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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K/A
(AMENDMENT NO. 1)
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-4034
TOTAL RENAL CARE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Delaware 51-0354549
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
</TABLE>
21250 Hawthorne Boulevard, Suite 800, Torrance, California 90503-5517
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (310) 792-2600
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par
value $0.001 per share
Name of each exchange on which registered: New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on March 16, 1998, based on the price at
which the Common Stock was sold as of March 16, 1998, was $2,833,602,632.
The number of shares of the Registrant's Common Stock outstanding as of
March 16, 1998 was 80,463,321 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
On February 27, 1998, the Registrant acquired Renal Treatment Centers, Inc.
("RTC") in a transaction accounted for as a pooling of interests. Accordingly,
the Registrant's consolidated financial statements have been restated to
include the consolidated financial statements of RTC for all periods presented
(see Note 1 to the Consolidated Financial Statements). Such restated financial
statements and a corresponding update of Items 6 and 7 of the originally filed
Form 10-K are included herein. General information in the originally filed
Form 10-K was presented as of March 31, 1997 and has not been updated in this
amended filing.
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected consolidated financial data of the
Company for the periods indicated. The consolidated financial data as of May
31, 1993, 1994 and 1995 and as of December 31, 1995, 1996 and 1997 and for
each of the years in the three year period ended May 31, 1995, the seven month
period ended December 31, 1995, and the years ended December 31, 1996 and 1997
have been derived from the Company's audited consolidated financial
statements. The consolidated financial data for the seven months ended
December 31, 1994 and the year ended December 31, 1995 are unaudited and
include all adjustments consisting solely of normal recurring adjustments
necessary to present fairly the Company's results of operations for the period
indicated. The results of operations for the seven month periods ended
December 31, 1994 and 1995 are not necessarily indicative of the results which
may occur for the full fiscal year. The following financial and operating data
should be read in conjunction with "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements filed as part of this Report.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED DECEMBER
YEARS ENDED MAY 31,(1) 31, YEARS ENDED DECEMBER 31,
-------------------------- ----------------- --------------------------
1993 1994 1995 1994 1995 1995 1996 1997
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(2)(8)
Net operating revenues. $125,617 $153,513 $214,425 $122,065 $176,463 $299,411 $498,024 $760,997
Total operating
expenses(3)........... 108,243 133,211 182,251 104,053 143,196 247,925 427,520 636,217
-------- -------- -------- -------- -------- -------- -------- --------
Operating income....... 17,374 20,302 32,174 18,012 33,267 51,486 70,504 124,780
Interest expense, net.. 1,442 1,549 7,851 3,838 6,831 11,801 9,559 25,039
-------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes, minority
interests and
extraordinary item.... 15,932 18,753 24,323 14,174 26,436 39,685 60,945 99,741
Income taxes........... 5,181 6,208 7,827 4,759 9,931 13,841 22,960 40,212
-------- -------- -------- -------- -------- -------- -------- --------
Income before minority
interests and
extraordinary item.... 10,751 12,545 16,496 9,415 16,505 25,844 37,985 59,529
Minority interests in
income of consolidated
subsidiaries.......... 775 1,046 1,593 878 1,784 2,544 3,578 4,502
-------- -------- -------- -------- -------- -------- -------- --------
Income before
extraordinary item.... $ 9,976 $ 11,499 $ 14,903 $ 8,537 $ 14,721 $ 23,300 $ 34,407 $ 55,027
======== ======== ======== ======== ======== ======== ======== ========
Income per share before
extraordinary
item(4)(5)............ $ 0.33 $ 0.20 $ 0.26 $ 0.43 $ 0.46 $ 0.71
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAY 31, DECEMBER 31,
------------------------- ----------------------------
1993 1994 1995 1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:(2)(9)
Working capital........ $18,569 $ 33,773 $ 42,918 $ 98,071 $184,975 $ 199,754
Total assets........... 73,038 103,628 218,081 338,866 665,221 1,278,235
Long-term debt ........ 11,833 17,531 115,522 96,979 233,126 724,226
Mandatory redeemable
Common Stock(6)....... 9,528 3,990
Stockholders'
equity(7)............. 31,493 65,391 61,749 193,162 359,099 428,830
</TABLE>
1
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(1) In 1995, the Company changed its fiscal year end to December 31 from May
31.
(2) The August 1994 Transaction and subsequent acquisitions had a significant
impact on the Company's capitalization and equity securities and on the
Company's results of operations. Consequently, the Balance Sheet Data as
of May 31, 1995 and as of December 31, 1995, 1996 and 1997 and the Income
Statement Data for the fiscal year ended May 31, 1995, for the seven
months ended December 31, 1995, and the years ended December 31, 1996 and
1997 are not directly comparable to corresponding information as of prior
dates and for prior periods, respectively.
(3) General and administrative expenses for the fiscal years ended May 31,
1993 and 1994 include overhead allocations by the Company's former parent
of $235,000 and $1,458,000, respectively. The overhead allocations for the
fiscal year ended May 31, 1993 were made using a different methodology
than that used in the fiscal year ended May 31, 1994 and the substantial
increase in that year reflects this change in methodology rather than a
change in the level of services provided. No overhead allocation was made
for the period from March 1, 1994 through the closing of the August 1994
Transaction, at which time the Company began to record general and
administrative expenses as incurred on a stand-alone basis. General and
administrative expenses for the fiscal year ended May 31, 1994 also
reflect $458,000 in expenses relating to a terminated equity offering.
(4) In December 1995, the Company recorded an extraordinary loss of $2,555,000
or $0.04 per share, net of tax, on the early extinguishment of debt. In
July and September 1996, the Company recorded a combined extraordinary
loss of $7,700,000 or $0.10 per share net of tax, on the early
extinguishment of debt. See Note 8 of Notes to Consolidated Financial
Statements.
(5) See additional income per share information in the Consolidated Statements
of Income. No income per share information is presented for the years
ended May 31, 1993 and 1994 as the Company was a wholly-owned subsidiary
during those periods.
(6) Mandatorily redeemable Common Stock represents shares of Common Stock
issued in certain acquisitions subject to put options that terminated upon
the completion of the Initial Public Offering.
(7) In connection with the August 1994 Transaction, the Company paid a special
dividend to Tenet Healthcare Corporation ("Tenet") of $81.7 million,
including $75.5 million in cash.
(8) The consolidated income statement data combine the Company's results of
operations for the years ended May 31, 1993, 1994 and 1995, the seven
months ended December 31, 1994 and 1995 and the years ended December 31,
1995, 1996 and 1997 with RTC's results of operations for the years ended
December 31, 1992, 1993 and 1994, the six months ended December 31, 1994
and 1995 and the years ended December 31, 1995, 1996 and 1997.
(9) The consolidated balance sheet data combine the Company's balance sheet as
of May 31, 1993, 1994, 1995 and December 31, 1995, 1996 and 1997 with
RTC's balance sheet as of December 31, 1992, 1993, 1994, 1995, 1996 and
1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following should be read in conjunction with the Company's Consolidated
Financial Statements and the related notes thereto contained elsewhere in this
Form 10-K.
BACKGROUND
The Company's wholly owned subsidiary Total Renal Care, Inc., formerly
Medical Ambulatory Care, Inc., was organized in 1979 by Tenet Healthcare
Corporation ("Tenet," formerly National Medical Enterprises, Inc.), to own and
operate Tenet's hospital-based dialysis services as freestanding dialysis
facilities and to acquire and develop additional dialysis facilities in
Tenet's markets. The Company was organized to facilitate the August 1994
Transaction which consisted of the sale by Tenet of approximately 75% of its
ownership interest to DLJ Merchant Banking Partners, L.P. and certain of its
affiliates ("DLJMB"), management of the Company and certain holders of debt
securities of the Company. In connection with the August 1994 Transaction, the
2
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Company, NME Properties Corporation (a wholly-owned subsidiary of Tenet),
Tenet and DLJMB entered into a number of agreements relating to, among other
things, corporate governance, the provision of certain services to the Company
by Tenet, and restrictions on stock transfers.
In the August 1994 Transaction, the Company paid a special dividend of $81.7
million, including $75.5 million in cash, to Tenet out of the net proceeds
from (i) the issuance of units consisting of $100 million in principal amount
at maturity of 12% Senior Subordinated Discount Notes due 2004 (the "Discount
Notes"), which were issued at approximately 70% of par, and 1,000,000 shares
of Common Stock and (ii) borrowing under the Company's revolving credit
facility with The Bank of New York (the "TRC Credit Facility"). The Company
raised additional capital to fund the continuation of its growth strategy
through an initial public offering ("IPO") on October 30, 1995 in which the
Company issued and sold 11,500,000 shares of its Common Stock and raised gross
proceeds of $107 million. Concurrent with the IPO, the Company listed its
Common Stock on the New York Stock Exchange under the symbol "TRL." Subsequent
to the IPO, the Company changed its fiscal year end from May 31 to December
31.
The Company raised additional capital to further fund its growth strategy
with two secondary stock offerings in April and October of 1996 which raised
gross proceeds to the Company of approximately $135 million. In October of
1996 the Company increased its credit facility with the Bank of New York from
$130 million to $400 million (the "Credit Facility"). With the proceeds from
the IPO, the April 1996 secondary offering and the Credit Facility, the
Company was able to complete the early retirement of the Discount Notes. On
October 24, 1997, the Company increased the Credit Facility to an aggregate of
$1,050,000,000 in two bank facilities ("the Credit Facilities").
Following the August 1994 Transaction, the Company implemented a focused
strategy to increase net operating revenues per treatment and improve
operating income margins. The Company has significantly increased per-
treatment revenues through the addition of in-house clinical laboratory and
pharmacy services, improved pricing, and increased utilization of ancillary
services. To improve operating income, the Company began a systematic review
of the Company's vendor relations leading to the renegotiation of a number of
supply contracts and insurance arrangements that reduced operating expenses.
In addition the Company has focused on improving facility operating
efficiencies and leveraging corporate and regional management. These
improvements have been offset in part by increased amortization of goodwill
and other intangible assets relating to the Company's acquisitions (all of
which have been accounted for as purchase transactions, except the Merger) and
start-up expenses related to de novo developments.
The Company incurred approximately $70.4 million of indebtedness as a result
of the August 1994 Transaction. The related interest expense had a significant
impact on the Company's results of operations for subsequent periods. The
Company's results of operations for these periods have also been materially
affected by the implementation of the Company's growth strategy subsequent to
the August 1994 Transaction.
On February 27, 1998 the Company acquired Renal Treatment Centers, Inc.
("RTC"), with headquarters in Berwyn, Pennsylvania (the "Merger"). In
connection with the Merger, the Company issued 34,565,729 shares of its common
stock in exchange for all of the outstanding shares of RTC common stock. The
RTC merger transaction has been accounted for as a pooling of interests and as
such, the consolidated financial statements have been restated to include RTC
for all periods presented as described in Note 1 to the Consolidated Financial
Statements.
NET OPERATING REVENUES
Net operating revenues are derived primarily from four sources: (i)
outpatient facility hemodialysis services, (ii) ancillary services, including
EPO administration, clinical laboratory services and intravenous and oral
pharmaceutical products and services, (iii) home dialysis services and related
products and (iv) inpatient hemodialysis services provided to hospitalized
patients pursuant to arrangements with hospitals. Additional revenues are
derived from the provision of dialysis facility management services to certain
subsidiaries and affiliated and unaffiliated dialysis centers. The Company's
dialysis and ancillary services are reimbursed primarily under the Medicare
ESRD program in accordance with rates established by HCFA. Payments are also
provided by other third party payors, generally at rates higher than those
reimbursed by Medicare for up to the
3
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first 21 months of treatment as mandated by law. Rates paid for services
provided to hospitalized patients are negotiated with individual hospitals.
For the year ended May 31, 1995, approximately 65% and 7% of the Company's net
operating revenues were derived from reimbursement under Medicare and
Medicaid, respectively. For the seven months ended December 31, 1995,
approximately 55% and 6% of the Company's net operating revenues were derived
from reimbursement under Medicare and Medicaid, respectively. For the years
ended December 31, 1996 and December 31, 1997, approximately 60% and 56%,
respectively, and 5% and 5%, respectively of the Company's net operating
revenues were derived from reimbursement under Medicare and Medicaid,
respectively. See "Item 1. Business--Operations--Sources of Revenue
Reimbursement."
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth selected unaudited quarterly financial and
operating information for each of the last two calendar years:
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996 1997 1997 1997 1997
---------- --------- -------------- ------------- ---------- --------- -------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARES AND PER TREATMENT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating
revenues........... $ 98,493 $ 117,719 $ 133,707 $ 148,105 $ 157,937 $179,715 $ 197,749 $ 225,596
Facility operating
expenses........... 67,878 80,947 92,289 103,066 107,728 121,373 131,670 150,219
General and
administrative
expenses........... 6,991 7,648 8,747 8,964 9,916 12,120 13,208 14,855
Operating income.... 12,512 17,547 18,437 22,008 24,596 28,694 33,287 38,203
Income before
extraordinary item. 5,655 9,002 8,731 11,019 11,788 13,470 14,632 15,137
Income per share
before
extraordinary item
(1)................ $ 0.08 $ 0.12 $ 0.12 $ 0.14 $ 0.15 $ 0.17 $ 0.19 $ 0.19
Outpatient
facilities......... 204 218 232 240 267 316 337 383
Treatments.......... 452,982 527,539 599,285 657,048 691,406 803,035 894,067 1,003,163
Net operating
revenues per
treatment.......... $ 217.43 $ 223.96 $ 231.76 $ 226.76 $ 228.43 $ 223.79 $ 221.18 $ 224.88
Operating income
margin............. 12.7% 14.9% 13.8% 14.9% 15.6% 16.0% 16.8% 16.9%
</TABLE>
- -------
(1) See additional income per share information in Note 16 to the Consolidated
Financial Statements.
Utilization of the Company's services is generally not subject to material
seasonal fluctuations. The quarterly variations shown above reflect the impact
of increasing labor costs and decreasing margins related to the corresponding
costs of providing services and amortization of intangibles from acquired
facilities.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected
information expressed as a percentage of net operating revenues for such
periods:
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED
YEAR ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
MAY 31, -------------- ----------------------------
1995 1994 1995 1995 1996 1997
---------- ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues.. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Facility operating
expenses............... 68.4 68.3 65.3 66.3 69.1 67.1
General and
administrative
expenses............... 8.3 8.3 6.9 7.0 6.5 6.6
Provision for doubtful
accounts............... 2.6 2.9 2.6 2.5 3.2 2.7
Depreciation and
amortization........... 5.8 5.8 6.1 6.2 6.5 7.2
Merger expenses......... .3 .7 .6
Operating income........ 15.0 14.8 18.9 17.2 14.2 16.4
Interest expense, net of
interest income........ 3.6 3.1 3.9 3.9 1.9 3.3
Income taxes............ 3.7 3.9 5.6 4.6 4.6 5.3
Minority interests...... .7 .7 1.0 .8 .7 .6
Income before
extraordinary item..... 7.0 7.0 8.3 7.8 6.9 7.2
</TABLE>
4
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Year Ended December 31, 1997 compared to Year Ended December 31, 1996
Net Operating Revenues. Net operating revenues increased $262,973,000 to
$760,997,000 for the year ended December 31, 1997 ("Year End 1997") from
$498,024,000 for the year ended December 31, 1996 ("Year End 1996")
representing a 52.8% increase. Of this increase $257,113,000 was due to
increased treatments from acquisitions, existing facility growth and from de
novo developments. The remainder was due to an increase in net operating
revenues per treatment which were $224.37 in Year End 1997 compared to $222.64
in Year End 1996. The increase in operating revenues per treatment was due to
increases in ancillary services utilization and in affiliated and unaffiliated
facility management fees.
Facility Operating Expenses. Facility operating expenses consist of costs
and expenses specifically attributable to the operation of dialysis
facilities, including operating and maintenance costs of such facilities,
equipment, direct labor, and supply and service costs relating to patient
care. Facility operating expenses increased $166,810,000 to $510,990,000 in
Year End 1997 from $344,180,000 in Year End 1996 and as a percentage of net
operating revenues, facility operating expenses decreased to 67.1% in Year End
1997 from 69.1% in Year End 1996. This decrease is mostly due to improvements
in labor and pharmaceutical costs as a percentage of revenues partially offset
by an increase in other facility expenses, consisting primarily of rent and
medical director fees. In December 1996, the Company implemented its best
demonstrated practices program which focuses primarily upon deriving
efficiencies in labor and supply costs.
General and Administrative Expenses. General and administrative expenses
include headquarters expense and administrative, legal, quality assurance,
information systems and centralized accounting support functions. General and
administrative expenses increased $17,749,000 to $50,099,000 in Year End 1997
from $32,350,000 in Year End 1996, and as a percentage of net operating
revenues, general and administrative expenses increased to 6.6% for Year End
1997 from 6.5% in Year End 1996. The increase was due to additional corporate
labor resources added to further the Company's growth via acquisitions
proportionately in excess of revenue growth.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased $4,788,000 to $20,525,000 in Year End 1997 from $15,737,000 in Year
End 1996. As a percentage of net operating revenues, the provision for
doubtful accounts decreased to 2.7% in Year End 1997 from 3.2% in Year End
1996, due to better management of the collection process for patient secondary
balances remaining after Medicare, as the primary payor, has paid 80% of the
claim.
Depreciation and Amortization. Depreciation and amortization increased
$22,158,000 to $54,603,000 in Year End 1997 from $32,445,000 in Year End 1996,
and as a percentage of net operating revenues, depreciation and amortization
increased to 7.2% in Year End 1997 from 6.5% in Year End 1996. This increase
was attributable to increased amortization due to acquisition activity and
increased depreciation from new center leaseholds and routine capital
expenditures.
Merger Expenses. There were no merger expenses for the year ended December
31, 1997, as compared to $2,808,000 for the same period in 1996. For the year
ended December 31, 1996, merger expenses were incurred as a result of the
mergers by RTC which were completed during 1996 and were accounted for under
the pooling-of-interests method of accounting. Merger expenses include
investment banking, legal, accounting and other fees and expenses.
Operating Income. Operating income increased $54,276,000 to $124,780,000 in
Year End 1997 from $70,504,000 in Year End 1996, and as a percentage of net
operating revenues, operating income increased to 16.4% in Year End 1997 from
14.2% in Year End 1996. This increase in operating income as a percentage of
net operating revenue reflects a decrease in facility operating costs and the
provision for doubtful accounts offset by an increase in general and
administrative expenses, and depreciation and amortization.
Interest Expense. Interest expense, net of interest income, increased
$15,480,000 to $25,039,000 in Year End 1997 from $9,559,000 in Year End 1996,
and as a percentage of net operating revenues, interest expense, net of
interest income, was 3.3% in Year End 1997 and 1.9% in Year End 1996. Cash
interest expense during Year End 1997 was $28,214,000 and non-cash interest
during the same period was $0 versus $9,021,000 and $4,396,000 in Year End
1996, respectively. Non-cash interest expense during Year End 1996 was related
to the Company's Discount Notes which were completely retired through an early
extinguishment during the third
5
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quarter of 1996. The increase in cash interest expense was due primarily to an
increase in borrowings made under the Company's credit facilities to fund the
Company's acquisitions.
Provision for Income Taxes. Provision for income taxes increased $17,252,000
to $40,212,000 in Year End 1997 from $22,960,000 in Year End 1996, and the
effective income tax rate after minority interests increased to 42.2% in Year
End 1997 from 40.0% in Year End 1996. The overall increase in the effective
tax rate primarily reflects non-deductible goodwill associated with stock
acquired, and to foreign net operating losses, for which no benefit was
recognized during 1997, from businesses in Argentina.
Minority Interests. Minority interests represent the pretax income earned by
physicians who directly or indirectly own minority interests in the Company's
partnership affiliates and the net income in two of the Company's corporate
subsidiaries. Minority interests increased $924,000 to $4,502,000 in Year End
1997 from $3,578,000 in Year End 1996, and as a percentage of net operating
revenues, minority interest decreased to 0.6% in Year End 1997 from 0.7% in
Year End 1996. This decrease in minority interest as a percentage of net
operating revenues is a result of a relative proportionate decrease in the
formation of partnership affiliates and subsidiaries as a percentage of total
new acquisitions.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
Net Operating Revenues. Net operating revenues increased $198,613,000 to
$498,024,000 for Year End 1996 from $299,411,000 for the year ended December
31, 1995 ("Year End 1995") representing a 66.3% increase. Of this increase
$191,811,000 was due to increased treatments from acquisitions, existing
facility growth and from de novo developments. The remainder was due to an
increase in net operating revenues per treatment which were $222.64 in Year
End 1996 compared to $219.60 in Year End 1995. The increase in net operating
revenues per treatment was due to the addition of the Company's ESRD
laboratory in 1995 resulting in a full year of revenue in 1996, an overall
increase in average reimbursement rates, increased ancillary services
utilization primarily in the administration of EPO, the opening of the
Company's oral pharmaceutical and IV therapy program, and an increase in
affiliated and unaffiliated facility management fees.
Facility Operating Expenses. Facility operating expenses increased
$145,526,000 to $344,180,000 in Year End 1996 from $198,654,000 in Year End
1995 and as a percentage of net operating revenues, facility operating
expenses increased to 69.1% in Year End 1996 from 66.3% in Year End 1995. In
Year End 1996 the increase in facility operating expenses as a percentage of
revenue primarily was due to increased labor and benefits partially incurred
as a result of utilizing existing employees of the acquired facilities during
transition periods after the acquisitions.
General and Administrative Expenses. General and administrative expenses
increased $11,350,000 to $32,350,000 in Year End 1996 from $21,000,000 in Year
End 1995, and as a percentage of net operating revenues, general and
administrative expenses declined to 6.5% in Year End 1996 from 7.0% in Year
End 1995. This decline as a percentage of net revenue is a result of revenue
growth and economies of scale achieved through the leveraging of corporate
staff across a higher revenue base.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased $8,157,000 to $15,737,000 in Year End 1996 from $7,580,000 in Year
End 1995, and as a percentage of net operating revenues, provision for
doubtful accounts increased to 3.2% in Year End 1996 from 2.5% in Year End
1995. The increase is due to the recognition of an increase in uncollectible
accounts, primarily patient secondary amounts remaining after Medicare, as the
primary payor, paid 80% of the bill. The decrease in collectibility was caused
by RTC's conversion to a new system in late 1995.
Depreciation and Amortization. Depreciation and amortization increased
$13,842,000 to $32,445,000 in Year End 1996 from $18,603,000 in Year End 1995,
and as a percentage of net operating revenues, depreciation and amortization
increased to 6.5% in Year End 1996 from 6.2% in Year End 1995. This increase
was attributable to increased amortization due to acquisition activity and
increased depreciation from new center leaseholds and routine capital
expenditures.
6
<PAGE>
Merger Expenses. Merger expenses increased 34.5% to $2,808,000 for the Year
End December 31,1996 from $2,088,000 for Year End 1995. The merger expenses
represented expenses incurred in connection with the completed mergers by RTC
which were accounted for under the pooling-of-interest method of accounting.
Merger expenses include investment banking, legal, accounting and other fees
and expenses.
Operating Income. Operating income increased $19,018,000 to $70,504,000 in
Year End 1996 from $51,486,000 in Year End 1995, and as a percentage of net
operating revenues, operating income decreased to 14.2% in Year End 1996 from
17.2% in Year End 1995. This decrease in operating income as a percentage of
revenue is primarily due to an increase in facility operating expenses,
provision for doubtful accounts and depreciation and amortization partially
offset by a decrease in general and administrative expenses as a percentage of
net operating revenues.
Interest Expense. Interest expense, net of interest income, decreased
$2,242,000 to $9,559,000 in Year End 1996 from $11,801,000 in Year End 1995,
and as a percentage of net operating revenues, interest expense, net of
interest income, was 1.9% in Year End 1996 and 3.9% in Year End 1995. Cash
interest expense during Year End 1996 was $9,021,000 and non-cash interest
during the same period was $4,396,000 versus $3,929,000 and $8,901,000 in Year
End 1995, respectively. The decrease in Year End 1996 non-cash interest
expense was due primarily to the early extinguishment of a portion of the
Discount Notes in December of 1995 and the remainder in the third quarter of
the year ended December 31, 1996 (as discussed in "Liquidity and Capital
Resources" below), and short term investment income earned on excess proceeds
from the public stock offerings in April and October, 1996.
Provision for Income Taxes. Provision for income taxes increased $9,119,000
to $22,960,000 in Year End 1996 from $13,841,000 in Year End 1995, and the
effective income tax rate before minority interests increased to 40.0% in Year
End 1996 from 37.3% in Year End 1995. The overall increase in the effective
tax rate reflects an increase in the blended state rates and additional non-
deductible goodwill associated with certain acquisitions of stock.
Minority Interests. Minority interests increased $1,034,000 to $3,578,000 in
Year End 1996 from $2,544,000 in Year End 1995, and as a percentage of net
operating revenues, minority interest decreased to 0.7% in Year End 1996 from
0.8% in Year End 1995. This decrease in minority interest as a percentage of
net operating revenues is a result of a relative proportionate decrease in the
formation of partnership affiliates and subsidiaries as a percentage of total
new acquisitions.
Extraordinary Loss. In December 1995 the Company redeemed 35% of the
accreted value of the Discount Notes for a total redemption price of
$31,912,000. In connection with this redemption, the Company recorded an
extraordinary loss of $2,555,000 (net of income tax effect). In July and
September 1996, the Company retired all remaining outstanding Notes for a
total redemption price of $68,499,000. In connection with these redemptions,
the Company recorded an extraordinary loss of $7,700,000 (net of income tax
effect).
Seven Months Ended December 31, 1995 compared to Seven Months Ended December
31, 1994
Net Operating Revenues. Net operating revenues increased $54,398,000 to
$176,463,000 for the seven months ended December 31, 1995 ("1995 Seven Month
Period") from $122,065,000 for the seven months ended December 31, 1994 ("1994
Seven Month Period") representing a 44.6% increase. The increase was due to
increased treatments from acquisitions, existing facility growth and de novo
developments. The remaining increase was attributable to an increase in
affiliated and unaffiliated facility management fees, the addition of TRC's
ESRD laboratory, an overall increase in reimbursement rates, increased
ancillary services utilization primarily in the administration of EPO and the
opening of the Company's oral pharmaceutical and IV therapy program.
Facility Operating Expenses. Facility operating expenses increased
$31,849,000 to $115,219,000 in the 1995 Seven Month Period from $83,370,000 in
the 1994 Seven Month Period and as a percentage of net
7
<PAGE>
operating revenues, facility operating expenses declined to 65.3% in the 1995
Seven Month Period from 68.3% in the 1994 Seven Month Period. In the 1995
Seven Month Period the decrease in facility operating expenses as a percentage
of revenue was due to substantial reductions achieved in the costs of
providing services, including medical and pharmaceutical supplies, and overall
labor resource efficiencies.
General and Administrative Expenses. General and administrative expenses
increased $2,018,000 to $12,117,000 in the 1995 Seven Month Period from
$10,099,000 in the 1994 Seven Month Period, and as a percentage of net
operating revenues, general and administrative expenses declined to 6.9% in
the 1995 Seven Month Period from 8.3% in the 1994 Seven Month Period. This
decline as a percentage of net revenue is a result of revenue growth and
economies of scale achieved through the leveraging of corporate staff across a
higher revenue base.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased $1,066,000 to $4,552,000 in the 1995 Seven Month Period from
$3,486,000 in the 1994 Seven Month Period, and as a percentage of net
operating revenues, provision for doubtful accounts decreased to 2.6% in the
1995 Seven Month Period from 2.9% in the 1994 Seven Month Period. The
provision for doubtful accounts is influenced by the amount of net operating
revenues generated from non-governmental payor sources. The decrease for the
1995 Seven Month Period reflects better management of accounts receivable,
including increased collection efforts, billing accuracy and improved
preauthorization procedures with payors.
Depreciation and Amortization. Depreciation and amortization increased
$3,710,000 to $10,808,000 in the 1995 Seven Month Period from $7,098,000 in
the 1994 Seven Month Period, and as a percentage of net operating revenues,
depreciation and amortization increased to 6.1% in the 1995 Seven Month Period
from 5.8% in the 1994 Seven Month Period. This increase was attributable to
increased amortization due to acquisition activity and increased depreciation
from new center leaseholds and routine capital expenditures.
Merger Expenses. Merger expenses in the 1995 Seven Month Period were the
expenses incurred as a result of the RTC merger completed on August 1, 1995
which was accounted for under the pooling-of-interests method of accounting.
These expenses included fees for the investment banker, attorneys,
accountants, and various other expenses incurred as a result of combining the
companies.
Operating Income. Operating income increased $15,255,000 to $33,267,000 in
the 1995 Seven Month Period from $18,012,000 in the 1994 Seven Month Period,
and as a percentage of net operating revenues, operating income increased to
18.9% in the 1995 Seven Month Period from 14.8% in the 1994 Seven Month
Period. This increase in operating income reflects a decrease in facility
operating expenses, general and administrative expenses, and the provision for
doubtful accounts, slightly offset by an increase in depreciation and
amortization, all as a percentage of net operating revenues.
Interest Expense. Interest expense, net of interest income, increased
$2,993,000 to $6,831,000 in the 1995 Seven Month Period from $3,838,000 in the
1994 Seven Month Period, and as a percentage of net operating revenues,
interest expense, net of interest income, was 3.9% in the 1995 Seven Month
Period and 3.1% in the 1994 Seven Month Period. Cash interest expense during
the 1995 Seven Month Period was $2,466,000 and non-cash interest during the
same period was $5,228,000 versus $1,198,000 and $3,274,000 in the 1994 Seven
Month Period, respectively. The increase in the 1995 Seven Month Period cash
interest expense was due primarily to increased borrowing under the TRC Credit
Facility and the increase in non cash interest expense was due to the August
11, 1994 issuance of the Discount Notes, which resulted in four and a half
months of interest expense recognized in the 1994 Seven Month Period as
compared to a full seven months of interest expense recognized in the 1995
Seven Month Period. In addition, interest accrued in the 1995 Seven Month
Period on a higher accreted principal amount through December 7, 1995, on
which date the Company redeemed 35% of the principal amount of the Discount
Notes at maturity.
Provision for Income Taxes. Provision for income taxes increased $5,172,000
to $9,931,000 in the 1995 Seven Month Period from $4,759,000 in the 1994 Seven
Month Period, and the effective income tax rate after minority interests
increased to 40.3% in the 1995 Seven Month Period from 35.8% in the 1994 Seven
Month Period. The increase was primarily due to an increase in the blended
state tax rates.
8
<PAGE>
Minority Interests. Minority interests increased $906,000 to $1,784,000 in
the 1995 Seven Month Period from $878,000 in the 1994 Seven Month Period, and
as a percentage of net operating revenues, minority interest increased to 1.0%
in the 1995 Seven Month Period from 0.7% in the 1994 Seven Month Period. This
increase in minority interest as a percentage of revenue is a result of
increased profitability at these partnership affiliates and subsidiaries and
an increase in the number of company facilities owned by such partnership
affiliates.
Extraordinary Loss. On December 7, 1995 the Company redeemed 35% of the
accreted value of the Discount Notes at a redemption premium of 111% for a
total redemption price of $31,912,000. In connection with this redemption, the
Company recorded an extraordinary loss of $2,555,000 (net of income tax
effect) in December 1995.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash. Net cash provided by operating activities of the
Company was $21,279,000, $30,926,000, $14,393,000 and $19,305,000 for Year End
1997, Year End 1996, 1995 Seven Month Period and the fiscal year ended May 31,
1995, respectively. Net cash provided by operating activities consists of the
Company's net income, increased by an extraordinary item related to the early
extinguishment of debt (for the 1995 Seven Month Period and Year End 1996) and
non-cash expenses such as depreciation, amortization, accreted interest and
the provision for doubtful accounts, and adjusted by changes in components of
working capital, primarily accounts receivable. Net cash used in investing
activities was $526,217,000, $273,069,000, $47,973,000 and $83,156,000 for
Year End 1997, Year End 1996, 1995 Seven Month Period and the fiscal year
ended May 31, 1995, respectively. The Company's principal uses of cash in
investing activities have been related to acquisitions, purchases of new
equipment and leasehold improvements for the Company's outpatient facilities,
as well as the development of new outpatient facilities. Net cash provided by
financing activities was $489,754,000 for Year End 1997 consisting primarily
of proceeds from the Company's Credit Facilities, $225,058,000 for Year End
1996 consisting primarily of net proceeds from two public issuances of common
stock, net proceeds from the Credit Facility and proceeds from issuance of the
RTC Convertible Subordinated Notes, offset by amounts paid in connection with
the remaining Discount Notes; $67,003,000 for the 1995 Seven Month Period
consisting primarily of net proceeds from the IPO, less amounts paid in
connection with the redemption of 35% of the outstanding Discount Notes and
net payments of borrowings under the Credit Facility; and $66,571,000 for the
fiscal year ended May 31, 1995, consisting primarily of debt and equity
offering proceeds, and borrowings under the Credit Facility, net of cash
dividends paid to Tenet.
Expansion. The Company anticipates aggregate capital requirements for
purchases of equipment and leasehold improvements for outpatient facilities
including the development costs of 30 de novo facilities after March 31, 1998
will be approximately $40,000,000.
The Company's strategy is to continue to expand its operations both through
development of de novo centers and through acquisitions. The development of a
typical outpatient facility generally requires $800,000 to $1,200,000 for
initial construction and equipment and $200,000 to $300,000 for working
capital. Based on the Company's experience, a de novo facility typically
achieves operating profitability, before depreciation and amortization, by the
12th to 15th month of operation. However, the period of time for a de novo
facility to break even is dependent on many factors which can vary
significantly from facility to facility, and, therefore, the Company's past
experience may not be indicative of the performance of future de novo
facilities.
From January 1, 1998 through March 31, 1998 the Company has paid
approximately $51 million in consideration for acquisitions of nine facilities
and a pharmacy operation. Additionally, the Company has entered into letters
of intent to acquire additional facilities for approximately $100 million.
Credit Facilities. On October 24, 1997, the Company expanded its existing
$400 million Credit Facility to an aggregate of $1,050,000,000 in two bank
facilities. The Credit Facilities consist of a seven-year $800 million
revolving credit facility and a ten-year $250 million term facility. Under the
revolving credit
9
<PAGE>
facility, up to $100,000,000 may be used in connection with letters of credit,
and up to $15,000,000 in short-term funds may be borrowed the same day notice
is given to the banks under a "Swing Line" facility. Up to $75,000,000 of the
available letters of credit or borrowings under the revolving credit facility
may be utilized for foreign financing. In general, borrowings under the Credit
Facilities bear interest at one of two floating rates selected by the Company:
(i) the Alternate Base Rate (defined as the higher of The Bank of New York's
prime rate or the federal funds rate plus 0.5%); or (ii) Adjusted LIBOR
(defined as the 30-, 60-, 90- or 180-day London Interbank Offered Rate,
adjusted for statutory reserves) plus a margin that ranges from 0.45% to 1.75%
depending on the Company's leverage ratio. Swing Line borrowings bear interest
at either a rate negotiated by the Company and the banks at the time of
borrowing or, if no rate is negotiated and agreed upon, the Alternate Base
Rate.
The Credit Facilities contain financial and operating covenants including,
among other things, requirements that the Company maintain certain financial
ratios and satisfy certain financial tests, and imposes limitations on the
Company's ability to make capital expenditures, to incur other indebtedness
and to pay dividends. As of the date hereof, the Company is in compliance with
all such covenants.
On November 25, 1996, the Company entered into a seven year interest rate
swap agreement involving the exchange of fixed and floating interest payment
obligations without the exchange of the underlying principal amounts. At
December 31, 1997 the total notional principal amount of this interest rate
swap agreement was $100,000,000 and the effective interest rate thereon was
7.57%.
On July 24, 1997, the Company entered into a ten-year interest rate swap
agreement. At December 31, 1997 the total notional principal amount of this
interest rate swap agreement was $200,000,000 and the effective interest rate
thereon was 7.77%.
Stock Split. On September 30, 1997 the Company declared a five-for-three
split of its Common Stock in the form of a stock dividend. Stockholders of
record on October 7, 1997 received two additional shares of the Company's
Common Stock for every three shares owned. The dividend shares were delivered
to the record stockholders on October 20, 1997. The Company issued a cash
dividend for all fractional shares of approximately $14,000 which was also
paid on October 20, 1997.
Year 2000 Risks. Certain of the Company's older computer software programs
identify years with two digits instead of four. This is likely to cause
problems because the programs may recognize the year 2000 as the year 1900.
Plans are in the process to eliminate all Year 2000 software problems. The
Company fully expects to complete the necessary conversions by the end of the
second quarter of 1999. The Company believes that the cost of modifying those
systems that were not already scheduled for replacement for business reasons
prior to 2000 is immaterial. Although the Company does not expect Year 2000 to
have a material adverse effect on its internal operations, it is possible that
Year 2000 problems could have a significant adverse effect on (i) the
Company's suppliers and their ability to service the Company and to accurately
process payments received and (ii) the ability of certain third party
insurance payors and governmental payors, such as Medicare and the individual
state Medicaid programs, to accurately process remittance (payments) on
patient accounts receivable due to the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index included at "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
10
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)Documents filed as part of this Report:
(1) Index to Financial Statements of Total Renal Care Holdings, Inc.:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants of Price Waterhouse LLP F-1
Report of Independent Accountants of Coopers & Lybrand L.L.P. F-2
Report of Independent Accountants of Deloitte & Touche LLP F-3
Report of Independent Accountants of Baird, Kurtz & Dobson F-4
Consolidated Balance Sheets as of December 31, 1996 and December
31, 1997 F-5
Consolidated Statements of Income for year ended May 31, 1995,
the seven months ended December 31, 1994 (unaudited) and
December 31, 1995 and the years ended December 31, 1995
(unaudited), December 31, 1996 and December 31, 1997 F-6
Consolidated Statements of Stockholders' Equity for the year
ended May 31, 1995, the seven months ended December 31, 1995 and
the years ended December 31, 1996 and December 31, 1997 F-7
Consolidated Statements of Cash Flows for year ended May 31,
1995, the seven months ended December 31, 1994 (unaudited) and
December 31, 1995 and the years ended December 31, 1995
(unaudited), December 31, 1996 and December 31, 1997 F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
(2) Index to Financial Statements of Renal Treatment Centers, Inc.:
<TABLE>
<S> <C>
Report of Independent Accountants of Coopers & Lybrand L.L.P. F-34
Consolidated Balance Sheets at December 31, 1996 and 1997 F-35
Consolidated Statements of Income for the years ended December
31, 1995, 1996 and 1997 F-36
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1995, 1996 and 1997 F-37
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 F-38
Notes to Consolidated Financial Statements F-39
</TABLE>
(3) Index to Financial Statement Schedules:
<TABLE>
<S> <C>
Report of Independent Accountants on Financial Statement
Schedule of Price Waterhouse LLP S-1
Schedule II--Valuation and Qualifying Accounts of Total Renal
Care Holdings Inc. S-2
</TABLE>
(4)(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Company, dated December 4, 1995.@@
3.2 Certificate of Amendment of Certificate of Incorporation of
the Company, dated February 26, 1998.+++
3.3 Bylaws of the Company, dated October 6, 1995.+
4.1 Shareholders Agreement, dated August 11, 1994 between DLJMB,
DLJIP, DLJOP, DLJMBF, NME Properties, Continental Bank, as
voting trustee, and the Company.##
4.2 Agreement and Amendment, dated as of June 30, 1995, between
DLJMBP, DLJIP, DLJOP, DLJMBF, DLJESC, Tenet, the Company,
Victor M.G. Chaltiel, the Putnam Purchasers, the Crescent
Purchasers and the Harvard Purchasers, relating to the
Shareholders Agreement dated as of August 11, 1994 between
DLJMB, DLJIP, DLJOP, DLJMBF, NME Properties, Continental
Bank, as voting trustee, and the Company.##
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
<C> <S> <C>
10.1 Subscription Agreement dated May 26, 1994 between DLJMB,
DLJIP, DLJOP, DLJMBF, NME Properties, Tenet and the
Company.#
10.2 Services Agreement dated August 11, 1994 between the Company
and Tenet.##
10.3 Noncompetition Agreement dated August 11, 1994 between the
Company and Tenet.##
10.4 Employment Agreement dated as of August 11, 1994 by and
between the Company and Victor M.G. Chaltiel (with forms of
Promissory Note and Pledge and Stock Subscription Agreement
attached as exhibits thereto) (the "Chaltiel Employment
Agreement").##*
10.5 Amendment to Chaltiel Employment Agreement, dated as of
August 11, 1994.##*
10.6 Employment Agreement dated as of September 1, 1994 by and
between the Company and Barry C. Cosgrove.##*
10.7 Employment Agreement dated as of August 11, 1994 by and
between the Company and Leonard W. Frie (the "Frie
Employment Agreement").##*
10.8 Amendment to Frie Employment Agreement, dated as of October
11, 1994.##*
10.9 Employment Agreement dated as of September 1, 1994 by and
between the Company and John E. King.##*
10.10 First Amended and Restated 1994 Equity Compensation Plan
(the "1994 Plan") of the Company (with form of Promissory
Note and Pledge attached as an exhibit thereto), dated
August 5, 1994.##*
10.11 Form of Stock Subscription Agreement relating to the 1994
Plan.##*
10.12 Form of Purchased Shares Award Agreement relating to the
1994 Plan.##*
10.13 Form of Nonqualified Stock Option relating to the 1994
Plan.##*
10.14 1995 Equity Compensation Plan.+*
10.15 Employee Stock Purchase Plan.+*
10.16 Option Exercise and Bonus Agreement dated as of September
18, 1995 between the Company and Victor M.G. Chaltiel.+*
10.17 1997 Equity Compensation Plan.**
10.18 Subsidiary Guaranty (the "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). Renal Treatment Centers--Mid-
Atlantic, Inc., Renal Treatment Centers--Northeast, Inc.,
Renal Treatment Centers--California, Inc., Renal Treatment
Centers--West, Inc., and Renal Treatment Centers--
Southeast, Inc. subsequently executed an agreement in this
form on February 27, 1998.@@@
10.19 Borrower Pledge Agreement dated as of October 24, 1997 and
entered into by and between the Company, 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>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
<C> <S> <C>
10.20 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). RTC subsequently
executed an agreement in this form on February 27,
1998.@@@
10.21 Agreement and Plan of Merger dated as of November 18, 1997
by and among TRCH, Nevada Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of TRCH, and
RTC.###
10.22 Amendment No. 2 and Consent No. 2 to the Revolving Credit
Agreement and First Amendment to the Subsidiary Guaranty
dated February 17, 1998.+++
10.23 Third Amendment to the Term Loan Agreement and First
Amendment to the Subsidiary Guaranty dated February 17,
1998. (The provisions of this agreement amending the
original term loan agreement have been superseded by
exhibit no. 10.31 hereof.)+++
10.24 Special Purpose Option Plan.++
10.25 Indenture, dated June 12, 1996, by RTC to PNC Bank including
form of RTC Note (the "Indenture").***
10.26 First Supplemental Indenture, dated as of February 27, 1998,
among RTC, TRCH and PNC Bank under the Indenture.+++
10.27 Second Supplemental Indenture, dated as of March 31, 1998,
among RTC, TRCH and PNC Bank under the Indenture.+++
10.28 Guaranty, entered into as of March 31, 1998, by the Company
in favor of and for the benefit of PNC Bank.+++
10.29 Amended and Restated Term Loan Agreement, dated April 30,
1998, by and among the Company, the lenders party thereto,
DLJ Capital Funding, Inc., as Syndication Agent, and The
Bank of New York, as Administrative Agent (the "Term Loan
Agreement").X
10.30 Amended and Restated Revolving Credit Agreement, dated April
30, 1998, by and among the Company, 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").X
10.31 Form of First Amendment to Borrower/Subsidiary Pledge
Agreement, dated April 30, 1998, by and among the Company,
RTC, Total Renal Care, Inc., and The Bank of New York, as
Collateral Agent.X
10.32 Form of Acknowledgment and Confirmation, dated April 30,
1998, by the Company, RTC, TRC West, Inc., Total Renal
Care, Inc., Total Renal Care Acquisition Corp., Renal
Treatment Centers--Mid-Atlantic, Inc., Renal Treatment
Centers--Northeast, Inc., Renal Treatment Centers--
California, Inc., Renal Treatment Centers--West, Inc., and
Renal Treatment Centers--Southeast, Inc. for the benefit of
The Bank of New York, as Collateral Agent and the lenders
party to the Term Loan Agreement or the Revolving Credit
Agreement.X
21 List of Subsidiaries of the Company.+++
23.1 Consent of Price Waterhouse LLP.X
23.2 Consent of Coopers & Lybrand L.L.P.X
23.3 Consent of Deloitte & Touche, L.L.P.X
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
<C> <S> <C>
23.4 Consent of Baird, Kurtz & Dobson.X
24 Powers of Attorney with respect to the Company (included on
Page II-1 hereof).+++
27 Financial Data Schedule.X
</TABLE>
- --------
X Included in this filing.
@ Filed on October 18, 1996 as an exhibit to the Company's Current Report on
Form 8-K.
@@ Filed on March 18, 1996 as an exhibit to the Company's Transitional Report
on Form 10-K for the transition period from June 1, 1995 to December 31,
1995.
@@@ Filed on December 19, 1997 as an exhibit to the Company's Current Report
on Form 8-K.
+ Filed on October 24, 1995 as an exhibit to Amendment No. 2 to the Company's
Registration Statement on Form S-1 (Registration Statement No. 33-97618).
++ Filed on February 25, 1998 as an exhibit to the Company's Registration
Statement on Form S-8 (Registration Statement No. 333-46887).
+++ Filed on March 31, 1998 as an exhibit to the Company's Form 10-K for the
year ended December 31, 1997.
# Filed on June 6, 1994 as an exhibit to the Company's Registration Statement
on Form S-1 (Registration Statement No. 33-79770).
## Filed on August 29, 1995 as an exhibit to the Company's Form 10-K for the
year ended May 31, 1995.
### Filed on December 19, 1997 as Annex A to the Company's Registration
Statement on Form S-4 (Registration No. 333-42653).
* Management contract or executive compensation plan or arrangement.
** Filed on August 29, 1997 as an exhibit to the Company's Registration
Statement on Form S-8 (Registration Statement No. 333-34695).
*** Filed as an exhibit to RTC's Form 10-Q for the quarter ended June 30,
1996.
(b) Reports on Form 8-K:
Current Report on Form 8-K, dated November 21, 1997, reporting under Item
5 the issuance by TRCH of a press release in connection with the Merger.
Current Report on Form 8-K, dated December 19, 1997, reporting under Item
7: (i) the Audited Financial Statements of the Nephrology Services Business
of Caremark International, Inc., (ii) the Audited Financial Statements of
New West Dialysis, Inc., (iii) the 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., (iv) Audited
Financial Statements of Dialysis Care of North Carolina, (v) Audited
Financial Statements of the Renal Dialysis Business of the Rogosin
Institute, Inc. and (vi) certain Unaudited Pro Forma Financial Statements.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Total Renal Care Holdings, Inc.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated
statements of income, of stockholders' equity, and of cash flows present
fairly, in all material respects, the financial position of Total Renal Care
Holdings, Inc. and its subsidiaries at December 31, 1996 and 1997, and the
results of their operations and their cash flows for the year ended May 31,
1995, the seven months ended December 31, 1995 and the years ended December
31, 1996 and 1997 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We did not audit the financial statements of Renal
Treatment Centers, Inc. (RTC) a wholly-owned subsidiary, which statements
reflect total assets of $293,948,000 and $585,494,000 at December 31, 1996 and
1997, respectively, and total revenues of $115,457,000; $86,752,000;
$225,077,000 and $322,792,000 for the year ended December 31, 1994, the six
months ended December 31, 1995, and the years ended December 31, 1996 and
1997, respectively. Those statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for RTC, is based solely on the
report of the other auditors. 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 and the report of other
auditors provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Seattle, Washington
February 16, 1998,
except as to the pooling of interests with
RTC which is as of May 14, 1998
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Renal Treatment Centers, Inc.
We have audited the accompanying consolidated balance sheets of Renal
Treatment Centers, Inc. and Subsidiaries as of December 31, 1996 and 1997, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the four years in the period ended December 31, 1997 and for
the six month period ended December 31, 1995 (not presented separately
herein). Our audits also included Financial Statement Schedule II of Renal
Treatment Centers, Inc. and its subsidiaries (not presented separately
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Wichita Dialysis Group and Healthcare Corporation and Affiliates for the year
ended December 31, 1994. Such Companies were acquired by the Company in
business combinations which have both been accounted for using the pooling of
interest method of accounting, as described in Note 2 to the financial
statements. The financial statements for the Companies reflect 22 percent of
total consolidated net patient revenue for the year ended December 31, 1994.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it related to the amounts
included for Wichita Dialysis Group and Healthcare Corporation and Affiliates,
is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Renal Treatment
Centers, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
four years in the period ended December 31, 1997 and for the six month period
ended December 31, 1995, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information required to included therein.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 14, 1998
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Healthcare Corporation and Affiliates
Nashville, Tennessee
We have audited the combined statements of income, stockholder's equity and
cash flows for the year ended December 31, 1994 of Healthcare Corporation and
Affiliates (the "Company"). These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such combined financial statements (not presented separately
herein) present fairly, in all material respects, the results of the Company's
operations and its cash flows for the year ended December 31, 1994 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Nashville, Tennessee
March 31, 1995
F-3
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
The Shareholders
Wichita Dialysis Group
Wichita, Kansas
We have audited the accompanying combined balance sheets of WICHITA DIALYSIS
GROUP as of December 31, 1993 and 1994, and the related combined statements of
operations, changes in stockholders' equity and cash flows for each of the two
years in the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of WICHITA DIALYSIS
GROUP as of December 31, 1993 and 1994 and the results of its operations and
its cash flows for each of the two years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
/s/ Baird, Kurtz & Dobson
_____________________________________
Baird, Kurtz & Dobson
July 14, 1995, except for Note 9 as to which the date is July 24, 1995
Wichita, Kansas
F-4
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
<S> <C> <C>
ASSETS
Cash and cash equivalents....................... $ 21,327,000 $ 6,143,000
Investments..................................... 41,202,000 0
Patient accounts receivable, less allowance for
doubtful accounts of $15,765,000 and
$30,695,000, respectively...................... 156,207,000 248,408,000
Receivable from Tenet........................... 347,000 534,000
Inventories..................................... 10,433,000 15,766,000
Deferred income taxes........................... 5,383,000 9,853,000
Prepaid expenses and other current assets....... 17,304,000 21,500,000
------------ --------------
Total current assets........................ 252,203,000 302,204,000
Property and equipment, net..................... 97,844,000 172,838,000
Notes receivable from related parties........... 1,919,000 11,344,000
Deferred taxes, noncurrent...................... 385,000
Other long-term assets.......................... 1,992,000 17,198,000
Intangible assets, net.......................... 311,263,000 774,266,000
------------ --------------
$665,221,000 $1,278,235,000
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable................................ $ 23,841,000 $ 33,283,000
Employee compensation and benefits.............. 16,349,000 25,430,000
Other accrued liabilities....................... 12,605,000 15,927,000
Current portion of long-term obligations........ 14,433,000 27,810,000
------------ --------------
Total current liabilities................... 67,228,000 102,450,000
------------ --------------
Long-term debt.................................. 233,126,000 723,782,000
------------ --------------
Deferred income taxes........................... 61,000 2,500,000
------------ --------------
Other long-term liabilities..................... 993,000 1,594,000
------------ --------------
Minority interests.............................. 4,714,000 19,079,000
------------ --------------
Commitments and contingencies (Notes 8, 9 and
13)
Stockholders' equity
Preferred stock ($.001 par value; 5,000,000
shares authorized; none outstanding)......... -- --
Common stock ($.001 par value, 195,000,000
shares authorized; 76,686,364 and 77,991,595
shares issued and outstanding)............... 77,000 78,000
Additional paid-in capital.................... 343,586,000 358,492,000
Notes receivable from stockholders............ (2,827,000) (3,030,000)
Retained earnings............................. 18,263,000 73,290,000
------------ --------------
Total stockholders' equity.................. 359,099,000 428,830,000
------------ --------------
$665,221,000 $1,278,235,000
============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
MAY 31, -------------------------- ----------------------------------------
1995 1994 1995 1995 1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues.. $214,425,000 $122,065,000 $176,463,000 $299,411,000 $498,024,000 $760,997,000
------------ ------------ ------------ ------------ ------------ ------------
Operating expenses
Facilities............. 146,560,000 83,370,000 115,219,000 198,654,000 344,180,000 510,990,000
General and
administrative........ 17,856,000 10,099,000 12,117,000 21,000,000 32,350,000 50,099,000
Provision for doubtful
accounts.............. 5,492,000 3,486,000 4,552,000 7,580,000 15,737,000 20,525,000
Depreciation and
amortization.......... 12,343,000 7,098,000 10,808,000 18,603,000 32,445,000 54,603,000
Merger costs........... 500,000 2,088,000 2,808,000
------------ ------------ ------------ ------------ ------------ ------------
Total operating
expenses.............. 182,251,000 104,053,000 143,196,000 247,925,000 427,520,000 636,217,000
------------ ------------ ------------ ------------ ------------ ------------
Operating income........ 32,174,000 18,012,000 33,267,000 51,486,000 70,504,000 124,780,000
Interest expense, net of
capitalized interest... (8,651,000) (4,472,000) (7,694,000) (12,830,000) (13,417,000) (28,214,000)
Interest income......... 800,000 634,000 863,000 1,029,000 3,858,000 3,175,000
------------ ------------ ------------ ------------ ------------ ------------
Income before income
taxes, minority
interests and
extraordinary item.... 24,323,000 14,174,000 26,436,000 39,685,000 60,945,000 99,741,000
Income taxes............ 7,827,000 4,759,000 9,931,000 13,841,000 22,960,000 40,212,000
------------ ------------ ------------ ------------ ------------ ------------
Income before minority
interests and
extraordinary item.... 16,496,000 9,415,000 16,505,000 25,844,000 37,985,000 59,529,000
Minority interests in
income of consolidated
subsidiaries........... 1,593,000 878,000 1,784,000 2,544,000 3,578,000 4,502,000
------------ ------------ ------------ ------------ ------------ ------------
Income before
extraordinary item.... 14,903,000 8,537,000 14,721,000 23,300,000 34,407,000 55,027,000
Extraordinary loss
related to early
extinguishment of debt,
net of tax............. 2,555,000 2,555,000 7,700,000
------------ ------------ ------------ ------------ ------------ ------------
Net income.............. $ 14,903,000 $ 8,537,000 $ 12,166,000 $ 20,745,000 $ 26,707,000 $ 55,027,000
============ ============ ============ ============ ============ ============
Earnings per common
share:
Net income before
extraordinary item.... $ 0.33 $ 0.20 $ 0.26 $ 0.43 $ 0.46 $ 0.71
Extraordinary loss..... (0.04) (0.05) (0.10)
------------ ------------ ------------ ------------ ------------ ------------
Net income............. $ 0.33 $ 0.20 $ 0.22 $ 0.38 $ 0.36 $ 0.71
============ ============ ============ ============ ============ ============
Weighted average number
of common shares
outstanding............ 45,301,000 42,682,000 57,109,000 53,936,000 74,042,000 77,524,000
============ ============ ============ ============ ============ ============
Earnings per common
share--assuming
dilution:
Net income before
extraordinary item.... $ 0.31 $ 0.19 $ 0.25 $ 0.40 $ 0.45 $ 0.69
Extraordinary loss..... (0.05) (0.04) (0.10)
------------ ------------ ------------ ------------ ------------ ------------
Net income............. $ 0.31 $ 0.19 $ 0.20 $ 0.36 $ 0.35 $ 0.69
============ ============ ============ ============ ============ ============
Weighted average number
of common shares and
equivalents
outstanding--assuming
dilution............... 47,506,000 44,879,000 60,693,000 57,744,000 77,225,000 79,975,000
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
NOTES
ADDITIONAL RECEIVABLE RETAINED
PAID-IN FROM EARNINGS
SHARES AMOUNT CAPITAL STOCKHOLDERS (DEFICIT) TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1994. 21,642,062 $22,000 $ 25,282,000 $ 40,296,000 $ 65,600,000
Shares issued to Tenet.. 4,888,890 4,000 4,000
Shares issued in change
of control:
DLJMB.................. 11,666,667 12,000 10,488,000 10,500,000
Employees.............. 2,077,778 2,000 1,868,000 $(995,000) 875,000
Shares issued in
offerings.............. 7,393,315 7,000 51,994,000 52,001,000
Stock issuance costs.... (2,172,000) (2,172,000)
Dividend paid to Tenet:
Cash................... (75,500,000) (75,500,000)
Intercompany receiv-
able.................. (6,152,000) (6,152,000)
Shares issued in
acquisitions........... 729,687 1,000 2,258,000 2,259,000
Shares issued to
employees and others... 1,275,420 1,000 1,147,000 (513,000) 635,000
Options exercised....... 476,275 1,000 315,000 316,000
Acquisition of treasury
stock.................. (5,797) (47,000) (47,000)
Dividend distribution... (1,473,000) (1,473,000)
Net income.............. 14,903,000 14,903,000
---------- ------- ------------ ----------- ------------ ------------
Balance at May 31, 1995. 50,144,297 50,000 91,133,000 (1,508,000) (27,926,000) 61,749,000
Net proceeds from
initial public
offering............... 11,500,000 12,000 98,282,000 98,294,000
Shares and options
issued in acquisitions. 1,574,616 1,000 8,453,000 8,454,000
Shares issued to
employees and others... 46,117 0 59,000 (13,000) 46,000
Shares issued to repay
debt................... 67,447 0 523,000 523,000
Options exercised....... 2,355,894 3,000 2,519,000 (1,330,000) 1,539,000
Conversion of
mandatorily redeemable
common stock........... 1,136,112 1,000 3,989,000 3,990,000
Payments on notes
receivable, net of
interest accrued....... 78,000 78,000
Income tax benefit
related to stock
options exercised...... 1,792,000 1,792,000
Acquisition of treasury
stock.................. (43,868) (347,000) (347,000)
Dividend distribution... (1,499,000) (1,499,000)
Adjustment to conform
fiscal years of RTC.... 6,377,000 6,377,000
Net income.............. 12,166,000 12,166,000
---------- ------- ------------ ----------- ------------ ------------
Balance at December 31,
1995................... 66,780,615 67,000 206,750,000 (2,773,000) (10,882,000) 193,162,000
Net proceeds from stock
offerings.............. 6,666,667 7,000 128,311,000 128,318,000
Shares issued in
acquisitions........... 161,095 2,810,000 2,810,000
Shares issued in
connection with merger. 2,422,534 2,000 105,000 3,097,000 3,204,000
Shares issued to
employees and others... 1,883 15,000 15,000
Shares issued to repay
debt................... 190,109 1,474,000 1,474,000
Options exercised....... 463,461 1,000 3,183,000 3,184,000
Interest accrued on
notes receivable, net
of payments............ (54,000) (54,000)
Income tax benefit
related to stock
options exercised...... 938,000 938,000
Dividend distribution... (659,000) (659,000)
Net income.............. 26,707,000 26,707,000
---------- ------- ------------ ----------- ------------ ------------
Balance at December 31,
1996................... 76,686,364 77,000 343,586,000 (2,827,000) 18,263,000 359,099,000
Shares issued in
acquisitions........... 17,613 273,000 273,000
Shares issued to
employees and others... 174,775 1,773,000 1,773,000
Options exercised....... 447,456 2,025,000 2,019,000
Shares issued to repay
debt................... 664,580 1,000 5,147,000 5,148,000
Interest accrued on
notes receivable, net
of payments............ (203,000) (203,000)
Income tax benefit
related to stock
options exercised...... 5,453,000 5,453,000
Grant of stock options.. 235,000 235,000
Issuance of treasury
stock to repay debt.... 807 6,000 6,000
Net income.............. 55,027,000 55,027,000
---------- ------- ------------ ----------- ------------ ------------
Balance at December 31,
1997................... 77,991,595 $78,000 $358,492,000 $(3,030,000) $ 73,290,000 $428,830,000
========== ======= ============ =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
MAY 31, -------------------------- ------------------------------------------
1995 1994 1995 1995 1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities
Net income............ $ 14,903,000 $ 8,537,000 $ 12,166,000 $ 20,745,000 $ 26,707,000 $ 55,027,000
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 12,343,000 7,098,000 10,808,000 18,603,000 32,445,000 54,603,000
Extraordinary loss.... 4,258,000 4,258,000 12,623,000
Non-cash interest..... 6,947,000 3,274,000 5,228,000 8,901,000 4,396,000
Deferred income taxes. (1,213,000) (481,000) (2,219,000) (2,233,000) (1,258,000) (5,131,000)
Provision for doubtful
accounts............. 5,492,000 3,486,000 4,552,000 7,580,000 15,737,000 20,525,000
Loss (gain) on
disposition of
property and
equipment............ (37,000) (3,000) (144,000) (146,000) (20,000) 76,000
Equity in (earnings)
losses from
affiliate............ (96,000) (51,000) (267,000) (267,000) 16,000 (40,000)
Minority interests in
income of
consolidated
subsidiaries......... 1,593,000 878,000 1,784,000 2,544,000 3,578,000 4,502,000
Changes in operating
assets and
liabilities, net of
effect of
acquisitions:
Accounts receivable.. (28,612,000) (16,919,000) (26,608,000) (40,247,000) (52,909,000) (109,811,000)
Inventories.......... (383,000) (804,000) (968,000) (267,000) (3,030,000) (1,843,000)
Prepaid expenses and
other current
assets.............. (1,363,000) (398,000) (277,000) (432,000) (8,805,000) (143,000)
Other long-term
assets.............. (300,000) (300,000) (9,166,000)
Accounts payable..... 1,618,000 2,842,000 (560,000) (3,194,000) 2,147,000 (992,000)
Employee compensation
and benefits........ 3,473,000 1,453,000 (354,000) 1,216,000 6,043,000 8,539,000
Other accrued
liabilities......... 5,115,000 1,262,000 3,757,000 6,867,000 (207,000) 2,791,000
Income taxes payable. (475,000) (483,000) 2,323,000 816,000 (6,315,000) 2,329,000
Other long-term
liabilities......... 107,000 1,214,000 916,000 (222,000) 13,000
------------ ------------ ------------ ------------ ------------- -------------
Net cash provided by
operating
activities......... 19,305,000 9,798,000 14,393,000 25,360,000 30,926,000 21,279,000
------------ ------------ ------------ ------------ ------------- -------------
Cash flow from
investing activities
Purchases of property
and equipment........ (8,935,000) (4,912,000) (8,896,000) (14,713,000) (41,740,000) (62,033,000)
Additions to
intangible assets.... (1,573,000) (734,000) (1,520,000) (3,086,000) (10,775,000) (35,224,000)
Cash paid for
acquisitions, net of
cash acquired........ (72,799,000) (29,532,000) (35,450,000) (56,911,000) (179,002,000) (455,090,000)
Purchase of
investments.......... (38,500,000) (26,223,000) (55,311,000)
Sale of investments... 38,589,000 38,589,000 2,662,000 14,109,000 41,202,000
Investment in
affiliate............ (972,000) (972,000) (46,000) (2,935,000)
Issuance of long-term
notes receivable..... (1,379,000) (1,379,000) (540,000) (12,502,000)
Proceeds from
disposition of
property and
equipment............ 62,000 28,000 244,000 495,000 236,000 365,000
------------ ------------ ------------ ------------ ------------- -------------
Net cash used in
investing
activities......... (83,156,000) (22,784,000) (47,973,000) (73,904,000) (273,069,000) (526,217,000)
------------ ------------ ------------ ------------ ------------- -------------
Cash flows from
financing activities
Advances from Tenet... 2,874,000 3,499,000
Proceeds from long-
term borrowings...... 18,539,000 14,987,000 258,000 258,000 107,000 4,511,000
Principal payments on
long-term
obligations.......... (14,414,000) (61,000) (2,094,000) (9,044,000) (8,649,000) (26,269,000)
Proceeds from
Convertible notes.... 121,250,000
Cash dividends paid to
Tenet................ (75,500,000) (75,500,000)
Payment of Dividend
distribution......... (1,473,000) (1,023,000) (417,000) (1,499,000) (659,000)
Net proceeds from debt
offering............. 66,841,000 66,140,000
Cash paid to retire
bonds................ (31,912,000) (31,912,000) (68,499,000)
Proceeds from bank
credit facility...... 13,253,000 31,981,000 50,916,000 239,835,000 505,000,000
Payment of bank credit
facility............. (4,000,000) (31,625,000) (31,625,000) (188,510,000)
Net proceeds from
issuance of common
stock................ 62,159,000 11,122,000 99,947,000 100,267,000 131,517,000 3,792,000
Income tax benefit
related to stock
options exercised.... 1,792,000 1,792,000 938,000 5,453,000
Cash received on notes
receivable from
stockholders......... 175,000 175,000 170,000 35,000
Distributions to
minority interests... (1,708,000) (723,000) (1,102,000) (2,087,000) (2,442,000) (2,768,000)
------------ ------------ ------------ ------------ ------------- -------------
Net cash provided by
financing
activities......... 66,571,000 18,441,000 67,003,000 77,241,000 225,058,000 489,754,000
------------ ------------ ------------ ------------ ------------- -------------
Net increase (decrease)
in cash............... 2,720,000 5,455,000 33,423,000 28,697,000 (17,085,000) (15,184,000)
Cash and cash
equivalents at
beginning of period... 2,109,000 4,260,000 4,989,000 9,715,000 38,412,000 21,327,000
------------ ------------ ------------ ------------ ------------- -------------
Cash and cash
equivalents at end of
period................ $ 4,829,000 $ 9,715,000 $ 38,412,000 $ 38,412,000 $ 21,327,000 $ 6,143,000
============ ============ ============ ============ ============= =============
Supplemental cash flow
information (Note 15)
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Total Renal Care Holdings, Inc. (the Company) operates kidney dialysis
facilities and provides related medical services in Medicare certified
dialysis facilities in various geographic sectors of the United States and
also in Argentina, Puerto Rico, Europe and Guam.
The Company was a wholly-owned subsidiary of Tenet Healthcare Corporation
("Tenet", formerly National Medical Enterprises, Inc.) until August 1994. In
August 1994, the Company completed a public offering of senior subordinated
notes and common stock, the proceeds of which were used to partially fund a
dividend to Tenet. Immediately after payment of the dividend, Donaldson,
Lufkin, Jenrette Merchant Banking Funding, Inc. and certain of its affiliates
(DLJMB) and certain members of management acquired newly issued common stock
of the Company to effect a change in control of the Company. Although there
was a change in control, the Company's accounts were not adjusted from their
historical bases due to the significant continuing ownership interest of
Tenet.
On February 27, 1998 the Company acquired Renal Treatment Centers, Inc.
("RTC"), with headquarters in Berwyn, Pennsylvania ("Merger"). In connection
with the Merger, the Company issued 34,565,729 shares of its common stock in
exchange for all of the outstanding shares of RTC common stock. RTC
shareholders received 1.335 shares of the Company's common stock for each
share of RTC common stock that they owned. The Company also issued 2,156,424
options in substitution for previously outstanding RTC stock options,
including 1,662,354 of the vested options that were exercised on the merger
date or shortly thereafter. In addition, the Company guaranteed $125,000,000
of RTC's 5 5/8% subordinated convertible notes. In conjunction with this
transaction, the Board and the Company's stockholders authorized an additional
140,000,000 share of common stock. The RTC merger transaction has been
accounted for as a pooling of interests and as such, the consolidated
financial statements have been restated to include RTC for all periods
presented. RTC has always used a December 31 year end while the Company used a
May 31 year end until May 31, 1995 after which it changed to a December 31
fiscal year end. Accordingly, the restated consolidated financial statements
combine the Company's balance sheet as of December 31, 1997 and 1996 and the
results of operations and cash flows for the twelve months ended December 31,
1997 and 1996, the seven month period ended December 31, 1995 and the twelve
months ended May 31, 1995 with RTC's balance sheet as of December 31, 1997 and
1996 and the results of operations and cash flows for the twelve months ended
December 31, 1997 and 1996, the six months ended December 31, 1995 and the
twelve months ended December 31, 1994, respectively. Net revenue and net
income of RTC for the six month period ended June 30, 1995 was $77,816,000 and
$6,377,000, respectively, with the net income reflected as an adjustment to
retained earnings effective July 1, 1995. See Note 17.
There were no transactions between the Company and RTC prior to the
combination and immaterial adjustments were recorded to conform RTC's
accounting policies. Certain reclassifications were made to the RTC financial
statements to conform to the Company's presentations.
Basis of presentation
The consolidated financial statements include the accounts of Total Renal
Care Holdings, Inc. and its wholly-owned and majority-owned corporate
subsidiaries and partnership investments. All significant intercompany
transactions and balances have been eliminated in consolidation.
In February 1996, RTC acquired, through two separate transactions,
Intercontinental Medical Services, Inc. ("IMS") and Midwest Dialysis Unit and
its affiliates (collectively "MDU"). Each of the transactions was separately
accounted for as a pooling-of-interests. The consolidated financial statements
include the results of IMS and MDU as of January 1, 1996. Prior year financial
statements have not been restated to reflect these transactions because the
effect of such transactions is not material.
F-9
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In July 1996, RTC acquired Panama City Artificial Kidney Center, Inc. and
North Florida Artificial Kidney Center, Inc. (collectively "the Group"). In
July 1995, RTC acquired Wichita Dialysis Center, P.A., Southeast Kansas
Dialysis Center, P.A., Garden City Dialysis Center, P.A. and Wichita Dialysis
Center, East, P.A. (the "Wichita Companies"). In March 1995, RTC acquired
Healthcare Corporation and its affiliates (collectively, "HCC"). These
transactions were accounted for as a pooling-of-interests. Accordingly, the
consolidated financial statements have been prepared to give retroactive
effect to the mergers.
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 amounts expected to be
realized from governmental and third-party payors, patients and others for
services provided. Appropriate allowances are established based upon credit
risk of specific third-party payors, historical trends and other factors and
are reflected in the provision for doubtful accounts as a component of
operating expenses in the consolidated statements of income.
During the years ended May 31, 1995, the seven months ended December 31,
1995 and the years ended December 31, 1996 and 1997, the Company received
approximately 72%, 61%, 65% and 61%, respectively, of its dialysis revenues
from Medicare and Medicaid programs. Accounts receivable from Medicare and
Medicaid amounted to $119,611,000 and $205,564,000 as of December 31, 1996,
and 1997, respectively. Medicare historically pays approximately 80% of
government established rates for services provided by the Company. The
remaining 20% is typically paid by state Medicaid programs, private insurance
companies or directly by the patients receiving the services.
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-governmental
third-party payors at established private rates. The Company has contracts for
the provision of dialysis services to members of certain managed care
organizations which generally include rate provisions at less than the
established private rates.
In August 1993, the provisions of the Omnibus Budget Reconciliation Act of
1993 ("OBRA 93") became effective. The OBRA 93 provisions were originally
interpreted by the Health Care Financing Administration (HCFA) to modify the
requirements that employer group health sponsored insurance plans (private
payors) be the primary payor for end-stage renal disease (ESRD) patients who
subsequently become dually entitled to Medicare benefits because of ESRD
following initial eligibility under age or disability provisions. In July
1994, HCFA instructed the Medicare fiscal intermediaries to retroactively
apply the provisions of OBRA 93 to August 10, 1993. In April 1995, HCFA issued
instructions of clarification to the fiscal intermediaries that it had
misinterpreted the OBRA regulations and that Medicare would continue as the
primary payor after dual eligibility was achieved under the ESRD provision. In
January 1998, a permanent injunction was issued by a federal court preventing
HCFA from retroactively applying its reinterpretation of the OBRA 93
regulations as unlawful retroactive rule-making. Accordingly, the Company has
recognized as revenue payments from private payors in excess of the revenue
previously recognized at lower rates which are attributable to such patients.
As a Medicare and Medicaid provider, the Company is subject to extensive
regulation by both the federal government and the states in which the Company
conducts its business. Due to heightened awareness of federal and state
budgets, scrutiny is being placed on the health care industry, potentially
subjecting the Company to regulatory investigation and changes in billing
procedures.
The provisions of the Kennedy-Kassebaum legislation issued January 1, 1997
may limit the Company's ability to pay for policy premiums for patients even
with proven financial hardship. However, the Company
F-10
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
believes that the bill did not intend to limit the Company's ability to pay
premiums for insurance coverage to third-party or governmental payors. In the
Fall of 1997, the Office of Inspector General of the HHS issued an advisory
opinion which would allow the Company to make grants to a foundation that may
provide for such premium payments on behalf of ESRD patients. In addition,
legislation is currently pending which would permit the Company to pay
premiums for insurance coverage for patients with proven financial hardship.
Cash and cash equivalents
Cash equivalents are highly liquid investments with original maturities of
three months or less.
Investments
Investments were comprised of investments in corporate bonds and government
and government agency securities. Investment income is recognized when earned
and realized gains and losses are recognized on a trade date basis, computed
based on original cost. The investments are stated at cost, which approximates
fair market value. All investments were managed by one financial institution.
Subsequent to December 31, 1996, all investments were liquidated, resulting in
an immaterial realized gain.
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 stated at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation and amortization expense are
computed using the straight-line method over the useful lives of the assets
estimated as follows: buildings, 20 to 40 years; leaseholds and improvements,
over the shorter of their estimated useful life or the lease term; and
equipment, 3 to 15 years.
Capitalized interest
The Company capitalizes interest associated with the costs of significant
facility expansion and construction. Interest is capitalized by using an
interest rate which is equal to the weighted average borrowing rate on the
Company's long-term debt. Approximately $685,000 in interest expense was
capitalized for the year ended December 31, 1997.
Intangible assets
Business acquisition costs allocated to patient lists are amortized
generally over five to eight years using the straight-line method. Business
acquisition costs allocated to covenants not to compete are amortized over the
terms of the agreements, typically three to eleven years, using the straight-
line method. Deferred debt issuance costs are amortized over the term of the
debt using the effective interest method. Pre-opening and development costs,
included in other intangible assets, are amortized over five years.
The excess of aggregate purchase price over the fair value of net assets of
businesses acquired is recorded as goodwill. Goodwill is amortized over 15 to
40 years using the straight-line method.
The carrying value of intangible assets is assessed for any permanent
impairment by evaluating the operating performance and future undiscounted
cash flows from operations of the underlying businesses. Adjustments are made
if the sum of the expected future undiscounted net cash flows is less than
book value. Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of (SFAS 121), requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable.
F-11
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income taxes
The Company accounts for income taxes using an asset and liability approach,
which requires recognition of deferred income taxes for all temporary
differences between the tax and financial reporting bases of the Company's
assets and liabilities based on enacted tax rates applicable to the periods in
which the differences are expected to be recovered or settled.
Following the change in control described above, the Company's results of
operations were no longer included in Tenet's consolidated federal and
applicable unitary state income tax returns. For financial reporting purposes,
the provision for income taxes through August 11 of the first quarter of
fiscal year 1995 was calculated as if the Company filed separate federal and
state income tax returns.
Minority interests
Minority interests represent the proportionate equity interest of other
partners and stockholders in the Company's consolidated entities which are not
wholly owned. As of December 31, 1997, these included 29 active partnerships
and corporations.
Stock-based compensation
During the year ended December 31, 1996, the Company adopted the Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123). This pronouncement requires the Company to elect to
account for stock-based compensation on a fair value based model or an
intrinsic value based model. The intrinsic value based model is currently used
by the Company and is the accounting principle prescribed by Accounting
Principles Board No. 25, Accounting for Stock Issued to Employees (APB 25).
Under this model, compensation cost is the excess, if any, of the quoted
market price of the stock at the date of grant or other measurement date over
the amount an employee must pay to acquire the stock. The fair value based
model prescribed by SFAS 123 requires the Company to value stock-based
compensation using an accepted valuation model. Compensation cost is measured
at the grant date based on the value of the award and would be recognized over
the service period which is usually the vesting period. SFAS 123 requires the
Company to either reflect the results of the valuation in the consolidated
financial statements or alternatively continue to apply the provisions of APB
25 and make appropriate disclosure of the impact of such valuation in the
accompanying notes to consolidated financial statements.
The Company has elected to continue to apply the provisions of APB 25 to
their employee stock-based compensation plans and therefore has included the
required disclosure of the pro forma impact on net income and earnings per
share of the difference between compensation expense using the intrinsic value
method and the fair value method (see Note 10).
Earnings per share
In February 1997, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). The Company adopted SFAS 128 in the fourth quarter of 1997, as required
by this pronouncement. SFAS 128 establishes standards for computing and
presenting earnings per share. Basic earnings per share is calculated by
dividing net income before extraordinary item, and net income by the weighted
average number of shares of common stock outstanding. Accordingly, earnings
per common share assuming dilution includes the dilutive effects of stock
options and warrants using the treasury stock method, in determining the
weighted average number of shares of common stock outstanding. Not currently
used in the calculation is the effect of the Company's convertible debt of
$125,000,000. For the years ended December 31, 1996 and 1997, the effect of
the convertible debt is antidilutive and as such, is not to be included in the
diluted EPS calculation. Earnings per share for all periods presented have
been restated following the provisions of SFAS 128.
F-12
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest rate swap agreements
The Company has entered into two interest rate swap agreements (Note 8) as a
means of managing its interest rate exposure. The Company has not entered
these agreements for trading or speculative purposes. These agreements have
the effect of converting the Company's line of credit obligation from a
variable rate to a fixed rate. Net amounts paid or received are reflected as
adjustments to interest expense. The counterparty to these agreements is a
large international financial institution. These interest rate swap agreements
subject the Company to financial risk that will vary during the life of the
agreements in relation to the prevailing market interest rates. The Company is
also exposed to credit loss in the event of non-performance by this
counterparty. However, the Company does not anticipate non-performance by the
other party, and no material loss would be expected from non-performance by
the counterparty.
Financial instruments
The Company's financial instruments consist primarily of cash, investments,
accounts receivable, notes receivable from related parties, accounts payable,
employee compensation and benefits, and other accrued liabilities. These
balances, as presented in the financial statements at December 31, 1996 and
1997, approximate their fair value. Borrowings under the Company's three
credit facilities, of which $590,000,000 was outstanding as of December 31,
1997, reflect fair value as they are subject to fees and rates competitively
determined in the marketplace. The fair value of the interest rate swap
agreement is based on the present value of expected future cash flows from the
agreement and was in a net payable position of $49,000 at December 31, 1997.
The fair value of convertible subordinated notes was approximately
$149,700,000 at December 31, 1997.
Foreign currency translation
The Company's principal operations outside of the United States are in
Argentina. The currency in Argentina floats with the U.S. dollar, therefore,
there are no significant foreign currency translation adjustments. The
Company's operations in Europe were nominal through December 31, 1997.
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
In December 1995, the Company changed its year-end to December 31 from May
31. The information presented for the seven months ended December 31, 1994 and
the year ended December 31, 1995 has not been audited. In the opinion of
management, the unaudited consolidated statements of income and of cash flows
include all adjustments consisting solely of normal recurring adjustments
necessary to present fairly the Company's consolidated results of operations
and cash flows for the seven months ended December 31, 1994 and the year ended
December 31, 1995.
Reclassifications
Certain prior year balances have been reclassified to conform to the current
year presentation.
F-13
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
<S> <C> <C>
Land.................... $ 473,000 $ 1,410,000
Buildings............... 5,428,000 6,463,000
Leaseholds and
improvements........... 40,162,000 78,956,000
Equipment............... 93,194,000 147,824,000
Construction in
progress............... 4,638,000 7,352,000
------------ ------------
143,895,000 242,005,000
Less accumulated
depreciation and
amortization........... (46,051,000) (69,167,000)
------------ ------------
Property and equipment,
net.................... $ 97,844,000 $172,838,000
============ ============
</TABLE>
Depreciation and amortization expense on property and equipment was
$5,315,000, $4,855,000, $13,903,000 and $22,160,000 for the year ended May 31,
1995, the seven months ended December 31, 1995, and the years ended December
31, 1996 and 1997, respectively.
3. INTANGIBLE ASSETS
A summary of intangible assets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
<S> <C> <C>
Goodwill......................................... $244,539,000 $624,740,000
Patient lists.................................... 58,119,000 122,463,000
Noncompetition agreements........................ 38,984,000 61,797,000
Deferred debt issuance costs..................... 9,122,000 23,415,000
Other............................................ 6,277,000 18,891,000
------------ ------------
357,041,000 851,306,000
Less accumulated amortization.................... (45,778,000) (77,040,000)
------------ ------------
$311,263,000 $774,266,000
============ ============
</TABLE>
Amortization expense applicable to intangible assets was $7,028,000,
$5,953,000, $18,542,000 and $32,443,000 for the year ended May 31, 1995, the
seven months ended December 31, 1995, and the years ended December 31, 1996
and 1997, respectively.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
<S> <C> <C>
Supplier rebates and other non-trade receivables.... $ 6,594,000 $10,886,000
Prepaid income taxes................................ 6,491,000 5,501,000
Prepaid expenses.................................... 4,084,000 4,910,000
Deposits............................................ 135,000 203,000
----------- -----------
$17,304,000 $21,500,000
=========== ===========
</TABLE>
F-14
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. NOTES RECEIVABLE FROM RELATED PARTIES
During the year ended December 31, 1997 the Company entered into various
agreements to provide funding for expansion to certain companies that provide
renal dialysis or renal related services. These notes receivables are secured
by the assets and operations of these companies. Approximately $9,205,000 was
outstanding and included in notes receivable from related parties at December
31, 1997. Additionally, a note receivable from the Company's President was
approximately $1,678,000 and $1,820,000 at December 31, 1996 and 1997,
respectively.
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
<S> <C> <C>
Customer refunds........................................ $ 6,068,000 $ 5,278,000
Accrued interest........................................ 4,185,000 5,395,000
Other................................................... 2,352,000 5,254,000
----------- -----------
$12,605,000 $15,927,000
=========== ===========
</TABLE>
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED YEARS ENDED DECEMBER 31,
MAY 31, DECEMBER 31, --------------------------
1995 1995 1996 1997
<S> <C> <C> <C> <C>
Current
Federal............. $ 7,602,000 $9,546,000 $ 20,655,000 $ 35,128,000
State............... 1,438,000 1,462,000 3,562,000 6,430,000
Foreign............. 1,070,000
Deferred
Federal............. (1,002,000) (943,000) (1,151,000) (1,963,000)
State............... (211,000) (134,000) (106,000) (453,000)
----------- ---------- ------------ ------------
$ 7,827,000 $9,931,000 $ 22,960,000 $ 40,212,000
=========== ========== ============ ============
</TABLE>
F-15
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Temporary differences which give rise to deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
<S> <C> <C>
Receivables, primarily allowance for doubtful
accounts.......................................... $4,860,000 $8,635,000
Intangibles, primarily patient lists............... 5,241,000 6,055,000
Property and equipment............................. 33,000
Accrued vacation................................... 831,000 2,114,000
Deferred compensation.............................. 107,000 67,000
Foreign NOL carryforward........................... 944,000
Foreign tax credit carryforward.................... 200,000
Other.............................................. 14,000 417,000
---------- ----------
Gross deferred tax assets.......................... 11,053,000 18,065,000
Depreciation and amortization...................... (1,976,000) (2,454,000)
Intangible assets.................................. (3,442,000) (6,712,000)
Change in tax accounting method.................... (313,000) (17,000)
---------- ----------
Gross deferred tax liabilities................... (5,731,000) (9,183,000)
Valuation allowance.............................. (1,144,000)
---------- ----------
Net deferred tax assets.......................... $5,322,000 $7,738,000
========== ==========
</TABLE>
The valuation allowance relates to deferred tax assets established under
SFAS No. 109 for foreign net operating loss carryforwards of $2.86 million and
foreign tax credit carryforwards of $200,000. These unutilized loss and credit
carryforwards which expire in 2002, will be carried forward to future years
for possible utilization. No benefit of these carryforwards has been
recognized on the financial statements.
The reconciliation between the Company's effective tax rate and the U.S.
federal income tax rate on income is as follows:
<TABLE>
<CAPTION>
SEVEN MONTHS YEARS ENDED
YEAR ENDED ENDED DECEMBER 31,
MAY 31, DECEMBER 31, --------------
1995 1995 1996 1997
<S> <C> <C> <C> <C>
Federal income tax rate............. 34.0% 35.0% 35.0% 35.0%
State taxes, net of federal benefit. 4.0 3.8 4.1 4.1
Foreign income taxes................ 0.4
Nondeductible amortization of
intangible assets.................. 0.9 1.5 1.1 0.8
Federal and state income tax benefit
from S corporation status of HCC... (4.0) (1.1) (0.3)
Valuation allowance................. 1.2
Other............................... (0.5) 1.1 0.1 0.7
---- ---- ------ ------
Effective tax rate.................. 34.4 40.3 40.0 42.2
Minority interests in partnerships.. (2.2) (2.7) (2.3) (1.9)
---- ---- ------ ------
Effective tax rate before minority
interests.......................... 32.2% 37.6% 37.7% 40.3%
==== ==== ====== ======
</TABLE>
F-16
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT
Long-term debt comprises:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
<S> <C> <C>
Credit Facilities............................... $ 85,000,000 $590,000,000
Convertible Subordinated Notes, 5 5/8%, due
2006........................................... 125,000,000 125,000,000
Acquisition obligations......................... 29,091,000 26,651,000
Capital lease obligations (Note 9).............. 6,716,000 5,180,000
Other........................................... 1,752,000 4,761,000
------------ ------------
247,559,000 751,592,000
Less current portion............................ (14,433,000) (27,810,000)
------------ ------------
$233,126,000 $723,782,000
============ ============
</TABLE>
Maturities of long-term debt for the years ending December 31 are as
follows:
<TABLE>
<S> <C>
1998....................................................... $ 27,810,000
1999....................................................... 3,180,000
2000....................................................... 45,775,000
2001....................................................... 60,507,000
2002....................................................... 60,305,000
Thereafter................................................. 554,015,000
</TABLE>
12% Senior Subordinated Discount Notes
In August 1994, the Company completed a public offering consisting of units
of 12% Senior Subordinated Discount Notes (the "Notes") and common stock.
Aggregate proceeds from the offering were $71,294,000, of which $900,000 was
allocated to the common stock, based upon the estimated value of the stock and
the remaining $70,394,000 to the Notes. The Notes had a stated maturity of
August 15, 2004 with the first semi-annual cash interest payment commencing on
February 15, 1998, at a rate of 12% per annum. Prior to February 15, 1998,
interest was paid in kind through amortization of the discount. The discount
was amortized using the effective interest rate of 12.39%.
On December 7, 1995, the Company redeemed 35% of the accreted value of the
Notes equaling $28,749,000 at a redemption premium of 111% for a total
redemption price of $31,912,000. An extraordinary loss on the early
extinguishment of debt of $4,258,000, net of income tax effect of $1,703,000,
was recorded during the seven months ended December 31, 1995. In July and
September 1996, the Company retired the remaining 65% of the outstanding Notes
for $68,499,000, including consent payments of $1,100,000. An extraordinary
loss on the early extinguishment of debt of $12,623,000, net of income tax
effect of $4,923,000, was recorded in the year ended December 31, 1996.
Credit Facilities
At December 31, 1997 and 1996, the Company had outstanding borrowings under
its revolving credit facilities of $353,000,000 and $85,000,000, respectively.
On October 24, 1997, the Company expanded its existing $400 million
revolving credit facility to an aggregate of $1,050,000,000 consisting of a
seven-year $800 million revolving credit facility and a ten-year $250 million
term facility. Under the $800 million revolving credit facility, up to
$100,000,000 may be used in
F-17
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
connection with letters of credit, and up to $15,000,000 in short-term funds
may be borrowed the same day notice is given to the banks under a "Swing Line"
facility. Up to $75,000,000 of the available letters of credit or borrowings
under the revolving credit facility may be utilized for foreign financing. In
general, borrowings under the credit facilities bear interest at one of two
floating rates selected by the Company: (i) the Alternate Base Rate (defined
as the higher of The Bank of New York's prime rate or the federal funds rate
plus 0.5%); or (ii) Adjusted LIBOR (defined as the 30-, 60-, 90- or 180-day
London Interbank Offered Rate, adjusted for statutory reserves) plus a margin
that ranges from 0.45% to 1.75% depending on the Company's leverage ratio.
Swing Line borrowings bear interest at either a rate negotiated by the Company
and the banks at the time of borrowing or, if no rate is negotiated and agreed
upon, the Alternate Base Rate.
Maximum borrowings under the $800 million revolving credit facility will be
reduced by $75,000,000 on September 30, 2001, $125,000,000 on September 30,
2002, and another $200,000,000 on September 30, 2003, and the revolving credit
facility terminates on September 30, 2004. Under the $250 million term
facility, payments of $2,500,000 shall be made each consecutive year beginning
on September 30, 1998 and continuing through September 30, 2006. The remaining
balance of $227,500,000 is due on September 30, 2007 when the term facility
terminates. The credit facilities contain financial and operating covenants
including, among other things, requirements that the Company maintain certain
financial ratios and satisfy certain financial tests, and imposes limitations
on the Company's ability to make capital expenditures, to incur other
indebtedness and to pay dividends. The Company is in compliance with all such
covenants.
The Company and certain of its subsidiaries, including Total Renal Care,
Inc. ("TRC"), TRC West, Inc., Total Renal Care Acquisition Corp., RTC, Renal
Treatment Centers-Mid Atlantic, Inc., Renal Treatment Centers-Northeast, Inc.,
Renal Treatment Centers-California, Inc., Renal Treatment Centers-West, Inc.
and Renal Treatment Centers-Southeast, Inc., have guaranteed the Company's
obligations under the credit facilities on a senior basis.
RTC also had a Credit Agreement which provided for a $350,000,000 revolving
credit/term facility available to fund acquisitions and general working
capital requirements, of which $237,000,000 and no amounts were outstanding as
of December 31, 1997 and December 31, 1996, respectively. Borrowings under the
RTC Credit Agreement bear interest at either (i) the agent bank's base rate
payable on a quarterly basis or (ii) a one-, two-, three-, or six-month period
Libor rate plus .50% to 1.50%, depending on RTC's ratio of consolidated debt
to annualized cash flow, payable at maturity, or, in the case of a six-month
period rate, at three months and maturity. The weighted average interst rate
of all loans outstanding at December 31, 1997 was 6.9%. The loans are
collateralized by all stock of RTC's subsidiaries and the assignment of all
intercompany notes. The RTC Credit Agreement was terminated and repaid with
borrowings under the TRCH Credit Facilities on February 27, 1998.
Convertible Subordinated Notes
In June 1996, RTC issued $125,000,000 of 5 5/8% Convertible Subordinated
Notes due 2006 (the "Notes"). The Notes are convertible, at the option of the
holder, at any time after August 12, 1996 through maturity, unless previously
redeemed or repurchased, into Common Stock at a conversion price of $25.62
principal amount per share, subject to certain adjustments. At any time on or
after July 17, 1999, all or any part of the Notes will be redeemable at the
Company's option on at least 15 and not more than 60 days notice as a whole
or, from time to time, in part at redemption prices ranging from 103.94% to
100% of the principal amount thereof, depending on the year of redemption,
together with accrued interest to, but excluding, the date fixed for
redemption.
The 5 5/8% subordinated convertible notes are issued by the Company's
wholly-owned subsidiary, Renal Treatment Centers, Inc. (RTC) and is guaranteed
by the Company. The following is summarized financial information of RTC:
F-18
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1996 1997
<S> <C> <C>
Cash and cash equivalents......................... $ 1,446,000 $ 743,000
Accounts receivable, net.......................... 65,198,000 95,927,000
Other current assets.............................. 54,273,000 19,484,000
------------ ------------
Total current assets............................ 120,917,000 116,154,000
Property and equipment, net....................... 39,578,000 72,777,000
Intangible assets, net............................ 130,646,000 384,529,000
Other assets...................................... 2,807,000 12,034,000
------------ ------------
Total assets.................................... $293,948,000 $585,494,000
============ ============
Current liabilities............................... $ 35,240,000 $ 62,673,000
Long-term debt.................................... 130,574,000 367,219,000
Other long-term liabilities....................... -- 444,000
Stockholder's equity.............................. 128,134,000 155,158,000
------------ ------------
$293,948,000 $585,494,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1995 1996 1997
<S> <C> <C> <C>
Net operating revenues............... $164,568,000 $225,077,000 $322,792,000
Total operating expenses............. 139,748,000 203,402,000 277,869,000
------------ ------------ ------------
Operating income..................... 24,820,000 21,675,000 44,923,000
Interest expense, net................ 2,557,000 4,384,000 11,802,000
------------ ------------ ------------
Income before income taxes........... 22,263,000 17,291,000 33,121,000
Income taxes......................... 7,632,000 6,609,000 15,071,000
------------ ------------ ------------
Net income........................... $ 14,631,000 $ 10,682,000 $ 18,050,000
============ ============ ============
</TABLE>
Acquisition Obligations
In 1994, pursuant to a business acquisition, RTC entered into an agreement
to pay $7,364,100 in annual installments commencing June 1995 through June
1998. Interest on the unpaid principal amount of the note accrued at an annual
rate of 6.50%, payable in arrears each June 1 from 1995 from 1998. The note
allowed the seller to convert the principal amount of the note into that
number of shares of common stock of RTC based upon the average daily closing
sale price of RTC stock during December 1994. During 1997, the note payable
was paid in full through the issuance of common stock.
In 1996, pursuant to a business acquisition, RTC entered into an agreement
to pay a total of $8,050,000 in one installment in January 1997. During 1997,
pursuant to several business acquisitions, RTC entered into several other
agreements to pay the various Sellers a total of $24,468,000 in one
installment in January 1998.
In conjunction with certain facility acquisitions, the Company issued three
letters of credit. Two of these were released on April 1, 1997. The remaining
letter of credit of $3,000,000 is being released to the seller in three annual
principal installments of $1,000,000 commencing January 1997. The Company has
also agreed to pay the seller interest at 6.5% on the outstanding principal.
As of December 31, 1996 and December 31, 1997 the aggregate amount
outstanding, including accrued interest, was $15,886,000 and $2,183,000
respectively.
F-19
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest Rate Swap Agreements
On November 25, 1996, the Company entered into a seven-year interest rate
swap agreement involving the exchange of fixed and floating interest payment
obligations without the exchange of the underlying principal amounts. At
December 31, 1997 the total notional principal amount of this interest rate
swap agreement was $100,000,000 and the effective interest rate thereon was
7.57%.
On July 24, 1997, the Company entered into a ten-year interest rate swap
agreement. At December 31, 1997 the total notional principal amount of this
interest rate swap agreement was $200,000,000 and the effective interest rate
thereon was 7.77%.
9. LEASES
The Company leases the majority of its facilities under noncancelable
operating leases expiring in various years through 2021. Most lease agreements
cover periods from five to ten years and contain renewal options of five to
ten years at the fair rental value at the time of renewal or at rates subject
to consumer price index increases since the inception of the lease. In the
normal course of business, operating leases are generally renewed or replaced
by other similar leases.
Future minimum lease payments under noncancelable operating leases for the
years ending December 31 are as follows:
<TABLE>
<S> <C>
1998...................................................... $ 28,282,000
1999...................................................... 25,461,000
2000...................................................... 23,350,000
2001...................................................... 20,740,000
2002...................................................... 19,588,000
Thereafter................................................ 74,233,000
------------
Total minimum lease payments.............................. $191,654,000
============
</TABLE>
Rental expense under all operating leases for the year ended May 31, 1995,
the seven months ended December 31, 1995 and the years ended December 31, 1996
and 1997 amounted to $7,425,000, $5,851,000, $15,901,000 and $24,589,000,
respectively.
The Company also leases certain equipment under capital lease agreements.
Future minimum lease payments under capital leases for the years ending
December 31 are as follows:
<TABLE>
<S> <C>
1998........................................................ $2,473,000
1999........................................................ 2,091,000
2000........................................................ 801,000
2001........................................................ 245,000
2002........................................................ 28,000
Thereafter.................................................. 176,000
----------
5,814,000
Less--Portion representing interest......................... 634,000
----------
Total capital lease obligation, including current portion of
$782,000................................................... $5,180,000
==========
</TABLE>
F-20
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net book value of fixed assets under capital lease was $5,932,000 and
$5,649,000 at December 31, 1996 and 1997, respectively. Capital lease
obligations are included in long-term debt (Note 8).
10. STOCKHOLDERS' EQUITY
Public offerings of common stock
On March 1, 1994, RTC completed a public offering whereby it issued
6,393,315 shares of common stock. The stock offering resulted in net proceeds
to RTC in the amount of $51,101,000 after the deduction of certain expenses.
On November 3, 1995, the Company completed an initial public offering of its
common stock at an offering price of $9.30 per share. The Company received net
proceeds of $98,294,000 after the deduction of underwriting discounts and
commissions and other expenses. The Company used net proceeds of $62,912,000
to redeem outstanding notes and to repay outstanding borrowings. The remainder
of the net proceeds was used for general corporate purposes, acquisitions, de
novo facility developments and other capital expenditures.
On April 3, 1996, and October 31, 1996 the Company completed equity offerings
of its 13,416,667 and 4,166,667 shares of common stock, respectively; 5,833,333
and 833,334, respectively, of which were sold for the Company's account and
7,583,333 and 3,333,333 respectively, of which were sold by certain of the
Company's stockholders. The net proceeds received by the Company of $109,968,000
and $18,350,000, respectively, were used to repay borrowings incurred under the
Company's Credit Facilities in connection with acquisitions, to repurchase and
subsequently retire its 12% senior subordinated debt, to finance other
acquisitions and de novo developments and for working capital and other
corporate purposes.
Change in shares, stock splits and dividends
In July 1994, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of common stock from 1,000 shares to
35,000,000 shares and to reduce the par value of such stock from $1.00 per
share to $.001 per share. Concurrent with this change, the Board of Directors
approved a 1,000-for-1 stock split. Shares held by Tenet were the only shares
affected by this action. Following the split, Tenet purchased an additional
4,888,890 shares of common stock for $4,400.
Immediately following the public debt offering of 12% senior subordinated
debt in August 1994, the Company paid Tenet a dividend totaling $81,652,000.
The dividend comprised $75,500,000 in cash and $6,152,000 in the forgiveness
of Tenet's intercompany balance due the Company. Subsequently, the Company has
not made, nor is it intending to make, dividends to its stockholders.
During October 1995 the Company's directors authorized an increase in the
authorized number of shares of common stock to 55,000,000, authorized
5,000,000 new shares of $.001 par value preferred stock, and approved a three-
into-two reverse stock split of the Company's common stock. All information in
these consolidated financial statements pertaining to shares of common stock
and per share amounts have been restated to retroactively reflect the stock
splits.
Dividend distributions paid during 1995 and 1996 were to the former
shareholders of entities acquired by RTC in transactions accounted for as
poolings of interests as described in Note 1.
F-21
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On September 30, 1997 the Company announced a common stock dividend to all
shareholders of record as of October 7, 1997, to be paid on October 20, 1997.
Each shareholder received two additional shares of common stock for each three
shares held. Fractional shares calculated as a result of the stock dividend
were paid out in cash in the amount of approximately $14,000. As such, all
share and per share amounts presented in the financial statements and related
notes thereto have been retroactively restated to reflect this dividend which
was accounted for as a stock split.
Earnings per share
The reconciliation of the numerators and denominators used to calculate
earnings per share for all periods presented is as follows:
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEAR ENDED
------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
MAY 31, 1995 1994 1995 1995 1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Income:
As reported............ $14,903,000 $8,537,000 $12,166,000 $20,745,000 $26,707,000 $55,027,000
=========== ========== =========== =========== =========== ===========
Net Income--assuming di-
lution:
As reported............ $14,903,000 $8,537,000 $12,166,000 $20,745,000 $26,707,000 $55,027,000
Add back interest on
RTC earnout note, tax
effected.............. 136,000 283,000 233,000 34,000
----------- ---------- ----------- ----------- ----------- -----------
$14,903,000 $8,537,000 $12,302,000 $21,028,000 $26,940,000 $55,061,000
=========== ========== =========== =========== =========== ===========
Applicable common
shares:
Average outstanding
during the period..... 45,376,000 42,812,000 57,237,000 54,058,000 74,172,000 77,649,000
Average mandatorily
redeemable common
shares outstanding
during the period..... 110,000
Reduction in shares in
connection with notes
receivable from
employees............. (185,000) (130,000) (128,000) (122,000) (130,000) (125,000)
----------- ---------- ----------- ----------- ----------- -----------
Weighted average number
of shares outstanding
for use in computing
earnings per share..... 45,301,000 42,682,000 57,109,000 53,936,000 74,042,000 77,524,000
Outstanding stock
options (based on the
treasury stock
method)............... 2,205,000 2,197,000 2,728,000 2,897,000 2,411,000 2,288,000
Dilutive effect of RTC
earnout note.......... 0 0 856,000 911,000 772,000 163,000
----------- ---------- ----------- ----------- ----------- -----------
Adjusted weighted
average number of
common and common
share equivalent
shares outstanding.... 47,506,000 44,879,000 60,693,000 57,744,000 77,225,000 79,975,000
=========== ========== =========== =========== =========== ===========
Earnings per common
share.................. $ 0.33 $ 0.20 $ 0.22 $ 0.38 $ 0.36 $ 0.71
Earnings per common
share--assuming
dilution............... $ 0.31 $ 0.19 $ 0.20 $ 0.36 $ 0.35 $ 0.69
</TABLE>
Stock-Based Compensation Plans
At December 31, 1997, the Company has four stock-based compensation plans,
which are described below.
1994 Stock Plan. In August 1994, the Company established the Total Renal
Care Holdings, Inc. 1994 Equity Compensation Plan (1994 Stock Plan) which
provides for awards of nonqualified stock options to purchase common stock and
other rights to purchase shares of common stock to certain employees,
directors, consultants and facility medical directors of the Company.
Under terms of the 1994 Stock Plan, the Company may grant awards for up to
8,474,078 shares of common stock. Original options granted generally vest on
the ninth anniversary of the date of grant, subject to accelerated
F-22
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
vesting in the event the Company meets certain performance criteria. In April
1996, the Company changed the vesting schedule for new options granted so that
options vest over four years from the date of grant. The exercise price of
each option equals the market price of the Company's stock on the date of
grant, and an option's maximum term is ten years.
Purchase rights to acquire 1,314,450 common shares for $.90-$3.60 per share
have been awarded to certain employees under the 1994 Stock Plan, the majority
of which were granted in connection with the change in control. All such
rights were exercised and the Company received notes for the uncollected
portion of the purchase proceeds. The notes bear interest at the lesser of The
Bank of New York's prime rate or 8%, are full recourse to the employees, and
are secured by the employees' stock. The notes are repayable four years from
the date of issuance, subject to certain prepayment requirements. At December
31, 1995, 1996 and 1997 the outstanding notes plus accrued interest totaled
$378,000, $227,000, and $212,000 respectively.
During the year ended May 31, 1995, 1,477,778 of the options issued to
purchase common stock were issued to the Company's President. These options
originally vested 50% over four years and 50% in the same manner as other
options granted under the 1994 Stock Plan. In September 1995, the Board of
Directors and stockholders agreed to accelerate the President's vesting period
and all of the options became 100% vested. Pursuant to this action, the
President exercised all of the stock options through issuance of a full
recourse note of $1,330,000 bearing interest at the lesser of prime or 8%.
Additionally, the President executed a full recourse note for $1,349,000
bearing interest at the lesser of prime or 8% per annum to meet his tax
liability in connection with the stock option exercise. In April 1996, this
note was increased by an additional $173,000. These notes are secured by other
shares of company stock and mature in September 1999 or upon disposition of
the common stock by the President.
1995 Stock Plan. In November 1995, the Company established the Total Renal
Care Holdings, Inc. 1995 Equity Incentive Plan (1995 Stock Plan) which
provides awards of stock options and the issuance of common shares subject to
certain restrictions to certain employees, directors and other individuals
providing services to the Company. There are 1,666,667 common shares reserved
for issuance under the 1995 Stock Plan. Options granted generally vest over
four years from the date of grant and an option's maximum term is ten years,
subject to certain restrictions. The Company generally issues awards with the
exercise prices equal to the market price of the Company's stock on the date
of grant.
1997 Stock Plan. In July 1997, the Company established the Total Renal Care
Holdings, Inc. 1997 Equity Compensation Plan (1997 Stock Plan) which provides
awards of stock options and the issuance of common shares subject to certain
restrictions to certain employees, directors and other individuals providing
services to the Company. There are 4,166,667 common shares reserved for
issuance under the 1997 Stock Plan. Options granted generally vest over four
years from the date of grant and an option's maximum term is ten years. The
Company generally issues awards with the exercise prices equal to the market
price of the Company's stock on the date of grant.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants for the seven months ended December 31, 1995, year ended December 31,
1996, and year ended December 31, 1997, respectively: dividend yield of 0
percent for all periods; weighted average expected volatility of 40.5%, 36.35%
and 35.12%; risk-free interest rates of 5.92%, 6.56% and 6.40% and expected
lives of six years for all periods.
F-23
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A combined summary of the status of the 1994 Stock Plan, 1995 Stock Plan,
and 1997 Stock Plan as of and for the seven months ended December 31, 1995 and
years ended December 31, 1996 and 1997, is presented below:
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------- ------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 2,863,890 $ .90 1,441,685 $ 1.91 3,118,394 $13.82
Granted................. 322,238 5.41 1,818,913 22.28 3,931,080 19.74
Exercised............... (1,744,443) .90 (111,647) .92 (275,620) 3.96
Forfeited............... (30,557) 2.43 (1,734,016) 22.46
---------- ----- --------- ------ ---------- ------
Outstanding at end of
year................... 1,441,685 $1.91 3,118,394 $13.82 5,039,838 $16.01
========== ===== ========= ====== ========== ======
Options exercisable at
year end............... 351,855 663,007 797,474
Weighted-average fair
value of options
granted during the
year................... $3.17 $10.52 $ 9.15
</TABLE>
Forfeitures and grants include the effects of modifications to the terms of
awards as if the original award was repurchased and exchanged for a new award
of greater value. On April 24, 1997, 1,649,735 shares were cancelled and
reawarded at the market price as of that date. The new awards vest annually
over 3 years on the anniversary date of the new award.
The following table summarizes information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------
WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EERCISE PRICESX OPTIONS CONTRACTUAL LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$ 0.01-$ 5.00 950,917 6.8 years $ 1.15 666,411 $ 1.08
$ 5.01-$10.00 19,735 7.0 years 5.44 10,531 5.47
$10.01-$15.00 13,890 7.8 years 11.82 7,230 11.82
$15.01-$20.00 3,561,952 8.8 years 18.64 99,969 17.49
$20.01-$25.00 100,002 9.3 years 22.07 2,083 20.73
$25.01-$30.00 300,283 9.6 years 26.20 11,250 28.43
$30.01-$35.00 93,059 9.8 years 30.79 0 0
--------- --------- ------ ------- ------
5,039,838 8.5 years $16.01 797,474 $ 3.73
========= ========= ====== ======= ======
</TABLE>
RTC Stock Plan. In September 1990, RTC established a stock plan, which
provided for awards of incentive and nonqualified stock options to certain
directors, officers, employees and other individuals. In 1995 and 1996, the
stock plan was amended to increase the number of RTC common shares available
for grant to 3,253,395 and 4,321,395 respectively. In addition, in 1996, RTC
established an option plan for outside directors pursuant to which
nonqualified stock options to purchase up to 80,100 shares of RTC common stock
were reserved for issuance.
Options granted generally vest from three to five years and an option's
maximum term is ten years, subject to certain restrictions. Incentive stock
options were granted at an exercise price not less than the fair market value
of RTC's common stock on the date of grant. Nonqualified stock options were
permitted to be granted as low as 50% of market value, subject to certain
floor restrictions. Accordingly, compensation expense for the difference
between the fair market value and the exercise price for nonqualified stock
options is recorded over the vesting period of such options.
F-24
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In May 1995, RTC granted 559,557 incentive stock options to certain
directors, officers and employees of RTC. These options were granted at an
exercise price equal to the fair market value of RTC's common stock on the
date of the grant. These options vest over three years. Certain options
totaling 407,175 vest upon the earlier of attainment of predetermined earnings
per share targets or nine years.
In March 1996, RTC granted 821,495 incentive stock options to certain
directors, officers and employees of RTC. These options were granted at an
exercise price equal to the fair market value of RTC's common stock on the
date of the grant and vest over four years. Certain options aggregating
231,398 vest upon the earlier of attainment of predetermined earnings per
share targets or nine years.
In December 1996, RTC granted 133,500 incentive stock options to an officer
of the Company. These options were granted at an exercise price equal to the
fair market value of RTC's common stock on the date of the grant and were
fully vested on the grant date.
Also in December 1996, RTC granted 40,050 non-qualified stock options in
connection with the release of RTC from certain obligations. The options were
granted at an exercise price equal to the fair market value of RTC's common
stock on the date of grant and were fully vested as of December 31, 1997.
During 1997, RTC granted 1,182,543 incentive stock options to certain
directors, officers and employees. These options were granted at an exercise
price equal to the fair market value of RTC's common stock on the dates of the
grants and vest in two to five years.
In 1997 RTC granted 26,700 options to acquisition consultants for covenants
not to compete. These options were granted at a price equal to the fair market
values of RTC's common stock on the date of the grant and were valued at
$235,000.
Upon consummation of the Merger, all outstanding options were converted to
The Total Renal Care Holdings Inc. Special Purpose Plan (Special Purpose Plan)
options. The Special Purpose Plan provides for awards of incentive and
nonqualified stock options in exchange for outstanding RTC stock plan options.
The Special Purpose Plan options have the same provisions and terms as the RTC
stock plan, including acceleration provisions upon certain sale of assets,
mergers and consolidations. On the Merger date, there was a conversion of
2,156,426 of the Company's options. Further, options for 1,305,738 shares
became fully vested due to change in control accelerated vesting provisions
which were contained in the original grants. Options for 1,662,356 shares were
exercised subsequent to the Merger date. The Stock Plan Committee has the
option of accelerating the remaining options upon certain sale of assets,
mergers and consolidations.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
the six months ended December 31, 1995, the year ended December 31, 1996 and
the year ended December 31, 1997, respectively: dividend yield of 0 percent
for all periods; weighted average expected volatility of 29.3%, 29.3% and 43%;
risk free interest rates of 6.39%, 6.18% and 6.55%; and expected lives of
6.00, 5.63, 4.29 years.
F-25
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the RTC Stock Plan as of and for the six months
ended December 31, 1995, and the years ended December 31, 1996 and 1997, is
presented below:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------------------- ------------------------- -------------------------
WEIGHTED AVG. WEIGHTED AVG. WEIGHTED AVG.
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 1,985,756 $ 6.62 1,658,601 $ 7.33 2,293,483 $11.09
Granted................. 4,197 12.55 997,376 16.50 1,182,543 16.84
Exercised............... (326,012) 3.08 (351,814) 8.73 (171,830) 7.60
Forfeited............... (5,340) 8.43 (10,680) 9.09 (19,004) 13.09
--------- ------ --------- ------ --------- ------
Outstanding at end of
year................... 1,658,601 $ 7.33 2,293,483 $11.09 3,285,192 $13.33
========= ====== ========= ====== ========= ======
Options exercisable at
year end............... 995,018 966,903 1,785,169
========= ========= =========
Weighted-average fair
value of options
granted during the
year................... $ 4.90 $ 7.35 $ 9.70
========= ========= =========
</TABLE>
The following table summarizes information about RTC fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ------------------------
WEIGHTED AVG.
RANGE OF REMAINING WEIGHTED AVG. WEIGHTED AVG.
EERCISE PRICESX OPTIONS CONTRACTUAL LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
3.75- 7.49. 703,307 4.87 $ 6.49 614,100 $ 6.58
7.50-11.24. 516,430 7.61 8.58 274,262 8.58
11.25-14.99. 4,197 7.89 12.55 4,197 12.55
15.00-18.74. 1,995,843 9.09 16.59 868,580 16.70
18.75-22.50. 65,415 9.33 20.13 24,030 20.37
--------- ---- ------ --------- ------
3,285,192 7.96 $13.33 1,785,169 $12.01
========= ==== ====== ========= ======
</TABLE>
Stock Purchase Plan. In November 1995, the Company established the Total
Renal Care Holdings, Inc. Employees Stock Purchase Plan (the Stock Purchase
Plan) which entitles qualifying employees to purchase up to $25,000 of common
stock during each calendar year. The amounts used to purchase stock are
typically accumulated through payroll withholdings and through an optional
lump sum payment made in advance of the first day of the Plan. The Stock
Purchase Plan allows employees to purchase stock for the lesser of 100% of the
fair market value on the first day of the purchase right period or 85% of the
fair market value on the last day of the purchase right period. Except for the
initial purchase right period, which began on November 3, 1995 (the date of
completion of the initial public offering, and ended on December 31, 1996),
each purchase right period begins on January 1 or July 1, as selected by the
employee and ends on December 31. Payroll withholdings related to the Stock
Purchase Plan, included in accrued employee compensation and benefits, were
$411,000, $1,790,000 and $1,120,307 at December 31, 1995, 1996, and 1997
respectively. Subsequent to December 31, 1996, and December 31, 1997, 174,775
and 49,060 shares, respectively were issued to satisfy the Company's
obligations under the Plan.
For the November 1995 and July 1996 purchase right periods the fair value of
the employees' purchase rights were estimated on the beginning date of the
purchase right period using the Black-Scholes model with the
F-26
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
following assumptions for grants on November 3, 1995 and July 1, 1996,
respectively: dividend yield of 0 percent for both periods; expected
volatility of 36.6 percent for both periods; risk-free interest rate of 5.5
and 6.6 percent and expected lives of 1.2 and 0.5 years. Using these
assumptions, the weighted-average fair value of purchase rights granted on
November 3, 1995 and July 1, 1996 is $2.86 and $7.37, respectively.
The fair value of the January 1, 1997 and July 1, 1997 purchase right period
were not estimated at December 31, 1997 because of the employee's ability to
withdraw from participation through December 31.
Pro forma net income and earnings per share. The Company applied APB Opinion
No. 25 and related interpretations in accounting for all of its plans.
Accordingly, no compensation cost has been recognized for its fixed stock
option plans and its stock purchase plan. Had compensation cost for the
Company's stock-based compensation plans been determined consistent with SFAS
123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
DEC. 31, 1995 1996 1997
<S> <C> <C> <C>
Income before extraordinary item.... $14,038,000 $28,830,000 $43,282,000
Extraordinary loss related to early
extinguishment of debt, net of tax. 2,555,000 7,700,000 0
----------- ----------- -----------
Net income........................ $11,483,000 $21,130,000 $43,282,000
=========== =========== ===========
Earnings per common share
Income before extraordinary item.. $ 0.25 $ 0.39 $ 0.56
Extraordinary loss................ (0.05) (0.10) 0
----------- ----------- -----------
Net income........................ $ 0.20 $ 0.29 $ 0.56
=========== =========== ===========
Weighted average number of common
shares and equivalents outstanding. 56,465,000 74,042,000 77,524,000
=========== =========== ===========
Earnings per common share--assuming
dilution:
Income before extraordinary item.. $ 0.20 $ 0.25 $ 0.55
Extraordinary loss................ (0.05) ( 0.09)
----------- ----------- -----------
Net income........................ $ 0.15 $ 0.16 $ 0.55
=========== =========== ===========
Weighted average number of common
shares and equivalents
outstanding--assuming dilution..... 58,220,000 83,477,000 78,982,000
=========== =========== ===========
</TABLE>
Stock issued to employees outside of plans
In connection with the change in control in August 1994, the Company awarded
its Chief Executive Officer and Chief Operating Officer rights to purchase
1,855,555 and 222,222 common shares, respectively, at a purchase price of $.90
per share. These rights were awarded outside of the 1994 Stock Plan in
connection with the respective employment agreements. All such purchase rights
were made and the Company received notes totaling $935,000 for the uncollected
portion of the purchase proceeds. The notes bear terms similar to those issued
in connection with the 1994 Stock Plan.
11. TRANSACTIONS WITH RELATED PARTIES
The Company provides dialysis services to Tenet hospital patients under
agreements with terms of one to three years. The contract terms are comparable
to contracts with unrelated third parties. Included in the receivable from
Tenet are amounts related to these services of $347,000 and $534,000 at
December 31, 1996 and 1997,
F-27
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respectively. Net operating revenues received from Tenet for these services
were $2,130,000, $1,332,000, $2,260,000 and $2,640,000 for the year ended May
31, 1995, the seven months ended December 31, 1995, and the years ended
December 31, 1996 and 1997, respectively.
Prior to October 1994, company employees were eligible to participate in the
Tenet Retirement Savings Plan, a defined contribution retirement plan,
covering substantially all full-time employees, whereby employees'
contributions to the plan were matched by the Company up to certain limits.
Defined contributions made by the Company for the year ended May 31, 1995
amounted to $152,000.
Prior to December 1994, the Company was insured for employee health coverage
and a substantial portion of workers' compensation through self-insurance
programs administered by Tenet. Additionally, all professional and general
liability risks were insured by a wholly owned subsidiary of Tenet. The
Company has no liability for employee health coverage claims incurred prior to
December 31, 1994 or workers' compensation claims prior to August 11, 1994.
Insurance expense under these programs amounted to $1,409,000 for year ended
May 31, 1995.
DLJMB
An affiliate of DLJMB was the underwriter for public debt offering of units,
comprising Senior Subordinated Discount Notes and common stock, and DLJMB
participated in the change in control transaction in which DLJMB and certain
employees acquired 74% of the Company. Fees for these transactions were
$2,496,000 and $1,160,000, respectively. During the seven months ended
December 31, 1995 and the year ended December 31, 1996 an affiliate of DLJMB
also was one of several underwriters for the initial public offering of common
stock as well as the two additional public stock offerings in which the
Company issued 11,500,000, 11,666,667 and 833,334 shares, respectively. Fees
for these transactions to DLJMB or its affiliates were $7,245,000, $5,075,000,
and $780,000, respectively. Effective with the August 1997 public offering of
common stock, DLJMB and it's affiliates are no longer considered a related
party.
12. EMPLOYEE BENEFIT PLAN
The Company has a savings plan (the Plan) for substantially all employees,
which has been established pursuant to the provisions of Section 401(k) of the
Internal Revenue Code (IRC). The Plan provides for employees to contribute
from 1% to 15% of their base annual salaries on a tax-deferred basis not to
exceed IRC limitations. The Company, in its sole discretion, may make a
contribution under the Plan each fiscal year as determined by the Board of
Directors. This contribution was allocated for the year ended May 31, 1995 to
each participant not eligible for participation in the 1994 Stock Plan (Note
9) in proportion to the compensation paid during the year and the length of
employment for each of the participants. For the year ended May 31, 1995, the
Company accrued contributions under the Plan in the amount of $200,000. The
Company did not make any contributions subsequent to May 31, 1995.
RTC has a defined contribution savings plan covering substantially all of
their employees. RTC's contributions under the plan were approximately
$231,002, $462,004, $548,471, and $1,069,283 for the six months ended December
31, 1995 and for the years ended December 31, 1995, 1996 and 1997,
respectively. Effective July 1, 1998, the plan will be terminated and merged
into the Company's plan.
13. CONTINGENCIES
The Company's laboratory subsidiary is presently the subject of a Medicare
carrier review. The carrier has requested certain medical and billing records
for certain patients and the Company has provided the requested records. The
carrier has not informed the Company of the reason for or the exact nature or
scope of this review.
F-28
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
14. MERGERS AND ACQUISITIONS
Mergers:
During the fiscal years 1996 and 1995, RTC completed the following five
mergers. There were no mergers in 1994 and 1997.
Merger with Group:
On July 23, 1996, RTC acquired the Group. The two dialysis facilities
acquired are located in Florida and serviced a total of approximately 185
patients as of the acquisition date. The transaction was accounted for under
the pooling-of-interest method of accounting. In the transaction, RTC issued
482,377 shares of its common stock in exchange for all of the outstanding
stock of the Group.
Merger with MDU:
On February 29, 1996, RTC acquired MDU. The 11 dialysis facilities acquired
are located in Oklahoma and serviced approximately 317 patients as of the
acquisition date. The transaction was accounted for under the pooling-of-
interests method of accounting. In the transaction, RTC issued 767,168 shares
of its common stock in exchange for all of the outstanding stock of MDU.
Merger with IMS:
On February 20, 1996, RTC acquired IMS. The four dialysis facilities
acquired are located in Hawaii and served a total of approximately 444
patients as of the acquisition date. The transaction was accounted for under
the pooling-of-interests method of accounting. In the transaction, RTC issued
1,047,464 shares of its common stock in exchange for all of the outstanding
stock of IMS.
Merger with The Wichita Companies:
On August 1, 1995, RTC acquired Wichita Dialysis Center, P.A, Southeast
Kansas Dialysis Center, P.A., Garden City Dialysis Center, P.A. and Wichita
Dialysis Center, East, P.A. (the "Wichita Companies"). All of the facilities
acquired are located in Kansas and serviced approximately 355 patients as of
the acquisition date. The transaction was accounted for under the pooling-of-
interest method of accounting. In the transaction, RTC issued 1,558,920 shares
of its common stock in exchange for all of the outstanding stock of the
Wichita Companies.
Merger with HCC:
On March 6, 1995, RTC completed its acquisition of Healthcare Corporation
and its affiliates (collectively, "HCC"). The 13 facilities acquired from HCC
are located in Missouri, Illinois, North Carolina, Florida and Washington,
D.C. and serviced approximately 720 patients as of the acquisition date. The
transaction was accounted for under the pooling-of-interests method of
accounting. In the transaction, RTC issued 2,292,222 shares of its common
stock in exchange for all of the outstanding stock of HCC.
F-29
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The consolidated financial statements give retroactive effect to the mergers
with the Group, the Wichita Companies and HCC and include the Group, the
Wichita Companies, and HCC for all periods presented. The consolidated
financial statements include the operations of IMS and MDU as of January 1,
1996. The following is a summary of the separate and combined results of
operations for periods prior to the mergers (dollars in thousands):
<TABLE>
<CAPTION>
POOLING RTC
RTC COMPANIES* COMBINED
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31:
1996:
Net patient revenue.......................... $217,529 $ 7,548 $225,077
Income from operations....................... 20,495 1,180 21,675
Net income................................... 9,985 697 10,682
1995:
Net patient revenue.......................... $150,467 $14,101 $164,568
Income from operations....................... 23,319 1,501 24,820
Net income................................... 13,239 1,392 14,631
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995:
Net patient revenue.......................... $ 83,685 $ 3,067 $ 86,752
Income from operations....................... 14,289 512 14,801
Net income................................... 7,709 545 8,254
</TABLE>
- --------
* Includes pooling transactions only for period prior to acquisition. Activity
subsequent to acquisition dates is included in RTC.
Acquisitions
Beginning in August 1994, the Company implemented an acquisition strategy
which through the year ended December 31, 1997 has resulted in the acquisition
of 231 facilities providing services to ESRD patients, more than 180 programs
providing acute hospital in-patient dialysis services, two laboratories, a
vascular access management company and a clinical research company
specializing in renal and renal related services. In addition, during this
period the Company developed forty-six de novo facilities, entered into a
management contract covering an additional two unaffiliated facilities, and
purchased the minority interest at one of its existing facilities. The
following is a summary for all acquisitions that were accounted for as
purchases.
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, DECEMBER 31, -------------------------
1995 1995 1996 1997
<S> <C> <C> <C> <C>
Number of facilities
acquired................... 24 16 67 119
Number of common shares
issued..................... 729,687 1,574,616 102,645 17,613
Numbers of mandatorily
redeemable shares issued... 1,136,112
Number of common stock
options issued............. 66,667
Estimated fair value of
common shares issued....... $ 2,259,000 $ 8,403,000 $ 1,830,000 $ 273,000
Estimated fair value of
mandatorily redeemable
shares issued.............. 3,990,000
Estimated fair value of
common stock options
issued..................... 51,000
Payable to former owners of
acquired facility.......... 1,243,000
Acquisition obligations
(Note 8)................... 15,886,000
Cash paid................... 73,330,000 35,450,000 179,002,000 455,090,000
----------- ----------- ------------ ------------
Aggregate purchase price.... $79,579,000 $45,147,000 $196,718,000 $455,363,000
=========== =========== ============ ============
</TABLE>
F-30
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The assets and liabilities of the acquired entities in the preceding table
were recorded at their estimated fair market values at the dates of
acquisition. The initial allocations of fair market value are preliminary and
subject to adjustment during the first year following the acquisition. The
results of operations of the facilities and laboratories have been included in
the Company's financial statements from their respective acquisition dates.
These initial allocations were as follows:
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED YEARS ENDED DECEMBER 31,
MAY 31, DECEMBER 31, --------------------------
1995 1995 1996 1997
<S> <C> <C> <C> <C>
Identified intangibles.. $16,277,000 $10,321,000 $ 34,682,000 $ 87,498,000
Goodwill................ 57,520,000 32,144,000 135,456,000 366,121,000
Tangible assets......... 9,973,000 7,414,000 44,265,000 47,053,000
Liabilities assumed..... (4,191,000) (4,732,000) (17,685,000) (45,309,000)
----------- ----------- ------------ ------------
Total purchase price.. $79,579,000 $45,147,000 $196,718,000 $455,363,000
=========== =========== ============ ============
</TABLE>
The following summary, prepared on a pro forma basis, combines the results
of operations as if the acquisitions had been consummated as of the beginning
of each of the periods presented, after including the impact of certain
adjustments such as amortization of intangibles, interest expense on
acquisition financing and income tax effects.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net revenues..................................... $794,235,000 $930,960,000
Net income before extraordinary items............ $ 50,253,000 $ 70,539,000
Pro forma net income per share before
extraordinary items............................. $ 0.68 $ 0.91
Pro forma net income per share before
extraordinary items--assuming dilution.......... $ 0.65 $ 0.88
</TABLE>
The unaudited pro forma results are not necessarily indicative of what
actually would have occurred if the acquisitions had been completed prior to
the beginning of the periods presented. In addition, they are not intended to
be a projection of future results and do not reflect any of the synergies,
additional revenue-generating services or direct facility operating expense
reduction that might be achieved from combined operations.
F-31
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. SUPPLEMENTAL CASH FLOW INFORMATION
The table below provides supplemental cash flow information:
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, DECEMBER 31 DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
<S> <C> <C> <C> <C>
Cash paid for:
Income taxes............ $8,970,000 $3,599,000 $30,069,000 $37,402,000
Interest................ 1,346,000 1,919,000 5,730,000 25,039,000
Noncash investing and
financing activities:
Notes receivable for
issuance of common
stock.................. 1,508,000 1,330,000
Dividend of Tenet
intercompany
receivable............. 6,152,000
Estimated value of stock
and options issued in
acquisitions........... 6,249,000 5,335,000 2,810,000 273,000
Fixed assets acquired
under capital lease
obligations............ 542,000 2,021,000 3,670,000 829,000
Contribution to
partnerships........... 1,111,000 943,000 2,318,000
Issuance of common stock
in connection with earn
out note............... 7,364,000 523,000 1,474,000 5,148,000
Issuance of common stock
in connection with IMS
and MDU mergers........ 3,204,000
Grant of stock options
in connection with
covenant not to
compete................ 235,000
</TABLE>
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summary unaudited quarterly financial data for the years ended December 31,
1996 and 1997 is as follows (in thousands, except per share amounts).
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996 1997 1997 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating revenues.. $98,493 $117,719 $133,707 $148,105 $157,937 $179,715 $197,749 $225,596
Operating income........ 12,512 17,547 18,437 22,008 24,596 28,694 33,287 38,203
Income before
extraordinary item..... 5,655 9,002 8,731 11,019 11,788 13,470 14,632 15,137
Net income (loss)....... 5,655 9,002 1,031 11,019 11,788 13,470 14,632 15,137
Earning (loss) per
common share:
Income before
extraordinary item per
share.................. 0.08 0.12 0.12 0.14 0.15 0.17 0.19 0.19
Extraordinary loss...... 0.00 0.00 0.11 0.00 0.00 0.00 0.00 0.00
Net income (loss) per
share.................. 0.08 0.12 0.01 0.14 0.15 0.17 0.19 0.19
Earnings (loss) per
common share--assuming
dilution:
Income before
extraordinary item per
share.................. 0.08 0.11 0.11 0.14 0.15 0.17 0.18 0.19
Extraordinary loss...... 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00
Net income (loss) per
share.................. 0.08 0.11 0.01 0.14 0.15 0.17 0.18 0.19
</TABLE>
F-32
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. SUBSEQUENT EVENTS
As described in Note 1, on February 27, 1998 the Company acquired Renal
Treatment Centers, Inc. ("RTC") in a transaction accounted for as a pooling of
interests. The results of operations for TRCH and the combined amounts
presented in the consolidated financial statements follow:
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED DEC. 31, YEARS ENDED DECEMBER 31,
MAY 31, -------------- -------------------------
1995 1995 1996 1997
<S> <C> <C> <C> <C>
Net operating revenues
TRCH.................. $ 98,968,000 $ 89,711,000 $272,947,000 $438,205,000
RTC................... 115,457,000 86,752,000 225,077,000 322,792,000
------------ ------------ ------------ ------------
$214,425,000 $176,463,000 $498,024,000 $760,997,000
============ ============ ============ ============
Net income before
extraordinary item
TRCH.................. $ 4,852,000 $ 6,467,000 $ 23,725,000 $ 36,977,000
RTC................... 10,051,000 8,254,000 10,682,000 18,050,000
------------ ------------ ------------ ------------
$ 14,903,000 $ 14,721,000 $ 34,407,000 $ 55,027,000
============ ============ ============ ============
Net income after
extraordinary item
TRCH.................. $ 4,852,000 $ 3,912,000 $ 16,025,000 $ 36,977,000
RTC................... 10,051,000 8,254,000 10,682,000 18,050,000
------------ ------------ ------------ ------------
$ 14,903,000 $ 12,166,000 $ 26,707,000 $ 55,027,000
============ ============ ============ ============
</TABLE>
In connection with the RTC merger, fees and expenses incurred or anticipated
which are relative to the merger and to the integration of the combined
companies will be expensed as required under the pooling of interests
accounting method. Such fees and expenses amounted to $92,835,000 in the first
fiscal quarter of 1998. The charge includes financial advisory, legal,
accounting and other direct transaction costs, payments under severance and
employment agreements and other costs associated with certain compensation
plans and costs to combine the two operations. Costs to combine operations
include the impairment of certain systems and equipment, elimination of
duplicate departments and facilities, and other costs associated with planning
and executing the merger of operations. Included in other long term assets at
December 31, 1997 are $8,247,000 of deferred merger expenses.
F-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Renal Treatment Centers, Inc.
We have audited the accompanying consolidated balance sheets of Renal
Treatment Centers, Inc. and Subsidiaries as of December 31, 1996 and 1997, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Renal Treatment Centers, Inc. and Subsidiaries as of December 31, 1996 and
1997, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 14, 1998
F-34
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 1,445,798 $ 742,959
Investments...................................... 41,202,123 --
Accounts receivable, net of allowance for
doubtful accounts of $7,853,350 in 1996 and
$18,802,377 in 1997............................. 65,198,524 95,926,837
Inventories...................................... 4,388,290 7,023,557
Income tax receivable............................ 3,782,890 3,708,195
Deferred taxes................................... 2,149,718 3,561,178
Prepaid expenses and other current assets........ 2,749,497 4,610,104
Deferred merger expenses......................... -- 27,376,000
------------ ------------
Total current assets........................... 120,916,840 142,948,830
------------ ------------
Property and equipment (net of accumulated
deprecation of $19,691,015 in 1996 and $30,247,762
in 1997).......................................... 39,578,245 72,776,980
Intangibles (net of accumulated amortization of
$51,014,614 in 1997 and $32,934,871 in 1996)...... 130,645,378 385,331,951
Deferred taxes, non-current........................ 2,807,064 3,566,279
------------ ------------
Total assets................................... $293,947,527 $604,624,040
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................ $ 12,369,365 $ 25,788,509
Accounts payable................................. 11,341,983 12,441,487
Accrued compensation............................. 3,838,502 8,766,781
Accrued expenses................................. 4,051,614 10,981,771
Accrued merger expenses.......................... -- 19,129,972
Accrued interest................................. 3,638,874 4,694,136
------------ ------------
Total current liabilities...................... 35,240,338 81,802,656
------------ ------------
Long-term debt, net................................ 130,573,685 367,663,194
Stockholders equity:
Preferred stock, $.01 par value, 5,000,000
shares, authorized; none issued................. -- --
Common stock, $.01 par value, 45,000,0000 shares
authorized; issued and outstanding, 24,430,256
and 24,056,785 shares in 1996 and 1997,
respectively.................................... 244,303 250,568
Additional paid-in capital....................... 87,890,138 96,852,405
Retained earnings................................ 40,393,139 58,442,895
------------ ------------
128,527,580 155,545,868
Less treasury stock; 37,202 shares in 1996 and
36,598 in 1997, at cost........................... (394,076) (387,678)
------------ ------------
Total stockholders' equity..................... 128,133,504 155,158,190
------------ ------------
Total liabilities and stockholders' equity..... $293,947,527 $604,624,040
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Net patient revenue.................. $164,568,392 $225,076,500 $322,792,052
Facilities costs..................... 111,677,282 160,192,504 218,375,586
------------ ------------ ------------
Operating profit................. 52,891,110 64,883,996 104,416,466
General and administrative expenses.. 9,156,107 13,082,689 20,385,996
Provision for doubtful accounts...... 4,760,678 10,240,920 11,629,308
Depreciation and amortization
expense............................. 12,066,461 17,076,827 27,478,658
Merger expenses...................... 2,087,542 2,808,247 --
------------ ------------ ------------
Income from operations............... 24,820,322 21,675,313 44,922,504
Interest income...................... (156,150) (1,980,513) (735,019)
Interest expense..................... 2,713,599 6,364,556 12,536,604
------------ ------------ ------------
Income before income taxes........... 22,262,873 17,291,270 33,120,919
Provision for income taxes........... 7,632,069 6,608,871 15,071,163
------------ ------------ ------------
Net income........................... $ 14,630,804 $ 10,682,399 $ 18,049,756
============ ============ ============
Basic earnings per share data:
Earnings per share................. $ 0.67 $ 0.44 $ 0.73
Weighted average common stock...... 21,868,067 24,230,156 24,884,268
Diluted earnings per share data:
Diluted earning per share.......... $ 0.65 $ 0.43 $ 0.70
Weighted average common stock and
dilutive securities............... 23,095,135 25,646,300 25,972,541
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------- PAID-IN RETAINED ------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 21,449,029 $214,491 $78,319,626 $14,141,396 (4,342) $ (47,219) $ 92,628,294
Exercise of common stock
options................ 458,016 4,580 1,297,693 1,302,273
Issuance of common stock
to repay debt.......... 50,522 505 522,524 523,029
Acquisition of treasury
stock.................. (32,860) (346,857) (346,857)
Dividend distribution... (1,499,330) (1,499,330)
Issuance of common stock
in connection with
purchase of businesses. 252,122 2,521 3,117,226 3,119,747
Net income.............. 14,630,804 14,630,804
---------- -------- ----------- ----------- ------- --------- ------------
Balance, December 31,
1995................... 22,209,689 222,097 83,257,069 27,272,870 (37,202) (394,076) 110,357,960
Exercise of common
stock options......... 263,531 2,636 3,071,112 3,073,748
Issuance of common
stock in connection
with mergers.......... 1,814,632 18,146 89,137 3,096,370 3,203,653
Issuance of common
stock to repay debt... 142,404 1,424 1,472,820 1,474,244
Dividend distribution.. (658,500) (658,500)
Net income............. 10,682,399 10,682,399
---------- -------- ----------- ----------- ------- --------- ------------
Balance, December 31,
1996................... 24,430,256 244,303 87,890,138 40,393,139 (37,202) (394,076) 128,133,504
Exercise of common
stock options......... 128,716 1,287 1,305,039 1,306,326
Issuance of common
stock to repay debt... 497,813 4,978 5,143,495 5,148,473
Issuance of treasury
stock to repay debt... 604 6,398 6,398
Grant of stock options
for covenant not to
compete............... 235,000 235,000
Income tax benefit from
stock compensation.... 2,278,733 2,278,733
Net income............. 18,049,756 18,049,756
---------- -------- ----------- ----------- ------- --------- ------------
Balance, December 31,
1997................... 25,056,785 $250,568 $96,852,405 $58,442,895 (36,598) $(387,678) $155,158,190
========== ======== =========== =========== ======= ========= ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-37
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income....................... $ 14,630,804 $ 10,682,399 $ 18,049,756
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization.. 12,131,465 17,120,149 27,853,778
Deferred income taxes.......... (1,506,643) (1,924,546) (2,170,675)
Provision for doubtful
accounts...................... 4,760,678 10,240,920 11,629,308
(Gain)/loss on sale of
equipment..................... -- -- 66,159
Equity in (earnings) losses
from affiliate................ (266,592) 15,910 (40,163)
Deferred start up costs........ -- -- (6,295,995)
Deferred merger costs.......... -- -- (9,165,945)
Changes in operating assets and
liabilities, net of effect of
companies acquired:
Accounts receivable.......... (19,444,635) (19,969,828) (35,095,883)
Inventories.................. (117,157) (1,054,213) (514,604)
Prepaid expenses and other
current assets.............. 99,673 (1,167,162) (1,551,300)
Accounts payable and accrued
expenses.................... 585,345 4,579,714 6,755,358
Income tax
payable/receivable.......... 1,747,000 (6,001,582) 2,329,297
------------ ------------- -------------
Net cash provided by
operating
activities................ 12,619,938 12,521,761 11,849,091
------------ ------------- -------------
Cash flows from investing
activities:
Capital expenditures............. (7,899,143) (16,319,461) (25,530,381)
Purchase of businesses, net of
cash required................... (11,646,992) (40,791,079) (254,465,618)
Purchase of investments.......... -- (55,311,044) --
Sale of investments.............. 2,661,944 14,108,921 41,202,123
Other............................ (1,904,962) (3,254,313) (5,304,647)
------------ ------------- -------------
Net cash used in investing
activities................ (18,789,153) (101,566,976) (244,098,523)
------------ ------------- -------------
Cash flows from financing
activities:
Proceeds from long-term debt
borrowings...................... 19,621,000 30,500,000 240,959,286
Proceeds from issuance of 5 5/8%
Convertibles Subordinated Notes
due 2006........................ -- 121,250,000 --
Repayments of debt............... (7,355,102) (70,760,938) (9,498,577)
Proceeds from issuance of common
stock........................... 1,302,272 3,073,748 1,306,326
Payment of dividend distribution. (1,499,330) (658,500) --
Payment on capital lease
obligations..................... (450,985) (1,144,718) (1,220,442)
------------ ------------- -------------
Net cash provided by
financing activities...... 11,617,855 82,259,592 231,546,593
------------ ------------- -------------
Net increase (decrease) in cash and
cash equivalents.................. 5,448,640 (6,785,623) (702,839)
Cash and cash equivalents at
beginning of year................. 2,782,781 8,231,421 1,445,798
------------ ------------- -------------
$ 8,231,421 $ 1,445,798 $ 742,959
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
Renal Treatment Centers, Inc. (the "Company") was incorporated in Delaware
on August 11, 1988 for the purpose of providing dialysis services for End
Stage Renal Disease ("ESRD") patients in an outpatient environment or in the
patient's home. Additionally, the Company has acquired or entered into
inpatient dialysis service agreements with hospitals to provide dialysis
treatments on an inpatient basis.
For the years ended December 31, 1995, 1996, 1997, approximately 68%, 62%
and 68%, respectively, of the Company's net patient revenue was received from
Medicare and Medicaid and other state administered programs. Accordingly, the
Company's operations and cash flows are dependent upon the rate and manner of
payment for patient services from third party payors, and, in particular,
federal and state administered programs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation:
In February 1996, the Company acquired, through two separate transactions,
Intercontinental Medical Services, Inc. ("IMS") and Midwest Dialysis Unit and
its affiliates (collectively "MDU"). Each of the transaction s was separately
accounted for as a pooling-of-interest. The consolidated financial statements
of the Company include the results of IMS and MDU as of January 1, 1996. Prior
year financial statements have not been restated to reflect these transactions
because the impact on the Company's financial statements of such transactions
is not material.
In July 1996, the Company acquired Panama City Artificial Kidney Center,
Inc. and North Florida Artificial Kidney Center, Inc. (collectively "the
Group"). The transaction was accounted for as a pooling-of-interests.
Accordingly, the consolidated financial statements of the Company have been
prepared to give retroactive effect to the merger with the Group, since this
transactions, when combined with the MDU and IMS pooling transaction, was
deemed to be a material transaction.
Certain amounts included in the accompanying consolidated financial
statements and related footnotes reflect the use of estimates based on
assumptions made by management. Actual amounts could differ from these
estimates.
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
Principles of Consolidation:
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Patient Revenue and Allowances:
Patient revenue is recorded at established rates on the accrual basis in the
period during which the service is provided. Appropriate allowances to give
recognition to third-party arrangements are also recorded on the accrual
basis. Payments to the Company under Medicare and Medicaid and other state
administered programs are based upon a predetermined specific fee per
treatment.
The Company does not believe there are any significant credit risks
associated with receivables from Medicare and Medicaid and other state
administered programs. The allowance for doubtful accounts consists of
management's estimate of amounts that may prove uncollectible from secondary
insurers or patients.
F-39
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Facilities Costs:
Facilities costs include medical supplies, including Erythropoietin ("EPO")
supplies, salaries and benefits associated directly with the facility and all
other costs incurred by the facilities.
General and Administrative Costs:
General and administrative costs include all costs generated by the
Company's corporate offices (Berwyn and Argentina) and the regional office.
These costs include, but are not limited to, corporate and regional salaries,
rent for these office, accounting for legal fees and depreciation of major
information systems items such as the Company's accounting package and billing
systems.
Inventories:
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market and consist of dialysis supplies and prescription
drugs, such as EPO.
Property, Equipment, Depreciation and Amortization:
Property and equipment are stated at cost or respective fair market value at
the time of acquisition. Equipment under capital lease is stated at the lower
of the fair market value or net present value of the minimum lease payments at
inception of the lease. Depreciation and amortization are provided by the
straight-line method over the estimated useful lives of the related assets or
lease terms for leasehold improvements and equipment under capital lease. The
estimated useful life is five to seven years for furniture, fixtures and
equipment, 39 years for buildings, and five to ten years for leasehold
improvements. Costs of maintenance and repairs are charged to expense as
incurred. Sales and retirements of depreciable assets are recorded by removing
the related cost and accumulated depreciation from the accounts. Gains and
losses on sales and retirements of assets are reflected in the results of
operations.
Goodwill:
Goodwill, the excess of aggregate purchase price over the fair value of the
net assets of businesses acquired, is amortized on a straight-line basis,
principally over 25 to 40 years.
Patient Lists:
Patient lists, arising from the purchase of renal dialysis centers, are
stated at cost and amortized over eight years using the straight-line method.
Non-Compete Agreements
Non-compete agreements, arising from acquisitions, are stated at cost and
amortized over the terms of the agreements, on a straight-line basis, over
periods from three to eleven years.
Other Intangibles:
Other intangibles consist of debt issuance costs, inpatient dialysis service
agreements, deferred financing costs, start-up costs and organization costs
and are stated at cost and amortized over one to eleven years using the
straight-line method. Start up costs consist principally of rent and utility
expenses incurred prior to the commencement of dialysis treatments , as well
as costs relating to the development of the renal diagnostic lab. These costs
are amortized over one year commencing with the start of operations.
F-40
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Management evaluates intangible assets for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. This evaluation is based on certain financial
indicators, such as historical and future ability to generate income from
operations.
Income Taxes:
The Company and its subsidiaries file a consolidated federal tax return and
separate company state tax returns. Income taxes are provided for under the
liability method in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
Under the liability method, deferred income taxes are recognized for the tax
consequences of differences between amounts reported for financial reporting
and income tax purposes by applying enacted statutory tax rates applicable to
future years to such differences. Deferred taxes results primarily from
temporary differences arising from a difference between the book life and the
tax life of certain assets. Under SFAS No. 109, the effect on deferred taxes
of a change in tax rates is recognized in income in the period that includes
the enactment date.
Federal (and state, where applicable) income taxes for HCC and the Wichita
Companies (which are later defined) and IMS, MDU and the Group prior to their
acquisition by the Company were payable personally by the stockholders of IMS,
MDU and the Group pursuant to S Corporation elections under the Internal
Revenue Code.
Prepaid Expenses:
Prepaid expenses and other current assets consist primarily of prepaid
insurance, rent, various taxes and other current assets.
Merger Expenses:
The Company's policy is to defer expenses incurred in connection with a
pooling-of-interests transaction until the transaction is effective or
terminated. The Company has deferred merger expenses consisting of severances
and bonus payments, accounting and legal fees in connection with the merger
with Total Renal Care Holdings, Inc.
Accrued Expenses:
Accrued expenses consist principally of uninvoiced inventory, accrued
insurance and other miscellaneous accruals.
Estimated Medical Professional Liability Claims:
The Company is insured for medical professional liability claims through a
commercial insurance policy. It is the Company's policy that a provision for
estimated premium adjustments to medical professional liability costs be made
for asserted and unasserted claims and based upon the Company's experience.
Provision for such professional liability claims includes estimates of the
ultimate costs of such claims. To date, the Company's loss experience with
such claims has not been significant. Accordingly, no such provision has been
made.
Cash Equivalents:
For the purpose of reporting cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents. The cash of the Company is principally held by one financial
institution.
F-41
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Investments:
Investments were comprised of investments in corporate bonds and government
and government agency securities. Investment income is recognized when earned
and realized gains and losses are recognized on a trade date basis, computed
based on original cost. At December 31, 1996, the investments were stated at
cost, which approximated fair market value. All investments were managed by
one financial institution. Subsequent to December 31, 1996, all investments
were liquidated, resulting in an immaterial realized gain.
Earnings per Share:
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share" ("SFAS No. 128"). This statement
establishes standards for computing and presenting earnings per share. Basic
earnings per share is calculated using the average shares of common stock
outstanding, while diluted earnings per share reflects the potential dilution
that could occur if stock options and the earn out note were exercised. The
Company adopted SFAS No. 128 in the fourth quarter of 1997. Prior period
earnings per share amounts have been restated in accordance with SFAS No. 128.
For the years ended December 31, 1996 and 1997, the Notes are not used in the
calculation as the affect is antidilutive and, as such, is not to be included
in the diluted earnings per share calculation.
3. BUSINESS ACQUISITIONS:
During the fiscal years 1996 and 1995, the Company completed the following
five mergers. There were no mergers in 1997.
Merger with Group:
On July 23, 1996, the Company acquired the Group. The two dialysis
facilities acquired are located in Florida and serviced a total of
approximately 185 patients as of the acquisition date. The transaction was
accounted for under the pooling-of-interest method of accounting. In the
transaction, the Company issued 482,377 shares of its common stock in exchange
for all of the outstanding stock of the Group. The acquisition was structured
as a merger of the Group into a subsidiary of the Company.
Merger with MDU:
On February 29, 1996, the Company acquired MDU. The 11 dialysis facilities
acquired are located in Oklahoma and serviced approximately 317 patients as of
the acquisition date. The transaction was accounted for under the pooling-of-
interests method of accounting. In the transaction, the Company issued 767,168
shares of its common stock in exchange for all of the outstanding stock of
MDU. The acquisition was structured as a merger of MDU into a subsidiary of
the Company.
Merger with IMS:
On February 20, 1996, the Company acquired IMS. The four dialysis facilities
acquired are located in Hawaii and served a total of approximately 444
patients as of the acquisition date. The transaction was accounted for under
the pooling-of-interests method of accounting. In the transaction, the Company
issued 1,047,464 shares of its common stock in exchange for all of the
outstanding stock of IMS. The acquisition was structured as a merger of IMS
into a subsidiary of the Company.
Merger with The Wichita Companies:
On July 25, 1995, with an effective date of August 1, 1995, the Company
acquired Wichita Dialysis Center, P.A, Southeast Kansas Dialysis Center, P.A.,
Garden City Dialysis Center, P.A. and Wichita Dialysis Center,
F-42
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
East, P.A. (the "Wichita Companies"). All of the facilities acquired are
located in Kansas and serviced approximately 355 patients as of the
acquisition date. The transaction was accounted for under the pooling-of-
interest method of accounting. In the transaction, the Company issued
1,558,920 shares of its common stock in exchange for all of the outstanding
stock of the Wichita Companies. The acquisition was structured as a merger of
the Wichita Companies into a subsidiary of the Company.
Merger with HCC:
On March 6, 1995, the Company completed its acquisition of Healthcare
Corporation and its affiliates (collectively, "HCC"). The 13 facilities
acquired from HCC are located in Missouri, Illinois, North Carolina, Florida
and Washington, D.C. and serviced approximately 720 patients as of the
acquisition date. The transaction was accounted for under the pooling-of-
interests method of accounting. In the transaction, the Company issued
2,292,222 shares of its common stock in exchange for all of the outstanding
stock of HCC. The acquisition was structured as a merger of HCC into several
subsidiaries of the Company.
The consolidated financial statements give retroactive effect to the mergers
with the Group, the Wichita Companies and HCC and include combined operations
of the Company, the Group, the Wichita Companies, and HCC for all periods
presented. The consolidated financial statements include the operations of IMS
and MDU as of January 1, 1996. The following is a summary of the separate and
combined results of operations for periods prior to the mergers (dollars in
thousands):
<TABLE>
<CAPTION>
RENAL TREATMENT
CENTERS, INC. POOLING
FOR THE YEAR ENDED DECEMBER 31, (PRIOR TO POOLINGS) COMPANIES* COMBINED
<S> <C> <C> <C>
1996:
Net patient revenue............... $217,529 $ 7,548 $225,077
Income from operations............ 20,495 1,180 21,675
Net income........................ 9,985 697 10,682
1995:
Net patient revenue............... $150,467 $14,101 $164,568
Income from operations............ 23,319 1,501 24,820
Net income........................ 13,239 1,392 14,631
</TABLE>
*Includes pooling transactions only for period prior to acquisition.
Activity subsequent to acquisition dates is included in Renal Treatment
Centers, Inc. (Prior to Poolings).
The acquisitions described below have been accounted for under the purchase
method. The results of these acquisitions have been included in the results of
operations from the applicable acquisition dates. The purchase price of the
acquisitions has been principally allocated to fixed assets, patient lists,
non-compete agreements and goodwill. Goodwill, which is the excess of the
purchase price over the fair value of net assets, acquired in connection with
the 1997 acquisitions was approximately $195,753,000 and is being amortized on
a straight-line basis over 25 to 40 years.
1997 Acquisitions:
During 1997, the Company acquired 68 dialysis centers, including several
acute care contracts, in eight states and in the Republic of Argentina for
approximately $254.5 million in cash and the incurrence and assumption of
approximately $30.3 million of liabilities. The acquisitions included
substantially all of the non-current assets and certain current assets and the
assumptions of certain liabilities and capital leases of the centers.
F-43
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1996 Acquisitions:
During 1996, the Company acquired 10 dialysis centers, including several
acute care contracts, in five states and the Republic of Argentina for
approximately $40.8 million in cash and the incurrence and assumption of
approximately $9.2 million of liabilities. The acquisitions included
substantially all of the non-current assets, certain current assets, and the
assumption of certain liabilities and capital leases of the centers.
1995 Acquisitions:
During 1995, the Company acquired nine dialysis centers, including several
acute care contracts, in five states for approximately $11.6 million in cash,
302,644 shares of unregistered common stock, valued at approximately $3.6
million at the respective dates of acquisition, and the assumption of
approximately $118,000 of liabilities. The acquisitions included substantially
all of the non-current assets and certain current assets and the assumption of
certain liabilities and capital leases of the centers.
The following unaudited pro forma information combines the consolidated
results of operations of the Company and the companies acquired in the
acquisitions that were accounted for under the purchase method during 1996 and
1997 as if they had occurred on January 1, 1996:
<TABLE>
<CAPTION>
1996 1997
(UNAUDITED)
<S> <C> <C>
Net patient revenue............................... $392,693,934 $410,867,897
Income from operations............................ 66,008,136 69,340,597
Net income........................................ 33,253,134 30,729,309
Basic earnings per share.......................... 1.37 1.23
</TABLE>
The pro forma results do not necessarily represent results that would have
occurred if these acquisitions had taken place at the beginning of each
period, nor are they indicative of the results of future combined operations.
4. PROPERTY AND EQUIPMENT:
A summary of property and equipment and related accumulated depreciation as
of December 31, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Furniture, fixtures and equipment................... $37,340,616 $64,470,386
Leasehold improvements.............................. 14,699,276 29,866,581
Capital leases...................................... 5,679,063 5,537,470
Building............................................ 1,450,239 2,188,239
Land................................................ 100,066 962,066
----------- -----------
59,269,260 103,024,742
Less accumulated depreciation....................... 19,691,015 30,247,762
----------- -----------
$39,578,245 $72,776,980
=========== ===========
</TABLE>
Capital leases primarily consist of dialysis equipment. Depreciation expense
was $3,846,294, $6,601,223 and $9,732,842 for the years ended December 31,
1995, 1996 and 1997, respectively.
F-44
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INTANGIBLE ASSETS:
Intangible assets consist of goodwill and other identifiable intangibles. A
summary of intangible assets and related accumulated amortization as of
December 31, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Goodwill.......................................... $ 92,416,850 $290,758,339
Patient lists..................................... 45,354,310 100,042,510
Non-compete agreements............................ 16,005,803 22,919,553
Other intangibles, principally debt issuance
costs............................................ 9,803,286 16,330,168
Start-up costs.................................... -- 6,295,995
------------ ------------
163,580,249 436,346,565
Less accumulated amortization..................... 32,934,871 51,014,614
------------ ------------
$130,645,378 $385,331,951
============ ============
</TABLE>
Intangible assets principally arose from acquisitions. Amortization expense
was $8,220,167, $10,475,604 and $17,745,816 for the years ended December 31,
1995, 1996, and 1997, respectively.
6. DEBT:
Debt as of December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Revolving credit/term facility payable in 16
equal quarterly installments................... -- $237,000,000
Note, payable to The Dialysis Centers Limited
Liability Company in four annual installments
of variable amounts commencing on June 1, 1995. $ 5,154,870 --
Various sellers' notes due January 1997......... 8,050,000 --
Various sellers' notes due January 1998......... -- 24,467,922
Convertible Subordinated Notes, 5 5/8%, due
2006........................................... 125,000,000 125,000,000
Other........................................... 1,144,297 4,312,363
Capital lease obligations....................... 3,593,883 2,671,418
------------ ------------
142,943,050 393,451,703
Less current portion............................ (12,369,365) (25,788,509)
------------ ------------
$130,573,685 $367,663,194
============ ============
</TABLE>
The Company's Credit Agreement provides for a $350,000,000 revolving
credit/term facility available to fund acquisitions and general working
capital requirements, of which $237,000,000 and no amounts were outstanding as
of December 31, 1997 and December 31, 1996, respectively. On May 2, 1997, the
Company increased its revolving credit/term facility from $100,000,000 to
$200,000,000. Subsequently, on September 26, 1997, the Credit Agreement was
amended and restated and increased the credit/term facility to $350,000,000.
The revolving credit/term facility converts into a term loan March 31, 2004.
Borrowings under the Credit Agreement bear interest, at the Company's option,
at either (i) the agent bank's base rate payable on a quarterly basis or (ii)
a one-, two-, three-, or six-month period LIBOR rate plus .50% to 1.50%,
depending on the Company's ratio of consolidated debt to annualized cash flow,
payable at maturity, or, in the case of a six-month period rate, at three
months and maturity. The weighted average interest rate of all loans
outstanding at December 31, 1997 was 6.9%.
F-45
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Credit Agreement also provides for the issuance of letters of credit up
to $10,000,000 provided that the aggregate of all outstanding letters of
credit plus the outstanding aggregate principal amount of all revolving
credit/term loans does not exceed the lesser of the total revolving
credit/term commitment or the patient borrowing base, as defined in the Credit
Agreement, at such time. As of December 31, 1996 and 1997, there were no
letters of credit outstanding.
The loans are collateralized by all stock of the Company's subsidiaries and
the assignment of all intercompany notes. The Credit Agreement limits
additional indebtedness, acquisitions, investments and dividends and requires
the Company to comply with certain other covenants and maintain certain
financial ratios. The dividend distributions presented in the Consolidated
Statement of Stockholders' Equity in 1995 and 1996 were paid to the former
stockholders of HCC, the Wichita Companies and the Group and were not subject
to the Credit Agreement limitation on dividend payments.
In June 1996, the Company issued $125,000,000 of 5 5/8% Convertible
Subordinated Notes due 2006 (the "Notes"). The Notes are convertible, at the
option of the holder, at any time after August 12, 1996 through maturity,
unless previously redeemed or repurchased, into Common Stock at a conversion
price of $34.20 principal amount per share, subject to certain adjustments.
The fair value of the Notes was approximately $149,687,500 at December 31,
1997. At any time on or after July 17, 1999, all or any part of the Notes will
be redeemable at the Company's option on at least 15 and not more than 60 days
notice as a whole or, from time to time, in part at redemption prices ranging
from 103.94% to 100.00% of the principal amount thereof, depending on the year
of redemption, together with accrued interest to, but excluding, the date
fixed for redemption.
In June 1994, pursuant to a business acquisition, the Company entered into
an agreement to pay the Seller, the Dialysis Centers Limited Liability
Company, $7,364,100, payable in annual installments commencing June 1995
through June 1998. Interest on the unpaid principal mount of the note accrued
at an annual rate of 6.50%, payable in arrears each June 1 from 1995 through
1998. The note allowed the Seller to convert the principal amount of the note
into that number of shares of common stock of the Company which shall be equal
to the quotient of the outstanding unpaid principal amount of the note
dividend by the average daily closing sale price of the stock during December,
1994. During the first and second quarter of 1997, the note payable to The
Dialysis Centers Limited Liability Company was paid in full through the
issuance of the Company's Common Stock.
In September 1996, pursuant to a business acquisition, the Company entered
into an agreement to pay Sellers. Columbus Regional Dialysis Center, Inc. and
Phoenix City Nephrology Referral Center, Inc., a total of $8,050,000 in one
installment in January 1997.
During the fourth quarter of 1997, pursuant to several business
acquisitions, the Company entered into several agreements to pay the various
Sellers a total of $24,467,922 in one installment in January 1998.
Unless otherwise noted above, the carrying amount of long-term debt
approximates fair value.
Maturities of debt outstanding, excluding capital leases as of December 31,
1997 for each of the next five years is as follows:
<TABLE>
<S> <C>
1998............................................................ $ 24,744,941
1999............................................................ --
2000............................................................ 45,162,804
2001............................................................ 60,217,072
2002 and thereafter............................................. 260,655,468
</TABLE>
F-46
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES:
The provision for income taxes for the years ended December 31, 1995, 1996
and 1997 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Current:
Federal............................. $ 8,330,951 $ 7,852,091 $14,046,163
State and local..................... 807,761 681,326 2,125,607
Foreign............................. -- -- 1,070,068
----------- ----------- -----------
9,138,712 8,533,417 17,241,838
----------- ----------- -----------
Deferred:
Federal............................. (1,372,961) (1,694,959) (1,831,991)
State and local..................... (133,682) (229,587) (338,684)
----------- ----------- -----------
(1,506,643) (1,924,546) (2,170,675)
----------- ----------- -----------
$ 7,632,069 $ 6,608,871 $15,071,163
=========== =========== ===========
</TABLE>
The tax effects of temporary differences which comprise the net deferred tax
asset are as follows for the years ended December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Deferred tax debits:
Allowance for doubtful accounts.................. $ 2,136,098 $ 4,188,883
Intangibles, principally patient lists........... 5,241,100 6,055,084
Vacation reserve................................. -- 397,478
Property and equipment........................... -- 33,199
Foreign NOL carryforward......................... -- 944,000
Foreign tax credit carryforward.................. -- 200,000
Other............................................ 13,620 451,797
----------- -----------
Total deferred tax assets........................ 7,390,818 12,270,441
----------- -----------
Valuation allowance.............................. -- (1,144,000)
----------- -----------
7,390,818 11,126,441
=========== ===========
Deferred tax credits:
Property and equipment........................... (164,806) --
Goodwill......................................... (2,269,230) (3,998,984)
----------- -----------
(2,434,036) (3,998,984)
=========== ===========
Net deferred tax asset............................. $ 4,956,782 $ 7,127,457
=========== ===========
</TABLE>
The valuation allowance relates to deferred tax assets established under
SFAS No. 109 for foreign net operating loss carryforwards of $2.86 million and
foreign tax credit carryforwards of $200,000. These unutilized loss and credit
carryforwards which expire in 2002, will be carried forward to future years
for possible utilization. No benefit of these carryforwards has been
recognized on the financial statements.
F-47
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of the statutory federal income tax rates
to the effective rates as a percentage of income before provision for income
taxes as reported in the financial statements for the years ended December 31,
1995, 1996, and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
U.S. federal income tax rate............................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit... 2.4% 2.5% 3.3%
Foreign taxes........................................... -- -- 1.0%
Non-tax effected items, principally intangibles......... 1.8% 1.7% 2.3%
Federal and state income tax benefit from S Corporation
status of HCC, the Wichita Companies and the Group..... (3.5%) (0.9%) --
Valuation allowance..................................... -- -- 3.5%
Other................................................... (1.4%) (0.1%) 0.4%
---- ---- ----
Effective income tax rate............................... 34.3% 38.2% 45.5%
==== ==== ====
</TABLE>
8. BENEFIT AND COMPENSATION PLANS:
The Company has a defined contribution savings plan covering substantially
all employees. The Company's contributions under the plan were approximately
$462,004, $548,471, and $1,069,283 for the years ended December 31, 1995,
1996, and 1997, respectively.
In September 1990, the Company established a stock plan, pursuant to which
incentive stock options and non-qualified stock options may be issued to
employees and others through the year 2000. The Company applies APB Opinion
No. 25 and related interpretations in accounting for its stock plan. The FASB
issued SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123")
in 1995 and, if fully adopted by the Company, changes the method for
recognition of cost on stock plans. Although the Company has elected not to
adopt the cost recognition requirements under SFAS No. 123, pro-forma
disclosures as of the Company had adopted the requirements beginning in 1995
are presented below:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Net earnings--as reported............... $14,630,804 $10,682,399 $18,049,756
Net earnings--pro-forma................. 14,165,049 8,350,485 11,072,010
Earnings per share--as reported......... 0.67 0.44 0.73
Earnings per share--pro-forma........... 0.65 0.34 0.44
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions for options granted for the years ended December 31, 1995, 1996
and 1997, respectively, weighted average expect volatility of 29.3%, 29.3%,
39.75%, no dividend payments are made for the expected terms; average expected
term of 5.5 years for options that vest over time and 3 years for options
which vest immediately; risk free interest rate on the date of grant with the
maturity equal to the expected term; exercise price equal to the fair market
value on grant date. Options which have vesting provisions that accelerate
upon a change in control either in the option grant or through employment
agreements have been accelerated to 1997 due to the expected changes in
control on February 27, 1998.
Incentive stock options may be granted at an exercise price not less than
the fair market value of the Company's common stock on the date of grant. Non-
qualified stock options may be granted at an exercise price not less than the
lower of the book value of the Company's common stock or 50% of the fair
market value per share of common stock on the date of grant. Accordingly,
compensation expense for the difference between the fair market value and the
exercise price for non-qualified stock options issued is recorded over the
vesting period of such options.
F-48
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1995 and 1996, the stock plan was amended to increase the number of
shares available for grant to 2,437,000 and 3,237,000 shares, respectively. In
addition, the Company established an option plan for outside directors
pursuant to which non-qualified stock options to purchase up to 60,000 shares
may be issued to non-employee directors of the Company. These options may be
granted at an exercise price not less than the fair market value of the
Company's common stock on the date of the grant.
In May 1995, the Company granted 419,144 incentive stock options to certain
directors, officers and employees of the Company. These options were granted
at an exercise price equal to the fair market value of the Company's common
stock on the date of the grant. These options vest over the next three years.
Certain options totaling 305,000 vest upon the earlier of attainment of
predetermined earnings per share targets or nine years.
In March 1996, the Company granted 615,352 incentive stock options to
certain directors, officers and employees of the Company. These options were
granted at an exercise price equal to the fair market value of the Company's
common stock on the date of the grant. These options vest over the next four
years. Certain options aggregating 173,332 vest upon the earlier of attainment
of predetermined earnings per share targets or ten years.
In December 1996, the Company granted 100,000 incentive stock options to an
officer of the Company. These option were granted at an exercise price equal
to the fair market value of the Company's common stock on the date of the
grant. The options are fully vested.
Also in December 1996, the Company granted 30,000 non-qualified stock
options in connection with the release of the Company from certain
obligations. The options were granted at an exercise price equal to the fair
market value of the Company's common stock on the date of grant. The options
are fully vested as of December 31, 1997.
During 1997, the Company granted 885,800 incentive stock options to certain
directors, officers and employees of the Company. These options were granted
at an exercise price equal to the fair market value of the Company's common
stock on the dates of the grants. These options were vest over the next two
years to five years.
In 1997, the Company granted 20,000 options to acquisition consultants for
covenants not to compete. These options were granted at price equal to the
fair market values of the Company's common stock on the date of the grant. The
Company value the options at $235,000.
Approximately, $50,000 was recorded as compensation expense in 1995, in
connection with incentive and non-qualified options to officers of the
Company, which have been amortized over the remaining vesting period. Certain
options outstanding at December 31, 1997, which were issued to certain
officers and employees of the Company, become fully vested upon certain sales
of assets, mergers and consolidations involving the Company, as set forth in
the respective employee and stock option agreements. The remaining options
outstanding at December 31, 1997, which are issued to certain officers and
employees of the Company, become fully vested upon certain sales of assets,
mergers and consolidations involving the Company, at the option of the Stock
Plan Committee.
F-49
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of option transactions and exercise prices:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
YEAR ENDED AVERAGE YEAR ENDED AVERAGE YEAR ENDED AVERAGE
DECEMBER 31, EXERCISE DECEMBER 31, EXERCISE DECEMBER 31, EXERCISE
1995 PRICE 1996 PRICE 1997 PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 1,281,930 $ 6.66 1,242,398 $ 9.78 1,717,965 $14.80
--------- ------ --------- ------ --------- ------
Granted................. 413,144 11.54 747,098 22.03 885,800 22.48
Exercised............... 448,676 2.47 263,531 11.66 128,714 10.15
Forfeited............... 4,000 11.25 8,000 12.14 14,233 17.47
--------- ------ --------- ------ --------- ------
Outstanding at end of
period................. 1,242,398 $ 9.78 1,717,965 $14.80 2,460,818 $17.80
========= ====== ========= ====== ========= ======
</TABLE>
The following table summarizes information about fixed stock options at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
RANGE OF EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
<S> <C> <C> <C> <C> <C>
$5.00-$10.00............ 526,822 4.87 $ 8.67 460,000 $ 8.78
$10.01- $15.00.......... 386,839 7.61 11.45 205,439 11.45
$15.01-$20.00........... 3,144 7.89 16.75 3,144 16.75
$20.01-$25.00........... 1,495,013 9.09 22.35 650,622 22.29
$25.01-$30.00........... 49,000 9.33 26.88 18,000 27.19
--------- -------- ---------- ----------- --------
2,460,818 7.96 $ 17.80 1,337,205 $ 16.03
========= ======== ========== =========== ========
</TABLE>
9. CAPITAL STOCK:
On January 30, 1996, the Board of Directors of the Company declared a
dividend on the Company's common stock of one share of common stock for each
share outstanding, thereby effecting a 2-for-1 stock split. The dividend
shares were issued on March 14, 1996 to stockholders of record as of February
29, 1996. Additionally, on February 29, 1996, the Company amended its capital
structure to increase the Company's authorized capital to 45,000,000 shares of
$0.01 par value common stock and 5,000,000 shares of $.01 par value Series
Preferred Stock. All references in the financial statements to outstanding and
authorized common shares, average number of shares outstanding and related
prices, per share amounts and stock plan data have been restated to reflect
the split effected by the stock dividend.
10. LEASING ARRANGEMENTS:
The Company leases certain of its operating facilities, corporate office and
furniture and equipment under noncancelable leases for terms ranging from four
to ten years with certain renewal options. Certain of these facilities are
leased by the Company from medical directors.
F-50
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING
THIRD-PARTY LEASES
CAPITAL OPERATING WITH MEDICAL
LEASES LEASES DIRECTORS
<S> <C> <C> <C>
1998....................................... $1,494,563 $11,150,274 $ 2,323,603
1999....................................... 1,185,433 10,635,183 1,826,351
2000....................................... 237,522 9,702,719 1,757,139
2001....................................... -- 9,398,941 1,715,303
2002 and thereafter........................ -- 34,513,142 10,564,748
---------- ----------- -----------
Total minimum lease payments............... 2,917,518 $75,400,259 $18,187,144
=========== ===========
Less amounts representing interest......... 246,100
----------
Present value of net minimum payments under
capital leases............................ 2,671,418
Less current portion....................... 1,320,584
----------
$1,350,834
==========
</TABLE>
Rent expense paid to third parties under operating leases was $4,921,026,
$5,497,285 and $7,757,194 for the years ended December 31, 1995, 1996 and
1997, respectively. Rent expense paid to medical directors under facility
operating leases was $1,030,208, $1,350,253 and $2,232,904 for the years ended
December 31, 1995, 1996 and 1997, respectively
11. COMMITMENTS AND CONTINGENCIES:
The Company has entered into long-term compensation agreements with the
medical directors of each dialysis facility. The agreements range from one to
ten years with certain agreements containing one to ten year options to renew.
The agreements provide for total annual compensation as follows:
<TABLE>
<CAPTION>
PHYSICIAN
DIRECTOR
COMPENSATION
------------
<S> <C>
1998............................................................ $13,930,431
1999............................................................ 13,899,732
2000............................................................ 14,439,947
2001............................................................ 14,438,983
2002 and thereafter............................................. 37,514,213
-----------
Total minimum payments.......................................... $94,223,306
===========
</TABLE>
The Company has employment agreements with seven officers, with terms
ranging from two to three years and six month. These agreements provide for
total annual compensation of $1,275,000 and provide that in the event any
payment or benefit received by any of them in connection with a change of
control is deemed an "excess parachute payment" under the Internal Revenue
Code, the Company shall pay the officer a cash bonus equal to any additional
tax liability imposed upon him as a result.
The Company is a party to certain legal actions arising in the ordinary
course of business. The Company believes it has adequate legal defenses and/or
insurance coverage for these actions and that the ultimate outcome of these
actions will not have a material adverse impact on the Company's results of
operations, financial condition or liquidity.
F-51
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates in one principal industry segment, the treatment of
patients with kidney disease. The Company's sales are generated primarily from
the Medicare system. Prior to 1997, the Company's only significant operations
were in the United States. Geographic financial information as of and for the
year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
U.S. ARGENTINA ELIMINATIONS CONSOLIDATED
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales to unaffiliated
customers.................. $301,397,539 $21,394,513 -- $322,792,052
Transfers between geographic
areas...................... -- -- -- --
------------ ----------- --------- ------------
Total net revenue........... $301,397,539 $21,394,513 -- $322,792,052
============ =========== ========= ============
Operating profit before
corporate expenses......... $ 56,768,606 $ 7,792,432 $ 64,561,038
General corporate expenses.. 19,638,534
Interest expense, net....... 11,801,585
------------
Income from continuing
operations before income
taxes...................... $ 33,120,919
============
Identifiable assets at
December 31, 1997.......... $492,813,377 $65,970,786 $(276,610) $558,507,553
============ =========== =========
Corporate assets............ 46,116,487
------------
Total assets at December 31,
1997....................... $604,624,040
============
</TABLE>
Net sales to unaffiliated customers is based on the location of the
customer. There are no transfers between geographic areas. Operating profit is
total revenue less operating expenses. In computing operating profit, neither
net interest expense, corporate expenses, nor income taxes were added or
deducted. Identifiable assets are those assets of the Company that are
identified with the operations in each geographic area. Corporate assets are
principally fixed assets.
F-52
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EARNINGS PER SHARE:
Earnings per share have been restated in accordance with SFAS No. 128. This
restatement resulted in no material change from amounts previously reported.
Earnings per share are computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
<S> <C> <C> <C>
Basic earnings per share:
Net income available for common stock.... $14,630,804 $10,682,399 $18,049,756
=========== =========== ===========
Average common stock outstanding......... 21,868,067 24,230,156 24,884,268
=========== =========== ===========
Basic earnings per share................. $ 0.67 $ 0.44 $ 0.73
=========== =========== ===========
Diluted earnings per share:
Net income............................... $14,630,804 $10,682,399 $18,049,756
Add back interest on earnout note, tax
effected................................ 283,136 232,573 34,122
----------- ----------- -----------
Net income available for Common Stock and
dilutive securities....................... $14,913,940 $10,914,972 $18,083,878
=========== =========== ===========
Average Common Stock outstanding........... 21,868,067 24,230,156 24,884,268
Additional common shares resulting from
dilutive securities:
Stock options............................ 544,666 837,744 965,831
Earnout note............................. 682,402 578,400 122,442
----------- ----------- -----------
Average Common Stock and dilutive
securities outstanding.................... 23,095,135 25,646,300 25,972,541
=========== =========== ===========
Diluted earnings per share................. $ 0.65 $ 0.43 $ 0.70
=========== =========== ===========
</TABLE>
F-53
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental disclosure of cash flow information for the years ended
December 31, 1995, 1996, and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Cash paid for:
Interest.................................. $2,177,255 $ 3,609,972 $10,842,106
========== =========== ===========
Income taxes.............................. $5,680,430 $17,198,434 $17,037,849
========== =========== ===========
Non-cash investing and financing activities:
Capital lease obligations entered into.... $2,081,699 $ 2,553,368 $ 298,914
========== =========== ===========
Issuance of common stock in connection
with purchase of business................ $3,119,747 -- --
========== =========== ===========
Issuance of common stock in connection
with an earn out note.................... $ 523,029 $ 1,474,244 $ 5,154,871
========== =========== ===========
Issuance of short-term notes in connection
with purchase of businesses.............. -- $ 9,194,297 $24,467,922
========== =========== ===========
Liabilities assumed in connection with
purchases of businesses.................. $ 118,000 -- $ 5,857,090
========== =========== ===========
Issuance of common stock in connection
with the IMS and MDU mergers............. -- $ 3,203,653 --
========== =========== ===========
Financing fees incurred in the Notes
offering................................. -- $ 3,750,000 --
========== =========== ===========
Acquisition of treasury stock in
connection with payroll taxes resulting
from exercise of stock options........... $ 346,857 -- --
========== =========== ===========
Grant of stock options in connection with
covenant not to compete.................. -- -- $ 235,000
========== =========== ===========
Income tax benefit from stock
compensation............................. -- -- $ 2,278,733
========== =========== ===========
</TABLE>
15. NEW ACCOUNTING PRONOUNCEMENTS:
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") established standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general-purpose financial statements. This
statement is effective for fiscal years beginning after December 15, 1997. It
would require the Company to reclassify financial statements for earlier
periods provided for comparative purposes.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of and Enterprise and Related Information" ("SFAS No. 131")
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operation
segments in interim financial reports issued to shareholders. This Statement
is effective for financial statements for the period beginning after December
15, 1997. In the initial year of application, comparative information for
earlier years is to be restated.
The Company does not expect SFAS No. 130 and SFAS No. 131 to have a material
impact on the financial statements.
F-54
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In accordance with Statement of Position ("SOP") "Reporting on the Costs of
Start-up Activities", start up costs must be expensed as incurred. The SOP is
effective for years beginning after December 15, 1998. The Company expects to
adopt this SOP in the first quarter of 1998. The Company expects to write-off
approximately $6 million of start-up costs previously recorded.
16. SUBSEQUENT EVENT:
On February 26, 1998, the Company's stockholders approved the merger with
Total Renal Care Holdings, Inc. ("TRCH") which became effective on February
27, 1998 (the "Merger"). The Merger is expected to be accounted for as a
pooling-of-interests. In connection with the Merger, each of the Company's
stockholders will receive 1.335 shares of TRCH common stock.
The Merger constituted a "change in control" and resulted in certain
executives terminating their employment for good reason. In connection with
the Merger, these certain executives received severance payments and their
1997 bonuses totaling approximately $2,000,000; Merger bonuses of
approximately $4,600,000 and $8,850,000 for covenants not to compete. In
addition, 978,081 of previously issued stock options to employees, which had
an automatic change in control provision in the option grant, became fully
vested on February 27, 1998.
F-55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Total Renal Care Holdings, Inc.
Our audit of the consolidated financial statements referred to in our report
dated February 16, 1998, except as to the pooling of interests with Renal
Treatment Centers, Inc. which is as of May 14, 1998, appearing on page F-1 of
this Annual Report on Form 10-K/A also included audits of the information
included in the Financial Statement Schedule listed in Item 14(a)(2) of this
Form 10-K/A for the year ended May 31, 1995, the seven months ended December
31, 1995 and the years ended December 31, 1996 and 1997. In our opinion, based
upon our audit and the report of other auditors, the Financial Statement
Schedule presents fairly, in all material respects, the information for the
year ended May 31, 1995, the seven months ended December 31, 1995 and the
years ended December 31, 1996 and 1997 set forth therein when read in
conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Seattle, Washington
February 16, 1998, except as to the
pooling of interests with Renal Treatment
Centers, Inc. which is as of May 14, 1998
S-1
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------------------- ----------
BALANCE AT AMOUNTS BALANCES OF AMOUNTS BALANCE AT
BEGINNING OF CHARGED TO COMPANIES WRITTEN END
DESCRIPTION YEAR INCOME ACQUIRED OFF OF YEAR
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended May 31, 1995. $ 3,051,000 5,492,000 1,203,000 3,005,000 $ 6,741,000
Seven months ended
December 31, 1995...... $ 6,741,000 4,552,000 541,000 2,662,000 $ 9,172,000
Year ended December 31,
1996................... $ 9,172,000 15,737,000 1,896,000 11,040,000 $15,765,000
Year ended December 31,
1997................... $15,765,000 20,525,000 2,962,000 8,557,000 $30,695,000
</TABLE>
S-2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TOTAL RENAL CARE HOLDINGS, INC.
/s/ John E. King
By: _________________________________
John E. King
Vice President, Finance and
Chief Financial Officer
Date: May 18, 1998
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of
the Company, dated December 4, 1995.@@
3.2 Certificate of Amendment of Certificate of
Incorporation of the Company, dated February 26,
1998.+++
3.3 Bylaws of the Company, dated October 6, 1995.+
4.1 Shareholders Agreement, dated August 11, 1994 between
DLJMB, DLJIP, DLJOP, DLJMBF, NME Properties,
Continental Bank, as voting trustee, and the
Company.##
4.2 Agreement and Amendment, dated as of June 30, 1995,
between DLJMBP, DLJIP, DLJOP, DLJMBF, DLJESC, Tenet,
the Company, Victor M.G. Chaltiel, the Putnam
Purchasers, the Crescent Purchasers and the Harvard
Purchasers, relating to the Shareholders Agreement
dated as of August 11, 1994 between DLJMB, DLJIP,
DLJOP, DLJMBF, NME Properties, Continental Bank, as
voting trustee, and the Company.##
10.1 Subscription Agreement dated May 26, 1994 between
DLJMB, DLJIP, DLJOP, DLJMBF, NME Properties, Tenet and
the Company.#
10.2 Services Agreement dated August 11, 1994 between the
Company and Tenet.##
10.3 Noncompetition Agreement dated August 11, 1994 between
the Company and Tenet.##
10.4 Employment Agreement dated as of August 11, 1994 by and
between the Company and Victor M.G. Chaltiel (with
forms of Promissory Note and Pledge and Stock
Subscription Agreement attached as exhibits thereto)
(the "Chaltiel Employment Agreement").##*
10.5 Amendment to Chaltiel Employment Agreement, dated as of
August 11, 1994.##*
10.6 Employment Agreement dated as of September 1, 1994 by
and between the Company and Barry C. Cosgrove.##*
10.7 Employment Agreement dated as of August 11, 1994 by and
between the Company and Leonard W. Frie (the "Frie
Employment Agreement").##*
10.8 Amendment to Frie Employment Agreement, dated as of
October 11, 1994.##*
10.9 Employment Agreement dated as of September 1, 1994 by
and between the Company and John E. King.##*
10.10 First Amended and Restated 1994 Equity Compensation
Plan (the "1994 Plan") of the Company (with form of
Promissory Note and Pledge attached as an exhibit
thereto), dated August 5, 1994.##*
10.11 Form of Stock Subscription Agreement relating to the
1994 Plan.##*
10.12 Form of Purchased Shares Award Agreement relating to
the 1994 Plan.##*
10.13 Form of Nonqualified Stock Option relating to the 1994
Plan.##*
10.14 1995 Equity Compensation Plan.+*
10.15 Employee Stock Purchase Plan.+*
10.16 Option Exercise and Bonus Agreement dated as of
September 18, 1995 between the Company and Victor M.G.
Chaltiel.+*
10.17 1997 Equity Compensation Plan.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
<C> <S> <C>
10.18 Subsidiary Guaranty (the "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). Renal Treatment Centers--Mid-
Atlantic, Inc., Renal Treatment Centers--Northeast,
Inc., Renal Treatment Centers--California, Inc., Renal
Treatment Centers--West, Inc., and Renal Treatment
Centers--Southeast, Inc. subsequently executed an
agreement in this form on February 27, 1998.@@@
10.19 Borrower Pledge Agreement dated as of October 24, 1997
and entered into by and between the Company, 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).@@@
10.20 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). RTC subsequently executed an
agreement in this form on February 27, 1998.@@@
10.21 Agreement and Plan of Merger dated as of November 18,
1997 by and among TRCH, Nevada Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of
TRCH, and RTC.###
10.22 Amendment No. 2 and Consent No. 2 to the Revolving
Credit Agreement and First Amendment to the Subsidiary
Guaranty dated February 17, 1998.+++
10.23 Third Amendment to the Term Loan Agreement and First
Amendment to the Subsidiary Guaranty dated February
17, 1998. (The provisions of this agreement amending
the original term loan agreement have been superseded
by exhibit no. 10.31 hereof.)+++
10.24 Special Purpose Option Plan.++
10.25 Indenture, dated June 12, 1996, by RTC to PNC Bank
including form of RTC Note (the "Indenture").***
10.26 First Supplemental Indenture, dated as of February 27,
1998, among RTC, TRCH and PNC Bank under the
Indenture.+++
10.27 Second Supplemental Indenture, dated as of March 31,
1998, among RTC, TRCH and PNC Bank under the
Indenture.+++
10.28 Guaranty, entered into as of March 31, 1998, by the
Company in favor of and for the benefit of PNC
Bank.+++
10.29 Amended and Restated Term Loan Agreement, dated April
30, 1998, by and among the Company, the lenders party
thereto, DLJ Capital Funding, Inc., as Syndication
Agent, and The Bank of New York, as Administrative
Agent (the "Term Loan Agreement").X
10.30 Amended and Restated Revolving Credit Agreement, dated
April 30, 1998, by and among the Company, 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").X
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
<C> <S> <C>
10.31 Form of First Amendment to Borrower/Subsidiary Pledge
Agreement, dated April 30, 1998, by and among the Company,
RTC, Total Renal Care, Inc., and The Bank of New York, as
Collateral Agent.X
10.32 Form of Acknowledgment and Confirmation, dated April 30, 1998,
by the Company, RTC, TRC West, Inc., Total Renal Care, Inc.,
Total Renal Care Acquisition Corp., Renal Treatment Centers--
Mid-Atlantic, Inc., Renal Treatment Centers--Northeast, Inc.,
Renal Treatment Centers--California, Inc., Renal Treatment
Centers--West, Inc., and Renal Treatment Centers--Southeast,
Inc. for the benefit of The Bank of New York, as Collateral
Agent and the lenders party to the Term Loan Agreement or the
Revolving Credit Agreement.X
21 List of Subsidiaries of the Company.+++
23.1 Consent of Price Waterhouse LLP.X
23.2 Consent of Coopers & Lybrand L.L.P.X
23.3 Consent of Deloitte & Touche, L.L.P.X
23.4 Consent of Baird, Kurtz & Dobson.X
24 Powers of Attorney with respect to the Company (included on
Page II-1 hereof).+++
27 Financial Data Schedule.X
</TABLE>
- --------
X Included in this filing.
@ Filed on October 18, 1996 as an exhibit to the Company's Current Report on
Form 8-K.
@@ Filed on March 18, 1996 as an exhibit to the Company's Transitional Report
on Form 10-K for the transition period from June 1, 1995 to December 31,
1995.
@@@ Filed on December 19, 1997 as an exhibit to the Company's Current Report
on Form 8-K.
+ Filed on October 24, 1995 as an exhibit to Amendment No. 2 to the Company's
Registration Statement on Form S-1 (Registration Statement No. 33-97618).
++ Filed on February 25, 1998 as an exhibit to the Company's Registration
Statement on Form S-8 (Registration Statement No. 333-46887).
+++ Filed on March 31, 1998 as an exhibit to the Company's Form 10-K for the
year ended December 31, 1997.
# Filed on June 6, 1994 as an exhibit to the Company's Registration Statement
on Form S-1 (Registration Statement No. 33-79770).
## Filed on August 29, 1995 as an exhibit to the Company's Form 10-K for the
year ended May 31, 1995.
### Filed on December 19, 1997 as Annex A to the Company's Registration
Statement on Form S-4 (Registration No. 333-42653).
* Management contract or executive compensation plan or arrangement.
** Filed on August 29, 1997 as an exhibit to the Company's Registration
Statement on Form S-8 (Registration Statement No. 333-34695).
*** Filed as an exhibit to RTC's Form 10-Q for the quarter ended June 30,
1996.
(b) Reports on Form 8-K:
Current Report on Form 8-K, dated November 21, 1997, reporting under Item
5 the issuance by TRCH of a press release in connection with the Merger.
Current Report on Form 8-K, dated December 19, 1997, reporting under Item
7: (i) the Audited Financial Statements of the Nephrology Services Business
of Caremark International, Inc., (ii) the Audited Financial Statements of
New West Dialysis, Inc., (iii) the 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., (iv) Audited
Financial Statements of Dialysis Care of North Carolina, (v) Audited
Financial Statements of the Renal Dialysis Business of the Rogosin
Institute, Inc. and (vi) certain Unaudited Pro Forma Financial Statements.
<PAGE>
EXHIBIT 10.29
EXECUTION VERSION
================================================================================
AMENDED AND RESTATED
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
________________
$400,000,000
________________
Dated as of April 30, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.......................................... 2
------------------------------------------
1.1 Definitions................................................................... 2
1.2 Principles of Construction.................................................... 30
2. AMOUNT AND TERMS OF LOANS........................................................... 31
-------------------------
2.1 Term Loans................................................................... 31
2.2 Term Loan Notes.............................................................. 32
2.3 Procedure for Borrowing...................................................... 33
2.4 Prepayments of the Term Loans................................................ 34
2.5 Conversions and Continuations................................................ 38
2.6 Interest Rate and Payment Dates.............................................. 39
2.7 Substituted Interest Rate.................................................... 40
2.8 Taxes........................................................................ 41
2.9 Illegality................................................................... 44
2.10 Increased Costs.............................................................. 44
2.11 Indemnification for Loss..................................................... 45
2.12 Option to Fund............................................................... 46
2.13 Use of Proceeds.............................................................. 47
2.14 Capital Adequacy............................................................. 47
2.15 Administrative Agent's Records............................................... 48
3. FEES; PAYMENTS...................................................................... 48
--------------
3.1 [intentionally omitted]...................................................... 48
3.2 Pro Rata Treatment and Application of Principal Payments..................... 48
3.3 Non Pro Rata Payments........................................................ 49
4. REPRESENTATIONS AND WARRANTIES...................................................... 49
------------------------------
4.1 Subsidiaries; Capitalization................................................. 49
4.2 Existence and Power.......................................................... 49
4.3 Authority.................................................................... 50
4.4 Binding Agreement............................................................ 50
4.5 Litigation................................................................... 50
4.6 Required Consents............................................................ 51
4.7 No Conflicting Agreements.................................................... 51
4.8 Compliance with Applicable Laws.............................................. 51
4.9 Taxes........................................................................ 51
4.10 Governmental Regulations..................................................... 52
4.11 Federal Reserve Regulations; Use of Loan Proceeds............................ 52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
4.12 Plans........................................................................ 52
4.13 Financial Statements......................................................... 53
4.14 Property..................................................................... 53
4.15 Franchises, Intellectual Property, Etc....................................... 54
4.16 Environmental Matters........................................................ 54
4.17 Labor Relations.............................................................. 55
4.18 Burdensome Obligations....................................................... 55
4.19 Medicare Participation/Accreditation......................................... 55
4.20 Fraud and Abuse.............................................................. 56
4.21 No Misrepresentation......................................................... 56
4.22 Subordinated Indebtedness.................................................... 56
4.23 Survival of Rights Created under Existing Term Loan Agreement................ 57
5. CONDITIONS TO EFFECTIVENESS OF AGREEMENT............................................ 57
----------------------------------------
5.1 Evidence of Action........................................................... 57
5.2 This Agreement............................................................... 58
5.3 Notes........................................................................ 58
5.4 Acknowledgement and Confirmation............................................. 58
5.5 First Amendment to Pledge Agreements......................................... 58
5.6 [Intentionally omitted]...................................................... 58
5.7 [Intentionally omitted]...................................................... 59
5.8 Revolving Credit Facility.................................................... 59
5.9 Litigation................................................................... 59
5.10 [intentionally omitted]...................................................... 59
5.11 Opinions of Counsel to the Credit Parties.................................... 59
5.12 Opinion of Special Counsel................................................... 59
5.13 Fees......................................................................... 60
5.14 Interest and Fees under Existing Term Loan Agreement......................... 60
5.15 Conversion of Existing Term Loans............................................ 60
5.16 Fees and Expenses of Special Counsel......................................... 60
5.17 Documentation and Proceedings................................................ 60
5.18 Required Acts and Conditions................................................. 61
5.19 Officers' Certificate Regarding Certain Conditions........................... 61
5.20 Approval of Special Counsel.................................................. 61
5.21 Agent for Service of Process................................................. 61
5.22 Other Documents.............................................................. 62
5.23 Consent to Amendments; Repayments of obligations to Non-Continuing Lenders... 62
6. CONDITIONS OF LENDING............................................................... 62
---------------------
6.1 Compliance................................................................... 62
6.2 Loan Closings................................................................ 62
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
6.3 Borrowing Request............................................................. 63
6.4 Documentation and Proceedings................................................. 63
6.5 Required Acts and Conditions.................................................. 63
6.6 Approval of Special Counsel................................................... 63
6.7 Supplemental Opinions......................................................... 63
6.8 Other Documents............................................................... 63
6.9 No Injunction or Restraining Order............................................ 64
6.10 No Violation of Law........................................................... 64
6.11 No Adverse Litigation......................................................... 64
7. AFFIRMATIVE COVENANTS................................................................ 64
---------------------
7.1 Financial Statements.......................................................... 64
7.2 Certificates; Other Information............................................... 65
7.3 Legal Existence............................................................... 68
7.4 Taxes......................................................................... 68
7.5 Insurance..................................................................... 68
7.6 Payment of Indebtedness and Performance of Obligations........................ 69
7.7 Condition of Property......................................................... 69
7.8 Observance of Legal Requirements.............................................. 69
7.9 Inspection of Property; Books and Records; Discussions........................ 69
7.10 Licenses, Intellectual Property............................................... 70
7.11 Additional Guarantors; Additional Collateral.................................. 70
8. NEGATIVE COVENANTS................................................................... 71
------------------
8.1 Incurrence of Indebtedness and Issuance of Disqualified Stock................. 71
8.2 Limitations on Liens.......................................................... 74
8.3 Limitation on Merger, Consolidation and Certain Dispositions of Assets........ 75
8.4 Limitations on Restricted Payments............................................ 76
8.5 Investments, Loans, Etc....................................................... 78
8.6 Business Change............................................................... 80
8.7 Limitation on Asset Sales..................................................... 80
8.8 Subsidiaries.................................................................. 80
8.9 Certificate of Incorporation.................................................. 80
8.10 ERISA......................................................................... 80
8.11 Acquisition or Issuance of Additional Stock................................... 81
8.12 Dividend and Other Payment Restrictions Affecting Subsidiaries................ 81
8.13 Fiscal Year................................................................... 83
8.14 Transactions with Affiliates.................................................. 83
8.15 Limitation on Certain Amendments.............................................. 83
9. DEFAULT.............................................................................. 84
-------
9.1 Events of Default............................................................. 84
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
10. THE AGENT........................................................................... 88
---------
10.1 Appointment.................................................................. 88
10.2 Delegation of Duties......................................................... 89
10.3 Exculpatory Provisions....................................................... 89
10.4 Reliance by Administrative Agent............................................. 89
10.5 Notice of Default............................................................ 90
10.6 Non-Reliance on Administrative Agent and
Other Lenders................................................................ 90
10.7 Indemnification.............................................................. 91
10.8 Administrative Agent in Its Individual
Capacity..................................................................... 91
10.9 Successor Administrative Agent............................................... 91
10.10 Appointment of Collateral Agent;
Intercreditor Agreement; Collateral
Documents; Subsidiary Guaranty............................................... 92
10.11 The Co-Arrangers............................................................. 92
10.12 The Syndication Agent........................................................ 93
11. OTHER PROVISIONS.................................................................... 93
----------------
11.1 Amendments and Waivers....................................................... 93
11.2 Notices...................................................................... 94
11.3 No Waiver; Cumulative Remedies............................................... 95
11.4 Survival of Representations and Warranties................................... 96
11.5 Payment of Expenses and Taxes................................................ 96
11.6 Lending Offices.............................................................. 97
11.7 Assignments and Participations............................................... 97
11.8 Counterparts; Effectiveness.................................................. 100
11.9 Adjustments; Set-off......................................................... 100
11.10 Construction................................................................. 101
11.11 Indemnity.................................................................... 101
11.12 GOVERNING LAW................................................................ 102
11.13 Headings Descriptive......................................................... 102
11.14 Severability................................................................. 102
11.15 Integration.................................................................. 103
11.16 Consent to Jurisdiction...................................................... 103
11.17 Service of Process........................................................... 103
11.18 No Limitation on Service or Suit............................................. 104
11.19 WAIVER OF TRIAL BY JURY...................................................... 104
11.20 Designation as Designated Senior Indebtedness................................ 104
11.21 Year 2000.................................................................... 104
</TABLE>
<PAGE>
AMENDED AND RESTATED TERM LOAN AGREEMENT
This AMENDED AND RESTATED TERM LOAN AGREEMENT, is dated as of April 30,
1998, 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"), and THE BANK OF NEW YORK, as administrative agent for the Lenders (in
- -----
such capacity, the "Administrative Agent").
--------------------
PRELIMINARY STATEMENTS
A. The Borrower, the Existing Lenders (or their predecessors), the
Syndication Agent and the Administrative Agent have heretofore entered into that
certain Term Loan Agreement dated as of October 24, 1997, as amended by that
certain First Amendment to Term Loan Agreement dated as of December 1, 1997,
that certain Second Amendment to Term Loan Agreement dated as of January 13,
1998, and that certain Third Amendment to Term Loan Agreement and First
Amendment to Subsidiary Guaranty dated as of February 17, 1998 (as so amended,
the "Existing Term Loan Agreement").
B. On the Effective Date, all loans and other obligations owed under
the Existing Term Loan Agreement to each Non-Continuing Lender shall be repaid
at par in full, and each Non-Continuing Lender shall cease to be a lender under
the Existing Term Loan Agreement. The loans outstanding under the Existing Term
Loan Agreement on the Effective Date, excluding those that held by the Non-
Continuing Lenders, which shall be repaid on the Effective Date, shall
constitute Existing Term Loans hereunder. The Lenders hereunder include the
Existing Lenders and the New Lenders but exclude the Non-Continuing Lenders.
C. The Borrower, the Lenders, the Syndication Agent and the
Administrative Agent desire to amend and restate the Existing Term Loan
Agreement in its entirety in order to provide, among other things, that (i) New
Lenders shall, subject to the terms and conditions set forth herein, make First
Additional Term Loans to the Borrower on the Effective Date, (ii) the scheduled
Maturity Date shall be extended to March 31, 2008; (iii) the interest rates
shall be revised as set forth herein; and (iv) the other terms and provisions of
the Existing Term Loan Agreement shall otherwise be modified as set forth
herein.
D. The Borrower agrees that its existing pledge and grant of a
security interest in 100% of its interest in its First-Tier Domestic
Subsidiaries, and 66-2/3% of its interest in its First-Tier Foreign Subsidiaries
will continue as security for the payment and performance of the Obligations of
the Borrower hereunder and under the Revolving Credit Facility.
1
<PAGE>
E. The Borrower agrees to cause each of its Subsidiaries that is a
Guarantor under the Subsidiary Guaranty to confirm and agree that such
Subsidiary Guaranty will continue as a guaranty of the Obligations hereunder and
under the Revolving Credit Facility.
F. The Borrower agrees to cause each of its Subsidiaries that is a
Pledgor under any Subsidiary Pledge Agreement to confirm and agree that such
Subsidiary Pledge Agreement will continue to secure the Obligations of such
Subsidiary under the Subsidiary Guaranty.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrower, Lenders, Syndication
Agent, and the Administrative Agent, agree that the Existing Term Loan Agreement
shall be amended and restated, without novation, as follows:
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.
------------------------------
"Acknowledgement and Confirmation" an Acknowledgement and Confirmation
--------------------------------
Agreement dated as of the Effective Date, substantially in the form of Exhibit N
---------
hereto, pursuant to which each Pledgor and Guarantor shall acknowledge and
confirm that its obligations under the Subsidiary Guaranty and the Collateral
Documents to which it is a party shall continue to guaranty or secure, as the
case may be, the Obligations of the Borrower hereunder and under the Revolving
Credit Facility, as such Acknowledgement and Confirmation Agreement may
hereafter be amended, restated, supplemented or otherwise modified from time to
time.
2
<PAGE>
"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 (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
3
<PAGE>
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 First
-------------------------------
Additional Term Loan Commitments of all Lenders on such date.
"Agreement": this Amended and Restated 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
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": (a) 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:
4
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin Applicable
for Eurodollar Margin for ABR
Period Advances Advances
- ------ -------- --------
<S> <C> <C>
When the Leverage Ratio
is equal to or greater
than 4.00:1.00 2.00% 0.75%
When the Leverage Ratio
is less than 4.00:1.00 1.75% 0.50%
</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 (but subject to the last sentence of
subsection (b) above), until the Compliance Certificate for the fiscal quarter
ended March 31, 1998 shall have been delivered or shall be required to be
delivered to the Administrative Agent, the Applicable Margin for Eurodollar
Advances shall be 1.75% and the Applicable Margin for ABR Advances shall be
0.50%, and any change in the Applicable Margin resulting from a change in the
Leverage Ratio, as evidenced by the Compliance Certificate for the fiscal
quarter ended March 31, 1998, 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
5
<PAGE>
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.
---
"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 as
-------------------------
of October 24, 1997, by and between the Borrower and the Collateral Agent,
delivered pursuant to the Existing Term Loan Agreement, 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.
6
<PAGE>
"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 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
7
<PAGE>
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, each First Amendment to 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.
----------
"Compensatory Interest Payment": as defined in Section 2.6(c).
-----------------------------
"Compliance Certificate": a certificate substantially in the form of
----------------------
Exhibit D.
"Consent to Amendment" a Consent to Amendment substantially in the
--------------------
form of Exhibit L.
"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 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
8
<PAGE>
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.
"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
9
<PAGE>
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, the sum
of (i) prior to the funding of the First Additional Term Loans or the
termination of the Term Loan Commitments, that Lender's Term Loan Commitment
plus (ii) 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 the signature page of
such Lender; 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.
10
<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 exclude (to the extent otherwise included
therein) (w) for the fiscal quarter ended March 31, 1998, non-recurring cash
charges related to the merger contemplated by the RTC Merger Agreement in an
amount not to exceed $70,000,000, (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 upon which 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 binding or effective on
--------
any party hereto unless all such conditions are satisfied not later than May 15,
1998.
"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.
11
<PAGE>
"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 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 the signature
page of such Lender (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
12
<PAGE>
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 Lender": each Lender that has Existing Term Loans
---------------
outstanding on the date and time this Agreement becomes effective.
"Existing Pension Plans": as defined in Section 4.12.
----------------------
"Existing Term Loan" and "Existing Term Loans": as defined in Section
------------------ -------------------
2.1(a).
"Existing Term Loan Agreement": as defined in paragraph A of the
----------------------------
Preliminary Statements to this Agreement.
"Existing Term Loan Notes": as defined in Section 2.2(a).
------------------------
"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.
--------------------
13
<PAGE>
"First Additional Term Loan" and "First Additional Term Loans": as
-------------------------- ---------------------------
defined in Section 2.1(b).
"First Additional Term Loan Commitment": as to any Lender, such Lender's
-------------------------------------
undertaking, subject to the terms and conditions hereof, to make First
Additional Term Loans on the Effective Date in an aggregate outstanding
principal amount not exceeding the amount set forth on the signature page for
such Lender as such Lender's First Additional Term Loan Commitment.
"First Additional Term Loan Pro Rata Share": with respect to each
-----------------------------------------
Lender, the percentage obtained by dividing (x) the First Additional Term Loan
--------
Commitment of that Lender by (y) the aggregate amount of First Additional Term
--
Loan Commitments of all Lenders, as such percentage may be adjusted by
assignments permitted pursuant to Section 11.7. The initial First Additional
Term Loan Pro Rata Share of each Lender shall be set forth on the signature page
for such Lender.
"First Amendment to Pledge Agreements": collectively, each First
------------------------------------
Amendment to Pledge Agreement dated as of the Effective Date, substantially in
the form of Exhibit I hereto, each by and between the Pledgor named therein and
---------
the Collateral Agent, which shall amend the Borrower Pledge Agreement and each
Subsidiary Pledge Agreement.
"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 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 upon which the First Additional Term
------------
Loans are made.
14
<PAGE>
"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., Total Renal Care
----------
Acquisition Corp., Renal Treatment Centers, Inc., a Delaware corporation, Renal
Treatment Centers - Mid-Atlantic, Inc., a Delaware corporation, Renal Treatment
Centers - Northeast, Inc., a Delaware corporation, Renal Treatment Centers -
California, Inc., a Delaware corporation, Renal Treatment Centers - West, Inc.,
a Delaware corporation and Renal Treatment Centers - Southeast, Inc., a Delaware
corporation, (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".
"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.
15
<PAGE>
"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,
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.
16
<PAGE>
"Intercreditor Agreement": the Intercreditor and Collateral Agency
-----------------------
Agreement, dated as of October 24, 1997, 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, delivered pursuant to the
Existing Term Loan Agreement, 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 week or 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
week (during the period referred to in clause (iv) below) or 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, (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, and
(iv) during the 30 day period (or such shorter period as the Administrative
Agent and the Syndication Agent shall notify the Borrower) following the
Effective Date, each Interest Period shall be the period commencing on the
Borrowing Date or Conversion/Continuation Date with respect to such Advance and
ending approximately one week thereafter, and all Interest Periods during such
30 day period shall begin and end on the same day.
17
<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, the Acknowledgement and
Confirmation 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 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
18
<PAGE>
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": March 31, 2008, 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
19
<PAGE>
provision for taxes on such extraordinary gain or loss, realized by such Person
during such period.
"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 Lender": each Lender that has a First Additional Term Loan
----------
Commitment.
"New Subsidiary": as defined in Section 8.11.
--------------
"Non-Continuing Lenders": those lenders party to the Existing Term
----------------------
Loan Agreement listed on Schedule 1.1(N).
"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
20
<PAGE>
equity compensation plans, employee stock option plans, employee stock purchase
plans and all other similar plans, and all participants therein and
beneficiaries thereof.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA, or any Governmental Authority succeeding to
the functions thereof.
"Pension Plan": at any date of determination, any employee pension
------------
benefit plan (including a Multiemployer Plan) that is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code,
the funding requirements of which (under Section 302 of ERISA or Section 412 of
the Code) are, or at any time within the five years immediately preceding such
date, were in whole or in part, the responsibility of the Borrower, any of its
Subsidiaries or any ERISA Affiliate, provided that the term Pension Plan shall
not include the employee benefit pension plans listed on Schedule 1.1(P).
"Permitted Acquisitions": 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, TRC and RTC 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
21
<PAGE>
"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;
(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
22
<PAGE>
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:
Redemption Price
Period Percentage
------ ----------------
May 1, 1998 to April 30, 1999 101.5%
May 1, 1999 to April 30, 2000 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.
23
<PAGE>
"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.
"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.
24
<PAGE>
"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
Subordinated Indebtedness, except in accordance with the mandatory redemption or
repayment provisions set forth in the original documentation governing such
Subordinated 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.
"Revolving Credit Facility": the Amended and Restated 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.
---------------
"RTC": Renal Treatment Centers, Inc., a Delaware corporation.
---
"RTC Convertible Subordinated Indenture": 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 amended
by that certain First
25
<PAGE>
Supplemental Indenture dated as of February 27, 1998 and that certain Second
Supplemental Indenture dated as of March 31, 1998, and as the same may be
further amended, supplemented, restated or otherwise modified from time to time
in accordance with Section 8.15.
"RTC Convertible Subordinated Notes": 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": that certain Agreement and Plan of Merger
--------------------
dated as of November 18, 1997 by and among Borrower, Nevada Acquisition Corp, a
Delaware corporation 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.
"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 unsecured Indebtedness of the
-------------------------
Borrower subordinated in right of payment to the payment in full of the
Obligations of the Borrower and other senior obligations of the Borrower;
provided that (i) the negative covenants in such Indebtedness are less
- --------
restrictive than the negative covenants in this Agreement as in effect at the
time such Indebtedness is incurred, (ii) the affirmative covenants in such
Indebtedness are no more restrictive than the affirmative covenants in this
Agreement as in effect at the time such Indebtedness is incurred, (iii) the
events of default in such Indebtedness relating to insolvency and nonpayment of
amounts owed thereunder are no more restrictive than the corresponding defaults
in this Agreement as in effect at the time such Indebtedness is incurred, and
the other events of default in such Indebtedness are less restrictive than the
corresponding defaults in this Agreement as in effect at the time such
Indebtedness is incurred, (iv) such Indebtedness does not cross-default to other
Indebtedness (but may cross-accelerate to other Indebtedness of Borrower or any
Guarantor that has guarantied such Indebtedness), (v) the subordination
provisions in such Indebtedness are on market terms for subordinated debt
instruments prevailing at or around the time such Indebtedness is incurred and
(vi) such Indebtedness provides for no scheduled payment or mandatory
prepayments of principal before the date that is 180 days after the scheduled
Maturity Date, other than (x) redemptions made at the option of the holders of
such Indebtedness upon a change in control
26
<PAGE>
of the Borrower in circumstances where the holders of the Term Loans would have
rights to prepayment under Section 2.4(c), provided that any such redemptions
are made not fewer than 30 days after such change in control and (y) mandatory
prepayments required as a result of asset dispositions if such Indebtedness
allows the Borrower to satisfy such mandatory prepayment requirement by
prepayment of senior obligations of the Borrower or reinvestment of the asset
disposition proceeds within a specified period of time.
"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.
"Subsidiary Guaranty": the Subsidiary Guaranty, dated as of October
-------------------
24, 1997, by the Guarantors in favor of the Collateral Agent, executed and
delivered pursuant to the Existing Term Loan Agreement, as amended, supplemented
or otherwise modified from time to time.
"Subsidiary Pledge Agreements": collectively, each Subsidiary Pledge
----------------------------
Agreement (i) delivered on or before the Effective Date pursuant to the Existing
Term Loan Agreement or pursuant to Section 5.6 hereof or (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
27
<PAGE>
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.
"Term Loan" and "Term Loans": an Existing Term Loan or First
--------- ----------
Additional Term Loan, and the Existing Term Loans and First Additional Term
Loans, respectively.
"Term Loan Note" and "Term Loan Notes": as defined in Section 2.2(a).
-------------- ---------------
"Term Loan Commitment": as to any Lender, such Lender's First Additional Term
--------------------
Loan Commitment.
"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).
"Termination Event": with respect to any Pension Plan, (i) a
-----------------
Reportable Event, (ii) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination, in each case under Section 4041(c) of ERISA, (iii)
the institution of proceedings to terminate a Pension Plan under Section 4042 of
ERISA, or (iv) the appointment of a trustee to administer any Pension Plan under
Section 4042 of ERISA.
"Total Debt": the difference between (i) all Indebtedness (less
----------
Excluded Contingent Obligations) and (ii) cash and cash equivalents, in each
case, of the Borrower and its Subsidiaries on a Consolidated basis in accordance
with GAAP.
"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)).
28
<PAGE>
"Transactions": the transactions contemplated under this Agreement
------------
and the other Loan Documents on the Effective Date and the Funding Date,
including the borrowing of the First Additional 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).
"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,
29
<PAGE>
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".
2. AMOUNT AND TERMS OF LOANS
-------------------------
2.1 Term Loans
----------
(a) Existing Term Loans. Each Existing Lender (or its predecessor)
-------------------
made term loans (each an "Existing Term Loan" and, as the context may require,
------------------
collectively with the Existing Term Loans of all other Existing Lenders, the
"Existing Term Loans") to the Borrower on January 22, 1998, pursuant to the
- --------------------
Existing Term Loan Agreement. Subject to the terms and conditions hereof, each
Existing Lender severally agrees to maintain its Existing Term Loan as a Term
Loan hereunder. Borrowings of Existing Term Loans that are subsequently repaid
or prepaid may not be reborrowed.
(b) First Additional Term Loans. Subject to the terms and conditions
---------------------------
hereof, each New Lender severally agrees to make term loans (each a "First
-----
Additional Term Loan" and, as the context may require, collectively with the
- --------------------
First Additional Term Loans of all other New Lenders, the "First Additional Term
---------------------
Loans") to the Borrower on the Funding Date, provided, however, that immediately
- -----
after giving effect thereto (a) such New Lender's First Additional Term Loans
shall not exceed such Lender's First Additional Term Loan Commitment and (b) the
aggregate principal amount of all Term Loans of all Lenders shall not exceed
$400,000,000. The Borrower may make only one borrowing under the First
30
<PAGE>
Additional Term Loan Commitments. Amounts borrowed under this Section 2.1(b)
and subsequently repaid or prepaid may not be reborrowed.
(c) Conversion of Existing Term Loans into Term Loans. Upon
-------------------------------------------------
satisfaction or written waiver by Required Lenders of the conditions set forth
in Sections 5 and 6, as of the Effective Date all Existing Term Loans
outstanding under the Existing Term Loan Agreement as of, and at the time of,
the Effective Date shall be converted into and deemed to be Term Loans for all
purposes under this Agreement. Any amounts of accrued interest or other amounts
owed (whether or not presently due and payable) by the Borrower to the Lenders
under or in respect of the Existing Term Loans that have not been paid on or
before the Effective Date shall, as of the Effective Date, continue to be due
and payable to the Lenders under the Term Loan Notes issued to the Lenders under
this Agreement. The conversion of the Existing Term Loans hereunder shall not
be deemed to be repayment thereof, and the Borrower shall not be required to
deliver any notice of prepayment or notice of borrowing or to satisfy any other
condition relating to required amounts of prepayments or borrowings hereunder
with respect to such conversion of the Existing Term Loans.
2.2 Term Loan Notes
---------------
(a) The Existing Term Loan continued by each Existing Lender and the
First Additional Term Loan made by each New 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 sum of (x) the
unpaid principal balance of all Existing Term Loans of such Lender outstanding
on the Effective Date at the time of the effectiveness hereof, plus (y) the
----
original amount of the First Additional Term Loan Commitment of such Lender and
(b) the aggregate unpaid principal balance of all Term Loans made or continued
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. Upon the execution and delivery to any
Existing Lender of a Term Loan Note pursuant to this Section 2.2, the term loan
note that was executed and delivered to such Existing Lender pursuant to the
Existing Term Loan Agreement (each, an "Existing Term Loan Note") shall be null
and void, and such Existing Lender shall promptly return such Existing Term Loan
Note to the Borrower for cancellation. 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.
31
<PAGE>
2.3 Procedure for Borrowing
-----------------------
(a) The Borrower may borrow First Additional Term Loans in a single
draw on the Effective Date. When the Borrower desires to borrow the First
Additional 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 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 New Lender thereof. Subject to
its receipt of the notice referred to in the preceding sentence, each New Lender
will make the amount of its First Additional Term Loan Pro Rata Share of the
First Additional 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 First Additional Term Loan
requested hereunder nor shall the First Additional 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 First Additional 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 New
32
<PAGE>
Lender's First Additional Term Loan Pro Rata Share of the First Additional 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 First Additional Term Loan Pro Rata Share
of such First Additional 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
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 First Additional 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
33
<PAGE>
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 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:
<TABLE>
<CAPTION>
Scheduled
Date Repayment of Term Loans
------ ----------------------------
<S> <C>
September 30, 1998 $4,000,000
September 30, 1999 $4,000,000
September 30, 2000 $4,000,000
September 30, 2001 $4,000,000
September 30, 2002 $4,000,000
September 30, 2003 $4,000,000
September 30, 2004 $4,000,000
September 30, 2005 $4,000,000
September 30, 2006 $4,000,000
September 30, 2007 $4,000,000
March 31, 2008 $360,000,000
</TABLE>
; 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
March 31, 2008, 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
34
<PAGE>
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 (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(f) 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 (to an amount not less than zero) 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
35
<PAGE>
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 Borrower 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 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.
36
<PAGE>
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) 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,
37
<PAGE>
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), (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 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
38
<PAGE>
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 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
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 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.
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
39
<PAGE>
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;
(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
40
<PAGE>
(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 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),
41
<PAGE>
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 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
42
<PAGE>
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
(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
43
<PAGE>
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 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
44
<PAGE>
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 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.
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<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 [intentionally omitted]
-----------------------
3.2 Pro Rata Treatment and Application of Principal Payments
--------------------------------------------------------
Except as set forth in Section 3.3, each payment, including each
prepayment, of principal and interest on the Loans 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
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<PAGE>
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 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 Non Pro Rata Payments on the Effective Date Anything contained
-------------------------------------------
herein or in the other Loan Documents to the contrary notwithstanding, the
parties hereto agree that the payments on the Effective Date pursuant to Section
5.23 shall not be distributed to the Lenders in proportion to their respective
---
Pro Rata Shares thereof (as would otherwise be required pursuant to Section 3.3)
but shall instead be applied to the repayment in full of all term loans and
other obligations owed under the Existing Term Loan Agreement to the Non-
Continuing Lenders on the Effective Date. The parties hereto further agree that
the payments of interest, fees and other amounts paid pursuant to Sections 5.14
and 5.15 shall not be distributed to the Lenders in proportion to their
---
respective Pro Rata Shares thereof (as would otherwise be required pursuant to
Section 3.3) but shall instead shall be distributed to the Non-Continuing
Lenders and Existing Lenders in accordance with Section 3.2 of the Existing Term
Loan Agreement.
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:
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
47
<PAGE>
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 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.
48
<PAGE>
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
with all statutes, regulations, rules and orders applicable to Borrower, such
Subsidiary or such Credit Party of all Governmental Authorities, including,
49
<PAGE>
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 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.
50
<PAGE>
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, 1997 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.
51
<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
52
<PAGE>
any threatened or actual material liability in connection with the presence of
any Hazardous Substance on any Real Property (or any Real Property previously
owned by the Borrower, any of its Subsidiaries or any Credit Party) or the
release or threatened release of any Hazardous Substance into the environment,
(iii) has received notice of any federal or state investigation evaluating
whether any material remedial action is needed to respond to the presence of any
Hazardous Substance on any Real Property (or any Real Property previously owned
by the Borrower, any of its Subsidiaries or any Credit Party) or a release or
threatened release of any Hazardous Substance into the environment for which the
Borrower, any of its Subsidiaries or any Credit Party is or may be liable, or
(iv) has received notice that the Borrower, any of its Subsidiaries or any
Credit Party is or may be liable for a material amount to any Person under any
Environmental Law.
(d) For purposes of subsections (a), (b) and (c) of this Section 4.16
"material" shall mean any liability or potential liability of the Borrower and
its Subsidiaries on a Consolidated basis for an aggregate amount in excess of
$1,000,000.
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
53
<PAGE>
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.
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. '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.
54
<PAGE>
4.22 Subordinated Indebtedness
-------------------------
The subordination provisions of (i) the RTC Convertible Subordinated
Indenture, (ii) any Guarantee by the Borrower of the Indebtedness under the RTC
Convertible Subordinated Indenture and the RTC Convertible Subordinated Notes,
(iii) any Subordinated Indebtedness of the Borrower now existing or hereafter
incurred or assumed by the Borrower and (iv) any Guarantee by any Subsidiary of
the Borrower of any Subordinated Indebtedness of the Borrower will be
enforceable against the holders thereof, and the Loans and all other monetary
Obligations hereunder and all monetary obligations under the Subsidiary Guaranty
will constitute "Senior Indebtedness" and "Designated Senior Indebtedness" (or
any comparable terms) as defined in such provisions.
4.23 Survival of Rights Created under Existing Term Loan Agreement
-------------------------------------------------------------
Notwithstanding the modification or deletion of certain
representations and warranties of the Borrower contained in the Existing Term
Loan Agreement (including, without limitation, the deletion of representations
and warranties as to the future consequences of certain events which occurred
prior to the date of this Agreement), the Borrower acknowledges and agrees that
any choses in action or other rights created in favor of any Lender and their
------ -- ------
respective successors and assigns arising out of the representations and
warranties of the Borrower contained in or delivered (including representations
and warranties delivered in connection with the making of loans thereunder) in
connection with the Existing Term Loan Agreement, shall survive the execution
and delivery of this Agreement. The Borrower and Lenders acknowledge that
certain representations and warranties made by the Borrower under the Existing
Term Loan Agreement (including representations and warranties as to the future
consequences of certain events which occurred prior to the date of this
Agreement) were made subject to changes in the facts and conditions on which
such representations and warranties were based, which such changes were
permitted or required under the Existing Term Loan Agreement or this Agreement
and any such representations and warranties incorporated herein are so
incorporated subject to such changes permitted or required under the Existing
Term Loan Agreement or this Agreement.
5. CONDITIONS TO EFFECTIVENESS OF AGREEMENT
----------------------------------------
The effectiveness of this Agreement and the obligation of each
Existing Lender to maintain its Existing Term Loan as a Term Loan hereunder, and
the obligation of each New Lender to make its First Additional 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:
55
<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 and Pledgors. The Administrative Agent shall have
---------------------------
received a certificate, dated the Effective Date, of the Secretary or Assistant
Secretary of each Guarantor and 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 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 or
Pledgor'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 Acknowledgement and Confirmation
--------------------------------
The Administrative Agent shall have received counterparts of the
Acknowledgement and Confirmation signed by each of the parties thereto.
56
<PAGE>
5.5 First Amendment to Pledge Agreements
------------------------------------
The Administrative Agent shall have received counterparts of each
First Amendment to Pledge Agreement signed by the Borrower, TRC and, unless RTC
shall have merged with and into the Borrower, RTC.
5.6 [Intentionally omitted]
-----------------------
5.7 [Intentionally omitted]
-----------------------
5.8 Revolving Credit Facility
-------------------------
The Revolving Credit Facility 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 Revolving Credit Facility, which shall be in form
and substance satisfactory to the Administrative Agent and the Syndication
Agent.
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 [intentionally omitted]
-----------------------
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.
57
<PAGE>
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 set forth in that certain Letter Agreement
dated April 1, 1998, between the Borrower, the Co-Arrangers, the Administrative
Agent and the Syndication Agent, shall have been paid.
5.14 Interest and Fees under Existing Term Loan Agreement.
-----------------------------------------------------
The Borrower shall have paid to the Administrative Agent, for
distribution (as appropriate) to the Administrative Agent, the Non-Continuing
Lenders and the Existing Lenders, all unpaid interest, fees and other amounts
(other than the principal amount of the Existing Term Loans, which shall
continue to be owed hereunder and under the Notes) owed under the Existing Term
Loan Agreement that have accrued to the Effective Date.
5.15 Conversion of Existing Term Loans.
---------------------------------
Notwithstanding anything to the contrary contained in the Existing
Term Loan Agreement, the Borrower shall have converted all Existing Term Loans
and term loans held by Non-Continuing Lenders on the Effective Date that are
Eurodollar Advances into ABR Advances and, in connection therewith, shall have
paid to the Administrative Agent for distribution to the Existing Lenders and
Non-Continuing Lenders such amounts as would have been payable under Section
2.11 of the Existing Term Loan Agreement if such Eurodollar Advances had been
prepaid on the Effective Date.
5.16 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.
5.17 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
58
<PAGE>
documents (where appropriate) to be certified by an Authorized Signatory of the
Borrower or proper Governmental Authorities.
5.18 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.
5.19 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.
5.20 Approval of Special Counsel
---------------------------
All legal matters in connection with the making of the Loans shall be
reasonably satisfactory to Special Counsel.
5.21 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.
59
<PAGE>
5.22 Other Documents
---------------
The Administrative Agent shall have received such other documents as
the Administrative Agent or the Required Lenders shall reasonably request.
5.23 Consent to Amendments; Repayments of obligations to Non-Continuing
------------------------------------------------------------------
Lenders
- -------
Each Non-Continuing Lender shall have executed and delivered to the
Administrative Agent a Consent to Amendment substantially in the form of Exhibit
L, pursuant to which such Non-Continuing Lender shall consent to the amendment
and restatement of the Existing Term Loan Agreement pursuant to this Agreement.
On the Effective Date, concurrently with the effectiveness hereof, the Borrower
shall repay all principal and, to the extent not otherwise paid under Sections
5.14 and 5.15, interest, fees and other amounts owed to each Non-Continuing
Lender under the Existing Term Loan Agreement at par in full, and each Non-
Continuing Lender shall thereupon cease to be a lender under the Existing Term
Loan Agreement.
6. 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:
6.1 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 First
Additional Term 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.
6.2 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.
60
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6.3 Borrowing Request
-----------------
With respect to the making of the First Additional Term Loans on the
Funding Date, the Administrative Agent shall have received a Borrowing Request
duly executed by an Authorized Signatory of the Borrower.
6.4 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.
6.5 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.
6.6 Approval of Special Counsel
---------------------------
All legal matters in connection with the making of each Loan shall be
reasonably satisfactory to Special Counsel.
6.7 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.
6.8 Other Documents
---------------
The Administrative Agent shall have received such other documents as
the Administrative Agent or the Lenders shall reasonably request.
61
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6.9 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.
6.10 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.
6.11 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.
7. 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:
7.1 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
62
<PAGE>
obtained no knowledge, in the course of performing their audit, that would
indicate that the Borrower was in violation of any financial covenant contained
in this Agreement or of the existence of any Default by the Borrower under this
Agreement. The consolidated balance sheet and consolidated statements of income,
retained earnings and cash flows shall be audited and certified without
qualification by the Accountants, which certification shall (i) state that the
examination by such Accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards and, accordingly, included such tests of the accounting records and
such other auditing procedures as were considered necessary in the
circumstances, and (ii) include the opinion of such Accountants that such
consolidated financial statements have been prepared in accordance with GAAP in
a manner consistent with prior fiscal periods, except as otherwise specified in
such opinion.
(b) As soon as available, but in any event within 45 days after the end
of each fiscal quarter, a copy of the consolidated balance sheet of the Borrower
and its Subsidiaries as at the end of each such quarterly period, together with
the related consolidated statements of income, retained earnings and cash flows
for such period and for the elapsed portion of the fiscal year through such
date, setting forth in each case in comparative form the figures for the
corresponding periods of the preceding fiscal year, certified by the chief
financial officer of the Borrower (or such other officer acceptable to the
Administrative Agent), as being complete and correct in all material respects
and as presenting fairly the consolidated financial condition and the
consolidated results of operations of the Borrower and its Subsidiaries.
(c) Within 45 days after the end of each of the first three fiscal
quarters in each year and within 90 days after the end of the last fiscal
quarter in each year, a Compliance Certificate, certified by the chief financial
officer of the Borrower (or such other officer as shall be acceptable to the
Administrative Agent) setting forth the Leverage Ratio as of the last day of
such fiscal quarter and certifying 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.
7.2 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
63
<PAGE>
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, 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)
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setting forth the details of such event and the action that the Borrower, such
Subsidiary or such ERISA Affiliate proposes to take with respect thereto,
together with a copy of all notices and filings with respect thereto.
(e) Prompt written notice in the event that Borrower, any of its
Subsidiaries or any ERISA Affiliate shall receive a demand letter from the PBGC
notifying the Borrower, such Subsidiary or such ERISA Affiliate of any final
decision finding liability in an aggregate amount in excess of $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.
7.3 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
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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.
7.4 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 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.
7.5 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.
7.6 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
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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.
7.7 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.
7.8 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.
7.9 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).
7.10 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.
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7.11 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, and (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) 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.
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8. 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 Administrative Agent, the Borrower shall perform,
and cause each of its Subsidiaries to perform, all of the covenants in this
Section 8:
8.1 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
$950,000,000 minus the aggregate amount of all permanent reductions in the
-----
Revolving Credit Commitments pursuant to Section 2.7(f) 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);
(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
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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);
(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) (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 February 27, 1998;
(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, amount, covenants and conditions of such Indebtedness shall be
reasonably satisfactory to the Required Lenders;
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(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;
(xiii) subordinated Guaranties by any Guarantor of Borrower's
obligations under any Subordinated Indebtedness permitted hereunder,
provided that (a) all Obligations of Borrower are guarantied by such
--------
Guarantor under the Subsidiary Guaranty, (b) each such Guaranty is
subordinated to at least the same extent as the Subordinated Indebtedness
guarantied thereby is subordinated to the Obligations of Borrower, (c) each
such Guaranty contains a limitation as to maximum amount guarantied thereby
similar to that set forth in subsection 2.2(a) of the Subsidiary Guaranty,
provided that in no event shall the liability of the Guarantor under such
Guaranty exceed the maximum amount permissible under applicable fraudulent
conveyance or similar law, and (d) each such Guaranty is otherwise on market
terms for guaranties of subordinated debt instruments prevailing at or
around the time such Guaranties are entered into;
(xiv) that certain Guaranty entered into as of March 31, 1998 by
the Borrower with respect to RTC's obligations under the RTC Convertible
Subordinated Notes provided that such Guaranty is subordinated to at least
--------
the same extent as the Indebtedness under the RTC Convertible Subordinated
Notes is subordinated to the Obligations of RTC under the Subsidiary
Guaranty; and
(xv) additional unsecured Indebtedness of the Borrower in an
aggregate principal amount not to exceed $35,000,000 at any one time
outstanding.
8.2 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 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);
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(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
(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
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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
8.3 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.
8.4 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 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
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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);
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(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.
8.5 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;
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(b) Investments in accounts and notes receivable acquired in the
ordinary course of business;
(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, 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
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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;
(i) Investments existing on the date hereof that are set forth on
Schedule 8.5;
(j) Investments existing on the date hereof in Subsidiaries that are
set forth on Schedule 4.1;
(k) any other Investments not permitted by the preceding clauses (a)-
(j) above that do not exceed $20,000,000 at any time;
(l) Contingent obligations to the extent permitted by Section 8.1(b);
and
(m) Restricted Investments to the extent permitted under Section 8.4.
8.6 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.
8.7 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.
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8.8 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.
8.9 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.
8.10 ERISA
-----
The Borrower will not permit any Pension Plan to have a Funded Current
Liability Percentage of less than 60 percent.
8.11 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; and
(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.
8.12 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
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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 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;
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(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.
8.13 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.
8.14 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.
8.15 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(f) of the Revolving Credit Facility (or any other provision
requiring mandatory prepayments or commitment reductions as a result of sales of
Property) in any
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way that, with respect to this clause (c), would adversely affect the interests
of the Lenders under any of the Loan Documents.
(b) 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.
(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 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.
(d) The Borrower will not, and will not permit any of its Subsidiaries
to, amend or otherwise change the terms of any Subordinated Indebtedness, or
make any payment consistent with an amendment thereof or change thereto (unless
such payment is permitted under clause (vi) of Section 8.4), if the effect of
such amendment or change is to change (to any date before the date that is 180
days after the scheduled Maturity Date) any dates upon which payments of
principal are due thereon, change the redemption, prepayment or defeasance
provisions thereof (unless the redemption or prepayment provisions as so changed
would be permitted under clause (vi) of the definition of "Subordinated
Indebtedness"), change the subordination provisions thereof (or of any guaranty
thereof), or grant any Lien to secure payment thereof, or if the effect of such
amendment or change, together with all other amendments or changes made, is to
increase materially the obligations of the obligor thereunder or to confer any
additional rights on the holders of such Subordinated Indebtedness (or a trustee
or other representative on their behalf) which would be adverse to the Borrower
or Lenders.
9. DEFAULT
-------
9.1 Events of Default
-----------------
The following shall each constitute an "Event of Default" hereunder:
----------------
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(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 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
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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 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
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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 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,
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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 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 all
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.
10. THE AGENT
---------
10.1 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.
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10.2 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.
10.3 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,
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.
10.4 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
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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.
10.5 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 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.
10.6 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
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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.
10.7 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 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.
10.8 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.
10.9 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
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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.
10.10 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.
10.11 The Co-Arrangers
----------------
The Co-Arrangers shall have no duties or obligations under the Loan
Documents in their capacity as Co-Arrangers.
10.12 The Syndication Agent
---------------------
The Syndication Agent shall have no duties or obligations under the
Loan Documents in its capacity as Syndication Agent.
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11. OTHER PROVISIONS
----------------
11.1 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) extend the Maturity
Date; (ii) decrease the rate or prepayment penalty or premium, or extend the
time of payment, of interest on, or change or forgive the principal amount
of, or change the pro rata allocation of payments under, any Loan, (iii)
except as provided in Section 11.1(c), release or discharge any Credit Party
or release any Collateral; (iv) change the provisions of Sections 2.8, 2.10,
2.11, 2.12, 2.14, 11.1 or 11.7(a), (v) change the definition of Required
Lenders, Pro Rata Share or First Additional Term Loan Pro Rata Share, (vi)
change the several nature of the obligations of the Lenders, (vii) extend
the date or decrease the amount of any scheduled payment of Term Loans
pursuant to Section 2.4(b), (viii) add any new borrower under this Agreement
or (ix) waive Section 5.23;
(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;
(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; and
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(d) no such amendment, supplement, modification, waiver or consent
shall increase the aggregate principal amount of Term Loans or commitments
to make Term Loans hereunder without the consent of Required Lenders and
each Lender providing such Term Loans or commitments.
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.
11.2 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:
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
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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.
11.3 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 Loan Documents are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
11.4 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.
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11.5 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 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.
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11.6 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.
11.7 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 negotiation pursuant to clause (iv) shall be in a
minimum amount of $1,000,000 (or, if less, a Lender's entire Credit Exposure).
In addition, during the 30 day period following the Effective Date, assignments
made by the Administrative
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Agent and the Syndication Agent (excluding assignments of Term Loans in an
aggregate principal amount equal to the amount of Existing Term Loans held by
them on April 20, 1998) shall not be subject to the $1,000,000 minimum size
restriction or require payment of the Assignment Fee. 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 date of the assignor's Note subject to 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 Note, dated the date of the assignor's Note subject to 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.
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(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).
(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.
(g) In the event that the Borrower shall request that Lenders enter
into any amendment, modification, consent or waiver with respect to this
Agreement or any other Loan Document, which amendment, modification, consent or
waiver cannot become effective without the consent of each Lender, and any
Lender elects not to enter into such amendment, modification, consent or waiver
(each such Lender being a "Dissenting Lender"), then the Borrower shall have the
-----------------
right upon 10 days' written notice to the Administrative Agent and such
Dissenting Lender, to require each such Dissenting Lender to assign 100% of its
Term Loans and Term Loan Notes at par to any Lender or any other financial
institution that agrees, in its sole discretion, to assume such Term Loans and
Term Loan Notes. Each such assignment shall be made pursuant to an Assignment
and Acceptance Agreement and shall comply with the other terms of this Section
11.7. In the event that the amendment, modification, consent or waiver
requested by the Borrower would reduce the interest payable on the Term Loans of
any Dissenting Lender or extend the scheduled Maturity Date of the Term Loans of
any Dissenting Lender, and such Dissenting Lender is required to assign 100% of
its Term Loans and Term Loan Notes to another Lender or financial institution
pursuant to this Section 11.7(g), the Borrower shall pay to such Dissenting
Lender, concurrently with the effectiveness of such assignment, an amount equal
to the redemption premium and any amounts payable under Section 2.11 that would
have been payable to such Dissenting Lender if the Borrower had voluntarily
prepaid such Term Loans.
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11.8 Counterparts; Effectiveness
---------------------------
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. On the
Effective Date, at the time of the effectiveness of this Agreement, this
Agreement shall amend and restate the Existing Term Loan Agreement, all
obligations of the Borrower under the Existing Term Loan Agreement that have not
been paid as of the Effective Date shall become Obligations of the Borrower
hereunder, and the commitments under the Existing Term Loan Agreement shall
terminate.
11.9 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 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
97
<PAGE>
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.
11.10 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.
11.11 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 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
98
<PAGE>
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.
11.12 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.
11.13 Headings Descriptive
--------------------
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
11.14 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.
11.15 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 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.
99
<PAGE>
11.16 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.
11.17 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.
11.18 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.
11.19 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
100
<PAGE>
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.
- ----- ----
11.20 Designation as Designated Senior Indebtedness
---------------------------------------------
This Agreement, the Subsidiary Guaranty, and all Loans and all other
monetary Obligations hereunder and thereunder, are hereby expressly designated
as "Designated Senior Indebtedness," as that term is defined in the RTC
Convertible Subordinated Indenture and in any Guarantee thereof.
11.21 Year 2000
---------
The Borrower and its Subsidiaries have reviewed the areas within
their business and operations which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications used by the Borrower
and its Subsidiaries may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date after December
31, 1999). Based on such review and program, the Borrower reasonably believes
that the "Year 2000 Problem" will not have a material adverse effect on the
financial condition, operations, business, prospects or Property of the Borrower
and its Subsidiaries taken as a whole since December 31, 1997.
101
<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: /s/ John E. King
----------------------
Name: John E. King
Title: V/P Finance & CFO
<PAGE>
Lender: THE BANK OF NEW YORK,
- ------ Individually, and as
Administrative Agent
By: /s/ Rebecca K. Levine
-------------------------
Name: Rebecca K. Levine
Title: Vice President
First Additional Term Loan Commitment: $22,500,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 15.0000%
- -----------------------------------------
Pro Rata Share: 6.8750%
- --------------
Domestic Lending Office: The Bank of New York
- ----------------------- One Wall Street
New York, New York 10286
Attn: Kalyani Bose
Telephone: (212) 635-4693
Fax: (212) 635-6365
Eurodollar Lending Office: The Bank of New York
- ------------------------- IBF Offshore Support Dept.
Attn: Kalyani Bose
Telephone: (212) 635-4693
Fax: (212) 635-6365
<PAGE>
Lender: DLJ CAPITAL FUNDING, INC.,
- ------ Individually and as Syndication
Agent
By: /s/ Eric Swanson
-------------------------
Name: Eric Swanson
Title: Managing Director
First Additional Term Loan Commitment: $75,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 50.0%
- -----------------------------------------
Pro Rata Share: 18.7500%
- --------------
Domestic Lending Office: DLJ Capital Funding, Inc.
- ----------------------- 277 Park Avenue
17th Floor
New York, New York 10172
Attn: Harold Phillips
Telephone: (212) 892-3690
Fax: (212) 892-7740
Eurodollar Lending Office: DLJ Capital funding, Inc.
- ------------------------- 277 Park Avenue
17th Floor
New York, New York 10172
Attn: Harold Phillips
Telephone: (212) 892-3690
Fax: (212) 892-7740
<PAGE>
Lender: DEEPROCK & COMPANY
- ------
By: /s/ Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 0.5000%
- --------------
Domestic Lending Office: State Street Bank & Trust Company
- ----------------------- Corporate Trust Division
One Enterprise Drive
North Quiney, MA 02171
Attn: Patrick McEnroe
Telephone: (617) 664-5366
Fax: (617) 664-5367
Eurodollar Lending Office: State Street Bank & Trust Company
- ------------------------- Corporate Trust Division
One Enterprise Drive
North Quiney, MA 02171
Attn: Patrick McEnroe
Telephone: (617) 664-5366
Fax: (617) 664-5367
<PAGE>
Lender: DELANO COMPANY,
- ------ By Pacific Investment Management
Company, as its Investment Advisor
By: /s/ Raymond Kennedy
-------------------------
Name: Raymond Kennedy
Title: Sr. Vice President
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 2.0000%
- --------------
Domestic Lending Office: Chase Bank of Texas National
- ----------------------- Association
601 Travis Street, 8th Floor
Houston, Texas 77002
Attn: Delano Company/
Robert Tomicic
Telephone: (713) 216-4672
Fax: (713) 216-8299
Eurodollar Lending Office: Chase Bank of Texas National
- ------------------------- Association
601 Travis Street, 8th Floor
Houston, Texas 77002
Attn: Delano Company/
Robert Tomicic
Telephone: (713) 216-4672
Fax: (713) 216-8299
<PAGE>
Lender: FRANKLIN FLOATING RATE TRUST
- ------
By: /s/ Chauncey F. Lufkin
-----------------------------
Name: Chauncey F. Lufkin
Title: Vice President
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 0.3750%
- --------------
Domestic Lending Office: Franklin Templeton Worldwide
- ----------------------- 777 Mariners Island Blvd.
San Mateo, California 94404
Attn: Mr. Richard Hsu
Telephone: (650) 312-3732
Fax: (650) 312-3346
Eurodollar Lending Office: Franklin Templeton Worldwide
- ------------------------- 777 Mariners Island Blvd.
San Mateo, California 94404
Attn: Mr. Richard Hsu
Telephone: (650) 312-3732
Fax: (650) 312-3346
<PAGE>
Lender: GCB INVESTMENT PORTFOLIO
- ------ By: Citibank, N.A.
By: /s/ Steven Kuufman
-----------------------------
Name: Steven Kuufman
Title: Vice President
First Additional Term Loan Commitment: $2,500,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 1.6666%
- -----------------------------------------
Pro Rata Share: 2.5000%
- --------------
Domestic Lending Office: GCB Investment Portfolio
- ----------------------- Two Pennsway
New Castle, DE 19720
Attn: John Bohinski
Telephone: (302) 894-6045
Fax: (302) 894-6120
Eurodollar Lending Office: GCB Investment Portfolio
- ------------------------- Two Pennsway
New Castle, DE 19720
Attn: John Bohinski
Telephone: (302) 894-6045
Fax: (302) 894-6120
<PAGE>
Lender: JACKSON NATIONAL LIFE INSURANCE
- ------ COMPANY
By: PPM America, Inc., as
attorney in fact, on behalf
of Jackson National Life
Insurance Company
By: /s/ Michael DiRe
-----------------------------
Name: Michael DiRe
Title: Vice President
First Additional Term Loan Commitment: $5,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 3.3333%
- -----------------------------------------
Pro Rata Share: 1.2500%
- --------------
Domestic Lending Office: PPM America Inc.
- ----------------------- 225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attn: Susan Perrino, Portfolio
Administrator
Telephone: (312) 634-1205
Fax: (312) 634-0054
Eurodollar Lending Office: PPM America Inc.
- ------------------------- 225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attn: Susan Perrino, Portfolio
Administrator
Telephone: (312) 634-1205
Fax: (312) 634-0054
<PAGE>
Lender: KZH IV CORPORATION
- ------
By: /s/ Virginia Conway
-----------------------------
Name: Virginia Conway
Title: Authorized Agent
First Additional Term Loan Commitment: $7,500,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 5.0000%
- -----------------------------------------
Pro Rata Share: 1.8750%
- --------------
Domestic Lending Office: KZH IV Corporation
- ----------------------- c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Telephone: (212) 946-7575
Fax: (212) 946-7776
Eurodollar Lending Office: KZH IV Corporation
- ------------------------- c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Telephone: (212) 946-7575
Fax: (212) 946-7776
<PAGE>
Lender: KZH - SOLEIL CORPORATION
- ------
By: /s/ Virginia Conway
-----------------------------
Name: Virginia Conway
Title: Authorized Agent
First Additional Term Loan Commitment: $5,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 3.3333%
- -----------------------------------------
Pro Rata Share: 3.7500%
- --------------
Domestic Lending Office: KZH - Soleil Corporation
- ----------------------- c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Telephone: (212) 946-7575
Fax: (212) 946-7776
Eurodollar Lending Office: KZH - Soleil Corporation
- ------------------------- c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Telephone: (212) 946-7575
Fax: (212) 946-7776
<PAGE>
Lender: MERRILL LYNCH SENIOR FLOATING
- ------ RATE FUND, INC.
By: /s/ R. Douglas Henderson
-----------------------------
Name: R. Douglas Henderson
Title: Authorized Signatory
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 5.6250%
- --------------
Domestic Lending Office: Bank of New York
- ----------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Michelle Moore
Telephone: (212) 495-2919
Fax: (212) 495-2935
Eurodollar Lending Office: Bank of New York
- ------------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Michelle Moore
Telephone: (212) 495-2919
Fax: (212) 495-2935
<PAGE>
Lender: SENIOR HIGH INCOME PORTFOLIO, INC.
- ------
By: /s/ R. Douglas Henderson
-----------------------------
Name: R. Douglas Henderson
Title: Authorized Signatory
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 1.2500%
- --------------
Domestic Lending Office: Bank of New York
- ----------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Michelle Moore
Telephone: (212) 495-2919
Fax: (212) 495-2935
Eurodollar Lending Office: Bank of New York
- ------------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Michelle Moore
Telephone: (212) 495-2919
Fax: (212) 495-2935
<PAGE>
[Intentionally Omitted]
<PAGE>
Lender: DEBT STRATEGIES FUND, INC.
- ------
By: /s/ R. Douglas Henderson
-----------------------------
Name: R. Douglas Henderson
Title: Authorized Signatory
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 1.2500%
- --------------
Domestic Lending Office: Bank of New York
- ----------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Paul Mazanec
Telephone: (212) 495-2917
Fax: (212) 495-2935
Eurodollar Lending Office: Bank of New York
- ------------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Paul Mazanec
Telephone: (212) 495-2917
Fax: (212) 495-2935
<PAGE>
Lender: DEBT STRATEGIES FUND II, INC.
- ------
By: /s/ R. Douglas Henderson
-----------------------------
Name: R. Douglas Henderson
Title: Authorized Signatory
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 3.7500%
- --------------
Domestic Lending Office: Bank of New York
- ----------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Manlai Chang
Telephone: (212) 495-2920
Fax: (212) 495-2935
Eurodollar Lending Office: Bank of New York
- ------------------------- 90 Washington Street, 12th Floor
New York, New York 10286
Attn: Manlai Chang
Telephone: (212) 495-2920
Fax: (212) 495-2935
<PAGE>
Lender: OCTAGON LOAN TRUST
- ------
By: /s/ James Perguson
-----------------------------
Name: James Perguson
Title: Managing Director
OCTAGON LOAN TRUST
By: Octagon Credit Investors,
as manager
First Additional Term Loan Commitment: $5,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 3.3333%
- -----------------------------------------
Pro Rata Share: 5.0000%
- --------------
Domestic Lending Office: State Street Bank and Trust
- ----------------------- Company
2 International Place, 5th Floor
Boston, Massachusetts 02110-2804
Attn: Herb Schofield/Wayne Elpus
Telephone: (617) 664-5205
Fax: (617) 664-5291
Eurodollar Lending Office: State Street Bank and Trust
- ------------------------- Company
2 International Place, 5th Floor
Boston, Massachusetts 02110-2804
Attn: Herb Schofield/Wayne Elpus
Telephone: (617) 664-5205
Fax: (617) 664-5291
<PAGE>
Lender: ORIX USA CORPORATION
- ------
/s/ Hiroyuki Miyauchi
-----------------------------
By: Hiroyuki Miyauchi
Title: Executive Vice President
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 2.50000%
- --------------
Domestic Lending Office: Orix USA Corporation
- ----------------------- 780 Third Avenue, 48th Floor
New York, New York 10017-7088
Attn: Ms. Paula Penkal
Telephone: (212) 418-8364
Fax: (212) 418-8308
Eurodollar Lending Office: Orix USA Corporation
- ------------------------- 7800 Third Avenue, 48th Floor
New York, New York 10017-7088
Attn: Ms. Paula Penkal
Telephone: (212) 418-8364
Fax: (418) 418-8308
<PAGE>
Lender: OSPREY INVESTMENTS PORTFOLIO
- ------ By: Citibank, N.A., as Manager
By: /s/ Hans L. Christensen
--------------------------
Name: Hans L. Christensen
Title: Vice President
First Additional Term Loan Commitment: $5,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 3.3333%
- -----------------------------------------
Pro Rata Share: 1.2500%
- --------------
Domestic Lending Office: State Street Bank & Trust Company
- ----------------------- 225 Franklin Street
Boston, Massachusetts 02110
Attn: Mr. Tony McKendry
Telephone: (617) 664-5628
Fax: (617) 664-5367
Eurodollar Lending Office: State Street Bank & Trust Company
- ------------------------- 225 Franklin Street
Boston, Massachusetts 02110
Attn: Mr. Tony McKendry
Telephone: (617) 664-5628
Fax: (617) 664-5367
<PAGE>
Lender: PIMCO TOTAL RETURN FUND (Acct 700)
- ------ By Pacific Investment Management
Company, as Investment Advisor,
acting through Investors Fiduciary
Trust Company in the Nominee Name
of IFTCO
By: /s/ Raymond Kennedy
----------------------
Name: Raymond Kennedy
Title: Sr. Vice President
First Additional Term Loan Commitment: $15,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 10.0000%
- -----------------------------------------
Pro Rata Share: 12.0000%
- --------------
Domestic Lending Office: Pacific Investment Management Co.
- ----------------------- 840 Newport Center Dr.
Newport Beach, CA 92658
Attn: Jason R. Rosiak
Telephone: (714) 640-3407
Fax: (714) 720-8586
Eurodollar Lending Office: Pacific Investment Management Co.
- ------------------------- 840 Newport Center Dr.
Newport Beach, CA 92658
Attn: Jason R. Rosiak
Telephone: (714) 640-3407
Fax: (714) 720-8586
<PAGE>
Lender: SENIOR DEBT PORTFOLIO
- ------
By: Boston Management and
Research, as Investment
Advisor
By: /s/ Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
First Additional Term Loan Commitment: $0.00
- -------------------------------------
First Additional Term Loan Pro Rata Share: 0.00%
- -----------------------------------------
Pro Rata Share: 8.2500%
- --------------
Domestic Lending Office: Senior Debt Portfolio
- ----------------------- c/o Boston Management and Research
24 Federal Street
6th Floor
Boston, MA 02110
Attn: Juliana Riley/
David M. Lochiano
Telephone: (617) 348-0115
Fax: (617) 695-9594
Eurodollar Lending Office: Senior Debt Portfolio
- ------------------------- c/o Boston Management and Research
24 Federal Street
6th Floor
Boston, MA 02110
Attn: Juliana Riley/
David M. Lochiano
Telephone: (617) 348-0115
Fax: (617) 695-9594
<PAGE>
Lender: THE BANK OF NEW YORK, as Trustee
- ------ on behalf of NATS Loan Trust 18
and not in its individual capacity
By: /s/ Betty A. Cocozza
-------------------------
Name: Betty A. Cocozza
Title: Vice President
First Additional Term Loan Commitment: $5,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 3.3333%
- -----------------------------------------
Pro Rata Share: 1.2500%
- --------------
Domestic Lending Office: The Bank of New York
- ----------------------- 101 Barclay Street
New York, New York 10286
Attn: Betty Cocozza
Telephone: (212) 815-5095
Fax: (212) 815-7157
Eurodollar Lending Office: The Bank of New York
- ------------------------- 101 Barclay Street
New York, New York 10286
Attn: Betty Cocozza
Telephone: (212) 815-5095
Fax: (212) 815-7157
<PAGE>
[Intentionally Omitted]
<PAGE>
Lender: TRANSAMERICA LIFE INSURANCE AND
- ------ ANNUITY COMPANY
By:
-------------------------
Name:
Title:
First Additional Term Loan Commitment: $5,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 3.3333%
- -----------------------------------------
Pro Rata Share: 1.2500%
- --------------
Domestic Lending Office: Mellon Securities Trust Company
- ----------------------- 120 Broadway Street, 13th Floor
New York, New York 10271
Attn: Mr. Tony Bello
Telephone: (212) 374-0124
Eurodollar Lending Office: Mellon Securities Trust Company
- ------------------------- 120 Broadway Street, 13th Floor
New York, New York 10271
Attn: Mr. Tony Bello
Telephone: (212) 374-0124
<PAGE>
Lender: VAN KAMPEN AMERICAN CAPITAL
- ------ PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
First Additional Term Loan Commitment: $20,000,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 13.3333%
- -----------------------------------------
Pro Rata Share: 18.1250%
- --------------
Domestic Lending Office: State Street Bank & Trust
- ----------------------- Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102
Attn: Sean Emerson
Telephone: (617) 664-5481
Fax: (617) 664-5366, 5367
Eurodollar Lending Office: State Street Bank & Trust
- ------------------------- Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102
Attn: Sean Emerson
Telephone: (617) 664-5481
Fax: (617) 664-5366, 5367
<PAGE>
Lender: KZH - SOLEIL-2 CORPORATION
- ------
By: /s/ Virginia Conway
-------------------------
Name: Virginia Conway
Title: Authorized Agent
First Additional Term Loan Commitment: $2,500,000
- -------------------------------------
First Additional Term Loan Pro Rata Share: 1.6666%
- -----------------------------------------
Pro Rata Share: .6250%
- --------------
Domestic Lending Office: KZH - Soleil-2 Corporation
- ----------------------- c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Telephone: (212) 946-7575
Fax: (212) 946-7776
Eurodollar Lending Office: KZH - Soleil-2 Corporation
- ------------------------- c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Telephone: (212) 946-7575
Fax: (212) 946-7776
<PAGE>
EXHIBIT 10.30
===============================================================================
===============================================================================
AMENDED AND RESTATED
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,
________________
$950,000,000
________________
Dated as of April 30, 1998
===============================================================================
===============================================================================
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of April 30,
1998, 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") (the "Agreement").
-------------------- ---------
PRELIMINARY STATEMENTS
----------------------
A. The Borrower, the Existing Lenders (or their predecessors), the
Syndication Agent, the Documentation Agent and the Administrative Agent have
heretofore entered into that certain Revolving Credit Agreement, dated as of
October 24, 1997, as amended by Amendment No. 1 and Consent No. 1, dated as of
December 1, 1997, and Amendment No. 2 and Consent No. 2 and Amendment No. 1 to
Subsidiary Guaranty, dated as of February 17, 1998 (as so amended, the "Existing
Revolving Credit Agreement").
B. Each Non-Continuing Lender has entered into an Assignment and
Acceptance Agreement with one or more Lenders hereunder, pursuant to which such
Non-Continuing Lender shall assign 100% of its revolving credit loans and
interests in the Existing Revolving Credit Agreement to such Lenders. On the
Effective Date, immediately before the effectiveness of this Agreement, each
such Assignment and Acceptance Agreement shall become effective and the Non-
Continuing Lenders shall cease to be lenders under the Existing Revolving Credit
Agreement. The revolving credit loans (including those that are assigned by the
Non-Continuing Lenders to Lenders hereunder), the letters of credit and the
swing line loans, in each case outstanding under the Existing Revolving Credit
Agreement on the Effective Date, shall respectively constitute Revolving Credit
Loans, Swing Line Loans and Letters of Credit hereunder.
C. The Borrower, the Lenders, the Syndication Agent, the Documentation
Agent and the Administrative Agent desire to amend and restate the Existing
Revolving Credit Agreement in its entirety in order to provide, among other
things, that (i) the Maturity Date shall be extended to March 31, 2005 and (ii)
the other terms and provisions of the Existing Revolving Credit Agreement shall
otherwise be modified as set forth herein.
D. The Borrower agrees that its existing pledge and grant of a security
interest in 100% of its interest in its First-Tier Domestic Subsidiaries, and
66-2/3% of its interest in its First-Tier Foreign Subsidiaries will continue as
security for the payment and performance of the Obligations of the Borrower
hereunder and under the Term Loan Facility.
E. The Borrower agrees to cause each of its Subsidiaries that is a
Guarantor under the Subsidiary Guaranty to confirm and agree that such
Subsidiary Guaranty will continue as a guaranty of the Obligations hereunder and
under the Term Loan Facility.
F. The Borrower agrees to cause each of its Subsidiaries that is a
Pledgor under any Subsidiary Pledge Agreement to confirm and agree that such
Subsidiary Pledge
<PAGE>
Agreement will continue to secure the Obligations of such Subsidiary under the
Subsidiary Guaranty.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrower, the Lenders, the
Syndication Agent, the Documentation Agent and the Administrative Agent, agree
that the Existing Revolving Credit Agreement shall be amended and restated,
without novation, as follows:
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 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.
------------------------------
"Acknowledgment and Confirmation": an Acknowledgment and Confirmation
-------------------------------
Agreement dated as of the Effective Date, substantially in the form of Exhibit O
hereto, pursuant to which each Pledgor and Guarantor shall acknowledge and
confirm that its Obligations under the Subsidiary Guaranty and the Collateral
Documents to which it is a party shall continue to guaranty or secure, as the
case may be, the Obligations of the Borrower hereunder and under the Term Loan
Facility, as such Acknowledgment and Confirmation Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.
"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
-2-
<PAGE>
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 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(f).
"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,
-3-
<PAGE>
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 (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 Amended and Restated 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
-4-
<PAGE>
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), the rate, as reported by
BNY to the Administrative Agent, quoted by BNY at approximately 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, marginal, 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 adjusted 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
-5-
<PAGE>
limited to, the administration of erythropoietin, intradialytic parenteral
nutrition, bone densimetry studies, EKGs, nerve conduction studies, Doppler Flow
Testing, blood transfusions, pharmacy and laboratory services, technical
services with respect to equipment used in connection with the provision of
Dialysis Services and management services with respect to the provision of
Dialysis Services.
"Applicable Lending Office": in respect of any Lender, (i) in the case
-------------------------
of such Lender's ABR Advances, its Domestic Lending Office, (ii) in the case of
such Lender's Eurodollar Advances, its Eurodollar Lending Office, (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:
<TABLE>
<CAPTION>
Applicable
Period Margin
------ -----------
<S> <C>
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%
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C>
When the Leverage Ratio
is less than 2.50:1.00
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%
</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 (but subject to the last sentence of
subsection (b) above), until the Compliance Certificate for the fiscal quarter
ending June 30, 1998 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 the Compliance
Certificate for the fiscal quarter ending June 30, 1998, shall become effective
upon delivery of such Compliance Certificate, provided that if the Compliance
Certificate delivered to the Administrative Agent for the fiscal quarter ending
March 31, 1998 indicates a Leverage Ratio equal to or greater than 3.50:1.00,
then the Applicable Margin for the period from the delivery of such Compliance
Certificate to the delivery of the Compliance Certificate for the fiscal quarter
ending June 30, 1998 shall be the applicable percentage for such Leverage Ratio
set forth in subsection (a) above.
"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
-7-
<PAGE>
(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 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 as
-------------------------
of October 24, 1997, by and between the Borrower and the Collateral Agent,
delivered pursuant to the Existing Revolving Credit Agreement, 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.
-8-
<PAGE>
"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 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
-9-
<PAGE>
(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, each First Amendment to 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 obligation of such secondary obligor (i) guaranteeing or in effect
guaranteeing any return
-10-
<PAGE>
on any Investment made in another Person, or (ii) guaranteeing or in effect
guaranteeing any Indebtedness, lease, dividend or other obligation ("primary
-------
obligation") of any other Person (the "primary obligor") in any manner, whether
- ---------- ---------------
directly or indirectly, including, without limitation, any obligation of such
secondary obligor, whether contingent, (A) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor,
(B) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (C) to purchase Property, securities or services primarily for
the purpose of assuring the beneficiary of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, (D)
otherwise to assure or hold harmless the beneficiary of such primary obligation
against loss in respect thereof, and (E) in respect of the liabilities of any
partnership in which such secondary obligor is a general partner, except to the
extent that such liabilities of such partnership are nonrecourse to such
secondary obligor and its separate Property, provided, however, that the term
"Contingent Obligation" shall not include the indorsement of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith.
"Continuing 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.
-11-
<PAGE>
"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.
"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 exclude (to the extent otherwise included
therein) (w) for the fiscal quarter ended March 31, 1998, non-recurring cash
charges related to the merger contemplated by the RTC Merger Agreement in an
amount not to exceed $70,000,000, (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 upon which the Administrative Agent shall
--------------
have received executed counterparts hereof from all parties hereto and the
conditions as set forth in Section 5 have been or simultaneously will be
satisfied, provided that this Agreement shall not become binding or effective on
any party hereto unless all such conditions are satisfied not later than May 15,
1998.
-12-
<PAGE>
"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 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%):
-13-
<PAGE>
(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.
"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 Lender": each "Lender" (as such term is defined in the
---------------
Existing Revolving Credit Agreement, as in effect immediately prior to the
Effective Date) that is a Lender under this Agreement on the Effective Date.
"Existing Pension Plans": as defined in Section 4.12.
----------------------
"Existing Revolving Credit Agreement": as defined in paragraph A of
-----------------------------------
the Preliminary Statements to this Agreement.
"Existing Revolving Credit Loans": the "Revolving Credit Loans" (as
-------------------------------
such term is defined in the Existing Revolving Credit Agreement) outstanding
under the Existing Revolving Credit Agreement on the Effective Date, including
those that are
-14-
<PAGE>
assigned by the Non-Continuing Lenders to Lenders hereunder; each an "Existing
Revolving Credit Loan".
- ---------------------
"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 Amendment to Pledge Agreements": collectively, each First
------------------------------------
Amendment to Pledge Agreement, dated as of the Effective Date, substantially in
the form of Exhibit P hereto, each by and between the Pledgor named therein and
the Collateral Agent, which shall amend the Borrower Pledge Agreement and each
Subsidiary Pledge Agreement.
"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 setting
-15-
<PAGE>
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. Total Renal Care
----------
Acquisition Corp., Renal Treatment Centers, Inc., a Delaware corporation, Renal
Treatment Centers-Mid-Atlantic, Inc., a Delaware corporation, Rental Treatment
Centers - Northeast, Inc., a Delaware corporation, Renal Treatment Centers -
California, Inc., a Delaware corporation, Renal Treatment Centers - West, Inc.,
a Delaware corporation and Renal Treatment Centers - Southeast, Inc., a Delaware
corporation, (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".
---------
"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
-16-
<PAGE>
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,
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 as of October 24, 1997, 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, delivered pursuant to the Existing
Revolving Credit Agreement, 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
-17-
<PAGE>
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 week or
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 week (during the period referred to in
clause (iv) below) or 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, (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 (iv) during the
30 day period (or such shorter period as the Administrative Agent and the
Syndication Agent shall notify the Borrower) following the Effective Date, each
Interest Period shall be the period commencing on the Borrowing Date or
Conversion/Continuation Date with respect to such Advance and ending
approximately one week thereafter, and all Interest Periods during such period
shall begin and end on the same day; 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
-18-
<PAGE>
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 the
----------------
following shall constitute a Letter of Credit for the purposes of this
Agreement: letter of credit no. S111397 in the amount of $800,000, dated January
22, 1997, issued by First Union National Bank (formerly known as First Union
National Bank of North Carolina) to Mutual Indemnity (Bermuda) Ltd. for the
account of RTC, as such letter of credit may be renewed from time to time in
accordance with its terms.
"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) and, solely
-----------------------
for purposes of the Letter of Credit referred to in clause (ii) of the
definition of "Letter of Credit", First Union National Bank (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
-19-
<PAGE>
(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, the
Acknowledgment and Confirmation and the Intercreditor Agreement.
"Loan": a Revolving Credit Loan or a Swing Line Loan, as the case may
----
be.
"Loans": the Revolving Credit Loans and/or the Swing Line Loans, as
-----
the case may be.
"Mandatory Borrowing": as defined in Section 2.3(c).
-------------------
"Margin Stock": any "margin stock", as defined in Regulation U of the
------------
Board of Governors of the Federal Reserve System, as the same may be amended or
supplemented from time to time.
"Material Adverse Change": a material adverse change in (i) the
-----------------------
financial condition, operations, business, prospects or Property of the Borrower
and its Subsidiaries taken as a whole, (ii) the ability of 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": March 31, 2005, 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).
-------------------
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<PAGE>
"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
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.
--------------
"Non-Continuing Lenders": those lenders party to the Existing
----------------------
Revolving Credit Agreement that have assigned their Revolving Credit Loans (as
such term is defined in the Existing Revolving Credit Agreement) and interests
in the Existing Revolving Credit Agreement to Lenders hereunder pursuant to
Assignment and Acceptance Agreements that provide that they become effective on
the Effective Date immediately before the effectiveness hereof.
"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.
-------------------
"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.
-21-
<PAGE>
"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, TRC and RTC 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.
"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.
-22-
<PAGE>
"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.
"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.
-23-
<PAGE>
"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.
"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
-24-
<PAGE>
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.
"RTC": Renal Treatment Centers, Inc., a Delaware corporation and a
---
wholly-owned Subsidiary of the Borrower.
"RTC Convertible Subordinated Guaranty": The Guaranty, dated as of
-------------------------------------
March 31, 1998, made by the Borrower in favor of PNC Bank, National Association,
as trustee, pursuant to which the Borrower guaranteed, on a subordinated basis,
the RTC Convertible Subordinated Notes, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with Section 8.9.
"RTC Convertible Subordinated Indenture": the Indenture, dated as of
--------------------------------------
June 12, 1996, between RTC and PNC Bank, National Association, as trustee,
pursuant to which RTC issued the RTC Convertible Subordinated Notes, as amended
by that certain First Supplemental Indenture dated as of February 27, 1998 and
that certain Second Supplemental Indenture dated as of March 31, 1998, and as
the same may be further amended, supplemented or otherwise modified from time to
time in accordance with Section 8.9.
"RTC Convertible Subordinated Notes": the 5-5/8% Convertible
----------------------------------
Subordinated Notes, due 2006, issued by RTC pursuant to the RTC Convertible
Subordinated Indenture, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with Section 8.9.
"RTC Merger Agreement": the Agreement and Plan of Merger, dated as of
--------------------
November 18, 1997, by and among the Borrower, Nevada Acquisition Corp., a
Delaware corporation, and RTC, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with Section 8.9.
"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.
"Subordinated Indebtedness": any unsecured Indebtedness of the
-------------------------
Borrower subordinated in right of payment to the payment in full of the
Obligations of the Borrower
-25-
<PAGE>
and other senior obligations of the Borrower; provided that (i) the negative
covenants in such subordinated Indebtedness are less restrictive than the
negative covenants in this Agreement as in effect at the time such subordinated
Indebtedness is incurred, (ii) the affirmative covenants in such subordinated
Indebtedness are no more restrictive that the affirmative covenants in this
Agreement as in effect at the time such subordinated Indebtedness is incurred,
(iii) the events of default in such subordinated Indebtedness relating to
insolvency and nonpayment of amounts owed thereunder are no more restrictive
than the corresponding defaults in this Agreement as in effect at the time such
subordinated Indebtedness is incurred, (iv) such subordinated Indebtedness does
not cross-default to other Indebtedness (but may cross-accelerate to other
Indebtedness of Borrower or any Guarantor that has guarantied such subordinated
Indebtedness), (v) the subordination provisions in such subordinated
Indebtedness are on market terms for subordinated debt instruments prevailing at
or around the time such subordinated Indebtedness is incurred and (vi) such
subordinated Indebtedness provides for no scheduled payment or mandatory
prepayments of principal before September 30, 2008 other than (x) redemptions
made at the option of the holders of such subordinated Indebtedness upon a
change in control of the Borrower in circumstances where the Lenders under this
Agreement would have rights to prepayment under Section 2.7(c), provided that
any such redemptions are made not fewer than 30 days after such change in
control and (y) mandatory prepayments required as a result of asset dispositions
if such subordinated Indebtedness allows the Borrower to satisfy such mandatory
prepayment requirement by prepayment of Loans under this Agreement or other
senior obligations of the Borrower or reinvestment of the asset disposition
proceeds within a specified period of time.
"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.
"Subsidiary Guaranty": the Subsidiary Guaranty, dated as of October
-------------------
24, 1997, by the Guarantors in favor of the Collateral Agent, executed and
delivered pursuant to the Existing Revolving Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Subsidiary Pledge Agreements": collectively, each Subsidiary Pledge
----------------------------
Agreement (i) delivered on or before the Effective Date pursuant to the Existing
Revolving Credit Agreement or (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
-26-
<PAGE>
$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 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 Amended and Restated 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.
-27-
<PAGE>
"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 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.
"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.
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
-28-
<PAGE>
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".
2. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS AND LETTERS OF CREDIT
----------------------------------------------------------------
2.1. 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 $125,000,000. 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.
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<PAGE>
2.2. 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.
2.3. 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
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.
(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.
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<PAGE>
(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.
2.4. Swing Line Note
---------------
The Swing Line Loans made by the Swing Line Lender shall be evidenced
by a promissory note of the Borrower, substantially in the form of Exhibit B-2,
with appropriate insertions therein as to date and principal amount (as indorsed
or modified from time to time, including all replacements thereof and
substitutions therefor, the "Swing Line Note"), payable to the order of the
---------------
Swing Line Lender and representing the obligation of the Borrower to pay the
lesser of (i) the amount of the Swing Line Commitment and (ii) the aggregate
unpaid principal balance of all Swing Line Loans with interest thereon as set
forth in Section 2.10. The Swing Line Note shall be stated to mature on the
Swing Line Termination Date, and bear interest for the period from and including
the date thereof on the unpaid principal balance thereof from time to time
outstanding at the applicable interest rate or rates per annum determined as
provided in Section 2.10. Interest on the Swing Line Note shall be payable as
specified in Section 2.10.
2.5. 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
Business Day prior to the requested Borrowing Date, in the case of ABR Advances,
specifying (i) the aggregate principal amount to be borrowed under the Aggregate
Revolving Credit Commitments, (ii) the requested Borrowing Date, (iii) whether
such borrowing is to consist of one or more Eurodollar Advances, 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,
-31-
<PAGE>
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 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
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<PAGE>
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 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.
2.6. 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.
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<PAGE>
(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:
<TABLE>
<CAPTION>
Aggregate Revolving
Credit Commitments
Dates Reduction
----- -------------------
<S> <C>
September 30, 2001 $ 89,100,000
September 30, 2002 $148,400,000
September 30, 2003 $237,500,000
</TABLE>
(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,
----------------------------------------------------------
Subordinated Indebtedness and Sales of Property. On each date that a prepayment
- -----------------------------------------------
is made or required pursuant to Section 2.7(d) or (f), 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). On each date that a
prepayment is made or required pursuant to Section 2.7(e) in connection with the
issuance by the Borrower of Subordinated Indebtedness (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), the Aggregate
Revolving Credit Commitments shall be automatically and permanently reduced in
an amount equal to (x) the aggregate proceeds (net of sales and other
commissions and legal and other related expenses incurred in connection with
such issuance) received by the Borrower in connection with such issuance of
Subordinated Indebtedness to the extent that such net proceeds, when added to
the aggregate proceeds (net of sales and other commissions and legal and other
related expenses incurred in connection with such issuance) received by the
Borrower in connection with the issuance of all other Subordinated Indebtedness
after the Effective Date, exceed $200,000,000 less (y) the aggregate amount of
prior reductions of the Aggregate Revolving Credit Commitments made pursuant to
this sentence.
(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
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<PAGE>
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).
2.7. 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 approximately $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.
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<PAGE>
(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 Issuances of Subordinated
-----------------------------------------------------------
Indebtedness. Upon the date of any issuance of Subordinated Indebtedness by the
- ------------
Borrower, the Borrower shall prepay the Revolving Credit Loans in an amount
equal to the aggregate proceeds (net of sales and other commissions and legal
and other related expenses incurred in connection with such issuance) received
by the Borrower in connection with such issuance of Subordinated Indebtedness.
(f) 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 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
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<PAGE>
Fraction; provided, however, that if any prepayment is required to be made under
Section 2.7(f)(i) on any date on which a prepayment is required to be made under
this Section 2.7(f)(ii), for purposes of this Section 2.7(f)(ii), the "Total
Prepayment Amount" (as such term is defined in the Term Loan Facility) on such
date shall be reduced (to an amount not less than zero) by the "Total Prepayment
Amount" (as such term is defined herein) on such date.
(g) 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.
(h) Mandatory Prepayments Relating to Aggregate Alternate Currency
--------------------------------------------------------------
Exposure. If, on the last day of any fiscal quarter, the Aggregate Alternate
- --------
Currency Exposure shall exceed $125,000,000, 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 $125,000,000. 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 $100,000,000, the Borrower shall deposit an amount
equal to such excess in the Cash Collateral Account.
(i) 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.
2.8. Participation in Swing Line Loans
---------------------------------
(a) Upon each receipt by a Lender of notice of an Event of Default
from the Administrative Agent pursuant to Section 10.5, such Lender shall
purchase unconditionally, irrevocably, and severally (and not jointly) from the
Swing Line Lender a participation in the outstanding Swing Line Loans (including
accrued interest thereon) in an amount equal to the product of its Commitment
Percentage and the outstanding amount of the Swing Line Loans (the "Swing Line
----------
Participation Amount"). Each Lender shall also be liable for an amount equal to
- --------------------
the product of its Commitment Percentage and any amounts paid by the Borrower
pursuant to 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
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<PAGE>
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.
2.9. 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, 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
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<PAGE>
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).
(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
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<PAGE>
on a telecopied notice of conversion or continuation whether such notice is
confirmed by the delivery of a Notice of Conversion/Continuation.
2.10. Interest Rate and Payment Dates
-------------------------------
(a) Prior to Maturity. Except as otherwise provided in Section
-----------------
2.10(b), prior to maturity the Loans shall bear interest on the outstanding
principal balance thereof at the applicable interest rate or rates per annum set
forth below:
<TABLE>
<CAPTION>
ADVANCES/LOANS RATE
-------------- ----
<S> <C>
Each ABR Advance Alternate Base Rate.
Each Eurodollar Eurodollar Rate applicable
Advance to such Eurodollar Advance for the
applicable 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 Interest Period.
</TABLE>
(b) Event of Default. After the occurrence and during the continuance
----------------
of an Event of Default under Section 9.1(a), (b) (with respect to interest, the
Commitment Fee, the LC Fronting Fee or the Letter of Credit Fee), (h) or (i),
the outstanding principal balance of the Loans shall bear interest at a rate per
annum equal to 2% plus the rate that would otherwise be applicable under Section
2.10(a) until, in the case of Eurodollar Advances and Swing Line Loans, the end
of the applicable Interest Period therefor, and, thereafter, at the Alternate
Base Rate 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
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<PAGE>
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 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.
2.11. 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
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<PAGE>
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 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.
2.12. 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;
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<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 2.12(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
------------------------
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
-43-
<PAGE>
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.
(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
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<PAGE>
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.
2.13. 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 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.
2.14. 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
-45-
<PAGE>
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 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.
2.15. 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:
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<PAGE>
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, 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.
2.16. 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
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<PAGE>
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.
2.17. Use of Proceeds
---------------
The proceeds of the Loans shall be used 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.
2.18. 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.
2.19. 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
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<PAGE>
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 $125,000,000. Each Letter of Credit issued
pursuant to this Section shall have a termination date that shall be not later
than the earlier of one year from the date of issuance or 5 days prior to the
Maturity Date. At the request of the Borrower, and upon 3 Business Days' prior
written notice to the Administrative Agent, and provided that no Default or
Event of Default shall then exist, each Letter of Credit termination date may be
extended, from time to time, for a period not to exceed the earlier of (i) one
year or (ii) the 5th day prior to the Maturity Date. No Letter of Credit shall
be issued if the Administrative Agent, or any Lender by notice to the
Administrative Agent no later than 1:00 P.M. one Business Day prior to the
requested date of issuance of such Letter of Credit, shall have determined that
the conditions set forth in Section 6 have not been satisfied.
(b) Each Letter of Credit shall be issued for the account of the
Borrower in support of an obligation of the Borrower or a Subsidiary of the
Borrower in favor of a beneficiary who has requested the issuance of such Letter
of Credit as a condition to a transaction entered into in connection with the
Borrower's ordinary course of business. The Borrower shall give the
Administrative Agent a Letter of Credit Request for the issuance of each Letter
of Credit by (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.
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<PAGE>
2.20. 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 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
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<PAGE>
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.
2.21. 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.
2.22. 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
-51-
<PAGE>
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.
2.23. Administrative Agent's Records
------------------------------
The Administrative Agent's records regarding the amount of each Loan
and Letter of Credit, each payment by the Borrower of principal and interest on
the Loans and reimbursement obligations in respect of Letters of Credit and
other information relating to the Loans shall be presumptively correct absent
manifest error.
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 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:
<TABLE>
<CAPTION>
Commitment
Pricing Level Fee Percentage
------------- --------------
<S> <C>
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%
</TABLE>
-52-
<PAGE>
<TABLE>
<S> <C>
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%
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%
</TABLE>
(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 (but subject to the last sentence of
subsection (b) above), until such time as the Compliance Certificate for the
fiscal quarter ending June 30, 1998 shall have been delivered to the
Administrative Agent, the Commitment Fee percentage shall be equal to 0.300%,
provided that if the Compliance
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<PAGE>
Certificate delivered to the Administrative Agent for the fiscal quarter ending
March 31, 1998 indicates a Leverage Ratio equal to or greater than 3.50:1.00,
then the Applicable Margin for the period from the delivery of such Compliance
Certificate to the delivery of the Compliance Certificate for the fiscal quarter
ending June 30, 1998 shall be the applicable Commitment Fee percentage for such
Leverage Ratio set forth in subsection (a) above.
3.2. Letter of Credit Fees
---------------------
(a) The Borrower agrees to pay to the Administrative Agent, for the
account of the Lenders in accordance with each Lender's Commitment Percentage, a
fee (the "Letter of Credit Fee") with respect to each Letter of Credit for the
--------------------
period from and including the date of issuance thereof to and including the
expiration date thereof, at the LC Rate on the maximum amount available to be
drawn (under any contingency) under such Letter of Credit (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 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.
3.3. 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. Notwithstanding
the foregoing, each payment of the Existing Revolving Credit Loans, interest,
fees and other amounts made pursuant to Section 5.14 shall be distributed to the
Non-Continuing Lenders and the Existing Lenders
-54-
<PAGE>
in accordance with Section 3.3 of the Existing Revolving Credit Agreement. 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 Alternate Currency Revolving Credit Loan is denominated.
4. 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:
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.
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<PAGE>
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 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,
-56-
<PAGE>
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
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.
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(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.
-57-
<PAGE>
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 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 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.
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.
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<PAGE>
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, 1997 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.
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,
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<PAGE>
suit, action, proceeding, event, condition, report, directive, Lien, violation,
non-compliance or investigation indicating or concerning any potential or actual
material liability (including, without limitation, potential material liability
for enforcement, investigatory costs, cleanup costs, government response costs,
removal costs, remedial costs, natural resources damages, Property damages,
personal injuries or penalties) arising in connection with: (x) any non-
compliance with or violation of the requirements of any applicable Environmental
Laws, or (y) the presence of any Hazardous Substance on any Real Property (or
any Real Property previously owned by the Borrower, any of its Subsidiaries or
any Credit Party) or the release or threatened release of any Hazardous
Substance into the environment, (ii) has knowledge of any threatened or actual
material liability in connection with the presence of any Hazardous Substance on
any Real Property (or any Real Property previously owned by the Borrower, any of
its Subsidiaries or any Credit Party) or the release or threatened release of
any Hazardous Substance into the environment, (iii) has received notice of any
federal or state investigation evaluating whether any material remedial action
is needed to respond to the presence of any Hazardous Substance on any Real
Property (or any Real Property previously owned by the Borrower, any of its
Subsidiaries or any Credit Party) or a release or threatened release of any
Hazardous Substance into the environment for which the Borrower, any of its
Subsidiaries or any Credit Party is or may be liable, or (iv) has received
notice that the Borrower, any of its Subsidiaries or any Credit Party is or may
be liable for a material amount to any Person under any Environmental Law.
(d) For purposes of subsections (a), (b) and (c) of this Section 4.16
"material" shall mean any liability or potential liability of the Borrower and
its Subsidiaries on a Consolidated basis for an aggregate amount in excess of
$1,000,000.
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
-60-
<PAGE>
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.
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.
4.22. Subordinated Indebtedness
-------------------------
The subordination provisions of (i) the RTC Convertible Subordinated
Indenture, (ii) the RTC Convertible Subordinated Notes, (iii) the RTC
Convertible
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<PAGE>
Subordinated Guaranty, (iv) any Subordinated Indebtedness now existing or
hereafter incurred or assumed by the Borrower and (v) any guarantee by any
Subsidiary of the Borrower of any Subordinated Indebtedness will be enforceable
against the holders thereof, and the Loans and all other monetary obligations
hereunder and all monetary obligations under the Subsidiary Guaranty will
constitute "Senior Indebtedness" and "Designated Senior Indebtedness" (or any
comparable terms) as defined in such provisions.
4.23. Survival of Rights Created under Existing Revolving Credit Agreement
--------------------------------------------------------------------
Notwithstanding the modification or deletion of certain
representations and warranties of the Borrower contained in the Existing
Revolving Credit Agreement (including, without limitation, the deletion of
representations and warranties as to the future consequences of certain events
which occurred prior to the date of this Agreement), the Borrower acknowledges
and agrees that any choses in action or other rights created in favor of any
Lender and their respective successors and assigns arising out of the
representations and warranties of the Borrower contained in or delivered
(including representations and warranties delivered in connection with the
making of loans and issuance of letters of credit thereunder) in connection with
the Existing Revolving Credit Agreement, shall survive the execution and
delivery of this Agreement. The Borrower and Lenders acknowledge that certain
representations and warranties made by the Borrower under the Existing Revolving
Credit Agreement (including representations and warranties as to the future
consequences of certain events which occurred prior to the date of this
Agreement) were made subject to changes in the facts and conditions on which
such representations and warranties were based, which such changes were
permitted or required under the Existing Revolving Credit Agreement or this
Agreement and any such representations and warranties incorporated herein are so
incorporated subject to such changes permitted or required under the Existing
Revolving Credit Agreement or this Agreement.
5. CONDITIONS TO EFFECTIVENESS OF AGREEMENT
----------------------------------------
The effectiveness of this Agreement shall be subject to the fulfillment of
the following conditions precedent:
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.
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<PAGE>
(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 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 and such Pledgor'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 Revolving Credit
Notes and the Swing Line Note, duly executed by an Authorized Signatory of the
Borrower. Each Existing Lender upon its receipt of its Revolving Credit Note
and the Swing Line Lender upon its receipt of its Swing Line Note shall promptly
return to the Borrower for cancellation its existing revolving credit note, and
in the case of the Swing Line Lender its existing swing line note, delivered to
it pursuant to the Existing Revolving Credit Agreement, upon which such existing
revolving credit note and swing line note shall be deemed null and void.
5.4. Acknowledgment and Confirmation
-------------------------------
The Administrative Agent shall have received counterparts of the
Acknowledgment and Confirmation signed by each of the parties thereto.
5.5. First Amendment to Pledge Agreements
------------------------------------
The Administrative Agent shall have received counterparts of each
First Amendment to Pledge Agreement signed by the Borrower, TRC and, unless RTC
shall have merged with and into the Borrower, RTC.
5.6. [INTENTIONALLY OMITTED]
5.7. [INTENTIONALLY OMITTED]
5.8. 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 First Additional Term Loans (as defined in the Term Loan
Facility) shall have been
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<PAGE>
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 Term Loan Facility.
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 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. [INTENTIONALLY OMITTED]
5.11. 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
Administrative Agent, the Collateral Agent, the Documentation 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 Co-
Arrangers, the Documentation 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 set forth in that certain Letter Agreement
dated April 1, 1998, among the Borrower, the Co- Arrangers, Administrative Agent
and the Syndication Agent, shall have been paid.
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<PAGE>
5.14. Refinancing of Existing Revolving Credit Loans.
----------------------------------------------
The Administrative Agent shall have received a Borrowing Request duly
executed by an Authorized Signatory of the Borrower for Revolving Credit Loans
hereunder (and the Borrower shall have satisfied the other requirements of
Section 6) and the Borrower shall have paid to the Administrative Agent such
additional funds which, when added to the requested Revolving Credit Loans, are
sufficient to prepay in full the Existing Revolving Credit Loans together with
all unpaid interest on the Existing Revolving Credit Loans, all unpaid interest
on the existing Swing Line Loans (under and as defined in the Existing Revolving
Credit Agreement), all fees, all amounts payable under Section 2.15 of the
Existing Revolving Credit Agreement with respect to the prepayment of the
Existing Revolving Credit Loans and all other amounts (other than the principal
amount of such existing Swing Line Loans and the existing obligations under the
existing Reimbursement Agreements (under and as defined in the Existing
Revolving Credit Agreement), in each case which shall continue to be owed
hereunder and under the Swing Line Note and the Reimbursement Agreements) owed
under the Existing Revolving Credit Agreement that have accrued to the Effective
Date (collectively, the "Refinancing Amount"). Following receipt thereof, the
------------------
Administrative Agent shall make appropriate distribution of the Refinancing
Amount to the Administrative Agent, the Non-Continuing Lenders, the Letter of
Credit Issuer, the Swing Line Lender and the Existing Lenders, all in accordance
with the Existing Credit Agreement. The requested Revolving Credit Loans shall
be effected by (i) each Existing Lender applying the proceeds of its Revolving
Credit Loan hereunder to its Existing Revolving Credit Loans and to the extent
that its Revolving Credit Loan hereunder exceeds its Existing Revolving Credit
Loans making available to the Administrative Agent an amount equal to such
excess and (ii) each Lender hereunder that is not an Existing Lender making
available to the Administrative Agent its Revolving Credit Loan hereunder.
5.15. [INTENTIONALLY OMITTED]
5.16. 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.
5.17. 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.
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<PAGE>
5.18. 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 Effective 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.
5.19. Approval of Special Counsel
---------------------------
All legal matters in connection with the effectiveness of this
Agreement shall be reasonably satisfactory to Special Counsel.
5.20. Other Documents
---------------
The Administrative Agent shall have received such other documents as
the Administrative Agent or the Required Lenders shall reasonably request.
5.21. Officers' Certificate Regarding Certain Conditions.
--------------------------------------------------
The following conditions shall be satisfied and the Borrower shall
have delivered to the Administrative Agent a certificate of an Authorized
Signatory of the Borrower in form and substance satisfactory to the
Administrative Agent, to the following 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.
5.22. 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 Q.
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<PAGE>
5.23. Assignments of Existing Revolving Credit Loans by Non-Continuing
----------------------------------------------------------------
Lenders.
- -------
Each Non-Continuing Lender shall have entered into an Assignment and
Acceptance Agreement, pursuant to which such Non-Continuing Lender shall assign
all of its interest in the Existing Revolving Credit Loans and the Existing
Revolving Credit Agreement to one or more Lenders hereunder. All conditions
precedent to the effectiveness of each such Assignment and Acceptance Agreement
shall have been satisfied or waived.
6. 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 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:
6.1. 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 $125,000,000 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.
6.2. 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 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.
6.3. Borrowing Request
-----------------
With respect to the making of each Loan, the Administrative Agent
shall have received a Borrowing Request duly executed by an Authorized Signatory
of the Borrower.
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<PAGE>
6.4. 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.
6.5. 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.
6.6. 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.
6.7. Approval of Special Counsel
---------------------------
All legal matters in connection with the making of each Loan shall be
reasonably satisfactory to Special Counsel.
6.8. 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.
6.9. Other Documents
---------------
The Administrative Agent shall have received such other documents as
the Administrative Agent or the Required Lenders shall reasonably request.
7. 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
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<PAGE>
remains outstanding and unpaid, or any other amount is owing under any Loan
Document to any Lender or the Administrative Agent, the Borrower shall:
7.1. 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, 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 in each year and within 90 days after the end of the last fiscal
quarter in each year, 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.
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(d) Such other information as the Administrative Agent, the
Documentation Agent, the Syndication Agent or any Lender may reasonably request
from time to time.
7.2. 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 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
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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 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.
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7.3. 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.
7.4. 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 Subsidiaries, that, if
unpaid, could reasonably be expected to have a Material Adverse Effect or become
a Lien on the Property of the Borrower or such Subsidiary (other than a Lien
described in Section 8.2(i)), unless and to the extent only that such Taxes,
assessments, charges, license fees and levies shall be contested in good faith
and by appropriate proceedings diligently conducted by the Borrower or such
Subsidiary provided that the Borrower shall give the Administrative Agent
prompt notice of such contest and that such reserve or other appropriate
provision as shall be required by the Accountants in accordance with GAAP shall
have been made therefor.
7.5. 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.
7.6. 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.
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7.7. 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.
7.8. 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.
7.9. 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 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).
7.10. 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.
7.11. 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
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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 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.
7.12. Interest Coverage Ratio
-----------------------
Maintain at all times an Interest Coverage Ratio of not less than
2.25:1.00.
7.13. Minimum Net Worth
-----------------
Maintain at all times a Consolidated net worth of the Borrower and its
Subsidiaries of not less than $325,000,000 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 proceeds received by the Borrower from its
issuance of Stock, in each case determined on a cumulative basis for the period
commencing April 1, 1998.
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7.14. 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.
7.15. 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:
<TABLE>
<CAPTION>
Periods Ratio
- --------------------------------------- ---------
<S> <C>
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
</TABLE>
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.
8. 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:
8.1. Indebtedness
------------
Create, incur, assume or suffer to exist any liability for
Indebtedness, or permit any of its Subsidiaries so to do, except (i)
Indebtedness due under the Loan Documents, (ii) Indebtedness of the Borrower or
any of its Subsidiaries existing on the date hereof as set forth on Schedule
8.1, as the same may be refinanced from time to time, containing repayment terms
and conditions no less favorable to the Borrower or such Subsidiary than the
Indebtedness being refinanced, (iii) purchase money Indebtedness and
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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 aggregate 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 outstanding 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, amount, 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) Subordinated Indebtedness, provided that
immediately before and after giving effect to the incurrence thereof no Default
or Event of Default shall exist, (xiv) subordinated guaranties by any Guarantor
of the Borrower's obligations under any Subordinated Indebtedness permitted
hereunder, provided that (A) all Obligations of the Borrower are guarantied by
such Guarantor under the Subsidiary Guaranty, (B) each such Guaranty is
subordinated to at least the same extent as the Subordinated Indebtedness
guarantied thereby is subordinated to the Obligations of the Borrower, (C) each
such subordinated guaranty contains a limitation as to the maximum amount
guarantied thereby similar to that set forth in subsection 2.2(a) of the
Subsidiary Guaranty, provided that in no event shall the liability of the
Guarantor under such subordinated guaranty exceed the maximum amount permissible
under applicable fraudulent conveyance or similar law, and (D) each such
subordinated guaranty is otherwise on market terms for guaranties of
subordinated debt
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instruments prevailing at or around the time that such subordinated guaranty is
entered into, (xv) Indebtedness permitted under Section 8.5(d), (xvi)
Indebtedness under the Term Loan Facility, (xvii) Indebtedness of RTC under the
RTC Convertible Subordinated Indenture and the RTC Convertible Subordinated
Notes, (xviii) other Indebtedness of RTC and its Subsidiaries existing on
February 27, 1998 and (xix) Indebtedness under the RTC Convertible Subordinated
Guaranty.
8.2. 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 money Indebtedness and Capital Lease
Obligations permitted by this Agreement (in which cases, any prohibition or
limitation shall only be effective against the Property acquired or leased
thereby), or permit any Subsidiary so to do, which prohibits or limits the
ability of the Borrower or such Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, except (i) Liens for Taxes, assessments or similar charges
incurred in the ordinary course of business that are not delinquent or that are
being contested in accordance with Section 7.4, provided that enforcement of
such Liens is stayed pending such contest, (ii) Liens in connection with
workers' compensation, unemployment insurance or other social security
obligations (but not ERISA), (iii) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of business, (iv) zoning ordinances, easements,
rights of way, minor defects, irregularities, and other similar restrictions
affecting Real Property that do not 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 contested in
accordance with Section 7.6, provided that enforcement of such Liens is stayed
pending such contest, (vii) purchase money Liens and Liens arising out of
Capital Lease Obligations on Property of the Borrower or any of its Subsidiaries
acquired after the date hereof to secure Indebtedness (and replacement Liens on
such Property to secure refinancings of such Indebtedness in accordance with
Section 8.1(iii)) of the Borrower or its Subsidiaries permitted by Section
8.1(iii), incurred in connection with the acquisition or lease of such Property,
provided that each such Lien is limited to such Property so acquired or leased,
(viii) Liens on Property of the Borrower and its Subsidiaries existing on the
Effective Date as set forth on Schedule 8.2, (ix) Liens to secure Indebtedness
permitted by Section 8.1(vii), provided that such Liens shall be limited to
Liens on the 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, (xi) Liens created under the Collateral
Documents, and (xii) Liens to secure Indebtedness permitted by Section
8.1(xviii), provided that such Liens shall be limited to Liens on the Property
acquired in connection with the merger contemplated by the RTC Merger Agreement.
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8.3. 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
(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 merger involving TRC, and (e)
the Borrower shall have delivered a certificate to the Administrative Agent on
the day of the merger as to its compliance with each of the requirements set
forth in clauses (a) through (d) above, and (iii) any Permitted Acquisition.
8.4. 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.
8.5. 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 in Subsidiaries set
forth on Schedule 4.1, (ii) existing on the date hereof as set forth on Schedule
8.5, and (iii) acquired after the Effective Date and approved by the Board of
Directors of the Borrower
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<PAGE>
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;
(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
October 24, 1997 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
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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 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,
(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 shall not exceed $60,000,000 at any one time, (iii) the
Borrower or TRC shall have full control over all bank accounts 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;
(j) Investments in Hedging Obligations permitted by Section 8.1(x);
and
(k) Contingent Obligations to the extent permitted by Section 8.1.
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.
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8.6. Business Change
---------------
Materially change the nature of the business of the Borrower and its
Subsidiaries as conducted on the Effective Date.
8.7. 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 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 immediately before and after giving
effect thereto, no Event of Default existed, (y) that the consideration received
or to be received by the Borrower or such Subsidiary for such Property has been
determined by the Board of Directors thereof to be not less than the fair market
value of such Property and (z) the total consideration to be paid in respect of
such Asset Sale.
8.8. 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.
8.9. Amendments, Etc. of Certain Documents
-------------------------------------
(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
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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 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.
(d) Amend or otherwise modify, or permit RTC so to do, the RTC
Convertible Subordinated Indenture, the RTC Convertible Subordinated Notes or
the RTC Convertible Subordinated Guaranty in any way that would adversely affect
the interests of the Administrative Agent and the Lenders under any of the Loan
Documents.
(e) The Borrower will not, and will not permit any of its Subsidiaries
to, amend or otherwise change the terms of any Subordinated Indebtedness, or
make any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to change (to any date before the date
that is 180 days after March 31, 2008) any dates upon which payments of
principal are due thereon, change the redemption, prepayment or defeasance
provisions thereof (unless the redemption or prepayment provisions as so changed
would be permitted under clause (vi) of the definition of "Subordinated
Indebtedness"), change the subordination provisions thereof (or of any guaranty
thereof), or grant any Lien to secure payment thereof, or if the effect of such
amendment or change, together with all other amendments or changes made, is to
increase materially the obligations of the obligor thereunder or to confer any
additional rights on the holders of such Subordinated Indebtedness (or a trustee
or other representative on their behalf) which would be adverse to the Borrower
or Lenders.
8.10. ERISA
-----
Permit any Pension Plan to have a Funded Current Liability Percentage
of less than 60 percent.
8.11. 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 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;
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(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) the Borrower may issue additional Stock; and
(f) pursuant to the terms of the RTC Convertible Subordinated
Indenture and the RTC Convertible Subordinated Notes;
provided, however, that all Stock issued pursuant to this Section 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.
8.12. 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 declaring or paying any cash
dividends or distributions on or on account of any class of its stock or other
equity interest owned directly or indirectly by the Borrower or (b) such
Subsidiary is or would be prohibited from or otherwise restricted in making
advances to the Borrower, 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).
8.13. Fiscal Year
-----------
Change its fiscal year from that in effect on the Effective Date, or
permit any of its Subsidiaries so to do.
8.14. 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.
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9. DEFAULT
-------
9.1. 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
(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
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substantial part of its Property, (vii) be the subject of any such proceeding
filed against it that remains undismissed for a period of 45 days, (viii) file
any answer admitting or not contesting the material allegations of any such
petition filed against it or any order, judgment or decree approving such
petition in any such proceeding, (ix) seek, approve, consent to, or acquiesce in
any such proceeding, or in the appointment of any trustee, receiver,
sequestrator, custodian, liquidator, or fiscal agent for it, or any substantial
part of its Property, or an order is entered appointing any such trustee,
receiver, custodian, liquidator or fiscal agent and such order remains in effect
for 45 days, or (x) take any formal action for the purpose of effecting any of
the foregoing; or
(i) An order for relief is entered under the United States bankruptcy
laws or any other decree or order is entered by a court having jurisdiction (i)
adjudging the Borrower or any of its Subsidiaries bankrupt or insolvent, (ii)
approving as properly filed a petition seeking reorganization, liquidation,
arrangement, adjustment or composition of or in respect of the Borrower or any
of its Subsidiaries under the United States bankruptcy laws or any other
applicable Federal, 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 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 $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
(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
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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 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
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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
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.
10. THE ADMINISTRATIVE AGENT
------------------------
10.1. 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
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covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into the Loan Documents or otherwise exist against the Administrative
Agent.
10.2. 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.
10.3. 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,
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.
10.4. 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
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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.
10.5. 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 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.
10.6. 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.
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10.7. 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 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.
10.8. 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.
10.9. 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
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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.
10.10. 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 parties to the
Intercreditor Agreement upon the terms of the Subsidiary Guaranty, the
Collateral Documents and the Intercreditor Agreement.
10.11. The Co-Arrangers
----------------
The Co-Arrangers shall have no duties or obligations under the Loan
Documents in their capacity as Co-Arrangers.
10.12. The Syndication Agent
---------------------
The Syndication Agent shall have no duties or obligations under the
Loan Documents in its capacity as Syndication Agent.
10.13. The Documentation Agent
-----------------------
The Documentation Agent shall have no duties or obligations under the
Loan Documents in its capacity as Documentation Agent.
11. OTHER PROVISIONS
----------------
11.1. 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
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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
(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
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
(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
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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.
11.2. 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:
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 2.5, 2.9 or 2.19 shall
not be effective until
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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.
11.3. 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.
11.4. 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.
11.5. 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 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 consummation of the
transactions contemplated thereby, including, without limitation, the reasonable
fees and disbursements of Special Counsel, (ii) to pay or reimburse the
Administrative Agent, the Documentation Agent, the 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 collection proceedings resulting therefrom or in connection with
the negotiation of any restructuring or "work-out" (whether consummated or not)
of the obligations of the Credit Parties under any of the Loan Documents and (B)
the enforcement of this Section, (iii) to pay, indemnify, and hold the
Administrative Agent, the Documentation Agent, the 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
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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 termination of the
Aggregate Revolving Credit Commitments and the Swing Line Commitment and the
payment of all amounts payable under the Loan Documents.
11.6. Lending Offices
---------------
(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.
11.7. 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
----------
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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 (excluding First Union National Bank) (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 (excluding First Union
National Bank) (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 Lender or (y) of a Lender's entire
interest) shall be in a minimum amount of $5,000,000. In addition, during the 30
day period (or such shorter period as the Administrative Agent and the
Syndication Agent shall notify the Borrower) following the Effective Date,
assignments made by the Administrative Agent and the Syndication Agent
(excluding assignments of Revolving Credit Commitments held by them in an amount
equal to the Revolving Credit Commitments (as defined in the Existing Credit
Agreement) held by them under the Existing Credit Agreement on April 20, 1998)
shall not be subject to the $5,000,000 minimum size restriction or require
payment of the Assignment Fee. 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
date of the Assignor's Revolving Credit Note subject to 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 date of the Assignor's Revolving
Credit Note subject to 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 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 companies, 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
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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 and (iv) 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 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, transfer, 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.
(g) In the event that the Borrower shall request that Lenders enter
into any amendment, modification, consent or waiver with respect to this
Agreement or any other Loan Document, which amendment, modification, consent or
waiver cannot become effective without the consent of each Lender, and any
Lender elects not to enter into such amendment, modification, consent or waiver
(each such lender being a "Dissenting Lender"), then the Borrower shall have the
right upon 10 days' written notice to the Administrative Agent and such
Dissenting Lender, to require each such Dissenting Lender to assign 100% of its
Revolving Credit Loans, Revolving Credit Notes and Revolving Credit Commitment
at par to any Lender or any other financial institution which satisfies the
requirements of Section 11.7(b) and has been consented to by the Administrative
Agent, the Swing Line Lender and the Letter of Credit Issuer (excluding First
Union National Bank (which consents shall not be unreasonably withheld or
delayed), in each
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case that agrees, in its sole discretion, to assume such Revolving Credit Loans,
Revolving Credit Notes and Revolving Credit Commitment. Each such assignment
shall be made pursuant to an Assignment and Acceptance Agreement and shall
comply with the other terms of this Section 11.7. The Borrower shall pay to such
Dissenting Lender, concurrently with the effectiveness of such assignment, any
amounts payable under Section 2.15 that would have been payable if the Borrower
had voluntarily prepaid such Revolving Credit Loans. The Dissenting Lender shall
not be required to pay the Assignment Fee.
11.8. Counterparts; Effectiveness
---------------------------
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. On the
Effective Date, at the time of the effectiveness of this Agreement, (i) this
Agreement shall amend and restate the Existing Revolving Credit Agreement, (ii)
all Existing Revolving Credit Loans outstanding under the Existing Revolving
Credit Agreement shall continue as and constitute Revolving Credit Loans for all
purposes under this Agreement, (iii) all Swing Line Loans (under and as defined
in the Existing Revolving Credit Agreement) shall continue as and constitute
Swing Line Loans for all purposes under this Agreement, (iv) all Letters of
Credit (under and as defined in the Existing Credit Agreement) shall continue as
and constitute Letters of Credit for all purposes under this Agreement, and (v)
all obligations of the Borrower under the Existing Revolving Credit Agreement
that have not been paid as of the Effective Date shall become Obligations of the
Borrower under this Agreement.
11.9. 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,
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to the extent not prohibited by law) with respect to such portion as fully as if
such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, upon the occurrence of an Event of Default and the acceleration of the
obligations owing in connection with the Loan Documents, or at any time upon the
occurrence and during the continuance of an Event of Default, under Section
9.1(a) or (b), each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by each Credit Party to the
extent not prohibited by applicable law, to set-off and apply against any
indebtedness, whether matured or unmatured, of such Credit Party to such Lender,
any amount owing from such Lender to such Credit Party, at, or at any time
after, the happening of any of the above-mentioned events. To the extent not
prohibited by applicable law, the aforesaid right of set-off may be exercised by
such Lender against such Credit Party or against any trustee in bankruptcy,
custodian, debtor in possession, assignee for the benefit of creditors,
receiver, 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.
11.10. 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.
11.11. 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
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made therein, in light of the circumstances under which made, not misleading;
(iii) any acts, practices or omissions or alleged acts, practices or omissions
of any Credit Party or its agents relating to the use of the proceeds of any or
all borrowings made by the Borrower alleged to be in violation of Section 2.17,
or in violation of any federal securities law or of any other statute,
regulation or other law of any jurisdiction applicable thereto; or (iv) any
acquisition or proposed acquisition by any Credit Party of all or a portion of
the Stock, or all or a portion of the assets, of any Person whether such
Indemnified Person is a party thereto, provided that the Borrower shall have no
obligation under this Section to an Indemnified Person with respect to any of
the foregoing to the extent any such loss, cost, liability, damage or expense
resulted from or arose out of the gross negligence or wilful misconduct of such
Indemnified Person or arose from claims between one such Indemnified Person and
another such Indemnified Person. The indemnity set forth herein shall be in
addition to any other obligations or liabilities of the Borrower to each
Indemnified Person under the Loan Documents or at common law or otherwise, and
shall survive any termination of the Loan Documents, the expiration of the
Commitments and the payment of all indebtedness of the Borrower under the Loan
Documents.
11.12. 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.
11.13. Headings Descriptive
--------------------
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
11.14. 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.
11.15. 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 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.
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11.16. 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.
11.17. 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.
11.18. 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, 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.
11.19. 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 immediately 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 currency. If for the purpose of
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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 immediately 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.
11.20. 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 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 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.
11.21. 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).
(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
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<PAGE>
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.
11.22. Designation as Designated Senior Indebtedness
---------------------------------------------
This Agreement, the Subsidiary Guaranty, and all Loans and all other
monetary obligations hereunder and thereunder, are hereby expressly designated
as "Designated Senior Indebtedness", as that term is defined in the RTC
Convertible Subordinated Indenture and in the RTC Convertible Subordinated
Guaranty.
11.23. Year 2000
---------
The Borrower and its Subsidiaries have reviewed the areas within their
business and operations which could be adversely affected by, and have developed
or are developing a program to address on a timely basis, the "Year 2000
Problem" (that is, the risk that computer applications used by the Borrower and
its Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on such review and program, the Borrower reasonably believe that
the "Year 2000 Problem" will not have a material adverse effect on the financial
condition, operations, business, prospects or Property of the Borrower and its
Subsidiaries taken as a whole since December 31, 1997.
103
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED 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>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
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.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
DLJ CAPITAL FUNDING, INC.,
Individually and as Syndication Agent
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
FIRST UNION NATIONAL BANK,
Individually and as Documentation Agent
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
ABN AMRO BANK N.V.
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
ALLIED IRISH BANKS, P.L.C.,
CAYMAN ISLANDS BRANCH
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
BANCO ESPIRITO SANTO E COMERCIAL DE
LISBOA, NASSAU BRANCH
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
BANK LEUMI TRUST COMPANY OF NEW
YORK
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE BANK OF NOVA SCOTIA
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
BANQUE NATIONALE DE PARIS
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
BANQUE PARIBAS
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
BHF BANK AKTIENGESELLSCHAFT
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
CITY NATIONAL BANK
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
CREDIT LYONNAIS NEW YORK BRANCH
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
CREDITANSTALT CORPORATE FINANCE,
INC.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
FLEET NATIONAL BANK
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE FUJI BANK, LIMITED
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
HIBERNIA NATIONAL BANK
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE INDUSTRIAL BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
KREDIETBANK N.V.
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
LONG TERM CREDIT BANK OF JAPAN, LTD.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
MELLON BANK, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
MICHIGAN NATIONAL BANK
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
NATIONAL CITY BANK OF KENTUCKY
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK B.A,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
ROYAL BANK OF CANADA
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE ROYAL BANK OF SCOTLAND plc
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE SANWA BANK, LIMITED
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
SOCIETE GENERALE
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
SUNTRUST BANK, NASHVILLE, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE TOKAI BANK, LIMITED
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THE TOYO TRUST & BANKING CO., LTD.,
Los Angeles Agency
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
UNION BANK OF CALIFORNIA, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
U.S. BANK NATIONAL ASSOCIATION
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
EXHIBIT 10.31
[FORM OF FIRST AMENDMENT
TO PLEDGE AGREEMENT]
This FIRST AMENDMENT TO [BORROWER][SUBSIDIARY] PLEDGE AGREEMENT (this
"AMENDMENT") is dated as of April 30, 1998 and entered into by and between
[TOTAL RENAL CARE HOLDINGS, INC.,][RENAL TREATMENT CENTERS, INC., a Delaware
corporation][TOTAL RENAL CARE, INC., a California corporation] ("PLEDGOR"), and
THE BANK OF NEW YORK ("BNY"), as administrative agent for and representative of
(in such capacity herein called "COLLATERAL AGENT") the Secured Parties referred
to below.
PRELIMINARY STATEMENTS
A. Total Renal Care Holdings, Inc., is a party to (i) that certain Amended
and Restated Revolving Credit Agreement dated as of April 30, 1998, with the
lenders named therein (the "Revolving Lenders"), DLJ Capital Funding, Inc., as
Syndication Agent, The Bank of New York, as Administrative Agent, and First
Union National Bank, as Documentation Agent (such Amended and Restated Revolving
Credit Agreement, being the "REVOLVING CREDIT AGREEMENT"), and (ii) that certain
Amended and Restated Term Loan Agreement dated as of April 30, 1998 with the
lenders named therein (the "Term Lenders"), DLJ Capital Funding, Inc., as
Syndication Agent, and The Bank of New York, as the Administrative Agent (said
Amended and Restated Term Loan Agreement being the "TERM LOAN AGREEMENT").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Revolving Credit Agreement and, if not defined
therein, in the Term Loan Agreement.
B. The Pledgor is a party to that certain [Borrower][Subsidiary] Pledge
Agreement dated as of [October 24, 1997][February 27, 1998] (the "Pledge
Agreement") with the Collateral Agent, as administrative agent for and
representative of the Secured Parties, as "Secured Parties" is defined therein.
C. It is a condition precedent to the effectiveness of the Revolving
Credit Agreement and the Term Loan Agreement that the Pledgor and the Collateral
Agent have agreed to amend the Pledge Agreement pursuant to this Amendment.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Pledgor hereby agrees with the Collateral Agent as follows:
SECTION 1. AMENDMENT TO PLEDGE AGREEMENT.
-----------------------------
1
<PAGE>
Section [17][18][1] of the Pledge Agreement is hereby amended by
deleting the reference to "January 1, 1999" contained therein and substituting
therefor a reference to "July 1, 1999."
SECTION 2. MISCELLANEOUS.
-------------
A. REFERENCE TO AND EFFECT ON THE PLEDGE AGREEMENT.
(i) On and after the Effective Date, each reference in the Pledge
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of
like import referring to the Pledge Agreement, shall mean and be a reference
to the Pledge Agreement as amended hereby.
(ii) Except as specifically amended by this Amendment, the Pledge
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
(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
Collateral Agent or any Secured Party under, the Pledge Agreement.
B. 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.
C. GOVERNING 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.
D. 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.
- ------------------------
[1] Insert 17 for Amendment to Borrower Pledge Agreement and 18 for Amendment
to Subsidiary Pledge Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused
this Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
[NAME OF PLEDGOR]
as Pledgor
By:_______________________________
Title:____________________________
THE BANK OF NEW YORK, as the Collateral Agent
By:_______________________________
Title:____________________________
3
<PAGE>
EXHIBIT 10.32
[FORM OF ACKNOWLEDGMENT AND CONFIRMATION]
This ACKNOWLEDGEMENT AND CONFIRMATION (this "ACKNOWLEDGEMENT") is dated
as of April 30, 1998, entered into by each of the undersigned (each a "CREDIT
SUPPORT PARTY" and together the "CREDIT SUPPORT PARTY"), for the benefit of The
Bank of New York, as Collateral Agent, and the Term Lenders and the Revolving
Lenders referred to below, and is made with reference to (i) that certain
Amended and Restated Revolving Credit Agreement dated as of April 30, 1998, with
the lenders named therein (the "Revolving Lenders"), DLJ Capital Funding, Inc.,
as Syndication Agent, The Bank of New York, as Administrative Agent, and First
Union National Bank, as Documentation Agent (such Amended and Restated Revolving
Credit Agreement being the "REVOLVING CREDIT AGREEMENT"), and (ii) that certain
Amended and Restated Term Loan Agreement dated as of April 30, 1998 with the
lenders named therein (the "Term Lenders"), DLJ Capital Funding, Inc., as
Syndication Agent, and The Bank of New York, as the Administrative Agent (said
Amended and Restated Term Loan Agreement being the "TERM LOAN AGREEMENT").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Revolving Credit Agreement and, if not defined
therein, in the Term Loan Agreement.
PRELIMINARY STATEMENTS
----------------------
A. The Borrower is a party to that certain Revolving Credit Agreement
dated as of October 24, 1997 with the lenders party to such Revolving Credit
Agreement, DLJ Capital Funding, Inc., as Syndication Agent, The Bank of New
York, as Administrative Agent, and First Union National Bank, as Documentation
Agent (such Revolving Credit Agreement as amended to the date hereof, being the
"EXISTING REVOLVING CREDIT AGREEMENT").
B. The Borrower is a party to that certain Term Loan Agreement dated
as of October 24, 1997 with the lenders party to such Term Loan Agreement, DLJ
Capital Funding, Inc., as Syndication Agent, and The Bank of New York, as the
Administrative Agent (said Term Loan Agreement, as amended to the date hereof,
being the "EXISTING TERM LOAN AGREEMENT").
C. The parties to the Existing Revolving Credit Agreement desire to
amend and restate it in its entirety pursuant to the Revolving Credit Agreement.
D. The parties to the Existing Term Loan Agreement desire to amend
and restate it in its entirety pursuant to the Term Loan Agreement.
1
<PAGE>
E. The Borrower is a party to the Borrower Pledge Agreement pursuant
to which Borrower has pledged certain Collateral to the Collateral Agent to
secure, among other things, the obligations under the Existing Term Loan
Agreement and the Existing Revolving Credit Agreement. TRC is a party to a
Subsidiary Pledge Agreement dated as of October 24, 1997 (the "Subsidiary Pledge
Agreement (TRC)") pursuant to which TRC pledged certain Collateral to the
Collateral Agent to secure, among other things, the obligations under the
Existing Term Loan Agreement and the Existing Revolving Credit Agreement and to
secure the obligations of TRC under the Subsidiary Guaranty. RTC is a party to
a Subsidiary Pledge Agreement dated as of February 27, 1998 (the "Subsidiary
Pledge Agreement (RTC)") pursuant to which RTC pledged certain Collateral to the
Collateral Agent to secure, among other things, the obligations under the
Existing Term Loan Agreement and the Existing Revolving Credit Agreement and to
secure the obligations of RTC under the Subsidiary Guaranty. Each Guarantor
listed on the signature pages hereof is a party to the Subsidiary Guaranty
pursuant to which such Guarantor has guarantied, among other things, the
obligations under the Existing Term Loan Agreement and the Existing Revolving
Credit Agreement. The Borrower, TRC, and RTC are collectively referred to herein
as the "PLEDGORS." The Pledgors and the Guarantors are collectively referred to
herein as the "CREDIT SUPPORT PARTIES." The Borrower Pledge Agreement, the
Subsidiary Pledge Agreement (TRC), the Subsidiary Pledge Agreement (RTC), and
the Subsidiary Guaranty are collectively referred to herein as the "CREDIT
SUPPORT DOCUMENTs".
F. It is a condition precedent to the effectiveness of the Revolving
Credit Agreement and the Term Loan Agreement that the Pledgors and Guarantors
acknowledge and confirm the Credit Support Documents to which they are a party
shall continue to guaranty or secure, as the case may be, the obligations under
the Revolving Credit Agreement and the Term Loan Agreement and the Loan
Documents referenced in the Revolving Credit Agreement and the Term Loan
Agreement.
G. The Credit Support Parties desire expressly to confirm the
foregoing matters and to acknowledge for purposes of clarification that all
obligations of the Borrower under the Revolving Credit Agreement and the Term
Loan Agreement are within the definition of "Guarantied Obligations" contained
in the Subsidiary Guaranty and constitute "Secured Obligations" under the
Collateral Documents.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Credit Support Parties hereby
agree as follows:
1. Each Credit Support Party hereby acknowledges that it has reviewed
the terms and provisions of the Existing Revolving Credit Agreement, the
Existing Term Loan Agreement, the Revolving Credit Agreement and the Term Loan
Agreement and consents to the amendment and restatement of the Existing
Revolving Credit Agreement and the Existing Term Loan Agreement effected
pursuant to the Revolving Credit Agreement and the Term Loan Agreement. 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 the case may be, to the fullest extent
possible the
2
<PAGE>
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 the Borrower now or
hereafter existing under or in respect of the Revolving Credit Agreement and the
Term Loan Agreement and the Loan Documents, as defined in each such agreement.
2. Each Credit Support Party hereby acknowledges and confirms the
understanding and intent of such party that, upon the Effective Date of the
Revolving Credit Agreement and the Term Loan Agreement, and as a result thereof,
the definitions of "Guarantied Obligations" and "Secured Obligations" contained
in the Subsidiary Guaranty and the Collateral Documents shall include, without
limitation, obligations in respect of the First Additional Term Loans and the
obligations in respect of the Revolving Credit Commitments.
3. 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 the Revolving Credit Agreement and the Term Loan
Agreement. Each Credit Support Party represents and warrants that all
representations and warranties contained in the Revolving Credit Agreement and
the Term Loan 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 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.
4. Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in the Revolving
Credit Agreement and the Term Loan Agreement, such Credit Support Party is not
required by the terms of the Revolving Credit Agreement or the Term Loan
Agreement or any document referenced therein to consent to the amendment and
restatement of the Existing Revolving Credit Agreement and the Existing Term
Loan Agreement effected pursuant the Revolving Credit Agreement and the Term
Loan Agreement and (ii) nothing in the Revolving Credit Agreement or the Term
Loan Agreement or any document referenced therein shall be deemed to require the
consent of such Credit Support Party to any future amendments to the Revolving
Credit Agreement or the Term Loan Agreement.
5. On and after the Effective Date, each reference in the Credit
Support Documents to the "Revolving Credit Agreement" "thereunder", "thereof",
"therein" or words of like import referring to the Existing Revolving Credit
Agreement shall mean and be a reference to the Revolving Credit Agreement (as
defined herein), as it may hereafter be amended, restated, or otherwise modified
from time to time.
6. On and after the Effective Date, each reference in the Credit
Support Documents to the "Term Loan Agreement" "thereunder", "thereof",
"therein" or words of like
3
<PAGE>
import referring to the Existing Term Loan Agreement shall mean and be a
reference to the Term Loan Agreement (as defined herein), as it may hereafter be
amended, restated, or otherwise modified from time to time.
7. THIS ACKNOWLEDGEMENT 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.
8. This Acknowledgment 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.
[Remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Credit Support Parties has
caused this Acknowledgement and Confirmation to be duly executed and delivered
by its officer thereunto duly authorized as of the date first written above.
TOTAL RENAL CARE HOLDINGS, INC. as Borrower and
a Pledgor
TOTAL RENAL CARE, INC., as a Guarantor and a
Pledgor
TOTAL RENAL CARE ACQUISITION CORP., as a
Guarantor
RENAL TREATMENT CENTERS, INC., as a Guarantor
and a Pledgor
RENAL TREATMENT CENTERS - MID-ATLANTIC, INC.,
as a Guarantor
RENAL TREATMENT CENTERS - NORTHEAST, INC., as a
Guarantor
RENAL TREATMENT CENTERS - CALIFORNIA, INC., as
a Guarantor
RENAL TREATMENT CENTERS - WEST, INC., as a
Guarantor
RENAL TREATMENT CENTERS - SOUTHEAST, INC., as a
Guarantor
By___________________________
Title_______________________
TRC WEST, INC., as a Guarantor
By___________________________
Title_______________________
5
<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. 333-1620, No. 333-34693, No. 333-34695 and No. 333-46887) of Total
Renal Care Holdings, Inc. of our report dated February 16, 1998, except as to
the pooling of interests with Renal Treatment Centers, Inc. which is as of May
14, 1998, appearing on page F-1 in this Annual Report on Form 10-K/A. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page S-1 of this Form 10-K/A.
Price Waterhouse LLP
Seattle, Washington
May 15, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We 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-
1620, No. 333-34693, No. 333-34695 and No. 333-46887) of Total Renal Care
Holdings, Inc. of our report dated May 14, 1998, on our audits of the
financial statements and financial statement schedule of Renal Treatment
Centers, Inc. and Subsidiaries as of December 31, 1997 and 1996, and for each
of the four years in the period ended December 31, 1997 and for the six months
ended December 31, 1995 (not presented separately herein), which report is
included on page F-2 in this Annual Report on Form 10-K/A.
Coopers & Lybrand L.L.P.
Philadelphia, PA
May 15, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We 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-
1620, No. 333-34693, No. 333-34695 and No. 333-46887) of Total Renal Care
Holdings, Inc. of our report dated March 31, 1995, on the combined financial
statements of Healthcare Corporation and Affiliates for the year ended
December 31, 1994 (not presented separately therein), appearing in the Annual
Report on Form 10-K/A of Total Renal Care Holdings, Inc. for the year ended
December 31, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Nashville, Tennessee
May 14, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We 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-
1620, No. 333-34693, No. 333-34695 and No. 333-46887) of Total Renal Care
Holdings, Inc. of our report dated July 14, 1995, except for Note 9 as to
which the date is July 24, 1995, on our audit of the Wichita Dialysis Group as
of December 31, 1994 and for the year then ended, appearing in the Annual
Report on Form 10-K/A (Amendment No. 1) of Total Renal Care Holdings, Inc. for
the year ended December 31, 1997.
/s/ Baird, Kurtz & Dobson
Baird, Kurtz & Dobson
Wichita, Kansas
May 15, 1998
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