Company of the New
West Facilities, the Michigan Facilities, the North Carolina Facilities, the
Rogosin Facilities and other individually insignificant acquisitions
consummated during the period January 1, 1997 through December 19, 1997, and
individually insignificant acquisitions which were probable as of December 19,
1997, in each case as if such acquisitions were consummated on January 1,
1997.
The Unaudited Pro Forma Combined Statement of Income for the nine months ended
September 30, 1996 gives effect to the acquisition by the Company of the
Caremark Facilities; the South Carolina Facilities; the New West Facilities;
the Michigan Facilities; the North Carolina Facilities; the Rogosin
Facilities; and other individually insignificant acquisitions consummated
during the period January 1, 1997 through December 19, 1997, and individually
insignificant acquisitions which were probable as of December 19, 1997, in
each case as if such acquisitions were consummated on January 1, 1996. The
Unaudited Pro Forma Combined Statement of Income for the nine months ended
September 30, 1996 also gives effect to the Debt Retirement as if such
transaction occurred on January 1, 1996.
The Unaudited Pro Forma Combined Statement of Income for the year ended
December 31, 1996 gives effect to the acquisition by the Company of the
Caremark Facilities, the South Carolina Facilities, the New West Facilities,
the Michigan Facilities, the North Carolina Facilities, the Rogosin
Facilities and other individually insignificant acquisitions consummated
during the period January 1, 1997 through December 31, 1997, and individually
insignificant acquisitions which were probable as of December 19, 1997, in
each case as if such acquisitions were consummated on January 1, 1996. The
Unaudited Pro Forma Combined Statement of Income for the year ended December
31, 1996 also gives effect to the Debt Retirement as if such transaction
occurred on January 1, 1996.
The pro forma adjustments are based on consideration exchanged, including the
estimated fair value of assets acquired and liabilities assumed. The actual
adjustments, which will be based on valuations of fair value as of the date of
acquisition, may differ from those made herein. The Company does not believe
the effect of any adjustments would be material.
Net income per common share data and weighted average number of common shares
and equivalents outstanding for the nine month periods ended September 30,
1997 and 1996 and for the year ended December 31, 1996 have been retroactively
restated to reflect the five-for-three stock split which occurred in October
1997.
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. The
Company retired the remaining 12% senior subordinated discount notes for
$68,499,000 including consent payments of $1,100,000. These repurchases
resulted in an extraordinary loss of $7.7 million.
(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 to 40, 10 and 7
years, respectively.
(d) To eliminate interest expense on borrowings not assumed by the Company.
(e) To record interest expense resulting from acquisitions funded by borrowings
from the senior credit facility with an assumed interest rate of 8% and
assuming that all acquisitions during the period were funded by borrowings
as discussed in Note a) in the Notes to Unaudited Proforma Combined Balance
Sheet.
F-59
<PAGE>
(f) To record income tax effects related to the pro forma adjustments.
(g) To record the minority interest income from two 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 that shares issued in the April 3, 1996
Secondary Offering (the "Secondary Offering") to the extent that cash
generated from such shares was used to purchase facilities and was
outstanding from January 1, 1996 to the date of the Secondary Offering as
follows:
Caremark Facilities 1,560,000
South Carolina Facilities 359,000
Share amounts were derived by taking the total purchase price of each
significant acquisition divided by the proceeds per share from the
Secondary Offering of $31.42 per share. As these acquisitions took place in
March 1996, these shares were factored into the weighted average number of
common shares and equivalents outstanding for an additional three months.
F-60
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description of Exhibit Page
Number
<C> <S>
10.1 Revolving Credit Agreement, dated as of October 24, 1997,
by and among Total Renal Care Holdings, Inc., the lenders
thereto, DLJ Capital Funding, Inc., as Syndication Agent,
First Union National Bank, as Documentation Agent, and
the Bank of New York, as Administrative Agent (the
"Revolving Credit Agreement").*
10.2 Amendment No. 1 and Consent No. 1, dated as of December
1, 1997, to the Revolving Credit Agreement.
10.3 Term Loan Agreement, dated as of October 24, 1997, by and
among Total Renal Care Holdings, Inc., the lenders
thereto, DLJ Capital Funding, Inc., as Syndication Agent,
First Union National Bank, as Documentation Agent, and
the Bank of New York, as Administrative Agent (the "Term
Loan Agreement").*
10.4 First Amendment, Dated December 1, 1997, to the Term Loan
Agreement.
10.5 Subsidiary Guaranty dated as of October 24, 1997 by Total
Renal Care, Inc., TRC West, Inc. and Total Renal Care
Acquisition Corp. in favor of and for the benefit of the
Bank of New York, as Collateral Agent, the lenders to the
Revolving Credit Agreement, the lenders to the Term Loan
Agreement, the Term Agent (as defined therein), the
Acknowledging Interest Rate Exchangers (as defined
therein) and the Acknowledging Currency Exchangers (as
defined therein).
10.6 Borrower Pledge Agreement dated as of October 24, 1997
and entered into by and between Total Renal Care
Holdings, Inc., and the Bank of New York, as Collateral
Agent, the lenders to the Revolving Credit Agreement, the
lenders to the Term Loan Agreement, the Term Agent (as
defined therein), the Acknowledging Interest Rate
Exchangers (as defined therein) and the Acknowledging
Currency Exchangers (as defined therein).
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.7 Subsidiary Pledge Agreement dated as of October 24, 1997
by Total Renal Care, Inc., TRC West, Inc. and Total Renal
Care Acquisition Corp., and the Bank of New York, as
Collateral Agent, the lenders to the Revolving Credit
Agreement, the lenders to the Term Loan Agreement, the
Term Agent (as defined therein), the Acknowledging Interest
Rate Exchangers (as defined therein) and the Acknowledging
Currency Exchangers (as defined therein).
23.1 Consent of Price Waterhouse LLP.
</TABLE>
- -------------
* The registrant agrees to furnish supplementally a copy of any schedule thereto
to the Commission upon its request.
<PAGE>
================================================================================
================================================================================
EXHIBIT 10.1
REVOLVING CREDIT AGREEMENT
by and among
TOTAL RENAL CARE HOLDINGS, INC.,
THE LENDERS PARTY HERETO,
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent,
FIRST UNION NATIONAL BANK,
as Documentation Agent,
AND
THE BANK OF NEW YORK,
as Administrative Agent
with
BNY CAPITAL MARKETS, INC. and DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION,
as Co-Arrangers,
________________
$800,000,000
________________
Dated as of October 24, 1997
================================================================================
================================================================================
<PAGE>
REVOLVING CREDIT AGREEMENT, dated as of October 24, 1997, 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"), DLJ CAPITAL FUNDING,
------- ------
INC., as Syndication Agent (the "Syndication Agent"), FIRST UNION NATIONAL BANK,
=================
as Documentation Agent (the "Documentation Agent"), and THE BANK OF NEW YORK, as
===================
administrative agent for the Lenders (in such capacity, the "Administrative
--------------
Agent").
- -----
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 in
Dollars 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.
"Additional Guarantor Event": any time when (i) any Person that is not
--------------------------
a Guarantor becomes a First-Tier wholly-owned Domestic Subsidiary of the
Borrower after the Effective Date, or (ii) (x) the aggregate total assets
(without duplication) at such time of all Subsidiaries of the Borrower formed or
acquired after the Effective Date that are not Guarantors, plus (y) the
----
aggregate total Investments made during the period from the Effective Date to
such time (calculated without duplication and excluding Investments made
pursuant to Section 8.5(f) to the extent the proceeds thereof were used to
acquire Stock or assets included in (x) above) by the Credit Parties in all
Subsidiaries of the Borrower that are not Guarantors, less (z) the aggregate
----
total assets at such time of all Subsidiaries of the Borrower existing on the
Effective Date that became Guarantors after the Effective Date, exceeds 10% of
-------
the Consolidated total assets of the Borrower and its Subsidiaries.
"Adjusted Net Cash Proceeds": with respect to any Asset Sale as of any
--------------------------
date of
<PAGE>
determination, the amount equal to the difference between (i) the Net Cash
Proceeds from such Asset Sale, and (ii) the Reinvested Proceeds in connection
with such Asset Sale that have been used prior to the date prepayment is
required to be made under Section 2.7(e).
"Advance": an ABR Advance, a Eurodollar Advance or an Alternate
-------
Currency 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 or an Alternate Currency Advance, an
amount equal to the principal amount of such Eurodollar Advance or such
Alternate Currency 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, Alternate Currency
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, Alternate
Currency 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, Alternate Currency 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, Alternate
Currency 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.
"Affiliate Transaction": as defined in Section 8.14.
---------------------
"Agent Payment Office": (i) with respect to all amounts owing under
--------------------
the Loan Documents (other than in respect of Alternate Currency Advances),
initially, the office, branch, affiliate, or correspondent bank of the
Administrative Agent designated as its "Domestic Payment Office" in Exhibit N
and, thereafter, such other office, branch, affiliate, or correspondent bank
thereof as it may from time to time designate in writing as such to the
Borrower, the Issuing Bank, the Swing Line Lender and each Lender, and (ii) with
respect to all amounts owing in respect of each Alternate Currency Advance,
initially, the office, branch, affiliate, or correspondent bank of the
Administrative Agent designated as its payment office for the applicable
Currency in Exhibit N and, thereafter, such other office, branch, affiliate, or
correspondent bank thereof as it may from time to time designate in writing as
such to the Borrower, the Issuing Bank, the Swing Line Lender and each Lender.
"Aggregate Alternate Currency Exposure": at any time, the sum at such
-------------------------------------
time of
<PAGE>
(i) the outstanding principal amount of the Alternate Currency Revolving Credit
Loans of all Lenders (determined, in the case of each Alternate Currency
Revolving Credit Loan, on the basis of the Dollar Equivalent thereof), and (ii)
an amount equal to the Letter of Credit Exposure of all Lenders attributable to
Alternate Currency Letters of Credit.
"Aggregate Credit Exposure": at any time, the sum at such time of the
-------------------------
Credit Exposures of all Lenders.
"Aggregate Revolving Credit Commitments": on any date, the sum of the
--------------------------------------
Revolving Credit Commitments of all Lenders on such date.
"Agreement": this Revolving Credit Agreement, as the same may be
---------
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.
"Alternate Currency": any Currency (other than Dollars).
------------------
"Alternate Currency Advances": the Revolving Credit Loans (or any
---------------------------
portions thereof) at such time as they (or such portions) are made and/or being
maintained in an Alternate Currency at a rate of interest based upon the
applicable Alternate Currency Euro Rate.
"Alternate Currency Equivalent": on any date of determination thereof,
-----------------------------
the amount, as determined by the Administrative Agent, of the relevant Alternate
Currency which could be purchased with the amount of Dollars involved in such
computation at the spot rate at which such Alternate Currency may be exchanged
into Dollars as set forth on such date on Dow Jones Telerate pages 262, 264,
265, 266 or 9993 (or any successor pages) or, if such rate does not appear on
such pages, at the arithmetic mean of the respective spot exchange rates
therefor notified to the Administrative Agent by BNY as of 11:00 A.M. (London
time) on such date for delivery two Business Days later.
"Alternate Currency Euro Rate": with respect to the Interest Period
----------------------------
applicable to any Alternate Currency 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)(i) the rate per annum for deposits in the applicable Currency
having a maturity most nearly comparable to the Interest Period in respect of
such Alternate Currency Advance which appears on page 3740 or 3750, or any other
applicable page with respect to such Currency, of the Dow Jones Telerate Screen
(or any successor page) as of 11:00 a.m. London time on the date which is two
Business Days prior to the first day of such Interest Period, (ii) if such rate
does not appear on such page of the Dow Jones Telerate Screen (or any successor
<PAGE>
page), the rate, as reported by BNY to the Administrative Agent, quoted by BNY
at ap proximately 11:00 a.m. London time (or as soon thereafter as practicable)
on the date which is two Business Days prior to the first day of such Interest
Period to leading banks in the interbank eurocurrency market as the rate at
which BNY is offering deposits in such Currency in an amount approximately equal
to BNY's Commitment Percentage of such Alternate Currency Advance and having a
period to maturity approximately equal to such Interest Period, or (iii) to the
extent required by Section 2.11, the rate, as reported by BNY to the
Administrative Agent, determined by BNY to be reflective of the all-in cost of
funds to BNY of funding such Alternate Currency Advance in an amount
approximately equal to its Commitment Percentage of such Alternate Currency
Advance and having a period to maturity approximately equal to such Interest
Period, by
(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, mar ginal, emergency, supplemental and special
reserves) and similar charges (including any liquidity, monetary control and
prudential requirements of the Bank of England), expressed as a decimal,
established by any Governmental Authority, including 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 Alternate Currency 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. Alternate Currency 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 Alternate Currency Euro Rate shall be ad justed automatically
on and as of the effective date of any change in any such reserve or charge.
"Alternate Currency Lending Office": as to any Lender, with respect
---------------------------------
to an Alternate Currency Advance in any Currency, initially, the office, branch
or affiliate of such Lender designated as such Lender's Alternate Currency
Lending Office for Alternate Currency Advances in such Currency on Schedule 1.1,
and thereafter, such other office, branch or affiliate of such Lender through
which it shall be making or maintaining Alternate Currency Advances in such
Currency, as reported by such Lender to the Administrative Agent and the
Borrower.
"Alternate Currency Letter of Credit": each Letter of Credit
-----------------------------------
denominated in an Alternate Currency.
"Alternate Currency Revolving Credit Loan": each Revolving Credit Loan
----------------------------------------
denominated in an Alternate Currency.
"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
<PAGE>
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, (iii) in the
case of such Lender's Alternate Currency Advances, its Alternate Currency
Lending Office, and (iv) 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 Alternate Currency Advances, and
based on the most recently delivered Compliance Certificate of the Borrower, the
percentage set forth below under the heading "Applicable Margin" next to the
applicable period:
Applicable
Period Margin
------ -----------
When the Leverage Ratio
is equal to or greater
than 4.00:1.00 1.750%
When the Leverage Ratio
is less than 4.00:1.00
but equal to or greater
than 3.75:1.00 1.625%
When the Leverage Ratio
is less than 3.75:1.00
but equal to or greater
than 3.50:1.00 1.375%
When the Leverage Ratio
is less than 3.50:1.00
but equal to or greater
than 3.00:1.00 1.250%
When the Leverage Ratio
is less than 3.00:1.00
but equal to or greater
than 2.50:1.00 0.900%
When the Leverage Ratio
is less than 2.50:1.00
<PAGE>
but equal to or greater
than 2.00:1.00 0.800%
When the Leverage Ratio
is less than 2.00:1.00
but equal to or greater
than 1.50:1.00 0.750%
When the Leverage Ratio
is less than 1.50:1.00
but equal to or greater
than 1.00:1.00 0.550%
When the Leverage Ratio
is less than 1.00:1.00 0.450%
(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
4.00:1.0.
(c) Notwithstanding the foregoing, until the Compliance Certificate
for the fiscal year ending December 31, 1997 shall have been delivered to the
Administrative Agent, the Applicable Margin shall be 1.250% 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.
"Approved Fund": with respect to any Lender that is a fund that
-------------
invests in commercial loans, any other fund that invests in commercial loans and
is advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Asset Sale": any direct or indirect sale, issuance, conveyance,
----------
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Borrower or any of
its Subsidiaries (including any sale and leaseback transaction) to any Person of
(a) any capital Stock of any Subsidiary of the Borrower, or (b) any other
Property or assets of the Borrower or any Subsidiary of the Borrower other than
in the ordinary course of business; provided that Asset Sales shall not include
--------
(i) any transfer of Property or assets in connection with a dividend to holders
of capital Stock if such payment is permitted by Section 8.4, (ii) the granting
of Permitted Liens, (iii) a merger permitted under Section 8.3, (iv) the sale or
other disposition of Cash Equivalents or inventory in the ordinary course of
business or obsolete equipment in the ordinary course of business consistent
with past practices of the Borrower or (v) the lease or sublease of any real or
personal property in the ordinary course of business (provided that, for
purposes of this definition, "ordinary course of business" shall not include the
sale or disposition of any Subsidiary of the Borrower, any
<PAGE>
ESRD-Related Business or any interest therein).
"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).
--------------
"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.
"Borrower Pledge Agreement": the Borrower Pledge Agreement, dated the
-------------------------
date hereof, by and between the Borrower and the Collateral Agent, substantially
in the form of Exhibit J, as the same may be amended, supplemented or otherwise
modified from time to time.
"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":
------------
(i) for all purposes (other than as covered by clause (ii) below), any
day except Saturday, Sunday or a day which in New York City is a legal holiday
or a day on which banking institutions are authorized or required by law or
other government action to close, and
(ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, a Eurodollar Advance, an
Alternate Currency Advance
<PAGE>
or an Alternate Currency Letter of Credit, any day which is a Business Day
described in clause (i) above, is a day for trading by and between banks in the
London interbank market and which is not a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close in the national jurisdiction of which the applicable Currency is
the freely transferable lawful money.
"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.
"Cash Collateral Account": as defined in Section 2.7(b).
-----------------------
"Cash Equivalents": (a) securities with maturities of one year or
----------------
less from the date of acquisition, issued, fully guaranteed or insured by the
United States Government, (b) securities with maturities of one year or less
from the date of acquisition issued, fully guaranteed or insured by any State of
the United States of America or any political subdivision thereof rated at least
AA- by Standard & Poor's Ratings Services or Aa3 by Moody's Investors Service,
Inc., or carrying an equivalent rating by a nationally recognized rating agency
if both of the two named rating agencies cease publishing ratings of
investments, (c) certificates of deposit, time deposits, overnight bank
deposits, bankers' acceptances and repurchase agreements issued by a Qualified
Issuer having maturities of 270 days or less from the date of acquisition, (d)
commercial paper of an issuer rated at least A-2 by Standard & Poor's Ratings
Services or P-2 by Moody's Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, and having maturities of 270
days or less from the date of acquisition, (e) money market accounts or funds, a
substantial portion of the assets of which constitute Cash Equivalents described
in clauses (a) through (d) above, with, issued by or managed by Qualified
Issuers, and (f) money market accounts or funds, a substantial portion of the
assets of which constitute Cash Equivalents described in clauses (a) through (d)
above, which money market accounts or funds have net assets of not less than
$500,000,000 and have the highest rating available of either Standard & Poor's
Ratings Services or Moody's Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments.
"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.
"Co-Arrangers": BNY Capital Markets, Inc. and Donaldson, Lufkin &
------------
Jenrette Securities Corporation.
"Code": the Internal Revenue Code of 1986, as the same may be amended
----
from
<PAGE>
time to time, or any successor thereto, and the rules and regulations issued
thereunder, as from time to time in effect.
"Collateral": collectively, the Collateral under and as defined in the
----------
Collateral Documents.
"Collateral Agent": BNY acting in its capacity as Collateral Agent
----------------
under the Intercreditor Agreement, the Collateral Documents and the Subsidiary
Guaranty, and its successors in such capacity.
"Collateral Documents": collectively, the Borrower Pledge Agreement,
--------------------
each Subsidiary Pledge Agreement and all other instruments or documents
delivered by any Credit Party in order to grant to the Collateral Agent Liens on
any Collateral.
"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": when applied to an accounting term used with respect
------------
to more than one Person, such accounting term determined on a consolidated basis
for such Persons in accordance with GAAP, including principles of consolidation
under GAAP.
"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 obliga tion of such secondary obligor (i) guaranteeing or in effect
guaranteeing any return on any In vestment made in another Person, or (ii)
guaranteeing or in effect guaranteeing any In debtedness, lease, dividend or
other obligation ("primary obligation") of any other Person (the "primary
------------------ -------
obligor") in any manner, whether directly or indirectly, including, without
- -------
limitation,
<PAGE>
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 Director": 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) an ABR Advance is converted to a
Eurodollar Advance, (iii) a Eurodollar Advance is continued as a new Eurodollar
Advance, or (iv) an Alternate Currency Advance is continued as a new Alternate
Currency 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 (determined, in the case of each Alternate Currency Revolving
Credit Loan, on the basis of the Dollar Equivalent thereof), (ii) the Swing Line
Exposure of such Lender and (iii) the Letter of Credit Exposure of such Lender.
"Credit Party": the Borrower, each Guarantor and each Pledgor.
------------
"Currencies": collectively, Dollars, French Francs, German Marks,
----------
Japanese Yen and Sterling Pounds; each a "Currency".
"Currency Agreement": any foreign exchange contract, currency swap
------------------
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement to which the Borrower or any of its Subsidiaries is a
party.
"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,
<PAGE>
hemoperfusion, plasmapheresis, continuous arteriovenous hemofiltration and bio-
medical services related to the foregoing.
"Dollar Equivalent": on any date of determination thereof, the amount,
-----------------
as determined by the Administrative Agent, of Dollars which could be purchased
with the amount of the relevant Alternate Currency involved in such computation
at the spot rate at which Dollars may be exchanged into such Alternate Currency
as set forth on such date on Dow Jones Telerate pages 262, 264, 265, 266 or 9993
(or any successor pages) or, if such rate does not appear on such pages, at the
spot exchange rate therefor notified to the Administrative Agent by BNY as of
11:00 A.M. (London time) on such date for delivery two Business Days later.
"Dollars" and "$": lawful currency of the United States of America.
------- -
"Domestic Acquisition": any Acquisition that is not a Foreign
--------------------
Acquisition.
"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.
"Domestic Subsidiary": any Subsidiary of the Borrower that is not a
-------------------
Foreign Subsidiary.
"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 31,
1997.
"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.
<PAGE>
"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.
"Equity Interests": capital Stock and all warrants, options or other
----------------
rights to acquire capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, capital Stock).
"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 in Dollars 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
<PAGE>
(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)(B), (v) or (vi) of the definition of Indebtedness.
"Existing Pension Plans": as defined in Section 4.12.
----------------------
"Existing Indebtedness": collectively, the Indebtedness of the
---------------------
Borrower and its Subsidiaries under (i) the 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 BNY, as
administrative agent, as amended, and (ii) the other Loan Documents (as defined
in such Credit Agreement), including, without limitation, in each case, 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
<PAGE>
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.
--------------------
"First-Tier": with respect to any Subsidiary of the Borrower, the
----------
direct ownership by the Borrower of such Subsidiary's capital Stock.
"Foreign Acquisition": as defined in Section 8.5(f).
-------------------
"Foreign Subsidiary": any Subsidiary of the Borrower which is a
------------------
"controlled foreign corporation" within the meaning of Section 957 of the Code.
"French Francs": freely transferable lawful money of France.
-------------
"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 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 set ting forth a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP.
"German Marks": freely transferable lawful money of Germany.
------------
"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.
"Guarantors": collectively, (i) TRC, TRC West, Inc. and TRC
----------
Acquisition Corp., (ii) any other First-Tier wholly-owned Domestic Subsidiary of
the Borrower as of the Effective Date, and (iii) any other Subsidiary of the
Borrower that becomes a party to the Subsidiary
<PAGE>
Guaranty pursuant to Section 7.11; each a "Guarantor".
---------
"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.
"Hedging Obligations": with respect to any Person, the obligations of
-------------------
such Person under Interest Rate Agreements or Currency Agreements designed to
protect such Person against fluctuations in interest or currency exchange rates.
"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 Loans 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
(A) acceptance facilities and the amount available to be drawn under all letters
of credit issued for the account of such Person, and (B) 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.
------------------
"Indemnified Tax": as to any Person, any Tax, except (i) a Tax on the
---------------
Income imposed on such Person and (ii) any interest, fees or penalties for late
payment imposed on such
<PAGE>
Person, in each case to the extent not attributable to the failure of the
Borrower or any of its Subsidiaries to obtain any necessary approvals or
consents of, or file or cause to be filed any reports, applications, documents,
instruments or information required to be filed pursuant to any applicable law,
rule, regulation or request of, any Governmental Authority.
"Indemnified Tax Person": the Administrative Agent, the Collateral
----------------------
Agent, the Syndication Agent, the Documentation Agent, a Co-Arranger, the
Issuing Bank, the Swing Line Lender, or any Lender, as the case may be.
"Intellectual Property": all copyrights, trademarks, servicemarks,
---------------------
patents, trade names and service names.
"Intercreditor Agreement": the Intercreditor and Collateral Agency
-----------------------
Agreement, dated the date hereof, among the Collateral Agent, the Administrative
Agent, BNY, as the administrative agent under the Term Loan Facility, the Credit
Parties listed on the signature pages thereof and such other Persons that may
become party thereto, substantially in the form of Exhibit M, as amended,
supplemented or otherwise modified from time to time.
"Interest Coverage Ratio": at any date of determination, the ratio of
-----------------------
(i) Consolidated Pre-Minority EBITDA to (ii) Interest Expense of the Borrower
and its Subsidiaries on a Consolidated basis, 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
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 or
Alternate Currency 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 or Alternate Currency 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 or
---------------
Alternate Currency 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 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
<PAGE>
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 twenty different
Interest Periods outstanding at any one time for all Revolving Credit Loans; and
(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 Agreement": any interest rate swap agreement, interest
-----------------------
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement to which the Borrower or any of its Subsidiaries is a party.
"Investments": with respect to any Person, all investments by such
-----------
Person in other Persons (including Affiliates of such Person) in the form of
loans, Contingent Obligations, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. The amount of any Investment shall be the original cost
of such Investment plus the cost of all additions thereto, without any
----
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Japanese Yen": freely transferable lawful money of Japan.
------------
"Judgment Currency": as defined in Section 11.19.
-----------------
"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, provided that each of
----------------
the Existing Letters of Credit shall constitute a Letter of Credit for the
purposes of this Agreement.
<PAGE>
"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
(determined, in the case of each Alternate Currency Letter of Credit, on the
basis of the Dollar Equivalent thereof) of the outstanding Letters of Credit at
such time, (y) the aggregate amount of unpaid drafts (determined, in the case of
each Alternate Currency Letter of Credit, on the basis of the Dollar Equivalent
thereof) 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 determined, in the case of such reimbursement
obligations in respect of any Alternate Currency Letter of Credit, on the basis
of the Dollar Equivalent thereof), 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 L.
------------------------
"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
fiscal quarter period of the Borrower ending on the date of determination
multiplied by four; and
(b) for all other purposes, (i) Total Debt to (ii) the sum of (A)
Consolidated Pre-Minority EBITDA for the fiscal quarter of the Borrower
immediately preceding such date of determination (or in the event that the date
of determination is a fiscal quarter ending date, the fiscal quarter period then
ended) less any Consolidated EBITDA during such fiscal quarter attributable to
any Permitted Acquisition which occurred during such fiscal quarter, multiplied
by four, plus (B) Consolidated EBITDA during such fiscal quarter attributable to
----
any Permitted Acquisition which (1) occurred during such fiscal quarter, and (2)
shall have been operated by the Borrower or any of its Subsidiaries or included
in the Consolidated results of operations of the Borrower, in either case for at
least 30 days during such fiscal quarter, calculated as if each such Permitted
Acquisition occurred on the first day of such fiscal quarter, 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, the Collateral Documents, the Subsidiary Guaranty and
the Intercreditor Agreement.
"Loan": a Revolving Credit Loan or a Swing Line Loan, as the case may
----
be.
<PAGE>
"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 any Credit Party to
perform its obligations under the Loan Documents to which it is a party or (iii)
the ability of the Administrative Agent, the Collateral Agent or 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 any Credit Party to
perform its obligations under the Loan Documents to which it is a party or (iii)
the ability of the Administrative Agent, the Collateral Agent or the Lenders to
enforce the Loan Documents.
"Maturity Date": September 30, 2004, 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(g).
-------------------
"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.
"Net Cash Proceeds": with respect to any Asset Sale by any Person, the
-----------------
excess, if any, of (i) the cash received by such Person and/or its Affiliates
(including any cash payments received by way of deferred payment pursuant to, or
monetization of, a note or installment receivable or otherwise, but only as and
when received) in connection with such Asset Sale, over (ii) the sum of (A) the
amount of any Indebtedness (other than Indebtedness under this Agreement and the
Term Loan Facility) that is secured by such asset and which is required to be
repaid by such Person in connection with such Asset Sale, plus (B) the out-of-
pocket expenses (1) incurred by such Person in connection with such Asset Sale
and (2) if such Person is a Subsidiary, incurred in connection with the transfer
of such amount to the parent company or entity of such Person, plus (C)
provision for taxes, including income taxes, attributable to the Asset Sale or
attributable to required prepayments or repayments of Indebtedness with the
<PAGE>
proceeds of such Asset Sale, plus (D) a reasonable reserve for any
indemnification payments (fixed or contingent) attributable to seller's
indemnities and representations and warranties to purchaser in respect of such
Asset Sale undertaken by the Borrower or any of its Subsidiaries in connection
with such Asset Sale plus (E) if such Person is a Subsidiary, any dividends or
distributions payable to holders of minority interests in such Subsidiary from
the proceeds of such Asset Sale.
"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.
"Obligation Currency": as defined in Section 11.19.
-------------------
"Original Principal Stockholders": means Tenet Healthcare 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 Acquisition": any Acquisition permitted by Section 8.5(f).
---------------------
"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.
"Pledgor": (i) the Borrower and (ii) each Subsidiary of the Borrower
-------
that executes and delivers to the Collateral Agent a Subsidiary Pledge Agreement
after the Effective
<PAGE>
Date pursuant to Section 7.11.
"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.
"Public Debt": as defined in Section 8.1.
-----------
"Qualified Issuer": (A) any Lender hereunder, (B) any lender that is
----------------
a party to the Term Loan Facility and (C) any commercial bank that has capital
and surplus in excess of $100,000,000.
"Real Property": all real property owned or leased by the Borrower or
-------------
any of its Subsidiaries.
"Register": as defined in Section 11.7(b).
--------
"Reimbursement Agreement": as defined in Section 2.19(b).
-----------------------
"Reinvested Proceeds": with respect to any Asset Sale as of any date
-------------------
of determination, the amount of Net Cash Proceeds from such Asset Sale that is
used by the Borrower or any of its Subsidiaries to acquire, during the
Reinvestment Period, Property that is to be used in the same or a related line
of business of the Borrower.
"Reinvestment Period": the period beginning on, and ending 365 days
-------------------
after, the date that proceeds from an Asset Sale are received by the Borrower or
any of its Subsidiaries, as the case may be.
"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.
"Relevant Date": (i) in the case of each Lender listed on the
-------------
signature pages hereof, the Effective Date, and (ii) in the case of each other
Lender, the effective date of the Assignment and Acceptance Agreement or other
document pursuant to which it became a Lender.
<PAGE>
"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 Alternate Currency Advance or
convert an Advance to, or continue an Advance as, a Eurodollar Advance or
Alternate Currency 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 Alternate Currency Advance, as
the case may be; 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, an Alternate Currency 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, an
Alternate Currency 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.
"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.
"Required Payment": as defined in Section 2.12(a).
----------------
"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.
"Revolver Multiple": on any date of calculation, a number determined
-----------------
by dividing (a) the Aggregate Revolving Credit Commitments as of such date, by
(b) (i) prior to the termination of the term loan commitments under the Term
Loan Facility, the aggregate amount of term loan commitments by the lenders
under the Term Loan Facility as of such date, or (ii) after the termination of
the term loan commitments under the Term Loan Facility, the aggregate principal
amount of term loans outstanding under the Term Loan Facility as of such date.
<PAGE>
"Revolver Prepayment Fraction": on any date of calculation, a fraction
----------------------------
determined by dividing (a) the Aggregate Revolving Credit Commitments as of such
date, by (b) the sum of (i) the Aggregate Revolving Credit Commitments as of
such date, plus (ii) (A) prior to the termination of the term loan commitments
under the Term Loan Facility, the aggregate amount of term loan commitments by
the lenders under the Term Loan Facility as of such date, or (B) after the
termination of the term loan commitments under the Term Loan Facility, the
aggregate principal amount of term loans outstanding under the Term Loan
Facility as of such date.
"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 Commitment", as
the same may be reduced pursuant to Section 2.6.
"Revolving Credit Commitment Period": the period from the Effective
----------------------------------
Date until the earlier of (i) the day preceding the Maturity Date, or (ii) such
other date upon which the Revolving Credit Commitments shall have been
terminated in accordance with Sections 2.6 or 9.1.
"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.
"Sterling Pounds": freely transferable lawful money of the United
---------------
Kingdom.
"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
<PAGE>
profits and losses, however determined.
"Subsidiary Guaranty": the Subsidiary Guaranty, dated the date hereof,
-------------------
by the Guarantors in favor of the Collateral Agent, substantially in the form of
Exhibit I, as amended, supplemented or otherwise modified from time to time.
"Subsidiary Pledge Agreements": collectively, each Subsidiary Pledge
----------------------------
Agreement (i) delivered pursuant to Section 5.6 and (ii) delivered after the
Effective Date pursuant to Section 7.11(c), each such Subsidiary Pledge
Agreement by and between the Pledgor named therein and the Collateral Agent,
substantially in the form of Exhibit K, as each such agreement may be amended,
supplemented or otherwise modified from time to time.
"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.
"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 Income": as to any Person, a Tax imposed by one of the
-----------------
following jurisdictions or by any political subdivision or taxing authority
thereof: (i) the United States, (ii) the jurisdiction in which such Person is
organized, (iii) the jurisdiction in which such Person's principal office is
located, or (iv) in the case of each Lender, any jurisdiction in which such
Person is deemed to be doing business; which Tax is an income tax (or any tax
in lieu thereof or equivalent thereto) or franchise tax imposed on all or part
of the net income or net profits of such Person or with respect to the net
increase in the shareholders' or owners' equity or capital
<PAGE>
in such Person or which Tax represents interest, fees or penalties for payment
of any such income tax or franchise tax.
"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.
"Term Loan Facility": the Term Loan Agreement, dated as of the date
------------------
hereof, by and among the Borrower, the lenders party thereto, DLJ Capital
Funding, Inc., as syndication agent, and BNY, as administrative agent, together
with all other documents executed in connection therewith, as the same may be
amended, supplemented, refinanced or otherwise modified from time to time in
accordance with Section 8.9.
"Term Prepayment Fraction": a fraction equal to 1.00 minus the
------------------------
Revolver Prepayment Fraction.
"Threshold Amount": with respect to any Asset Sale as of any date of
----------------
determination, the amount equal to the greater of (A) zero, and (B) the
difference between (x) $5,000,000, minus (y) the aggregate amount of Adjusted
-----
Net Cash Proceeds from all other Asset Sales made on or after the Effective
Date.
"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.
"Total Prepayment Amount": with respect to any Asset Sale as of any
-----------------------
date of determination, the amount equal to the greater of (A) zero, and (B) the
difference between (x) the Adjusted Net Cash Proceeds from such Asset Sale,
minus (y) the Threshold Amount.
- -----
"Transactions": the transactions contemplated under this Agreement,
------------
the other Loan Documents and the Term Loan Facility, including the repayment of
the Existing Indebtedness, the borrowing of the Loans, the borrowing of the term
loans under the Term Loan Facility, the issuances of Letters of Credit and other
transactions related to any of the foregoing.
"TRC": Total Renal Care, Inc., a California corporation.
---
"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.
<PAGE>
"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.
B. Principles of Construction
--------------------------
(a) All terms defined in this Agreement shall have the meanings given
such terms herein when used in the other Loan Documents or any certificate,
opinion or other document made or delivered pursuant hereto, unless otherwise
expressly provided 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.
(d) The phrase "may not" is prohibitive and not permissive.
(e) Unless the context otherwise requires, words in the singular
number include the plural, and words in the plural include the singular.
(f) Unless specifically provided in a Loan Document to the contrary,
references to a time shall refer to New York City time.
(g) 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".
II. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS AND LETTERS OF CREDIT
----------------------------------------------------------------
<PAGE>
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 in Dollars or an Alternate Currency
- -----------------------
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, (b) the
Aggregate Credit Exposure of all Lenders shall not exceed the Aggregate
Revolving Credit Commitments and (c) if such Revolving Credit Loan is an
Alternate Currency Revolving Credit Loan, the Aggregate Alternate Currency
Exposure shall not exceed $75,000,000. 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
(each, as indorsed or modified from time to time, including all replacements
thereof and substitutions therefor, 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
aggregate unpaid principal balance of all Revolving Credit Loans made by such
Lender, with interest thereon as prescribed in 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 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 in Dollars 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
<PAGE>
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 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.
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
<PAGE>
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, 2:00 P.M. four Business Days prior to the requested
Borrowing Date in the case of Alternate Currency Advances, and 2:00 P.M. one
Busi ness 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 Commit ments, (ii) the requested Borrowing Date,
(iii) whether such borrowing is to consist of one or more Eurodollar Advances,
Alternate Currency Advances, ABR Advances, or a combination thereof and (iv) if
the borrowing is to consist of one or more Eurodollar Advances or Alternate
Currency Advance, the length of the Interest Period for each such Eurodollar
Advance or Alternate Currency 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), 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, and each Alternate Currency Advance shall be in the aggregate principal
amount having a Dollar Equivalent equal approximately to $5,000,000 or such
amount plus a whole multiple having a Dollar Equivalent of approximately
$500,000 in excess thereof.
(b) 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 such notice shall be irrevocable and
confirmed immediately
<PAGE>
by delivery to the Administrative Agent of a Borrowing Request. 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.
(c) 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, 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 applicable Agent Payment Office not later than 12:00 Noon
(local time in the city in which the applicable Agent Payment Office is located)
on the relevant Borrowing Date requested by the Borrower, in the applicable
Currency and in funds immediately available to the Administrative Agent at such
Agent Payment Office. The amounts so made available to the Administrative Agent
on such Borrowing Date will then, subject to the 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
applicable Agent Payment Office in the applicable Currency.
(d) 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, (i) in the case of the Borrower, the
applicable interest rate set forth in Section 2.10, and, (ii) in the case of
such Lender, the Federal Funds Rate (or, in the case of each Alternate Currency
Revolving Credit Loan, a rate determined by the Administrative Agent to be
reflective of the all-in cost of funds to the Administrative Agent in funding
such Alternate Currency Revolving Credit Loan) 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
<PAGE>
Credit Loans.
(e) 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 in
the same Currency as such new Revolving Credit Loan, 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.
(f) 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 Aggregate Credit Exposure, provided, however, that
any such reduction shall be in the amount of $10,000,000 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.
(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:
Aggregate Revolving
Credit Commitments
Dates Reduction
- -------------------------- --------------------
September 30, 2001 $ 75,000,000
September 30, 2002 $125,000,000
September 30, 2003 $200,000,000
<PAGE>
(c) 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.
(d) Mandatory Reductions Relating to Issuances of Public Debt and
-------------------------------------------------------------
Sales of Property. On each date that a prepayment is made or required pursuant
- -----------------
to Section 2.7(d) or (e), the Aggregate Revolving Credit Commitments shall be
automatically and permanently reduced in an amount equal to the amount of the
required prepayment (assuming, solely for purposes of this Section 2.6(d), that
the then outstanding amount of Revolving Credit Loans equals or exceeds the
amount of such prepayment).
(e) Mandatory Reductions Relating to Reductions or Prepayments under
--------------------------------------------------------------------
the Term Loan Facility. On each date that a reduction of the term loan
- ----------------------
commitments under the Term Loan Facility or the prepayment of term loans
outstanding under the Term Loan Facility is made (other than with respect to
Section 2.4(d) of the Term Loan Facility or with respect to a refinancing of the
Term Loan Facility permitted by Section 8.9), the Aggregate Revolving Credit
Commitments shall be automatically and permanently reduced in an amount equal to
the amount of such reduction or prepayment made under the Term Loan Facility
multiplied by the Revolver Multiple.
(f) In General. Reductions of the Aggregate Revolving Credit
----------
Commitments shall be applied to reduce the Revolving Credit Commitments of the
Lenders pro rata. 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 or Alternate Currency Advances,
specifying the Revolving Credit Loans to be prepaid, whether such Revolving
Credit Loans consist of ABR Advances, Eurodollar Advances, Alternate Currency
Advances, or a combination thereof, the amount to be prepaid (stated in the
applicable Currency) 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 made
pursuant to this subsection shall be (A) with respect to ABR Advances and
Eurodollar Advances, 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), and (B) in the
case of Alternate Currency Advances, in an aggregate principal amount in the
applicable Currency having an Alternate Currency Equivalent of approximately
$1,000,000 or such amount plus an amount in the applicable Currency having an
Alternate Currency Equivalent of a whole multiple of ap-
<PAGE>
proximately $250,000 in excess thereof (or, if less, the outstanding principal
balance of the Revolving Credit Loans). After giving effect to any partial
prepayment (A) 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, and (B) with respect to Alternate
Currency Advances denominated in the same Currency 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 Alternate
Currency Advances shall equal (subject to Section 2.9) an amount in such
Currency having a Dollar Equivalent of approximately $5,000,000 or such amount
plus an amount in such Currency having a Dollar Equivalent of a whole multiple
of approximately $500,000 in excess thereof.
(b) Mandatory Prepayments 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. If, after giving effect to the
prepayment of all outstanding Revolving Credit Loans and Swing Line Loans, the
Letter of Credit Exposure exceeds the Aggregate Revolving Credit Commitments
(after giving effect to such reduction), the Borrower shall deposit an amount
equal to such excess in a cash collateral account (the "Cash Collateral
---------------
Account") with and under the exclusive control of the Administrative Agent.
- -------
(c) Mandatory Prepayments 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 the Cash Collateral Account.
(d) Mandatory Prepayments Relating to Issuances of Public Debt. Upon
--------------------------------------------------------------
the date of any issuance of Public Debt by the Borrower, the Borrower shall
prepay the Revolving Credit Loans in an amount equal to the aggregate proceeds
of such issuance of Public Debt (net of sales and other commissions and legal
and other related expenses incurred in connection with such issuance).
(e) Mandatory Prepayments Relating to Sales of Property. (i) With
---------------------------------------------------
respect to each Asset Sale, the Borrower shall prepay the Revolving Credit Loans
in an amount equal to the sum of (A) the Revolver Prepayment Fraction multiplied
by the Total Prepayment
<PAGE>
Amount, plus (B) 50% of the amount equal to the difference between (1) the Term
Prepayment Fraction multiplied by the Total Prepayment Amount, and (2) the
amount the Term Loans are actually prepaid under the Term Loan Facility in
connection with such sale. Such prepayment shall be made on the earlier of (x)
the last day of the Reinvestment Period with respect to such sale, or (y) the
occurrence of an Event of Default.
(ii) On each date on which any mandatory prepayment of term loans is
required under Section 2.4(d)(i) of the Term Loan Facility, the Borrower shall
prepay the Revolving Credit Loans in an amount equal to the Total Prepayment
Amount (as such term is defined in the Term Loan Facility) multiplied by the
Revolver Prepayment Fraction; provided, however, that if any prepayment is
required to be made under Section 2.7(e)(i) on any date on which a prepayment is
required to be made under this Section 2.7(e)(ii), for purposes of this Section
2.7(e)(ii), the "Total Prepayment Amount" (as such term is defined in the Term
Loan Facility) on such date shall be reduced by the "Total Prepayment Amount"
(as such term is defined herein) on such date.
(f) Mandatory Prepayments Relating to Aggregate Credit Exposure. If,
-----------------------------------------------------------
on the last day of any fiscal quarter, the Aggregate Credit Exposure shall
exceed the Aggregate Revolving Credit Commitments, the Borrower shall prepay the
Loans in an aggregate principal amount such that immediately after giving effect
thereto the Aggregate Credit Exposure shall not exceed the Aggregate Revolving
Credit Commitments. If, after giving effect to the prepayment of all outstanding
Loans, the Letter of Credit Exposure exceeds the Aggregate Revolving Credit
Commitments, the Borrower shall deposit an amount equal to such excess in the
Cash Collateral Account.
(g) Mandatory Prepayments Relating to Aggregate Alternate Currency
--------------------------------------------------------------
Exposure. If, on the last day of any fiscal quarter, the Aggregate Alternate
- --------
Currency Exposure shall exceed $75,000,000, the Borrower shall prepay Alternate
Currency Revolving Credit Loans in an aggregate principal amount such that
immediately after giving effect thereto the Aggregate Alternate Currency
Exposure shall not exceed $75,000,000. If, after giving effect to the
prepayment of all outstanding Alternate Currency Revolving Credit Loans, the
Letter of Credit Exposure for all Lenders attributable to Alternate Currency
Letters of Credit exceeds $75,000,000, the Borrower shall deposit an amount
equal to such excess in the Cash Collateral Account.
(h) In General. Each prepayment of Revolving Credit Loans denominated
----------
in Dollars shall first be applied to ABR Advances. If any prepayment is made in
respect of any Eurodollar Advance, Alternate Currency 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
<PAGE>
(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 Section 2.8(c) 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 Dollars and in
immediately available funds. The Administrative Agent shall deliver the
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 1%, 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, (ii) continue Eurodollar Advances by
selecting a new Interest Period therefor, and (iii) continue Alternate Currency
Advances in the same applicable Currency by selecting a new Interest Period
therefor,
<PAGE>
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 or Alternate Currency Advances, as
the case may be, specifying the amount to be so converted or continued 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
such continuation of Eurodollar Advances or Alternate Currency Advances shall
only be made on the last day of the Interest Period applicable to the Eurodollar
Advances or the Alternate Currency Advances that are to be continued as such new
Eurodollar Advances or Alternate Currency Advances, as the case may be. The
Administrative Agent shall promptly provide the Lenders with a copy of each such
Notice of Conversion/Continuation. Advances may be converted or continued
pursuant to this Section in whole or in part, provided that (A) 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, and (B) continuations of Alternate
Currency Advances denominated in the same Currency shall be in an aggregate
principal amount having a Dollar Equivalent of approximately $5,000,000 or such
amount plus an amount in such Currency having a Dollar Equivalent of a whole
multiple of approximately $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, (A) each ABR Advance shall be automatically continued as an ABR
Advance, (B) each Eurodollar Advance shall be automatically converted to an ABR
Advance on the last day of the Interest Period applicable to such Eurodollar
Advance and (C) each Alternate Currency Advance shall, on the last day of the
Interest Period applicable thereto, be automatically continued as a new
Alternate Currency Advance in the same applicable Currency with a one month
Interest Period.
(c) No Interest Period selected in respect of conversion or
continuation of any Eurodollar Advance or Alternate Currency 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 and Alternate Currency 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).
(d) Each conversion or continuation shall be effected by each Lender
by applying the proceeds of its new ABR Advance, Eurodollar Advance or Alternate
Currency 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).
<PAGE>
(e) Notwithstanding anything to the contrary contained in any Loan
Document, if the Borrower shall fail, for any reason, to convert or continue a
Eurodollar Advance or an Alternate Currency Advance, as the case may be, under
this Section 2.9 in connection with the expiration of an Interest Period with
respect to any existing Eurodollar Advance or Alternate Currency Advance, as the
case may be, then (i) such Eurodollar Advance shall be converted to an ABR
Advance, and (ii) such Alternate Currency Advance shall be continued as a new
Alternate Currency Advance in the same applicable Currency with a one month
Interest Period, in each case until such time, if any, as the Borrower shall
elect a new Eurodollar Advance or Alternate Currency Advance, as the case may
be, pursuant to this Section 2.9.
(f) 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:
ADVANCES/LOANS RATE
-------------- ----
Each ABR Advance Alternate Base Rate.
Each Eurodollar Eurodollar Rate applicable
Advance to such Eurodollar Advance for the ap-
plicable Interest Period plus
the Applicable Margin.
Each Alternate Alternate Currency Euro Rate
Currency Advance applicable to such Alternate Currency
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
<PAGE>
Interest Period.
(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 plus 2%, payable in the case of interest on any overdue principal, on
demand. 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, and Alternate Currency Advances
in Sterling Pounds 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, Eurodollar Advances and Alternate
Currency Advances in French Francs, German Marks and Japanese Yen 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 and
upon each payment (including prepayment) or conversion of the Loans. Any change
in the interest rate on the Loans resulting from a change in the Alternate Base
Rate or reserve requirements or charges described in clause (b) of the
definition of "Alternate Currency Euro Rate" or "Eurodollar Rate" 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 or an Alternate Currency Euro 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 excess
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
<PAGE>
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 eurocurrency market either
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
or the Alternate Currency Euro Rate, as the case may be, 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 or Alternate
Currency Euro Rate, as the case may be, will not adequately and fairly reflect
the cost to such Lenders of maintaining or funding loans bearing interest based
on such Eurodollar Rate or Alternate Currency Euro Rate, as the case may be,
with respect to any portion of the Loans that the Borrower has requested be made
as Eurodollar Advances or Alternate Currency Advances, as the case may be, or
Eurodollar Advances or Alternate Currency Advances, as the case may be, that
will result from the requested conversion or continuation of any portion of the
Advances into or as Eurodollar Advances or Alternate Currency 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) in the case of Eurodollar Advances, (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, and (b) in the case of Alternate Currency Advances,
the interest rate for such Affected Advances shall be determined pursuant to
clause (a)(iii) of the definition of Alternate Currency Euro Rate. 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 and the
Lenders promptly upon either (x) the Administrative Agent having determined that
such circumstances affecting the interbank eurocurrency market no longer exist
and that adequate and reasonable means do exist for determining the Eurodollar
Rate or
<PAGE>
Alternate Currency Euro Rate, as the case may be, 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), (1) no further Eurodollar Advances shall be required to be made by
the Lenders, (2) the Borrower shall not have the right to convert or continue
all or any portion of the Loans to or as Eurodollar Advances, and (3) the
interest rate for Alternate Currency Advances shall be determined pursuant to
clause (a)(iii) of the definition of Alternate Currency Euro Rate.
L. Taxes
-----
(a) Payments to Be Free and Clear. Subject to Sections 2.12(d),
-----------------------------
2.12(e) and 2.12(f), all payments by each Credit Party under the Loan Documents
shall be made free and clear of, and without any deduction or withholding for,
any Indemnified Tax. If any Credit Party or any other Person is required by any
law, rule, regulation, order, directive, treaty or guideline to make any
deduction or withholding (which deduction or withholding would constitute an
Indemnified Tax) from any amount required to be paid by any Credit Party to or
on behalf of any Indemnified Tax Person under any Loan Document (each a
"Required Payment"), then:
- -----------------
(i) such Credit Party shall notify the Administrative Agent and such
Indemnified Tax Person of any such requirement or any change in any such
requirement as soon as such Credit Party becomes aware thereof;
(ii) such Credit Party shall pay such Indemnified Tax prior to the
date on which penalties attach thereto, such payment to be made (to the extent
that the liability to pay is imposed on such Credit Party) for its own account
or (to the extent that the liability to pay is imposed on such Indemnified Tax
Person) on behalf and in the name of such Indemnified Tax Person;
(iii) such Credit Party shall pay to such Indemnified Tax Person an
additional amount such that such Indemnified Tax Person shall receive on the due
date therefor an amount equal to the Required Payment had no such deduction or
withholding been required; and
(iv) such Credit Party shall, within 30 days after paying such In-
demnified Tax, deliver to the Administrative Agent and such Indemnified Tax
Person satisfactory evidence of such payment to the relevant Governmental
Authority.
(b) Other Indemnified Taxes. If any Indemnified Tax Person or any
-----------------------
affiliate thereof is required by any law, rule, regulation, order, directive,
treaty or guideline to pay any Indemnified Tax (excluding an Indemnified Tax
which is subject to Section 2.12(a)) with respect to any sum paid or payable by
any Credit Party to such Indemnified Tax Person under the Loan Documents, then,
within five days after such Indemnified Tax Person shall have notified such
Credit Party thereof (which notice shall be accompanied by a statement setting
forth the reasonable calculation thereof), such Credit Party shall pay to such
Indemnified Tax Person the amount of such Indemnified Tax.
(c) Tax on Indemnified Taxes. If any amounts are payable by any Credit
------------------------
<PAGE>
Party in respect of Indemnified Taxes pursuant to Section 2.12(a) or (b), such
Credit Party agrees to pay to the applicable Indemnified Tax Person, within five
days of written request therefor (which request shall set forth the reasonable
calculations thereof), an amount equal to all Taxes imposed with respect to such
amounts as such Indemnified Tax Person shall determine in good faith are payable
by such Indemnified Tax Person or any affiliate thereof in respect of such
amounts and in respect of any amounts paid to or on behalf of such Indemnified
Tax Person pursuant to this Section 2.12(c).
(d) Exception for Existing Taxes. No amount shall be required to be
----------------------------
paid to any Indemnified Tax Person under Section 2.12(a) or (b) with respect to
any Indemnified Tax to the extent that such Indemnified Tax would have been
required to have been paid under any law, rule, regulation, order, directive,
treaty or guideline in effect on the Relevant Date.
(e) U.S. Tax Certificates. Each Lender that is organized under the
---------------------
laws of any jurisdiction other than the United States or any political
subdivision thereof shall deliver to the Administrative Agent for transmission
to the Borrower, on or prior to the Relevant Date, and at such other times as
may be necessary in the determination of the Borrower, any other Credit Party or
the Administrative Agent (each in the reasonable exercise of its discretion),
such certificates, documents or other evidence, properly completed and duly
executed by such Lender (including Internal Revenue Service Form 1001 or Form
4224 (or, in each case, any equivalent or successor form)) to establish that
such Lender is not subject to deduction or withholding of United States federal
income tax under Section 1441 or 1442 of the Code or otherwise (or under any
comparable provisions of any successor statute) with respect to any payments to
such Lender of principal, interest, fees or other amounts payable under the Loan
Documents or in the case of a Lender that is claiming an exemption from United
States withholding tax under Section 871(h) or 881(c) of the Internal Revenue
Code with respect to payments of "portfolio interest" two accurate and complete
signed original Forms W-8 (or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is exempt from United States
withholding tax on payments under this Agreement or the Notes) and, if such
Lender delivers such Forms W-8 (or successor form), two signed certificates that
such Lender is not (1) a "bank" for purposes of Section 881(c) of the Internal
Revenue Code, (2) is not a 10% shareholder (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) of the Borrower and (3) is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Internal Revenue Code). No Credit Party shall be
required to pay any additional amount to any such Lender under Section
2.12(a)(iii) 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 Relevant Date, nothing in this Section
2.12(e) shall relieve any Credit Party of its obligation to pay any additional
amounts pursuant to Section 2.12(a)(iii) in the event that, as a result of any
change in applicable law (including any change in the interpretation thereof),
such Lender is no longer properly entitled to deliver certificates, forms,
documents or other evidence at a subsequent date establishing the fact that such
Lender is not subject to deduction or withholding as described in the
immediately preceding sentence.
<PAGE>
(f) Other Tax Certificates. Each Indemnified Tax Person agrees to use
----------------------
reasonable efforts to deliver to any Credit Party or the Administrative Agent,
promptly upon any reasonable request therefor from time to time by such Credit
Party or the Administrative Agent, such certificates, forms, documents and
information as may be required by applicable law, regulation, order, directive,
guideline or treaty from time to time and to file all appropriate forms to
obtain a certificate, form or other appropriate documents from the appropriate
Governmental Authorities to establish that payments made in respect of any
Alternate Currency Advance by such Credit Party can be made without (or at a
reduced rate of) deduction or withholding of Indemnified Taxes, provided,
--------
however, that if such Indemnified Tax Person is or becomes unable by virtue of
- -------
any change in applicable law, regulation or treaty, to establish such exemption
or reduction, such Credit Party shall nonetheless remain obligated under Section
2.12(a) to pay the amounts described therein, and provided further that no
-------- -------
Indemnified Tax Person shall be required to take any action under this Section
2.12(f) which, in the sole discretion of such Indemnified Tax Person, would
cause such Indemnified Tax Person or any affiliate thereof to suffer a material
economic, legal or regulatory disadvantage.
(g) Other Taxes. Each Credit Party agrees to pay any current or future
-----------
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, the Loan Documents or otherwise
with respect to, the Loan Documents.
(h) Refunds. Upon the reasonable request of a Credit Party, and at
-------
such Credit Party's expense, each Indemnified Tax Person shall cooperate with
such Credit Party in seeking to obtain refunds of Taxes paid by such Credit
Party, provided that each such Indemnified Tax Person shall have no obligation
to (i) engage in any litigation, hearing or proceeding with respect thereto or
(ii) disclose any tax return or other confidential information other than
information reasonably requested by the applicable taxing authority which, in
the opinion of such Indemnified Tax Person, is not detrimental to such
Indemnified Tax Person. If an Indemnified Tax Person 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
such Credit Party pursuant to this Section 2.12, such Indemnified Tax Person, so
long as no Event of Default shall then exist, shall promptly pay to such Credit
Party 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 or Alternate Currency Advances as contemplated
by this Agreement, (i) the commitment of such Lender hereunder to (A) make
Eurodollar Advances or Alternate Currency Advances as the case may be, (B)
convert ABR Advances to Eurodollar Advances or (C) continue Eurodollar Advances
or Alternate Currency Advances, as the case may be, to new Eurodollar Advances
or Alternate Currency Advances, as the case may be, shall forthwith be
suspended, (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
<PAGE>
as required by law, and (iii) with respect to such Lender's outstanding
Alternate Currency Advances affected hereby, the Borrower shall take such
actions as such Lender may reasonably request (including, without limitation,
repaying such Alternate Currency Advances) with a view to minimizing the
obligations of the Borrower under Section 2.15. If the commitment of any Lender
with respect to Eurodollar Advances or Alternate Currency 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 or Alternate Currency Advances, as the case may be, such
Lender's commitment to make or maintain Eurodollar Advances or Alternate
Currency Advances, as the case may be, 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 existing
law, regulation, treaty or directive or in the interpretation or application
thereof by any Governmental Authority charged with the administration thereof or
compliance by any Lender (or any Person 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:
(a) does or shall subject any Lender to any Taxes of any kind
whatsoever with respect to any Eurodollar Advances or any Alternate Currency
Advances or its obligations under this Agreement to make Eurodollar Advances or
Alternate Currency 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 or Alternate Currency 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 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
(b) 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 or Alternate Currency Advances
that is not otherwise included in the determination of a Eurodollar Rate or
Alternate Currency Euro Rate, as the case may be;
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 Alternate Currency Advances or its commitment to make such Eurodollar
Advances or Alternate Currency Advances, or to reduce any amount receivable
hereunder in respect of its Eurodollar Advances or Alternate Currency 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
<PAGE>
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 or an
Alternate Currency 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 an Alternate Currency Advance, as the case may be, 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 an
Alternate Currency 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 an Alternate
Currency Advance or Swing Line Loan bearing interest at a Negotiated Rate is
outstanding, any repayment or prepayment of such Eurodollar Advance, Alternate
Currency 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 or an Alternate Currency
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, Alternate Currency Euro Rate or Negotiated Rate,
as the case may be (expressed as a decimal), applicable to such Eurodollar
Advance, Alternate Currency Advance or Swing Line Loan;
"C" equals the applicable Eurodollar Rate or Alternate Currency Euro Rate, as
the case may be (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 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,
<PAGE>
with an Interest Period equal approximately to the applicable Remaining Interest
Period, as determined by such Lender; and
"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, Alternate Currency 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, an Alternate Currency 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, Alternate Currency 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,
Alternate Currency 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,
Alternate Currency 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, Alternate Currency
Advance or Swing Line Loan during the applicable Interest Period through the
purchase of deposits in an amount equal to such Eurodollar Advance, Alternate
Currency 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 pay in full
the Existing Indebtedness and cancel all commitments thereunder, and (ii)
thereafter, for Permitted Acquisitions and the general corporate purposes of the
Borrower and its Subsidiaries. Notwithstanding anything to the contrary
contained in any Loan Document, the Borrower agrees
<PAGE>
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 Person directly or indirectly owning or
controlling such Lender, or imposes any restriction on or otherwise adversely
affects such Lender (or any lending office of such Lender) or any Person
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 (or such Person's)
capital or the asset value to such Lender of any Loan made by, or any Letter of
Credit issued or participated in 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 (or such Person) could
have achieved but for such enactment, promulgation, change or compliance (after
taking into account such Lender's policies (or such Person's) 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 (or such
Person) 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, the Letter
of Credit Issuer 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") in Dollars or in an Alternate
- ------ ----------------
Currency during the Revolving Credit Commitment Period for the account of the
Borrower, provided that immediately after the issuance of each Letter of Credit,
(i) the Letter of Credit Exposure of all Lenders at any one time shall not
exceed $100,000,000, (ii) the Aggregate Credit Exposure shall not exceed the
Aggregate Revolving Credit Commitments and (iii) the Aggregate Alternate
Currency Exposure shall not exceed $75,000,000. 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
<PAGE>
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 (A) in the case of a Letter of Credit denominated in Dollars, 2:00
P.M., three Business Days prior to the requested date of issuance, and (B) in
the case of an Alternate Currency Letter of Credit, 2:00 P.M., ten Business Days
prior to the requested date of issuance. Such Letter of Credit Request shall be
accompanied by the Letter of Credit Issuer'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 Currency of, and 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 the Letter of Credit Issuer and each Lender thereof. The Letter of Credit
Issuer 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 the
Letter of Credit Issuer, 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 the Letter of Credit Issuer shall reasonably require.
Each Letter of Credit shall be used solely for the purposes described therein.
(c) Each payment by the Letter of Credit Issuer of a draft drawn under
a Letter of Credit shall give rise to an obligation on the part of the Borrower
to reimburse the Letter of Credit Issuer immediately for the amount thereof in
the same Currency as such Letter of Credit is denominated.
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 the
Letter of Credit Issuer 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 the Letter of Credit Issuer 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
<PAGE>
Default or the compliance by the Borrower with any of its obligations under the
Loan Documents, provided, however, that no Lender shall have any liability to
the Letter of Credit Issuer under this Section 2.20 for any payment under a
Letter of Credit to the extent made as a result of the Letter of Credit Issuer's
gross negligence or willful misconduct.
(b) The Administrative Agent will promptly notify each Lender (which
notice shall be promptly confirmed in writing) of the date and the amount and
Currency 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 the
Letter of Credit Issuer) shall make available to the Administrative Agent for
the account of the Letter of Credit Issuer its Commitment Percentage of the
amount of such unreimbursed draft at the office of the Administrative Agent
specified in Section 11.2, in the same Currency as such Letter of Credit is
denominated 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 the Letter of
Credit Issuer) pursuant to the immediately preceding sentence to the Letter of
Credit Issuer promptly upon receipt thereof in like funds as received. Each
Lender shall indemnify and hold harmless the Administrative Agent and the Letter
of Credit Issuer 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 the Letter of Credit
Issuer under a Letter of Credit in accordance with this clause (b) above (except
in respect of losses, liabilities or other obligations suffered by the
Administrative Agent or the Letter of Credit Issuer resulting from the gross
negligence or willful misconduct of the Letter of Credit Issuer). If a Lender
does not make available to the Administrative Agent when due such Lender's
Commitment Percentage of any unreimbursed payment made by the Letter of Credit
Issuer under a Letter of Credit (other than payments made by the Letter of
Credit Issuer 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 the Letter of Credit Issuer, from the date such Lender's payment is
due until the date such payment is received by the Administrative Agent, on such
Lender's Commitment Percentage of such payment 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 1%.
The Administrative Agent shall distribute such interest payments to the Letter
of Credit Issuer upon receipt thereof in like funds as received.
(c) Whenever the Administrative Agent is reimbursed by the Borrower,
for the account of the Letter of Credit Issuer, 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.
<PAGE>
U. Absolute Obligation with respect to Letter of Credit Payments
-------------------------------------------------------------
The Borrower's obligation to reimburse the Administrative Agent for
the account of the Letter of Credit Issuer 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, the
Letter of Credit Issuer, 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 the account of the Letter of
Credit Issuer for any wrongful payment under such Letter of Credit to the extent
made as a result of the Letter of Credit Issuer'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 the Letter of
Credit Issuer or any Lender, or (b) impose on the Administrative Agent, the
Letter of Credit Issuer or such Lender any other condition regarding the Letters
of Credit (except for imposition of, or changes in the rate of, Tax on the
Income of the Administrative Agent, the Letter of Credit Issuer or such Lender)
and the result of any event referred to in clause (a) or (b) above shall be to
increase the cost to the Letter of Credit Issuer or any such Lender 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, the Letter of Credit Issuer, or any Lender, as the
case may be, deems material, then, upon demand by the Administrative Agent, the
Letter of Credit Issuer or such Lender, as the case may be, the Borrower shall
immediately pay to the Administrative Agent, the Letter of Credit Issuer or such
Lender, as the case may be, from time to time as specified by the Administrative
Agent, the Letter of Credit Issuer or such Lender, additional amounts that shall
be sufficient to compensate the Administrative Agent, the Letter of Credit
Issuer 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, the Letter of Credit Issuer 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, the Letter of Credit Issuer 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
------------------------------
<PAGE>
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 reim bursement 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, Alternate Currency Revolving Credit Loans and
Alternate Currency Letters of Credit, if any) multiplied by (b) the percentage
set forth below for the applicable pricing level in effect on such day:
Commitment
Pricing Level Fee Percentage
------------- --------------
When the Leverage Ratio
is equal to or greater
than 4.00:1.00 0.375%
When the Leverage Ratio
is less than 4.00:1.00
but equal to or greater
than 3.75:1.00 0.375%
When the Leverage Ratio
is less than 3.75:1.00
but equal to or greater
than 3.50:1.00 0.350%
When the Leverage Ratio
is less than 3.50:1.00
but equal to or greater
than 3.00:1.00 0.300%
When the Leverage Ratio
is less than 3.00:1.00
but equal to or greater
than 2.50:1.00 0.250%
<PAGE>
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 0.175%
(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 4.00:1.00.
(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 2.6, 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, 1997 shall have been
delivered to the Administrative Agent, the Commitment Fee percentage shall be
equal to 0.300%.
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 (or in the case of
Existing Letters of Credit, the Effective Date) to and including the
expiration date thereof, at the LC Rate on the maximum amount available to be
drawn
<PAGE>
(under any contingency) under such Letter of Credit (determined, in the case of
each Alternate Currency Letter of Credit, on the basis of the Dollar Equivalent
thereof) on such day.
(b) The Borrower further agrees to pay to the Letter of Credit Issuer,
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 (or in the case of Existing Letters of Credit, the Effective Date) 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 (determined, in the case of each Alternate Currency Letter of
Credit, on the basis of the Dollar Equivalent thereof) 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 the Letter of Credit Issuer, 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
--------------------------------------------------------
(a) Each payment, including each prepayment, of principal and interest
on the Loans and of the Commitment Fee and the Letter of Credit Fee shall be
made by the Borrower without set-off or counterclaim and shall be made to the
Administrative Agent in the applicable Currency at the applicable Agent Payment
Office in funds immediately available to the Administrative Agent at such office
by 1:30 P.M. (local time in the city in which the applicable Agent Payment
Office is located) 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 and the Letter of
Credit 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 and the Letter of Credit 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 or Alternate Currency
Advance prior to the last day of the applicable Interest Period, the Borrower
shall indemnify each Lender in accordance with Section 2.15.
(b) Notwithstanding anything to the contrary contained in any Loan
Document, each payment (including each prepayment) of principal and interest on
each Alternate Currency Revolving Credit Loan shall be made solely in the
Currency in which such
<PAGE>
Alternate Currency Revolving Credit Loan is denominated.
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, the Letter of Credit
Issuer 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.
C. 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 (including the Transactions) and,
<PAGE>
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.
D. 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.
E. 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 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.
F. 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 (including the Transactions), or is required as a condition
to the validity or enforceability of the Loan Documents.
G. 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 (including the Transactions), 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.
<PAGE>
H. 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.
I. 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.
J. 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 limita-
tion, 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.
K. Federal Reserve Regulations; Use of Proceeds
--------------------------------------------
Neither the Borrower, any of its Subsidiaries nor any Credit Party is
engaged
<PAGE>
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 or Letters of Credit 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 or Letters of Credit
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.
L. 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.
M. 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, 1996 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.
<PAGE>
N. 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.
O. 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.
P. 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
<PAGE>
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.
Q. 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.
R. Burdensome Obligations
----------------------
Neither the Borrower, any of its Subsidiaries nor 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.
S. 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.
T. Fraud and Abuse
---------------
Neither the Borrower nor any of its Subsidiaries, nor any of their
respective offic-
<PAGE>
ers 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 im-
puted 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.
U. 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.
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 Effective Date, of the Secretary or Assistant Secretary
of the Borrower (i)
<PAGE>
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 of ficers 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 Guarantors and Pledgors. The Administrative Agent shall have
---------------------------
received a certificate, dated the Effective Date, of the Secretary or Assistant
Secretary of each Guarantor and each Pledgor (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 Docu ments 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
such Guarantor's and such Pledgor's jurisdiction of organization and principal
place of business.
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. Subsidiary Guaranty
-------------------
The Collateral Agent shall have received the Subsidiary Guaranty,
dated the date hereof, duly executed by an Authorized Signatory of each
Guarantor.
E. Borrower Pledge Agreement
-------------------------
The Collateral Agent shall have received the Borrower Pledge
Agreement, duly executed by an Authorized Signatory of the Borrower and dated
the date hereof, together with one or more share certificates, representing (i)
100% of the issued and outstanding capital Stock of each First-Tier wholly-owned
Domestic Subsidiary of the Borrower, and (ii) 66% of the issued and outstanding
capital Stock of each First-Tier wholly-owned Foreign Subsidiary of the
Borrower, together with (A) an undated stock power, executed in blank by an
Authorized Signatory of the Borrower and bearing a signature guarantee in all
respects satisfactory to the
<PAGE>
Collateral Agent, in respect of each such certificate and (B) with respect to
clause (ii), the favorable written opinion of counsel as to the validity,
perfection and priority of the Lien on the capital Stock of each such Foreign
Subsidiary under the laws of the jurisdiction governing each such Lien; provided
that if the Borrower is unable to provide a pledge of the capital Stock of any
such Foreign Subsidiary and such applicable opinion on the date hereof pursuant
to the preceding clause (ii), the Borrower need not comply with such clause (ii)
on the date hereof so long as the Borrower provides each such pledge and opinion
by December 24, 1997.
F. Subsidiary Pledge Agreement
---------------------------
The Collateral Agent shall have received the Subsidiary Pledge
Agreement, duly executed by an Authorized Signatory of TRC and dated the date
hereof, together with one or more share certificates, representing (i) 100% of
the issued and outstanding capital Stock of each Guarantor owned by TRC, and
(ii) 66% of the issued and outstanding capital Stock of Total Renal Care
International, Limited, a Foreign Subsidiary of TRC, together with (A) an
undated stock power, executed in blank by an Authorized Signatory of TRC and
bearing a signature guarantee in all respects satisfactory to the Collateral
Agent, in respect of each such certificate and (B) with respect to clause (ii),
the favorable written opinion of counsel as to the validity, perfection and
priority of the Lien on the capital Stock of such Foreign Subsidiary under the
laws of the jurisdiction governing such Lien; provided that if TRC is unable to
provide a pledge of the capital Stock of such Foreign Subsidiary and such
applicable opinion on the date hereof pursuant to the preceding clause (ii), TRC
need not comply with such clause (ii) on the date hereof so long as TRC provides
such pledge and opinion by December 24, 1997.
G. Intercreditor Agreement
-----------------------
The Collateral Agent, the Administrative Agent, BNY, as administrative
agent under the Term Loan Facility, the Borrower and the other parties thereto
shall have executed and delivered to each other the Intercreditor Agreement.
H. Term Loan Facility
------------------
The Term Loan Facility, in form and substance satisfactory to the
Administrative Agent, shall have been duly executed and shall have become
effective, and the Administrative Agent shall have received a certificate of an
Authorized Signatory of the Borrower attaching a true and correct copy of the
executed Term Loan Facility.
I. 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 chal-
<PAGE>
lenging 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.
J. Existing Indebtedness
---------------------
Prior to or simultaneously with the making of the first Loans, the
Administrative Agent shall have received evidence satisfactory to it that the
Existing Indebtedness has been repaid in full and all commitments thereunder
cancelled pursuant to Section 2.17.
K. Opinion of Counsel to the Borrower and the Guarantors
-----------------------------------------------------
The Administrative Agent shall have received opinions of (i) the
general counsel to the Borrower and the other Credit Parties, addressed to the
Administrative Agent, the Collateral Agent, the Documentation Agent, the
Syndication Agent, the Lenders, and Special Counsel, and dated the Effective
Date, substantially in the form of Exhibit F-1, and (ii) Riordan & McKinzie,
special counsel to the Borrower and the other Credit Parties, addressed to the
Administrative Agent, the Collateral Agent, the Documentation Agent, the
Syndication Agent, the Lenders, and Special Counsel, and dated the Effective
Date, substantially in the form of Exhibit F-2. It is understood that such
opinions are being delivered to the Administrative Agent, the Collateral Agent,
the Documentation Agent, the Syndication Agent, the Lenders and Special Counsel
upon the direction of the Borrower and the Credit Parties and that the Adminis
trative Agent, the Collateral Agent, the Documentation Agent, the Syndication
Agent, the Lenders and Special Counsel may and will rely upon such opinions.
L. Opinion of Special Counsel
--------------------------
The Administrative Agent shall have received an opinion of Special
Counsel, addressed to the Administrative Agent, the Collateral Agent, the Co-
Arrangers, the Documentation Agent, the Syndication Agent and the Lenders and
dated the Effective Date, substantially in the form of Exhibit G.
M. Fees
----
All fees payable to the Administrative Agent, the Co-Arrangers, the
Documentation Agent, the Syndication Agent and the Lenders on or before the
Effective Date shall have been paid.
N. 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 the Letter of Credit Issuer to issue
any Letter of Credit
<PAGE>
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 of each Loan Document
to which it is a party, (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 Credit
Exposure will not exceed the Aggregate Revolving Credit Commitments, (e) the
Aggregate Alternate Currency Exposure shall not exceed $75,000,000 and (f) 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.
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
<PAGE>
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
Guarantors, addressed to the Administrative Agent, the Co-Arrangers, the
Documentation Agent, the Syndication 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 Required Lenders shall reasonably request.
VII. AFFIRMATIVE COVENANTS
---------------------
The Borrower agrees that, so long as this Agreement is in effect, any Loan
or reimbursement obligation (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 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
<PAGE>
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, re tained earnings and
cash flows shall be audited and certified without qualification by the Ac
countants, 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 fis cal 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
7.15, (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, the Syndication 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
and/or any of its Subsidiaries in excess of $1,000,000 on an aggregate basis is
declared or shall become due
<PAGE>
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 and/or any of its Subsidiaries in excess of
$1,000,000 on an aggregate 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, sub poena, order
to show cause or other document, (ii) any lapse or other termination of any
material Intellectual Property, license, permit, franchise or other
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 $500,000, (v) the aggregate amount of Unrecognized
Retiree Welfare Liability under all applicable Employee Benefit Plans is in
excess of $500,000, (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 $500,000, (vii) the imposition of any tax
in excess of $500,000 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 $500,000 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 ac ceptable 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.
<PAGE>
(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 $500,000 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 secu rity 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.
(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, partnership or other existence, as the case may be, in good standing
in the jurisdiction of its in corporation 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.
<PAGE>
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 ap propriate
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 finan cial 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.
F. 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 $1,000,000 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 Ac
countants in accordance with GAAP shall have been made therefor.
G. 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.
<PAGE>
H. 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, per mits, 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.
I. 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 re quirements 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, the
Syndication 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).
J. 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.
K. Additional Guarantors; Additional Collateral
--------------------------------------------
(a) Within 30 days after the occurrence of an Additional Guarantor
Event, (i) cause one or more Domestic Subsidiaries of the Borrower that are not
currently Guarantors to become a party to the Subsidiary Guaranty, in accordance
with the terms thereof, on and as of such date, to the extent that, after giving
effect thereto, such Additional Guarantor Event shall no longer exist, (ii)
deliver or cause to be delivered to the Administrative Agent with respect to
each such Subsidiary, simultaneously with the execution and delivery of the
same, (A) a certificate, dated the date such Subsidiary shall have become a
party to the Subsidiary Guaranty, executed by such Subsidiary and substantially
in the form of, and with substantially the same attachments as, the certificate
which would have been required under Section 5.1 if such Subsidiary had become a
party to the Subsidiary Guaranty on or before the Effective Date, (B)
<PAGE>
an opinion of counsel to such Subsidiary, in form and substance satisfactory to
the Administrative Agent, (C) 100% of the issued and outstanding capital Stock
of such Subsidiary, together with an undated stock power, executed in blank by
an Authorized Signatory of the Pledgor of such Stock, and (D) such other
documents as may by required by the applicable Collateral Documents and as the
Administrative Agent shall request.
(b) As soon as practicable, and in any event within 90 days after any
Person becomes a First-Tier wholly-owned Foreign Subsidiary of the Borrower
after the Effective Date, deliver or cause to be delivered to the Administrative
Agent 66% of the issued and outstanding capital Stock (or equivalent) of such
Subsidiary, together with an undated stock power (or equivalent), executed in
blank by an Authorized Signatory of the Borrower, and deliver such other
documents and take such actions as may by required by the Borrower Pledge
Agreement and as the Collateral Agent shall request in order to grant to the
Collateral Agent a valid, perfected first priority Lien on such capital Stock
(or equivalent), and, where reasonably available, the favorable written opinions
of counsel with respect to the validity, perfection and priority of such Lien
under the laws of the jurisdictions governing such Lien.
(c) If the capital Stock (or equivalent) of any Subsidiary that
becomes a Guarantor pursuant to Section 7.11(a) is owned by a Subsidiary that is
not a Pledgor, within 30 days of the applicable Additional Guarantor Event, (i)
cause the Subsidiary that owns such capital Stock (or equivalent) to execute and
deliver to the Collateral Agent a Subsidiary Pledge Agreement substantially in
the form of Exhibit K, duly completed and (ii) deliver or cause to be delivered
to the Collateral Agent with respect to such Subsidiary, simultaneously with the
execution and delivery of the same, (A) a certificate, dated the date such
Subsidiary shall have become a Pledgor, executed by such Subsidiary and
substantially in the form of, and with substantially the same attachments as,
the certificate which would have been required under Section 5.1, if such
Subsidiary had been a party to a Subsidiary Pledge Agreement on or before the
Effective Date, (B) an opinion of counsel to such Subsidiary, in form and
substance satisfactory to the Administrative Agent, and (C) such other documents
as may be required by the Subsidiary Pledge Agreement and as the Collateral
Agent shall request.
(d) To the extent that the Borrower or TRC does not provide a pledge
of the capital Stock of any Foreign Subsidiary and any applicable opinion on the
date of this Agreement as required pursuant to Section 5.5 or Section 5.6,
provide, or shall cause TRC to provide, any such pledge and any such opinion as
specified in such Sections 5.5 and 5.6 by no later than December 24, 1997.
L. Interest Coverage Ratio
-----------------------
Maintain at all times an Interest Coverage Ratio of not less than
2.25:1.00.
M. Minimum Net Worth
-----------------
Maintain at all times a Consolidated net worth of the Borrower and its
Subsidiaries of not less than $210,000,000 plus the sum of 85% of quarterly
----
Consolidated net income of the Borrower and its Subsidiaries (excluding net
losses) and 85% of the net cash pro ceeds received by the Borrower from its
issuance of Stock, in each case determined on a cumu lative basis for the
period commencing July 1, 1997.
<PAGE>
N. Minimum Consolidated EBITDA Ratio
---------------------------------
Maintain at all times a ratio of (i) Consolidated EBITDA to (ii)
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.
O. Leverage Ratio
--------------
Maintain at all times a Leverage Ratio not greater than the applicable
ratio set forth below with respect to the applicable period set forth below:
Periods Ratio
------------ ------------
December 31, 1997 through
December 30, 1998 4.25:1.00
December 31, 1998 through
December 30, 1999 4.00:1.00
December 31, 1999 through
December 30, 2000 3.75:1.00
December 31, 2000
and thereafter 3.50:1.00
Provided, however, that if at any time the Collateral Agent shall release
the Collateral pursuant to the provisions of Section 17 of the Borrower Pledge
Agreement or Section 18 of the Subsidiary Pledge Agreement when the Leverage
Ratio requirement under this Section 7.15 immediately before or after giving
effect thereto is greater than or equal to 3.50:1.00, the Leverage Ratio which
the Borrower shall be required to maintain under this Section 7.15 shall be
automatically reduced to 3.50:1.00 for all subsequent periods.
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
<PAGE>
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
$25,000,000 at any one time, in the case of the Borrower, and $25,000,000 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 $20,000,000 at any one
time, (v) other Contingent Obligations of the Borrower and its Subsidiaries for
the benefit of one or more of the Borrower or its Subsidiaries in an ag gregate
outstanding amount not exceeding $30,000,000, (vi) unsecured Indebtedness of the
Domestic Subsidiaries of the Borrower provided that the aggregate outstanding
principal amount of such Indebtedness shall not exceed $15,000,000 at any one
time, (vii) Indebtedness of the Foreign Subsidiaries of the Borrower provided
that the aggregate outstanding principal amount of such Indebtedness shall not
exceed $15,000,000 at any one time, (viii) Indebtedness of TRC (excluding
Indebtedness incurred under clause (iii)) assumed in connection with a Permitted
Acquisition that is not a Foreign Acquisition, provided that the aggregate
outstanding principal amount of such Indebtedness shall not exceed $25,000,000
at any one time, (ix) Indebtedness of Foreign Subsidiaries (excluding
Indebtedness incurred under clause (iii)) assumed in connection with a Permitted
Acquisition that is a Foreign Acquisition, provided that the aggregate
outstanding principal amount of such Indebtedness shall not exceed $15,000,000
at any one time, (x) Hedging Obligations that are incurred by the Borrower or
any of its Subsidiaries for the purpose of fixing or hedging foreign currency
exchange risks or interest rate risks with respect to any floating rate
Indebtedness that is permitted by the terms of this Agreement to be outstanding,
(xi) unsecured Indebtedness of the Borrower in an aggregate out standing
principal amount not to exceed $25,000,000 at any one time, provided that
immediately before and after giving effect to the incurrence thereof no Default
or Event of Default shall exist, (xii) unsecured Indebtedness of the Borrower to
one or more investors under an indenture subject to the Trust Indenture Act of
1939, as amended ("Public Debt"), 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, (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 (D) the Borrower shall make the prepayment as
required by Section 2.7(d) upon the issuance of such Public Debt, (xiii)
Indebtedness permitted under Section 8.5(d), and (xiv) Indebtedness under the
Term Loan Facility.
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,
the Term Loan Facility and secured purchase
<PAGE>
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' compensa tion, 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 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', and 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 con tested 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 CapitalLease 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 assets of the Foreign Subsidiary
incurring such Indebtedness, (x) Liens to secure Indebtedness permitted by
Section 8.1(viii) or 8.1(ix), provided that such Liens shall be limited to Liens
on the Property acquired in connection with such Permitted Acquisition, and (xi)
Liens created under the Collateral Documents.
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 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
<PAGE>
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 re quirements 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 or any other
wholly-owned Subsidiary of 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 $5,000,000 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 make any
Investment in or with any Person, including, without limitation, an Acquisition,
or permit any of its Subsidiaries so to do, except:
(a) Investments in Cash Equivalents;
(b) Investments in accounts and notes payable acquired in the
ordinary course of business;
(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 Syndication Agent, the Documentation Agent and the
Required Lenders;
(d) Investments of the Borrower or any of its Subsidiaries in any
Subsidiary of the Borrower for working capital and capital expenditure purposes
of such Subsidiary or to enable such Subsidiary to make Investments permitted by
subsections (f) and (g) below, provided that (i) such Investments in non-wholly
owned Subsidiaries shall be made in the form of demand loans, the aggregate
outstanding principal amount of which shall not exceed $10,000,000 at any one
time, and (ii) such Investments in wholly-owned Subsidiaries shall be made
either in the form of (x) demand loans or (y) additional paid in equity provided
that the aggregate amount of all such additional paid in equity shall not exceed
$20,000,000 at any one time;
<PAGE>
(e) Investments by the Borrower or TRC (i) in ESRD-Related Businesses
existing on the date hereof as set forth on Schedule 8.5, and (ii) in ESRD-
Related Businesses of Persons (other than the Borrower and its Subsidiaries)
made after the Effective Date in an aggregate amount not exceeding $20,000,000
at any one time, provided that immediately before and after giving effect
thereto no Event of Default shall exist;
(f) Foreign Acquisitions by the Borrower or Domestic Acquisitions by
the Borrower or any wholly-owned Subsidiary of the Borrower, 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 the Borrower 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 (a "Foreign Acquisition"), the total
-------------------
consideration to be paid in connection with all such acquisitions made after the
Effective Date shall not exceed $60,000,000 in the aggregate,
(D) within fifteen Business Days after the consummation of any
Acquisition in respect of which the total consideration therefor exceeds
$50,000,000, 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 Syndication 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 7.15,
(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
7.15, in each case after giving effect to such Loans,
(F) in the event the total consideration to be paid in connection
with
<PAGE>
any one Acquisition shall exceed $60,000,000 ($75,000,000 if the consideration
to be paid for such Acquisition is comprised solely of the common Stock of the
Borrower), the Required Lenders shall have consented thereto, except that no
such consent shall be required with respect to a certain pending Acquisition
(total consideration for which shall not exceed $140,000,000) previously
described by the Borrower to the Co-Arrangers, provided that such Acquisition
shall be consummated within six months after the Effective Date,
(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;
(g) Investments by the Borrower or TRC in 50% or less of the voting
Stock or other equity interest in another Person (the "Minority Investment"),
-------------------
provided that (i) the Borrower or TRC owns at least 20% (on a fully diluted
basis) 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 TRC on and after the Effective Date shall not exceed
$60,000,000 at any one time, (iii) the Borrower or TRC shall have full control
over all bank ac counts of such Person if the Borrower or TRC is the largest
holder of voting Stock or other equity interests in such Person, (iv) the
Borrower or TRC shall control or act as the managing general partner of such
Person if such Person is a partnership and if the Borrower or TRC 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;
(h) Investments in notes permitted by Section 8.7(iii);
(i) notes from employees issued to the Borrower representing payment
for capital Stock of the Borrower or representing payment of the exercise price
of options to purchase capital Stock of the Borrower in an aggregate amount at
any time outstanding not to exceed $5,000,000; and
(j) Investments in Hedging Obligations permitted by Section 8.1(x).
For purposes of this Section 8.5, the amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
F. Business Change
---------------
Materially change the nature of the business of the Borrower and its
Subsidiaries as conducted on the Effective Date.
G. Sale of Property
----------------
Consummate any Asset Sale, or permit any of its Subsidiaries so to do,
except any Asset Sale by the Borrower or any of its Subsidiaries as to which the
following conditions
<PAGE>
have been satisfied:
(i) the Administrative Agent and all of the Lenders shall have
consented thereto if the sale consideration shall exceed $10,000,000 with
respect to any single Asset Sale or $25,000,000 in the aggregate for all such
Asset Sales made pursuant to this Section 8.7,
(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 $10,000,000 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 Asset 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 im mediately before and after giving
effect thereto, no Event of Default existed, (y) that the con sideration
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 Asset Sale.
H. Subsidiaries
------------
Create or acquire any other Subsidiary, or permit any of its
Subsidiaries so to do, unless the provisions of Sections 7.11 and 8.11 are
satisfied.
I. Certificate of Incorporation and By-laws and Term Loan Facility
---------------------------------------------------------------
(a) 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.
(b) Amend or otherwise modify (i) the Term Loan Facility by shortening
the scheduled final maturity of the Term Loan Facility, increasing the amount of
any scheduled repayment of the Term Loans (as defined therein), shortening any
scheduled date for repayments of the Term Loans, or increasing the outstanding
principal amount of the Term Loans, (ii) the definition of "Required Lenders" in
the Term Loan Facility, (iii) any mandatory prepayment or commitment reduction
required pursuant to the Term Loan Agreement (including, without limitation, the
provisions of Section 2.4 of the Term Loan Facility and any definition used in
such Section) in any way that, with respect to this clause (iii), would
adversely affect the interests of the Lenders under any of the Loan Documents,
or (iv) any
<PAGE>
affirmative covenant, negative covenant or default or event of default contained
in the Term Loan Facility (including, without limitation, the provisions
contained in Sections 7, 8 and 9 of the Term Loan Facility and any definition
used in such Sections), in any way that, with respect to this clause (iv), would
adversely affect the interests of the Lenders under any of the Loan Documents.
(c) Refinance the Term Loan Facility unless the terms and provisions
of such refinancing would be permitted under Section 8.9(b) as if the Term Loan
Facility were not being refinanced but were instead being amended to contain
such terms and provisions.
J. ERISA
-----
Permit any Pension Plan to have a Funded Current Liability Percentage
of less than 60 percent.
K. Acquisition or Issuance of Additional 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 ad ditional 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;
(e) all Stock issued pursuant to this Section shall constitute common
stock with no mandatory dividend, redemption or similar requirement.
L. Limitation on Upstream Dividends and Advances by Subsidiaries
-------------------------------------------------------------
Permit any Subsidiary to enter into or agree, or otherwise become
subject, to any restriction in 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 de claring 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, except for any such restrictions imposed against a
Foreign Subsidiary contained in any agreement governing Indebtedness of such
Foreign Subsidiary permitted by Section 8.1(vii).
M. Fiscal Year
-----------
<PAGE>
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
----------------------------
Sell, lease, transfer or otherwise dispose of any of its Properties
to, or purchase any Property from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, (i) any
Affiliate of the Borrower or any Subsidiary of the Borrower or (ii) any Person
directly or indirectly owning 5% or more of the voting Stock or other voting
equity interests of the Borrower or any of its Subsidiaries (each of the
foregoing, an "Affiliate Transaction"), or permit any of its Subsidiaries so to
---------------------
do, unless such Affiliate Transaction is on terms that are no less favorable to
the Borrower or the relevant Subsidiary than those that would have been obtained
in a comparable arm's-length transaction by the Borrower or such Subsidiary with
an unrelated Person; provided that this Section 8.14 shall not restrict the
--------
ability of the Borrower or any of its Subsidiaries to make Restricted Payments
otherwise permitted under Section 8.4.
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 Loan or reimbursement obligation 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, or to any other Person to whom such payment is to be
made, 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 Section 7.3, 7.11, 7.12, 7.13, 7.14 or 7.15 or Section 8;
or
(e) The failure of any Credit Party 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
<PAGE>
(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 of the Borrower (other than its
obligations under the Notes) and/or any of its Subsidiaries (whether as
principal, guarantor, surety, lessee or other obligor) in excess of $5,000,000
on an aggregate basis 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 ap-
plicable Federal, state or foreign 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
Borrower or any of its Subsidiaries, and any such decree or order continues un-
stayed and in effect for a period of 45 days; or
(j) Judgments or decrees against the Borrower and/or any of its
Subsidiaries in excess of $3,500,000 on an aggregate 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 (i)
any Loan Document, or (ii) the Term Loan Facility; or
<PAGE>
(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 $2,500,000 in the
aggregate; (ii) any Accumulated Funding Deficiency in excess of $2,500,000 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 $2,500,000 in the aggregate that is payable
by it to the PBGC or to a Pension Plan under Title IV of ERISA; or
(n) (i) any Guarantor shall not be a wholly-owned Subsidiary of the
Borrower, or (ii) any Guarantor that was a First-Tier Subsidiary of the Borrower
on the date such Guarantor became a party to the Subsidiary Guaranty shall no
longer be a First-Tier Subsidiary of the Borrower; or
(o) (i) A judgment creditor of the Borrower or any of its Subsidiaries
shall obtain possession of any material portion of the Collateral under the
Collateral Documents by any means, including, without limitation, levy,
distraint, replevin or self-help, (ii) any of the Collateral Documents shall
cease for any reason to be in full force and effect, or any party thereto shall
purport to disavow its obligations thereunder or shall declare that it does not
have any further obligations thereunder or shall contest the validity or
enforceability thereof or the Collateral Agent, for the benefit of the Lenders
and others, shall cease to have a valid and perfected first priority security
interest in any material Collateral therein, or (iii) the Collateral Agent's
security interests or liens on any material portion of the Collateral under the
Collateral Documents shall become otherwise impaired or unenforceable; or
(p) 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 (or, in the case of a Subsidiary of the Borrower
that became a Subsidiary pursuant to a Permitted Acquisition, 180 days following
the date such Permitted Acquisition was consummated, provided that (x) such
failure existed at the time such Permitted Acquisition was consummated, (y) the
consideration paid for such Permitted Acquisition was less than $10,000,000, and
(z) the aggregate consideration paid for all Subsidiaries of the Borrower that
became Subsidiaries pursuant to a Permitted Acquisition then subject to any such
failure is less than $15,000,000).
Upon the occurrence of an Event of Default or at any time thereafter
during the
<PAGE>
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 the Cash Collateral Account 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 the Cash Collateral
Account 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.
In the event that the Aggregate Revolving Credit Commitments and the
Swing Line Commitment shall have been terminated or the Loans 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, subject
to the Intercreditor Agreement, in liquidation of the Loans and the obligations
of the Borrower under the Loan Documents and the applicable Currency Agreements
and Interest Rate Agreements 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, the Letter of Credit Issuer 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, in the following order, of accrued LC Fronting Fees, Commitment Fees,
Letter of Credit Fees and all other fees, expenses and amounts due under the
Loan Documents (other than principal and interest on the Loans and reimbursement
obligations with respect to Letters of Credit); (v) fifth, pro rata according to
the outstanding principal amount of the Loans and the outstanding principal
amount of reimbursement obligations with respect to Letters of Credit, to the
payment of interest due on the Loans and with respect to such reimbursement
obligations; (vi) sixth, pro rata according to the outstanding principal amount
<PAGE>
of the Loans, the Secured Interest Rate Obligations and Secured Currency
Obligations (as each such term is defined in the Intercreditor Agreement) of the
Lenders and their Affiliates and the outstanding principal amount of
reimbursement obligations with respect to Letters of Credit to the payment of
principal outstanding on the Loans, the principal amount of reimbursement
obligations with respect to Letters of Credit and such Secured Interest Rate
Obligations and Secured Currency Obligations; and (vii) seventh, to the payment
of any other amounts owing to the Administrative Agent, the Letter of Credit
Issuer and the Lenders under any Loan Document.
X. THE ADMINISTRATIVE AGENT
------------------------
A. Appointment
-----------
Each Lender hereby irrevocably designates and appoints BNY as the Ad-
ministrative 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 (including, without limitation, the Intercreditor Agreement) 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 the Administrative Agent or such
Person under or in connection with the Loan Documents (except the Administrative
Agent or such Person 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
<PAGE>
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 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 (or, when expressly required
by a Loan Document, all the 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, the
Letter of Credit Issuer 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.
<PAGE>
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 hereafter, 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 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 Loans) 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 from
the 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.
<PAGE>
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
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 Persons entitled thereto during such time.
J. Appointment of Collateral Agent
-------------------------------
Each Lender hereby authorizes the Administrative Agent to enter into
the Intercreditor Agreement on behalf of and for the benefit of that Lender and
agrees to be bound by the terms of the Intercreditor Agreement. Each Lender
hereby authorizes the Collateral Agent to enter into the Collateral Documents
and the Intercreditor Agreement and to accept the Subsidiary Guaranty and to
take all action contemplated by the Intercreditor Agreement, the Collateral
Documents, and Subsidiary Guaranty. Each Lender agrees that no Lender shall
have any right individually to seek or to enforce the Subsidiary Guaranty or to
realize upon the security granted by any Collateral Document, it being
understood and agreed that such rights and remedies may be exercised by the
Collateral Agent for the benefit of the Lenders and the
<PAGE>
parties to the Intercreditor Agreement upon the terms of the Subsidiary
Guaranty, the Collateral Documents and the Intercreditor Agreement.
K. The Co-Arrangers
----------------
The Co-Arrangers shall have no duties or obligations under the Loan
Documents in their capacity as Co-Arrangers.
L. The Syndication Agent
---------------------
The Syndication Agent shall have no duties or obligations under the
Loan Documents in its capacity as Syndication Agent.
M. 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 this Agreement, the Notes
and the Intercreditor Agreement 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 this Agreement, the Notes and the
Intercreditor Agreement 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 Commitment of
any Lender or the Aggregate Revolving Credit Commitments or the maximum amount
of allowable Aggregate Alternate Currency Exposure, (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 on, or change or forgive the
principal amount of, or change the pro rata allocation of payments under, any
Note, (iv) except as provided in Section 11.1(e), release or discharge any
Credit Party or release any Collateral, (v) change the provisions of Sections
2.12, 2.14, 2.15, 2.16, 2.18, 2.22, 11.1 or 11.7(a), (vi) change the definition
of Required Lenders, (vii) change the several nature of the obligations of the
Lenders, (viii) extend the date or decrease the amount of any required
Commitment reduction pursuant to Section 2.6(b), (ix) add any new currency to
the definition of Currencies, or (x) add any new borrower under this Agreement;
and
<PAGE>
(b) without the written consent of the Letter of Credit Issuer, 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 the Administrative Agent, no such amend
ment, 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 other Loan Documents; and
(e) notwithstanding anything to the contrary contained in this Section
11.1, (i) the Collateral Documents, the Intercreditor Agreement and the
Subsidiary Guaranty may only be amended in accordance with the terms thereof and
of the Intercreditor Agreement, and (ii) the Collateral Agent may, at any time
and from time to time without the consent of any one or more of the Lenders, (A)
release all or any of the obligations of any one or more Subsidiaries under the
Collateral Documents in connection with a disposition of such Subsidiary as
permitted by Section 8.3 or 8.7, and (B) release any Collateral or any security
interest therein in connection with any release specifically provided for in the
Collateral 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 Letter of Credit Issuer, 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, the Letter of
Credit Issuer 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.
B. 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.
<PAGE>
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
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, 2.9 or 2.19 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.
C. No Waiver; Cumulative Remedies
------------------------------
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent, the Letter of Credit Issuer 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.
D. Survival of Representations and Warranties
------------------------------------------
<PAGE>
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.
E. 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, the Syndication Agent and the Co-
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 consumma tion 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 Syndication Agent, the Co-
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 collec tion 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 Syndication Agent, the Co-
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 Syndication Agent, the Co-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 Syndication Agent, the Co-Arrangers, the Letter of
Credit Issuer or any Lender to the extent arising from such indemnified party's
gross negligence or willful misconduct or claims between one indemnified party
and another indemnified party. The agreements in this Section shall survive the
termina tion of the Aggregate Revolving Credit Commitments and the Swing Line
Commitment and the payment of all amounts payable under the Loan Documents.
F. Lending Offices
---------------
<PAGE>
(a) Each Lender shall have the right at any time and from time to time
to transfer its Letter of Credit Exposure or Loans, as the case may be, to a
different office, provided that it shall promptly notify the Administrative
Agent and the Borrower of any such change of office. Such office shall thereupon
become, with respect to its Loans, its Lender's Domestic Lending Office,
Eurodollar Lending Office or Alternate Currency Lending Office, as the case may
be, provided, however, that it shall not be entitled to receive any greater
amount under Sections 2.12, 2.14, 2.15, 2.18 or 2.22 as a result of any such
transfer to a different office than it would be entitled to immediately prior
thereto unless (i) such claim would have arisen even if such transfer had not
occurred, (ii) such transfer was made pursuant to subsection (b) below, or (iii)
such claims arose as a result of a change of law after such transfer.
(b) The Letter of Credit Issuer and each Lender agrees that, upon the
occurrence of any event giving rise to any increased cost or indemnity under
Sections 2.12, 2.14, 2.15, 2.18 or 2.22 with respect to the Letter of Credit
Issuer or such Lender, as the case may be, it will, if requested by the
Borrower, use reasonable efforts (subject to its overall policy considerations)
to designate another office for any part of its Letter of Credit Exposure or
Loans affected by such event, provided that such designation is made on such
terms that the Letter of Credit Issuer or such Lender, as the case may be, and
its 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.
G. Assignments and Participations
------------------------------
(a) The Loan Documents shall be binding upon and inure to the benefit
of the Borrower, the Lenders, the Letter of Credit Issuer, 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, the Letter of Credit Issuer and each Lender.
(b) Each Lender shall have the right at any time, upon written notice
to the Administrative Agent of its intent to do so and the payment of a fee (the
"Assignment Fee") of $3,500 to the Administrative Agent by the assigning or
- ---------------
assignee Lender, 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 or
Approved Funds 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 or fund, which in the
normal course of its business, purchases loans such as the Loans, provided that
each such sale, assignment, transfer or negotiation (other than sales,
assignments, transfers or negotiations (x) to affiliates of such
<PAGE>
Lender or (y) of a Lender's entire interest) shall be in a minimum amount of
$5,000,000. For each assignment, the parties to such assignment shall execute
and deliver to the Administrative Agent for its acceptance an Assignment and
Acceptance Agreement which the Administrative Agent shall record in a register
(the "Register") maintained by the Administrative Agent on behalf of the
--------
Borrower, for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time
to time and the registered owners of the obligation(s) evidenced by the Note(s),
the entries in the Register shall be presumptively correct absent manifest
error. 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, if not already a
Lender, 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 Revolving Credit 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, a Revolving Credit Note, dated the effective date
of such Assignment and Acceptance Agreement, in an aggregate principal amount
equal to the bal ance of such assignor Lender's Loans and Commitment, if any,
and each assignor Lender shall cancel and return to the Borrower its existing
Revolving Credit 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) Each Lender may grant participations in all or any part of its
Loans, its Note, its Letter of Credit Exposure and its Commitment to one or more
banks, insurance com panies, financial institutions, pension fund, mutual funds
or funds which in the normal course of business purchase loans such as the
Loans, 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, the Letter of Credit Issuer 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.
(d) If any (i) assignment is made pursuant to subsection (b) above or
(ii) participation is granted pursuant to subsection (c) above 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(e).
(e) No Lender shall, as between and among the Borrower, the
Administrative Agent, the Documentation Agent, the Syndication Agent, the Swing
Line Lender, the Letter of
<PAGE>
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 Letter of
Credit Exposure, its Commitment or its Note, except that a Lender shall be
relieved of its obligations to the extent of any such sale, assignment, trans
fer, or negotiation of all or any part of its Loans, its Letter of Credit
Exposure, 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 or pledge all or
any portion of its rights under the Loan Documents to (i) a Federal Reserve Bank
or (ii) if such Lender is a fund which in the normal course of its business
purchasers loans such as the Loans, to its lenders or a trustee under an
indenture for the benefit of its creditors, to secure such fund's obligations,
provided that any such assignment or pledge shall not release such assignor from
its obligations thereunder.
H. 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 of any 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.
I. 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-
<PAGE>
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 con nection 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 in
debtedness, 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, 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 posses sion, 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.
J. 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.
K. Indemnity
---------
The Borrower agrees to indemnify and hold harmless the Administrative
Agent, the Documentation Agent, the Syndication Agent, the Co-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, that is 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)
<PAGE>
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 al leged 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 acquisi tion
or proposed acquisition by any Credit Party of all or a portion of the Stock, or
all or a por tion 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
Indem nified Person. The indemnity set forth herein shall be in addition to
any other obligations or li abilities 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.
L. 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.
M. Headings Descriptive
--------------------
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
N. 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.
O. 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.
<PAGE>
P. 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 here after 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.
Q. 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 of fices at 1633 Broadway, New York, New York 10019 (or any
other location in New York City) (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 re spect 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.
R. 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, the Letter
of Credit Issuer or any Lender to serve process in any manner permitted by law
or limit the right of the Administrative Agent, the Letter of Credit Issuer 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.
S. Judgment Currency
-----------------
(a) Each Credit Party's obligations under the Loan Documents to make
payments in the applicable Currency (the "Obligation Currency") shall not be
-------------------
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency,
except to the extent that, on the Business Day im mediately following the date
of such tender or recovery, the Administrative Agent, the Letter of Credit
Issuer, the Swing Line Lender or the applicable Lender, as the case may be, may,
in accordance with normal banking procedures, purchase the Obligation Currency
with such other
<PAGE>
currency. If for the purpose of obtaining or enforcing judgment against any
Credit Party in any court or in any jurisdiction, it becomes necessary to
convert into any currency other than the Obligation Currency (such other
currency being hereinafter referred to as the "Judgment Currency") an amount
-----------------
due in the Obligation Currency, the conversion shall be made at the rate of
exchange at which, in accordance with normal banking procedures in the relevant
jurisdiction, the Obligation Currency could be purchased with the Judgment
Currency as of the day im mediately preceding the day on which the judgment is
given.
(b) If the amount of Obligation Currency purchased pursuant to the
last sentence of subsection (a) above is less than the sum originally due in the
Obligation Currency, the applicable Credit Party covenants and agrees to
indemnify the applicable recipient against such loss, and if the Obligation
Currency so purchased exceeds the sum originally due to such recipient, such
recipient agrees to remit to the applicable Credit Party such excess.
T. WAIVER OF TRIAL BY JURY
-----------------------
THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AGENT, THE SYNDICATION
AGENT, THE CO-ARRANGERS, THE LENDERS, THE LETTER OF CREDIT ISSUER AND EACH
CREDIT PARTY EACH HEREBY KNOW INGLY, VOLUNTARILY AND INTENTIONALLY WAIVES 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 SYNDICATION AGENT, THE CO-ARRANGERS, THE LETTER OF CREDIT ISSUER OR THE
LENDERS, OR COUNSEL TO THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AGENT, THE
SYNDICATION AGENT, THE CO-ARRANGERS , THE LETTER OF CREDIT ISSUER OR THE
LENDERS, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT,
THE DOCUMENTATION AGENT, THE SYNDICATION AGENT, THE CO-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
SYNDICATION AGENT, THE CO-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.
U. International Banking Facilities
--------------------------------
(a) The Borrower acknowledges that some or all of the Lenders may, in
connection with the Loan Documents, utilize an International banking facility
(as defined in Regulation D of the Board of Governors of the Federal Reserve
System).
<PAGE>
(b) The Borrower (i) understands that it is the policy of the Board of
Governors of the Federal Reserve System that deposits received by International
banking facilities may be used only to support the non-U.S. operations of a
depositor (or its foreign affiliates) located outside the United States and that
extensions of credit by International banking facilities may be used only to
finance the non-U.S. operations of a customer (or its foreign affiliates)
located outside the United States, and (ii) acknowledges that the proceeds of
its borrowings hereunder from an International banking facility will be used
solely to finance its operations outside the United States, or those of its
foreign affiliates.
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
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.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
THE BANK OF NEW YORK,
Individually, as the Letter of Credit Issuer, as the
Swing Line Lender and as Administrative Agent
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
THE BANK OF NEW YORK,
Individually, as the Letter of Credit Issuer, as the
Swing Line Lender and as Administrative Agent
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT APPLICATION
DLJ CAPITAL FUNDING, INC.,
Individually and as Syndication Agent
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
FIRST UNION NATIONAL BANK,
Individually and as Documentation Agent
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
ABN AMRO BANK N.V.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
ABN AMRO BANK N.V.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
ALLIED IRISH BANKS, P.L.C.,
CAYMAN ISLANDS BRANCH
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
BANK LEUMI TRUST COMPANY OF NEW
YORK
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
BANKBOSTON N.A.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
BANK OF MONTREAL
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
THE BANK OF NOVA SCOTIA
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
BANQUE NATIONALE DE PARIS
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
BANQUE PARIBAS
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
CITY NATIONAL BANK
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
CORESTATES BANK N.A.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
FLEET NATIONAL BANK
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
THE FUJI BANK, LIMITED
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
HIBERNIA NATIONAL BANK
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
THE INDUSTRIAL BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
LONG TERM CREDIT BANK OF JAPAN, LTD.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
MELLON BANK, N.A.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
MICHIGAN NATIONAL BANK
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK B.A,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
ROYAL BANK OF CANADA
By:
------------------------------------
Name:
-----------------------------------
Title:
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
THE ROYAL BANK OF SCOTLAND plc
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
THE SAKURA BANK, LIMITED
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
<PAGE>
SOCIETE GENERALE
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
<PAGE>
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
SUNTRUST BANK, NASHVILLE, N.A.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
REVOLVING CREDIT AGREEMENT
U.S. BANK NATIONAL ASSOCIATION
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
TRCH EXHIBIT A
--------------
LIST OF COMMITMENTS
-------------------
Revolving
Credit Commitment
Lender Commitment Percentage
- ------ ---------- ----------
The Bank of New York $ 35,000,000 4.375%
DLJ Capital Funding, Inc. $ 35,000,000 4.375%
First Union National Bank $ 35,000,000 4.375%
Banque Paribas $ 30,000,000 3.750%
Deutsche Bank AG, New York
and/or Cayman Islands Branches $ 30,000,000 3.750%
Long Term Credit Bank of Japan, $ 30,000,000 3.750%
Ltd.
The Sanwa Bank, Limited $ 30,000,000 3.750%
Societe Generale $ 30,000,000 3.750%
The Sumitomo Bank, Limited,
Chicago Branch $ 30,000,000 3.750%
SunTrust Bank Nashville, N.A. $ 30,000,000 3.750%
Union Bank of California, N.A. $ 30,000,000 3.750%
ABN AMRO Bank N.V. $ 20,000,000 2.500%
Bank of Montreal $ 20,000,000 2.500%
The Bank of Nova Scotia $ 20,000,000 2.500%
Banque Nationale De Paris $ 20,000,000 2.500%
Corestates Bank N.A. $ 20,000,000 2.500%
Credit Lyonnais New York Branch $ 20,000,000 2.500%
<PAGE>
Dresdner Bank AG, New York
and Grand Cayman Branch $ 20,000,000 2.500%
Fleet National Bank $ 20,000,000 2.500%
Hibernia National Bank $ 20,000,000 2.500%
Industrial Bank of Japan, Ltd.,
Los Angeles Agency $ 20,000,000 2.500%
Mellon Bank, N.A. $ 20,000,000 2.500%
The Mitsubishi Trust and Banking
Corporation $ 20,000,000 2.500%
Cooperatieve Centrale
Raiffeisen - Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch $ 20,000,000 2.500%
The Royal Bank of Scotland plc $ 20,000,000 2.500%
The Sakura Bank, Limited $ 20,000,000 2.500%
U.S. Bank National Association $ 20,000,000 2.500%
Allied Irish Banks, p.l.c.,
Cayman Islands Branch $ 15,000,000 1.875%
Bank Leumi Trust Company
of New York $ 15,000,000 1.875%
BankBoston N.A. $ 15,000,000 1.875%
City National Bank $ 15,000,000 1.875%
The Fuji Bank, Limited $ 15,000,000 1.875%
Michigan National Bank $ 15,000,000 1.875%
National City Bank of Kentucky $ 15,000,000 1.875%
Royal Bank of Canada $ 15,000,000 1.875%
The Sumitomo Trust & Banking Co.,
<PAGE>
Ltd., New York Branch $ 15,000,000 1.875%
TOTAL $800,000,000 100%
============ ======
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 1 and CONSENT NO. 1
---------------------------------
AMENDMENT NO. 1 and CONSENT NO. 1 (this "Amendment"), dated as of
---------
December 1, 1997, to the Revolving Credit Agreement (the "Revolving Credit
----------------
Agreement"), dated as of October 24, 1997, by and among TOTAL RENAL CARE
- ---------
HOLDINGS, INC., a Delaware corporation (the "Borrower"), the lenders party
--------
thereto (the "Lenders"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (the
-------
"Syndication Agent"), FIRST UNION NATIONAL BANK, as Documentation Agent, and THE
- ------------------
BANK OF NEW YORK, as administrative agent (the "Administrative Agent").
--------------------
RECITALS
--------
XII. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Revolving Credit
Agreement.
XIII. The Borrower has requested that the Administrative Agent and the
Lenders agree to amend the Revolving Credit Agreement upon the terms and
conditions contained herein, and the Administrative Agent and the Required
Lenders are willing to so agree.
Accordingly, in consideration of the Recitals and the covenants and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
A. Section 1.1 of the Revolving Credit Agreement is amended by adding
the following definitions in their appropriate alphabetical order:
"5-5/8% Indenture": the Indenture, dated as of June 12, 1996,
----------------
between RTC and PNC Bank, National Association, as trustee, pursuant to
which RTC issued the 5-5/8% Notes, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with Section 8.9.
"5-5/8% Notes": the 5-5/8% Convertible Subordinated Notes, due 2006,
------------
issued by RTC pursuant to the 5-5/8% Indenture, as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with Section 8.9.
"Merger Agreement": the Agreement and Plan of Merger, dated as of
----------------
November 18, 1997, by and among the Borrower, Newco and RTC, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with Section 8.9.
"Newco": Nevada Acquisition Corp., a Delaware corporation and a
-----
wholly-owned Subsidiary of the Borrower (prior to the consummation of the
Permitted Merger).
"Permitted Merger": the merger of Newco into and with RTC (with RTC
----------------
being the survivor)
<PAGE>
pursuant to the terms and conditions of the Merger Agreement as permitted
by Section 8.5(k).
"RTC": Renal Treatment Centers, Inc., a Delaware corporation and a
---
wholly-owned Subsidiary of the Borrower (after the consummation of the
Permitted Merger).
"RTC Loan Agreement": the Sixth Amended and Restated Loan Agreement,
------------------
dated as of September 26, 1997, among RTC, the lenders party thereto,
First Union National Bank, as agent, CoreStates Bank, N.A., as
documentation agent, and such other institutions identified therein as co-
agents, and all other documents executed in connection therewith, as each
such loan agreement or other document may have been amended, supplemented
or otherwise modified.
B. Section 2.7(e)(ii) of the Revolving Credit Agreement is amended by
inserting the phrase "(to an amount not less than zero)" immediately after the
word "reduced" contained in the eighth line of such Section 2.7(e)(ii).
C. Section 8.1 of the Revolving Credit Agreement is amended by (a)
deleting the word "and" immediately before clause (xiv) of such Section 8.1, and
(b) inserting the following immediately prior to the period at the end of such
Section 8.1:
, (xv) Indebtedness of RTC under the 5-5/8% Indenture and the 5-5/8%
Notes, and (xvi) such other Indebtedness of RTC and its Subsidiaries
existing on the date the Permitted Merger is consummated in an
aggregate amount not to exceed $10,000,000.
D. Section 8.2 of the Revolving Credit Agreement is amended by (a)
deleting the word "and" immediately before clause (xi) of such Section 8.2, and
(b) inserting the following immediately prior to the period at the end of such
Section 8.2:
, and (xii) Liens to secure Indebtedness permitted by Section
8.1(xvi), provided that such Liens shall be limited to Liens on the
Property acquired in connection with the Permitted Merger.
E. Section 8.3 of the Revolving Credit Agreement is amended by (a)
deleting the word "and" immediately before clause (ii) of such Section 8.3, and
(b) inserting the following immediately prior to the period at the end of such
Section 8.3:
, and (iii) any Permitted Acquisition or the Permitted Merger.
F. Section 8.5 of the Revolving Credit Agreement is amended by (a)
deleting the word "and" immediately after clause (i) of such Section 8.5, and
(b) inserting the following immediately prior to the period at the end of clause
(j) of such Section 8.5:
(k) the Permitted Merger, provided that on or prior to the date the
Permitted Merger is consummated:
(A) a certificate signed by the chief financial officer of the
Borrower (or such other officer as shall be acceptable to the
Administrative Agent) shall have been delivered to the Administrative
Agent and the Lenders (i) certifying to the effect that immediately
before and after giving effect thereto (1) the representations and
warranties contained in the Loan Documents and the Merger Agreement
shall be true
<PAGE>
and correct, and (2) no Event of Default shall exist, (ii)
certifying that the RTC Loan Agreement has been terminated, all
Indebtedness thereunder has been repaid in full with the proceeds
of Revolving Credit Loans, all commitments thereunder have been
terminated, and all Liens and guaranties securing or guarantying
any Indebtedness under the RTC Loan Agreement have been released,
(iii) certifying that the Permitted Merger has been consummated in
accordance with the terms and provisions of the Merger Agreement,
and (iv) setting forth calculations on a pro-forma basis showing
compliance with Sections 7.11 through 7.15, and
(B) the provisions of Section 7.11(a) shall have been satisfied
notwithstanding the 30 day period contained in the first line of
such Section 7.11(a); and
(l) Investments of RTC and its Subsidiaries existing on the date
the Permitted Merger is consummated as set forth on Schedule 8.5A.
G. Section 8.9 of the Revolving Credit Agreement is amended by (a)
amending and restating the heading of such Section in its entirety as follows:
"Amendments, Etc. of Certain Documents", and (b) adding new subsections (d) and
- --------------------------------------
(e) to such Section 8.9 as follows:
(d) Amend or otherwise modify, or permit RTC so to do, the 5-5/8%
Indenture or the 5-5/8% Notes in any way that would adversely affect
the interests of the Administrative Agent and the Lenders under any
of the Loan Documents, provided, however, that the Borrower and RTC
shall be permitted to enter into a supplemental indenture (in form
and substance satisfactory to the Administrative Agent and the
Syndication Agent) with respect to the 5-5/8% Indenture executed in
connection with the Permitted Merger.
(e) Amend or otherwise modify, or permit any of its Subsidiaries so
to do, any material term or provision of the Merger Agreement without
the consent of the Administrative Agent and the Syndication Agent,
provided, however, that if such amendment or other modification would
in any way materially adversely affect the interests of the
Administrative Agent and the Lenders under any of the Loan Documents,
the consent of the Administrative Agent, the Syndication Agent and
the Required Lenders shall be required.
H. Section 8.11 of the Revolving Credit Agreement is amended by (a)
inserting the phrase "or the Permitted Merger" immediately prior to the semi-
colon appearing at the end of clause (a) of such Section 8.11, and (b) deleting
clause (e) of such Section 8.11 in its entirety and inserting in its place the
following:
(e) the Borrower may issue additional Stock; and
(f) pursuant to the terms of the 5-5/8% Indenture and the
5-5/8% Notes;
provided, however, that all Stock issued pursuant to this Section shall
constitute common stock with no
<PAGE>
mandatory dividend, redemption or similar requirement, or warrants,
options or other equivalents (however designated) to acquire such common
stock.
I. The Schedules to the Revolving Credit Agreement are amended by adding
thereto Schedule 8.5A in substantially the form of Schedule 8.5A attached
hereto.
J. The Administrative Agent and the Lenders consent to the amendment of
the Term Loan Facility substantially in the form of Exhibit A attached hereto
(the "Term Loan Amendment").
-------------------
K. Paragraphs 1 - 10 of this Amendment shall not be effective until such
date as each of the following conditions shall have been satisfied:
1. The Administrative Agent shall have received a certificate of an
Authorized Signatory of the Borrower attaching a true, complete and correct copy
of the fully executed Merger Agreement.
2. The Term Loan Amendment shall have become effective, and the
Administrative Agent shall have received a certificate of an Authorized
Signatory of the Borrower attaching a true, complete and correct copy of the
fully executed Term Loan Amendment.
3. The Borrower shall have paid the reasonable fees and disbursements
of Special Counsel which shall have accrued up to the date hereof.
L. On the date hereof, each Credit Party hereby (a) reaffirms and admits
the validity and enforceability of the Loan Documents and all of its obligations
thereunder, (b) agrees and admits that it has no defenses to or offsets against
any such obligation, and (c) represents and warrants that no Default or Event of
Default has occurred and is continuing, and that each of the representations and
warranties made by it in the Loan Documents to which it is a party is true and
correct with the same effect as though such representation and warranty had been
made on the date hereof.
M. In all other respects, the Loan Documents shall remain in full force
and effect, and no amendment in respect of any term or condition of any Loan
Document contained herein shall be deemed to be an amendment in respect of any
other term or condition contained in any Loan Document.
N. This Amendment may be executed in any number of counterparts all of
which, taken together, shall constitute one Amendment. In making proof of this
Amendment, it shall only be necessary to produce the counterpart executed and
delivered by the party to be charged.
O. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED TO
BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE IN
ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
executed on its behalf.
TOTAL RENAL CARE HOLDINGS, INC.
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
THE BANK OF NEW YORK,
Individually, as the Letter of Credit Issuer,
as the Swing Line Lender and as Administrative
Agent
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
DLJ CAPITAL FUNDING, INC.,
Individually and as Syndication Agent
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
FIRST UNION NATIONAL BANK,
Individually and as Documentation Agent
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
ABN AMRO BANK N.V.
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
ALLIED IRISH BANKS, P.L.C.,
CAYMAN ISLANDS BRANCH
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
BANK LEUMI TRUST COMPANY OF NEW YORK
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
BANKBOSTON N.A.
Name:
______________________________________
Title:
______________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
Title:
______________________________________
BANK OF MONTREAL
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
THE BANK OF NOVA SCOTIA
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
BANQUE NATIONALE DE PARIS
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
BANQUE PARIBAS
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
CITY NATIONAL BANK
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
CORESTATES BANK N.A.
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCHES
By:
______________________________________
Name:
______________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND
CAYMAN BRANCH
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
FLEET NATIONAL BANK
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
THE FUJI BANK, LIMITED
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
HIBERNIA NATIONAL BANK
By:
______________________________________
Name:
______________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
Title:
______________________________________
THE INDUSTRIAL BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By:
____________________________________
Name:
____________________________________
Ttitle:
______________________________________
LONG TERM CREDIT BANK OF JAPAN, LTD.
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
MELLON BANK, N.A.
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
MICHIGAN NATIONAL BANK
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
THE MITSUBISHI TRUST AND BANKING CORPORATION
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
NATIONAL CITY BANK OF KENTUCKY
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK B.A,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
ROYAL BANK OF CANADA
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
THE ROYAL BANK OF SCOTLAND PLC
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
By:
______________________________________
Name:
______________________________________
Title:
______________________________________
THE SAKURA BANK, LIMITED
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
THE SANWA BANK, LIMITED
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
SOCIETE GENERALE
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
THE SUMITOMO TRUST & BANKING CO., LTD., NEW
YORK BRANCH
By:
_____________________________________
Name:
_____________________________________
Title:
_____________________________________
SUNTRUST BANK, NASHVILLE, N.A.
By:
_____________________________________
Name:
_____________________________________
Title:
_____________________________________
UNION BANK OF CALIFORNIA, N.A.
By:
_____________________________________
Name:
_____________________________________
Title:
_____________________________________
U.S. BANK NATIONAL ASSOCIATION
By:
_____________________________________
Name:
_____________________________________
Title:
_____________________________________
AGREED AND CONSENTED TO:
TOTAL RENAL CARE, INC.
By:
------
Name:
----
<PAGE>
AMENDMENT NO. 1 AND CONSENT NO. 1
TO REVOLVING CREDIT AGREEMENT
Title:
-----
TRC WEST, INC.
By:
-----
Name:
-----
Title:
-----
TRC ACQUISITION CORP.
By:
-----
Name:
-----
Title:
-----
<PAGE>
EXHIBIT 10.3
================================================================================
TERM LOAN AGREEMENT
by and among
TOTAL RENAL CARE HOLDINGS, INC.,
THE LENDERS PARTY HERETO,
DLJ CAPITAL FUNDING, INC.
as Syndication Agent,
and
THE BANK OF NEW YORK,
as Administrative Agent
with
BNY CAPITAL MARKETS, INC. AND DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION,
as Co-Arrangers
________________
$250,000,000
________________
Dated as of October 24, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION............................... 1
1.1 Definitions.............................................................. 1
1.2 Principles of Construction............................................... 26
2. AMOUNT AND TERMS OF LOANS................................................ 27
2.1 Term Loans............................................................... 27
2.2 Term Loan Notes.......................................................... 27
2.3 Procedure for Borrowing.................................................. 27
2.4 Prepayments of the Term Loans............................................ 29
2.5 Conversions and Continuations............................................ 32
2.6 Interest Rate and Payment Dates.......................................... 34
2.7 Substituted Interest Rate................................................ 35
2.8 Taxes.................................................................... 36
2.9 Illegality............................................................... 38
2.10 Increased Costs.......................................................... 39
2.11 Indemnification for Loss................................................. 40
2.12 Option to Fund........................................................... 41
2.13 Use of Proceeds.......................................................... 41
2.14 Capital Adequacy......................................................... 41
2.15 Administrative Agent's Records........................................... 42
3. FEES; PAYMENTS........................................................... 42
3.1 Commitment Fee........................................................... 42
3.2 Pro Rata Treatment and Application of Principal Payments................. 42
3.3 Failure To Fund Fee...................................................... 43
4. REPRESENTATIONS AND WARRANTIES........................................... 43
4.1 Subsidiaries; Capitalization............................................. 43
4.2 Existence and Power...................................................... 44
4.3 Authority................................................................ 44
4.4 Binding Agreement........................................................ 44
4.5 Litigation............................................................... 44
4.6 Required Consents........................................................ 45
4.7 No Conflicting Agreements................................................ 45
4.8 Compliance with Applicable Laws.......................................... 45
4.9 Taxes.................................................................... 46
4.10 Governmental Regulations................................................. 46
4.11 Federal Reserve Regulations; Use of Loan Proceeds........................ 46
4.12 Plans.................................................................... 46
4.13 Financial Statements..................................................... 47
4.14 Property................................................................. 47
</TABLE>
<PAGE>
<TABLE>
Page
------
<S> <C>
4.15 Franchises, Intellectual Property, Etc................................... 48
4.16 Environmental Matters.................................................... 48
4.17 Labor Relations.......................................................... 49
4.18 Burdensome Obligations................................................... 49
4.19 Medicare Participation/Accreditation..................................... 49
4.20 Fraud and Abuse.......................................................... 50
4.21 No Misrepresentation..................................................... 50
5. CONDITIONS TO EFFECTIVENESS OF AGREEMENT................................. 50
5.1 Evidence of Action....................................................... 51
5.2 This Agreement........................................................... 51
5.3 Notes.................................................................... 51
5.4 Subsidiary Guaranty...................................................... 51
5.5 Borrower Pledge Agreement................................................ 52
5.6 Subsidiary Pledge Agreement.............................................. 52
5.7 Intercreditor Agreement.................................................. 52
5.8 Revolving Credit Facility................................................ 52
5.9 Litigation............................................................... 53
5.10 Existing Indebtedness.................................................... 53
5.11 Opinions of Counsel to the Credit Parties................................ 53
5.12 Opinion of Special Counsel............................................... 53
5.13 Fees..................................................................... 54
5.14 Fees and Expenses of Special Counsel..................................... 54
5.15 Documentation and Proceedings............................................ 54
5.16 Required Acts and Conditions............................................. 54
5.17 Officers' Certificate Regarding Certain Conditions....................... 54
5.18 Approval of Special Counsel.............................................. 55
5.19 Agent for Service of Process............................................. 55
5.20 Other Documents.......................................................... 55
6. CONDITIONS OF LENDING.................................................... 55
6.1 Compliance............................................................... 55
6.3 Borrowing Request........................................................ 56
6.9 No Injunction or Restraining Order....................................... 57
6.10 No Violation of Law...................................................... 57
6.11 No Adverse Litigation.................................................... 57
7. AFFIRMATIVE COVENANTS.................................................... 57
7.1 Financial Statements..................................................... 57
7.2 Certificates; Other Information.......................................... 58
7.3 Legal Existence.......................................................... 61
7.4 Taxes.................................................................... 61
</TABLE>
<PAGE>
<TABLE>
Page
----
<S> <C>
7.5 Insurance................................................................ 61
7.6 Payment of Indebtedness and Performance of Obligations................... 61
7.7 Condition of Property.................................................... 62
7.8 Observance of Legal Requirements......................................... 62
7.9 Inspection of Property; Books and Records; Discussions................... 62
7.10 Licenses, Intellectual Property.......................................... 62
7.11 Additional Guarantors; Additional Collateral............................. 63
8. NEGATIVE COVENANTS....................................................... 64
8.1 Incurrence of Indebtedness and Issuance of Disqualified Stock............ 64
8.2 Limitations on Liens..................................................... 66
8.3 Limitation on Merger, Consolidation and Certain Dispositions of Assets... 67
8.4 Limitations on Restricted Payments....................................... 68
8.5 Investments, Loans, Etc.................................................. 70
8.6 Business Change.......................................................... 72
8.7 Limitation on Asset Sales................................................ 72
8.8 Subsidiaries............................................................. 72
8.9 Certificate of Incorporation............................................. 72
8.10 ERISA.................................................................... 72
8.11 Acquisition or Issuance of Additional Stock.............................. 73
8.12 Dividend and Other Payment Restrictions Affecting Subsidiaries........... 73
8.13 Fiscal Year.............................................................. 74
8.14 Transactions with Affiliates............................................. 75
8.15 Limitation on Certain Amendments......................................... 75
9. DEFAULT.................................................................. 75
9.1 Events of Default........................................................ 75
10. THE AGENT................................................................ 79
10.1 Appointment.............................................................. 79
10.2 Delegation of Duties..................................................... 79
10.3 Exculpatory Provisions................................................... 80
10.4 Reliance by Administrative Agent......................................... 80
10.5 Notice of Default........................................................ 81
10.6 Non-Reliance on Administrative Agent and Other Lenders................... 81
10.7 Indemnification.......................................................... 82
10.8 Administrative Agent in Its Individual Capacity.......................... 82
10.9 Successor Administrative Agent........................................... 82
10.10 Appointment of Collateral Agent; Intercreditor Agreement; Collateral
Documents; Subsidiary Guaranty 83
10.11 The Co-Arrangers......................................................... 83
10.12 The Syndication Agent.................................................... 83
</TABLE>
<PAGE>
<TABLE>
Page
----
<S> <C>
11. OTHER PROVISIONS......................................................... 84
11.1 Amendments and Waivers................................................... 84
11.2 Notices.................................................................. 85
11.3 No Waiver; Cumulative Remedies........................................... 86
11.4 Survival of Representations and Warranties............................... 86
11.5 Payment of Expenses and Taxes............................................ 86
11.6 Lending Offices.......................................................... 87
11.7 Assignments and Participations........................................... 88
11.8 Counterparts............................................................. 90
11.9 Adjustments; Set-off..................................................... 90
11.10 Construction............................................................. 91
11.11 Indemnity................................................................ 91
11.12 GOVERNING LAW............................................................ 92
11.13 Headings Descriptive..................................................... 92
11.14 Severability............................................................. 92
11.15 Integration.............................................................. 92
11.16 Consent to Jurisdiction.................................................. 93
11.17 Service of Process....................................................... 93
11.18 No Limitation on Service or Suit......................................... 93
11.19 WAIVER OF TRIAL BY JURY.................................................. 93
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - TERM LOAN COMMITMENTS; PRO RATA SHARES
Exhibit B - FORM OF TERM LOAN NOTES
Exhibit C - FORM OF BORROWING REQUEST
Exhibit D - FORM OF COMPLIANCE CERTIFICATE
Exhibit E - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Exhibit F-I - FORM OF OPINION OF GENERAL COUNSEL TO CREDIT PARTIES
Exhibit F-II - FORM OF OPINION OF SPECIAL COUNSEL TO CREDIT PARTIES
Exhibit G - FORM OF OPINION OF SPECIAL COUNSEL TO LENDERS
Exhibit H - FORM OF NOTICE OF CONVERSION/CONTINUATION
Exhibit I - FORM OF SUBSIDIARY GUARANTY
Exhibit J - FORM OF BORROWER PLEDGE AGREEMENT
Exhibit K - FORM OF SUBSIDIARY PLEDGE AGREEMENT
Exhibit L - FORM OF INTERCREDITOR AGREEMENT
Exhibit M - FORM OF FORM OF ACCEPTANCE BY AGENT FOR SERVICE OF PROCESS
</TABLE>
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(D) - DOMESTIC LENDING OFFICES; EURODOLLAR LENDING OFFICES
Schedule 1.1(E) - EXISTING LETTERS OF CREDIT
Schedule 1.1(P) - EXCLUDED PENSION PLANS
Schedule 4.1 - SUBSIDIARIES
Schedule 4.5 - LITIGATION
Schedule 4.9 - TAXES
Schedule 4.12 - EXISTING PENSION PLANS
Schedule 8.1 - CERTAIN EXISTING INDEBTEDNESS
Schedule 8.2 - EXISTING LIENS
Schedule 8.5 - EXISTING INVESTMENTS
</TABLE>
<PAGE>
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of October 24, 1997, by and among TOTAL RENAL
CARE HOLDINGS, INC., a Delaware corporation (the "Borrower"), the lenders party
--------
hereto and their respective successors and assigns, (the "Lenders", each a
-------
"Lender"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (the "Syndication
- ------- -----------
Agent"), and THE BANK OF NEW YORK, as administrative agent for the Lenders (in
- -----
such capacity, the "Administrative Agent").
--------------------
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
------------------------------------------
1.1 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 Term 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.
"Accepting Lender" as defined in Section 2.4(d)(iii).
----------------
"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.
"Acquisition Debt": with respect to any specified Person, Indebtedness
----------------
of any other Person (the "Acquired Person") existing at the time the Acquired
Person merges with or into, or becomes a Subsidiary of, such specified Person
and Indebtedness of such specified Person or such Acquired Person incurred in
connection with, or in contemplation of, the Acquired Person merging with or
into, or becoming a Subsidiary of, such specified Person.
"Additional Guarantor Event": any time when (i) any Person that is not
--------------------------
a Guarantor becomes a First-Tier wholly-owned Domestic Subsidiary of the
Borrower after the Effective Date, or (ii) (x) the aggregate total assets
(without duplication) at such time of all Subsidiaries of the Borrower formed or
acquired after the Effective Date that are not Guarantors, plus (y) the
aggregate total Investments made during the period from the Effective Date to
such time
<PAGE>
(calculated without duplication and excluding Investments made pursuant to
Section 8.5(g) to the extent the proceeds thereof were used to acquire Stock or
assets included in (x) above) by the Credit Parties in all Subsidiaries of the
Borrower that are not Guarantors, less (z) the aggregate total assets at such
time of all Subsidiaries of the Borrower existing on the Effective Date that
became Guarantors after the Effective Date, exceeds 10% of the Consolidated
total assets of the Borrower and its Subsidiaries at such time.
"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) a Eurodollar Advance 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; and (iii) the
Borrower shall prepay or repay all or any part of the principal amount of a
Eurodollar Advance prior to the last day of the Interest Period applicable
thereto, an amount equal to the principal amount of such Eurodollar Advance 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 Credit Exposures of all
-------------------------
Lenders at such time.
"Aggregate Term Loan Commitments": on any date, the sum of the Term
-------------------------------
Loan Commitments of all Lenders on such date.
"Agreement": this Term Loan 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
<PAGE>
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, and (ii) in the case
of such Lender's Eurodollar Advances, its Eurodollar Lending Office.
"Applicable Margin": at all times, with respect to the unpaid
-----------------
principal amount of Eurodollar Advances and ABR Advances, and based on the most
recently delivered Compliance Certificate of the Borrower, the percentage set
forth below under the heading "Applicable Margin for Eurodollar Advances" or
"Applicable Margin for ABR Advances", as applicable, next to the applicable
period:
<TABLE>
Applicable Margin Applicable
for Eurodollar Margin for ABR
Period Advances Advances
- -------------------------- ------------------ ---------------
<S> <C> <C>
When the Leverage Ratio
is equal to or greater
than 3.75:1.00 2.00% 0.75%
When the Leverage Ratio
is less than 3.75:1.00
but equal to or greater
than 3.00:1.00 1.75% 0.50%
When the Leverage Ratio
is less than 3.00:1.00
1.50% 0.25%
</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
4.00:1.0.
(c) Notwithstanding the foregoing, until the Compliance Certificate for
the fiscal year ending December 31, 1997 shall have been delivered to the
Administrative Agent, the Applicable Margin for Eurodollar Advances shall be
1.75% and the Applicable Margin for ABR Advances
<PAGE>
shall be 0.50% 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.
"Approved Fund": with respect to any Lender that is a fund that
-------------
invests in commercial loans, any other fund that invests in commercial loans and
is advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Asset Sale": any direct or indirect sale, issuance, conveyance,
----------
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Borrower or any of
its Subsidiaries (including any sale and leaseback transaction) to any Person
other than the Borrower or a wholly owned Subsidiary of the Borrower of (a) any
capital Stock of any Subsidiary of the Borrower; or (b) any other Property or
assets of the Borrower or any Subsidiary of the Borrower other than in the
ordinary course of business; provided, however, that Asset Sales shall not
--------
include (i) a transaction or series of related transactions for which the
Borrower or its Subsidiaries receive aggregate consideration of less than
$1,000,000, (ii) any transfer of property or assets in connection with a
dividend to holders of capital Stock if such payment is permitted by Section
8.4, (iii) the granting of Permitted Liens, or (iv) the sale, lease, conveyance,
disposition or other transfer (w) of all or substantially all of the assets of
the Borrower as permitted under Section 8.3, (x) pursuant to any foreclosure of
assets or other remedy provided by applicable law to a creditor of the Borrower
or any Subsidiary of the Borrower with a Lien on such assets, which Lien is a
Permitted Lien; provided that such foreclosure or other remedy is conducted in a
--------
commercially reasonable manner or in accordance with any bankruptcy law, (y)
involving only Cash Equivalents or inventory in the ordinary course of business
or obsolete equipment in the ordinary course of business consistent with past
practices of the Borrower or (z) involving only the lease or sublease of any
real or personal property in the ordinary course of business.
"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).
--------------
"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.
---
<PAGE>
"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.
"Borrower Pledge Agreement": the Borrower Pledge Agreement, dated the
-------------------------
date hereof, by and between the Borrower and the Collateral Agent, substantially
in the form of Exhibit J, as the same may be amended, supplemented or otherwise
modified from time to time.
"Borrowing Date": any Business Day specified in a Borrowing Request as
--------------
a date on which the Borrower requests the Lenders to make Term Loans.
"Borrowing Request": a request for Term Loans in the form of Exhibit
-----------------
C.
"Business Day":
------------
(i) for all purposes (other than as covered by clause (ii) below), any day
except Saturday, Sunday or a day which in New York City is a legal holiday or a
day on which banking institutions are authorized or required by law or other
government action to close, and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on a Eurodollar Advance, any day which is a
Business Day described in clause (i) above and is a day for trading by and
between banks in the London interbank market.
"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.
"Cash Equivalents": (a) securities with maturities of one year or less
----------------
from the date of acquisition, issued, fully guaranteed or insured by the United
States Government, (b) securities with maturities of one year or less from the
date of acquisition issued, fully guaranteed or insured by any State of the
United States of America or any political subdivision thereof rated at least AA-
by Standard & Poor's Ratings Services or Aa3 by Moody's Investors Service, Inc.,
or carrying an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of investments,
(c) certificates of deposit, time deposits, overnight bank deposits, bankers'
acceptances and repurchase agreements issued by a Qualified Issuer having
maturities of 270 days or less from the date of acquisition, (d) commercial
paper of an issuer rated at least A-2 by Standard & Poor's Ratings Services or
P-2 by Moody's Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments and having maturities of 270 days or
less from the date of acquisition, (e) money market accounts or funds, a
substantial portion of the assets of which constitute Cash Equivalents described
in clauses (a) through (d) above, with, issued by or managed by Qualified
Issuers, and (f) money market accounts or funds, a substantial portion of the
assets of which constitute Cash Equivalents
<PAGE>
described in clauses (a) through (d) above, which money market accounts or funds
have net assets of not less than $500,000,000 and have the highest rating
available by either Standard & Poor's Ratings Services or Moody's Investors
Service, Inc., or carrying an equivalent rating by a nationally recognized
rating agency if both of the two named rating agencies cease publishing ratings
of investments.
"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.
"Co-Arrangers": BNY Capital Markets, Inc. and Donaldson, Lufkin &
------------
Jenrette Securities Corporation.
"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.
"Collateral": collectively, the Collateral under and as defined in the
----------
Collateral Documents.
"Collateral Agent": BNY acting in its capacity as Collateral Agent
----------------
under the Intercreditor Agreement, the Collateral Documents, and the Subsidiary
Guaranty, and its successors in such capacity.
"Collateral Documents": collectively, the Borrower Pledge Agreement,
--------------------
each Subsidiary Pledge Agreement, and all other instruments or documents
delivered by any Credit Party in order to grant to Collateral Agent Liens on any
Collateral.
"Commitment": a Term Loan Commitment.
----------
"Commitment Fee": as defined in Section 3.1.
--------------
"Compensatory Interest Payment": as defined in Section 2.6(c).
-----------------------------
"Compliance Certificate": a certificate substantially in the form of
----------------------
Exhibit D.
"Consolidated": when applied to an accounting term used with respect
------------
to more than one Person, such accounting term determined on a consolidated basis
for such Persons in accordance with GAAP, including principles of consolidation
under GAAP.
<PAGE>
"Consolidated EBITDA": EBITDA of the Borrower and its Subsidiaries on
-------------------
a Consolidated basis determined in accordance with GAAP.
"Consolidated Net Income": with respect to any period, the aggregate
-----------------------
of the Net Income of the Borrower and its Subsidiaries for such period,
determined on a Consolidated basis in accordance with GAAP; provided that (i)
the Net Income of any Subsidiary that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to the Borrower or any of its wholly owned Subsidiaries, (ii)
the Net Income of any Subsidiary acquired directly or indirectly by the Borrower
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iii) the cumulative effect of a change in
accounting principles shall be excluded and (iv) the Net Income (if positive) of
any Subsidiary shall be excluded to the extent that the declaration or payment
of dividends or similar distributions or intercompany loans or advances by that
Subsidiary to the Borrower of such Net Income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary.
"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.
<PAGE>
"Continuing Director": 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) an ABR Advance is converted to a
Eurodollar Advance or (iii) a Eurodollar Advance is continued as a new
Eurodollar Advance.
"Credit Exposure": with respect to any Lender as at any time, (i)
---------------
prior to the funding of the Term Loans, that Lender's Term Loan Commitment and
(ii) after the funding of the Term Loans, the outstanding principal balance of
such Lender's Term Loans.
"Credit Party": the Borrower, each Guarantor, and each Pledgor.
------------
"Currency Agreement": any foreign exchange contract, currency swap
------------------
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement to which the Borrower or any of its Subsidiaries is a
party.
"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.
"Disqualified Stock": any capital Stock that, by its terms (or by the
------------------
terms of any security into which it is convertible or for which it is
exchangeable, in either case at the option of the holder of such capital Stock),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
option of the holder thereof (other than upon a change of control of the
Borrower in circumstances where the holders of the Term Loans would have similar
rights), in whole or in part, on or prior to September 30, 2007.
"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(D);
thereafter, such other office of such Lender through which it shall be making or
maintaining ABR Advances, as reported by such Lender to the Administrative Agent
and the Borrower.
"Domestic Subsidiary": any Subsidiary of the Borrower that is not a
-------------------
Foreign Subsidiary.
<PAGE>
"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 Section 5 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 31, 1997.
"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.
"Equity Interests": capital Stock and all warrants, options or other
----------------
rights to acquire capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, capital Stock).
"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
<PAGE>
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 Term 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(D) (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
(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.
<PAGE>
"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)(B), (v) or (vi) of the definition of Indebtedness.
"Existing Letters of Credit": the letters of credit set forth on
--------------------------
Schedule 1.1(E).
"Existing Pension Plans": as defined in Section 4.12.
----------------------
"Existing Indebtedness": collectively, the Indebtedness of the
---------------------
Borrower and its Subsidiaries (i) under the 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 BNY, as
administrative agent, as amended and (ii) under the other Loan Documents (as
defined in such Credit Agreement), including, without limitation, in each case,
all outstanding principal, unpaid and accrued interest, unpaid and accrued fees
and other unpaid sums thereunder, but excluding the Existing Letters of Credit.
"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.
--------------------
"First-Tier": with respect to any Subsidiary of the Borrower, the
----------
direct ownership by the Borrower of such Subsidiary's capital Stock.
"Fixed Charges": with respect to any Person for any period, the sum of
-------------
(a) Interest Expense of such Person and its Subsidiaries for such period,
whether paid or accrued, to the extent such expense was deducted in computing
Net Income of such Person (including amortization of original issue discount,
non-cash interest payments and the interest component of capital leases
<PAGE>
but excluding amortization of deferred financing fees) and (b) the product of
(i) all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of Preferred stock of such Person,
times (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case, on a Consolidated
basis and in accordance with GAAP.
"Foreign Subsidiary": any Subsidiary of the Borrower which is a
------------------
"controlled foreign corporation" within the meaning of Section 957 of the Code.
"Funded Current Liability Percentage": as defined in Section
-----------------------------------
401(a)(29) of the Code.
"Funding Date" means the date the Term Loans are made.
------------
"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 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.
"Guarantee": a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors": collectively, (i) TRC, TRC West, Inc. and Total Renal
----------
Care Acquisition Corp., (ii) any other First-Tier wholly-owned Domestic
Subsidiary of the Borrower as of the Effective Date, and (iii) any other
Subsidiary of the Borrower that becomes a party to the Subsidiary Guaranty
pursuant to Section 7.11; each a "Guarantor".
<PAGE>
"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.
"Hedging Obligations": with respect to any Person, the obligations of
-------------------
such Person under Interest Rate Agreements or Currency Agreements designed to
protect such Person against fluctuations in interest or currency exchange rates.
"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 Loans 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
(A) acceptance facilities and the amount available to be drawn under all letters
of credit issued for the account of such Person, and (B) 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.
------------------
"Indemnified Tax": as to any Person, any Tax, except (i) a Tax on the
---------------
Income imposed on such Person and (ii) any interest, fees or penalties for late
payment imposed on such Person, in each case to the extent not attributable to
the failure of the Borrower or any of its Subsidiaries to obtain any necessary
approvals or consents of, or file or cause to be filed any reports,
<PAGE>
applications, documents, instruments or information required to be filed
pursuant to any applicable law, rule, regulation or request of, any Governmental
Authority.
"Indemnified Tax Person": the Administrative Agent, the Collateral
----------------------
Agent, the Syndication Agent, a Co-Arranger, or any Lender, as the case may be.
"Intellectual Property": all copyrights, trademarks, servicemarks,
---------------------
patents, trade names and service names.
"Intercreditor Agreement": the Intercreditor and Collateral Agency
-----------------------
Agreement, dated the date hereof, among the Collateral Agent, the Administrative
Agent, BNY, as the administrative agent under the Revolving Credit Facility, the
Credit Parties listed on the signature pages thereof and such other Persons that
may become party thereto, substantially in the form of Exhibit L, as amended,
supplemented or otherwise modified from time to time.
"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
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 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 (iii) 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": 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 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 ten different Interest Periods outstanding
at any one time for all Term Loans.
<PAGE>
"Interest Rate Agreement": any interest rate swap agreement, interest
-----------------------
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement to which the Borrower or any of its Subsidiaries is a party.
"Investments": with respect to any Person, all investments by such
-----------
Person in other Persons (including Affiliates of such Person) in the form of
loans, Contingent Obligations, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. The amount of any Investment shall be the original cost
of such Investment plus the cost of all additions thereto, without any
----
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Leverage Ratio": at any date of determination, the ratio of (i) Total
--------------
Debt to (ii) Consolidated Pre-Minority EBITDA for the fiscal quarter period of
the Borrower ending on the date of determination 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
--------------
Collateral Documents, the Subsidiary Guaranty and the Intercreditor Agreement.
"Loan": a Term Loan.
----
"Loans": the Term Loans.
-----
"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 any Credit Party to
perform its obligations under the Loan Documents to which it is a
<PAGE>
party or (iii) the ability of the Administrative Agent, the Collateral Agent or
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 any Credit Party to
perform its obligations under the Loan Documents to which it is a party or (iii)
the ability of the Administrative Agent, the Collateral Agent or the Lenders to
enforce the Loan Documents.
"Material Subsidiary": as of any date of determination, (i) any
-------------------
Subsidiary of the Borrower that has aggregate total assets in an amount in
excess of 10% of the Consolidated total assets of the Borrower and its
Subsidiaries at such date of determination and (ii) any Subsidiary of the
Borrower for which the net income of such Subsidiary and its Subsidiaries,
determined on a Consolidated basis in accordance with GAAP, during the four
fiscal quarters most recently ended preceding the date of determination,
exceeded 10% of the Net Income of the Borrower and its Subsidiaries during such
period.
"Maturity Date": September 30, 2007, 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(h).
-------------------
"Multiemployer Plan": a Pension Plan that is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": with respect to any Asset Sale by any Person, the
-----------------
excess, if any, of (i) the cash received by such Person and/or its Affiliates
(including any cash payments received by way of deferred payment pursuant to, or
monetization of, a note or installment receivable or otherwise, but only as and
when received) in connection with such Asset Sale, over (ii) the sum of (A) the
amount of any Indebtedness (other than Indebtedness under this Agreement or the
Revolving Credit Facility) that is secured by such asset and which is required
to be repaid by such Person in connection with such Asset Sale, plus (B) the
out-of-pocket expenses (1) incurred by such Person in connection with such Asset
Sale and (2) if such Person is a Subsidiary, incurred in connection with the
transfer of such amount to the parent company or entity of such Person, plus (C)
provision for taxes, including income taxes, attributable to the Asset Sale or
attributable to required prepayments or repayments of Indebtedness with the
proceeds of such Asset Sale, plus (D) a reasonable reserve for any
indemnification payments (fixed or contingent) attributable to seller's
indemnities and representations and warranties to purchaser in respect of such
Asset Sale undertaken by the Borrower or any of its Subsidiaries in connection
with such Asset Sale plus (E) if such Person is a Subsidiary, any dividends or
distributions payable to holders of minority interests in such Subsidiary from
the proceeds of such Asset Sale.
"Net Income": with respect to any Person for any period, the net
----------
income (loss) of such Person, determined in accordance with GAAP for such
period, excluding, however, any gain (but not loss), together with any related
provision for taxes on such gain (but not loss) realized in connection with any
sale of assets by such Person during such period (including, without limitation,
dispositions pursuant to sale and leaseback transactions), and excluding any
extraordinary gain or loss, together with any related provision for taxes on
such extraordinary gain or loss, realized by such Person during such period.
<PAGE>
"Net Securities Proceeds": the cash proceeds, net of underwriting
-----------------------
discounts and commissions and other reasonable costs and expenses associated
therewith, including reasonable legal fees and expenses, from the issuance of
any Equity Interests of the Borrower after the Effective Date.
"New Subsidiary": as defined in Section 8.11.
--------------
"Note": a Term Loan Note.
----
"Notes": the Term Loan Notes.
-----
"Notice of Conversion/Continuation": a notice substantially in the
---------------------------------
form of Exhibit H.
"Obligations": all obligations of every nature of the Credit Parties
-----------
from time to time owed to the Administrative Agent, the Collateral Agent, the
Lenders or any of them under the Loan Documents, whether for principal,
interest, fees, expenses, indemnification or otherwise.
"Officers' Certificate": as applied to any corporation, a certificate
---------------------
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
--------
with respect to the compliance with a condition precedent to the making of the
Term Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"Original Principal Stockholders": means Tenet Healthcare 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).
<PAGE>
"Permitted Acquisitions": any Acquisition permitted under Section
----------------------
8.5(g).
"Permitted Investments": any Investment permitted under Sections
---------------------
8.5(a)-(j).
"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.
"Pledgor" (i) the Borrower and (ii) each Subsidiary of the Borrower
-------
that executes and delivers to the Collateral Agent a Subsidiary Pledge Agreement
after the Effective Date pursuant to Section 7.11.
"Preferred Stock": any class of capital stock of a corporation that is
---------------
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Pro Forma Coverage Ratio": for any date of determination, the pro
------------------------
forma ratio of the sum of (a) the Consolidated EBITDA for the Reference Period
for such date of determination calculated before deduction for minority
interests (less any EBITDA from Permitted Acquisitions that occurred in such
Reference Period) multiplied by four plus (b) the EBITDA from Permitted
Acquisitions that occurred in such Reference Period (which Permitted
Acquisitions have been operated by the Borrower or any of its Subsidiaries or
included in the Consolidated results of operations of the Borrower, in either
case for at least 30 days during such Reference Period) calculated as if such
Permitted Acquisitions occurred on the first day of such Reference Period
multiplied by four (the sum of such amounts being "Adjusted EBITDA")
divided by the Fixed Charges of the Borrower for such Reference Period
- ----------
multiplied by four. The Pro Forma Coverage Ratio shall, as applicable, be
calculated on the following basis:
(i) if the Indebtedness which is being created, incurred or
assumed is Acquisition Debt, the Pro Forma Coverage Ratio shall be
determined after giving effect to both the Fixed Charges related to the
creation, incurrence or assumption of such Acquisition Debt and the
Adjusted EBITDA (A) of the person becoming a Subsidiary of such person
or (B) in the case of an acquisition of assets which constitute
substantially all of an operating unit or business, relating to the
assets being acquired by such person;
(ii) there shall be excluded from Fixed Charges any Fixed Charges
related to Indebtedness repaid during and subsequent to the Reference
Period and which is not outstanding on the measurement date;
<PAGE>
(iii) Fixed Charges attributable to any Indebtedness (whether
existing or being incurred) bearing a floating rate of interest shall
be computed as if the rate in effect on the measurement date had been
the applicable rate for the entire Reference Period; and
(iv) the creation, incurrence or assumption of any Indebtedness
during the Reference Period or subsequent to the Reference Period and
prior to the measurement date, and the application of the proceeds
therefrom, shall be assumed to have occurred on the first day of the
Reference Period.
"Pro Rata Share": with respect to each Lender, the percentage obtained
--------------
by dividing (x) the Credit Exposure of that Lender by (y) the Aggregate Credit
-------- --
Exposure of all Lenders, as such percentage may be adjusted by assignments
permitted pursuant to subsection 11.7 and by prepayments made pursuant to
Section 2.4(d). The initial Pro Rata Share of each Lender is set forth opposite
the name of that Lender in Exhibit A.
"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.
"Purchase Money Indebtedness": Indebtedness of the Borrower and its
---------------------------
Subsidiaries incurred in connection with the purchase or financing of the
acquisition, construction or improvement of property or assets for the business
of the Borrower and its Subsidiaries; provided that any Lien or encumbrance
--------
relating to such Indebtedness shall be placed on such property or asset not
later than 120 days after the date of such purchase or the completion of
construction or improvement.
"Qualified Issuer": (A) any Lender hereunder, (B) any lender that is a
----------------
party to the Revolving Credit Facility and (C) any commercial bank that has
capital and surplus in excess of $100,000,000.
"Real Property": all real property owned or leased by the Borrower or
-------------
any of its Subsidiaries.
"Redemption Price": with respect to any voluntary prepayment of Term
----------------
Loans during any period set forth below, an amount equal to the principal amount
of such prepayment multiplied by the percentage set forth below opposite such
----------
period:
<PAGE>
Redemption Price
Period Percentage
---------- ----------
Funding Date to first
anniversary of Funding Date 101.5%
First anniversary of Funding
Date to second anniversary
of Funding Date 100.75%
Thereafter 100.00%
"Reference Period": for any date of determination, the most recently
----------------
concluded fiscal quarter preceding such date of determination for which
financial information is available.
"Refinancing Indebtedness": (i) Indebtedness of the Borrower incurred
------------------------
or given in exchange for, or the proceeds of which are used to, extend,
refinance, renew, replace, substitute, defease or refund any other Indebtedness
incurred by the Borrower in accordance with the terms of this Agreement and (ii)
Indebtedness of any Subsidiary incurred or given in exchange for, or the
proceeds of which are used to, extend, refinance, renew, replace, substitute,
defease or refund any other Indebtedness of such Subsidiary in accordance with
the terms of this Agreement.
"Register": as defined in Section 11.7(b).
--------
"Reinvested Proceeds": with respect to any Asset Sale as of any date of
-------------------
determination, the amount of Net Cash Proceeds from such Asset Sale that is used
by the Borrower or any of its Subsidiaries to acquire, during the Reinvestment
Period, Property that is to be used in the same or a related line of business of
the Borrower.
"Reinvestment Period": the period beginning on, and ending 365 days
-------------------
after, the date that proceeds from an Asset Sale are received by the Borrower or
any of its Subsidiaries, as the case may be.
"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.
"Relevant Date": (i) in the case of each Lender listed on the
-------------
signature pages hereof, the Effective Date, and (ii) in the case of each other
Lender, the effective date of the Assignment and Acceptance Agreement or other
document pursuant to which it became a Lender.
<PAGE>
"Remaining Interest Period": (i) in the event that the Borrower shall
-------------------------
fail for any reason to borrow a Term 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 a
Eurodollar Advance 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
(iii) in the event that the Borrower shall prepay or repay all or any part of
the principal amount of a Eurodollar Advance 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.
"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 Credit Exposure equal to at least
----------------
51% of the Aggregate Credit Exposure.
"Required Payment": as defined in Section 2.8(a).
----------------
"Restricted Investment": an Investment other than a Permitted
---------------------
Investment.
"Restricted Payment": (a) any dividend or other distribution declared
------------------
or paid on any Equity Interests of the Borrower or any of its Subsidiaries
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Borrower or such Subsidiary or dividends or
distributions payable to the Borrower or any Subsidiary); (b) any payment to
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Borrower or any Subsidiary or other Affiliate of the Borrower (other than
any Equity Interests owned by the Borrower or any Subsidiary); (c) any payment
to purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated in right of payment to the Term Loans (other
than with the proceeds of Indebtedness (including, but not limited to,
Refinancing Indebtedness) permitted under this Agreement), except in accordance
with the mandatory redemption or repayment provisions set forth in the original
documentation governing such Indebtedness; or (d) any Restricted Investment.
"Revolver Prepayment Fraction": on any date of calculation, a fraction
----------------------------
equal to 1.00 minus the Term Prepayment Fraction.
"Revolving Credit Commitments": as defined in the Revolving Credit
----------------------------
Facility.
<PAGE>
"Revolving Credit Facility": the Revolving Credit Agreement, dated as
-------------------------
of the date hereof, by and among the Borrower, the lenders party thereto, BNY
Capital Markets, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation,
as co-arrangers, DLJ Capital Funding, Inc., as syndication agent, First Union
National Bank, as Documentation Agent, and BNY, as administrative agent,
together with all other documents executed in connection therewith, in each case
as such agreements may be amended, restated, supplemented or otherwise modified
from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders; provided,
--------
however, that any such amendment, restatement, replacement, refinancing or other
- -------
restructuring of the Revolving Credit Facility as in effect from time to time
shall comply with the restrictions set forth in Sections 8.1 and 8.15. Upon any
amendment, restatement, replacement, refinancing or restructuring of the
Revolving Credit Facility, all references herein to definitions or sections in
the Revolving Credit Facility shall be deemed to refer to the corresponding
definitions or sections in the Revolving Credit Facility as so amended,
restated, replaced, refinanced or restructured.
"Revolving Loans": as defined in the Revolving Credit Facility.
---------------
"SEC": the Securities and Exchange Commission or any Governmental
---
Authority succeeding to the functions thereof.
"Special Counsel": O'Melveny & Myers LLP, special counsel to the
---------------
Administrative Agent.
"Stock": any and all shares, rights, interests, participations,
-----
warrants or other equivalents (however designated) of corporate stock.
"Subordinated Indebtedness": any Indebtedness of the Borrower or any
-------------------------
Guarantor subordinated in right of payment to the Obligations of such party
pursuant to documentation containing maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material terms
in form and substance satisfactory to the Administrative Agent and Required
Lenders.
"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.
<PAGE>
"Subsidiary Guaranty": the Subsidiary Guaranty, dated the date hereof,
-------------------
by the Guarantors in favor of the Collateral Agent, substantially in the form of
Exhibit I, as amended, supplemented or otherwise modified from time to time.
"Subsidiary Pledge Agreements": collectively, each Subsidiary Pledge
----------------------------
Agreement (i) delivered pursuant to Section 5.6 and (ii) delivered after the
Effective Date pursuant to Section 7.11(c), each such Subsidiary Pledge
Agreement by and between the Pledgor named therein and the Collateral Agent,
substantially in the form of Exhibit K, as each such agreement may be amended,
supplemented or otherwise modified from time to time.
"Surviving Entity": with respect to any transaction in which one
----------------
Person merges with or into or consolidates with another Person, or in which one
Person disposes by sale, assignment, conveyance, transfer, lease or disposition
all or substantially all of the properties and assets of such Person, the Person
formed by or surviving such merger or consolidation or that receives such
properties and assets.
"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 Income": as to any Person, a Tax imposed by one of the
-----------------
following jurisdictions or by any political subdivision or taxing authority
thereof: (i) the United States, (ii) the jurisdiction in which such Person is
organized, (iii) the jurisdiction in which such Person's principal office is
located, or (iv) in the case of each Lender, any jurisdiction in which such
Person is deemed to be doing business; which Tax is an income tax (or any tax
in lieu thereof or equivalent thereto) or franchise tax imposed on all or part
of the net income or net profits of such Person or with respect to the net
increase in the shareholders' or owners' equity or capital in such Person or
which Tax represents interest, fees or penalties for payment of any such income
tax or franchise tax.
"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.
"Term Loan" and "Term Loans": as defined in Section 2.1.
--------- ----------
"Term Loan Commitment": as to any Lender, such Lender's undertaking
--------------------
during the Term Loan Commitment Period to make Term 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 "Term Loan Commitment".
<PAGE>
"Term Loan Commitment Period": the period commencing on the Effective
---------------------------
Date and ending on the earliest of (i) the Funding Date, (ii) the date which is
90 days after the Effective Date, and (iii) any date on which the Aggregate Term
Loan Commitments are terminated pursuant to Section 2.4(c) or 9.1.
"Term Loan Note" and "Term Loan Notes": as defined in Section 2.2.
-------------- ---------------
"Term Prepayment Fraction": on any date of calculation, a fraction
------------------------
determined by dividing (a) the aggregate principal amount of Term Loans
outstanding at such time by (b) the sum of (i) the aggregate principal amount of
Term Loans outstanding at such time plus (ii) the aggregate amount of Revolving
----
Credit Commitments at such time (or, if the Revolving Credit Commitments have
been terminated at such time, the aggregate principal amount of Revolving Loans
outstanding at such time).
"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.
"Total Prepayment Amount": as of any date of determination, an amount
-----------------------
equal to all Net Cash Proceeds received by the Borrower and its Subsidiaries
after the Effective Date that have not become Reinvested Proceeds during the
applicable Reinvestment Periods for such Net Cash Proceeds and with respect to
which the applicable Reinvestment Periods have terminated; provided, however,
------------------
that the "Total Prepayment Amount" shall exclude (i) an aggregate of $5,000,000
in Net Cash Proceeds received by the Borrower and its Subsidiaries after the
Effective Date that have not become Reinvested Proceeds during the applicable
Reinvestment Periods for such Net Cash Proceeds and (ii) the portion of such Net
Cash Proceeds that has been applied to the prepayment of the Term Loans and the
reduction of the Revolving Credit Commitments pursuant to Section 2.4(d)
(including amounts for which the applicable prepayment was waived by the Lenders
pursuant to Section 2.4(d)(iii)).
"Transactions": the transactions contemplated under this Agreement and
------------
the other Loan Documents on the Effective Date and the Funding Date, including
the repayment of the Existing Indebtedness, the borrowing of the Term Loans and
the Revolving Loans and other transactions related to any of the foregoing.
"TRC": Total Renal Care, Inc., a California corporation.
---
"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).
<PAGE>
"Unqualified Amount": as defined in Section 2.6(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.
"Weighted Average Life to Maturity": when applied to any Indebtedness
---------------------------------
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other maturity or other required
scheduled payment of principal, including payment at final maturity, in respect
thereof, with (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii) the
then outstanding aggregate principal amount of such Indebtedness.
1.2 Principles of Construction
--------------------------
(a) All terms defined in this Agreement shall have the meanings given such
terms herein when used in the other Loan Documents or any certificate, opinion
or other document made or delivered pursuant hereto, unless otherwise expressly
provided 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.
(d) The phrase "may not" is prohibitive and not permissive.
(e) Unless the context otherwise requires, words in the singular number
include the plural, and words in the plural include the singular.
(f) Unless specifically provided in a Loan Document to the contrary,
references to a time shall refer to New York City time.
<PAGE>
(g) 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".
2. AMOUNT AND TERMS OF LOANS
-------------------------
2.1 Term Loans
----------
Subject to the terms and conditions hereof, each Lender severally
agrees to make term loans (each a "Term Loan" and, as the context may require,
---------
collectively with the Term Loans of all other Lenders, the "Term Loans") to the
----------
Borrower at any time during the Term Loan Commitment Period, provided, however,
that immediately after giving effect thereto (a) such Lender's Credit Exposure
shall not exceed such Lender's Term Loan Commitment and (b) the Aggregate Credit
Exposure of all Lenders shall not exceed the Aggregate Term Loan Commitments.
The Borrower may make only one borrowing under the Term Loan Commitments.
Amounts borrowed under this Section 2.1 and subsequently repaid or prepaid may
not be reborrowed.
2.2 Term Loan Notes
---------------
(a) The Term Loans made by a Lender shall be evidenced by a promissory
note of the Borrower, substantially in the form of Exhibit B (each, as indorsed
or modified from time to time, including all replacements thereof and
substitutions therefor, a "Term Loan Note" and, collectively with the Term Loan
--------------
Notes of all other Lenders, the "Term Loan 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
Term Loan Commitment of such Lender and (b) the aggregate unpaid principal
balance of all Term Loans made by such Lender, with interest thereon as
prescribed in Section 2.6. Each Term Loan 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 2.6.
Interest on each Term Loan Note shall be payable as specified in Section 2.6.
(b) The unpaid principal amount of the Term Loans shall be due and
payable on the Maturity Date.
2.3 Procedure for Borrowing
-----------------------
(a) The Borrower may borrow Term Loans in a single draw on any Business
Day during the Term Loan Commitment Period. When the Borrower desires to borrow
Term Loans, it shall deliver to the Administrative Agent a Borrowing Request
substantially in the form of Exhibit C 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
<PAGE>
Date, in the case of ABR Advances, specifying (i) the aggregate principal amount
to be borrowed under the Aggregate Term Loan 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 Term Loan shall end after the
Maturity Date. Such Borrowing Request shall be irrevocable. 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. Such notice shall be irrevocable. 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 Term Loan 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.
(b) Upon receipt of the Borrowing Request 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, each Lender will
make the amount of its Pro Rata Share of the Term Loans 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. No Lenders shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Term Loan requested hereunder nor shall the Term Loan
Commitment of any Lender be increased or decreased as a result of a default by
any other Lender in that other Lender's obligation to make a Term Loan requested
hereunder. The amounts so made available to the Administrative Agent on such
Borrowing Date will then, subject to the 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 Pro Rata Share of the Term 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 Pro Rata Share of such Term 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
<PAGE>
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 2.6 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 Term Loan as part of the Term
Loans for purposes of this Agreement, which Term Loan shall be deemed to have
been made by such Lender on the Borrowing Date applicable to such Term Loans.
(d) A Borrowing Request given by telecopy shall be deemed given when
received.
2.4 Prepayments of the Term Loans
-----------------------------
(a) Voluntary Prepayments.
---------------------
(i) Subject to clause 2.4(a)(ii) below, the Borrower may, at its
option, prepay the Term Loans 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 Term
Loans consisting of ABR Advances, and at least three Business Days
prior to the proposed prepayment date, in the case of Term Loans
consisting of Eurodollar Advances, specifying the Term Loans to be
prepaid, whether such Term Loans consist of ABR Advances, Eurodollar
Advances, or a combination thereof, the amount to be prepaid, the
Redemption Price of the amount to be prepaid, and the date of
prepayment. Voluntary prepayments of Term Loans shall be at the
Redemption Price of the principal amount prepaid. Such notice shall be
irrevocable and an amount equal to the Redemption Price of the
principal amount of Term Loans 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 made 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 Term 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 2.5)
$5,000,000 or such amount plus a whole multiple of $500,000 in excess
thereof.
(ii) The Borrower may not make voluntary prepayments of the Term
Loans pursuant to clause 2.4(a)(i) unless, concurrently with such
prepayment, the Borrower permanently reduces the Revolving Credit
Commitments (and makes any prepayments of Revolving Loans required
under the Revolving Credit Facility in connection with such reduction)
in an amount equal to the amount of such voluntary prepayment of Term
Loans multiplied by the ratio of aggregate
-------------
<PAGE>
amount of Revolving Credit Commitments immediately before such
prepayment to the aggregate amount of outstanding Term Loans
immediately before such prepayment.
(b) Scheduled Repayments of Term Loans. The Borrower shall make principal
----------------------------------
payments on the Term Loans in installments on the dates and in the amounts set
forth below:
Scheduled
Date Repayment of Term Loans
--------------------------------------
September 30, 1998 $ 2,500,000
September 30, 1999 $ 2,500,000
September 30, 2000 $ 2,500,000
September 30, 2001 $ 2,500,000
September 30, 2002 $ 2,500,000
September 30, 2003 $ 2,500,000
September 30, 2004 $ 2,500,000
September 30, 2005 $ 2,500,000
September 30, 2006 $ 2,500,000
September 30, 2007 $227,500,000
; provided that the scheduled installments of principal of the Term Loans set
--------
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the Term Loans in accordance with subsections 2.4(a), 2.4(c) or
2.4(d) and provided, further that the Term Loans and all other amounts owed
-------- -------
hereunder with respect to the Term Loans shall be paid in full no later than
September 30, 2007, and the final installment payable by the Borrower in respect
of the Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts owing by
the Borrower under this Agreement with respect to the Term Loans.
(c) Mandatory Commitment Reductions and Prepayments Relating to a Change
--------------------------------------------------------------------
of Control. Upon the occurrence of a Change of Control, the Aggregate Term Loan
- ----------
Commitments shall terminate and the Borrower shall (i) prepay in full the
outstanding principal balance of the Term Loans, together with accrued and
unpaid interest thereon and (ii) pay in full all fees and other amounts payable
under the Loan Documents.
(d) Mandatory Prepayments Relating to Asset Sales; Reductions of
------------------------------------------------------------
Revolving Credit Commitments.
- ----------------------------
(i) The Borrower shall prepay the Term Loans from time to time in
an amount equal to the product of the Accepting Lenders' aggregate Pro
Rata Shares of the Term Prepayment Fraction multiplied by the Total
Prepayment Amount at such time. Each such prepayment shall be due and
payable on (x) each date on which the Total Prepayment Amount exceeds
$10,000,000 and
<PAGE>
(y) the occurrence of an Event of Default. Each such prepayment shall
be at a price equal to 100% of the principal amount thereof plus
accrued interest thereon to the date of prepayment.
(ii) On each date on which any mandatory prepayments of Revolving
Loans are required under Section 2.7(e) of the Revolving Credit
Facility (or any other provision requiring prepayments of Revolving
Loans or reductions in Revolving Credit Commitments as a result of
sales of Property), the Borrower shall prepay an aggregate principal
amount of Term Loans equal to the Accepting Lenders' aggregate Pro Rata
Shares of the Total Prepayment Amount (as such term is defined in the
Revolving Credit Agreement, or any successor term referring to the
total amount of reductions in Revolving Credit Commitments and
prepayments in Revolving Loans and Term Loans required as a result of
sales of Property), multiplied by the Term Prepayment Fraction;
----------
provided, however, that if prepayments are required to be made under
------------------
Section 2.4(d)(i) on any date on which prepayments are required to be
made under this Section 2.4(d)(ii), for purposes of this Section
2.4(d)(ii), the "Total Prepayment Amount" (as such term is defined in
the Revolving Credit Agreement, or any successor term referring to the
total amount of reductions in Revolving Credit Commitments and
prepayments in Revolving Loans and Term Loans required as a result of
sales of Property) on such date shall be reduced by the "Total
Prepayment Amount" (as such term is defined herein) on such date. Each
such prepayment shall be at a price equal to 100% of the principal
amount thereof plus accrued interest thereon to the date of prepayment.
(iii) The Borrower may at its option elect to give the Lenders the
option to waive their rights to receive the prepayments under Section
2.4(d)(i) or Section 2.4(d)(ii) by notifying the Administrative Agent
in writing of such election not less than 10 Business Days before any
prepayment is due under Section 2.4(d)(i) or Section 2.4(d)(ii) (a
"Waivable Mandatory Prepayment"). The Administrative Agent shall, upon
------------------------------
receipt of such notice, notify each Lender thereof and of the amount of
such Waivable Mandatory Prepayment to be applied to such Lender's Term
Loan and of the designation of such Waivable Mandatory Prepayment as
such by the Borrower; provided, further that the Borrower shall use its
-------- -------
reasonable efforts to notify the Lenders of such Waivable Mandatory
Prepayment three Business Days prior to the date such Waivable
Mandatory Prepayment shall be due under Section 2.4(d)(i) or Section
2.4(d)(ii) (it being understood that the Borrower shall have no
liability for failing to so notify the Lenders). In the event any
Lender desires to waive such Lender's right to receive such Waivable
Mandatory Prepayment, such Lender shall so advise the Administrative
Agent in writing no later than the close of business not more than five
Business Days after it receives such notice from the Administrative
Agent. Each Lender that does not waive its right to receive a Waivable
Mandatory Prepayment is referred to herein as an "Accepting Lender." If
----------------
the does not elect to give the Lenders the option to waive their rights
to receive the prepayments under Section 2.4(d)(i) or Section
2.4(d)(ii), each Lender shall be deemed to be an Accepting Lender with
respect to such prepayments.
(iv) Concurrently with any mandatory prepayment of Term Loans made
pursuant to Section 2.4(d)(i), the Borrower shall permanently reduce
the Revolving Credit Commitments in an amount equal to the sum of (x)
the Revolver Prepayment Fraction multiplied by the Total
-------------
<PAGE>
Prepayment Amount plus (y) 50% of the difference between (A) the Term
----
Prepayment Fraction multiplied by the Total Prepayment Amount minus (B)
---------- -----
the aggregate principal amount of the Term Loans that are prepaid to
the Accepting Lenders in connection with the receipt of such Total
Prepayment Amount.
(e) Application of Prepayments.
--------------------------
(i) Each prepayment of Term Loans shall first be applied to ABR
Advances. If any prepayment is made in respect of any Eurodollar
Advance, 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 2.11.
(ii) Any voluntary prepayments of the Term Loans pursuant to
Section 2.4(a) and any mandatory prepayments of the Term Loans pursuant
to Sections 2.4(c) and 2.4(d) shall be applied on a pro rata basis (in
accordance with the respective outstanding principal amounts thereof)
to reduce each scheduled installment of principal of the Term Loans set
forth in Section 2.4(b) that is unpaid at the time of such prepayment.
2.5 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) 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
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. 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, (A)
<PAGE>
each ABR Advance shall be automatically continued as an ABR Advance and (B) each
Eurodollar Advance shall be automatically converted to an ABR Advance on the
last day of the Interest Period applicable to such Eurodollar Advance.
(c) 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 principal payment is scheduled to be made pursuant to
Section 2.4(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 Term Loans required to be paid on
such date pursuant to Section 2.4(b).
(d) 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).
(e) Notwithstanding anything to the contrary contained in any Loan
Document, if the Borrower shall fail, for any reason, to convert or continue a
Eurodollar Advance under this Section 2.5 in connection with the expiration of
an Interest Period with respect to any existing Eurodollar Advance, then such
Eurodollar Advance shall be converted to an ABR Advance until such time, if any,
as the Borrower shall elect a new Eurodollar Advance pursuant to this Section
2.5.
2.6 Interest Rate and Payment Dates
-------------------------------
(a) Prior to Maturity. Except as otherwise provided in Section 2.6(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:
ADVANCES RATE
-------- ----
Each ABR Advance Alternate Base Rate plus
----
the Applicable Margin
Each Eurodollar Eurodollar Rate applicable
Advance to such Eurodollar Advance for the applicable
Interest Period plus the Applicable Margin.
----
(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 or the
Commitment Fee), (h) or (i), the outstanding principal balance of the Term Loans
shall bear interest at a rate per annum equal to 2% plus the rate that would
otherwise be applicable under Section 2.6(a) until, in the case of Eurodollar
Advances, the end of the applicable Interest Period therefor, and, thereafter,
at the
<PAGE>
Alternate Base Rate plus 2%, payable in the case of interest on any
overdue principal, on demand. 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.
(c) In General. Interest on (i) ABR Advances 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) and (ii) ABR Advances 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. Except as otherwise provided in Section 2.6(b), interest
shall be payable in arrears on each Interest Payment Date and upon each payment
(including prepayment) or conversion of the Loans. 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, 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 excess amount being hereinafter referred to as an "Unqualified
-----------
Amount"), then (i) such 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 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 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 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.
<PAGE>
2.7 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 eurocurrency market either
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.6 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 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 (b) 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 and the Lenders promptly upon
either (x) the Administrative Agent having determined that such circumstances
affecting the interbank eurocurrency market no longer exist and that adequate
and reasonable means do exist for determining the Eurodollar Rate pursuant to
Section 2.6 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), (1) no further Eurodollar Advances shall be
required to be made by the Lenders and (2) the Borrower shall not have the right
to convert or continue all or any portion of the Loans to or as Eurodollar
Advances.
2.8 Taxes
-----
(a) Payments to Be Free and Clear. Subject to Sections 2.8(d), 2.8(e)
-----------------------------
and 2.8(f), all payments by each Credit Party under the Loan Documents shall be
made free and clear of, and without any deduction or withholding for, any
Indemnified Tax. If any Credit Party or any other Person is required by any
law, rule, regulation, order, directive, treaty or guideline to make any
deduction or withholding (which deduction or withholding would constitute an
Indemnified Tax) from any amount required to be paid by any Credit Party to or
on behalf of any Indemnified Tax Person under any Loan Document (each a
"Required Payment"), then:
- -----------------
(i) such Credit Party shall notify the Administrative Agent and such
Indemnified Tax Person of any such requirement or any change in any such
requirement as soon as such Credit Party becomes aware thereof;
<PAGE>
(ii) such Credit Party shall pay such Indemnified Tax prior to the
date on which penalties attach thereto, such payment to be made (to the extent
that the liability to pay is imposed on such Credit Party) for its own account
or (to the extent that the liability to pay is imposed on such Indemnified Tax
Person) on behalf and in the name of such Indemnified Tax Person;
(iii) such Credit Party shall pay to such Indemnified Tax Person an
additional amount such that such Indemnified Tax Person shall receive on the due
date therefor an amount equal to the Required Payment had no such deduction or
withholding been required; and
(iv) such Credit Party shall, within 30 days after paying such
Indemnified Tax, deliver to the Administrative Agent and such Indemnified Tax
Person satisfactory evidence of such payment to the relevant Governmental
Authority.
(b) Other Indemnified Taxes. If any Indemnified Tax Person or any
-----------------------
affiliate thereof is required by any law, rule, regulation, order, directive,
treaty or guideline to pay any Indemnified Tax (excluding an Indemnified Tax
which is subject to Section 2.8(a)) with respect to any sum paid or payable by
any Credit Party to such Indemnified Tax Person under the Loan Documents, then,
within five days after such Indemnified Tax Person shall have notified such
Credit Party thereof (which notice shall be accompanied by a statement setting
forth the reasonable calculation thereof), such Credit Party shall pay to such
Indemnified Tax Person the amount of such Indemnified Tax.
(c) Tax on Indemnified Taxes. If any amounts are payable by any Credit
------------------------
Party in respect of Indemnified Taxes pursuant to Section 2.8(a) or (b), such
Credit Party agrees to pay to the applicable Indemnified Tax Person, within five
days of written request therefor (which request shall set forth the reasonable
calculations thereof), an amount equal to all Taxes imposed with respect to such
amounts as such Indemnified Tax Person shall determine in good faith are payable
by such Indemnified Tax Person or any affiliate thereof in respect of such
amounts and in respect of any amounts paid to or on behalf of such Indemnified
Tax Person pursuant to this Section 2.8(c).
(d) Exception for Existing Taxes. No amount shall be required to be
----------------------------
paid to any Indemnified Tax Person under Section 2.8(a) or (b) with respect to
any Indemnified Tax to the extent that such Indemnified Tax would have been
required to have been paid under any law, rule, regulation, order, directive,
treaty or guideline in effect on the Relevant Date.
(e) U.S. Tax Certificates. Each Lender that is organized under the laws
---------------------
of any jurisdiction other than the United States or any political subdivision
thereof shall deliver to the Administrative Agent for transmission to the
Borrower, on or prior to the Relevant Date, and at such other times as may be
necessary in the determination of the Borrower, any other Credit Party or the
Administrative Agent (each in the reasonable exercise of its discretion), such
certificates, documents or other evidence, properly completed and duly executed
by such Lender (including Internal Revenue Service Form 1001 or Form 4224 (or,
in each case, any equivalent or successor form)) to establish that such Lender
is not subject to deduction or withholding of
<PAGE>
United States federal income tax under Section 1441 or 1442 of the Code or
otherwise (or under any comparable provisions of any successor statute) with
respect to any payments to such Lender of principal, interest, fees or other
amounts payable under the Loan Documents or in the case of a Lender that is
claiming an exemption from United States withholding tax under Section 871(h) or
881(c) of the Internal Revenue Code with respect to payments of "portfolio
interest" two accurate and complete signed original Forms W-8 (or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from United States withholding tax on payments under this Agreement or
the Notes) and, if such Lender delivers such Forms W-8 (or successor form), two
signed certificates that such Lender is not (1) a "bank" for purposes of Section
881(c) of the Internal Revenue Code, (2) is not a 10% shareholder (within the
meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower
and (3) is not a controlled foreign corporation related to the Borrower (within
the meaning of Section 864(d)(4) of the Internal Revenue Code). No Credit Party
shall be required to pay any additional amount to any such Lender under Section
2.8(a)(iii) 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 Relevant Date, nothing in this Section 2.8(e)
shall relieve any Credit Party of its obligation to pay any additional amounts
pursuant to Section 2.8(a)(iii) in the event that, as a result of any change in
applicable law (including any change in the interpretation thereof), such Lender
is no longer properly entitled to deliver certificates, forms, documents or
other evidence at a subsequent date establishing the fact that such Lender is
not subject to deduction or withholding as described in the immediately
preceding sentence.
(f) Other Tax Certificates. Each Indemnified Tax Person agrees to use
----------------------
reasonable efforts to deliver to any Credit Party or the Administrative Agent,
promptly upon any reasonable request therefor from time to time by such Credit
Party or the Administrative Agent, such certificates, forms, documents and
information as may be required by applicable law, regulation, order, directive,
guideline or treaty from time to time, provided, however, that if such
-------- -------
Indemnified Tax Person is or becomes unable by virtue of any change in
applicable law, regulation or treaty, to establish such exemption or reduction,
such Credit Party shall nonetheless remain obligated under Section 2.8(a) to pay
the amounts described therein, and provided further that no Indemnified Tax
-------- -------
Person shall be required to take any action under this Section 2.8(f) which, in
the sole discretion of such Indemnified Tax Person, would cause such Indemnified
Tax Person or any affiliate thereof to suffer a material economic, legal or
regulatory disadvantage.
(g) Other Taxes. Each Credit Party agrees to pay any current or future
-----------
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, the Loan Documents or otherwise
with respect to, the Loan Documents.
(h) Refunds. Upon the reasonable request of a Credit Party, and at
-------
such Credit Party's expense, each Indemnified Tax Person shall cooperate with
the such Credit Party in seeking to obtain refunds of Taxes paid by such Credit
Party, provided that each such Indemnified Tax Person shall have no obligation
to (i) engage in any litigation, hearing or proceeding with respect
<PAGE>
thereto or (ii) disclose any tax return or other confidential information other
than information reasonably requested by the applicable taxing authority which,
in the opinion of such Indemnified Tax Person, is not detrimental to such
Indemnified Tax Person. If an Indemnified Tax Person 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
such Credit Party pursuant to this Section 2.8, such Indemnified Tax Person, so
long as no Event of Default shall then exist, shall promptly pay to such Credit
Party the amount so received.
2.9 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 (A) make Eurodollar Advances or (B)
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.
2.10 Increased Costs
---------------
In the event that any law, regulation, treaty or directive hereafter
enacted, adopted, promulgated, approved or issued or any change in any existing
law, regulation, treaty or directive or in the interpretation or application
thereof by any Governmental Authority charged with the administration thereof or
compliance by any Lender (or any Person 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:
(a) 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 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
<PAGE>
(b) 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 2.8. 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.
2.11 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 the
Funding Date or Conversion/Continuation Date after it shall have given notice to
do so in which it shall have requested a Eurodollar Advance, (ii) a Eurodollar
Advance shall be terminated or repaid or prepaid for any reason prior to the
last day of the Interest Period applicable thereto, or (iii) while a Eurodollar
Advance is outstanding, any repayment or prepayment of such Eurodollar Advance
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 Pro Rata Share of
the Affected Principal Amount;
"B" equals the Eurodollar Rate (expressed as a decimal), applicable to such
Eurodollar Advance;
"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
<PAGE>
bid, as the case may be, on or about such date, for deposits in an amount equal
approximately to such Lender's Pro Rata Share of the Affected Principal Amount,
in each case, with an Interest Period equal approximately to the applicable
Remaining Interest Period, as determined by such Lender; and
"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, including, without limitation, in liquidating or
employing deposits acquired to fund or maintain the funding of its Pro Rata
Share of the Affected Principal Amount, or redeploying funds prepaid or repaid,
in amounts that correspond to its Pro Rata Share of the Affected Principal
Amount. Each determination by the Administrative Agent or a Lender pursuant to
this Section shall be conclusive and binding on the Borrower absent manifest
error.
2.12 Option to Fund
--------------
Each Lender has indicated that, if the Borrower requests a Eurodollar
Advance, such Lender may wish to purchase one or more deposits in order to fund
or maintain its funding of such Eurodollar Advance 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 and for purposes of determining
amounts owing under Sections 2.10, 2.11, and 2.14. Each Lender shall be
entitled to fund and maintain its funding of all or any part of each Eurodollar
Advance 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 during the applicable Interest Period through the purchase of
deposits in an amount equal to such Eurodollar Advance and having a maturity
corresponding to such Interest Period. The obligations of the Borrower under
Sections 2.7, 2.8, 2.9, 2.10, 2.11, and 2.14 shall survive the termination of
the Aggregate Term Loan Commitments, the payment of the Notes, and all other
amounts payable under the Loan Documents.
2.13 Use of Proceeds
---------------
The proceeds of the Loans shall be used (i) initially, to pay in full
the Existing Indebtedness and cancel all commitments thereunder, and (ii)
thereafter, for Permitted Acquisitions and the 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.
<PAGE>
2.14 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 Person directly or indirectly owning or
controlling such Lender, or imposes any restriction on or otherwise adversely
affects such Lender (or any lending office of such Lender) or any Person
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 (or such Person'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 at a level below that which such Lender (or such Person)
could have achieved but for such enactment, promulgation, change or compliance
(after taking into account such Lender's (or such Person'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
(or such Person) 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.
2.15 Administrative Agent's Records
------------------------------
The Administrative Agent's records regarding the amount of each Loan,
each payment by the Borrower of principal and interest on the Loans and other
information relating to the Loans shall be presumptively correct absent manifest
error.
3. FEES; PAYMENTS
--------------
3.1. Commitment Fee
--------------
(a) The Borrower agrees to pay to the Administrative Agent, for the
account of the Lenders in accordance with each Lender's Pro Rata Share, a fee
(the "Commitment Fee") for each day during the Term Loan Commitment Period
--------------
(including the first day thereof but excluding the last day thereof), equal to
the Aggregate Term Loan Commitments on such day multiplied by 0.30% per annum.
<PAGE>
(b) The Commitment Fee shall be payable on the last day of the Term Loan
Commitment Period. The Commitment Fee shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
3.2 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 without set-
off or counterclaim and shall be made to the Administrative Agent at its office
set forth in Section 11.2 in Dollars and 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, to the
Lenders according to the Pro Rata Share of each Lender; provided, that each
--------
prepayment made pursuant to Section 2.4(d) shall be remitted by the
Administrative Agent, in like funds as received, to the Accepting Lenders
according to the Pro Rata Share of each Accepting Lender. 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 2.11.
3.3 Failure To Fund Fee
-------------------
If the Term Loans are not borrowed during the Term Loan Commitment
Period, the Borrower agrees to pay to the Administrative Agent, for the account
of the Lenders in accordance with each Lender's Pro Rata Share, a fee equal to
the initial Aggregate Term Loan Commitments multiplied by 1.5%. Such fee shall
----------
be payable on the last day of the Term Loan Commitment Period, and shall
represent the amount that each Lender would have received had Borrower drawn on
the Term Loans during the Term Loan Commitment Period and immediately prepaid
the Term Loans.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Term Loans, the Borrower makes the following
representations and warranties to the Administrative Agent and each Lender as of
the date of this Agreement and the Funding Date:
<PAGE>
4.1 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.
4.2 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.
4.3 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 (including the Transactions) 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.
4.4 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
<PAGE>
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.
4.5 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 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.
4.6 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 (including the Transactions), or is required as a condition
to the validity or enforceability of the Loan Documents.
4.7 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 (including the Transactions), 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.
4.8 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
<PAGE>
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 4.19 and 4.20.
4.9 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(a)) 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.
4.10 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.
4.11 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
<PAGE>
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.
4.12 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.
4.13 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, 1996 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.
<PAGE>
4.14 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.
4.15 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.
4.16 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
<PAGE>
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.
4.17 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.
4.18 Burdensome Obligations
----------------------
Neither the Borrower, any of its Subsidiaries nor 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.
4.19 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.
<PAGE>
4.20 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.
4.21 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.
5. CONDITIONS TO EFFECTIVENESS OF AGREEMENT
----------------------------------------
The effectiveness of this Agreement and the obligation of each Lender to
make its Term Loan on the Funding Date shall be subject to the fulfillment of
the conditions precedent set forth in Section 6 and the following conditions
precedent:
<PAGE>
5.1 Evidence of Action
------------------
(a) The Borrower. The Administrative Agent shall have received a
------------
certificate, dated the Effective 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 Guarantors. The Administrative Agent shall have received a
--------------
certificate, dated the Effective Date, of the Secretary or Assistant Secretary
of each 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 such Guarantor's jurisdiction of organization and
principal place of business.
5.2 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).
5.3 Notes
-----
The Administrative Agent shall have received the Term Loan Notes, duly
executed by an Authorized Signatory of the Borrower.
5.4 Subsidiary Guaranty
-------------------
The Collateral Agent shall have received the Subsidiary Guaranty dated
the date hereof duly executed by an Authorized Signatory of each Guarantor.
5.5 Borrower Pledge Agreement
-------------------------
The Collateral Agent shall have received the Borrower Pledge
Agreement, duly executed by an Authorized Signatory of the Borrower and dated
the date hereof, together with one or more
<PAGE>
share certificates, representing (i) 100% of the issued and outstanding capital
Stock of each First-Tier wholly-owned Domestic Subsidiary of the Borrower, and
(ii) 66% of the issued and outstanding capital Stock of each First-Tier wholly-
owned Foreign Subsidiary of the Borrower, together with an undated stock power,
executed in blank by an Authorized Signatory of the Borrower and bearing a
signature guarantee in all respects satisfactory to the Collateral Agent, in
respect of each such certificate; provided that if the Borrower is unable to
--------
provide a pledge of the capital Stock of such Foreign Subsidiary on the date
hereof pursuant to the preceding clause (ii), the Borrower need not comply with
such clause (ii) on the date hereof so long as the Borrower provides such pledge
by December 24, 1997, together with, where reasonably available, the favorable
written opinions of counsel with respect to the validity, perfection and
priority of such Lien under the law of the jurisdictions governing such Lien.
5.6 Subsidiary Pledge Agreement
---------------------------
The Collateral Agent shall have received the Subsidiary Pledge
Agreement, duly executed by an Authorized Signatory of TRC and dated the date
hereof, together with one or more share certificates, representing (i) 100% of
the issued and outstanding capital Stock of each Guarantor owned by TRC, and
(ii) 66% of the issued and outstanding capital Stock of Total Renal Care
International Ltd., a Foreign Subsidiary of TRC, together with an undated stock
power, executed in blank by an Authorized Signatory of TRC and bearing a
signature guarantee in all respects satisfactory to the Collateral Agent, in
respect of each such certificate; provided that if TRC is unable to provide a
--------
pledge of the capital Stock of such Foreign Subsidiary on the date hereof
pursuant to the preceding clause (ii), TRC need not comply with such clause (ii)
on the date hereof so long as TRC provides such pledge by December 24, 1997,
together with, where reasonably available, the favorable written opinions of
counsel with respect to the validity, perfection and priority of such Lien under
the law of the jurisdictions governing such Lien.
5.7 Intercreditor Agreement
-----------------------
The Collateral Agent, the Administrative Agent, BNY, as administrative
agent under the Revolving Credit Facility, and the Credit Parties shall have
executed and delivered to each other the Intercreditor Agreement.
5.8 Revolving Credit Facility
-------------------------
The Revolving Credit Facility shall have been duly executed and shall
have become effective, and the first borrowing thereunder shall have been made,
and the Administrative Agent shall have received a certificate of an Authorized
Signatory of the Borrower attaching a true and correct copy of the executed
Revolving Credit Facility, which shall be in form and substance satisfactory to
the Administrative Agent and Required Lenders.
<PAGE>
5.9 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 (including the Transactions) 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.
5.10 Existing Indebtedness
---------------------
Prior to or simultaneously with the making of the first Loans, the
Administrative Agent shall have received evidence satisfactory to it that the
Existing Indebtedness has been repaid in full and all commitments thereunder
cancelled pursuant to Section 2.13. The Borrower shall have delivered to the
Administrative Agent all termination statements, satisfactions and releases as
to any financing statements which shall release all liens securing any and all
Existing Indebtedness and other releases relating to any guarantees executed in
connection therewith.
5.11 Opinions of Counsel to the Credit Parties
-----------------------------------------
The Administrative Agent shall have received opinions of (i) the
general counsel to the Borrower and the other Credit Parties, addressed to the
Administrative Agent, the Collateral Agent, the Syndication Agent, the Lenders,
and Special Counsel, and dated the Effective Date, substantially in the form of
Exhibit F-I and (ii) Riordan & McKinzie, special counsel to the Borrower and the
other Credit Parties, addressed to the Administrative Agent, the Collateral
Agent, the Syndication Agent, the Lenders, and the Special Counsel, and dated
the Effective Date, substantially in the form of Exhibit F-II. It is understood
that such opinions are being delivered to the Administrative Agent, the
Collateral Agent, the Syndication Agent, the Lenders, and Special Counsel, upon
the direction of the Credit Parties and that the Administrative Agent, the
Collateral Agent, the Syndication Agent, the Lenders, and Special Counsel may
and will rely upon such opinions.
5.12 Opinion of Special Counsel
--------------------------
The Administrative Agent shall have received an opinion of Special
Counsel, addressed to the Administrative Agent, the Collateral Agent, the
Syndication Agent and the Lenders and dated the Effective Date substantially in
the form of Exhibit G.
5.13 Fees
----
All fees payable to the Administrative Agent, the Co-Arrangers, the
Syndication Agent, and the Lenders on or before the Effective Date shall have
been paid.
<PAGE>
5.14 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.
5.15 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.
5.16 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 the Funding 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.
VI. Officers' Certificate Regarding Certain Conditions.
--------------------------------------------------
The following conditions shall be satisfied and the Borrower shall
have delivered to the Administrative Agent an Officers' Certificate, in form and
substance satisfactory to the Administrative Agent, to that effect:
(a) Representations and Warranties. The representations and
------------------------------
warranties contained herein and in the other Loan Documents shall
be true, correct and complete in all material respects on and as
of the Effective Date to the same extent as though made on and as
of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case
such representations and warranties shall have been true, correct
and complete in all material respects on and as of such earlier
date.
(b) No Event of Default. No event shall have occurred and be
-------------------
continuing as of the Effective Date that would constitute a
Default or an Event of Default.
(c) Performance of Agreements. Each Credit Party shall have
-------------------------
performed in all material respects all agreements and satisfied
all conditions which the Loan Documents provide shall be performed
or satisfied by such Credit Party on or before the Effective Date.
<PAGE>
6.1 Approval of Special Counsel
---------------------------
All legal matters in connection with the making of the Loans shall be
reasonably satisfactory to Special Counsel.
6.2 Agent for Service of Process
----------------------------
The Administrative Agent shall have received a written acceptance of
each Credit Party's agent for service of process referred to in Section 11.17,
substantially in the form of Exhibit M.
6.3 Other Documents
---------------
The Administrative Agent shall have received such other documents as
the Administrative Agent or the Required Lenders shall reasonably request.
7. CONDITIONS OF LENDING
---------------------
The obligation of each Lender to make its Term Loan on the Funding Date is
subject to satisfaction or waiver by Required Lenders of the conditions set
forth in Section 5 and the satisfaction of the following additional conditions
precedent as of the Funding Date:
7.1 Compliance
----------
On the Funding Date and after giving effect to the Loans to be made
thereon, (a) each Credit Party shall be in compliance with all of the terms,
covenants and conditions or each Loan Document to which it is a party, (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 the
Funding Date, and (d) the aggregate outstanding principal balance of the Loans
will not exceed the Aggregate Term Loan Commitments. The borrowing by the
Borrower shall constitute a certification by the Borrower as of the Funding Date
that each of the foregoing matters is true and correct in all respects.
7.2 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 Funding 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 the Funding Date.
<PAGE>
7.3 Borrowing Request
-----------------
With respect to the making of the Term Loans on the Funding Date, the
Administrative Agent shall have received a Borrowing Request duly executed by an
Authorized Signatory of the Borrower.
7.4 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.
7.5 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.
7.6 Approval of Special Counsel
---------------------------
All legal matters in connection with the making of each Loan shall be
reasonably satisfactory to Special Counsel.
7.7 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
Guarantors, addressed to the Administrative Agent, the Co-Arrangers, the
Syndication 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.
7.8 Other Documents
---------------
The Administrative Agent shall have received such other documents as
the Administrative Agent or the Lenders shall reasonably request.
<PAGE>
VIII. No Injunction or Restraining Order. No order, judgment or decree
----------------------------------
of any court, arbitrator or governmental authority shall purport to enjoin or
restrain any Lender from making the Loan to be made by it on the Funding Date.
IX. No Violation of Law. The making of the Loans requested on the
-------------------
Funding Date shall not violate any law including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System.
X. No Adverse Litigation. As of the Funding Date, there shall not
---------------------
be pending or, to the knowledge of the Borrower, threatened, any action, suit,
proceeding, governmental investigation or arbitration against or affecting the
Borrower or any of its Subsidiaries or any property of the Borrower or any of
its Subsidiaries that has not been disclosed by the Borrower in writing pursuant
to Section 4.5 prior to the execution of this Agreement, and there shall have
occurred no development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either event,
in the opinion of the Administrative Agent or of Required Lenders, would be
expected to have a Material Adverse Effect; and no injunction or other
restraining order shall have been issued and no hearing to cause an injunction
or other restraining order to be issued shall be pending or noticed with respect
to any action, suit or proceeding seeking to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of Loans hereunder.
11. AFFIRMATIVE COVENANTS
---------------------
The Borrower agrees that, so long as this Agreement is in effect, any
Loan remains outstanding and unpaid, or any other amount is owing under any Loan
Document to any Lender or the Administrative Agent, the Borrower shall:
11.1 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 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,
<PAGE>
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 Section 7.11, (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
Syndication Agent or any Lender may reasonably request from time to time.
11.2 Certificates; Other Information
-------------------------------
Furnish to the Administrative Agent and each Lender:
(a) Prompt written notice if: (i) any Indebtedness of the
Borrower and/or any of its Subsidiaries in excess of $1,000,000 on an aggregate
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 and/or any of its
Subsidiaries in excess of $1,000,000 on an aggregate basis has the right to
declare any such Indebtedness due and payable
<PAGE>
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 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 $500,000, (v) the aggregate amount of Unrecognized
Retiree Welfare Liability under all applicable Employee Benefit Plans is in
excess of $500,000, (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 $500,000, (vii) the imposition of any tax
in excess of $500,000 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 $500,000 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
<PAGE>
or such ERISA Affiliate of any final decision finding liability in an aggregate
amount in excess of $500,000 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.
(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.
11.3 Legal Existence
---------------
Maintain, and cause each of its Subsidiaries so to maintain, its
corporate, partnership or other 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.
11.4 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
<PAGE>
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(a)), 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.
11.5 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.
11.6 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 $1,000,000 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.
11.7 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.
<PAGE>
11.8 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.
11.9 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 Syndication 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).
11.10 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.
11.11 Additional Guarantors; Additional Collateral
--------------------------------------------
Within 30 days after the occurrence of an Additional Guarantor
Event, (i) cause one or more Domestic Subsidiaries of the Borrower that are not
currently Guarantors to become a party to the Subsidiary Guaranty, in accordance
with the terms thereof, on and as of such date, to the extent that, after giving
effect thereto, such Additional Guarantor Event shall no longer exist, and (ii)
deliver or cause to be delivered to the Collateral Agent with respect to each
such Subsidiary, simultaneously with the execution and delivery of the same, (A)
a certificate, dated the date such Subsidiary shall have become a party to the
Subsidiary Guaranty, executed by such Subsidiary and substantially in the form
of, and with substantially the same attachments as, the certificate which would
have been required under Section 5.1 if such Subsidiary had become a party to
the Subsidiary Guaranty on or before the Effective Date, (B) an opinion of
counsel to
<PAGE>
such Subsidiary, in form and substance satisfactory to the Administrative Agent,
(C) 100% of the issued and outstanding capital Stock of such Subsidiary,
together with an undated stock power, executed in blank by an Authorized
Signatory of the Pledgor of such Stock, and (D) such other documents as may by
required by the applicable Collateral Documents and as the Collateral Agent
shall request.
(b) As soon as practicable, and in any event within 90 days after
any Person becomes a First-Tier wholly-owned Foreign Subsidiary of the Borrower
after the Effective Date, deliver or cause to be delivered to the Administrative
Agent 66% of the issued and outstanding capital Stock (or equivalent) of such
Subsidiary, together with an undated stock power (or equivalent), executed in
blank by an Authorized Signatory of the Borrower, and deliver such other
documents and take such actions as may by required by the Borrower Pledge
Agreement and as the Collateral Agent shall request in order to grant to the
Collateral Agent a valid, perfected first priority Lien on such capital Stock
(or equivalent), and, where reasonably available, the favorable written opinions
of counsel with respect to the validity, perfection and priority of such Lien
under the law of the jurisdictions governing such Lien.
XII
If the capital Stock (or equivalent) of any Subsidiary that becomes
a Guarantor pursuant to Section 7.11(a) is owned by a Subsidiary that is not a
Pledgor, within 30 days of the applicable Additional Guarantor Event, (i) cause
the Subsidiary that owns such capital Stock (or equivalent) to execute and
deliver to the Collateral Agent a Subsidiary Pledge Agreement substantially in
the form of Exhibit K, duly completed and (ii) deliver or cause to be delivered
to the Collateral Agent with respect to such Subsidiary, simultaneously with the
execution and delivery of the same, (A) a certificate, dated the date such
Subsidiary shall have become a Pledgor, executed by such Subsidiary and
substantially in the form of, and with substantially the same attachments as,
the certificate which would have been required under Section 5.1 if such
Subsidiary had been a party to a Subsidiary Pledge Agreement on or before the
Effective Date, (B) an opinion of counsel to such Subsidiary, in form and
substance satisfactory to the Administrative Agent, and (C) such other documents
as may by required by the Subsidiary Pledge Agreement and as the Collateral
Agent shall request.
XIII
To the extent that the Borrower or TRC does not provide a pledge of the
capital Stock of any Foreign Subsidiary on the date of this Agreement as
required pursuant to clause (ii) of Section 5.5 or clause (ii) of Section 5.6,
respectively, the Borrower or TRC shall provide such pledge as specified in such
Section 5.5 or 5.6 by no later than December 24, 1997, together with, where
reasonably available, the favorable written opinions of counsel with respect to
the validity, perfection and priority of such Lien under the law of the
jurisdictions governing such Lien.
14. NEGATIVE COVENANTS
------------------
The Borrower agrees that, so long as this Agreement is in effect, any Loan
remains outstanding and unpaid, or any other amount is owing under any Loan
Document to any Lender or the
<PAGE>
Administrative Agent, the Borrower shall perform, and cause each of its
Subsidiaries to perform, all of the covenants in this Section 8:
14.1 Incurrence of Indebtedness and Issuance of Disqualified Stock
-------------------------------------------------------------
(a) Subject to Section 8.1(b), the Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable
for ("incur") any Indebtedness (including Acquisition Debt) or issue any
Disqualified Stock; provided however, that the Borrower may incur Subordinated
-----------------
Indebtedness or issue Disqualified Stock if the Borrower's Pro Forma Coverage
Ratio for the Reference Period immediately preceding the date of such incurrence
or issuance would not be less than 2.50 to 1.00 after giving effect to such
incurrence or issuance and (if applicable) the application of the net proceeds
therefrom.
(b) Section 8.1(a) shall not limit the incurrence of any of the
following:
(i) Indebtedness of the Borrower under the Revolving Credit
Facility (including Guarantees thereof by the Borrower's Subsidiaries)
in an aggregate principal amount at any time outstanding not to exceed
$800,000,000 minus the aggregate amount of all permanent reductions in
the Revolving Credit Commitments pursuant to Section 2.7(e) of the
Revolving Credit Facility;
(ii) Indebtedness existing on the date hereof set forth on
Schedule 8.1;
(iii) Indebtedness of the Borrower represented by the Term
Loans (including Guarantees thereof by the Borrower's Subsidiaries);
(iv) Refinancing Indebtedness, provided, however, that (1)
the principal amount of such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness so extended, refinanced, renewed,
replaced, substituted, defeased or refunded (plus the amount of
expenses incurred and premiums paid in connection therewith), (2) the
Weighted Average Life to Maturity of such Refinancing Indebtedness
shall have be equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed,
replaced, substituted, defeased or refunded, and (3) with respect to
Refinancing Indebtedness of Subordinated Indebtedness, such Refinancing
Indebtedness shall be at least as subordinated in right of payment to
the Term Loans (in the case of Refinancing Indebtedness incurred by the
Borrower) or to the Guarantees thereof (in the case of Refinancing
Indebtedness incurred by any Guarantor Subsidiary) as the Indebtedness
being extended, refinanced, replaced, renewed, substituted, defeased or
refunded;
(v) Indebtedness of the Borrower's Subsidiaries to the
Borrower to the extent permitted pursuant to Section 8.5(f);
<PAGE>
(vi) Hedging Obligations that are incurred for the purpose
of fixing or hedging foreign currency exchange risk or interest rate
risks with respect to any floating rate Indebtedness that is permitted
by the terms of this Agreement to be outstanding;
(vii) Capital Lease Obligations and Purchase Money
Indebtedness of the Borrower and its Subsidiaries in an aggregate
principal amount not to exceed $35,000,000 on a Consolidated basis at
any one time outstanding;
(viii) Guarantees and other Contingent Obligations incurred
by the Borrower and its Subsidiaries in an aggregate amount not to
exceed $20,000,000 on a Consolidated basis at any one time outstanding,
and other Guarantees and other Contingent Obligations incurred by the
Borrower and its Subsidiaries for the benefit of the Borrower and its
Subsidiaries in an aggregate amount not to exceed $30,000,000 on a
Consolidated basis at any one time outstanding;
(ix) Acquisition Debt incurred in connection with the
acquisition of Domestic Subsidiaries of the Borrower in an aggregate
principal amount not to exceed $35,000,000 at any one time outstanding;
(x) Acquisition Debt incurred in connection with the
acquisition of Foreign Subsidiaries of the Borrower in an aggregate
principal amount not to exceed $25,000,000 at any one time outstanding;
(xi) 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;
(xii) additional Indebtedness of the Borrower's Subsidiaries
in an aggregate principal amount not to exceed $30,000,000 at any one
time outstanding provided that not more than $15,000,000 in aggregate
--------
principal amount of such Indebtedness may be secured at any one time;
and
(xiii) additional unsecured Indebtedness of the Borrower in
an aggregate principal amount not to exceed $35,000,000 at any one time
outstanding.
14.2 Limitations on Liens
--------------------
The Borrower will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
the Borrower or any of its Subsidiaries whether owned on the
<PAGE>
Effective Date or acquired after the Effective Date, or any proceeds therefrom,
or assign or otherwise convey any right to receive income or profits therefrom,
except for the following:
(a) 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;
(b) Liens in connection with workers' compensation, unemployment
insurance or other social security obligations (but not ERISA);
(c) 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;
(d) zoning ordinances, easements, rights of way, minor defects,
irregularities, and other similar restrictions affecting Real Property that do
not 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;
(e) Liens arising by operation of law such as mechanics',
materialmen's, carriers', and 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;
(f) 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;
(g) Liens on Property of the Borrower or any of its Subsidiaries
acquired after the date hereof to secure Purchase Money Indebtedness and Capital
Lease Obligations permitted by Section 8.1(b)(vii) 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, and replacement Liens on such
Property to secure refinancings of such Indebtedness permitted by Section
8.1(b)(iv);
(h) Liens on Property of the Borrower and its Subsidiaries
existing on the Effective Date as set forth on Schedule 8.2;
(i) Liens to secure Indebtedness of Foreign Subsidiaries
permitted by Section 8.1(b)(xii), provided that such Liens shall be limited to
--------
Liens on the assets of the Foreign Subsidiary incurring such Indebtedness, and
such Indebtedness shall not exceed $15,000,000 at any time;
(j) Liens to secure Acquisition Debt permitted by Section
8.1(b)(ix) or 8.1(b)(x), provided that such Liens shall be limited to Liens on
--------
the Property acquired with the proceeds of such Acquisition Debt or securing
such Acquisition Debt at the time the applicable Acquired Person becomes a
subsidiary of the Borrower; and
<PAGE>
(k) Liens created under the Collateral Documents.
If the Borrower or any of its Subsidiaries shall create or assume any
Lien upon any of its Properties, whether now owned or hereafter acquired, other
than Liens permitted under the foregoing provisions of this Section 8.2, it
shall make or cause to be made effective provision whereby the Obligations of
the Credit Parties hereunder and under the other Loan Documents will be secured
by such Lien equally and ratably with any and all other Indebtedness secured
thereby as long as any such Indebtedness shall be so secured; provided that,
--------
notwithstanding the foregoing, this provision shall not be construed as a
consent by the Lenders to the creation or assumption of any Lien other than as
permitted by the foregoing provisions of this Section 8.2
14.3 Limitation on Merger, Consolidation and Certain Dispositions of
---------------------------------------------------------------
Assets
------
The Borrower shall not consolidate or merge with or into (whether or
not the Borrower is the Surviving Entity) or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) either
(a) the Borrower is the Surviving Entity or (b) the Surviving Entity (if other
than the Borrower) in such transactions is a corporation duly organized and
validly existing under the laws of the United States of America, any state
thereof or the District of Columbia; (ii) the Surviving Entity (if other than
the Borrower) assumes all the obligations of the Borrower under the Loan
Documents to which the Borrower is a party in a form reasonably satisfactory to
the Required Lenders, and this Agreement shall remain in full force and effect;
(iii) immediately before and immediately after giving effect to such transaction
on a pro forma basis, no Default or Event of Default shall have occurred and be
continuing; (iv) the Surviving Entity will have Consolidated net worth
(immediately after such transaction but prior to any purchase accounting
adjustments resulting from the transaction) equal to or greater than the
Consolidated net worth of the Borrower immediately preceding such transaction;
and (v) immediately before and immediately after giving effect to such
transaction on a pro forma basis, the Borrower (or the Surviving Entity if the
Borrower is not the continuing obligor under this Agreement) could incur $1.00
of additional Subordinated Indebtedness pursuant to Section 8.1(a).
If the Borrower sells, assigns, transfers, conveys or otherwise
disposes of (other than pursuant to a lease) all or substantially all of its
assets in compliance with this Section 8.3, and another Person shall be the
Surviving Entity in such transaction, the Borrower shall be released and
discharged from its obligations hereunder.
14.4 Limitations on Restricted Payments
----------------------------------
(a) Subject to Section 8.4(b), the Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment, unless (i) at the time of and immediately after giving
effect to the proposed Restricted Payment, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof, (ii) at
the time of and immediately after giving effect to the proposed Restricted
Payment (the value of any Restricted Payment, if other than cash, as determined
by the board of directors of the Borrower, whose
<PAGE>
determination shall be conclusive and evidenced by a board resolution), on a pro
forma basis, the Borrower would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to Section 8.1(a), and (iii) at the time of and
immediately after giving effect to the proposed Restricted Payment, the
aggregate amount of all Restricted Payments (excluding all payments,
investments, redemptions, repurchases, retirements and other acquisitions
described in clauses (ii) through (vii), inclusive, of Section 8.4(b) below)
declared or made after the Effective Date shall not exceed the sum of:
(x) $5,000,000;
(y) 50% of the aggregate cumulative Consolidated Net Income of
the Borrower for the period (taken as one accounting period) from the beginning
of the first full fiscal quarter ended immediately after the Effective Date to
and including the fiscal quarter ended immediately prior to the date of the
proposed Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, minus 100% of such deficit); plus
(z) 100% of the aggregate Net Securities Proceeds received by the
Borrower from the issuance or sale after the Effective Date of Equity Interests
of the Borrower (other than Equity Interests sold to a Subsidiary of the
Borrower and Equity Interests that constitute Disqualified Stock) plus 100% of
the net cash proceeds received by the Borrower from the issuance or sale of
Indebtedness and Disqualified Stock, to the extent such Indebtedness and
Disqualified Stock was originally sold for cash and is converted after the
Effective Date into or exchanged after the Effective Date for Equity Interests
(other than Disqualified Stock) of the Borrower (except, in each case, to the
extent such proceeds are used to purchase, redeem, or otherwise retire Equity
Interests or Subordinated Indebtedness as set forth below).
(b) Section 8.4(a) shall not prohibit the following actions:
(i) the payment of any dividend or distribution to the Borrower
or any wholly-owned Subsidiary of the Borrower within 60 days after
the date of declaration thereof, if at such date of declaration such
payment would be permitted by Section 8.4(a) without giving effect to
this Section 8.4(b); such payment shall be deemed to have been paid on
such date of declaration for purposes of the calculation required by
Section 8.4(a);
(ii) the redemption, repurchase, retirement or other acquisition
for value of any Equity Interests or any Indebtedness of the Borrower
or any Subsidiary in exchange for, or in an amount not in excess of
the Net Securities Proceeds received from, the substantially
concurrent sale (other than to the Borrower or a Subsidiary) of (a)
Equity Interests of the Borrower (other than any Disqualified Stock)
or (b) in the case of Equity Interests of any Subsidiary of the
Borrower, Equity Interests of such Subsidiary (other than any
Disqualified Stock); provided that the Net Securities Proceeds from
--------
the issuance of such Equity Interests are excluded from clause (z) of
Section 8.4(a);
<PAGE>
(iii) the redemption, repurchase, retirement or other acquisition
for value of any Equity Interests of the Borrower or any Subsidiary of
the Borrower held at any time by any director of the Borrower or any
of its Subsidiaries or by any member of the Borrower's (or any of its
Subsidiaries') management or a permitted transferee of such director
or member pursuant to any management equity subscription agreement,
stockholders' agreement or stock option agreement if (a) no Default or
Event of Default shall have occurred and be continuing or would result
from such redemption, repurchase, retirement or other acquisition, and
(b) the aggregate price paid for all such redeemed, repurchased,
retired or acquired Equity Interests does not in any fiscal year
exceed the sum of (1) $5,000,000 and (2) the amount of Equity
Interests that could have been, but were not, so redeemed,
repurchased, retired or acquired pursuant to this clause (b)(iii) in
the immediately preceding fiscal year;
(iv) payments to redeem, repurchase, retire or otherwise acquire
for value Equity Interests of holders in any Subsidiary of the
Borrower; provided that the aggregate amount of all such payments made
since the Effective Date, together with the aggregate amount of all
Investments made since the Effective Date pursuant to Section 8.5(h),
shall not exceed $80,000,000 in the aggregate;
(v) the payment of dividends by a Subsidiary on its common stock
(or distributions to its partners if such Subsidiary is a partnership)
if such dividends or distributions are paid pro rata to all holders of
such common stock or to all partners, as the case may be;
(vi) the redemption, repurchase, retirement or other acquisition
for value of any Subordinated Indebtedness, in exchange for, or in an
amount not in excess of the net proceeds of, the substantially
concurrent sale (other than to the Borrower or a Subsidiary) of (a)
subordinated Refinancing Indebtedness of the Borrower or (b) in the
case of Subordinated Indebtedness of a Subsidiary, subordinated
Refinancing Indebtedness of such Subsidiary, in each case to the
extent such Refinancing Indebtedness is permitted pursuant to Section
8.1(b)(iv); and
(vii) any other Restricted Payment in an amount that, along with
all other Restricted Payments made pursuant to this clause (vii), does
not exceed $5,000,000.
14.5 Investments, Loans, Etc.
------------------------
The Borrower will not at any time, purchase or otherwise acquire, hold
or make any Investment in any Person, including without limitation, an
Acquisition, or permit any of its Subsidiaries so to do, except:
(a) Investments in Cash Equivalents;
(b) Investments in accounts and notes receivable acquired in the
ordinary course of business;
<PAGE>
(c) notes from employees issued to the Borrower representing
payment for capital Stock of the Borrower or representing payment of the
exercise price of options to purchase capital Stock of the Borrower;
(d) any securities received in connection with an Asset Sale
permitted under Section 8.7;
(e) Hedging Obligations permitted under Section 8.1(b)(vi);
(f) Investments of the Borrower or any of its Subsidiaries in any
Subsidiary of the Borrower for working capital and capital expenditure purposes
of such Subsidiary or to enable such Subsidiary to make Investments permitted by
subsections (g) and (h) below, provided that (i) such Investments in non-wholly
--------
owned Subsidiaries shall be made in the form of demand loans, the aggregate
outstanding principal amount of which shall not exceed $10,000,000 at any one
time, and (ii) such Investments in wholly-owned Subsidiaries shall be made
either in the form of (x) demand loans or (y) additional paid in equity provided
that the aggregate amount of all such additional paid in equity shall not exceed
$20,000,000 at any one time;
(g) Acquisitions by the Borrower or any wholly owned Subsidiary
of the Borrower, provided that (i) no Event of Default shall exist immediately
before or after giving effect to such Acquisition, (ii) each such Acquisition
was initially approved by the board of directors (or other Person performing
similar functions) of each of the parties thereto, (iii) if, after giving effect
to such Acquisition, an Additional Guarantor Event would occur, the Borrower
shall cause one or more Domestic Subsidiaries to become a Guarantor such that
the Additional Guarantor Event shall no longer exist, and (iv) the following
conditions shall have been satisfied: (x) 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 the Borrower or its Subsidiaries, and (y) 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 $80,000,000 in the
aggregate;
(h) Investments by the Borrower or a 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 such Guarantor owns at least 20%
- ----------
(on a fully diluted basis) of the issued and outstanding capital Stock or other
equity interest in such Person, (ii) the aggregate outstanding amount of
Minority Investments made by the Borrower and the Guarantors on and after the
Effective Date, together with the aggregate amount of all payments made after
the Effective Date pursuant to Section 8.4(b)(iv), shall not exceed $80,000,000
in the aggregate, (iii) the Borrower or such Guarantor shall have full control
over all bank accounts of such Person if the Borrower or such Guarantor is the
largest holder of voting Stock or other equity interests in such Person, (iv)
the Borrower or such Guarantor shall control or act as the managing general
partner of such Person if such Person is a partnership and if the Borrower or
such 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;
<PAGE>
(i) existing Investments set forth on Schedule 8.5;
(j) any other Investments not permitted by the preceding clauses
(a)-(i) above that do not exceed $20,000,000 at any time; and
(k) Restricted Investments to the extent permitted under Section
8.4.
14.6 Business Change
---------------
The Borrower will not, and will not permit its Subsidiaries to,
materially change the nature of their respective businesses as conducted on the
Effective Date.
14.7 Limitation on Asset Sales
-------------------------
The Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly consummate any Asset Sale unless (a) the Borrower or such
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by (x) in the case of an
Asset Sale producing less than $5,000,000 in Net Cash Proceeds, by an Officers'
Certificate delivered to Administrative Agent or (y) in the case of an Asset
Sale producing more than $5,000,000 in Net Cash Proceeds, a resolution of the
board of directors of the Borrower set forth in an Officers' Certificate
delivered to the Administrative Agent) of the assets sold or otherwise disposed
of and (b) at least 75% of the Net Cash Proceeds from such Asset Sale are
received in cash; provided, however, that any notes or other obligations
-------- -------
received by the Borrower or any such Subsidiary from a transferee shall be
deemed to be cash for purposes of this Section 8.7 so long as and to the extent
such notes or other obligations are converted by the Borrower or such Subsidiary
into cash within six months of such Asset Sale; provided further, however, that
-------- ------- -------
the 75% limitation referred to above in clause (b) shall not apply to any Asset
Sale in which the cash portion of the consideration received therefor,
determined in accordance with the foregoing proviso, is equal to or greater than
what the after-tax net proceeds would have been had such transaction complied
with the aforementioned 75% limitation.
14.8 Subsidiaries
------------
The Borrower will not create or acquire any other Subsidiary, or
permit any of its Subsidiaries so to do, unless the provisions of Sections 7.11
and 8.11 are satisfied.
14.9 Certificate of Incorporation
----------------------------
The Borrower will not amend or otherwise modify its Articles of
Incorporation or By-Laws in any way that would adversely affect the interests of
the Administrative Agent, the Collateral Agent and the Lenders under any of the
Loan Documents or permit any of its Subsidiaries to do so.
<PAGE>
14.10 ERISA
-----
The Borrower will not permit any Pension Plan to have a Funded
Current Liability Percentage of less than 60 percent.
14.11 Acquisition or Issuance of Additional Stock
-------------------------------------------
The Borrower will not 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;
(e) all Stock issued pursuant to this Section shall constitute
common stock with no mandatory dividend, redemption or similar requirement.
14.12 Dividend and Other Payment Restrictions Affecting Subsidiaries
--------------------------------------------------------------
The Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to (a)
pay dividends or make any other distributions to the Borrower or any other
Subsidiary on its Stock or in respect of any other interest or participation in,
or measured by, its profits, (b) pay any Indebtedness owed to the Borrower or
any other Subsidiary, (c) make loans or advances to the Borrower or any other
Subsidiary, or (d) transfer any of its properties or assets to the Borrower or
any other Subsidiary, except for such encumbrances or restrictions existing
under or by reason of any of the following:
(i) any Indebtedness existing on the date hereof listed on
Schedule 8.1;
(ii) the Revolving Credit Facility as in effect on the
Effective Date, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive in the aggregate
with respect to such dividend and other payment restrictions than
those contained in the Revolving Credit Facility (or, if more
restrictive, this Agreement) immediately prior to any
<PAGE>
such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing;
(iii) applicable law;
(iv) any instrument governing Indebtedness or Stock of a
Person acquired (an "Acquired Person") by the Borrower or any of its
Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred or instrument was entered
into in connection with or in contemplation of such acquisition),
provided that (x) such restriction is not applicable to any Person, or
--------
the properties or assets of any Person, other than the Acquired
Person, and (y) the Consolidated Net Income of an Acquired Person for
any period prior to such acquisition shall be taken into account in
determining whether such acquisition was permitted by the terms of
this Agreement only to the extent that the declaration or payment of
dividends or similar distributions or intercompany loans or advances
by such Acquired Person to the Borrower or any of its Subsidiaries
would not be prohibited by operation of the terms of such Acquired
Person's charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Acquired Person;
(v) customary non-assignment provisions in leases or
agreements entered into in the ordinary course of business and
consistent with past practices;
(vi) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only impose restrictions on the
property so acquired;
(vii) an agreement for the sale or disposition of the Stock or
assets of a Subsidiary, provided that such restriction is only
applicable to such Subsidiary or assets, as applicable;
(viii) Refinancing Indebtedness permitted hereunder provided
that the restrictions contained in the agreements governing such
Refinancing Indebtedness are no more restrictive in the aggregate than
those contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing;
(ix) restrictions imposed against a Foreign Subsidiary
contained in any agreement governing Indebtedness of such Foreign
Subsidiary permitted by Section 8.1(b)(xii); and
(x) management agreements between Subsidiaries of the
Borrower.
14.13 Fiscal Year
-----------
The Borrower will not change its fiscal year from that in effect on
the Effective Date, or permit any of its Subsidiaries so to do.
<PAGE>
14.14 Transactions with Affiliates
----------------------------
The Borrower will not, and will not permit any of its Subsidiaries to,
sell, lease, transfer or otherwise dispose of any of its Properties to, or
purchase any Property from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate of the Borrower or any Subsidiary (each of the foregoing, an
"Affiliate Transaction"), unless such Affiliate Transaction is on terms that are
no less favorable to the Borrower or the relevant Subsidiary than those that
would have been obtained in a comparable arm's-length transaction by the
Borrower or such Subsidiary with an unrelated Person; provided that this Section
--------
8.14 shall not restrict the ability of the Borrower to make Restricted Payments
otherwise permitted under Section 8.4.
14.15 Limitation on Certain Amendments
--------------------------------
(a) The Borrower will not, and will not permit any Subsidiary
to, enter into any amendment or make any payments with respect to, the Revolving
Credit Facility that would have the effect of (a) shortening the scheduled final
maturity of the Revolving Credit Facility, increasing the amount of any
scheduled reductions in the Revolving Credit Commitments, or shortening any
scheduled date for reductions in the Revolving Credit Commitments, (b) changing
the definition of "Required Lenders" in the Revolving Credit Facility, or (c)
changing any mandatory prepayments or commitment reductions required pursuant to
Section 2.7(e) of the Revolving Credit Facility (or any other provision
requiring mandatory prepayments or commitment reductions as a result of sales of
Property) in any way that, with respect to this clause (c), would adversely
affect the interests of the Lenders under any of the Loan Documents.
XV
The Borrower will not, and will not permit any Subsidiary to,
enter into any agreement that refinances, replaces or supersedes the Revolving
Credit Facility unless the terms and provisions of such agreement would be
permitted under Sections 8.1(b)(i) and 8.15(a) if the Revolving Credit Facility
were not being refinanced, replaced or superseded but were instead being amended
to contain such terms and provisions.
16. DEFAULT
-------
16.1 Events of Default
-----------------
The following shall each constitute an "Event of Default" hereunder:
----------------
(a) The failure of the Borrower to pay any principal of or
premium on any Loan on the date when due and payable; or
(b) The failure of the Borrower to pay any interest, fees,
expenses or other amounts payable under any Loan Document or otherwise to the
Administrative Agent, or to any other Person to
<PAGE>
whom such payment is to be made 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 2.13; or
(d) The failure of the Borrower to observe or perform any
covenant or agreement contained in Section 7.3, 8.3 or 8.4; or
(e) The failure of any Credit Party 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) Indebtedness under the Revolving Credit Facility or any other
obligation or obligations of the Borrower (other than its obligations under the
Notes) and/or any of its Subsidiaries (whether as principal, guarantor, surety,
lessee or other obligor) in excess of $10,000,000 on an aggregate basis 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, as a
result of any default thereunder to declare such obligation due and payable
prior to the expressed maturity thereof, and such default shall have continued
without cure or waiver for a period of 15 Business Days;
(h) The Borrower or any of its Material 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
<PAGE>
(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 Material 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 Material Subsidiaries under the United
States bankruptcy laws or any other applicable Federal, state or foreign law,
(iii) appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Borrower or any of its Material
Subsidiaries or of any substantial part of the Property thereof, or (iv)
ordering the winding up or liquidation of the affairs of the Borrower or any of
its Material 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 and/or any of its
Subsidiaries in excess of $5,000,000 on an aggregate basis shall remain unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of 30
days; or
(k) 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
(l) (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 $2,500,000
in the aggregate; (ii) any Accumulated Funding Deficiency in excess of
$2,500,000 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 $2,500,000 in the aggregate
that is payable by it to the PBGC or to a Pension Plan under Title IV of ERISA;
or
(m) (i) any Guarantor shall not be a wholly-owned Subsidiary of
the Borrower, or (ii) any Guarantor that was a First-Tier Subsidiary of the
Borrower on the date such Guarantor became a party to the Subsidiary Guaranty
shall no longer be a First-Tier Subsidiary of the Borrower; or
(n) (A) A judgment creditor of the Borrower or any of its
Subsidiaries shall obtain possession of any material portion of the Collateral
under the Collateral Documents by any means, including, without limitation,
levy, distraint, replevin or self-help, (B) any of the Collateral Documents
shall cease for any reason to be in full force and effect, or any party thereto
shall purport to disavow its obligations thereunder or shall declare that it
does not have any further obligations thereunder or shall contest the validity
or enforceability thereof or the Collateral Agent, for the benefit of the
Lenders and others, shall cease to have a valid and perfected first priority
security interest in any material Collateral therein, or (C) the Collateral
Agent's security interests or liens on any material portion of the Collateral
under the Collateral Documents shall become otherwise impaired or unenforceable;
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
<PAGE>
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 (or,
in the case of a Subsidiary of the Borrower that became a Subsidiary pursuant to
a Permitted Acquisition, 180 days following the date such Permitted Acquisition
was consummated, provided that (x) such failure existed at the time such
Permitted Acquisition was consummated, (y) the consideration paid for such
Permitted Acquisition was less than $10,000,000, and (z) the aggregate
consideration paid for all Subsidiaries of the Borrower that became Subsidiaries
pursuant to a Permitted Acquisition then subject to any such failure is less
than $15,000,000).
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 Term Loan Commitments shall
terminate and the Term Loans, all accrued and unpaid interest thereon, and all
other amounts owing under the Loan Documents shall immediately become due and
payable, and the Administrative Agent and the Collateral 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 Term Loan Commitments to be terminated forthwith, whereupon the
Aggregate Term Loan Commitments 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, 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
Administrative Agent and the Collateral 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.
In the event that the Aggregate Term Loan Commitments shall have been
terminated or the Loans 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, subject to the Intercreditor Agreement, in
liquidation of the Loans and the obligations of the Borrower under the Loan
Documents and the applicable Currency Agreements and Interest Rate Agreements 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
<PAGE>
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, and all
other fees, expenses and amounts due under the Loan Documents (other than
principal and interest on the Loans); (v) fifth, pro rata according to the
outstanding principal amount of the Loans, to the payment of interest due on the
Loans; (vi) sixth, pro rata according to the outstanding principal amount of the
Loans, the Secured Interest Rate Obligations and Secured Currency Obligations
(as each such term is defined in the Intercreditor Agreement) of the Lenders and
their Affiliates, to the payment of principal outstanding on the Loans and such
Secured Interest Rate Obligations and Secured Currency Obligations; and (vii)
seventh, to the payment of any other amounts owing to the Administrative Agent
and the Lenders under any Loan Document.
17. THE AGENT
---------
17.1 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 (including, without limitation, the Intercreditor Agreement) 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.
17.2 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.
17.3 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 the Administrative Agent or such
Person under or in connection with the Loan Documents (except the Administrative
Agent or such Person for its own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
<PAGE>
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 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.
17.4 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 (or, when expressly required
by a Loan Document, all the 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.
17.5 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
<PAGE>
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.
17.6 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 hereafter, 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 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.
17.7 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 Pro Rata Share 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 Loans)
be imposed on, incurred by or asserted against the Administrative Agent
<PAGE>
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 from the 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.
17.8 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.
17.9 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
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 Persons entitled thereto during such time.
<PAGE>
17.10 Appointment of Collateral Agent; Intercreditor Agreement;
---------------------------------------------------------
Collateral Documents; Subsidiary Guaranty
-----------------------------------------
Each Lender hereby authorizes Administrative Agent to enter into the
Intercreditor Agreement on behalf of and for the benefit of that Lender and
agrees to be bound by the terms of the Intercreditor Agreement. Each Lender
hereby authorizes the Collateral Agent to enter into the Collateral Documents
and the Intercreditor Agreement and to accept the Subsidiary Guaranty and to
take all action contemplated by the Intercreditor Agreement, the Collateral
Documents, and Subsidiary Guaranty. Each Lender agrees that no Lender shall
have any right individually to seek or to enforce the Subsidiary Guaranty or to
realize upon the security granted by any Collateral Document, it being
understood and agreed that such rights and remedies may be exercised by
Collateral Agent for the benefit of Lenders and the parties to the Intercreditor
Agreement upon the terms of the Subsidiary Guaranty, the Collateral Documents
and the Intercreditor Agreement.
17.11 The Co-Arrangers
----------------
The Co-Arrangers shall have no duties or obligations under the Loan
Documents in their capacity as Co-Arrangers.
17.12 The Syndication Agent
---------------------
The Syndication Agent shall have no duties or obligations under the
Loan Documents in its capacity as Syndication Agent.
18. OTHER PROVISIONS
----------------
18.1 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 this Agreement, the Notes
and the Intercreditor Agreement 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 this Agreement, the Notes and the
Intercreditor Agreement 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
Commitment of any Lender or the Aggregate Term Loan Commitments, (ii) extend the
Maturity Date; (iii) decrease the rate or prepayment penalty or premium, or
extend the time of payment, of the Commitment Fee or of interest on, or change
or forgive the principal amount of, or change the pro rata allocation of
payments under, any Loan,
<PAGE>
(iv) except as provided in Section 11.1(c), release or discharge any Credit
Party or release any Collateral; (v) change the provisions of Sections 2.8,
2.10, 2.11, 2.12, 2.14, 11.1 or 11.7(a), (vi) change the definition of Required
Lenders or Pro Rata Share, (vii) change the several nature of the obligations of
the Lenders, (viii) extend the date or decrease the amount of any scheduled
payment of Term Loans pursuant to Section 2.4(b) or (ix) add any new borrower
under this Agreement;
(b) without the written consent of the Administrative Agent, 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 other Loan Documents; and
(c) notwithstanding anything to the contrary contained in this
Section 11.1, (i) the Collateral Documents, the Intercreditor Agreement, and the
Subsidiary Guaranty may only be amended in accordance with the terms thereof and
of the Intercreditor Agreement, and (ii) the Collateral Agent may, at any time
and from time to time without the consent of any of the Lenders, release all or
any of the obligations of any one or more Subsidiaries under the Collateral
Documents in connection with a disposition of such Subsidiary as permitted by
Section 8.3 or 8.7, and release any Collateral or any security interest therein
in connection with any release specifically provided for in the Collateral
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.
18.2 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:
<PAGE>
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
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 2.3 or 2.5 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.
18.3 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
<PAGE>
Loan Documents are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
18.4 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.
18.5 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 Syndication Agent and the Co-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 Syndication Agent, the Co-Arrangers, 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 Syndication Agent, the Co-Arrangers, 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 Syndication Agent, the Co-Arrangers, 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 Syndication Agent, the Co-
Arrangers, or any Lender to the extent
<PAGE>
arising from such indemnified party's 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 Term
Loan Commitments and the payment of all amounts payable under the Loan
Documents.
18.6 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 2.8, 2.10, 2.11 and 2.14 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 (i) such claim would have arisen even if such
transfer had not occurred, (ii) such transfer was made pursuant to subsection
(b) below, or (iii) such claims arose as a result of a change of law after such
transfer.
(b) Each Lender agrees that, upon the occurrence of any event
giving rise to any increased cost or indemnity under Sections 2.8, 2.10, 2.11 or
2.14 with respect to such Lender, it will, if requested by the Borrower, 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.
18.7 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) Each Lender shall have the right at any time, upon written
notice to the Administrative Agent of its intent to do so and the payment of a
fee (the "Assignment Fee") of $1,500 to the Administrative Agent by the
--------------
assigning or assignee Lender, 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) to one or more of its affiliates or the
affiliates or Approved Funds of one or more of the other Lenders, (iii) to any
Federal Reserve Bank or (iv) with the prior written consent of the Borrower and
the Administrative Agent (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 or fund, which in the normal course of its
business, purchases loans such as the Loans, provided that each such sale,
--------
assignment, transfer or
<PAGE>
negotiation pursuant to clause (iv) shall be in a minimum amount of $1,000,000
(or, if less, a Lender's entire Credit Exposure). For each assignment, the
parties to such assignment shall execute and deliver to the Administrative Agent
for its acceptance an Assignment and Acceptance Agreement which the
Administrative Agent shall record in a register (the "Register") maintained by
the Administrative Agent on behalf of the Borrower, for the recordation of the
names and addresses of the Lenders and the Commitment of, and principal amount
of the Loans owing to, each Lender from time to time and the registered owners
of the obligation(s) evidenced by the Note(s). The entries in the Register shall
be presumptively correct absent manifest error. 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, if not already a Lender, 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 Pro Rata Shares set forth in Exhibit A shall be adjusted
accordingly by the Administrative Agent.
(c) Each 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, mutual funds or funds which in
the normal course of business purchase loans such as the Loans, 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 2.8, 2.10, 2.11, and 2.14 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.
(d) If any (i) assignment is made pursuant to subsection (b)
above or (ii) participation is granted pursuant to subsection (c) above, 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
2.8(e).
<PAGE>
(e) No Lender shall, as between and among the Borrower, the
Administrative Agent, the Syndication Agent, 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 or pledge all or
any portion of its rights under the Loan Documents to (i) a Federal Reserve Bank
or (ii) if such Lender is a fund which in the normal course of its business
purchases loans such as the Loans, to its lenders or a trustee under an
indenture for the benefit of its creditors, to secure such fund's obligations,
provided that any such assignment or pledge shall not release such assignor from
its obligations thereunder.
18.8 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 of any 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.
18.9 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
<PAGE>
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, 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.
18.10 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.
18.11 Indemnity
---------
The Borrower agrees to indemnify and hold harmless the Administrative
Agent, the Syndication Agent, the Co-Arrangers, 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, that is 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
<PAGE>
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 2.13, 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.
18.12 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.
18.13 Headings Descriptive
--------------------
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
18.14 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.
18.15 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
<PAGE>
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.
18.16 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.
18.17 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 (or any
other location in New York City) (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.
18.18 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.
<PAGE>
18.19 WAIVER OF TRIAL BY JURY
-----------------------
THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE CO-ARRANGERS, THE
LENDERS, AND EACH CREDIT PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES 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 SYNDICATION
AGENT, THE CO-ARRANGERS OR THE LENDERS, OR COUNSEL TO THE ADMINISTRATIVE AGENT,
THE SYNDICATION AGENT, THE CO-ARRANGERS OR THE LENDERS HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT,
THE CO-ARRANGERS 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 SYNDICATION AGENT, THE CO-
ARRANGERS AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
INTER ALIA, THE PROVISIONS OF THIS SECTION.
- ----- ----
<PAGE>
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.
By: ___________________________________
Name: _________________________________
Title: ________________________________
THE BANK OF NEW YORK,
Individually, and as Administrative Agent
By: ___________________________________
Name: _________________________________
Title: ________________________________
DLJ CAPITAL FUNDING, INC.,
Individually and as Syndication Agent
By: ___________________________________
Name: _________________________________
Title: ________________________________
<PAGE>
EXHIBIT 10.4
TOTAL RENAL CARE HOLDINGS, INC.
FIRST AMENDMENT
TO TERM LOAN AGREEMENT
This FIRST AMENDMENT TO TERM LOAN AGREEMENT (this "AMENDMENT") is
dated as of December 1, 1997 and entered into by and among TOTAL RENAL CARE
HOLDINGS, INC., a Delaware corporation (the "Borrower"), the financial
--------
institutions listed on the signature pages hereof and their respective
successors and assigns (the "Lenders", each a "Lender"), DLJ CAPITAL FUNDING,
------- ------
INC., as Syndication Agent (the "Syndication Agent"), THE BANK OF NEW YORK, as
-----------------
administrative agent for the Lenders (in such capacity, the "Administrative
--------------
Agent"), and, for purposes of Section 4 hereof, the Credit Support Parties (as
- -----
defined in Section 4 hereof) listed on the signature pages hereof, and is made
with reference to that certain Term Loan Agreement dated as of October 24, 1997
(the "TERM LOAN AGREEMENT"), by and among Borrower, Lenders, Syndication Agent
and Administrative Agent. Capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Term Loan Agreement.
RECITALS
WHEREAS, Nevada Acquisition Corp., a wholly-owned Subsidiary of
Borrower, has entered into an Agreement and Plan of Merger pursuant to which it
will merge with and into Renal Treatment Centers, Inc. ("RTC"), with RTC being
the surviving company and a wholly-owned Subsidiary of Borrower following the
effectiveness of such merger;
WHEREAS, Borrower and Lenders desire to amend the Term Loan Agreement
to permit RTC to remain liable with respect to certain Acquisition Debt incurred
in connection with such merger; and
WHEREAS, subject to the terms and conditions of this Amendment,
Lenders are willing to agree to such amendments.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE TERM LOAN AGREEMENT
1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO DEFINED TERMS
--------------------------------------------------------------
0.1. Subsection 1.1 of the Term Loan Agreement is hereby amended by
adding thereto the following definitions, which shall be inserted in proper
alphabetical order:
<PAGE>
"`NEWCO' means Nevada Acquisition Corp., a Delaware corporation and a
wholly-owned Subsidiary of Borrower."
"`RTC' means Renal Treatment Centers, Inc., a Delaware corporation."
"`RTC CONVERTIBLE SUBORDINATED INDENTURE' means that certain Indenture
dated as of June 12, 1996 by and between RTC and PNC Bank, National
Association, pursuant to which the RTC Convertible Subordinated Notes were
issued, as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with Section 8.15."
"`RTC CONVERTIBLE SUBORDINATED NOTES' means the $125,000,000 in aggregate
principal amount of 5-5/8% Convertible Subordinated Notes due 2006 of RTC
issued pursuant to the RTC Convertible Subordinated Indenture, as the same
may be amended, supplemented, restated or otherwise modified from time to
time in accordance with Section 8.15."
"`RTC MERGER AGREEMENT' means that certain Agreement and Plan of Merger
dated as of November 18, 1997 by and among Borrower, Newco and RTC, as in
effect on November 22, 1997 and as such Agreement and Plan of Merger may be
amended, supplemented or otherwise modified from time to time with the
consent of the Administrative Agent and the Syndication Agent."
2. Subsection 1.1 of the Term Loan Agreement is hereby amended by
deleting clause (c) from the definition of "Restricted Payment" contained
therein and substituting the following therefor:
"(c) any payment to purchase, redeem, defease or otherwise acquire or
retire for value any Subordinated Indebtedness (other than payments made in
Stock of the Borrower and payments made with the proceeds of Indebtedness
(including, but not limited to, Refinancing Indebtedness) permitted under
this Agreement), except in accordance with the mandatory redemption or
repayment provisions set forth in the original documentation governing such
Subordinated Indebtedness; or".
1.2 AMENDMENT TO SECTION 2: AMOUNT AND TERMS OF LOANS
-------------------------------------------------
Subsection 2.4(d)(ii) of the Term Loan Agreement is hereby amended by
inserting a reference to the phrase "(to an amount not less than zero)"
immediately after the reference to the phrase "on such date shall be reduced"
contained in the first sentence thereof.
1.3 AMENDMENTS TO SECTION 8: NEGATIVE COVENANTS
-------------------------------------------
A. Subsection 8.1(b)(ix) of the Term Loan Agreement is hereby amended by
deleting it in its entirety and substituting the following therefor:
<PAGE>
"(ix) (A) Acquisition Debt incurred in connection with the acquisition
of Domestic Subsidiaries of the Borrower in an aggregate principal amount
not to exceed $35,000,000 at any one time outstanding plus (B) Acquisition
Debt outstanding under the RTC Convertible Subordinated Notes and other
Acquisition Debt in an aggregate principal amount not to exceed
$10,000,000, in each case owed by RTC on the effective date of the merger
contemplated by the RTC Merger Agreement provided that no debt shall be
----
permitted under clause (B) of this subsection 8.1(b)(ix) unless and until
(1) Newco shall have merged into RTC in the manner provided in the RTC
Merger Agreement, (2) no material term or provision of the RTC Merger
Agreement is amended, modified or waived at any time after the execution
thereof without the written consent of the Administrative Agent and the
Syndication Agent, and (3) concurrently with the consummation of the merger
contemplated by the RTC Merger Agreement, RTC shall become a party to the
Subsidiary Guaranty and all other actions described in Section 7.11(a)
relating to RTC shall be taken, notwithstanding the 30 day period that such
Section would otherwise permit for such actions to be taken;".
B. Section 8.5 of the Term Loan Agreement is hereby amended by (i)
deleting the reference to the phrase "clauses (a)-(i)" contained in clause (j)
thereof and substituting a reference to the phrase "clauses (a)-(j)", (ii)
relabelling clauses (j) and (k) thereof as clauses (k) and (l), respectively,
and (iii) adding a new clause (j) thereto as follows:
"(j) Investments by RTC and its Subsidiaries existing on the effective
date of the merger contemplated by the RTC Merger Agreement that are set forth
on Schedule 8.5A hereto; and".
C. Subsection 8.11 of the Term Loan Agreement is hereby amended by
deleting clause (e) therefrom and substituting therefor a new clause (e) and
proviso as follows:
- -------
"(e) the Borrower may issue Stock; provided, however, that
-------- -------
all Stock issued pursuant to this Section 8.11 shall constitute common
stock with no mandatory dividend, redemption or similar requirement, or
warrants, options or other equivalents (however designated) to acquire such
common stock."
D. Section 8.15 of the Term Loan Agreement is hereby amended by adding a
new subsection (c) thereto as follows:
"(c) The Borrower will not, and will not permit any of its Subsidiaries
to, amend or otherwise change the terms of any Indebtedness outstanding
under the RTC Convertible Subordinated Notes or the RTC Convertible
Subordinated Indenture (or any Refinancing Indebtedness issued in respect
thereof), or make any payment consistent with an amendment thereof or
change thereto, if the effect of such amendment or change is to change (to
earlier dates) any dates upon which payments of principal or interest are
due thereon, change the redemption, prepayment or defeasance provisions
thereof, or change the subordination provisions thereof (or of any guaranty
thereof), provided, however, that (i) the Borrower and RTC shall be
permitted to enter into a supplemental indenture to the RTC
<PAGE>
Convertible Subordinated Indenture (in form and substance satisfactory to
the Administrative Agent and the Syndication Agent) containing the terms
described in Section 2.1(d) of the RTC Merger Agreement and (ii) this
Section 8.15 shall not restrict the ability of RTC to voluntarily redeem
RTC Convertible Subordinated Notes to the extent permitted by Section 8.4
hereof or the ability of the Borrower to issue any common stock upon the
conversion of any RTC Convertible Subordinated Notes."
1.4 AMENDMENTS TO SCHEDULES
-----------------------
The Term Loan Agreement is hereby amended by adding a new Schedule
8.5A thereto in the form of Schedule 8.5A hereto.
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT
EFFECTIVE DATE"):
A. The Administrative Agent shall have received a certificate from
an Authorized Signatory of the Borrower attaching a true, correct and
complete copy of an amendment and consent to the Revolving Credit Agreement
that permits the transactions contemplated by the RTC Merger Agreement and
consents to this Amendment, which amendment and consent shall be in form
and substance satisfactory to the Administrative Agent and Syndication
Agent, and all conditions to the effectiveness thereof (other than
effectiveness hereof) shall have been satisfied or waived.
B. The Administrative Agent shall have received a certificate from
an Authorized Signatory of the Borrower attaching a true, correct and
complete copy of the RTC Merger Agreement.
C. All fees and expenses incurred by Syndication Agent and its
counsel, O'Melveny & Myers LLP, in connection with the preparation,
negotiation and closing of this Amendment shall have been paid by Borrower.
SECTION 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Term Loan Agreement in the manner provided herein, Borrower represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Each Credit Party has all
requisite corporate power and authority to enter into this Amendment and to
carry out the
<PAGE>
transactions contemplated by, and perform its obligations under, the Term Loan
Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), and each of
Borrower and Newco has all requisite corporate power and authority to enter into
the RTC Merger Agreement and to carry out the transactions contemplated by, and
perform its obligations under, the RTC Merger Agreement.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment have been duly authorized by all necessary corporate action on
the part of each Credit Party, and the execution and delivery of the RTC Merger
Agreement have been duly authorized by all necessary corporate action on the
part of Borrower and Newco. The performance of the Amended Agreement has been
duly authorized by all necessary corporate action on the part of each Credit
Party, and the performance of the RTC Merger Agreement has been duly authorized
by all necessary corporate action on the part of Borrower and Newco.
C. NO CONFLICT. The execution and delivery by each Loan Party
of this Amendment, the execution and delivery by Borrower and Newco of the
Merger Agreement, the performance by each Loan Party of the Amended Agreement
and the performance by Borrower and Newco of the RTC Merger Agreement (including
the consummation of the merger contemplated thereby) do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Borrower or any of its Subsidiaries, the Certificate or Articles
of Incorporation or Bylaws of Borrower or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Borrower or any of its Subsidiaries, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
contractual obligation of Borrower or any of its Subsidiaries, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Borrower or any of its Subsidiaries (other than Liens created under
any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any contractual obligation of Borrower or any of its
Subsidiaries, except for such approvals or consents required in connection with
the RTC Merger Agreement which will be obtained on or before the consummation of
the merger contemplated thereby.
D. GOVERNMENTAL CONSENTS. The execution and delivery by each
Credit Party of this Amendment, the execution and delivery by Borrower and Newco
of the RTC Merger Agreement, the performance by each Loan Party of the Amended
Agreement and the performance by Borrower and Newco of the RTC Merger Agreement
(including consummation of the merger contemplated thereby) do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body, other than registrations, consents, approvals and notices
required in connection with the RTC Merger Agreement, which will be made or
obtained on or before the consummation of the merger contemplated thereby.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement
have been duly executed and delivered by each Credit Party and are the legally
valid
<PAGE>
and binding obligations of each Credit Party, enforceable against each Credit
Party in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
F. RTC MERGER AGREEMENT. Borrower has delivered to Administrative
Agent true and correct copies of the RTC Merger Agreement and all exhibits and
schedules thereto. The RTC Merger Agreement has been duly authorized, executed
and delivered by the parties thereto, is in fully force and effect and no term
or condition thereof has been modified or amended as of the date hereof.
G. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM TERM LOAN
AGREEMENT. The representations and warranties contained in Section 4 of the Term
Loan Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
H. ABSENCE OF DEFAULT. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Borrower is a party to the Borrower Pledge Agreement pursuant to which
Borrower has pledged certain Collateral to Administrative Agent to secure the
Obligations. TRC is a party to the Subsidiary Guaranty and the Subsidiary Pledge
Agreement pursuant to which TRC has (i) guarantied the Obligations and (ii)
pledged certain Collateral to Administrative Agent to secure the Obligations and
to secure the obligations of TRC under the Subsidiary Guaranty. TRC West, Inc.
is a party to the Subsidiary Guaranty pursuant to which TRC West, Inc. has
guarantied the Obligations. Total Renal Care Acquisition Corp. is a party to the
Subsidiary Guaranty pursuant to which Total Renal Care Acquisition Corp. has
guarantied the Obligations. Borrower, TRC, TRC West, Inc. and Total Renal Care
Acquisition Corp. are collectively referred to herein as the "CREDIT SUPPORT
PARTIES", and the Borrower Pledge Agreement, the Subsidiary Pledge Agreement and
the Subsidiary Guaranty are collectively referred to herein as the "CREDIT
SUPPORT DOCUMENTs".
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Term Loan Agreement and this Amendment and consents
to the amendment of the Term Loan Agreement effected pursuant to this Amendment.
Each Credit Support Party hereby confirms that each Credit Support Document to
which it is a party or otherwise bound and all Collateral encumbered thereby
will continue to guaranty or secure, as
<PAGE>
the case may be, to the fullest extent possible the payment and performance of
all "Guarantied Obligations" and "Secured Obligations," as the case may be (in
each case as such terms are defined in the applicable Credit Support Document),
including without limitation the payment and performance of all such "Guarantied
Obligations" and "Secured Obligations," as the case may be, in respect of the
Obligations of Borrower now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the First Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Term Loan
Agreement or any other Loan Document to consent to the amendments to the Term
Loan Agreement effected pursuant to this Amendment and (ii) nothing in the Term
Loan Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to the
Term Loan Agreement.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE TERM LOAN AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the First Amendment Effective Date, each reference
in the Term Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Term Loan Agreement, and
each reference in the other Loan Documents to the "Term Loan Agreement",
"thereunder", "thereof" or words of like import referring to the Term Loan
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Term Loan
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
<PAGE>
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under, the Term Loan Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Borrower acknowledges that all costs, fees and
expenses as described in Sections 5.13 and 5.14 of the Term Loan Agreement
incurred by Administrative Agent, Syndication Agent, Co-Arrangers, Lenders and
Special Counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Borrower.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than the provisions of Section 1
hereof, the effectiveness of which is governed by Section 2 hereof) shall become
effective upon the execution of a counterpart hereof by Borrower, Required
Lenders and each of the Credit Support Parties and receipt by Borrower and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
BORROWER: TOTAL RENAL CARE HOLDINGS, INC.
By: _______________________________
Title: ____________________________
CREDIT SUPPORT PARTIES: TOTAL RENAL CARE, INC., (for purposes
of Section 4 only) as a Credit Support
Party
By: _______________________________
Title: ____________________________
TRC WEST, INC., (for purposes of
Section 4 only) as a Credit Support
Party
By: _______________________________
Title: ____________________________
TOTAL RENAL CARE ACQUISITION CORP.,
(for purposes of Section 4 only) as a
Credit Support Party
By: _______________________________
Title: ____________________________
<PAGE>
AGENTS: THE BANK OF NEW YORK, INDIVIDUALLY
AND AS ADMINISTRATIVE AGENT
By: ________________________________
Title: _____________________________
DLJ CAPITAL FUNDING, INC.,
INDIVIDUALLY AND AS SYNDICATION AGENT
By: ________________________________
Title: _____________________________
LENDERS: BDC FINANCE, LLC
By: _______________________________
Title: ____________________________
CITIBANK, N.A.
By: _______________________________
Title: ____________________________
<PAGE>
CONTINENTAL ASSURANCE COMPANY
Separate Account (E)
By:TCW Asset Management Company, as
Attorney-In-Fact, as Assignee
By: _______________________________
Title: ____________________________
By: _______________________________
Title: ____________________________
DEBT STRATEGIES FUND, INC.
By: _______________________________
Title: ____________________________
DEEPROCK & COMPANY
By: Eaton Vance Management as
Investment Advisor
By: _______________________________
Title: ____________________________
FRANKLIN FLOATING RATE TRUST
By: _______________________________
Title: ____________________________
KZH HOLDING CORPORATION III
By: _______________________________
Title: ____________________________
<PAGE>
KZH - CRESCENT CORPORATION
By: _______________________________
Title: ____________________________
KZH - SOLEIL CORPORATION
By: _______________________________
Title: ____________________________
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: _______________________________
Title: ____________________________
MORGAN STANLEY SENIOR FUNDING, INC.
By: _______________________________
Title: ____________________________
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(a unit of The Chase Manhattan Bank)
By: _______________________________
Title: ____________________________
<PAGE>
ORIX USA CORP.
By: _______________________________
Title: ____________________________
PARIBAS CAPITAL FUNDING LLC
By: _______________________________
Title: ____________________________
PILGRIM AMERICA PRIME RATE TRUST
By: _______________________________
Title: ____________________________
PIMCO HIGH YIELD FUND (Acct 705)
By: Pacific Investment Management
Company, as its Investment Advisor
acting through Investors Fiduciary
Trust Company in the Nominee Name of
IFTCO
By: _______________________________
Title: ____________________________
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By: _______________________________
Title: ____________________________
SENIOR HIGH INCOME PORTFOLIO, INC.
By: _______________________________
Title: ____________________________
T. ROWE PRICE HIGH YIELD FUND INC.
By: _______________________________
Title: ____________________________
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: _______________________________
Title: ____________________________
<PAGE>
SCHEDULE 8.5A
Existing Investments of RTC and its Subsidiaries
------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
SUBSIDIARY /1/ EQUITY INTEREST OWNED
BY RTC
- ---------------------------------------------------------------------------
<S> <C>
Renal Treatment Centers - Mid-Atlantic, Inc. 100%
- ---------------------------------------------------------------------------
Dialysis Treatment Centers of Macon, L.L.C. 20%
- ---------------------------------------------------------------------------
Renal Treatment Centers - Northeast, Inc. 100%
- ---------------------------------------------------------------------------
RTC Supply, Inc. 100%
- ---------------------------------------------------------------------------
Renal Treatment Centers - California, Inc. 100%
- ---------------------------------------------------------------------------
Renal Treatment Centers - West, Inc. 100%
- ---------------------------------------------------------------------------
Hutchinson Dialysis, L.L.C. 50%
- ---------------------------------------------------------------------------
Renal Treatment Centers - Southeast, Inc. 100%
- ---------------------------------------------------------------------------
RTC - Texas Acquisition, Inc. 100%
- ---------------------------------------------------------------------------
Southwest Dialysis Center, Inc. 100%
- ---------------------------------------------------------------------------
Tomball Dialysis, Inc. 100%
- ---------------------------------------------------------------------------
Renal Treatment Centers - Illinois, Inc. 100%
- ---------------------------------------------------------------------------
Renal Treatment Centers - Management Acquisition, Inc. 100%
- ---------------------------------------------------------------------------
Renal Treatment Centers - Hawaii, Inc. 100%
- ---------------------------------------------------------------------------
RTC TN, Inc. 100%
- ---------------------------------------------------------------------------
RTC Holdings, Inc. 100%
- ---------------------------------------------------------------------------
Renal Diagnostic Laboratories, Inc. 100%
- ---------------------------------------------------------------------------
RTC Holdings International, Inc. 95%
- ---------------------------------------------------------------------------
RTC Argentina S.A. 99.77%
- ---------------------------------------------------------------------------
RTC Buenos Aires S.A. 80%
- ---------------------------------------------------------------------------
RTC Cordoba S.A. 80%
- ---------------------------------------------------------------------------
SUBSIDIARY OF SHARES OWNED BY
RTC ARGENTINA S.A. RTC ARGENTINA S.A.
- ---------------------------------------------------------------------------
Caper S.A. 80%
- ---------------------------------------------------------------------------
Cenesi S.A. 100%
- ---------------------------------------------------------------------------
Cenha S.A. 100%
- ---------------------------------------------------------------------------
Centro Modelo Privado de Enfermedades Renales S.A. 80%
- ---------------------------------------------------------------------------
Centro de Enfermedades Renales S.A. 100%
- ---------------------------------------------------------------------------
Centro Nefrologico Junin S.A. 80%
- ---------------------------------------------------------------------------
Centro Nefrologico Privado Modelo S.A. 100%
- ---------------------------------------------------------------------------
Cerenales de Teer S.A. 100%
- ---------------------------------------------------------------------------
Enfermadades Renales-Centro de Dialisis S.A. 100%
- ---------------------------------------------------------------------------
Netroy S.A. 100%
- ---------------------------------------------------------------------------
Nudial S.A. 100%
- ---------------------------------------------------------------------------
Raquemar S.A. 100%
- ---------------------------------------------------------------------------
Terapia Sustitutiva Renal S.A. 100%
- ---------------------------------------------------------------------------
Tider S.A. 100%
- ---------------------------------------------------------------------------
Unidad Modelo de Nefrologia y Hemodialysis S.A. 80%
- ---------------------------------------------------------------------------
Unidad Renal S.A. 100%
- ---------------------------------------------------------------------------
</TABLE>
- --------------------
/1/ Indented headings indicate subsidiaries of the non-indented subsidiary
directly above such indented subsidiary.
<PAGE>
EXHIBIT 10.5
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of October 24, 1997 by THE
UNDERSIGNED (together with any future Domestic Subsidiaries executing this
Guaranty, being collectively referred to herein as the "GUARANTORS") in favor of
and for the benefit of THE BANK OF NEW YORK, as agent for and representative of
(in such capacity herein called "COLLATERAL AGENT") the REVOLVING LENDERS (as
hereinafter defined), the TERM LENDERS (as hereinafter defined), the REVOLVING
AGENT (as hereinafter defined), the TERM AGENT (as hereinafter defined), the
ACKNOWLEDGING INTEREST RATE EXCHANGERS (as hereinafter defined) and the
ACKNOWLEDGING CURRENCY EXCHANGERS (as hereinafter defined).
RECITALS
a. Total Renal Care Holdings, Inc., a Delaware corporation
("BORROWER"), has entered into that certain Revolving Credit Agreement
dated as of October 24, 1997, with the financial institutions parties
thereto (the "REVOLVING LENDERS"), DLJ Capital Funding Inc., as
Syndication Agent, First Union National Bank, as Documentation Agent,
and The Bank of New York, as administrative agent (the "REVOLVING
AGENT") (said Revolving Credit Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being
the "REVOLVING CREDIT AGREEMENT") pursuant to which Revolving Lenders
have made certain commitments, subject to the terms and conditions set
forth in the Revolving Credit Agreement, to extend certain credit
facilities to the Borrower.
b. The Borrower has entered into that certain Term Loan Agreement
dated as of October 24, 1997, with the financial institutions parties
thereto (the "TERM LENDERS"), DLJ Capital Funding Inc., as Syndication
Agent, and The Bank of New York, as administrative agent (the "TERM
AGENT") (said Term Loan Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "TERM
LOAN AGREEMENT"), pursuant to which Term Lenders have extended or will
extend credit, subject to the terms and conditions set forth in the
Term Loan Agreement, to the Borrower.
c. It is contemplated that the Borrower may from time to time enter
into one or more Interest Rate Agreements with one or more Revolving
Lenders or Term Lenders or their respective Affiliates (collectively,
the "INTEREST RATE EXCHANGERS") and it is desired that the obligations
of the Borrower under such Interest Rate Agreements, including the
obligation to make payments in the event of early termination
thereunder, be guarantied by this Guaranty; provided that any Interest
--------
Rate Exchanger desiring the benefit of such guaranty shall deliver to
the
<PAGE>
Collateral Agent an acknowledgement to the Intercreditor Agreement
executed by such Interest Rate Exchanger and the Borrower, pursuant to
which such Interest Rate Exchanger agrees to be bound by the terms
thereof. Each Interest Rate Exchanger that has executed and delivered
to the Collateral Agent an acknowledgement to the Intercreditor
Agreement is referred to herein as an "ACKNOWLEDGING INTEREST RATE
EXCHANGER," and each Interest Rate Agreement with an Acknowledging
Interest Rate Exchanger is referred to herein as a "GUARANTIED
INTEREST RATE AGREEMENT".
d. It is contemplated that the Borrower may from time to time enter
into one or more Currency Agreements with one or more Revolving
Lenders or Term Lenders or their respective Affiliates (collectively,
the "CURRENCY EXCHANGERS") and it is desired that the obligations of
the Borrower under such Currency Agreements be guarantied by this
Guaranty; provided that any Currency Exchanger desiring the benefit of
--------
such guaranty shall deliver to the Collateral Agent an acknowledgement
to the Intercreditor Agreement executed by such Currency Exchanger and
the Borrower, pursuant to which such Currency Exchanger agrees to be
bound by the terms thereof. Each Currency Exchanger that has executed
and delivered to the Collateral Agent an acknowledgement to the
Intercreditor Agreement is referred to herein as an "ACKNOWLEDGING
CURRENCY EXCHANGER," and each Currency Agreement with an Acknowledging
Currency Exchanger is referred to herein as a "GUARANTIED CURRENCY
AGREEMENT".
e. A portion of the proceeds of the Revolving Credit Loans and Term
Loans may be advanced to Guarantors and thus the Guarantied
Obligations (as hereinafter defined) are being incurred for and will
inure to the benefit of Guarantors (which benefits are hereby
acknowledged).
f. In addition to the Guarantors as of the date hereof, the terms of
the Revolving Credit Agreement and the Term Loan Agreement require
that each First-Tier wholly-owned Domestic Subsidiary acquired by the
Borrower after the date hereof, and certain other Domestic
Subsidiaries hereafter acquired by the Borrower, guaranty the
Guarantied Obligations.
g. Collateral Agent has been appointed as agent for the other
Beneficiaries pursuant to the Intercreditor Agreement by the Revolving
Agent on behalf of the Revolving Lenders, the Term Agent on behalf of
the Term Lenders, each Acknowledging Interest Rate Exchanger and each
Acknowledging Currency Exchanger.
h. Guarantors are willing irrevocably and unconditionally to
guaranty such obligations of the Borrower.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce the Revolving Lenders to make their respective loans to, and
issue Letters of Credit for the account of, the Borrower under the Revolving
Credit Agreement, and to induce the Term Lenders to make their respective loans
to the Borrower under the Term Loan Agreement, each Guarantor hereby agrees for
the benefit of the Collateral Agent and the other Beneficiaries as follows:
<PAGE>
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Capitalized terms used herein without
---------------------
definition shall have the meanings assigned thereto in the Revolving Credit
Agreement and, if not defined in the Revolving Credit Agreement, the Term Loan
Agreement, in each case as in effect on the date hereof. In addition, as used
in this Guaranty, the following terms shall have the following meanings unless
the context otherwise requires:
"BENEFICIARIES" means Collateral Agent, Revolving Agent, Term Agent,
Letter of Credit Issuer, Revolving Lenders, Term Lenders, Acknowledging
Interest Rate Exchangers and Acknowledging Currency Exchangers.
"DEFAULT" means any "Default" as defined in the Term Loan Agreement or
the Revolving Credit Agreement.
"EVENT OF DEFAULT" means (i) any of the events specified in Section
9.1 of the Term Loan Agreement or Section 9.1 of the Revolving Credit
Agreement, provided that any requirement for the giving of notice, the
--------
lapse of time, or any other condition has been satisfied and (ii) following
the payment in full of all obligations under the Revolving Loan Documents
and the Term Loan Documents, any breach or violation of any Secured
Interest Rate Agreement or Secured Currency Agreement.
"FINANCING DOCUMENTS" means the Revolving Loan Documents, the Term
Loan Documents, the Guarantied Interest Rate Agreements, the Guarantied
Currency Agreements, and all other documents and agreements executed and
issued in connection with the foregoing.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Subsidiary Guaranty dated as of October 24,
1997, as it may be amended, supplemented or otherwise modified from time to
time.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in
full of the Guarantied Obligations, including without limitation all
principal, interest, costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) of Beneficiaries as
required under the Financing Documents.
"REVOLVING LOAN DOCUMENTS" means the Loan Documents, as such term is
defined in the Revolving Credit Agreement.
"TERM LOAN DOCUMENTS" means the Loan Documents, as such term is
defined in the Term Loan Agreement.
<PAGE>
1.2 INTERPRETATION.
--------------
(a) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Guaranty unless otherwise
specifically provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Revolving Credit Agreement or the Term Loan Agreement,
the terms, conditions and provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Subject to the provisions of
--------------------------------------
subsection 2.2(a), Guarantors jointly and severally hereby irrevocably and
unconditionally guaranty, as primary obligors and not merely as sureties, the
due and punctual payment in full of all Guarantied Obligations when the same
shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED OBLIGATIONS"
is used herein in its most comprehensive sense and includes:
(a) any and all obligations of Borrower in respect of notes, advances,
borrowings, loans, debts, letters of credit, bankers' acceptances,
interest, fees, costs, expenses (including, without limitation, legal fees
and expenses of counsel and allocated costs of internal counsel),
indemnities and liabilities of whatsoever nature now or hereafter made,
incurred or created, whether now existing or hereafter arising, absolute or
contingent, liquidated or unliquidated, whether due or not due, and however
arising under or in connection with the Financing Documents, including
those arising under successive borrowing transactions under the Revolving
Credit Agreement which shall either continue such obligations of Borrower
or from time to time renew them after they have been satisfied and
including interest which, but for the filing of a petition in bankruptcy
with respect to Borrower, would have accrued on any Guarantied Obligations,
whether or not a claim is allowed against Borrower for such interest in the
related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.9 hereof.
2.2 LIMITATION ON AMOUNT GUARANTIED; CONTRIBUTION BY GUARANTORS. (a)
-----------------------------------------------------------
Anything contained in this Guaranty to the contrary notwithstanding, if any
Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of any Guarantor
under this Guaranty, such obligations of such Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
<PAGE>
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (x) in respect of intercompany indebtedness to Borrower or other
affiliates of Borrower to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Guarantor hereunder and (y) under
any guaranty of Subordinated Indebtedness which guaranty contains a limitation
as to maximum amount similar to that set forth in this subsection 2.2(a),
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Guarantor pursuant to
applicable law or pursuant to the terms of any agreement (including without
limitation any such right of contribution under subsection 2.2(b).
(b) Guarantors under this Guaranty together desire to allocate among
themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly,
in the event any payment or distribution is made on any date by any Guarantor
under this Guaranty (a "FUNDING GUARANTOR") that exceeds its Fair Share (as
defined below) as of such date, that Funding Guarantor shall be entitled to a
contribution from each of the other Contributing Guarantors in the amount of
such other Contributing Guarantor's Fair Share Shortfall (as defined below) as
of such date, with the result that all such contributions will cause each
Contributing Guarantor's Aggregate Payments (as defined below) to equal its Fair
Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Adjusted Maximum Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Adjusted Maximum Amounts with
respect to all Contributing Guarantors, multiplied by (ii) the aggregate amount
---------- --
paid or distributed on or before such date by all Funding Guarantors under this
Guaranty in respect of the obligations guarantied. "FAIR SHARE SHORTFALL"
means, with respect to a Contributing Guarantor as of any date of determination,
the excess, if any, of the Fair Share of such Contributing Guarantor over the
Aggregate Payments of such Contributing Guarantor. "ADJUSTED MAXIMUM AMOUNT"
means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor
under this Guaranty, determined as of such date in accordance with subsection
2.2(a); provided that, solely for purposes of calculating the "Adjusted Maximum
--------
Amount" with respect to any Contributing Guarantor for purposes of this
subsection 2.2(b), any assets or liabilities of such Contributing Guarantor
arising by virtue of any rights to subrogation, reimbursement or indemnification
or any rights to or obligations of contribution hereunder shall not be
considered as assets or liabilities of such Contributing Guarantor. "AGGREGATE
PAYMENTS" means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (i) the aggregate amount of all payments and
distributions made on or before such date by such Contributing Guarantor in
respect of this Guaranty (including, without limitation, in respect of this
subsection 2.2(b)) minus (ii) the aggregate amount of all payments
-----
received on or before such date by such Contributing Guarantor from the other
Contributing Guarantors as contributions under this subsection 2.2(b). The
amounts payable as contributions hereunder shall be determined as of the date on
which the related payment or distribution is made by the applicable Funding
Guarantor. The allocation among Contributing Guarantors of
<PAGE>
their obligations as set forth in this subsection 2.2(b) shall not be construed
in any way to limit the liability of any Contributing Guarantor hereunder.
2.3 PAYMENT BY GUARANTORS; APPLICATION OF PAYMENTS. Subject to the
----------------------------------------------
provisions of subsection 2.2(a), Guarantors hereby jointly and severally agree,
in furtherance of the foregoing and not in limitation of any other right which
any Beneficiary may have at law or in equity against any Guarantor by virtue
hereof, that upon the failure of Borrower to pay any of the Guarantied
Obligations when and as the same shall become due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)),
Guarantors will upon demand pay, or cause to be paid, in cash, to Collateral
Agent for the benefit of Beneficiaries, an amount equal to the sum of the unpaid
principal amount of all Guarantied Obligations then due as aforesaid, accrued
and unpaid interest on such Guarantied Obligations (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to Borrower, would have accrued on such Guarantied Obligations, whether
or not a claim is allowed against Borrower for such interest in the related
bankruptcy proceeding) and all other Guarantied Obligations then owed to
Beneficiaries as aforesaid. All such payments shall be applied promptly from
time to time by Collateral Agent:
First, to the payment of the costs and expenses of any collection or
-----
other realization under this Guaranty, including reasonable compensation to
Collateral Agent and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Collateral Agent in connection therewith;
Second, to the payment of all other Guarantied Obligations in the
------
order described in subsection 3 of the Intercreditor Agreement; and
Third, after payment in full of all Guarantied Obligations, to the
-----
payment to Guarantors, or their respective successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
payments.
2.4 LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its
--------------------------------
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting
the generality thereof, each Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Collateral Agent may enforce this Guaranty upon the occurrence of
an Event of Default, notwithstanding the existence of any dispute between
Borrower and any Beneficiary with respect to the existence of such Event of
Default.
<PAGE>
(c) The obligations of each Guarantor hereunder are independent of the
obligations of Borrower under the Financing Documents and the obligations
of any other guarantor (including any other Guarantor) of the obligations
of Borrower under the Financing Documents, and a separate action or actions
may be brought and prosecuted against such Guarantor whether or not any
action is brought against Borrower or any of such other guarantors and
whether or not Borrower is joined in any such action or actions.
(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's liability for any portion of the Guarantied Obligations which
has not been paid. Without limiting the generality of the foregoing, if
Collateral Agent is awarded a judgment in any suit brought to enforce any
Guarantor's covenant to pay a portion of the Guarantied Obligations, such
judgment shall not be deemed to release such Guarantor from its covenant to
pay the portion of the Guarantied Obligations that is not the subject of
such suit, and such judgment shall not, except to the extent satisfied by
such Guarantor, limit, affect, modify or abridge any other Guarantor's
liability hereunder in respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of any Guarantor's liability hereunder, from time
to time may (i) renew, extend, accelerate, increase the rate of interest
on, or otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations, (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Guarantied
Obligations and take and hold security for the payment of this Guaranty or
the Guarantied Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied Obligations, or any
other obligation of any Person (including any other Guarantor) with respect
to the Guarantied Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect of this
Guaranty or the Guarantied Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary
may have against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the applicable Financing Document,
the Intercreditor Agreement and any applicable security agreement,
including foreclosure on any such security pursuant to one or more judicial
or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, and even though such action operates to impair or
extinguish any right of reimbursement or subrogation or other right or
remedy of any Guarantor against Borrower or any security for the Guarantied
Obligations; and (vi) exercise any other rights available to it under the
Financing Documents.
(f) This Guaranty and the obligations of Guarantors hereunder shall be
valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any
<PAGE>
reason (other than payment in full of the Guarantied Obligations), and the
termination of the Revolving Credit Commitments, the Swing Line Commitment,
the Term Loan Commitments and the cancellation or expiration of all Letters
of Credit, including without limitation the occurrence of any of the
following, whether or not any Guarantor shall have had notice or knowledge
of any of them: (i) any failure or omission to assert or enforce or
agreement or election not to assert or enforce, or the stay or enjoining,
by order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Financing Documents, at law, in equity or otherwise) with
respect to the Guarantied Obligations or any agreement relating thereto, or
with respect to any other guaranty of or security for the payment of the
Guarantied Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including without limitation provisions relating to events of
default) of any Financing Document, or any agreement or instrument executed
pursuant thereto, or of any other guaranty or security for the Guarantied
Obligations, in each case whether or not in accordance with the terms of
any Financing Document or any agreement relating to such other guaranty or
security; (iii) the Guarantied Obligations, or any agreement relating
thereto, at any time being found to be illegal, invalid or unenforceable in
any respect; (iv) the application of payments received from any source
(other than payments received pursuant to the other Financing Documents or
from the proceeds of any security for the Guarantied Obligations, except to
the extent such security also serves as collateral for indebtedness other
than the Guarantied Obligations) to the payment of indebtedness other than
the Guarantied Obligations, even though any Beneficiary might have elected
to apply such payment to any part or all of the Guarantied Obligations; (v)
any Beneficiary's consent to the change, reorganization or termination of
the corporate or other structure or existence of Borrower or any of its
Subsidiaries and to any corresponding restructuring of the Guarantied
Obligations; (vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guarantied
Obligations; (vii) any defenses, set-offs or counterclaims which Borrower
may allege or assert against any Beneficiary in respect of the Guarantied
Obligations, including but not limited to failure of consideration, breach
of warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (viii) any other act or thing or omission, or
delay to do any other act or thing, which may or might in any manner or to
any extent vary the risk of any Guarantor as an obligor in respect of the
Guarantied Obligations.
2.5 WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit
---------------------
of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment or
performance by such Guarantor, to (i) proceed against Borrower, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Borrower, any such other guarantor (including any other Guarantor) or any
other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of any Beneficiary in favor of
Borrower or any other Person, or (iv) pursue any other remedy in the power
of any Beneficiary whatsoever;
<PAGE>
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Borrower including, without
limitation, any defense based on or arising out of the lack of validity or
the unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of Borrower from any cause other than payment in full of the Guarantied
Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of such Guarantor's obligations hereunder,
(ii) the benefit of any statute of limitations affecting such Guarantor's
liability hereunder or the enforcement hereof, (iii) any rights to set-
offs, recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any
security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under any Financing
Document or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Borrower
and notices of any of the matters referred to in subsection 2.4 and any
right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.6, any
------------------------------
reference to "the principal" includes Borrower, and any reference to "the
creditor" includes each Beneficiary. In accordance with Section 2856 of the
California Civil Code:
(a) each Guarantor agrees (i) to waive any and all rights of
subrogation and reimbursement against Borrower or against any collateral or
security granted by Borrower for any of the Guarantied Obligations and (ii)
to withhold the exercise of any and all rights of subrogation,
reimbursement and contribution against Borrower, against any other
guarantor of any of the Guarantied Obligations and against any collateral
or security granted by any such other guarantor for any of the Guarantied
Obligations until the Guarantied Obligations shall have been paid in full
and the Revolving Credit Commitments, the Swing Line Commitment and the
Term Loan Commitments shall have terminated and all Letters of Credit shall
have expired or been cancelled, all as more fully set forth in subsection
2.7;
<PAGE>
(b) each Guarantor waives any and all other rights and defenses
available to such Guarantor by reason of Sections 2787 to 2855, inclusive,
2899 and 3433 of the California Civil Code, including without limitation
any and all rights or defenses such Guarantor may have by reason of
protection afforded to the principal with respect to any of the Guarantied
Obligations, or to any other guarantor (including any other Guarantor) of
any of the Guarantied Obligations with respect to any of such guarantor's
obligations under its guaranty, in either case pursuant to the
antideficiency or other laws of the State of California limiting or
discharging the principal's indebtedness or such guarantor's obligations,
including without limitation Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure; and
(c) each Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for
any Guarantied Obligation, has destroyed such Guarantor's rights of
subrogation and reimbursement against the principal by the operation of
Section 580d of the California Code of Civil Procedure or otherwise; and
even though that election of remedies by the creditor, such as nonjudicial
foreclosure with respect to security for an obligation of any other
guarantor (including any other Guarantor) of any of the Guarantied
Obligations, has destroyed such Guarantor's rights of contribution against
such other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.6.
In accordance with subsection 4.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York, without regard to conflicts of laws principles. This
subsection 2.6 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guarantied
Obligations.
2.7 GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Each Guarantor
----------------------------------------------------
hereby waives any claim, right or remedy, direct or indirect, that such
Guarantor now has or may hereafter have against Borrower or any of its assets in
connection with this Guaranty or the performance by such Guarantor of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute (including without limitation under
California Civil Code Section 2847, 2848 or 2849), under common law or otherwise
and including without limitation (a) any right of subrogation, reimbursement or
indemnification that such Guarantor now has or may hereafter have against
Borrower, (b) any right to enforce, or to participate in, any claim, right or
remedy that any Beneficiary now has or may hereafter have against Borrower, and
(c) any benefit of, and any right to participate in, any collateral or security
now or hereafter held by any Beneficiary. In addition, until the Guarantied
Obligations shall have been indefeasibly paid in full and the Revolving Credit
Commitments, the Swing Line Commitment and the Term Loan Commitments shall have
terminated and all Letters of Credit shall have expired or been cancelled, each
Guarantor shall withhold exercise of any right of contribution such Guarantor
may have against any other guarantor (including any other Guarantor) of the
Guarantied Obligations (including without limitation any such right of
contribution under California Civil Code Section 2848 or under subsection
2.2(b)). Each
<PAGE>
Guarantor further agrees that, to the extent the waiver or agreement to withhold
the exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent jurisdiction
to be void or voidable for any reason, any rights of subrogation, reimbursement
or indemnification such Guarantor may have against Borrower or against any
collateral or security, and any rights of contribution such Guarantor may have
against any such other guarantor, shall be junior and subordinate to any rights
any Beneficiary may have against Borrower, to all right, title and interest any
Beneficiary may have in any such collateral or security, and to any right any
Beneficiary may have against such other guarantor. If any amount shall be paid
to any Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guarantied
Obligations shall not have been paid in full, such amount shall be held in trust
for Collateral Agent on behalf of Beneficiaries and shall forthwith be paid over
to Collateral Agent for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in accordance
with the terms hereof.
2.8 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Borrower now
----------------------------------
or hereafter held by any Guarantor is hereby subordinated in right of payment to
the Guarantied Obligations, and any such indebtedness of Borrower to such
Guarantor collected or received by such Guarantor after an Event of Default has
occurred and is continuing shall be held in trust for Collateral Agent on behalf
of Beneficiaries and shall forthwith be paid over to Collateral Agent for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of such Guarantor under any other provision of this Guaranty.
2.9 EXPENSES. Guarantors jointly and severally agree to pay, or cause to
--------
be paid, on demand, and to save Beneficiaries harmless against liability for,
any and all costs and expenses (including fees and disbursements of counsel and
allocated costs of internal counsel) incurred or expended by any Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty.
2.10 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall
-------------------
remain in effect until all of the Guarantied Obligations shall have been paid in
full and the Revolving Credit Commitments, the Swing Line Commitment and the
Term Loan Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled. Each Guarantor hereby irrevocably waives any right
(including without limitation any such right arising under California Civil Code
Section 2815) to revoke this Guaranty as to future transactions giving rise to
any Guarantied Obligations.
2.11 AUTHORITY OF GUARANTORS OR BORROWER. It is not necessary for any
-----------------------------------
Beneficiary to inquire into the capacity or powers of any Guarantor or Borrower
or the officers, directors or any agents acting or purporting to act on behalf
of any of them.
2.12 FINANCIAL CONDITION OF BORROWER. Any credit may be extended to
-------------------------------
Borrower or continued from time to time without notice to or authorization from
any Guarantor regardless of the
<PAGE>
financial or other condition of Borrower at the time of any such grant or
continuation. No Beneficiary shall have any obligation to disclose or discuss
with any Guarantor its assessment, or any Guarantor's assessment, of the
financial condition of Borrower. Each Guarantor has adequate means to obtain
information from Borrower on a continuing basis concerning the financial
condition of Borrower and its ability to perform its obligations under the
Financing Documents, and each Guarantor assumes the responsibility for being and
keeping informed of the financial condition of Borrower and of all circumstances
bearing upon the risk of nonpayment of the Guarantied Obligations. Each
Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary
to disclose any matter, fact or thing relating to the business, operations or
conditions of Borrower now known or hereafter known by any Beneficiary.
2.13 RIGHTS CUMULATIVE. The rights, powers and remedies given to
-----------------
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Financing Documents or any
agreement between any Guarantor and any Beneficiary or Beneficiaries or between
Borrower and any Beneficiary or Beneficiaries. Any forbearance or failure to
exercise, and any delay by any Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
2.14 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
-------------------------------------------------------------
So long as any Guarantied Obligations remain outstanding, no Guarantor shall,
without the prior written consent of Collateral Agent and Requisite Obligees (as
such term is defined in the Intercreditor Agreement), commence or join with any
other Person in commencing any bankruptcy, reorganization or insolvency
proceedings of or against Borrower. The obligations of Guarantors under this
Guaranty shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Borrower or by any defense which Borrower may have by reason of
the order, decree or decision of any court or administrative body resulting from
any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantors and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Borrower of any
portion of such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Collateral Agent, or allow the claim of
Collateral Agent in respect of, any such interest accruing after the date on
which such proceeding is commenced.
<PAGE>
(c) In the event that all or any portion of the Guarantied Obligations
are paid by Borrower, the obligations of Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty.
2.15 NOTICE OF EVENTS. As soon as any Guarantor obtains knowledge thereof,
----------------
such Guarantor shall give Collateral Agent written notice of any condition or
event which has resulted in (a) a material adverse change in the financial
condition of any Guarantor or Borrower or (b) a breach of or noncompliance with
any term, condition or covenant contained herein or in any Financing Document or
any other document delivered pursuant hereto or thereto.
2.16 SET OFF. In addition to any other rights any Beneficiary may have
-------
under law or in equity, if any amount shall at any time be due and owing by any
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of such Beneficiary owing to such Guarantor and any other
property of such Guarantor held by any Beneficiary to or for the credit or the
account of such Guarantor against and on account of the Guarantied Obligations
and liabilities of such Guarantor to any Beneficiary under this Guaranty.
2.17 DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the Stock (or
--------------------------------------------
equivalent ownership interest) of any Guarantor or any of its successors in
interest under this Guaranty shall be sold or otherwise disposed of (including
by merger or consolidation) in a sale or disposition permitted by Section 8.7 of
the Revolving Credit Agreement and Section 8.7 of the Term Loan Agreement or
otherwise consented to by Requisite Obligees, the Guaranty of such Guarantor or
such successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any Beneficiary or any
other Person effective as of the time of such sale or disposition; provided that
--------
(i) the Person acquiring the Stock (or equivalent ownership interest) of any
Guarantor or any of its successors or merging with or consolidating with such
Guarantor is not a Subsidiary of the Borrower and (ii) either (a) the net
proceeds from such sale are used by the Borrower contemporaneously with the
receipt thereof to prepay Term Loans and/or Revolving Credit Loans (and
permanently reduce the Revolving Credit Commitments in the amount of any such
prepayment of Revolving Credit Loans) to the extent required by the Term Loan
Agreement or the Revolving Credit Agreement or (b) at the time of and
immediately after such sale, disposition, or merger, no Default or Event of
Default shall have occurred and be continuing.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Beneficiaries to accept this Guaranty and to enter
into the Revolving Credit Agreement and the Term Loan Agreement, and to extend
credit thereunder, each Guarantor
<PAGE>
hereby represents and warrants to Beneficiaries that the following statements
are true and correct:
3.1 EXISTENCE. Such Guarantor is duly organized, validly existing and in
---------
good standing under the laws of the state of its incorporation or formation, has
the corporate or other power to own its assets and to transact the business in
which it is now engaged and is duly qualified as a foreign corporation or entity
and in good standing under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
except for failures to be so qualified, authorized or licensed that would not in
the aggregate have a material adverse effect on the business, operations, assets
or financial condition of such Guarantor and its Subsidiaries, taken as a whole.
3.2 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Such Guarantor has the
---------------------------------------------
corporate or other power, authority and legal right to execute, deliver and
perform this Guaranty and all obligations required hereunder and has taken all
necessary corporate or other action to authorize its Guaranty hereunder on the
terms and conditions hereof and its execution, delivery and performance of this
Guaranty and all obligations required hereunder. No consent of any other Person
including, without limitation, stockholders (or equivalent owners) and creditors
of such Guarantor, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required by such Guarantor in connection with this
Guaranty or the execution, delivery, performance, validity or enforceability of
this Guaranty and all obligations required hereunder. This Guaranty has been,
and each instrument or document required hereunder will be, executed and
delivered by a duly authorized officer of such Guarantor, and this Guaranty
constitutes, and each instrument or document required hereunder when executed
and delivered by such Guarantor hereunder will constitute, the legally valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
equitable principles relating to or limiting creditors' rights generally.
3.3 NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and
-----------------------------
performance of this Guaranty and the documents or instruments required
hereunder, and the use of the proceeds of the borrowings under the Financing
Documents, will not violate any provision of any existing law or regulation
binding on such Guarantor, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on such Guarantor, or the
certificate of incorporation or bylaws or other organizational documents of such
Guarantor or any securities issued by such Guarantor, or any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which such Guarantor is a party or by which such Guarantor or any of its assets
may be bound, the violation of which would have a material adverse effect on the
business, operations, assets or financial condition of such Guarantor and will
not result in, or require, the creation or imposition of any Lien on any of its
property, assets or revenues pursuant to the provisions of any such mortgage,
indenture, lease, contract or other agreement, instrument or undertaking.
<PAGE>
SECTION 4. MISCELLANEOUS
4.1 SURVIVAL OF WARRANTIES. All agreements, representations and
----------------------
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Financing Documents and any increase in the Commitments under the
Revolving Credit Agreement.
4.2 NOTICES. Any communications between Collateral Agent and any
-------
Guarantor and any notices or requests provided herein to be given may be given
by mailing the same, postage prepaid, or by telex, facsimile transmission or
cable to each such party at its address set forth below (in the case of
Collateral Agent) and on the signature pages hereof (in the case of Guarantors)
or to such other addresses as each such party may in writing hereafter indicate.
Any notice, request or demand to or upon Collateral Agent or any Guarantor shall
not be effective until received.
The Bank of New York, as Collateral Agent
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, as Collateral Agent
10990 Wilshire Blvd., Suite 1125
Los Angeles, California 90024
Attention: Rebecca K. Levine
Vice President
Telephone: (310) 996-8659
Fax: (310) 996-8667
4.3 SEVERABILITY. In case any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
4.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
----------------------
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Collateral Agent and, in the case of any such amendment or
modification, each Guarantor against whom enforcement of such amendment or
modification is sought. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
<PAGE>
4.5 HEADINGS. Section and subsection headings in this Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
4.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
--------------
GUARANTORS AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
----------------------
shall be binding upon each Guarantor and its respective successors and assigns.
This Guaranty shall inure to the benefit of Beneficiaries and their respective
successors and assigns. No Guarantor shall assign this Guaranty or any of the
rights or obligations of such Guarantor hereunder without the prior written
consent of Requisite Obligees. Any Beneficiary may, without notice or consent,
assign its interest in this Guaranty in whole or in part. The terms and
provisions of this Guaranty shall inure to the benefit of any transferee or
assignee of any Loan or Letter of Credit Exposure, and in the event of such
transfer or assignment the rights and privileges herein conferred upon such
Beneficiary shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.
4.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS GUARANTY, EACH GUARANTOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 4.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR
<PAGE>
IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 4.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
Each Guarantor further designates and appoints CT Corporation System, and such
other Persons as may hereafter be selected by such Guarantor irrevocably
agreeing in writing to so serve, as its agent to receive on its behalf service
of all process in any such proceedings in any such court, such service being
hereby acknowledged by each Guarantor to be effective and binding service in
every respect.
4.9 WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
GUARANTY. The scope of this waiver is intended to be all encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims and all other common law and statutory claims.
Each Guarantor and, by its acceptance of the benefits hereof, each Beneficiary,
(i) acknowledges that this waiver is a material inducement for such Guarantor
and Beneficiaries to enter into a business relationship, that such Guarantor and
Beneficiaries have already relied on this waiver in entering into this Guaranty
or accepting the benefits hereof, as the case may be, and that each will
continue to rely on this waiver in their related future dealings and (ii)
further warrants and represents that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 4.9 AND EXECUTED
BY COLLATERAL AGENT AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
In the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
4.10 NO OTHER WRITING. This writing is intended by Guarantors and
----------------
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing,
<PAGE>
course of performance or trade usage, and no parol evidence of any nature, shall
be used to supplement or modify any terms of this Guaranty. There are no
conditions to the full effectiveness of this Guaranty.
4.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Collateral Agent, Guarantors shall execute and deliver such further
documents and do such other acts and things as Collateral Agent may reasonably
request in order to effect fully the purposes of this Guaranty.
4.12 ADDITIONAL GUARANTORS. The initial Guarantors hereunder shall be such
---------------------
of the Domestic Subsidiaries of Borrower as are signatories hereto on the date
hereof. From time to time subsequent to the date hereof, additional Domestic
Subsidiaries of Borrower may become parties hereto, as additional Guarantors
(each an "ADDITIONAL GUARANTOR"), by executing a counterpart of this Guaranty.
Upon delivery of any such counterpart to Collateral Agent, notice of which is
hereby waived by Guarantors, each such Additional Guarantor shall be a Guarantor
and shall be as fully a party hereto as if such Additional Guarantor were an
original signatory hereof. Each Guarantor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release
of any other Guarantor hereunder, nor by any election of Collateral Agent not to
cause any Subsidiary of Borrower to become an Additional Guarantor hereunder.
This Guaranty shall be fully effective as to any Guarantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Guarantor hereunder.
4.13 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
---------------------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to each Guarantor upon the execution of a counterpart hereof by
such Guarantor (whether or not a counterpart hereof shall have been executed by
any other Guarantor) and receipt by Collateral Agent of written or telephonic
notification of such execution and authorization of delivery thereof.
4.14 COLLATERAL AGENT AS AGENT.
-------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder pursuant to the Intercreditor Agreement by the Revolving Agent on
behalf of the Revolving Lenders, the Term Agent on behalf of the Term Lenders,
and each Interest Rate Exchanger and Currency Exchanger signing an
acknowledgement to the Intercreditor Agreement. Collateral Agent shall be
obligated, and shall have the right hereunder, to make demands, to give notices,
to exercise or refrain from exercising any rights, and to take or refrain from
taking any action, solely in accordance with this Guaranty and the Intercreditor
Agreement.
(b) The Collateral Agent may resign or be removed and a successor
Collateral Agent may be appointed in the manner provided in the Intercreditor
Agreement. Resignation by the Collateral
<PAGE>
Agent pursuant to subsection 6(g) of the Intercreditor Agreement shall also
constitute notice of resignation as Collateral Agent under this Agreement;
removal of the Collateral Agent pursuant to subsection 6(g) of the Intercreditor
Agreement shall also constitute removal as Collateral Agent under this
Agreement; and appointment of a successor Collateral Agent pursuant to
subsection 6(g) of the Intercreditor Agreement shall also constitute appointment
of a successor Collateral Agent under this Agreement. Upon the acceptance of any
appointment as Collateral Agent under subsection 6(g) of the Intercreditor
Agreement by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Collateral Agent under this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
TOTAL RENAL CARE, INC.
By ______________________________
Title ___________________________
By ______________________________
Title ___________________________
Address:
Total Renal Care, Inc.
c/o 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
TRC WEST, INC.
By ______________________________
Title ___________________________
By ______________________________
Title ___________________________
Address:
TRC West, Inc.
c/o 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
<PAGE>
TOTAL RENAL CARE ACQUISITION CORP.
By ______________________________
Title ___________________________
By ______________________________
Title ___________________________
Address:
Total Renal Care Acquisition Corp.
c/o 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
<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, 199_.
________________________________________
(Name of Additional Guarantor)
By
________________________________
Title
____________________________
<PAGE>
EXHIBIT 10.6
BORROWER PLEDGE AGREEMENT
This BORROWER PLEDGE AGREEMENT (as it may be amended, supplemented or
otherwise modified from time to time, this "AGREEMENT") is dated as of October
24, 1997 and entered into by and between TOTAL RENAL CARE HOLDINGS, INC., a
Delaware corporation ("PLEDGOR"), and THE BANK OF NEW YORK, as collateral agent
for and representative of (in such capacity herein called "COLLATERAL AGENT")
the REVOLVING LENDERS (as hereinafter defined), the TERM LENDERS (as hereinafter
defined), the REVOLVING AGENT (as hereinafter defined), the TERM AGENT (as
hereinafter defined), the ACKNOWLEDGING INTEREST RATE EXCHANGERS (as hereinafter
defined) and the ACKNOWLEDGING CURRENCY EXCHANGERS (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of Stock
described in Schedule I annexed hereto and issued by the corporations named
----------
therein.
B. Pledgor has entered into that certain Revolving Credit Agreement
dated as of October 24, 1997, with the financial institutions parties thereto
(the "REVOLVING LENDERS"), DLJ Capital Funding Inc., as Syndication Agent, First
Union National Bank, as Documentation Agent, and The Bank of New York, as
administrative agent (the "REVOLVING AGENT") (said Revolving Credit Agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "REVOLVING CREDIT AGREEMENT"), pursuant to which the Revolving
Lenders have made certain commitments, subject to the terms and conditions set
forth in the Revolving Credit Agreement, to extend certain credit facilities to
Pledgor.
C. Pledgor has entered into that certain Term Loan Agreement dated as
of October 24, 1997, with the financial institutions parties thereto (the "TERM
LENDERS"), DLJ Capital Funding Inc., as Syndication Agent, and The Bank of New
York, as administrative agent (the "TERM AGENT") (said Term Loan Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "TERM LOAN AGREEMENT"), pursuant to which Term Lenders have
extended or will extend credit, subject to the terms and conditions set forth in
the Term Loan Agreement, to Pledgor.
D. It is contemplated that the Pledgor may from time to time enter
into one or more Interest Rate Agreements with one or more Revolving Lenders or
Term Lenders or their respective Affiliates (collectively, the "INTEREST RATE
EXCHANGERS") and it is desired that the obligations of the Pledgor under such
Interest Rate Agreements, including the obligation to make payments in the event
of early termination thereunder, be secured by the collateral described
herein; provided
--------
<PAGE>
that any Interest Rate Exchanger desiring the benefit of such security shall
deliver to the Collateral Agent an acknowledgement to the Intercreditor
Agreement executed by such Interest Rate Exchanger and the Pledgor, pursuant to
which such Interest Rate Exchanger agrees to be bound by the terms thereof. Each
Interest Rate Exchanger that has executed and delivered to the Collateral Agent
an acknowledgement to the Intercreditor Agreement is referred to herein as an
"ACKNOWLEDGING INTEREST RATE EXCHANGER", and each Interest Rate Agreement with
an Acknowledging Interest Rate Exchanger is referred to herein as a "SECURED
INTEREST RATE AGREEMENT".
E. It is contemplated that the Pledgor may from time to time enter
into one or more Currency Agreements with one or more Revolving Lenders or Term
Lenders or their respective Affiliates (collectively, the "CURRENCY EXCHANGERS")
and it is desired that the obligations of the Pledgor under such Currency
Agreements, including the obligation to make payments in the event of early
termination thereunder be secured by the collateral described herein; provided
--------
that any Currency Exchanger desiring the benefit of such security shall deliver
to the Collateral Agent an acknowledgement to the Intercreditor Agreement
executed by such Currency Exchanger and the Pledgor, pursuant to which such
Currency Exchanger agrees to be bound by the terms thereof. Each Currency
Exchanger that has executed and delivered to the Collateral Agent an
acknowledgement to the Intercreditor Agreement is referred to herein as an
"ACKNOWLEDGING CURRENCY EXCHANGER" and each Currency Agreement with an
Acknowledging Currency Exchanger is referred to herein as a "SECURED CURRENCY
AGREEMENT".
F. Collateral Agent has been appointed as collateral agent hereunder
pursuant to the Intercreditor Agreement by the Revolving Agent on behalf of the
Revolving Lenders, the Term Agent on behalf of the Term Lenders, and each
Interest Rate Exchanger and Currency Exchanger signing an acknowledgement to the
Intercreditor Agreement.
G. It is a condition precedent to the initial extensions of credit by
the Revolving Lenders under the Revolving Credit Agreement and the Term Lenders
under the Term Loan Agreement that Pledgor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Revolving Lenders to enter into the Revolving Credit Agreement and
make their respective loans to, and issue Letters of Credit for the account of,
the Pledgor, and to induce the Term Lenders to enter into the Term Loan
Agreement and make their respective loans to the Pledgor, Pledgor hereby agrees
with Collateral Agent as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein without
-----------
definition shall have the meanings assigned thereto in the Revolving Credit
Agreement and, if not defined in the Revolving Credit Agreement, the Term Loan
Agreement, in each case as in effect on the date hereof. In addition, as used
in this Agreement, the following terms shall have the following meanings unless
the context otherwise requires:
<PAGE>
"DEFAULT" means any "Default" as defined in the Term Loan Agreement or
the Revolving Credit Agreement.
"EVENT OF DEFAULT" means (i) any of the events specified in Section
9.1 of the Term Loan Agreement or Section 9.1 of the Revolving Credit Agreement,
provided that any requirement for the giving of notice, the lapse of time, or
- --------
any other condition has been satisfied and (ii) following the payment in full of
all obligations under the Revolving Loan Documents and the Term Loan Documents,
any breach or violation of any Secured Interest Rate Agreement or Secured
Currency Agreement.
"FINANCING DOCUMENTS" means the Revolving Loan Documents, the Term
Loan Documents, the Secured Interest Rate Agreements, the Secured Currency
Agreements, and all other documents and agreements executed and issued in
connection with the foregoing.
"INTERCREDITOR AGREEMENT" means the Intercreditor and Collateral
Agency Agreement, dated as of the date hereof, among the Revolving Agent, the
Term Agent and The Bank of New York, acting in its capacity as Collateral Agent
thereunder, each Acknowledging Interest Rate Exchanger and each Acknowledging
Currency Exchanger and the Loan Parties (as defined therein), as amended,
supplemented or otherwise modified from time to time.
"REQUISITE OBLIGEES" has the meaning assigned thereto in the
Intercreditor Agreement.
"REVOLVING LOAN DOCUMENTS" means the "Loan Documents" as defined in
the Revolving Credit Agreement.
"SEC" means the Securities and Exchange Commission or any Governmental
Authority succeeding to the functions thereof.
"SECURED PARTIES" means, collectively, the Collateral Agent, the
Revolving Agent, the Revolving Lenders, the Letter of Credit Issuer, the Term
Agent, the Term Lenders, the Acknowledging Interest Rate Exchangers and
Acknowledging Currency Exchangers.
"TERM LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Term Loan Agreement.
SECTION 2. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
------------------
Collateral Agent for its benefit and the benefit of the Secured Parties, and
hereby grants to Collateral Agent for its benefit and the benefit of the Secured
Parties, a security interest in, all of Pledgor's right, title and interest in
and to the following, in each case whether now owned or existing or hereafter
arising or acquired, whether tangible or intangible and wherever located (the
"PLEDGED COLLATERAL"):
(a) all shares of Stock of any Person that is on the date hereof or
hereafter becomes a First-Tier wholly-owned Subsidiary of Pledgor or a First-
Tier Domestic Subsidiary of Pledgor that is a
<PAGE>
Guarantor (whether or not wholly-owned by Pledgor) (such shares being the
"PLEDGED SHARES"), all securities convertible into and warrants, options and
other rights to purchase or otherwise acquire, any Pledged Shares, the
certificates or other instruments representing such Pledged Shares, securities,
warrants, options or other rights and any interest of Pledgor in the entries on
the books of any financial intermediary pertaining to such shares, and all
dividends, cash, warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such Pledged Shares, securities, warrants, options
or other rights; provided that Pledgor shall not be required to pledge more than
--------
the Maximum Percentage (as hereinafter defined) of the shares of Stock of any
Foreign Subsidiary;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, Stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(c) to the extent not covered by clauses (a) through (b) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" has the meaning assigned to it under Article
9 of the New York Uniform Commercial Code and to the extent not otherwise
included, shall include whatever is receivable or received when Pledged
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Collateral Agent from time to time with respect to any of the Pledged
Collateral.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Financing Documents, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Pledgor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Secured
<PAGE>
Party as a preference, fraudulent transfer or otherwise (all such obligations
and liabilities being the "UNDERLYING DEBT"), and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. Collateral Agent shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Collateral Agent or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 8(a). In
addition, Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
Collateral Agent acknowledges that, notwithstanding Pledgor's
representation and warranty in Section 5(b) hereof, Pledgor may deliver to
Collateral Agent stock certificates, together with undated stock powers,
representing less than 100% (but no less than 66%) of the outstanding shares of
stock of the Foreign Subsidiaries; all outstanding shares of the Foreign
Subsidiaries being referred to herein as the "FOREIGN SHARES". Because the
intent of Pledgor and Collateral Agent is to grant a security interest in a
percentage of the Foreign Shares equal to 66% or such other percentage as is the
maximum percentage of the Foreign Shares that can be pledged to the Collateral
Agent without constituting an investment of earnings in U.S. property under
Section 956 (or any successor provision) of the Code that would trigger an
increase in the gross income of Pledgor pursuant to Section 951 (or any
successor provision) of the Code (such percentage being the "MAXIMUM
PERCENTAGE"), Collateral Agent hereby confirms that the Pledged Shares of the
Foreign Subsidiaries shall refer only to, and the grants of security interests
created hereby shall extend only to, the Maximum Percentage of the Foreign
Shares.
If Collateral Agent shall take any action to foreclose on the Foreign
Shares, Collateral Agent hereby agrees to act only with regard to the Maximum
Percentage of the Foreign Shares; provided, however, that nothing herein shall
-------- -------
preclude Collateral Agent from exercising the stock powers with respect to all
outstanding Foreign Shares to take such action as may be necessary to transfer
the Foreign Shares (the "REMAINING SHARES") to Pledgor or to such other person
or entity as Pledgor designates. The parties hereto agree that Collateral Agent
has no fiduciary or other responsibilities or duties with regard to the
Remaining Shares and that Collateral Agent is serving only as custodian with
respect to the Remaining Shares.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable.
<PAGE>
(b) Description of Pledged Collateral. The Pledged Shares (other than
---------------------------------
the Foreign Shares) constitute 100% of the issued and outstanding shares of
Stock of each First-Tier wholly-owned Domestic Subsidiary of the Pledgor, and
there are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged Shares.
The Pledged Shares (other than the Foreign Shares) constitute 100% of the
outstanding shares of such Domestic Subsidiary that have been issued to Pledgor,
and there are no outstanding warrants, options, or other rights to purchase, or
other agreements outstanding with respect to, or property that is now or
hereafter convertible into, or that requires the issuance or sale of, any such
Pledged Shares. The Pledged Shares of each Foreign Subsidiary represent the
Maximum Percentage of the issued and outstanding shares of Stock of such Foreign
Subsidiary.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and as otherwise permitted under
the Revolving Credit Agreement or the Term Loan Agreement, as the case may be.
(d) Governmental Authorizations. Except as may be disclosed on
---------------------------
Schedule 5(d) with respect to Pledged Shares of a Foreign Subsidiary (which
Schedule 5(d) may be supplemented from time to time in connection with a pledge
hereunder of Pledged Shares of a new Foreign Subsidiary) and provided that with
--------
respect to any matters disclosed on Schedule 5(d) Pledgor shall as soon as
reasonably practicable obtain all such authorizations and approvals, make all
such notifications or filings and take all such other actions as may be so
disclosed and required under the laws governing such Foreign Subsidiary in
connection with the actions described in the following clauses (i)-(iii), no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for either (i) the pledge
by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by
Pledgor of the security interest granted hereby, (ii) the execution, delivery or
performance of this Agreement by Pledgor, or (iii) the exercise by Collateral
Agent of the voting or other rights, or the remedies in respect of the Pledged
Collateral, provided for in this Agreement (except as may be required in
connection with a disposition of Pledged Collateral by laws affecting the
offering and sale of securities generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to this
----------
Agreement creates a valid and perfected and, except as otherwise permitted under
the Revolving Credit Agreement or the Term Loan Agreement, as the case may be,
first priority security interest in the Pledged Collateral, securing the payment
of the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Collateral Agent by or on behalf of Pledgor with respect
to the Pledged Collateral is accurate and complete in all material respects.
<PAGE>
SECTION 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
- ----
(a) not, except as expressly permitted by Section 8.7 of the Revolving
Credit Agreement and Section 8.7 of the Term Loan Agreement, (i) sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral, (ii) create or suffer to exist
any Lien upon or with respect to any of the Pledged Collateral, except for the
security interest under this Agreement, or (iii) permit any issuer of Pledged
Shares to merge or consolidate unless all the outstanding capital stock of the
surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation; provided
--------
that in the event Pledgor makes a sale or disposition permitted by the Revolving
Credit Agreement and the Term Loan Agreement and the assets subject to such sale
or disposition are Pledged Shares, Collateral Agent shall release the Pledged
Shares that are the subject of such sale or disposition to Pledgor free and
clear of the lien and security interest under this Agreement concurrently with
the consummation of such sale or disposition; provided, further that, as a
-------- -------
condition precedent to such release, Collateral Agent shall have received
evidence satisfactory to it that arrangements satisfactory to it have been made
for delivery to the Revolving Agent and the Term Agent of the proceeds of such
sale or disposition to the extent required by the Revolving Credit Agreement and
the Term Loan Agreement;
(b) (i) cause each issuer of Pledged Shares not to issue any Stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to Pledgor, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional shares
of Stock or other securities of each issuer of Pledged Shares, (iii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all shares of Stock of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a First-Tier wholly-owned
Domestic Subsidiary of Pledgor, and (iv) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, the Maximum Percentage of shares
of Stock or any Person that, after the date of this Agreement, becomes, as a
result of any occurrence, a First-Tier Foreign Subsidiary of Pledgor;
(c) promptly notify Collateral Agent of any event of which Pledgor
becomes aware causing loss of the Pledged Collateral;
(d) promptly deliver to Collateral Agent all written notices received
by it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments, charges,
- --------
levies or claims not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed against
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
<PAGE>
SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that
Collateral Agent may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Collateral Agent
to exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, Pledgor
will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Collateral Agent may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby and
(ii) at Collateral Agent's request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Collateral Agent's security
interest in all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of Stock or other securities required to be pledged hereunder as provided
in Section 6, promptly (and in any event within thirty Business Days) deliver to
Collateral Agent a Pledge Amendment, duly executed by Pledgor, in substantially
the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in respect of the
-----------
additional Pledged Shares to be pledged pursuant to this Agreement. Pledgor
hereby authorizes Collateral Agent to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge Amendment
delivered to Collateral Agent shall for all purposes hereunder be considered
Pledged Collateral; provided that the failure of Pledgor to execute a Pledge
--------
Amendment with respect to any additional Pledged Shares pledged pursuant to this
Agreement shall not impair the security interest of Collateral Agent therein or
otherwise adversely affect the rights and remedies of Collateral Agent hereunder
with respect thereto.
SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement, the Revolving Credit Agreement or the Term Loan Agreement;
provided, however, that Pledgor shall not exercise or refrain from
-------- -------
exercising any such right if Collateral Agent shall have notified
Pledgor that, in Collateral Agent's judgment, such action would have a
material adverse effect on the value of the Pledged Collateral or any
part thereof; and provided, further, that Pledgor shall give Collateral
-------- -------
Agent at least five Business Days' prior written notice of the manner
in which it intends to exercise, or the reasons for refraining from
exercising, any such right. It is understood, however, that neither (A)
the voting by Pledgor of any Pledged Shares for or Pledgor's consent to
the election of directors at a regularly scheduled annual or other
meeting of stockholders or with respect to incidental matters at any
such meeting nor (B) Pledgor's consent to or approval of any action
otherwise permitted under this Agreement,
<PAGE>
the Revolving Credit Agreement and the Term Loan Agreement shall be
deemed inconsistent with the terms of this Agreement, the Revolving
Credit Agreement or the Term Loan Agreement within the meaning of this
Section 8(a)(i), and no notice of any such voting or consent need be
given to Collateral Agent;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however,
-------- -------
that any and all
(A) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-
surplus, and
(C) cash paid, payable or otherwise distributed in respect
of principal or in redemption of or in exchange for any
Pledged Collateral,
shall be, and shall forthwith be delivered to Collateral Agent to hold
as, Pledged Collateral and shall, if received by Pledgor, be received
in trust for the benefit of Collateral Agent, be segregated from the
other property or funds of Pledgor and be forthwith delivered to
Collateral Agent as Pledged Collateral in the same form as so received
(with all necessary indorsements); and
(iii) Collateral Agent shall promptly execute and deliver (or
cause to be executed and delivered) to Pledgor all such proxies,
dividend payment orders and other instruments as Pledgor may from time
to time reasonably request for the purpose of enabling Pledgor to
exercise the voting and other consensual rights which it is entitled to
exercise pursuant to paragraph (i) above and to receive the dividends,
principal or interest payments which it is authorized to receive and
retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Collateral Agent to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 8(a)(i)
shall cease, and all such rights shall thereupon become vested in
Collateral Agent which shall thereupon have the sole right to exercise
such voting and other consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(ii) shall cease, and all such rights shall
thereupon become vested in Collateral Agent which shall thereupon have
the sole right to receive and hold as Pledged Collateral such dividends
and interest payments; and
<PAGE>
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of
this Section 8(b) shall be received in trust for the benefit of
Collateral Agent, shall be segregated from other funds of Pledgor and
shall forthwith be paid over to Collateral Agent as Pledged Collateral
in the same form as so received (with any necessary indorsements).
(c) In order to permit Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Collateral Agent all such proxies, dividend payment orders and other instruments
as Collateral Agent may from time to time reasonably request and (ii) without
limiting the effect of the immediately preceding clause (i), Pledgor hereby
grants to Collateral Agent an irrevocable proxy to vote the Pledged Shares and
to exercise all other rights, powers, privileges and remedies to which a holder
of the Pledged Shares would be entitled (including, without limitation, giving
or withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor
-------------------------------------------
hereby irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor,
Collateral Agent or otherwise, from time to time in Collateral Agent's
discretion to take any action and to execute any instrument that Collateral
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) after and during the continuance of an Event of Default, to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Pledged Collateral;
(c) after and during the continuance of an Event of Default, to
receive, endorse and collect any instruments made payable to Pledgor
representing any dividend, principal or interest payment or other distribution
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same; and
(d) after and during the continuance of an Event of Default, to file
any claims or take any action or institute any proceedings that Collateral Agent
may deem necessary or desirable for the
<PAGE>
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Collateral Agent with respect to any of the Pledged Collateral.
SECTION 10. COLLATERAL AGENT MAY PERFORM. If Pledgor fails to
----------------------------
perform any agreement contained herein after the period in which such
performance is required, Collateral Agent may itself perform, or cause
performance of, such agreement, and the expenses of Collateral Agent incurred in
connection therewith shall be payable by Pledgor under Section 15(b).
SECTION 11. STANDARD OF CARE. The powers conferred on Collateral
----------------
Agent hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Collateral Agent shall have no duty as to any Pledged Collateral, it being
understood that Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral, whether
or not Collateral Agent has or is deemed to have knowledge of such matters, (b)
taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Pledged
Collateral) to preserve rights against any parties with respect to any Pledged
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the Pledged Collateral, or (d) initiating any action to protect the Pledged
Collateral against the possibility of a decline in market value. Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Collateral in its possession if such Pledged Collateral
is accorded treatment substantially equal to that which Collateral Agent accords
its own property consisting of negotiable securities.
SECTION 12. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "UCC") (whether
or not the UCC applies to the affected Pledged Collateral), and Collateral Agent
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Collateral
Agent may deem commercially reasonable, irrespective of the impact of any such
sales on the market price of the Pledged Collateral. Collateral Agent may be
the purchaser of any or all of the Pledged Collateral at any such public sale
and, to the extent permitted by law, private sale, and Collateral Agent, as
agent for and representative of Secured Parties (but not any Secured Party or
Secured Parties in its or their respective individual capacities unless
Requisite Obligees shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Pledged
<PAGE>
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Collateral Agent at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives any claims against Collateral Agent arising by
reason of the fact that the price at which any Pledged Collateral may have been
sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Collateral Agent to collect
such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and applicable state securities laws, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged Collateral
under the Securities Act and/or such state securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances and the registration rights granted to
Collateral Agent by Pledgor pursuant to Section 13, Pledgor agrees that the
effect of the foregoing in respect of any such private sale shall not be deemed
per se to cause such private sale to have not been made in a commercially
- --- --
reasonable manner and that Collateral Agent shall have no obligation to engage
in public sales and no obligation to delay the sale of any Pledged Collateral
for the period of time necessary to permit the issuer thereof to register it for
a form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Collateral Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Collateral Agent in
exempt transactions under the
<PAGE>
Securities Act and the rules and regulations of the SEC thereunder, as the same
are from time to time in effect.
SECTION 13. REGISTRATION RIGHTS. If Collateral Agent shall determine
-------------------
to exercise its right to sell all or any of the Pledged Collateral pursuant to
Section 12, Pledgor agrees that, upon request of Collateral Agent (which request
may be made by Collateral Agent in its sole discretion), Pledgor will, at its
own expense:
(a) execute and deliver, and use its best efforts to cause each issuer
of the Pledged Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things, as may be necessary or, in the
opinion of Collateral Agent, advisable to file a registration statement covering
such Pledged Collateral under the provisions of the Securities Act and to use
its best efforts to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are required
by law to be furnished, and to make all amendments and supplements thereto and
to the related prospectus which, in the opinion of Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the SEC applicable thereto;
(b) use its best efforts to qualify the Pledged Collateral under all
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested by
Collateral Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement which will satisfy the provisions
of Section 11(a) of the Securities Act;
(d) use its best efforts to do or cause to be done all such other acts
and things as may be necessary to make such sale of the Pledged Collateral or
any part thereof valid and binding and in compliance with applicable law; and
(e) bear all costs and expenses, including reasonable attorneys' fees,
of carrying out its obligations under this Section 13.
Pledgor further agrees that a breach of any of the covenants contained
in this Section 13 will cause irreparable injury to Collateral Agent, that
Collateral Agent has no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section 13 shall
be specifically enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no default has occurred giving rise to
the Secured Obligations becoming due and payable prior to their stated
maturities. Nothing in this Section 13 shall in any way alter the rights of
Collateral Agent under Section 12.
SECTION 14. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Collateral Agent in
respect of any sale of, collection from,
<PAGE>
or other realization upon all or any part of the Pledged Collateral may, in the
discretion of Collateral Agent, be held by Collateral Agent as Pledged
Collateral for, and/or then, or at any time thereafter, applied in full or in
part by Collateral Agent against, the Secured Obligations in the following order
of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Collateral Agent and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Collateral Agent in
connection therewith, and all amounts for which Collateral Agent is
entitled to indemnification hereunder and all advances made by
Collateral Agent hereunder for the account of Pledgor, and to the
payment of all costs and expenses paid or incurred by Collateral Agent
in connection with the exercise of any right or remedy hereunder, all
in accordance with Section 15;
SECOND: To the payment of all other Secured Obligations in the order
described in Section 3 of the Intercreditor Agreement; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 15. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Collateral Agent and each other
Secured Party from and against any and all claims, losses and liabilities in any
way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
solely from Collateral Agent's or such other Secured Party's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Collateral Agent upon demand the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Collateral Agent hereunder, or (iv) the failure by Pledgor to perform
or observe any of the provisions hereof.
(c) In the event of any public sale described in Section 13, Pledgor
agrees to indemnify and hold harmless Collateral Agent and each of Collateral
Agent's directors, officers, employees and agents from and against any loss,
fee, cost, expense, damage, liability or claim, joint or several, to which
Collateral Agent or such other persons may become subject or for which any of
them may be liable, under the Securities Act or otherwise, insofar as such
losses, fees, costs, expenses, damages, liabilities or claims (or any litigation
commenced or threatened in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a
<PAGE>
material fact contained in any preliminary prospectus, registration statement,
prospectus or other such document published or filed in connection with such
public sale, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Collateral Agent and such other persons for any
legal or other expenses reasonably incurred by Collateral Agent and such other
persons in connection with any litigation, of any nature whatsoever, commenced
or threatened in respect thereof (including without limitation any and all fees,
costs and expenses whatsoever reasonably incurred by Collateral Agent and such
other persons and counsel for Collateral Agent and such other persons in
investigating, preparing for, defending against or providing evidence, producing
documents or taking any other action in respect of, any such commenced or
threatened litigation or any claims asserted). This indemnity shall be in
addition to any liability which Pledgor may otherwise have and shall extend upon
the same terms and conditions to each person, if any, that controls Collateral
Agent or such persons within the meaning of the Securities Act.
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until either (i) the payment in
full of all Secured Obligations, the cancellation or termination of the
Revolving Credit Commitments, the Swing Line Commitment, the Term Loan
Commitments and the cancellation or expiration of all outstanding Letters of
Credit or (ii) the termination of this Agreement pursuant to Section 17, (b) be
binding upon Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions
of Section 11.7 of the Revolving Credit Agreement and Section 11.7 of the Term
Loan Agreement, any Secured Party may assign or otherwise transfer any Secured
Obligations held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Secured Parties herein or otherwise. Upon either (i) the payment in full of all
Secured Obligations, the cancellation or termination of the Revolving Credit
Commitments, the Swing Line Commitment, the Term Loan Commitments and the
cancellation or expiration of all outstanding Letters of Credit or (ii) the
termination of this Agreement pursuant to Section 17, the security interest
granted hereby shall terminate and all rights to the Pledged Collateral shall
revert to Pledgor. Upon any such termination Collateral Agent will, at
Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination and Pledgor shall be
entitled to the return, upon its request and at its expense, against receipt and
without recourse to Collateral Agent, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 17. TERMINATION OF SECURITY INTEREST.
---------------------------------
At any time after January 1, 1999, Pledgor may request the release of
the Pledged Collateral and the termination of the Collateral Agent's security
interest therein by delivering an officers' certificate from the Pledgor
certifying that (i) the Leverage Ratio (as such term is defined in the
<PAGE>
Revolving Credit Agreement) is less than 3.50:1.00 as calculated at the end of
each fiscal quarter for the immediately preceding four consecutive fiscal
quarters, (ii) no Default or Event of Default exists or would exist immediately
before or after giving effect to such release, and (iii) all representations and
warranties made by the Credit Parties in the Revolving Loan Documents and the
Term Loan Documents are true and correct on the date of such certificate
immediately before or after giving effect thereto as though made on that date,
except to the extent such representations and warranties specifically related to
an earlier date, in which case they were true and correct on such earlier date.
Upon receipt by the Collateral Agent of evidence satisfactory to it that the
foregoing certifications are true, the Collateral Agent will, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence the termination of the security interest granted
hereby and Pledgor shall be entitled to the return, upon its request and at its
expense, against receipt and without recourse to Collateral Agent, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof. Upon such receipt by Pledgor of such remaining Pledged
Collateral, the security interest granted hereby shall terminate and all rights
to the Pledged Collateral shall revert to Pledgor.
SECTION 18. COLLATERAL AGENT.
----------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder pursuant to the Intercreditor Agreement by the Revolving Agent on
behalf of the Revolving Lenders, the Term Agent on behalf of the Term Lenders,
each Acknowledging Interest Rate Exchanger and each Acknowledging Currency
Exchanger, and shall be entitled to the benefits of the Intercreditor Agreement.
Collateral Agent shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any rights,
and to take or refrain from taking any action (including, without limitation,
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement, the Intercreditor Agreement and the Financing Documents.
(b) The Collateral Agent may resign or be removed and a successor
Collateral Agent may be appointed in the manner provided in the Intercreditor
Agreement. Resignation by the Collateral Agent pursuant to subsection 6(g) of
the Intercreditor Agreement shall also constitute notice of resignation as
Collateral Agent under this Agreement; removal of the Collateral Agent pursuant
to subsection 6(g) of the Intercreditor Agreement shall also constitute removal
as Collateral Agent under this Agreement; and appointment of a successor
Collateral Agent pursuant to subsection 6(g) of the Intercreditor Agreement
shall also constitute appointment of a successor Collateral Agent under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 6(g) of the Intercreditor Agreement by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Collateral Agent under this Agreement, and the retiring or removed Collateral
Agent under this Agreement shall promptly (i) transfer to such successor
Collateral Agent all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Collateral Agent under this Agreement, and
<PAGE>
(ii) execute and deliver to such successor Collateral Agent such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Collateral Agent
of the security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent hereunder.
SECTION 19. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Collateral Agent and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 20. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 21. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 22. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 23. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 24. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
<PAGE>
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein, terms used in Articles 8 and 9 of the Uniform Commercial Code in
the State of New York are used herein as therein defined.
SECTION 25. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address as provided in Section 20, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Pledgor further designates and appoints CT Corporation System, and such
other Persons as may hereafter be selected by Pledgor irrevocably agreeing in
writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by Pledgor to be effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Collateral Agent to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 26. WAIVER OF JURY TRIAL. PLEDGOR AND COLLATERAL AGENT
--------------------
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Pledgor and Collateral Agent each
acknowledge that this waiver is a material inducement for Pledgor and Collateral
Agent to enter into a business relationship, that Pledgor and Collateral Agent
have already relied on this waiver in entering into this Agreement and that each
will continue to rely on this waiver in their related future dealings. Pledgor
and Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel,
<PAGE>
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
SECTION 27. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
TOTAL RENAL CARE HOLDINGS, INC.
By: __________________________
Title:
Notice Address:
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
<PAGE>
THE BANK OF NEW YORK,
as Collateral Agent
By: __________________________
Title:
Notice Address:
The Bank of New York, as Collateral Agent
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, as Collateral Agent
10990 Wilshire Blvd., Suite 1125
Los Angeles, California 90024
Attention: Rebecca K. Levine
Vice President
Telephone: (310) 996-8659
Fax: (310) 996-8667
<PAGE>
SCHEDULE I
Attached to and forming a part of the Borrower Pledge Agreement dated
as of October 24, 1997 between Total Renal Care Holdings, Inc., as Pledgor, and
The Bank of New York, as Collateral Agent.
<TABLE>
<CAPTION>
Class of Stock Certificate Par Number of
Stock Issuer Stock Nos. Value Shares
- ------------ -------- ----------------- ----- ---------
<S> <C> <C> <C> <C>
Total Renal Care, Inc. Common Stock 1 None 100
Total Renal Care
Acquisition Corp. Common Stock 1 $0.01 100
</TABLE>
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated as of____________, __, is delivered
pursuant to Section 7(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Borrower Pledge Agreement dated as of October 24, 1997, between the undersigned
and The Bank of New York, as Collateral Agent (the "BORROWER PLEDGE AGREEMENT,"
capitalized terms defined therein being used herein as therein defined), and
that the Pledged Shares listed on this Pledge Amendment shall be deemed to be
part of the Pledged Shares and shall become part of the Pledged Collateral and
shall secure all Secured Obligations.
[NAME OF PLEDGOR]
By: ___________________________
Title:
<TABLE>
<CAPTION>
Class of Stock Certificate Par Number of
Stock Issuer Stock Nos. Value Shares
- ------------ -------- ----------------- ----- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10.7
SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as it may be amended, supplemented or
otherwise modified from time to time, this "AGREEMENT") is dated as of October
24, 1997 and entered into by and between ____________________ a _______________
corporation ("PLEDGOR"), and THE BANK OF NEW YORK, as collateral agent for and
representative of (in such capacity herein called "COLLATERAL AGENT") the
REVOLVING LENDERS (as hereinafter defined), the TERM LENDERS (as hereinafter
defined), the REVOLVING AGENT (as hereinafter defined), the TERM AGENT (as
hereinafter defined), the ACKNOWLEDGING INTEREST RATE EXCHANGERS (as hereinafter
defined) and the ACKNOWLEDGING CURRENCY EXCHANGERS (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of Stock
described in Schedule I annexed hereto and issued by the corporations named
----------
therein.
B. Total Renal Care Holdings, Inc., a Delaware corporation (the
"BORROWER"), has entered into that certain Revolving Credit Agreement dated as
of October 24, 1997, with the financial institutions parties thereto (the
"REVOLVING LENDERS"), DLJ Capital Funding Inc., as Syndication Agent, First
Union National Bank, as Documentation Agent, and The Bank of New York, as
administrative agent (the "REVOLVING AGENT") (said Revolving Credit Agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "REVOLVING CREDIT AGREEMENT"), pursuant to which the Revolving
Lenders have made certain commitments, subject to the terms and conditions set
forth in the Revolving Credit Agreement, to extend certain credit facilities to
Borrower.
C. Borrower has entered into that certain Term Loan Agreement dated
as of October 24, 1997, with the financial institutions parties thereto (the
"TERM LENDERS"), DLJ Capital Funding Inc., as Syndication Agent, and The Bank of
New York, as administrative agent (the "TERM AGENT") (said Term Loan Agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "TERM LOAN AGREEMENT"), pursuant to which Term Lenders have
extended or will extend credit, subject to the terms and conditions set forth in
the Term Loan Agreement, to Borrower.
D. It is contemplated that the Borrower may from time to time enter
into one or more Interest Rate Agreements with one or more Revolving Lenders or
Term Lenders or their respective
<PAGE>
Affiliates (collectively, the "INTEREST RATE EXCHANGERS") and it is desired that
the obligations of the Borrower under such Interest Rate Agreements, including
the obligation to make payments in the event of early termination thereunder, be
secured by the collateral described herein; provided that any Interest Rate
--------
Exchanger desiring the benefit of such security shall deliver to the Collateral
Agent an acknowledgement to the Intercreditor Agreement executed by such
Interest Rate Exchanger and the Borrower, pursuant to which such Interest Rate
Exchanger agrees to be bound by the terms thereof. Each Interest Rate Exchanger
that has executed and delivered to the Collateral Agent an acknowledgement to
the Intercreditor Agreement is referred to herein as an "ACKNOWLEDGING INTEREST
RATE EXCHANGER", and each Interest Rate Agreement with an Acknowledging Interest
Rate Exchanger is referred to herein as a "SECURED INTEREST RATE AGREEMENT".
E. It is contemplated that the Borrower may from time to time enter
into one or more Currency Agreements with one or more Revolving Lenders or Term
Lenders or their respective Affiliates (collectively, the "CURRENCY EXCHANGERS")
and it is desired that the obligations of the Borrower under such Currency
Agreements, including the obligation to make payments in the event of early
termination thereunder be secured by the collateral described herein; provided
--------
that any Currency Exchanger desiring the benefit of such security shall deliver
to the Collateral Agent an acknowledgement to the Intercreditor Agreement
executed by such Currency Exchanger and the Borrower, pursuant to which such
Currency Exchanger agrees to be bound by the terms thereof. Each Currency
Exchanger that has executed and delivered to the Collateral Agent an
acknowledgement to the Intercreditor Agreement is referred to herein as an
"ACKNOWLEDGING CURRENCY EXCHANGER" and each Currency Agreement with an
Acknowledging Currency Exchanger is referred to herein as a "SECURED CURRENCY
AGREEMENT".
F. A portion of the proceeds of the Revolving Credit Loans and Term
Loans may be advanced to Pledgor and thus the Secured Obligations (as
hereinafter defined) are being incurred for and will inure to the benefit of
Pledgor (which benefits are hereby acknowledged).
G. Collateral Agent has been appointed as collateral agent hereunder
pursuant to the Intercreditor Agreement by the Revolving Agent on behalf of the
Revolving Lenders, the Term Agent on behalf of the Term Lenders, and each
Interest Rate Exchanger and Currency Exchanger signing an acknowledgement to the
Intercreditor Agreement.
H. It is a condition precedent to the initial extensions of credit by
the Revolving Lenders under the Revolving Credit Agreement and the Term Lenders
under the Term Loan Agreement that Pledgor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
I. Borrower has covenanted and agreed under the Revolving Loan
Agreement and the Term Loan Agreement to cause Pledgor to grant the security
interests and undertake the obligations contemplated by this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises and in order to induce
the Revolving Lenders to enter into the Revolving Credit Agreement and make
their respective loans to, and issue Letters of Credit (as hereinafter defined)
for the account of, the Borrower, and to induce the Term Lenders to enter into
the Term Loan Agreement and make their respective loans to the Borrower, Pledgor
hereby agrees with Collateral Agent as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein without
-----------
definition shall have the meanings assigned thereto in the Revolving Credit
Agreement and, if not defined in the Revolving Credit Agreement, the Term Loan
Agreement, in each case as in effect on the date hereof. In addition, as used
in this Agreement, the following terms shall have the following meanings unless
the context otherwise requires:
"DEFAULT" means any "Default" as defined in the Term Loan Agreement or
the Revolving Credit Agreement.
"EVENT OF DEFAULT" means (i) any of the events specified in Section 9.1
of the Term Loan Agreement or Section 9.1 of the Revolving Credit Agreement,
provided that any requirement for the giving of notice, the lapse of time, or
- --------
any other condition has been satisfied and (ii) following the payment in full of
all obligations under the Revolving Loan Documents and the Term Loan Documents,
any breach or violation of any Secured Interest Rate Agreement or Secured
Currency Agreement.
"FINANCING DOCUMENTS" means the Revolving Loan Documents, the Term Loan
Documents, the Secured Interest Rate Agreements, the Secured Currency
Agreements, and all other documents and agreements executed and issued in
connection with the foregoing.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement and
Collateral Agency, dated as of the date hereof, among the Revolving Agent, the
Term Agent and The Bank of New York, acting in its capacity as Collateral Agent
thereunder, each Acknowledging Interest Rate Exchanger and each Acknowledging
Currency Exchanger and the Loan Parties (as defined therein), as amended,
supplemented or otherwise modified from time to time.
"REQUISITE OBLIGEES" has the meaning assigned thereto in the
Intercreditor Agreement.
"REVOLVING LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Revolving Credit Agreement.
"SEC" means the Securities and Exchange Commission or any Governmental
Authority succeeding to the functions thereof.
"SECURED PARTIES" means, collectively, the Collateral Agent, the
Revolving Agent, the Revolving Lenders, the Letter of Credit Issuer, the Term
Agent, the Term Lenders, the Acknowledging Interest Rate Exchangers and
Acknowledging Currency Exchangers.
<PAGE>
"TERM LOAN DOCUMENTS" means the "Loan Documents" as defined in the Term
Loan Agreement.
"TERM LOAN NOTES" means, collectively, the promissory notes of the
Borrower payable to the order of the Term Lenders, each as indorsed or modified
from time to time.
"TERM LOANS" means the term loans made by the Term Lenders to the
Borrower under the Term Loan Agreement.
SECTION 2. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
------------------
Collateral Agent for its benefit and the benefit of the Secured Parties, and
hereby grants to Collateral Agent for its benefit and the benefit of the Secured
Parties, a security interest in, all of Pledgor's right, title and interest in
and to the following, in each case whether now owned or existing or hereafter
arising or acquired, whether tangible or intangible and wherever located (the
"PLEDGED COLLATERAL"):
(a) all shares of Stock of any Person that is on the date hereof or
hereafter becomes a First-Tier wholly-owned Subsidiary of Pledgor or a First-
Tier Domestic Subsidiary of Pledgor that is a Guarantor (whether or not wholly-
owned by Pledgor) (such shares being the "PLEDGED SHARES"), all securities
convertible into and warrants, options and other rights to purchase or otherwise
acquire, any Pledged Shares, the certificates or other instruments representing
such Pledged Shares, securities, warrants, options or other rights and any
interest of Pledgor in the entries on the books of any financial intermediary
pertaining to such shares, and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such Pledged Shares, securities, warrants, options or other rights; provided
--------
that Pledgor shall not be required to pledge more than the Maximum Percentage
(as hereinafter defined) of the shares of Stock of any Foreign Subsidiary;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, Stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(c) to the extent not covered by clauses (a) through (b) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" has the meaning assigned to it under Article
9 of the New York Uniform Commercial Code and to the extent not otherwise
included, shall include whatever is receivable or received when Pledged
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such
<PAGE>
disposition is voluntary or involuntary, and includes, without limitation,
proceeds of any indemnity or guaranty payable to Pledgor or Collateral Agent
from time to time with respect to any of the Pledged Collateral.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and
liabilities of every nature of Borrower now or hereafter existing under or
arising out of or in connection with the Financing Documents, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Borrower, would accrue on
such obligations), reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Secured Party as a preference, fraudulent transfer or otherwise
(all such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Pledgor now or hereafter existing under this
Agreement (all such obligations of Pledgor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. Collateral Agent shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Collateral Agent or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 8(a). In
addition, Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
Collateral Agent acknowledges that, notwithstanding Pledgor's
representation and warranty in Section 5(b) hereof, Pledgor may deliver to
Collateral Agent stock certificates, together with undated stock powers,
representing less than 100% (but no less than 66%) of the outstanding shares of
stock of the Foreign Subsidiaries; all outstanding shares of the Foreign
Subsidiaries being referred to herein as the "FOREIGN SHARES". Because the
intent of Pledgor and Collateral Agent is to grant a security interest in a
percentage of the Foreign Shares equal to 66% or such other percentage as is the
maximum percentage of the Foreign Shares that can be pledged to the Collateral
Agent without constituting an investment of earnings in U.S. property under
Section 956 (or any successor provision) of the Code that would trigger an
increase in the gross income
<PAGE>
of Pledgor pursuant to Section 951 (or any successor provision) of the Code
(such percentage being the "MAXIMUM PERCENTAGE"), Collateral Agent hereby
confirms that the Pledged Shares of the Foreign Subsidiaries shall refer only
to, and the grants of security interests created hereby shall extend only to,
the Maximum Percentage of the Foreign Shares.
If Collateral Agent shall take any action to foreclose on the Foreign
Shares, Collateral Agent hereby agrees to act only with regard to the Maximum
Percentage of the Foreign Shares; provided, however, that nothing herein shall
-------- -------
preclude Collateral Agent from exercising the stock powers with respect to all
outstanding Foreign Shares to take such action as may be necessary to transfer
the Foreign Shares (the "REMAINING SHARES") to Pledgor or to such other person
or entity as Pledgor designates. The parties hereto agree that Collateral Agent
has no fiduciary or other responsibilities or duties with regard to the
Remaining Shares and that Collateral Agent is serving only as custodian with
respect to the Remaining Shares.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable.
(b) Description of Pledged Collateral. The Pledged Shares (other than
---------------------------------
the Foreign Shares) constitute 100% of the issued and outstanding shares of
Stock of each issuer thereof, and there are no outstanding warrants, options or
other rights to purchase, or other agreements outstanding with respect to, or
property that is now or hereafter convertible into, or that requires the
issuance or sale of, any Pledged Shares. The Pledged Shares of each Foreign
Subsidiary represent the Maximum Percentage of the issued and outstanding shares
of Stock of such Foreign Subsidiary.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and as otherwise permitted under
the Revolving Credit Agreement or the Term Loan Agreement, as the case may be.
(d) Governmental Authorizations. Except as may be disclosed on
---------------------------
Schedule 5(d) with respect to Pledged Shares of a Foreign Subsidiary (which
Schedule 5(d) may be supplemented from time to time in connection with a pledge
hereunder of Pledged Shares of a new Foreign Subsidiary) and provided that with
--------
respect to any matters disclosed on Schedule 5(d) Pledgor shall as soon as
reasonably practicable obtain all such authorizations and approvals, make all
such notifications or filings and take all such other actions as may be so
disclosed and required under the laws governing such Foreign Subsidiary in
connection with the actions described in the following clauses (i)-(iii), no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for either (i) the pledge
by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by
Pledgor of the security interest granted hereby, (ii) the execution, delivery or
performance of this Agreement by Pledgor, or (iii) the exercise by Collateral
Agent of the voting or other rights, or the remedies in
<PAGE>
respect of the Pledged Collateral, provided for in this Agreement (except as may
be required in connection with a disposition of Pledged Collateral by laws
affecting the offering and sale of securities generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to this
----------
Agreement creates a valid and perfected and, except as otherwise permitted under
the Revolving Credit Agreement or the Term Loan Agreement, as the case may be,
first priority security interest in the Pledged Collateral, securing the payment
of the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or hereafter
-----------------
supplied to Collateral Agent by or on behalf of Pledgor with respect to the
Pledged Collateral is accurate and complete in all material respects.
SECTION 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
- ----
(a) not, except as expressly permitted by Section 8.7 of the Revolving
Credit Agreement and Section 8.7 of the Term Loan Agreement, (i) sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral, (ii) create or suffer to exist
any Lien upon or with respect to any of the Pledged Collateral, except for the
security interest under this Agreement, or (iii) permit any issuer of Pledged
Shares to merge or consolidate unless all the outstanding capital stock of the
surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation; provided
--------
that in the event Pledgor makes a sale or disposition permitted by the Revolving
Credit Agreement and the Term Loan Agreement and the assets subject to such sale
or disposition are Pledged Shares, Collateral Agent shall release the Pledged
Shares that are the subject of such sale or disposition to Pledgor free and
clear of the lien and security interest under this Agreement concurrently with
the consummation of such sale or disposition; provided, further that, as a
-------- -------
condition precedent to such release, Collateral Agent shall have received
evidence satisfactory to it that arrangements satisfactory to it have been made
for delivery to the Revolving Agent and the Term Agent of the proceeds of such
sale or disposition to the extent required by the Revolving Credit Agreement and
the Term Loan Agreement;
(b) (i) cause each issuer of Pledged Shares not to issue any Stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to Pledgor, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional shares
of Stock or other securities of each issuer of Pledged Shares, (iii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all shares of Stock of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a First-Tier wholly-owned
Domestic Subsidiary of Pledgor, and (iv) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, the Maximum
<PAGE>
Percentage of shares of Stock or any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a First-Tier Foreign
Subsidiary of Pledgor;
(c) promptly notify Collateral Agent of any event of which Pledgor
becomes aware causing loss of the Pledged Collateral;
(d) promptly deliver to Collateral Agent all written notices received
by it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments, charges,
- --------
levies or claims not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed against
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that
Collateral Agent may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Collateral Agent
to exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, Pledgor
will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Collateral Agent may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby and
(ii) at Collateral Agent's request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Collateral Agent's security
interest in all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of Stock or other securities required to be pledged hereunder as provided
in Section 6(b), promptly (and in any event within thirty Business Days) deliver
to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in
-----------
respect of the additional Pledged Shares to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Collateral Agent to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder
be considered Pledged Collateral; provided that the failure of Pledgor to
--------
execute a Pledge Amendment with respect to any additional Pledged Shares pledged
pursuant to this Agreement shall not impair the security interest of Collateral
Agent therein or otherwise adversely affect the rights and remedies of
Collateral Agent hereunder with respect thereto.
<PAGE>
SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement, the Revolving Credit Agreement or the Term Loan Agreement;
provided, however, that Pledgor shall not exercise or refrain from
-------- -------
exercising any such right if Collateral Agent shall have notified
Pledgor that, in Collateral Agent's judgment, such action would have a
material adverse effect on the value of the Pledged Collateral or any
part thereof; and provided, further, that Pledgor shall give Collateral
-------- -------
Agent at least five Business Days' prior written notice of the manner
in which it intends to exercise, or the reasons for refraining from
exercising, any such right. It is understood, however, that neither
(A) the voting by Pledgor of any Pledged Shares for or Pledgor's
consent to the election of directors at a regularly scheduled annual or
other meeting of stockholders or with respect to incidental matters at
any such meeting nor (B) Pledgor's consent to or approval of any action
otherwise permitted under this Agreement, the Revolving Credit
Agreement and the Term Loan Agreement shall be deemed inconsistent with
the terms of this Agreement, the Revolving Credit Agreement or the Term
Loan Agreement within the meaning of this Section 8(a)(i), and no
notice of any such voting or consent need be given to Collateral Agent;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however,
-------- -------
that any and all
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of principal
or in redemption of or in exchange for any Pledged Collateral, shall be, and
shall forthwith be delivered to Collateral Agent to hold as, Pledged Collateral
and shall, if received by Pledgor, be received in trust for the benefit of
Collateral Agent, be segregated from the other property or funds of Pledgor and
be forthwith delivered to Collateral Agent as Pledged Collateral in the same
form as so received (with all necessary indorsements); and
(iii) Collateral Agent shall promptly execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from
<PAGE>
time to time reasonably request for the purpose of enabling Pledgor to
exercise the voting and other consensual rights which it is entitled to
exercise pursuant to paragraph (i) above and to receive the dividends,
principal or interest payments which it is authorized to receive and
retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Collateral Agent to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 8(a)(i)
shall cease, and all such rights shall thereupon become vested in
Collateral Agent which shall thereupon have the sole right to exercise
such voting and other consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(ii) shall cease, and all such rights shall
thereupon become vested in Collateral Agent which shall thereupon have
the sole right to receive and hold as Pledged Collateral such dividends
and interest payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of
this Section 8(b) shall be received in trust for the benefit of
Collateral Agent, shall be segregated from other funds of Pledgor and
shall forthwith be paid over to Collateral Agent as Pledged Collateral
in the same form as so received (with any necessary indorsements).
(c) In order to permit Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Collateral Agent all such proxies, dividend payment orders and other instruments
as Collateral Agent may from time to time reasonably request and (ii) without
limiting the effect of the immediately preceding clause (i), Pledgor hereby
grants to Collateral Agent an irrevocable proxy to vote the Pledged Shares and
to exercise all other rights, powers, privileges and remedies to which a holder
of the Pledged Shares would be entitled (including, without limitation, giving
or withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor
-------------------------------------------
hereby irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor,
Collateral Agent or otherwise, from time to time in Collateral Agent's
discretion to take any action and to execute any instrument that Collateral
<PAGE>
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) after and during the continuance of an Event of Default, to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Pledged Collateral;
(c) after and during the continuance of an Event of Default, to
receive, endorse and collect any instruments made payable to Pledgor
representing any dividend, principal or interest payment or other distribution
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same; and
(d) after and during the continuance of an Event of Default, to file
any claims or take any action or institute any proceedings that Collateral Agent
may deem necessary or desirable for the collection of any of the Pledged
Collateral or otherwise to enforce the rights of Collateral Agent with respect
to any of the Pledged Collateral.
SECTION 10. COLLATERAL AGENT MAY PERFORM. If Pledgor fails to perform
----------------------------
any agreement contained herein after the period in which such performance is
required, Collateral Agent may itself perform, or cause performance of, such
agreement, and the expenses of Collateral Agent incurred in connection therewith
shall be payable by Pledgor under Section 15(b).
SECTION 11. STANDARD OF CARE. The powers conferred on Collateral
----------------
Agent hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Collateral Agent shall have no duty as to any Pledged Collateral, it being
understood that Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral, whether
or not Collateral Agent has or is deemed to have knowledge of such matters, (b)
taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Pledged
Collateral) to preserve rights against any parties with respect to any Pledged
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the Pledged Collateral, or (d) initiating any action to protect the Pledged
Collateral against the possibility of a decline in market value. Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Collateral in its possession if such Pledged Collateral
is accorded treatment substantially equal to that which Collateral Agent accords
its own property consisting of negotiable securities.
<PAGE>
SECTION 12. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "UCC") (whether
or not the UCC applies to the affected Pledged Collateral), and Collateral Agent
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Collateral
Agent may deem commercially reasonable, irrespective of the impact of any such
sales on the market price of the Pledged Collateral. Collateral Agent may be
the purchaser of any or all of the Pledged Collateral at any such public sale
and, to the extent permitted by law, private sale, and Collateral Agent, as
agent for and representative of Secured Parties (but not any Secured Party or
Secured Parties in its or their respective individual capacities unless
Requisite Obligees shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Pledged Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Pledged Collateral payable by Collateral Agent at such
sale. Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of Pledgor, and Pledgor hereby waives
(to the extent permitted by applicable law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. Pledgor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Collateral Agent shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Pledgor hereby waives any claims
against Collateral Agent arising by reason of the fact that the price at which
any Pledged Collateral may have been sold at such a private sale was less than
the price which might have been obtained at a public sale, even if Collateral
Agent accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the Secured
Obligations, Pledgor shall be liable for the deficiency and the fees of any
attorneys employed by Collateral Agent to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and applicable state securities laws, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged Collateral
under the Securities Act and/or such state securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and
<PAGE>
not with a view to the distribution or resale thereof. Pledgor acknowledges that
any such private sales may be at prices and on terms less favorable than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act) and, notwithstanding such circumstances and the registration
rights granted to Collateral Agent by Pledgor pursuant to Section 13, Pledgor
agrees that the effect of the foregoing in respect of any such private sale
shall not be deemed per se to cause such private sale to have not been made in
--- --
a commercially reasonable manner and that Collateral Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Pledged Collateral for the period of time necessary to permit the issuer thereof
to register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if such issuer
would, or should, agree to so register it.
(c) If Collateral Agent determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Collateral Agent in
exempt transactions under the Securities Act and the rules and regulations of
the SEC thereunder, as the same are from time to time in effect.
SECTION 13. REGISTRATION RIGHTS. If Collateral Agent shall determine
-------------------
to exercise its right to sell all or any of the Pledged Collateral pursuant to
Section 12, Pledgor agrees that, upon request of Collateral Agent (which request
may be made by Collateral Agent in its sole discretion), Pledgor will, at its
own expense:
(a) execute and deliver, and use its best efforts to cause each issuer
of the Pledged Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things, as may be necessary or, in the
opinion of Collateral Agent, advisable to file a registration statement covering
such Pledged Collateral under the provisions of the Securities Act and to use
its best efforts to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are required
by law to be furnished, and to make all amendments and supplements thereto and
to the related prospectus which, in the opinion of Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the SEC applicable thereto;
(b) use its best efforts to qualify the Pledged Collateral under all
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested by
Collateral Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement which will satisfy the provisions
of Section 11(a) of the Securities Act;
<PAGE>
(d) use its best efforts to do or cause to be done all such other acts
and things as may be necessary to make such sale of the Pledged Collateral or
any part thereof valid and binding and in compliance with applicable law; and
(e) bear all costs and expenses, including reasonable attorneys' fees,
of carrying out its obligations under this Section 13.
Pledgor further agrees that a breach of any of the covenants contained
in this Section 13 will cause irreparable injury to Collateral Agent, that
Collateral Agent has no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section 13 shall
be specifically enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no default has occurred giving rise to
the Secured Obligations becoming due and payable prior to their stated
maturities. Nothing in this Section 13 shall in any way alter the rights of
Collateral Agent under Section 12.
SECTION 14. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Collateral Agent in
respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral may, in the discretion of Collateral Agent, be
held by Collateral Agent as Pledged Collateral for, and/or then, or at any time
thereafter, applied in full or in part by Collateral Agent against, the Secured
Obligations in the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Collateral Agent and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Collateral Agent in
connection therewith, and all amounts for which Collateral Agent is
entitled to indemnification hereunder and all advances made by
Collateral Agent hereunder for the account of Pledgor, and to the
payment of all costs and expenses paid or incurred by Collateral Agent
in connection with the exercise of any right or remedy hereunder, all
in accordance with Section 15;
SECOND: To the payment of all other Secured Obligations in the order
described in Section 3 of the Intercreditor Agreement; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 15. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Collateral Agent and each other Secured
Party from and against any and all claims, losses and liabilities in any way
relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
<PAGE>
solely from Collateral Agent's or such other Secured Party's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Collateral Agent upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Collateral Agent hereunder, or (iv) the failure by Pledgor to perform
or observe any of the provisions hereof.
(c) In the event of any public sale described in Section 13, Pledgor
agrees to indemnify and hold harmless Collateral Agent and each of Collateral
Agent's directors, officers, employees and agents from and against any loss,
fee, cost, expense, damage, liability or claim, joint or several, to which
Collateral Agent or such other persons may become subject or for which any of
them may be liable, under the Securities Act or otherwise, insofar as such
losses, fees, costs, expenses, damages, liabilities or claims (or any litigation
commenced or threatened in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or other such
document published or filed in connection with such public sale, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse Collateral Agent and such other persons for any legal or other
expenses reasonably incurred by Collateral Agent and such other persons in
connection with any litigation, of any nature whatsoever, commenced or
threatened in respect thereof (including without limitation any and all fees,
costs and expenses whatsoever reasonably incurred by Collateral Agent and such
other persons and counsel for Collateral Agent and such other persons in
investigating, preparing for, defending against or providing evidence, producing
documents or taking any other action in respect of, any such commenced or
threatened litigation or any claims asserted). This indemnity shall be in
addition to any liability which Pledgor may otherwise have and shall extend upon
the same terms and conditions to each person, if any, that controls Collateral
Agent or such persons within the meaning of the Securities Act.
SECTION 16. SURETYSHIP WAIVERS; OTHER LIMITATIONS.
-------------------------------------
(a) Pledgor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than payment in full of the Underlying Debt. In furtherance of the
foregoing and without limiting the generality thereof, Pledgor agrees as
follows: (i) Collateral Agent or any other Secured Party may from time to time,
without notice or demand and without affecting the validity or enforceability of
this Agreement or giving rise to any limitation, impairment or discharge of
Pledgor's liability hereunder, (A) renew, extend, accelerate or otherwise change
the time, place, manner or terms of payment of the Underlying
<PAGE>
Debt, (B) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the Underlying Debt
or any agreement relating thereto and/or subordinate the payment of the same to
the payment of any other obligations, (C) request and accept guaranties of the
Underlying Debt and take and hold other security for the payment of the
Underlying Debt, (D) release, exchange, compromise, subordinate or modify, with
or without consideration, any other security for payment of the Underlying Debt,
any guaranties of the Underlying Debt, or any other obligation of any Person
with respect to the Underlying Debt, (E) enforce and apply any other security
now or hereafter held by or for the benefit of Collateral Agent or any other
Secured Party in respect of the Underlying Debt and direct the order or manner
of sale thereof, or exercise any other right or remedy that Collateral Agent or
other Secured Parties, or any of them, may have against any such security, as
Collateral Agent in its discretion may determine consistent with the Revolving
Credit Agreement and any applicable security agreement, including foreclosure on
any such security pursuant to one or more judicial or nonjudicial sales, whether
or not every aspect of any such sale is commercially reasonable, and (F)
exercise any other rights available to Collateral Agent or other Secured
Parties, or any of them, under the Financing Documents, at law or in equity; and
(ii) this Agreement and the obligations of Pledgor hereunder shall be valid and
enforceable and shall not be subject to any limitation, impairment or discharge
for any reason (other than payment in full of the Underlying Debt), including
without limitation the occurrence of any of the following, whether or not
Pledgor shall have had notice or knowledge of any of them: (A) any failure to
assert or enforce or agreement not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy with
respect to the Underlying Debt or any agreement relating thereto, or with
respect to any guaranty of or other security for the payment of the Underlying
Debt, (B) any rescission, waiver, amendment or modification of, or any consent
to departure from, any of the terms or provisions (including without limitation
provisions relating to events of default) of any of the Financing Documents or
any agreement or instrument executed pursuant thereto, or of any guaranty or
other security for the Underlying Debt, in each case whether or not in
accordance with the terms of any Financing Document or any agreement relating to
such guaranty or other security, (C) the Underlying Debt, or any agreement
relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect, (D) the application of payments received from any
source (other than payments received pursuant to the other Financing Documents
or from the proceeds of any security for the Secured Obligations, except to the
extent such security also serves as collateral for indebtedness other than the
Secured Obligations) to the payment of indebtedness other than the Underlying
Debt, even though Collateral Agent or other Secured Parties, or any of them,
might have elected to apply such payment to any part or all of the Underlying
Debt, (E) any Secured Party's consent to the change, reorganization or
termination of the corporate or other structure or existence of Borrower or any
of its Subsidiaries and to any corresponding restructuring of the Secured
Obligations; (F) any failure to perfect or continue perfection of a security
interest in any other collateral which secures any of the Underlying Debt, (G)
any defenses, set-offs or counterclaims which Borrower may allege or assert
against Collateral Agent or any other Secured Party in respect of the Underlying
Debt, including but not limited to failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction and
usury, and (H) any other act or thing or omission, or
<PAGE>
delay to do any other act or thing, which may or might in any manner or to any
extent vary the risk of Pledgor as an obligor in respect of the Underlying Debt.
(b) Pledgor hereby waives, for the benefit of other Secured Parties and
Collateral Agent: (i) any right to require Collateral Agent or other Secured
Parties, as a condition of payment or performance by Pledgor, to (A) proceed
against Borrower, any guarantor of the Underlying Debt or any other Person, (B)
proceed against or exhaust any other security held from Borrower, any guarantor
of the Underlying Debt or any other Person, (C) proceed against or have resort
to any balance of any deposit account or credit on the books of Collateral Agent
or any other Secured Party in favor of Borrower or any other Person, or (D)
pursue any other remedy in the power of Collateral Agent or any other Secured
Party whatsoever; (ii) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Borrower including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Underlying Debt or any agreement or instrument relating
thereto or by reason of the cessation of the liability of Borrower from any
cause other than payment in full of the Underlying Debt; (iii) any defense based
upon any statute or rule of law which provides that the obligation of a surety
must be neither larger in amount nor in other respects more burdensome than that
of the principal; (iv) any defense based upon Collateral Agent's or any other
Secured Party's errors or omissions in the administration of the Underlying
Debt, except behavior which amounts to bad faith; (v) (A) any principles or
provisions of law, statutory or otherwise, which are or might be in conflict
with the terms of this Agreement and any legal or equitable discharge of
Pledgor's obligations hereunder, (B) the benefit of any statute of limitations
affecting Pledgor's liability hereunder or the enforcement hereof, (C) any
rights to set-offs, recoupments and counterclaims, and (D) promptness, diligence
and any requirement that Collateral Agent or any other Secured Party protect,
secure, perfect or insure any other security interest or lien or any property
subject thereto; (vi) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction, notices of
default under the Revolving Credit Agreement, the Term Loan Agreement or any
agreement or instrument related thereto, notices of any renewal, extension or
modification of the Underlying Debt or any agreement related thereto, notices of
any extension of credit to Borrower and notices of any of the matters referred
to in the preceding paragraph and any right to consent to any thereof; and (vii)
to the fullest extent permitted by law, any defenses or benefits that may be
derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, or which may conflict with the terms of this Agreement.
(c) Until the Underlying Debt shall have been paid in full and the
commitments to extend credit under the Financing Documents shall have terminated
and all Letters of Credit shall have expired or been cancelled, Pledgor shall
withhold exercise of (i) any claim, right or remedy, direct or indirect, that
Pledgor now has or may hereafter have against Borrower or any of its assets in
connection with this Agreement or the performance by Pledgor of its obligations
hereunder, in each case whether such claim, right or remedy arises in equity,
under contract, by statute (including without limitation under California Civil
Code Section 2847, 2848 or 2849), under common law or otherwise and including
without limitation (A) any right of subrogation, reimbursement or
indemnification that Pledgor now has or may hereafter have against Borrower,
<PAGE>
(B) any right to enforce, or to participate in, any claim, right or remedy that
Collateral Agent or any Secured Party now has or may hereafter have against
Borrower, and (C) any benefit of, and any right to participate in, any other
collateral or security now or hereafter held by Collateral Agent or any other
Secured Party, and (ii) any right of contribution Pledgor may have against any
guarantor of any of the Underlying Debt. Pledgor further agrees that, to the
extent the waiver of its rights of subrogation, reimbursement, indemnification
and contribution as set forth herein is found by a court of competent
jurisdiction to be void or voidable for any reason, any rights of subrogation,
reimbursement or indemnification Pledgor may have against Borrower or against
any other collateral or security, and any rights of contribution Pledgor may
have against any such guarantor, shall be junior and subordinate to any rights
Collateral Agent or other Secured Parties may have against Borrower, to all
right, title and interest Collateral Agent or other Secured Parties may have in
any such other collateral or security, and to any right Collateral Agent or
other Secured Parties may have against any such guarantor.
(e) Other Secured Parties and Collateral Agent shall have no obligation
to disclose or discuss with Pledgor their assessment, or Pledgor's assessment,
of the financial condition of Borrower. Pledgor has adequate means to obtain
information from Borrower on a continuing basis concerning the financial
condition of Borrower and its ability to perform its obligations under the
Financing Documents, and Pledgor assumes the responsibility for being and
keeping informed of the financial condition of Borrower and of all circumstances
bearing upon the risk of nonpayment of the Underlying Debt. Pledgor hereby
waives and relinquishes any duty on the part of Collateral Agent or any other
Secured Party to disclose any matter, fact or thing relating to the business,
operations or condition of Borrower now known or hereafter known by Collateral
Agent or any other Secured Party.
(f) As used in this subsection 16(f), any reference to "the principal"
includes Borrower, and any reference to "the creditor" includes each Secured
Party. In accordance with Section 2856 of the California Civil Code:
(i) each Pledgor agrees (i) to waive any and all rights of
subrogation and reimbursement against Borrower or against any
collateral or security granted by Borrower for any of the Secured
Obligations and (ii) to withhold the exercise of any and all rights of
subrogation, reimbursement and contribution against Borrower, against
any other provider of collateral support for the Secured Obligations
and against any collateral or security granted by any such other
provider of collateral support for the Secured Obligations until the
Secured Obligations shall have been paid in full and the Revolving
Credit Commitments, the Swing Line Commitment and the Term Loan
Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled;
(ii) each Pledgor waives any and all other rights and defenses
available to such Pledgor by reason of Sections 2787 to 2855,
inclusive, 2899 and 3433 of the California Civil Code, including
without limitation any and all rights or defenses such Pledgor may have
by reason of protection afforded to the principal with respect to any
of the Secured Obligations, or to any other provider of collateral
support for the Secured Obligations or guarantor of any of the Secured
Obligations
<PAGE>
(including any other Pledgor) with respect to any of such Person's
credit support obligations, in either case pursuant to the
antideficiency or other laws of the State of California limiting or
discharging the principal's indebtedness or such Person's credit
support obligations, including without limitation Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure; and
(iii) each Pledgor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for any Secured Obligation, has destroyed such Pledgor's rights of
subrogation and reimbursement against the principal by the operation of
Section 580d of the California Code of Civil Procedure or otherwise;
and even though that election of remedies by the creditor, such as
nonjudicial foreclosure with respect to security for an obligation of
any other provider of collateral support for the Secured Obligations or
guarantor of any of the Secured Obligations (including any other
Pledgor), has destroyed such Pledgor's rights of contribution against
such other Person.
No other provision of this Agreement shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection
16(f). In accordance with subsection 25 below, this Agreement shall be governed
by, and shall be construed and enforced in accordance with, the internal laws of
the State of New York, without regard to conflicts of laws principles. This
subsection 16(f) is included solely out of an abundance of caution, and shall
not be construed to mean that any of the above-referenced provisions of
California law are in any way applicable to this Agreement or to any of the
Secured Obligations.
(g) Anything contained in this Agreement to the contrary
notwithstanding, if any Fraudulent Transfer Law (as hereinafter defined) is
determined by a court of competent jurisdiction to be applicable to the
obligations of any Pledgor under this Agreement, such obligations of such
Pledgor hereunder shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any applicable provisions of comparable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving effect
to all other liabilities of such Pledgor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Pledgor (x) in respect of intercompany indebtedness to
Borrower or other affiliates of Borrower to the extent that such indebtedness
would be discharged in an amount equal to the value contributed by such Pledgor
hereunder and (y) under any credit support of Subordinated Indebtedness which
credit support contains a limitation as to maximum amount similar to that set
forth in this subsection, pursuant to which the liability of such Pledgor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, reimbursement, indemnification or contribution of such Pledgor
pursuant to applicable law or pursuant to the terms of any agreement.
<PAGE>
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until either (i) the payment in
full of all Secured Obligations, the cancellation or termination of the
Revolving Credit Commitments, the Swing Line Commitment, the Term Loan
Commitments and the cancellation or expiration of all outstanding Letters of
Credit or (ii) the termination of this Agreement pursuant to Section 18, (b) be
binding upon Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
Section 11.7 of the Revolving Credit Agreement and Section 11.7 of the Term Loan
Agreement, any Secured Party may assign or otherwise transfer any Secured
Obligations held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Secured Parties herein or otherwise. Upon either (i) the payment in full of all
Secured Obligations, the cancellation or termination of the Revolving Credit
Commitments, the Swing Line Commitment, the Term Loan Commitments and the
cancellation or expiration of all outstanding Letters of Credit or (ii) the
termination of this Agreement pursuant to Section 18, the security interest
granted hereby shall terminate and all rights to the Pledged Collateral shall
revert to Pledgor. Upon any such termination Collateral Agent will, at
Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination and Pledgor shall be
entitled to the return, upon its request and at its expense, against receipt and
without recourse to Collateral Agent, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 18. TERMINATION OF SECURITY INTEREST.
---------------------------------
At any time after January 1, 1999, Pledgor may request the release of
the Pledged Collateral and the termination of the Collateral Agent's security
interest therein by delivering an officers' certificate from the Pledgor
certifying that (i) the Leverage Ratio (as such term is defined in the Revolving
Credit Agreement) is less than 3.50:1.00 as calculated at the end of each fiscal
quarter for the immediately preceding four consecutive fiscal quarters, (ii) no
Default or Event of Default exists or would exist immediately before or after
giving effect to such release, and (iii) all representations and warranties made
by the Credit Parties in the Revolving Loan Documents and the Term Loan
Documents are true and correct on the date of such certificate immediately
before or after giving effect thereto as though made on that date, except to the
extent such representations and warranties specifically related to an earlier
date, in which case they were true and correct on such earlier date. Upon
receipt by the Collateral Agent of evidence satisfactory to it that the
foregoing certifications are true, the Collateral Agent will, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence the termination of the security interest granted
hereby and Pledgor shall be entitled to the return, upon its request and at its
expense, against receipt and without recourse to Collateral Agent, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof. Upon such receipt by Pledgor of such remaining Pledged
Collateral, the security interest granted hereby shall terminate and all rights
to the Pledged Collateral shall revert to Pledgor.
<PAGE>
SECTION 19. COLLATERAL AGENT.
----------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder pursuant to the Intercreditor Agreement by the Revolving Agent on
behalf of the Revolving Lenders, the Term Agent on behalf of the Term Lenders,
each Acknowledging Interest Rate Exchanger and each Acknowledging Currency
Exchanger, and shall be entitled to the benefits of the Intercreditor Agreement.
Collateral Agent shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking any action (including, without limitation, the
release or substitution of Pledged Collateral), solely in accordance with this
Agreement, the Intercreditor Agreement and the Financing Documents.
(b) The Collateral Agent may resign or be removed and a successor
Collateral Agent may be appointed in the manner provided in the Intercreditor
Agreement. Resignation by the Collateral Agent pursuant to subsection 6(g) of
the Intercreditor Agreement shall also constitute notice of resignation as
Collateral Agent under this Agreement; removal of the Collateral Agent pursuant
to subsection 6(g) of the Intercreditor Agreement shall also constitute removal
as Collateral Agent under this Agreement; and appointment of a successor
Collateral Agent pursuant to subsection 6(g) of the Intercreditor Agreement
shall also constitute appointment of a successor Collateral Agent under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 6(g) of the Intercreditor Agreement by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Collateral Agent under this Agreement, and the retiring or removed Collateral
Agent under this Agreement shall promptly (i) transfer to such successor
Collateral Agent all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Collateral Agent under this Agreement, and (ii) execute and deliver to such
successor Collateral Agent such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Collateral Agent of the security interests created
hereunder, whereupon such retiring or removed Collateral Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Collateral Agent's resignation or removal hereunder as
Collateral Agent, the provisions of this Agreement shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Agreement while it
was Collateral Agent hereunder.
SECTION 20. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Collateral Agent and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 21. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or
<PAGE>
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed. For the purposes hereof, the address of
each party hereto shall be as set forth under such party's name on the signature
pages hereof or, as to either party, such other address as shall be designated
by such party in a written notice delivered to the other party hereto.
SECTION 22. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Collateral Agent in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 23. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 24. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 25. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein, terms used in
Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined.
SECTION 26. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
<PAGE>
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address as provided in Section 21, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Pledgor further designates and appoints CT Corporation System, and
such other Persons as may hereafter be selected by Pledgor irrevocably agreeing
in writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by Pledgor to be effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Collateral Agent to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 27. WAIVER OF JURY TRIAL. PLEDGOR AND COLLATERAL AGENT HEREBY
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Pledgor and Collateral Agent each
acknowledge that this waiver is a material inducement for Pledgor and Collateral
Agent to enter into a business relationship, that Pledgor and Collateral Agent
have already relied on this waiver in entering into this Agreement and that each
will continue to rely on this waiver in their related future dealings. Pledgor
and Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 28. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
____________________________________
By: __________________________
Title:
Notice Address:
______________________________, c/o
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
<PAGE>
THE BANK OF NEW YORK,
as Collateral Agent
By: __________________________
Title:
Notice Address:
The Bank of New York, as Collateral Agent
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, as Collateral Agent
10990 Wilshire Blvd., Suite 1125
Los Angeles, California 90024
Attention: Rebecca K. Levine
Vice President
Telephone: (310) 996-8659
Fax: (310) 996-8667
<PAGE>
SCHEDULE I
Attached to and forming a part of the Subsidiary Pledge Agreement dated
as of October 24, 1997 between _________________________, as Pledgor, and The
Bank of New York, as Collateral Agent.
Class of Stock Par Number of
Stock Issuer Stock Certificate Nos. Value Shares
- ------------ -------- ---------------- ----- ---------
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, __, is delivered pursuant to
Section 7(b) of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Subsidiary Pledge
Agreement dated as of October 24, 1997, between the undersigned and The Bank of
New York, as Collateral Agent (the "SUBSIDIARY PLEDGE AGREEMENT," capitalized
terms defined therein being used herein as therein defined), and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
[NAME OF PLEDGOR]
By: ___________________________
Title:
Class of Stock Par Number of
Stock Issuer Stock Certificate Nos. Value Shares
- ------------ -------- ---------------- ----- ---------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-84610, No. 33-83018, No. 33-99862, No. 33-99864,
No. 333-01620, No. 333-34693 and No. 333-34695) of Total Renal Care Holdings,
Inc. of our report dated February 28, 1996 relating to the financial statements
of the Nephrology Services Business of Caremark International Inc.; of our
report dated June 18, 1997 on the financial statements of New West Dialysis
Clinics, Inc.; of our report dated November 20, 1997 on the combined financial
statements of Southfield Dialysis Facility, P.C., North Oakland Dialysis
Facility, P.C., Macomb Kidney Center, P.C., and Novi Kidney Center, P.C.; of our
report dated December 12, 1997 on the financial statements of Dialysis Care of
North Carolina; and of our report dated December 18, 1997 on the financial
statements of the Renal Dialysis Business of The Rogosin Institute, Inc.
included in this Current Report on Form 8-K.
Price Waterhouse LLP
Seattle, Washington
December 19, 1997
