UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
------------------
Commission File Number 0-19294
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from - to
REHABCARE GROUP, INC.
---------------------
(Exact name of Registrant as specified in its charter)
Delaware 51-0265872
- ------------------------------ ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7733 Forsyth Boulevard, Suite 2300, St. Louis, MO 63105
-------------------------------------------------------
(Address of principal executive offices and zip code)
314-863-7422
----------------------------------------------------
(Registrant's telephone number, including area code)
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.
Yes X No _____
-----
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No _____
-----
Indicate the number of shares outstanding of the Registrant's common stock, as
of the latest practicable date.
Class Outstanding at November 3, 2004
- -------------------------------------- -------------------------------
Common Stock, par value $.01 per share 16,414,334
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REHABCARE GROUP, INC.
Index
Part I. - Financial Information
Item 1. - Condensed Consolidated Financial Statements
Condensed consolidated balance sheets,
September 30, 2004 (unaudited) and December 31, 2003 3
Condensed consolidated statements of earnings for the three months
and nine months ended September 30, 2004 and 2003
(unaudited) 4
Condensed consolidated statements of cash flows for the
nine months ended September 30, 2004 and 2003 (unaudited) 5
Notes to condensed consolidated financial statements (unaudited) 6
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 3. - Quantitative and Qualitative Disclosures about Market Risks 25
Item 4. - Controls and Procedures 26
Part II. - Other Information 26
Item 1. - Legal Proceedings 26
Item 6. - Exhibits 27
Signatures 28
2 of 28
PART 1. - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REHABCARE GROUP, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
September 30, December 31,
2004 2003
---- ----
Assets (unaudited)
------
Current assets:
Cash and cash equivalents $ 43,919 $ 28,320
Restricted cash 3,061 --
Marketable securities, available-for-sale -- 10,065
Accounts receivable, net of allowance for doubtful
accounts of $5,740 and $3,422, respectively 69,269 62,744
Deferred tax assets 8,231 14,706
Other current assets 2,208 1,912
------- -------
Total current assets 126,688 117,747
Marketable securities, trading 3,929 3,665
Equipment and leasehold improvements, net 13,652 14,063
Excess of cost over net assets acquired, net 62,368 48,729
Intangible assets, net 9,867 48
Assets held for sale -- 46,171
Investment in unconsolidated affiliate 39,441 --
Other 3,679 3,203
------- -------
Total assets $259,624 $233,626
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 3,773 $ --
Accounts payable 1,115 763
Accrued salaries and wages 28,107 24,035
Accrued expenses 16,820 14,800
Income taxes payable 1,147 1,197
------- -------
Total current liabilities 50,962 40,795
Long-term debt, less current portion 466 --
Deferred compensation 3,976 3,682
Deferred tax liabilities 5,567 1,423
Liabilities held for sale -- 9,771
------- -------
Total liabilities 60,971 55,671
------- -------
Stockholders' equity:
Preferred stock, $.10 par value, authorized
10,000,000 shares, none issued and outstanding -- --
Common stock, $.01 par value; authorized 60,000,000
shares, issued 20,412,932 shares and 20,144,577
shares as of September 30, 2004 and December 31,
2003, respectively 204 201
Additional paid-in capital 118,516 114,704
Retained earnings 134,637 117,753
Less common stock held in treasury at cost,
4,002,898 shares as of September 30, 2004 and
December 31, 2003 (54,704) (54,704)
Accumulated other comprehensive earnings -- 1
------- -------
Total stockholders' equity 198,653 177,955
------- -------
Total liabilities and stockholders' equity $ 259,624 $233,626
======= =======
See accompanying notes to condensed consolidated financial statements.
3 of 28
REHABCARE GROUP, INC.
Condensed Consolidated Statements of Earnings
(amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Operating revenues $93,277 $134,962 $288,718 $409,847
Costs and expenses:
Operating expenses 66,638 103,581 207,348 310,486
Selling, general &
administrative:
Divisions 7,596 15,786 25,132 51,213
Corporate 6,193 6,553 18,786 20,288
Restructuring charge -- 1,286 1,615 1,286
Gain on sale of business -- -- (485) --
Depreciation and amortization 2,125 2,084 5,903 6,429
------ ------- ------- -------
Total costs and expenses 82,552 129,290 258,299 389,702
------ ------- ------- -------
Operating earnings 10,725 5,672 30,419 20,145
Interest income 105 40 216 83
Interest expense (277) (184) (760) (532)
Other income (expense) (4) 10 (54) (63)
------ ------- ------- -------
Earnings before income taxes
and equity in net
loss of affiliate 10,549 5,538 29,821 19,633
Income taxes 4,378 2,215 12,378 7,809
Equity in net loss of affiliate (96) -- (559) --
------ ------- ------- --------
Net earnings $ 6,075 $ 3,323 $ 16,884 $ 11,824
====== ======= ======= =======
Net earnings per common share:
Basic $ 0.37 $ 0.21 $ 1.04 $ 0.74
====== ======= ======= =======
Diluted $ 0.36 $ 0.20 $ 1.00 $ 0.72
====== ======= ======= =======
Weighted-average number of
common shares outstanding:
Basic 16,302 16,086 16,230 15,962
====== ======= ======= =======
Diluted 16,867 16,540 16,819 16,507
====== ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
4 of 28
REHABCARE GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net earnings $ 16,884 $ 11,824
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 5,903 6,429
Provision for doubtful accounts 3,296 2,704
Equity in net loss of affiliate 559 --
Write-down of investment -- 50
Income tax benefit realized on employee
stock option exercises 1,521 764
Restructuring charge 1,615 871
Gain on sale of business (485) --
Change in assets and liabilities:
Accounts receivable, net (5,521) (6,033)
Prepaid expenses and other current assets (296) (133)
Other assets (392) 337
Net assets held for sale 1,903 --
Accounts payable and accrued expenses (292) 1,680
Accrued salaries and wages 2,889 1,950
Deferred compensation 247 (703)
Income taxes 7,675 76
------- ------
Net cash provided by operating activities 35,506 19,816
------- ------
Cash flows from investing activities:
Additions to equipment and leasehold improvements, net (4,016) (4,074)
Purchase of marketable securities (18,534) (5,288)
Proceeds from sale/maturities of marketable securities 28,382 996
Increase in restricted cash (3,061) --
Disposition of business (4,188) --
Purchase of businesses, net of cash acquired (19,586) --
Other, net (723) (606)
------- ------
Net cash used in investing activities (21,726) (8,972)
------- ------
Cash flows from financing activities:
Principal payments on long term debt (360) --
Exercise of stock options 2,179 1,996
------- ------
Net cash provided by financing activities 1,819 1,996
------- ------
Net increase in cash and cash equivalents 15,599 12,840
Cash and cash equivalents at beginning of period 28,320 9,580
------- ------
Cash and cash equivalents at end of period $ 43,919 $ 22,420
======= ======
See accompanying notes to condensed consolidated financial statements.
5 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Nine Month Periods Ended September 30, 2004 and 2003
(Unaudited)
Note 1. - Basis of Presentation
- -------------------------------
The condensed consolidated balance sheets and related condensed
consolidated statements of earnings, and cash flows contained in this Form 10-Q,
which are unaudited, include the accounts of RehabCare Group, Inc. and its
wholly owned subsidiaries (the "Company"). The Company accounts for its
investment in a less than 50% owned affiliate using the equity method. All
significant intercompany accounts and activity have been eliminated in
consolidation. In the opinion of management, all entries necessary for a fair
presentation of such financial statements have been included. The results of
operations for the three months and nine months ended September 30, 2004, are
not necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to current year
presentation.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with U.S. generally
accepted accounting principles. Reference is made to the Company's audited
consolidated financial statements and the related notes as of December 31, 2003
and 2002 and for each of the years in the three-year period ended December 31,
2003, included in the Annual Report on Form 10-K on file with the Securities and
Exchange Commission, which provide additional disclosures and a further
description of the Company's accounting policies.
Note 2. - Critical Accounting Policies and Estimates
- ----------------------------------------------------
The Company's condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles.
Preparation of these statements requires management to make judgments and
estimates. Some accounting policies have a significant impact on amounts
reported in these financial statements. A summary of significant accounting
policies and a description of accounting policies that are considered critical
may be found in our 2003 Annual Report on Form 10-K, filed on March 12, 2004, in
the Critical Accounting Policies and Estimates section of "Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
6 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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Note 3. - Stock-Based Compensation
- ----------------------------------
The Company accounts for stock-based employee compensation plans using the
intrinsic value method under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, stock-based employee compensation cost is not reflected in net
earnings, as all stock options granted under the plans had an exercise price
equal to the market value of the underlying common stock on the date of grant.
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of Statement No. 123, "Accounting for
Stock-Based Compensation," the Company's net earnings and earnings per share
would have been reduced to the pro forma amounts indicated below:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
(in thousands, except per share data)
Net earnings, as reported $6,075 $3,323 $16,884 $11,824
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects 928 860 2,793 3,041
----- ----- ------ ------
Pro forma net earnings $5,147 $2,463 $14,091 $ 8,783
===== ===== ====== ======
Basic net earnings per share: As reported $ 0.37 $ 0.21 $ 1.04 $ 0.74
===== ===== ====== ======
Pro forma $ 0.32 $ 0.15 $ 0.87 $ 0.55
===== ===== ====== ======
Diluted net earnings per
share: As reported $ 0.36 $ 0.20 $ 1.00 $ 0.72
===== ===== ====== ======
Pro forma $ 0.31 $ 0.15 $ 0.84 $ 0.53
===== ===== ====== ======
Note 4. - Restricted Cash and Other Insurance Collateral Commitments
- --------------------------------------------------------------------
Under the terms of the Company's general and professional liability
insurance policy, the insurance carrier requires that we provide collateral for
reimbursement of claim payments. As one component of the collateral, we have
entered into a trust agreement with our insurance carrier under which we have
deposited $3.1 million for its benefit in an escrow account with a bank. We can
access this cash no sooner than two business days after we and the insurance
carrier notify the bank that suitable replacement collateral has been moved to
the insurance carrier. The insurance carrier may only draw on these funds in the
event of a default as defined in the trust agreement. The Company also has $10.0
million in letters of credit issued to insurance carriers as collateral for
reimbursement of claims. The letters of credit reduce the amount the Company may
borrow against its line of credit. Finally, the Company has a $4.2 million
promissory note issued to its workers compensation carrier as additional
collateral. The promissory note is not recorded as a liability on the balance
sheet as it only becomes payable upon an event of default as defined in the
workers compensation security agreement.
Note 5. - Net earnings per share
- --------------------------------
Basic net earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average common shares
outstanding for the period. Diluted net earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity (as
calculated utilizing the treasury stock method).
7 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
The following table sets forth the computation of basic and diluted net
earnings per share:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
(in thousands, except per share data)
Numerator:
Numerator for basic/diluted net
earnings per share - net earnings
available to common stockholders $ 6,075 $ 3,323 $16,884 $11,824
====== ====== ====== ======
Denominator:
Denominator for basic net earnings
per share - weighted-average
shares outstanding 16,302 16,086 16,230 15,962
Effect of dilutive securities:
Stock options 565 454 589 545
------ ------ ------ ------
Denominator for diluted net
earnings per share - adjusted
weighted-average shares 16,867 16,540 16,819 16,507
====== ====== ====== ======
Basic net earnings per share $ 0.37 $ 0.21 $ 1.04 $ 0.74
====== ====== ====== ======
Diluted net earnings per share $ 0.36 $ 0.20 $ 1.00 $ 0.72
====== ====== ====== ======
Note 6. - Comprehensive Income
- ------------------------------
Comprehensive income for the three-month and nine-month periods ended
September 30, 2004 consisted only of net income. For the three-month and
nine-month periods ended September 30, 2003, the Company's only adjustment from
net income to comprehensive income was the net of tax impact of unrealized
holding gains on marketable securities in the amount of ($1,000) and ($2,000),
respectively.
Note 7. - Sale of Business
- --------------------------
On February 2, 2004, the Company completed the sale of its StarMed staffing
division to InteliStaf Holdings, Inc. ("InteliStaf") in consideration for
approximately 25% of InteliStaf on a fully diluted basis. The transaction was
effected as a purchase by InteliStaf of all of the outstanding common stock of
StarMed Health Personnel, Inc., the operating company for our staffing business.
At December 31, 2003, the assets and liabilities of StarMed were reported
as assets and liabilities held for sale and were recorded at their estimated
fair market value less estimated costs to sell. Upon consummating the sale on
February 2, 2004, the Company recorded a gain of $485,000 as a result of
adjusting the estimated costs to sell for then current information, recording a
liability for the estimated fair value of the indemnification provided to
InteliStaf in accordance with the sale agreement and as a result of changes in
the underlying asset and liability balances between December 31, 2003 and
February 2, 2004. This gain will be subject to further refinement once the
closing balance sheet has been agreed to by the parties and all costs to sell
have been finalized. These adjustments are not expected to be material.
8 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
As stated above, as part of the sale agreement, the Company indemnified
InteliStaf from certain obligations and liabilities, whether known or unknown,
which arose out of the operation of StarMed prior to February 2, 2004. As of
September 30, 2004, the Company has approximately $0.8 million accrued for this
indemnification. This liability is reported in accrued expenses on the September
30, 2004 balance sheet.
Note 8. - Investment in Unconsolidated Affiliate
- ------------------------------------------------
As stated in note 7, the Company sold its StarMed staffing business to
InteliStaf on February 2, 2004 in exchange for a 25% interest in InteliStaf on a
fully diluted basis. The Company uses the equity method to account for its
investment in InteliStaf and recorded its initial investment at its fair value
of $40 million, as determined by a third party valuation firm. A summary of the
results of operations for the three months ended September 30, 2004 and the
period from February 2, 2004 to September 30, 2004 and financial position as of
September 30, 2004 follows (dollars in thousands):
Period from
Three Months Ended February 2, 2004 to
September 30, 2004 September 30, 2004
------------------ ------------------
Net operating revenues $ 73,794 $218,475
Operating loss (30) (988)
Net loss (516) (2,232)
September 30, 2004
------------------
Current assets $ 67,550
Noncurrent assets 100,514
-------
Total assets $168,064
=======
Current liabilities $ 38,582
Noncurrent liabilities 42,580
-------
Total liabilities $ 81,162
=======
The value of the Company's investment in InteliStaf at the transaction date
exceeded its share of the book value of InteliStaf's stockholders' equity by
approximately $17.8 million. This excess has been accounted for as excess cost
over net assets acquired (although reported as a component of investment in
unconsolidated affiliate) and will be reviewed for impairment in accordance with
the terms of APB Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock."
Note 9. - Restructuring Costs
- -----------------------------
On July 30, 2003, the Company announced a comprehensive multifaceted
restructuring program to return the Company to growth and improved
profitability. As a result of the restructuring plan, the Company recognized a
pre-tax restructuring expense of $1.3 million for severance, outplacement and
exit costs.
As reported in note 7, the Company sold its StarMed staffing division to
InteliStaf on February 2, 2004. In connection with this sale, the Company
initiated a series of restructuring activities to reduce the cost of corporate
overhead that had previously been absorbed by the staffing division. These
activities included the elimination of approximately 40 positions, exiting a
portion of leased office space at the Company's corporate headquarters and the
write-off of certain abandoned leasehold improvements associated with the office
space consolidation. In addition, the Company modified the term of the stock
9 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
options of certain StarMed employees to allow them additional time to exercise
vested options after leaving the employment of the Company. This action
triggered a new measurement date for the modified options. The corresponding
expense has been included in the severance component of the restructuring
charge. As a result of these actions, the Company recorded a pre-tax
restructuring charge in the first quarter of 2004 of approximately $1.7 million.
During the second quarter of 2004, the Company reassessed the restructuring
reserve remaining related to the actions taken during the third quarter of 2003
and determined that the reserve for severance costs was in excess of the
remaining estimated costs. Accordingly, approximately $51,000 of the reserve was
reversed to income. Additionally, during the second and third quarters, the
Company determined that the reserve remaining for lease exit costs was
approximately $48,000 less than the remaining expected costs. A portion of the
excess severance cost reserve was reclassified to the lease exit cost reserve.
The following table summarizes the year-to-date activity, through
September 30, 2004, with respect to these restructuring activities:
(dollars in thousands)
Leasehold
Improvement
Severance Exit Costs Write-off Total
--------- ---------- --------- -----
Balance at December 31, 2003 $ 351 $ 145 $ -- $ 496
Restructuring charge 736 520 359 1,615
Reclassification (48) 48 -- --
Cash payments and
non-cash utilization (1,021) (158) (359) (1,538)
------ ---- ---- ------
Balance at September 30, 2004 $ 18 $ 555 $ -- $ 573
====== ==== ==== ======
Note 10. - Business Combinations
- --------------------------------
On February 2, 2004, the Company purchased the assets of CPR Therapies,
Inc. ("CPR") for cash and notes. CPR, headquartered in Denver, Colorado, is a
contract therapy services company for physical rehabilitation services in
skilled nursing and assisted living facilities with a significant market
presence in Colorado and California. CPR's annual operating revenues are
approximately $9 million. The purchase price, including estimated direct
acquisition costs, of CPR has been allocated as follows (in thousands of
dollars):
Equipment and leasehold improvements, net $ 16
Identifiable intangibles, principally
trade name, customer relationships
and noncompete agreements 1,660
Excess of cost over net assets acquired 2,595
------
$ 4,271
======
In accordance with the terms of the purchase agreement, the seller is
entitled to additional earn-out consideration up to, but not exceeding,
$799,000. The payment of this earn-out is contingent upon the execution of new
therapy contracts as defined in the agreement. On July 31, 2004, the first of
two earn-out calculations was performed resulting in an increase to the purchase
price of approximately $159,000 and a corresponding increase to the excess of
cost over net assets acquired. Any additional contingent consideration paid as a
result of this contract provision will be recorded at the time the contingency
is resolved.
10 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Effective March 1, 2004, the Company purchased from Health Net, Inc. all of
the outstanding common stock of American VitalCare, Inc. and its sister company,
Managed Alternative Care, Inc. (collectively "VitalCare") for cash and notes.
VitalCare provides management services to hospital based specialty care units in
the state of California generating annual operating revenues of approximately
$14 million. The purchase price, including estimated direct acquisition costs,
of VitalCare has been allocated as follows (in thousands of dollars):
Accounts receivable, net of allowance $ 2,978
Equipment and leasehold improvements, net 39
Other long-term assets 12
Identifiable intangibles, principally
trade name, customer relationships,
contractual customer relationships
and noncompete agreements 8,790
Excess of cost over net assets acquired 6,872
Net deferred tax liabilities (2,894)
Accounts payable (272)
Accrued salaries and wages (535)
------
$14,990
======
During the second quarter of 2004, the purchase price was adjusted based on
the balances contained in the closing balance sheet of VitalCare as agreed to by
the parties. This adjustment is reflected in the balances reported above. The
final purchase price may be further increased or decreased for an adjustment, as
defined in the agreement, related to the retention and/or termination of
customer contracts for a period of time after the purchase date.
On May 3, 2004, the Company purchased the assets of Phase 2 Consulting,
Inc. ("Phase 2") for cash. Phase 2, with offices in Salt Lake City, Utah and
Austin, Texas is a management consulting firm to the healthcare industry with
annual operating revenues of approximately $8 million. The purchase price,
including estimated direct acquisition costs, has been allocated as follows (in
thousands of dollars):
Current assets $ 1,324
Long-term assets 100
Trade name 400
Excess of cost over net assets acquired 4,172
Accounts payable (133)
Accrued expenses (412)
------
$ 5,451
======
The purchase price is subject to modification based on a final settlement
of the closing balance sheet. One such modification was made during the third
quarter to reduce accrued vacation by approximately $120,000 and to increase the
excess of cost over net assets acquired by the same amount.
John Short, Ph.D., the managing director and majority owner of Phase 2, is
President and Chief Executive Officer of the Company and a member of the
Company's Board of Directors.
The following pro forma information assumes the acquisitions of CPR,
VitalCare and Phase 2 occurred at the beginning of the three-month period ended
September 30, 2003 and nine-month periods presented. The financial information
reported for the three-month period ended September 30, 2004 is the actual
financial information reported for the quarter as all three acquisitions
occurred prior to the beginning of the quarter. This information is not
necessarily indicative either of results of operations that would have occurred
had the purchases actually been made at the beginning of the periods presented,
or of the future results of the Company.
11 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
(in thousands,except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
As Reported Pro Forma Pro Forma Pro Forma
----------- --------- --------- ---------
Operating revenues $93,277 $142,704 $294,632 $433,831
Net earnings $ 6,075 $ 3,906 $ 17,198 $ 14,021
Diluted net earnings per share $ 0.36 $ 0.24 $ 1.03 $ 0.85
Note 11. - Excess of Cost Over Net Assets Acquired and Other Intangible Assets
- ------------------------------------------------------------------------------
At September 30, 2004 and 2003, the Company had the following excess of
cost over net assets acquired and other intangible asset balances:
(dollars in thousands)
September 30, 2004 September 30, 2003
------------------ ------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------ ------------ ------ ------------
Amortized Intangible Assets:
Noncompete agreements $ 320 $ (58) $ -- $ --
Contractual customer
relationships 8,800 (1,025) 100 (46)
----- ------ --- ---
Total $9,120 $ (1,083) $ 100 $ (46)
===== ====== === ===
Unamortized Intangible Assets:
Trade names $1,830 $ --
===== ===
Amortization expense was approximately $432,000 and $1,030,000 for the
quarter and nine-month period ended September 30, 2004, respectively and
approximately $7,000 and $20,000 for the quarter and nine-month period ended
September 30, 2003, respectively. Estimated annual amortization expense for the
next 5 years is: 2004 - $1.5 million; 2005 - $1.7 million; 2006 - $1.7 million;
2007 - $1.0 million and 2008 - $0.8 million.
The changes in the carrying amount of excess of cost over net assets
acquired for the nine months ended September 30, 2004 are as follows:
(dollars in thousands)
Hospital
Rehabilitation Contract
Services Therapy Other Total
-------- ------- ----- -----
Balance at December 31, 2003 $35,739 $12,990 $ -- $48,729
Acquisitions 6,872 2,595 4,172 13,639
------ ------ ----- ------
Balance at September 30, 2004 $42,611 $15,585 $4,172 $62,368
====== ====== ===== ======
12 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Note 12. - Long-term Debt
- -------------------------
As part of the purchases of CPR and VitalCare, the Company issued long-term
subordinated promissory notes to the respective selling parties. In the case of
CPR, the Company issued a promissory note with a face value of $1.44 million and
a stated interest rate of 8%. Principal is due in eight equal quarterly
installments that started on May 1, 2004 along with accrued but unpaid interest.
During the third quarter of 2004, the Company incurred an additional liability
in the amount of approximately $159,000 as a purchase price adjustment in
accordance with the earn-out provisions of the CPR purchase agreement. The
interest rate on the earn-out is 8% per annum. Principal and interest will be
paid in 24 equal monthly installments beginning February 28, 2005. On September
30, 2004, the remaining aggregate principal balance was $1.239 million.
In the VitalCare acquisition, the Company issued a promissory note with a
face value of $3 million and a stated interest rate of 7%. Interest is payable
November 30, 2004 and August 31, 2005 and the principal is payable in full on
August 31, 2005.
Note 13. - Industry Segment Information
- ---------------------------------------
Prior to February 2, 2004, when the Company sold its healthcare staffing
division, the Company operated in two business segments that were managed
separately based on fundamental differences in operations: program management
services and healthcare staffing services. Program management includes hospital
rehabilitation services (including inpatient acute rehabilitation and skilled
nursing units and outpatient therapy programs) and contract therapy programs.
Virtually all of the Company's services are provided in the United States.
Summarized information about the Company's operations for the three months and
nine months ended September 30, 2004 and 2003 in each industry segment is as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Operating Revenues from
Unaffiliated Customers (dollars in thousands)
- --------------------------
Program management:
Hospital
rehabilitation
services $ 48,427 $ 46,503 $144,032 $138,975
Contract therapy 42,895 33,607 124,677 97,447
------- ------- ------- -------
Program
management total 91,322 80,110 268,709 236,422
Healthcare staffing -- 55,191 16,727 174,501
Other operations 1,955 -- 3,353 --
------- -------- ------- -------
Subtotal 93,277 135,301 288,789 410,923
Less intercompany
revenues* -- (339) (71) (1,076)
------- ------- ------- -------
Total $ 93,277 $134,962 $288,718 $409,847
======= ======= ======= =======
<FN>
*Intercompany revenues represent sales at market rates from the Company's
healthcare staffing segment to the Company's program management segment.
</FN>
13 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Operating Earnings (dollars in thousands)
- --------------------------
Program management:
Hospital
rehabilitation
services $ 8,340 $ 8,634 $25,201 $23,651
Contract therapy 2,301 913 6,718 4,464
------ ------ ------ ------
Program
management total 10,641 9,547 31,919 28,115
Healthcare staffing -- (2,589) (78) (6,684)
Other operations 84 -- 193 --
------ ------ ------- -------
Subtotal 10,725 6,958 32,034 21,431
Restructuring charge -- (1,286) (1,615) (1,286)
------ ------ ------ ------
Total $10,725 $ 5,672 $30,419 $20,145
====== ====== ====== ======
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Depreciation and
Amortization (dollars in thousands)
- --------------------------
Program management:
Hospital
rehabilitation
services $ 1,368 $ 1,252 $ 3,749 $ 4,024
Contract therapy 749 343 2,143 993
----- ----- ----- -----
Program
management total 2,117 1,595 5,892 5,017
Healthcare staffing -- 489 -- 1,412
Other operations 8 -- 11 --
----- ----- ----- -----
Total $ 2,125 $ 2,084 $ 5,903 $ 6,429
===== ===== ===== =====
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Capital Expenditures (dollars in thousands)
- --------------------------
Program management:
Hospital
rehabilitation
services $ 924 $ 892 $ 2,061 $ 1,694
Contract therapy 890 659 1,927 1,289
----- ----- ------ -----
Program
management total 1,814 1,551 3,988 2,983
Healthcare staffing -- 126 -- 1,091
Other operations 15 -- 28 --
----- ----- ----- -----
Total $ 1,829 $ 1,677 $ 4,016 $ 4,074
===== ===== ===== =====
14 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Total Assets Unamortized Goodwill
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
(dollars in thousands)
Program management:
Hospital
rehabilitation
services $162,631 $128,762 $ 42,611 $ 35,739
Contract therapy 51,484 40,581 15,585 12,990
------- ------- ------- -------
Program
management total 214,115 169,343 58,196 48,729
Healthcare staffing -- 86,607 -- 52,956
Other operations 6,068 -- 4,172 --
Corporate -
investment in
unconsolidated
affiliate 39,441 -- -- --
------- ------- ------- -------
Total $259,624 $255,950 $ 62,368 $101,685
======= ======= ======= =======
Note 14. - Related Party Transactions
- -------------------------------------
Beginning in the third quarter of 2003, the Company has retained a software
vendor for various computer related services. John H. Short, President and Chief
Executive Officer and a director of our Company, and Theodore M. Wight, a
director of our Company, are also directors of the software vendor company.
Messrs. Wight and Short and their affiliated entities own 27.3% and 5.5% of the
fully diluted capitalization of the software company, respectively. Each of the
completed projects and the vendor's fees have been disclosed in the Company's
prior reports. The Company continues to utilize the software vendor for website
hosting services at an approximate annual cost of $73,000. This contract is
cancelable upon 60 days notice.
In September 2004, the Company engaged the software vendor to provide
services in connection with developing the Company's HR center/employee portal.
The services are expected to be performed over a 12 week period of time once the
project is started and are expected to cost approximately $96,000 plus out of
pocket expenses. During the second and third quarters of 2004, the Company also
engaged the software vendor in several other minor projects with a total
aggregate cost of less than $10,000.
Prior to the Company's acquisition of Phase 2 on May 3, 2004, Phase 2
entered into a joint marketing arrangement with the aforementioned software
vendor. This agreement remains in force and during the third quarter of 2004,
Phase 2 paid the software vendor $15,000 in conjunction with this agreement.
During 2003, the Company entered into an agreement with Phase 2. Per the
terms of the agreement, Phase 2 provided the Company with management, consulting
and advisory services, including having John H. Short, Ph.D., the managing
director of Phase 2 and a member of the Company's Board of Directors, serve as
Interim President and Chief Executive Officer of the Company. A monthly
consulting fee of $55,000 was paid to Phase 2 during the term of the agreement
plus reimbursement of business expenses. In addition, Phase 2 was entitled to an
incentive fee based on predetermined performance standards. On May 3, 2004, the
Company acquired Phase 2 and elected Dr. Short as President and Chief Executive
Officer of the Company. The advisory services agreement with Phase 2 was
terminated at that time. Prior to the termination of the contract, during the
first half of 2004, the Company recorded approximately $505,000 of expense under
this agreement and made payments to Phase 2 of approximately $700,000.
15 of 28
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Prior to the Company's acquisition of Phase 2 on May 3, 2004, the Company
engaged Phase 2 for several consulting projects for services ranging from
long-term information technology strategy, staffing analysis and acquisition
target analysis, separate from the agreement described above. The total cost of
these projects, which were paid in full, was approximately $75,000.
As a result of Dr. Short's relationship to Phase 2, the terms and
conditions of the acquisition agreement between the Company and Phase 2 were
negotiated on behalf of the Company by the independent members of the Board of
Directors. The independent board members retained an independent financial
advisor to assist them during this process.
In accordance with the terms of the Transition Services Agreement between
the Company and InteliStaf, the Company agreed to provide certain accounting and
back-office services to InteliStaf until such time as those activities were
fully integrated by InteliStaf. These services are being billed at cost. During
the period from February 2, 2004, to September 30, 2004, the Company performed
services under this agreement with an aggregate cost of approximately $1.5
million. These costs have been netted against reimbursements from InteliStaf in
the Company's statements of earnings.
During the second and third quarters of 2004, the Company purchased air
transportation services from 55JS Limited, Co. in the amount of approximately
$29,000 and $87,000, respectively. 55JS Limited, Co. is owned by the Company's
President and Chief Executive Officer, John Short. The air transportation
services are billed to the Company, at cost, for hourly usage of 55JS's plane
for Company business.
During the third quarter of 2004, the management of Phase 2 had a senior
management retreat at the Diamond D Ranch. The Diamond D Ranch is 25% owned by
John Short. The total cost of the retreat was approximately $40,000. This entire
amount was pre-funded by Phase 2 prior to the Company's acquisition of Phase 2
on May 3, 2004. The pre-funded balance was reported as a current asset on the
closing balance sheet of Phase 2.
16 of 28
REHABCARE GROUP, INC.
Item 2. - Management's Discussion and Analysis of Financial Condition and
- --------------------------------------------------------------------------------
Results of Operations
- ---------------------
This Quarterly Report on Form 10-Q contains forward-looking statements that
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties that may cause our actual results in future
periods to differ materially from forecasted results. These risks and
uncertainties may include, but are not limited to, our ability to integrate
acquisitions and to implement client partnering relationships within the
expected timeframes and to achieve the revenue and earnings levels from such
acquisitions and relationships at or above the levels projected; the timing and
financial effect of restructuring efforts with respect to our continuing
businesses; changes in and compliance with governmental reimbursement rates and
other regulations or policies affecting our continuing businesses; our ability
to attract new client relationships or to retain and grow existing client
relationships through expansion of our hospital rehabilitation and contract
therapy service offerings and the development of alternative product offerings;
the future operating performance of InteliStaf Holdings, Inc., and the rate of
return that we will be able to achieve from our equity interest in InteliStaf;
the adequacy and effectiveness of our operating and administrative systems; our
ability and the additional costs of attracting administrative, operational and
professional employees; significant increases in health, workers' compensation
and professional and general liability costs; litigation risks of our past and
future business, including our ability to predict the ultimate costs and
liabilities or the disruption of our operations; competitive and regulatory
effects on pricing and margins; and general economic conditions, including
efforts by governmental reimbursement programs, insurers, healthcare providers
and others to contain healthcare costs.
Results of Operations
- ---------------------
Prior to the divestiture of our StarMed Staffing division to InteliStaf
Holdings, Inc. on February 2, 2004, we derived our revenue from two business
segments: program management services for hospitals and skilled nursing
facilities and healthcare staffing services. The program management segment
includes hospital rehabilitation services (including inpatient acute
rehabilitation, skilled nursing units and outpatient therapy programs) and
contract therapy programs.
Selected Operating Statistics:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Hospital Rehabilitation Services
- --------------------------------
Operating Revenues (in thousands)
Inpatient $37,253 $34,161 $109,717 $102,076
Outpatient 11,174 12,342 34,315 36,899
------ ------ ------- -------
Total $48,427 $46,503 $144,032 $138,975
Average Number of Programs
Inpatient 147 133 141 135
Outpatient 41 48 42 49
--- -- --- ---
Total 188 181 183 184
Contract Therapy
- ----------------
Operating Revenues (in thousands) $42,895 $33,607 $124,677 $ 97,447
Average Number of Locations 592 473 567 453
Average Revenue per Location $72,452 $71,094 $219,907 $215,113
Other Operations
- ----------------
Operating revenues (in thousands) $ 1,955 -- $ 3,353 --
17 of 28
REHABCARE GROUP, INC.
Three Months Ended September 30, 2004 Compared to Three Months Ended September
- --------------------------------------------------------------------------------
30, 2003
- --------
Operating Revenues
Operating revenues during the third quarter of 2004 decreased by $41.7
million, or 30.9%, to $93.3 million compared to $135.0 million in the third
quarter of 2003. The revenue decline was primarily due to the sale of the
healthcare staffing division, which had revenues of $55.2 million in the third
quarter of 2003, on February 2, 2004. Revenues for hospital rehabilitation
services and contract therapy increased 4.1% and 27.6%, respectively in the
third quarter of 2004 compared to the third quarter of 2003.
Hospital rehabilitation services revenue increased by 4.1% from $46.5
million in the third quarter of 2003 to $48.4 million in the third quarter of
2004. The revenue increase of $1.9 million was mostly attributable to the March
1, 2004 acquisition of VitalCare, which contributed revenues of approximately
$3.4 million in the third quarter of 2004, partially offset by a lower number of
continuing same store units. The average number of locations managed by the
division, including those added by the acquisition of VitalCare, increased 3.9%
from 181 in the third quarter of 2003 to 188 in the third quarter of 2004. The
VitalCare acquisition originally added 24 units, however 2 of those units have
since closed as a result of the host hospitals ceasing their operations due to
the deteriorating healthcare environment in the state of California. The average
revenue per location in the inpatient business decreased 1.1% year-over-year
from $256,700 to $253,900. This decline is primarily attributable to the
addition of smaller average size VitalCare units, partially offset by a 5.1%
increase in same store discharges as a result of more effective community
education and awareness. Revenues from our outpatient business declined 9.5%
year-over-year as a result of both a lower same store volumes and a reduced
number of locations, primarily driven by increased competition from physician
practices and the closure of certain smaller, less profitable locations.
Contract therapy revenue increased by 27.6% from $33.6 million in the third
quarter of 2003 to $42.9 million in the third quarter of 2004. While a portion
of the revenue increase, $2.9 million, is attributable to the acquisition of CPR
Therapies, LLC in the first quarter of 2004, the division's business development
sales efforts were the driving factor behind the revenue increase. The average
number of contract therapy locations managed by the division during the quarter
increased 25.2% from 473 in the third quarter of 2003 to 592 in the third
quarter of 2004. The average revenue per location increased 1.9% year-over-year
from approximately $71,100 to $72,500 per location. The division realized strong
same store growth for the periods being compared; however, the termination of
several large, mature programs in the second quarter and the smaller average
size of the sixty CPR Therapies facilities purchased partially offset this
growth.
Cost and Expenses
The ratios of operating expenses and selling, general and administrative
expenses as a percentage of revenues were significantly affected by the sale of
our healthcare staffing division on February 2, 2004. Historically, the
healthcare staffing division's operating and selling, general and administrative
expenses as a percentage of revenues were higher than our other divisions. As a
result, with the sale of that division, we experienced improvements in these
ratios on a year-over-year basis with the ratio of operating expenses to
revenues improving from 76.7% in the third quarter of 2003 to 71.4% in the third
quarter of 2004 and the ratio of selling, general and administrative expenses as
a percentage of revenues improving from 16.6% in the third quarter of 2003 to
14.8% in the third quarter of 2004. These improvements were achieved despite the
fact that corporate selling, general and administrative expenses were absorbed
over a smaller revenue base during the third quarter of 2004. Depreciation and
amortization expense remained flat at $2.1 million in both the third quarter of
2004 and 2003 as lower depreciation and amortization resulting from the sale of
the healthcare staffing division was offset by increased amortization on
18 of 28
REHABCARE GROUP, INC.
Three Months Ended September 30, 2004 Compared to Three Months Ended September
- --------------------------------------------------------------------------------
30, 2003 (Continued)
- --------------------
intangible assets relating to the acquisitions of CPR Therapies and VitalCare.
Corporate selling, general and administrative expenses decreased
approximately $0.4 million to $6.2 million in the third quarter of 2004 from
$6.6 million in the third quarter of 2003. This reduction was the result of
restructuring actions initiated during the third quarter of 2003 and the first
quarter of 2004 to streamline and better align our corporate support activities
with our operating activities. We have not further reduced these costs as it is
our intention to grow our company to a substantially larger size, and some of
the remaining infrastructure will be needed to manage that growth. As these
growth plans come to fruition, we expect to re-deploy some of these costs. In
the interim, as a result of selling our healthcare staffing division, a number
of fixed costs that had previously been allocated to our three divisions are now
being allocated between the remaining two divisions. For the hospital
rehabilitation services division, corporate selling, general and administrative
expenses increased from $2.2 million to $3.0 million, or as a percentage of
operating revenues from 4.7% to 6.2%. In contract therapy, these costs increased
from $2.1 million to $3.1 million, or as a percentage of operating revenues from
6.2% to 7.3%.
Total hospital rehabilitation services costs and expenses increased 5.9%
from $37.9 million in the third quarter of 2003 to $40.1 million in the third
quarter of 2004. As a percentage of net revenues, the division's direct
operating expenses decreased from 66.1% of net revenues to 65.5% of net revenues
year-over-year. The improvement in this ratio is primarily due to lower direct
operating expenses at the VitalCare units and to an increase in management only
contracts versus full staffing agreements. Division selling, general and
administrative costs increased as a percentage of revenues from 7.9% in the
third quarter of 2003 to 8.2% in the third quarter of 2004 primarily as a result
of increased spending on business development activities. Depreciation and
amortization expense as a percentage of operating revenues increased slightly
from 2.7% in the third quarter of 2003 compared to 2.8% in the third quarter of
2004 as amortization expense increased for certain intangible assets associated
with the acquisition of VitalCare. This increase was partially offset by lower
allocated software amortization expense. The net effect of the revenue growth,
relatively flat overall costs at the divisional level and the allocation of
additional corporate overhead from the third quarter of 2003 to the third
quarter of 2004 was a $0.3 million decrease in hospital rehabilitation service's
operating earnings (earnings before interest and income taxes) from $8.6 million
to $8.3 million.
Total contract therapy costs and expenses increased 24.2% from $32.7
million in the third quarter of 2003 to $40.6 million in the third quarter of
2004, which was due primarily to the increase in direct operating expenses
resulting from the increased number of contract therapy locations being managed
by the division. As a percentage of net revenues, the division's direct
operating expenses decreased from 80.9% of net revenues to 78.0% of net revenues
year-over-year. These decreased costs were brought about by a reduced
utilization of higher cost contract labor and therapist productivity
improvements. In addition, results from the third quarter of 2003 were
negatively impacted by lower productivity experienced during the division's
complex computer conversion. Contract therapy has continued to leverage its
division selling, general and administrative costs, which decreased as a
percentage of revenues from 9.2% in the third quarter of 2003 to 7.5% in the
third quarter of 2004 as the division was able to continue increasing revenues
at a rate faster than it has increased its selling, general and administrative
expenses. Depreciation and amortization expense as a percentage of operating
revenues increased year-over-year from 1.0% to 1.7%. The increased expense is
due to the amortization of the division's proprietary information system
implemented in the second half of 2003, and the amortization related to certain
intangible assets associated with the acquisition of CPR Therapies. The net
19 of 28
REHABCARE GROUP, INC.
Three Months Ended September 30, 2004 Compared to Three Months Ended September
- --------------------------------------------------------------------------------
30, 2003 (Continued)
- --------------------
effect of the revenue growth, overall cost control improvements at the
divisional level and the allocation of additional corporate overhead was a $1.4
million increase in contract therapy's operating earnings from the third quarter
of 2003 to the third quarter of 2004 (earnings before interest and income taxes)
from $0.9 million to $2.3 million.
Non-operating Items
Interest income increased marginally in the third quarter of 2004 versus
the third quarter of 2003 as a result of higher average cash and investment
balances.
Interest expense is comprised of the commitment fees paid on the unused
portion of our line of credit, letter of credit fees and interest expense on the
subordinated notes issued in connection with the acquisitions of CPR Therapies
and VitalCare. Interest expense in the third quarter of 2004 was $0.3 million,
an increase of $0.1 million over the third quarter of 2003. This increase was
primarily the result of interest related to the aforementioned subordinated
notes and higher outstanding letters of credit. We had no outstanding balance
against our line of credit as of September 30, 2004 or September 30, 2003.
Earnings before income taxes and equity in net loss of affiliate increased
$5.0 million or 90.5% to $10.5 million in the third quarter of 2004 from $5.5
million in the third quarter of 2003. The provision for income taxes was $4.4
million in the third quarter of 2004 compared to $2.2 million in the third
quarter of 2003, reflecting effective income tax rates of approximately 41.5%
and 40.0%, respectively. The effective tax rate increase was primarily the
result of non-deductible goodwill associated with the sale of the staffing
division in February 2004.
In connection with the sale of the staffing division to InteliStaf
Holdings, Inc., we received a 25% equity interest in InteliStaf. We account for
this investment using the equity method. For the third quarter of 2004, our
share of InteliStaf's after tax net loss was approximately $0.1 million.
InteliStaf's results, particularly operating revenues, have been adversely
impacted by the continuing slump in the healthcare staffing industry.
Net earnings in the third quarter of 2004 increased to $6.1 million
compared to $3.3 million in the year ago period. Our diluted net earnings per
share increased by 80.0% from $0.20 in the third quarter of 2003 to $0.36 in the
third quarter of 2004.
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
2003
- ----
Operating Revenues
Operating revenues during the first nine months of 2004 decreased by $121.1
million, or 29.6%, to $288.7 million compared to $409.8 million in the first
nine months of 2003. The revenue decline was primarily due to the sale of the
healthcare staffing division, which had revenues of $174.5 million during the
first nine months of 2003 compared to $16.7 million in the first nine months of
2004, on February 2, 2004. Revenues for hospital rehabilitation services and
contract therapy increased 3.6% and 27.9%, respectively for the first nine
months of 2004 compared to the first nine months of 2003.
20 of 28
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
2003 (Continued)
- ----------------
Hospital rehabilitation services revenue increased by 3.6% from $139.0
million in the nine months ended September 30, 2003 to $144.0 million in the
nine months ended September 30, 2004. The acquisition of VitalCare in the first
quarter of 2004 contributed $7.8 million to the revenue increase. This increase
and an increase in average revenue per location were offset by a decline in the
average number of units, excluding those added by the VitalCare acquisition,
operated in the first nine months of 2004. The average number of outpatient
units managed in the first nine months of 2004 declined 14.3% from the same
period in 2003. This decline was the result of closures of certain smaller, less
profitable units and from greater competition from physician practices. Overall,
the average number of hospital rehabilitation services locations managed by the
division decreased 0.5% from 184 in the nine months ended September 30, 2003 to
183 in the nine months ended September 30, 2004. The average revenue per
location in the inpatient business increased 3.1% year-over-year from $756,000
to $779,200 per location. The average revenue per location in the outpatient
business increased 8.3% year-over-year from $750,900 to $812,800 per location.
The increase in inpatient revenue per location was primarily due to a 7.1%
increase in same store discharges as a result of more effective community
education and awareness. The increase in outpatient revenue per location was
primarily due to the closure of certain smaller, less profitable units.
Contract therapy revenue increased by 27.9% from $97.4 million in the nine
months ended September 30, 2003 to $124.7 million in the nine months ended
September 30, 2004. While a portion of the revenue increase, $7.2 million, is
attributable to the acquisition of CPR Therapies, LLC in the first quarter of
2004, the division's business development sales efforts were the driving factor
behind the revenue increase. The average number of contract therapy locations
managed by the division during the period increased 25.2% from 453 in the nine
months ended September 30, 2003 to 567 in the nine months ended September 30,
2004. The average revenue per location increased 2.2% year-over-year from
$215,100 to $219,900 per location. This increase was the result of strong same
store growth for the periods being compared; however, some of this growth was
offset by the termination of several large, mature programs in the second
quarter of 2004 and the smaller average size of the sixty CPR Therapies
facilities purchased in February of 2004.
Cost and Expenses
The ratios of operating expenses and selling, general and administrative
expenses as a percentage of revenues were significantly affected by the sale of
our healthcare staffing division on February 2, 2004. Historically, the
healthcare staffing division's operating and selling, general and administrative
expenses as a percentage of revenues were higher than our other divisions. As a
result, with the sale of that division, we experienced improvements in these
ratios on a year-over-year basis with the ratio of operating expenses to
revenues improving from 75.8% in the first nine months of 2003 to 71.8% in the
first nine months of 2004 and the ratio of selling, general and administrative
expenses as a percentage of revenues improving from 17.4% in the first nine
months of 2003 to 15.2% in the first nine months of 2004. These improvements
were achieved despite the fact that corporate selling, general and
administrative expenses were absorbed over a smaller revenue base during the
first nine months of 2004. Depreciation and amortization expense decreased $0.5
million to $5.9 million in the first nine months of 2004 versus $6.4 million in
the year ago period, as lower depreciation and amortization resulting from the
sale of the healthcare staffing division was partially offset by increased
amortization on intangible assets relating to the acquisitions of CPR Therapies
and VitalCare.
21 of 28
REHABCARE GROUP, INC.
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
2003 (Continued)
- ----------------
Corporate selling, general and administrative expenses decreased
approximately $1.5 million to $18.8 million in the first nine months of 2004
from $20.3 million in the first nine months of 2003. This reduction was the
result of restructuring actions taken in the third quarter of 2003 and the first
quarter of 2004 to streamline and better align our corporate support activities
with our operating activities. We have not further reduced these costs as it is
our intention to grow our company to a substantially larger size, and some of
the remaining infrastructure will be needed to manage that growth. As these
growth plans come to fruition, we expect to re-deploy some of these costs. In
the interim, as a result of selling our healthcare staffing division, a number
of fixed costs that had previously been allocated to our three divisions are now
being allocated between the remaining two divisions. For the hospital
rehabilitation services division, corporate selling, general and administrative
expenses increased from $6.5 million to $8.5 million, or as a percentage of
operating revenues from 4.7% to 5.9%. In contract therapy, these costs increased
from $6.0 million to $9.2 million, or as a percentage of operating revenues from
6.2% to 7.4%.
Total hospital rehabilitation services costs and expenses increased 3.0%
from $115.3 million in the nine months ended September 30, 2003 to $118.8
million in the nine months ended September 30, 2004. As a percentage of net
revenues, the division's direct operating expenses decreased from 66.7% of net
revenues to 65.6% of net revenues year-over-year. The improvement in this ratio
is primarily due to lower direct operating expenses at the VitalCare units and
to an increase in management only contracts versus full staffing agreements,
partially offset by an increase in our provision for doubtful accounts in the
first nine months of 2004 as a result of our normal assessment of payment risk.
Hospital rehabilitation services has continued to leverage its division selling,
general and administrative costs, which decreased as a percentage of revenues
from 8.7% in the nine months ended September 30, 2003 to 8.4% in the nine months
ended September 30, 2004. The savings in selling, general and administrative
expenses was primarily the result of consolidating and restructuring the
inpatient and outpatient division specific overhead activities. Depreciation and
amortization expense as a percentage of operating revenues declined
year-over-year from 2.9% to 2.6%. The decrease was primarily due to a decrease
in the allocation of software amortization to the division partially offset by
an increase in amortization of certain intangible assets associated with the
acquisition of VitalCare. The net effect of the revenue growth, overall cost
control improvements at the divisional level and the allocation of additional
corporate overhead from the nine months ended September 30, 2003 to the nine
months ended September 30, 2004 was a $1.5 million increase in hospital
rehabilitation service's operating earnings (earnings before interest and income
taxes) from $23.7 million to $25.2 million.
Total contract therapy costs and expenses increased 26.9% from $93.0
million in the nine months ended September 30, 2003 to $118.0 million in the
nine months ended September 30, 2004, which was due primarily to the increase in
direct operating expenses resulting from the increased number of contract
therapy locations being managed by the division. As a percentage of net
revenues, the division's direct operating expenses decreased from 79.0% of net
revenues to 77.7% of net revenues year-over-year. These decreased costs were
brought about by therapist productivity improvements and a reduced utilization
of higher cost contract labor; however, these improvements were partially offset
by an increase in our provision for doubtful accounts in 2004 to mitigate some
of the risk associated with a few specific accounts in our receivables
portfolio. Results for the nine months ended September 30, 2003 were negatively
impacted by lower productivity experienced during the division's complex
computer conversion in the third quarter of 2003. Contract therapy has continued
to leverage its division selling, general and administrative costs, which
decreased as a percentage of revenues from 9.2% in the nine months ended
22 of 28
REHABCARE GROUP, INC.
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
2003 (Continued)
- ----------------
September 30, 2003 to 7.8% in the nine months ended September 30, 2004 as the
division was able to continue increasing revenues at a rate faster than it has
increased its selling, general and administrative expenses. Depreciation and
amortization expense as a percentage of operating revenues increased
year-over-year from 1.0% to 1.7%. The increased expense is due to the
amortization of the division's proprietary information system implemented in the
second half of 2003, and the amortization related to certain intangible assets
associated with the acquisition of CPR Therapies. The net effect of the revenue
growth, overall cost control improvements at the divisional level and the
allocation of additional corporate overhead from the nine months ended September
30, 2003 to the nine months ended September 30, 2004 was a $2.2 million increase
in contract therapy's operating earnings (earnings before interest and income
taxes) from $4.5 million to $6.7 million.
During the first quarter of 2004, in connection with the sale of the
healthcare staffing division, we initiated a series of restructuring activities
to reduce the cost of corporate overhead that had previously been absorbed by
that division. These activities included the elimination of approximately 40
positions, the exiting of a portion of the leased office space at our corporate
headquarters and the write-off of certain leasehold improvements associated with
the office space consolidation. As a result of the actions, we recorded a
pre-tax restructuring charge in the first quarter of 2004 in the amount of
approximately $1.7 million. This charge was recorded as a separate component of
operating expenses.
At December 31, 2003, the assets and liabilities of our healthcare staffing
division were reported as assets and liabilities held for sale and were reported
at their estimated fair market value less estimated costs to sell. Upon
consummating the sale of this business on February 2, 2004, we recorded a gain
of $485,000 as a result of adjusting the estimated costs to sell for then
current information, recording a liability for the estimated fair market value
of the indemnification provided to InteliStaf in accordance with the terms of
the purchase and sale agreement and changing the underlying asset and liability
balances between December 31, 2003 and February 2, 2004.
Non-operating Items
Interest income increased marginally in the first nine months of 2004
versus the first nine months of 2003 primarily as a result of higher average
cash and investment balances.
Interest expense is comprised of the commitment fees paid on the unused
portion of our line of credit, letter of credit fees and interest expense on the
subordinated notes issued in connection with the acquisitions of CPR Therapies
and VitalCare. Interest expense in the first nine months of 2004 was $0.8
million, an increase of $0.3 million over the first nine months of 2003. This
increase was primarily the result of interest related to the aforementioned
subordinated notes and higher outstanding letters of credit. We had no
outstanding balance against our line of credit as of September 30, 2004 or
September 30, 2003.
Earnings before income taxes and equity in net loss of affiliate increased
$10.2 million or 51.9% to $29.8 million in the first nine months of 2004 from
$19.6 million in the year ago period. The provision for income taxes was $12.4
million in the first nine months of 2004 compared to $7.8 million in the first
nine months of 2003, reflecting effective income tax rates of approximately
41.5% and 39.8%, respectively. The effective tax rate increase was primarily the
result of non-deductible goodwill associated with the sale of the staffing
division in February 2004.
23 of 28
REHABCARE GROUP, INC.
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
2003 (Continued)
- ----------------
In connection with the sale of the staffing division to InteliStaf on
February 2, 2004, we received in return a 25% equity interest in InteliStaf. We
account for this investment using the equity method. For the first nine months
of 2004, our share of InteliStaf's after tax net loss was approximately $0.6
million. InteliStaf's results, particularly operating revenues, have been
adversely impacted by the continuing slump in the healthcare staffing industry.
In addition, their results were adversely impacted by costs to integrate and
transition the acquired StarMed business activities.
Net earnings in the first nine months of 2004 increased to $16.9 million
compared to $11.8 million in the year ago period. Our diluted net earnings per
share increased by 38.9% from $0.72 in the first nine months of 2003 to $1.00 in
the first nine months of 2004.
Liquidity and Capital Resources
As of September 30, 2004, we had $43.9 million in cash and cash equivalents
and $3.1 million of restricted cash, and a current ratio, the amount of current
assets divided by current liabilities, of 2.49 to 1. Working capital decreased
by $1.3 million to $75.7 million as of September 30, 2004 as compared to $77.0
million as of December 31, 2003 due primarily to an increase in the current
portion of long-term debt attributable to the acquisitions of CPR and VitalCare,
accrued indemnification expenses for the sale of the staffing division, accrued
acquisition costs for CPR Therapies and costs accrued for restructuring which
was partially offset by an increase in cash and cash equivalents and trade
receivables. Net accounts receivable were $69.3 million at September 30, 2004,
compared to $62.7 million at December 31, 2003. The number of days' average net
revenue in net receivables was 67.7 and 72.0 (adjusted to exclude receivables
related to the staffing division) at September 30, 2004 and December 31, 2003,
respectively. Deferred tax assets decreased approximately $6.5 million primarily
due to the sale of the staffing division, which created a significant current
income tax benefit for the tax loss on the sale.
Operating cash flows constitute our primary source of liquidity and
historically have been sufficient to fund working capital, capital expenditures,
internal business expansion and debt service requirements. We expect to meet our
future working capital, capital expenditures, internal and external business
expansion and debt service requirements from a combination of internal sources
and outside financing. We had a $125.0 million revolving line of credit with no
balance outstanding as of September 30, 2004.
On October 12, 2004, we entered into an Amended and Restated Credit
Agreement with Bank of America, N.A., U.S. Bank, National Association, Harris
Trust and Savings Bank, National City Bank and SunTrust Bank, as participating
banks in the lending group. The Amended and Restated Credit Agreement is an
expandable $90 million, five-year revolving credit facility that replaces our
former $125 million revolving line of credit, dated as of August 29, 2000, which
was scheduled to expire in August 2005. The new revolving credit facility is
expandable to $125 million upon our notice to the lending group, subject to our
continued compliance with the terms of the Amended and Restated Credit
Agreement. The new credit facility features reduced bank fees and interest rate
spreads and significantly enhances our financial flexibility.
24 of 28
REHABCARE GROUP, INC.
We have approximately $10.0 million in letters of credit issued to
insurance carriers as collateral for reimbursement of claims. The letters of
credit reduce the amount we may borrow under the line of credit. We also have a
$4.2 million promissory note issued to our workers compensation carrier as
additional collateral. The promissory note is not recorded as a liability on the
balance sheet as it only becomes payable upon an event of default as defined in
the security agreement with the workers compensation carrier. Finally, as
additional collateral, we have a trust agreement with our professional and
general liability insurance carrier under which we have deposited $3.1 million
for their benefit in an escrow account. Our access to this cash is restricted
and the insurance carrier may only draw on these funds in the event of a default
as defined in the trust agreement.
As part of the purchases of CPR Therapies and VitalCare, we issued
long-term subordinated promissory notes to the respective selling parties. These
notes bear interest at rates ranging from 7%-8%. As of September 30, 2004,
approximately $4.2 million of these notes remained outstanding. In addition, as
part of our arrangement with Signature Healthcare Foundation, we extended a $2.0
million line of credit to Signature. At September 30, 2004, Signature had drawn
approximately $0.9 million against this line of credit.
Regulatory Update
On April 30, 2004, the Centers for Medicare and Medicaid Services announced
a final rule revising criteria for classifying hospitals as inpatient
rehabilitation facilities. We know this rule as the "modified 75% Rule." This
final rule became effective for cost reporting periods beginning on or after
July 1, 2004. The rule provides for a three-year transition period with
increasing percentages of the total patient population that will be required to
have one of the qualifying medical conditions. Commencing on July 1, 2004, the
annual percentage phase-in will be 50%, 60%, 65% and finally 75% after July 1,
2007, assuming no further regulatory action is taken. We are in the process of
analyzing the provisions of this new rule and the impact it will have on our
long-term financial results. For 2004, we expect the rule will have a minimal
impact on our financial results.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us 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. Our significant accounting policies,
including the use of estimates, were presented in the notes to consolidated
financial statements included in our 2003 Annual Report on Form 10-K, filed on
March 12, 2004.
Critical accounting policies are those that are considered most important
to the presentation of our financial condition and results of operations,
require management's most difficult, subjective and complex judgments, and
involve uncertainties. Our most critical accounting policies pertain to
allowance for doubtful accounts, excess cost over net assets acquired and other
intangible assets and health, workers compensation and professional liability
insurance accruals. Each of these critical accounting policies was discussed in
our 2003 Annual Report on Form 10-K in the Critical Accounting Policies and
Estimates section of "Item 7. - Management's Discussion and Analysis of
Financial Condition and Results of Operations." There were no significant
changes in the application of critical accounting policies during the first nine
months of 2004.
Item 3. - Quantitative and Qualitative Disclosures About Market Risks
- ---------------------------------------------------------------------
There have been no material changes in the reported market risks since the
filing of our Annual Report on Form 10-K for the year ended December 31, 2003.
25 of 28
REHABCARE GROUP, INC.
Item 4. - Controls and Procedures
- ---------------------------------
As of September 30, 2004, our Chief Executive Officer and Chief Financial
Officer have conducted an evaluation of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-14 (c) and 15d-14 (c) under the Securities Exchange Act of 1934, as
amended). Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures are effective in making known in a timely fashion material
information required to be filed in this report. There have been no significant
changes in internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Part II. - Other Information
- ----------------------------
Item 1. - Legal Proceedings
- ---------------------------
On September 30, 2004, the United States District Court for the Eastern
District of Missouri dismissed with prejudice a lawsuit against us and certain
of our former and current directors and officers that had alleged violations of
the federal securities laws. The appeal period for this decision has not yet
lapsed. The suit had been certified as a class action with the class consisting
of persons that purchased shares of our common stock between August 10, 2000 and
January 21, 2002. The case alleged weaknesses in the software systems selected
by our former StarMed Staffing subsidiary, and the purported negative effects of
such systems on our business operations.
In August 2002, a derivative lawsuit was filed in the Circuit Court of St.
Louis County, Missouri against us and certain of our former and current
directors. The complaint, which is based upon substantially the same facts as
were alleged in the federal securities class action, was filed on behalf of the
derivative plaintiff by a law firm that had earlier filed suit in the federal
case. We filed a motion to dismiss based primarily on the derivative plaintiff's
failure to make a pre-suit demand, which is pending. The federal court hearing
the securities law class action had stayed discovery in the derivative
proceeding until the federal court made its ruling on our motion to dismiss. We
have not been informed by the Circuit Court nor the derivative plaintiff as to
possible actions with respect to this case now that the federal securities class
action case has been dismissed with prejudice.
In July 2003, a civil action was filed under the qui tam provisions of the
False Claims Act in the United States District Court for the Eastern District of
Arkansas, seeking treble damages, civil penalties, back pay, and special damages
from us and Baxter County Regional Hospital. The allegations contained in the
suit, brought by a former independent contractor of ours and a former Baxter
physical therapist, relate to the proper clinical diagnoses for Medicare
reimbursement purposes of patients treated at the hospital's acute
rehabilitation unit, for which Baxter received reimbursement in excess of
$5,000,000. The original action was filed on August 21, 2000, under seal, and an
investigation by the United States Department of Justice resulted in a
department determination not to intervene. We and Baxter also initiated an
internal and external audit that concluded the allegations were unfounded and
that we and Baxter were in compliance with Medicare regulations. We have agreed
to indemnify Baxter for all fees and expenses on all counts except one, arising
out of the action. The court recently denied both parties motions to dismiss and
we have commenced discovery.
26 of 28
REHABCARE GROUP, INC.
Item 1 - Legal Proceedings (Continued)
- --------------------------------------
On May 7, 2004 we filed a civil action against The Queens Medical Center
("Queens"), in the U.S. District Court, District for Hawaii, for breach of
contract, including past due service fees in the amount of approximately
$300,000. On May 29, 2004, Queens filed an answer to our complaint and a
counterclaim against us, alleging breach of contract and seeking indemnification
for amounts of alleged incorrect billings submitted by the skilled nursing unit
we managed, additional management fees already paid to us and an estimate of
their attorney's fees, with respect to the counterclaim. The parties are engaged
in settlement discussions, and, as a first step in the discussions, have reached
an agreement in principle pursuant to which an independent third party will
conduct an audit of a representative sample of medical records to determine if
there were any incorrect billings.
The Wage and Hour Division of the United States Department of Labor has
been conducting an investigation of our former StarMed Staffing subsidiary. The
investigation is focused on minimum wage and overtime compensation of employees
who worked as on-call coordinators. Recently, the local office conducting the
investigation requested payroll information concerning office and field staff
employees (other than staffing coordinators and other exempt personnel) who
worked on-call shifts in addition to their regular duties. We and the Department
of Labor have reached an agreement in principle with respect to the payment by
us of approximately $140,000 in the aggregate to office and field staff
employees for overtime wages for on-call shifts worked by these employees.
Several federal lawsuits have been filed by certain on-call, recruiting and
staffing coordinators seeking overtime compensation and related damages. These
individuals were employed by our former staffing division. The individuals seek
to bring a collective or class action on behalf of all similarly situated
persons. Two of these cases have been consolidated in the United States District
Court for the Central District of California. Motions to proceed as a collective
or class action have been filed but have not yet been heard.
In addition to the above matters, we are a party to a number of other
claims and lawsuits. While these actions are being contested, the outcome of
individual matters is not predictable with assurance. From time to time, and
depending upon the particular facts and circumstances, we may be subject to
indemnification obligations under our contracts with our hospital and healthcare
facility clients relating to these matters. We do not believe that any liability
resulting from any of the above matters, after taking into consideration our
insurance coverage and amounts already provided for, will have a material
adverse effect on our consolidated financial position, cash flows or liquidity.
However, such matters could have a material effect on results of operations in a
particular quarter or fiscal year as they develop or as new issues are
identified.
Item 6 - Exhibits
- -----------------
See exhibit index
27 of 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REHABCARE GROUP, INC.
November 8, 2004
By: /s/ Vincent L. Germanese
---------------------------
Vincent L. Germanese
Senior Vice President,
Chief Financial Officer
and Secretary
28 of 28
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1, dated May 9, 1991
[Registration No.
33-40467], and incorporated herein by reference)
3.2 Certificate of Amendment of Certificate of Incorporation (filed as Exhibit
3.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1995 and incorporated herein by reference)
3.3 Amended and Restated Bylaws (filed as Exhibit 3.3 to the Registrant;
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 and
incorporated herein by reference)
4.1 Rights Agreement, dated August 28, 2002, by and between the Registrant and
Computershare Trust Company, Inc. (filed as Exhibit 1 to the Registrant's
Registration Statement on Form 8-A filed September 5, 2002 and
incorporated herein by reference)
10.1 Amended and Restated Credit Agreement, dated as of October 12, 2004, by
and among RehabCare Group, Inc., as borrower, certain subsidiaries and
affiliates of the borrower, as guarantors, and Bank of America, N.A., U.S.
Bank, National Association, Harris Trust and Savings Bank, National City
Bank and SunTrust Bank, as participating banks in the lending group.
10.2 Pledge Agreement, dated October 12, 2004, by and among RehabCare Group,
Inc. and Subsidiaries, as pledgors, and Bank of America, N.A., as
Administrative Agent.
10.3 Security Agreement, dated as of October 12, 2004, by and among RehabCare
Group, Inc. and Subsidiaries, as grantors, and Bank of America, N.A., as
Administrative Agent.
31.1 Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934, as amended
31.2 Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934, as amended
32.1 Certification of periodic financial report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section 1350
32.2 Certification of periodic financial report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section 1350
- -------------------------
================================================================================
EXHIBIT 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 12, 2004
among
REHABCARE GROUP, INC.,
as Borrower,
CERTAIN SUBSIDIARIES AND AFFILIATES OF THE BORROWER,
as Guarantors,
THE LENDERS NAMED HEREIN,
HARRIS TRUST AND SAVINGS BANK,
as Syndication Agent,
U.S. BANK NATIONAL ASSOCIATION,
as Documentation Agent
and
BANK OF AMERICA, N.A.,
as Administrative Agent
and
BANC OF AMERICA SECURITIES LLC,
as Sole Lead Arranger and Sole Book Manager
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 12, 2004
(the "Credit Agreement"), is by and among REHABCARE GROUP, INC., a Delaware
corporation (the "Borrower"), the Subsidiaries and Affiliates of the Borrower
identified as Guarantors on the signature pages hereto and such other
Subsidiaries and Affiliates of the Borrower as may from time to time become
Guarantors hereunder in accordance with the provisions hereof (the
"Guarantors"), the lenders named herein and such other lenders as may become a
party hereto (the "Lenders"), HARRIS TRUST AND SAVINGS BANK, as Syndication
Agent, U.S. BANK NATIONAL ASSOCIATION, as Documentation Agent, and BANK OF
AMERICA, N.A., as Administrative Agent for the Lenders (in such capacity, the
"Administrative Agent").
W I T N E S S E T H
WHEREAS, the Borrower requested, and the Lenders agreed pursuant to the
terms of that certain credit agreement, dated as of August 29, 2000 (as amended,
modified and supplemented, the "Existing Credit Agreement"), to provide $125
million in credit facilities;
WHEREAS, the Borrower has requested certain modifications to the credit
facilities, including, among other things, provision of a replacement five-year
revolving credit facility in an amount up to $90 million;
WHEREAS, the Lenders have agreed to make the requested credit facilities
available to the Borrower on the terms and conditions hereinafter set forth; and
WHEREAS, this Credit Agreement is given in amendment to, restatement of and
substitution for the Existing Credit Agreement.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
-----------
1.1 Definitions.
-----------
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Acquisition", by any Person, means the purchase or acquisition by
-----------
such Person of any Capital Stock of another Person (other than a member of
the Consolidated Group) or all or any substantial portion of the Property
(other than Capital Stock) of another Person (other than a member of the
Consolidated Group), whether or not involving a merger or consolidation
with such other Person.
1
"Adjusted Base Rate" means the Base Rate plus the Applicable
------------------ ----
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the Applicable
------------------------ ----
Percentage.
"Administrative Agent" shall have the meaning assigned to such term in the
--------------------
heading hereof, together with any successors or assigns.
"Administrative Agent's Engagement Letter" means that certain letter
----------------------------------------
agreement, dated as of July 8, 2004, between the Administrative Agent and the
Borrower, as amended, modified, restated or supplemented from time to time.
"Administrative Agent's Office" means the Administrative Agent's address
-----------------------------
and, as appropriate, account as set forth on Schedule 11.02, or such other
--------------
address or account as the Administrative Agent may from time to time notify the
Borrower and the Lenders.
"Administrative Questionnaire" means an administrative questionnaire for
----------------------------
the Lenders in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to any Person, another Person that
---------
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agent-Related Persons" means the Administrative Agent, together with its
---------------------
Affiliates (including, in the case of Bank of America in its capacity as the
Administrative Agent, Banc of America Securities LLC), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agency Services Address" means the notice address for the Administrative
-----------------------
Agent set forth in Section 11.1 or such other address as may be identified by
written notice from the Administrative Agent to the Borrower.
"Aggregate Revolving Committed Amount" shall have the meaning provided
------------------------------------
such term in Section 2.1(a).
"Applicable Percentage" means for any day, the rate per annum set forth
---------------------
below opposite the applicable Consolidated Total Leverage Ratio then in effect,
it being understood that the Applicable Percentage for (i) Base Rate Loans shall
be the percentage set forth under the column "Base Rate Margin", (ii) Eurodollar
Rate Loans shall be the percentage set forth under the column "Eurodollar Margin
and Letter of Credit Fee", (iii) the Letter of Credit Fee shall be the
percentage set forth under the column "Eurodollar Margin and Letter of Credit
Fee", and (iv) the Commitment Fee shall be the percentage set forth under the
column "Commitment Fee":
Eurodollar
Margin and
Pricing Consolidated Total Letter of Credit Base Rate Commitment
Level Leverage Ratio Fee Margin Fee
------- ------------------ ---------------- ---------- ----------
I >2.50:1.0 2.25% 1.25% 0.50%
II >2.00:1.0 but <2.50:1.0 2.00% 1.00% 0.375%
III >1.50:1.0 but <2.00:1.0 1.75% 0.75% 0.375%
IV <1.50:1.0 1.50% 0.50% 0.375%
2
The Applicable Percentage shall be determined and adjusted quarterly on the date
(each a "Rate Determination Date") five (5) Business Days after (A) the date by
which each annual and quarterly compliance certificates and related financial
statements and information are required in accordance with the provisions of
Sections 7.1(a), (b) and (c), as appropriate, and (B) the date on which any
Permitted Acquisition is consummated; provided that notwithstanding the
foregoing, in the event an annual or quarterly compliance certificate and
related financial statements and information are not delivered timely to the
Agency Services Address by the date required by Section 7.1(a), (b) or (c), as
appropriate, the Applicable Percentages shall be based on pricing level I until
such time as an appropriate compliance certificate and related financial
statements and information are delivered, whereupon the applicable pricing level
shall be adjusted based on the information contained in such compliance
certificate and related financial statements and information. Subject to the
qualifications set forth above, each Applicable Percentage shall be effective
from a Rate Determination Date until the next Rate Determination Date. The
Administrative Agent shall determine the appropriate Applicable Percentages in
the pricing matrix promptly upon receipt of the quarterly or annual compliance
certificate and related financial information and shall promptly notify the
Borrower and the Lenders of any change thereof. Such determinations by the
Administrative Agent shall be conclusive absent manifest error. Adjustments in
the Applicable Percentages shall be effective as to existing Extensions of
Credit as well as new Extensions of Credit made thereafter.
"Approved Fund" means any Fund that is administered or managed by (a) a
-------------
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.
"Asset Disposition" means (i) the sale, lease or other disposition of any
-----------------
Property by any member of the Consolidated Group (including the Capital Stock of
a Subsidiary), other than (A) the sale of inventory in the ordinary course of
business, (B) the sale, lease or other disposition of machinery and equipment no
longer used or useful in the conduct of business and (C) a sale, lease, transfer
or disposition of Property to a Credit Party, and (ii) receipt by any member of
the Consolidated Group of any cash insurance proceeds or condemnation award
payable by reason of theft, loss, physical destruction or damage, taking or
similar event with respect to any of its Property.
"Assignment and Assumption" means an assignment and assumption entered
-------------------------
into by a Lender and an Eligible Assignee (with the consent of any party whose
consent is required by Section 11.3 and accepted by the Administrative Agent, in
substantially the form of Schedule 11.3(b) or any other form approved by the
Administrative Agent.
"Bank of America" means Bank of America, N.A., and its successors.
---------------
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to time.
"Bankruptcy Event" means, with respect to any Person, the occurrence of
----------------
any of the following with respect to such Person: (i) a court or governmental
agency having jurisdiction in the premises shall enter a decree or order for
relief in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its Property
or ordering the winding up or liquidation of its affairs; or (ii) there shall be
commenced against such Person an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such Person
or for any substantial part of its Property or for the winding up or liquidation
of its affairs, and such involuntary case or other case, proceeding or other
3
action shall remain undismissed, undischarged or unbonded for a period of sixty
(60) consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its Property
or make any general assignment for the benefit of creditors; or (iv) such Person
shall be unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.
"Base Rate" means, for any day, the rate per annum equal to the higher of
---------
(a) the Federal Funds Rate for such day plus one-half of one percent (0.50%) and
(b) the Prime Rate for such day. Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate determined by
--------------
reference to the Base Rate.
"Borrower" means RehabCare Group, Inc., a Delaware corporation, as
--------
referenced in the opening paragraph, its successors and permitted assigns.
"Borrowing" means (a) a borrowing consisting of simultaneous Loans of the
---------
same Type and, in the case of Eurodollar Rate Loans, having the same Interest
Period, or (b) a borrowing of Swingline Loans, as appropriate.
"Business Day" means a day other than a Saturday, Sunday or other day on
------------
which commercial banks in Dallas, Texas, Charlotte, North Carolina or New York,
New York are authorized or required by law to close, except that, when used in
connection with a Eurodollar Rate Loan, such day shall also be a day on which
dealings between banks are carried on in Dollar deposits in London, England.
"Capital Lease" means, as applied to any Person, any lease of any Property
-------------
by that Person as lessee which, in accordance with GAAP, is or should be
accounted for as a capital lease on the balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation, capital stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that confers on
a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Capital Expenditures" means, for any period without duplication, all
--------------------
expenditures (whether paid in cash or other consideration) that are or should be
included in additions to plant, property and equipment in accordance with GAAP;
provided, that Capital Expenditures shall not include, for purposes hereof, (a)
expenditures in connection with any Acquisitions and Investments permitted
hereunder or (b) expenditures of proceeds of insurance settlements, condemnation
awards and other settlements in respect of lost, destroyed, damaged or condemned
assets, equipment or other property to the extent such expenditures are made to
replace or repair such lost, destroyed, damaged or condemned assets, equipment
or property.
"Cash Equivalents" means (a) securities issued or directly and fully
----------------
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
4
in support thereof) having maturities of not more than twelve months from the
date of acquisition, (b) Dollar denominated time deposits and certificates of
deposit of (i) any Lender, (ii) any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million or (iii) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent thereof
(any such bank being an "Approved Bank"), in each case with maturities of not
more than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition, (d) repurchase agreements entered into by any
Person with a bank or trust company (including any of the Lenders) or recognized
securities dealer having capital and surplus in excess of $500 million for
direct obligations issued by or fully guaranteed by the United States in which
such Person shall have a perfected first priority security interest (subject to
no other Liens) and having, on the date of purchase thereof, a fair market value
of at least 100% of the amount of the repurchase obligations and (e)
Investments, classified in accordance with GAAP as current assets, in money
market investment programs registered under the Investment Company Act of 1940,
as amended, which are administered by reputable financial institutions having
capital of at least $500 million and the portfolios of which are limited to
Investments of the character described in the foregoing subdivisions (a) through
(d). For purposes hereof, the foregoing items in "Cash Equivalents" shall be
treated as such regardless of treatment under GAAP.
"Change in Law" means the occurrence, after the date of this Credit
-------------
Agreement, of any of the following: (a) the adoption or taking effect of any
law, rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, guideline
or directive (whether or not having the force of law) by any Governmental
Authority.
"Change of Control" means the occurrence of any of the following events:
-----------------
(i) any Person or two or more Persons acting in concert shall have acquired
beneficial ownership, directly or indirectly, of, or shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of or control
over, Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) representing (A) so long as the Borrower maintains a shareholder
rights plan pursuant to which the acquisition by any Person of 15% or more of
the Borrower's outstanding Capital Stock triggers provisions which would act to
significantly dilute the ownership interest of such Person (a "Shareholder
Rights Plan"), 50.1% or more of the combined voting power of all Voting Stock of
the Borrower and (B) at any time the Borrower does not maintain a Shareholder
Rights Plan, 35% or more of the combined voting power of all Voting Stock of the
Borrower or (ii) during any period of up to 24 consecutive months, commencing
after the Closing Date, individuals who at the beginning of such 24 month period
were directors of the Borrower (together with any new director whose election by
the Borrower's board of directors or whose nomination for election by the
Borrower's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors of the
Borrower then in office. As used herein, "beneficial ownership" shall have the
meaning provided in Rule 13d-3 of the SEC under the Securities Exchange Act.
"Closing Date" means the date hereof.
------------
"Collateral" means a collective reference to the collateral which is
----------
identified in, and at any time will be covered by, the Collateral Documents.
5
"Collateral Documents" means a collective reference to the Security
--------------------
Agreement, the Pledge Agreement and such other documents executed and delivered
in connection with the attachment and perfection of the Administrative Agent's
security interests and liens arising thereunder, including without limitation
UCC financing statements and patent and trademark filings.
"Commitment" means the Revolving Commitment, the LOC Commitment and the
----------
Swingline Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
--------------
3.5(a).
"Commitment Period" means the period from and including the Closing Date
-----------------
to but not including the earlier of (i) the Termination Date or (ii) the date on
which the Commitments terminate in accordance with the provisions of this Credit
Agreement.
"Committed Amount" means any of the Revolving Committed Amount, the LOC
----------------
Committed Amount and/or the Swingline Committed Amount.
"Compliance Certificate" means a certificate substantially in the form of
----------------------
Schedule 7.1(c).
"Consolidated Adjusted EBITDA" means, for any period for the Consolidated
----------------------------
Group, the sum of (i) Consolidated EBITDA, minus (ii) Capital Expenditures, in
each case determined on a consolidated basis in accordance with GAAP. Except as
otherwise expressly provided, the applicable period shall be the four
consecutive fiscal quarters ending as of the date of determination.
"Consolidated EBITDA" means, for any period for the Consolidated Group,
-------------------
the sum of (i) Consolidated Net Income, plus (ii) to the extent deducted in
determining net income, (A) Consolidated Interest Expense, (B) taxes, (C)
depreciation and amortization, (D) non-recurring, non-cash charges and (E)
non-cash charges in connection with Statement No. 123 (Accounting for
Stock-Based Compensation) of the Financial Accounting Standards Board, in each
case on a consolidated basis determined in accordance with GAAP. Except as
otherwise expressly provided, the applicable period shall be the four
consecutive fiscal quarters ending as of the date of determination.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
----------------------------------------
ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges.
"Consolidated Fixed Charges" means, for any period for the Consolidated
--------------------------
Group, the sum of (i) the cash portion of Consolidated Interest Expense, plus
(ii) current maturities of Funded Debt (including, for purposes hereof, current
scheduled reductions in funded commitments), plus (iii) an amount equal to ten
percent (10%) of Obligations outstanding hereunder on the date of determination,
plus (iv) taxes paid in cash, in each case on a consolidated basis determined in
accordance with GAAP. Except as otherwise expressly provided, the applicable
period shall be the four consecutive fiscal quarters ending as of the date of
determination.
"Consolidated Group" means the Borrower and its consolidated subsidiaries
------------------
as determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period for the Consolidated
-----------------------------
Group, all interest expense, including the amortization of debt discount and
premium, the interest component under Capital Leases and the implied interest
component under Securitization Transactions, in each case on a consolidated
basis determined in accordance with GAAP. Except as expressly provided
otherwise, the applicable period shall be the four consecutive fiscal quarters
ending as of the date of determination.
6
"Consolidated Net Income" means, for any period for the Consolidated
-----------------------
Group, net income (or loss) determined on a consolidated basis in accordance
with GAAP, but excluding for purposes of determining the Consolidated Senior
Leverage Ratio, the Consolidated Total Leverage Ratio and the Consolidated Fixed
Charge Coverage Ratio, any extraordinary gains or losses and related tax effects
thereon. Except as otherwise expressly provided, the applicable period shall be
the four consecutive fiscal quarters ending as of the date of determination.
"Consolidated Net Worth" means, at any time, stockholders' equity or net
----------------------
worth of the Borrower and its subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Consolidated Senior Funded Debt" means the sum of Consolidated Total
-------------------------------
Funded Debt minus Consolidated Subordinated Debt.
"Consolidated Senior Leverage Ratio" means, as of the last day of each
----------------------------------
fiscal quarter, the ratio of Consolidated Senior Funded Debt on such day to
Consolidated EBITDA for the period of four consecutive fiscal quarters ending as
of such day.
"Consolidated Subordinated Debt" means Subordinated Debt of the
------------------------------
Consolidated Group determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Funded Debt" means Funded Debt of the Consolidated
------------------------------
Group determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Leverage Ratio" means, as of the last day of each
---------------------------------
fiscal quarter, the ratio of Consolidated Total Funded Debt on such day to
Consolidated EBITDA for the period of four consecutive fiscal quarters ending as
of such day.
"Continue", "Continuation", and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 3.2 hereof of a Eurodollar Rate Loan from one
Interest Period to the next Interest Period.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any material agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control" means the possession, directly or indirectly, of the power to
-------
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto. Without
limiting the generality of the foregoing, a Person shall be deemed to be
Controlled by another Person if such other Person possesses, directly or
indirectly, power to vote 30% or more of the securities having ordinary voting
power for the election of directors, managing general partners or the
equivalent.
"Convert", "Conversion", and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 3.2 or Sections 3.7 through 3.12, inclusive, of a Base Rate
Loan into a Eurodollar Rate Loan.
"Credit Agreement" has the meaning provided in the opening paragraph
----------------
hereof, as the same may be amended and modified from time to time.
7
"Credit Documents" means, collectively, this Credit Agreement, the Notes,
----------------
the LOC Documents, the Collateral Documents, the Administrative Agent's
Engagement Letter, and all other related agreements and documents issued or
delivered hereunder or thereunder or pursuant hereto or thereto.
"Credit Party" means any of the Borrower and the Guarantors.
------------
"Debt Transaction" means, with respect to any member of the Consolidated
----------------
Group, any sale, issuance or placement of Funded Debt (including Subordinated
Debt), whether or not evidenced by promissory note or other written evidence of
indebtedness, except for Funded Debt permitted to be incurred under clauses (a)
through (f) and (h) though (j) of Section 8.1.
"Debtor Relief Laws" means the Bankruptcy Code, and all other liquidation,
------------------
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.
"Default" means any event, act or condition which with notice or lapse of
-------
time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a) has failed to
-----------------
make a Loan or purchase a Participation Interest required pursuant to the terms
of this Credit Agreement within one Business Day of when due, (b) other than as
set forth in (a) above, has failed to pay to the Administrative Agent or any
Lender an amount owed by such Lender pursuant to the terms of this Credit
Agreement within one Business Day of when due, unless such amount is subject to
a good faith dispute or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or with respect to which (or with respect to
any of the assets of which) a receiver, trustee or similar official has been
appointed.
"Default Rate" means an interest rate equal to (a) with respect to
------------
Obligations other than (i) Eurodollar Rate Loans, (ii) Letter of Credit Fees and
(iii) Quoted Rate Swingline Loans, the Base Rate plus the Applicable Percentage,
if any, applicable to such Loans plus 2% per annum; (b) with respect to
Eurodollar Rate Loans, the Eurodollar Rate plus the Applicable Percentage, if
any, applicable to such Loans plus 2% per annum; (c) with respect to Quoted Rate
Swingline Loans, the Quoted Rate plus the Applicable Percentage, if any,
applicable to such Loans plus 2% per annum and (d) with respect to Letter of
Credit Fees, a rate equal to the Applicable Percentage plus 2% per annum; in
each case to the fullest extent permitted by applicable Law.
"Dollars" and "$" means dollars in lawful currency of the United States.
------- -
"Domestic Subsidiary" means any Subsidiary which is incorporated or
-------------------
organized under the laws of any State of the United States or the District of
Columbia.
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c)
-----------------
an Approved Fund; and (d) any other Person (other than a natural person)
approved by (i) the Administrative Agent, the Issuing Lender and the Swingline
Lender, and (ii) unless an Event of Default has occurred and is continuing, the
Borrower (each such approval not to be unreasonably withheld or delayed);
provided that notwithstanding the foregoing, "Eligible Assignee" shall not
include the Borrower or any of the Borrower's Affiliates or Subsidiaries.
"Environmental Laws" means any and all lawful and applicable federal,
------------------
state, local and foreign statutes, laws, regulations, ordinances, rules,
8
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to the environment or to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern into the environment including ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
Materials of Environmental Concern.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower, any other Credit Party or any of
their respective Subsidiaries directly or indirectly resulting from or based
upon (a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.
"Equity Transaction" means, with respect to any member of the Consolidated
------------------
Group, any issuance of shares of its capital stock or other equity interest,
other than an issuance (i) to a member of the Consolidated Group, (ii) in
connection with a conversion of debt securities to equity, (iii) in connection
with exercise by a present or former employee, officer or director under a stock
incentive plan, stock option plan or other equity-based compensation plan or
arrangement, or (iv) of Capital Stock of the Borrower in connection with a
Permitted Acquisition.
"ERISA" means the Employee Retirement Income Security Act of 1974.
-----
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o)
of the Internal Revenue Code for purposes of provisions relating to Section 412
of the Internal Revenue Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
-----------
(b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition that would reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower or any ERISA Affiliate.
"Eurodollar Base Rate" has the meaning specified in the definition of
--------------------
Eurodollar Rate.
"Eurodollar Rate" means for any Interest Period with respect to a
---------------
Eurodollar Rate Loan, a rate per annum determined by the Administrative Agent
pursuant to the following formula:
9
Eurodollar Base Rate
--------------------
Eurodollar Rate = 1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Base Rate" means, for any Interest Period with respect to a
--------------------
Eurodollar Rate Loan, the rate per annum equal to the British Bankers
Association LIBOR Rate ("BBA LIBOR"), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as
designated by the Administrative Agent from time to time) at
approximately 11:00 a.m., London time, two (2) Business Days prior to
the commencement of such Interest Period, for Dollar deposits (for
delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period. If such rate is not available at
such time for any reason, then the "Eurodollar Base Rate" for such
Interest Period shall be the rate per annum determined by the
Administrative Agent to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in
the approximate amount of the Eurodollar Rate Loan being made,
continued or converted by Bank of America and with a term equivalent to
such Interest Period would be offered by Bank of America's London
Branch to major banks in the London interbank eurodollar market at
their request at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the commencement of such Interest Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
-----------------------------
Period, the reserve percentage (expressed as a decimal, carried out to
five decimal places) in effect on such day, whether or not applicable
to any Lender, under regulations issued from time to time by the FRB
for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate
Loan shall be adjusted automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Eurodollar Rate Loan" means any Loan that bears interest at a rate based
--------------------
upon the Eurodollar Rate.
"Event of Default" shall have the meaning assigned to such term in Section
----------------
9.1.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, the Issuing Lender or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) taxes imposed on
or measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable Lending Office is located, (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 11.11), any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party hereto (or
designates a new Lending Office) or is attributable to such Foreign Lender's
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.11(e), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new Lending Office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 3.11(a).
10
"Executive Officer" of any Person means any of the chief executive
-----------------
officer, division president, chief financial officer or chief accounting officer
of such Person.
"Existing Letters of Credit" means those Letters of Credit outstanding on
--------------------------
the Closing Date and identified on Schedule 2.6.
"Extension of Credit" means, as to any Lender, the making of, or
-------------------
participation in, a Loan by such Lender (including Continuations and Conversions
thereof) or the issuance or extension of, or participation in, a Letter of
Credit by such Lender.
"Federal Funds Rate" means, for any day, the rate per annum 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
immediately succeeding such day; provided that (a) if such day 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 (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
(rounded upward, if necessary, to the multiple of 1/100th of 1%) charged to Bank
of America on such day on such transactions as determined by the Administrative
Agent.
"Fees" means all fees payable pursuant to Section 3.5.
----
"Foreign Lender" means any Lender that is organized under the laws of a
--------------
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States, each state thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means a Subsidiary which is not a Domestic
------------------
Subsidiary.
"FRB" means the Board of Governors of the Federal Reserve System of the
---
United States.
"Fund" means any Person (other than a natural person) that is (or will be)
----
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.
"Funded Debt" means, with respect to any Person, without duplication, (i)
-----------
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (iii) all purchase money
Indebtedness (including for purposes hereof, indebtedness and obligations in
respect of conditional sale or title retention arrangements described in clause
(c) of the definition of "Indebtedness" and obligations in respect of the
deferred purchase price of property or services described in clause (d) of the
definition of "Indebtedness") of such Person, including without limitation the
principal portion of all obligations of such Person under Capital Leases, (iv)
all Support Obligations of such Person with respect to Funded Debt of another
Person, (v) the maximum available amount of all standby letters of credit or
acceptances issued or created for the account of such Person, (vi) all Funded
Debt of another Person secured by a Lien on any Property of such Person, whether
or not such Funded Debt has been assumed, provided that for purposes hereof the
amount of such Funded Debt shall be limited to the amount of such Funded Debt as
to which there is recourse to such Person or the fair market value of the
property which is subject to the Lien, if less, (vii) the outstanding attributed
principal amount under any Securitization Transaction, (viii) the principal
balance outstanding under Synthetic Leases and (ix) the amount of payment
obligations (including earn-out payments and the like) incurred in connection
with Permitted Acquisitions or Acquisitions consummated prior to the Closing
Date when such obligations have become sufficiently certain and quantifiable as
to be recognized as a liability under GAAP. The Funded Debt of any Person shall
include the Funded Debt of any partnership or joint venture in which such Person
is a general partner or joint venturer, but only to the extent to which there is
recourse to such Person for the payment of such Funded Debt.
11
"GAAP" means generally accepted accounting principles in the United States
----
applied on a consistent basis and subject to the terms of Section 1.3.
"Governmental Authority" means the government of the United States or any
----------------------
other nation, or of any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).
"Guaranteed Obligations" means, without duplication, (i) all of the
----------------------
obligations of the Borrower to the Lenders (including the Issuing Lender) and
the Administrative Agent, whenever arising, under this Credit Agreement, the
Notes, the Collateral Documents or any of the other Credit Documents (including,
but not limited to, any interest accruing after the occurrence of a Bankruptcy
Event with respect to any Credit Party, regardless of whether such interest is
an allowed claim under any Debtor Relief Law), (ii) all liabilities and
obligations, whenever arising, owing from any Credit Party to any Lender, or any
Affiliate of a Lender, arising under any Hedging Agreement relating to the
Obligations to the extent permitted hereunder, (iii) all obligations (but
excluding fees for services) under any Treasury Management Agreement between any
Credit Party and any Lender or Affiliate of a Lender and (iv) all costs and
expenses incurred in connection with enforcement and collection of the
Guaranteed Obligations, including reasonable attorneys' fees and disbursements.
"Guarantors" means each Person identified as a "Guarantor" on the
----------
signature pages hereto and each other Person which may hereafter become a
Guarantor by execution of a Joinder Agreement, together with their successors
and permitted assigns, and "Guarantor" means any one of them.
"Hazardous Materials" means all explosive or radioactive substances or
-------------------
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos-containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreements" means any interest rate protection agreement or
------------------
foreign currency exchange agreement.
"Indebtedness" means, with respect to any Person, without duplication, (a)
------------
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to Property
purchased by such Person (other than customary reservations or retentions of
title under agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the deferred
purchase price of Property or services purchased by such Person (other than
trade debt incurred in the ordinary course of business and due within six months
of the incurrence thereof, or obligations under Treasury Management Agreements)
which would appear as liabilities on a balance sheet of such Person, (e) all
obligations of such Person under take-or-pay or similar arrangements or under
commodities agreements, (f) all Indebtedness of others secured by (or for which
12
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Support Obligations of such Person
with respect to Indebtedness of another Person, (h) the principal portion of all
obligations of such Person under Capital Leases and lease obligations under Sale
and Leaseback Transactions, (i) all obligations of such Person under Hedging
Agreements, (j) the maximum amount of all standby letters of credit issued or
bankers' acceptances facilities created for the account of such Person and,
without duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) all preferred Capital Stock issued by such Person and which by the terms
thereof could be (at the request of the holders thereof or otherwise) subject to
mandatory sinking fund payments, redemption (unless redeemable for common
Capital Stock) or other acceleration (other than as a result of a Change of
Control or an Asset Disposition that does not in fact result in a redemption of
such preferred Capital Stock) at any time during the term of the Credit
Agreement, (l) the principal portion of all obligations of such Person under
Synthetic Leases, (m) the Indebtedness of any partnership or unincorporated
joint venture in which such Person is a general partner or a joint venturer, (n)
with respect to any member of the Consolidated Group, the outstanding attributed
principal amount under any Securitization Transaction and (o) all payment
obligations (including earn-out payments and the like) incurred in connection
with Permitted Acquisitions or Acquisitions consummated prior to the Closing
Date.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Indemnitees" has the meaning provided in Section 11.5(b).
-----------
"Interest Payment Date" means (i) as to any Base Rate Loan (other than a
---------------------
Swingline Loan), the last Business Day of each March, June, September and
December, and the Termination Date, (ii) as to any Swingline Loan, the last
Business Day of each March, June, September and December, and the Termination
Date, or such other days as may be mutually agreed upon by the Borrower and the
Swingline Lender, and (iii) as to any Eurodollar Rate Loan, the last day of each
Interest Period for such Loan, the date of repayment of any principal amount
repaid of such Loan and the Termination Date, and in addition where the
applicable Interest Period is more than three months, then also on the date
three months from the beginning of the Interest Period, and each three months
thereafter. If an Interest Payment Date falls on a date which is not a Business
Day, such Interest Payment Date shall be deemed to be the next succeeding
Business Day.
"Interest Period" means (i) as to any Eurodollar Rate Loan, a period of
---------------
one, two, three, six or, if available to all the Lenders, twelve months'
duration, as the Borrower may elect, commencing in each case on the date of the
Borrowing (including Conversions, Continuations and renewals), and (ii) as to
any Swingline Loan, a period of up to ten (10) days, as the Borrower may request
and the Swingline Lender may agree in accordance with the provisions hereof,
commencing in each case on the date of Borrowing; provided, however, (A) if any
Interest Period would end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day (except that where
the next succeeding Business Day falls in the next succeeding calendar month,
then on the next preceding Business Day), (B) no Interest Period shall extend
beyond the Termination Date, and (C) where an Interest Period begins on a day
for which there is no numerically corresponding day in the calendar month in
which the Interest Period is to end, such Interest Period shall end on the last
day of such calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended, and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code shall be construed also to
refer to any successor sections.
"Investment" in any Person means (a) the acquisition (whether for cash,
----------
property, services, assumption of Indebtedness, securities or otherwise) of
13
Capital Stock, bonds, notes, debentures, partnership, joint ventures or other
ownership interests or other securities of such other Person, (b) any deposit
with, or advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other assets in
the ordinary course of business) or (c) any other capital contribution to or
investment in such Person, including any Support Obligations (including any
support for a letter of credit issued on behalf of such Person) incurred for the
benefit of such Person, but excluding any Restricted Payment to such Person.
"ISP" means, with respect to any Letter of Credit, the "International
---
Standby Practices 1998" published by the Institute of International Banking Law
& Practice (or such later version thereof as may be in effect at the time of
issuance of such Letter of Credit).
"Issuing Lender" means Bank of America.
--------------
"Joinder Agreement" means a joinder agreement substantially in the form of
-----------------
Schedule 7.12 hereto executed and delivered by a Subsidiary in accordance with
the provisions of Section 7.12.
"Lender Joinder Agreement" means a joinder agreement, substantially in the
------------------------
form of Schedule 2.1, executed and delivered in accordance with the provisions
of Section 2.1(d).
"Lenders" means each of the Persons identified as a "lender" on the
-------
signature pages hereto, and their successors and assigns.
"Lending Office" means, as to any Lender, the office or offices of such
--------------
Lender set forth in such Lender's Administrative Questionnaire or such other
office or offices as a Lender may from time to time notify the Borrower and the
Administrative Agent.
"Letter of Credit Borrowing" means any extension of credit resulting from
--------------------------
a drawing under any Letter of Credit that has not been reimbursed or refinanced
as a Borrowing of Revolving Loans.
"Letter of Credit" means any Existing Letter of Credit and any standby
----------------
letter of credit or commercial letter of credit issued by the Issuing Lender for
the account of the Borrower in accordance with the terms of Section 2.1(b).
"Letter of Credit Advance" means, with respect to each Lender, such
------------------------
Lender's funding of its participation in any Letter of Credit Borrowing.
"Letter of Credit Application" means an application and agreement for the
----------------------------
issuance or amendment of a Letter of Credit in the form from time to time in use
by the Issuing Lender.
"Letter of Credit Fee" shall have the meaning assigned to such term in
--------------------
Section 3.5(b)(i).
"Licenses" means all licenses, permits and other grants of authority
--------
obtained or required to be obtained from any Governmental Authorities in
connection with the management or operation of the business of the members of
the Consolidated Group or the ownership, lease, license or use of any Property
of the members of the Consolidated Group.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, security interest, encumbrance, lien (statutory or otherwise),
14
preference, priority or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform Commercial Code
as adopted and in effect in the relevant jurisdiction or other similar recording
or notice statute, and any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and/or Swingline Loans, and
---- -----
the Base Rate Loans, Eurodollar Rate Loans and the Quoted Rate Swingline Loans
comprising such Loans.
"LOC Commitment" means, with respect to the Issuing Lender, the commitment
--------------
of the Issuing Lender to issue, and to honor payment obligations under, Letters
of Credit and, with respect to each Lender, the commitment of such Lender to
purchase Participation Interests in the Letters of Credit up to such Lender's
LOC Committed Amount.
"LOC Committed Amount" shall have the meaning assigned to such term in
--------------------
Section 2.1(b).
"LOC Credit Extension" means, with respect to any Letter of Credit, the
--------------------
issuance thereof or extension of the expiry date thereof, or the increase of the
amount thereof.
"LOC Documents" means, with respect to any Letter of Credit, such Letter
-------------
of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for such
obligations.
"LOC Expiration Date" means the day that is seven days prior to the
-------------------
Termination Date then in effect (or, if such day is not a Business Day, the
immediately preceding Business Day).
"LOC Obligations" means, as at any date of determination, the aggregate
---------------
undrawn amount of all outstanding Letters of Credit plus the aggregate of all
Unreimbursed Amounts, including any Extension of Credit resulting from a drawing
under any Letter of Credit which has not been reimbursed on the date when made
or refinanced as a Loan. For purposes of computing the amount available to be
drawn under any Letter of Credit, the amount of such Letter of Credit shall be
determined in accordance with Section 1.7. For all purposes of this Credit
Agreement, if on any date of determination a Letter of Credit has expired by its
terms but any amount may still be drawn thereunder by reason of the operation of
Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be "outstanding"
in the amount so remaining available to be drawn.
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
condition (financial or otherwise), operations, business, assets, liabilities or
prospects of the Consolidated Group taken as a whole, (ii) the ability of any
member of the Consolidated Group to perform any material obligation under any
Credit Document to which it is a party or (iii) the material rights and remedies
of the Administrative Agent and the Lenders under the Credit Documents.
"Materials of Environmental Concern" means any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Laws, including asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any successor or
-------
assignee of the business of such company in the business of rating securities.
15
"Multiemployer Plan" means a Plan which is a "multiemployer plan" as
------------------
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Net Cash Proceeds" means the aggregate proceeds paid in cash or Cash
-----------------
Equivalents received by any member of the Consolidated Group in connection with
any Asset Disposition, Equity Transaction or Debt Transaction, net of (i) direct
costs (including legal, accounting and investment banking fees, and sales
commissions) and (ii) taxes paid or payable as a result thereof; and including,
in any event, realization of cash and Cash Equivalents upon the sale or
disposition of non-cash consideration received in connection with any such Asset
Disposition, Equity Transaction or Debt Transaction.
"Note" or "Notes" means any of the Revolving Notes.
---- -----
"Notice of Borrowing" means a written notice of Borrowing in substantially
-------------------
the form of Schedule 2.2(a)(i) as required by Section 2.2(a).
"Notice of Continuation/Conversion" means the written notice of
---------------------------------
Continuation or Conversion in substantially the form of Schedule 3.2, as
required by Section 3.2.
"Obligations" means the Revolving Loans, LOC Obligations and the Swingline
-----------
Loans.
"Operating Lease" means, as applied to any Person, any lease (including
---------------
leases which may be terminated by the lessee at any time) of any Property which
is not a Capital Lease other than any such lease in which that Person is the
lessor.
"Organization Documents" means, (a) with respect to any corporation, the
----------------------
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.
"Other Taxes" means all present or future stamp or documentary taxes or
-----------
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Credit Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Credit Agreement
or any other Credit Document.
"Outstanding Amount" means (a) with respect to Revolving Loans and
------------------
Swingline Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any Borrowings and prepayments or repayments of Revolving
Loans and Swingline Loans, as the case may be, occurring on such date and (b)
with respect to any LOC Obligations on any date, the aggregate outstanding
amount of such LOC Obligations on such date after giving effect to any LOC
Credit Extension occurring on such date and any other changes in the amount of
the LOC Obligations as of such date, including as a result of any reimbursements
by the Borrower of Unreimbursed Amounts.
"Participant" has the meaning specified in Section 11.3(d).
----------- ---------------
16
"Participation Interest" means the purchase by a Lender of a participation
----------------------
in LOC Obligations as provided in Section 2.6(b), in Swingline Loans as provided
in Section 2.7, and in Loans as provided in Section 3.16.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Pension Plan" means any "employee pension benefit plan" (as such term is
------------
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in Section 4064(a) of ERISA, has made contributions at any
time during the immediately preceding five plan years.
"Permitted Acquisition" means any Acquisition by a member of the
---------------------
Consolidated Group, provided that (A) the Required Lenders consent thereto, or
(B) (i) consideration paid is not greater than the fair market value of the
Property acquired as determined by the Borrower in its reasonable judgment, (ii)
the Property acquired (or the Property of the Person acquired) in such
Acquisition shall be used or useful in the same or similar line of business as
the members of the Consolidated Group on the Closing Date, (iii) all Property to
be acquired in connection with such acquisition shall be located in the United
States of America, (iv) in the case of an Acquisition of the Capital Stock of
another Person, the board of directors (or other comparable governing body) of
such other Person shall have duly approved such Acquisition, (v) no Default or
Event of Default shall exist immediately after giving effect to such
Acquisition, (vi) the representations and warranties made by the Credit Parties
in any Credit Document shall be true and correct in all material respects at and
as if made as of the date of such Acquisition (after giving effect thereto)
except to the extent such representations and warranties expressly relate to an
earlier date, (vii) if the Acquisition involves an interest in a partnership and
a requirement that a member of the Consolidated Group be a general partner, the
general partner shall be a special purpose Subsidiary of the Borrower, (viii)
total consideration (including cash and non-cash consideration, the assumption
of Indebtedness, the maximum amount of earn-out payments and consideration
consisting of any Capital Stock of the Borrower paid in connection with any
Acquisition (or series of related Acquisitions) shall not exceed $25 million and
(ix) the total consideration (including cash and non-cash consideration, the
assumption of Indebtedness, the maximum amount of earn-out payments and
consideration consisting of any Capital Stock of the Borrower) paid in
connection with all Acquisitions (excluding Investments in joint ventures and
Subsidiaries that are not Wholly Owned Subsidiaries permitted hereunder) in the
twelve-month period commencing on the date of this Credit Agreement or in any
subsequent twelve-month period beginning on an anniversary date of this Credit
Agreement, shall not exceed an amount equal to the sum of $50 million; provided
that, if, at the time of any Acquisition permitted hereunder, there are no
Revolving Loans then outstanding, the Borrower may use its own cash-on-hand as
consideration for such Acquisition without that consideration counting against
the consideration limitation of this clause (ix).
"Permitted Investments" means Investments which are (i) cash and Cash
---------------------
Equivalents; (ii) accounts receivable created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (iii) Investments consisting of Capital Stock, obligations,
securities or other Property received in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt obligors; (iv)
Investments existing as of the Closing Date and set forth in Schedule 8.6; (v)
advances or loans to directors, officers and employees that do not exceed
$500,000 in the aggregate at any one time outstanding; (vi) advances or loans to
customers and suppliers in the ordinary course of business that do not exceed
$500,000 in the aggregate at any one time outstanding; (vii) Investments by
17
members of the Consolidated Group in their Wholly Owned Subsidiaries existing on
the Closing Date, (viii) Investments by members of the Consolidated Group in and
to Credit Parties, (ix) Investments which constitute Permitted Acquisitions; (x)
Investments resulting from a qualified deferred compensation plan (structured as
a "Rabbi Trust") pursuant to which eligible employee's have a right to direct
their respective Investments, but which are being held in the name of the
Borrower; (xi) Investments in any joint venture or any Subsidiary that is not a
Wholly Owned Subsidiary in an amount not to exceed (A) $15 million in any
instance and (B) $30 million in the aggregate at any one time outstanding;
provided that, if, at the time of any such Investment, there are no Revolving
Loans then outstanding, the Borrower may use its own cash-on-hand without such
invested amount counting against the Investment amount limitation of this clause
(B) and (xii) Investments of a nature not contemplated in the foregoing
subsections in an amount not to exceed $1 million in the aggregate at any time
outstanding.
"Permitted Liens" means:
---------------
(i) Liens in favor of the Administrative Agent to secure the
obligations of the Credit Parties under the Credit Documents;
(ii) Liens in favor of a Lender or an Affiliate of a Lender pursuant
to a Hedging Agreement permitted hereunder, but only (A) to the extent
such Liens secure obligations under such agreements permitted under
Section 8.1, (B) to the extent such Liens are on the same collateral as to
which the Lenders hereunder also have a Lien, and (C) so long as the
obligations under such Hedging Agreement and the obligations of the Credit
Parties under the Credit Documents shall share pari passu in the
collateral subject to such Liens;
(iii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or Liens
for taxes being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is not
yet subject to foreclosure, sale or loss on account thereof);
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens imposed
by law or pursuant to customary reservations or retentions of title
arising in the ordinary course of business, provided that such Liens
secure only amounts not yet due and payable or, if due and payable, are
unfiled and no other action has been taken to enforce the same or are
being contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been established
(and as to which the Property subject to any such Lien is not yet subject
to foreclosure, sale or loss on account thereof);
(v) Liens (other than Liens created or imposed under ERISA) incurred
or deposits made by any member of the Consolidated Group in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance
of tenders, statutory obligations, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(vi) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall have been discharged within 30
days after the expiration of any such stay;
18
(vii) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of
the encumbered Property for its intended purposes;
(viii) Liens on Property of any Person securing purchase money
Indebtedness (including Capital Leases and Synthetic Leases) of such
Person to the extent permitted under Section 8.1(c), provided that any
such Lien attaches only to the Property financed or leased and such Lien
attaches concurrently with or within 90 days after the acquisition
thereof;
(ix) leases or subleases granted to others not interfering in any
material respect with the business of any member of the Consolidated
Group;
(x) any interest or title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by this
Credit Agreement;
(xi) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xii) Liens created or deemed to exist in connection with a
Securitization Transaction permitted hereunder (including any related
filings of any financing statements), but only to the extent that any such
Lien relates to the applicable Securitization Receivables actually sold,
contributed, financed or otherwise conveyed or pledged pursuant to such
transaction;
(xiii) Liens deemed to exist in connection with Investments in
repurchase agreements which constitute Permitted Investments;
(xiv) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(xv) Liens of a collection bank arising under Section 4-210 of the
Uniform Commercial Code on items in the course of collection;
(xvi) Liens created in connection with mortgage indebtedness
permitted under Section 8.1(i); provided that any such Lien does not
extend to any other property; and
(xvii) Liens existing as of the Closing Date and set forth on
Schedule 6.8; provided that (a) no such Lien shall at any time be extended
to or cover any Property other than the Property subject thereto on the
Closing Date and (b) the principal amount of the Indebtedness secured by
such Liens shall not be extended, renewed, refunded or refinanced on terms
and conditions less favorable to the Credit Parties than for such existing
Indebtedness.
"Person" means any natural person, corporation, limited liability company,
------
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any "employee benefit plan" (as such term is defined in
----
Section 3(3) of ERISA) established by the Borrower or, with respect to any such
plan that is subject to Section 412 of the Internal Revenue Code or Title IV of
ERISA, any ERISA Affiliate.
19
"Pledge Agreement" means the pledge agreement dated as of the Closing Date
----------------
given by the Borrower and certain other Credit Parties identified therein to the
Administrative Agent to secure the obligations of the Credit Parties under the
Credit Documents, as such pledge agreement may be amended and modified from time
to time.
"Prime Rate" means the per annum rate of interest established from time to
----------
time by Bank of America as its prime rate, which rate may not be the lowest rate
of interest charged by Bank of America.
"Pro Forma Basis" means, for purposes of calculating (utilizing the
---------------
principles set forth in the second paragraph of Section 1.4) the applicable
pricing level under the definition of "Applicable Percentage" and determining
compliance with each of the financial covenants set forth in Section 7.11, that
any transaction shall be deemed to have occurred as of the first day of the four
fiscal-quarter period ending as of the most recent fiscal quarter end preceding
the date of such transaction with respect to which the Administrative Agent has
received the Required Financial Information. As used herein, "transaction" shall
mean (i) any merger or consolidation as referred to in Section 8.4, (ii) any
Asset Disposition as referred to in Section 8.5, (iii) any Acquisition as
referred to in the definition of "Permitted Acquisition" or (iv) any Restricted
Payment as referred to in Section 8.7. In connection with any calculation of the
financial covenants set forth in Section 7.11 upon giving effect to a
transaction on a Pro Forma Basis:
(A) for purposes of any such calculation in respect of any Asset
Disposition referred to in Section 8.5, (1) income statement items
(whether positive or negative) attributable to the Property disposed of in
such Asset Disposition shall be excluded and (2) any Indebtedness which is
retired in connection with such Asset Disposition shall be excluded and
deemed to have been retired as of the day preceding the first day of the
applicable period; and
(B) for purposes of any such calculation in respect of any merger or
consolidation referred to in Section 8.4 or any Acquisition referred to in
the definition of "Permitted Acquisition", (1) any Indebtedness incurred
by any member of the Consolidated Group in connection with such
transaction (x) shall be deemed to have been incurred as of the first day
of the applicable period and (y) if such Indebtedness has a floating or
formula rate, shall have an implied rate of interest for the applicable
period for purposes of this definition determined by utilizing the rate
which is or would be in effect with respect to such Indebtedness as at the
relevant date of determination, and (2) income statement items (whether
positive or negative) attributable to the Property acquired in such
transaction or to the Acquisition comprising such transaction, as
applicable, shall be included beginning as of the first day of the
applicable period.
"Pro Forma Compliance Certificate" means a certificate of an Executive
--------------------------------
Officer of the Borrower delivered to the Administrative Agent in connection with
(i) any Support Obligations extended for the benefit of joint ventures under
Section 8.1(i) hereof, (ii) any merger or consolidation referred to in Section
8.4, (iii) any Asset Disposition referred to in Section 8.5, (iv) any
Acquisition referred to in the definition of "Permitted Acquisition" or (v) any
Restricted Payment as referred to in Section 8.7, as applicable, and containing
reasonably detailed calculations, upon giving effect to the applicable
transaction on a Pro Forma Basis, of the Consolidated Senior Leverage Ratio, the
Consolidated Total Leverage Ratio, the Consolidated Fixed Charge Coverage Ratio
and Consolidated Net Worth as of the most recent fiscal quarter end preceding
the date of the applicable transaction with respect to which the Administrative
Agent shall have received the Required Financial Information.
"Property" means any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
20
"Quoted Rate" means, with respect to a Quoted Rate Swingline Loan, the
-----------
fixed or floating percentage rate per annum, if any, offered by the Swingline
Lender and accepted by the Borrower in accordance with the provisions hereof.
"Quoted Rate Swingline Loan" means a Swingline Loan bearing interest at
--------------------------
the Quoted Rate.
"Rate Determination Date" shall have the meaning assigned to such term in
-----------------------
the definition of "Applicable Percentage".
"Register" shall have the meaning assigned to such term in Section
--------
11.3(c).
"Related Parties" means, with respect to any Person, such Person's
---------------
Affiliates and the partners, directors, officers, employees, agents and advisors
of such Person and of such Person's Affiliates.
"Reportable Event" means any of the events set forth in Section 4043(c) of
----------------
ERISA, other than those events as to which the notice requirement has been
waived by regulation.
"Required Financial Information" means the annual and quarterly compliance
------------------------------
certificates and related financial statements and information required by the
provisions of Section 7.1(a), (b) and (c).
"Required Lenders" means, at any time, Lenders having at least sixty-six
----------------
and two-thirds percent (66-2/3%) of the Commitments or, if the Commitments have
been terminated, Lenders having at least sixty-six and two-thirds percent
(66-2/3%) of the aggregate principal amount of the Obligations outstanding
(taking into account in each case Participation Interests or obligations to
participate therein); provided that the Commitments of, and outstanding
principal amount of Obligations (taking into account Participation Interests or
obligations to participate therein) owing to, a Defaulting Lender shall be
excluded for purposes hereof in making a determination of Required Lenders.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule, regulation or ordinance (including
Environmental Laws) or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or to which any of its material Property is subject.
"Restricted Payment" means (i) any dividend or other payment or
------------------
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any member of the Consolidated Group, now or hereafter
outstanding (including without limitation any payment in connection with any
dissolution, merger, consolidation or disposition involving any member of the
Consolidated Group), or to the holders, in their capacity as such, of any shares
of any class of Capital Stock of any member of the Consolidated Group, now or
hereafter outstanding (other than dividends or distributions payable in the same
class of Capital Stock of the applicable Person or dividends or distributions
payable to any Credit Party (directly or indirectly through Subsidiaries)), (ii)
any redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of any member of the Consolidated Group, now or hereafter outstanding, and
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of any member of the Consolidated Group, now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender, the commitment
--------------------
of such Lender to make Revolving Loans in an aggregate principal amount at any
time outstanding up to such Lender's Revolving Commitment Percentage at such
time of the Aggregate Revolving Committed Amount at such time.
21
"Revolving Commitment Percentage" means, for each Lender, a fraction
-------------------------------
(expressed as a percentage) the numerator of which is the Revolving Committed
Amount of such Lender at such time and the denominator of which is the Aggregate
Revolving Committed Amount at such time. The initial Revolving Commitment
Percentage of each Lender is set forth on Schedule 2.1.
"Revolving Committed Amount" means, with respect to each Lender, the
--------------------------
amount of such Lender's Revolving Commitment. The initial Revolving Committed
Amount of each Lender is set forth on Schedule 2.1.
"Revolving Loan" shall have the meaning assigned to such term in Section
--------------
2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory notes of the
-------------- ---------------
Borrower in favor of each of the Lenders evidencing the Revolving Loans and
Swingline Loans in substantially the form attached as Schedule 2.5, individually
or collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill
---
Companies, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Sale and Leaseback Transaction" means any arrangement pursuant to which
------------------------------
any member of the Consolidated Group, directly or indirectly, becomes liable as
lessee, guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any Property (a) which such member of the
Consolidated Group has sold or transferred (or is to sell or transfer) to a
Person which is not a member of the Consolidated Group or (b) which such member
of the Consolidated Group intends to use for substantially the same purpose as
any other Property which has been sold or transferred (or is to be sold or
transferred) by such member of the Consolidated Group to another Person which is
not a member of the Consolidated Group in connection with such lease. In the
case of a Sale and Leaseback Transaction that is an Operating Lease, the
attributed principal amount of obligations in respect thereof shall be
determined on the basis of the present value (discounted in accordance with GAAP
at the debt rate implied in the applicable lease) of the rental payments during
the term of the lease.
"SEC" means the Securities and Exchange Commission.
---
"Securities Exchange Act" means the Securities Exchange Act of 1934.
-----------------------
"Securitization Transaction" means any financing transaction or series of
--------------------------
financing transactions that have been or may be entered into by a member of the
Consolidated Group pursuant to which such member of the Consolidated Group may
sell, convey or otherwise transfer to (i) a Subsidiary or affiliate (a
"Securitization Subsidiary"), or (ii) any other Person, or may grant a security
interest in, any accounts receivable, notes receivable, rights to future lease
payments or residuals or other similar rights to payment (the "Securitization
Receivables") (whether such Securitization Receivables are then existing or
arising in the future) of such member of the Consolidated Group, and any assets
related thereto, including without limitation, all security interests in
merchandise or services financed thereby, the proceeds of such Securitization
Receivables, and other assets which are customarily sold or in respect of which
security interests are customarily granted in connection with securitization
transactions involving such assets.
22
"Security Agreement" means the security agreement dated as of the Closing
------------------
Date given by the Credit Parties to the Administrative Agent to secure the
obligations of the Credit Parties under the Credit Documents, as such security
agreement may be amended and modified from time to time.
"Subordinated Debt" means any Indebtedness of a member of the Consolidated
-----------------
Group which by its terms is expressly subordinated in right of payment to the
prior payment of the obligations of the Credit Parties under the Credit
Documents on terms and conditions and evidenced by documentation satisfactory to
the Administrative Agent and the Required Lenders.
"Subsidiary" means, as to any Person at any time, (a) any corporation more
----------
than 50% of whose Capital Stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at such time, any class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at such time owned by such Person directly or
indirectly through Subsidiaries, and (b) any partnership, association, joint
venture or other entity of which such Person directly or indirectly through
Subsidiaries owns at such time more than 50% of the Capital Stock.
"Support Obligations" means, with respect to any Person, without
-------------------
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any Property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount of
any Support Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Support Obligation is made.
"Swingline Commitment" means the commitment of the Swingline Lender to
--------------------
make Swingline Loans in an aggregate principal amount at any time outstanding up
to the Swingline Committed Amount and the commitment of each Lender to purchase
participation interests in Swingline Loans up to such Lender's Revolving
Commitment Percentage as provided in Section 2.1(c).
"Swingline Committed Amount" shall have the meaning assigned to such term
--------------------------
in Section 2.1(c).
"Swingline Lender" means Bank of America.
----------------
"Swingline Loan" means a swingline revolving loan made by the Swingline
--------------
Lender pursuant to the provisions of Section 2.1(c).
"Synthetic Lease" means any synthetic lease, tax retention operating
---------------
lease, off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an Operating Lease under GAAP.
23
"Taxes" means all present or future taxes, levies, imposts, duties,
-----
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.
"Termination Date" means the earlier of (a) October 12, 2009 or such later
----------------
date as to which all of the Lenders may in their sole discretion by written
consent agree or (b) the date on which the Commitments are terminated in
accordance with the provisions of this Credit Agreement.
"Treasury Management Agreement" means any agreement governing the
-----------------------------
provision of treasury or cash management services, including deposit accounts,
funds transfer, automated clearinghouse, zero balance accounts, returned check
concentration, controlled disbursement, lockbox, account reconciliation and
reporting and trade finance services.
"Unreimbursed Amount" shall have the meaning assigned to such term in
-------------------
Section 2.6(b).
"Voting Stock" means, with respect to any Person, Capital Stock issued by
------------
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
"Wholly Owned Domestic Subsidiary" of any Person means any Wholly Owned
--------------------------------
Subsidiary that is a Domestic Subsidiary.
"Wholly Owned Subsidiary" of any Person means any Subsidiary 100% of whose
-----------------------
Voting Stock is at the time owned by such Person directly or indirectly through
other Wholly Owned Subsidiaries.
1.2 Computation of Time Periods.
---------------------------
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
1.3 Interpretive Provisions.
-----------------------
With reference to this Credit Agreement and each other Credit Document,
unless otherwise specified herein or in such other Credit Document:
(a) The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation". The word "will" shall be construed to have
the same meaning and effect as the word "shall". Unless the context requires
otherwise, (i) any definition of or reference to any agreement, instrument or
other document (including any Organization Document) shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Credit
Document), (ii) any reference herein to any Person shall be construed to include
such Person's successors and assigns, (iii) the words "herein", "hereof" and
"hereunder," and words of similar import when used in any Credit Document, shall
24
be construed to refer to such Credit Document in its entirety and not to any
particular provision thereof, (iv) all references in a Credit Document to
"Articles", "Sections", "Exhibits" and "Schedules" shall be construed to refer
to articles and sections of, and exhibits and schedules to, the Credit Document
in which such references appear, (v) any reference to any law shall include all
statutory and regulatory provisions consolidating, amending replacing or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time, and (vi) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
(b) In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including;" the words "to" and
"until" each mean "to but excluding;" and the word "through" means "to and
including."
(c) Section headings herein and in the other Credit Documents are included
for convenience of reference only and shall not affect the interpretation of
this Credit Agreement or any other Credit Document.
1.4 Accounting Terms.
----------------
(a) All accounting terms not specifically or completely defined herein
shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Credit Agreement shall be prepared in conformity with, GAAP
applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the audited financial statements
referenced in Section 5.01(c), except as otherwise specifically prescribed
herein.
(b) Notwithstanding any provision herein to the contrary, determinations
of (i) the applicable pricing level under the definition of "Applicable
Percentage" and (ii) compliance with the financial covenants shall be made on a
Pro Forma Basis.
(c) The Borrower will provide a written summary of material changes in
GAAP or in the consistent application thereof with each annual and quarterly
Compliance Certificate delivered in accordance with Section 7.1(c). If at any
time any change in GAAP or in the consistent application thereof would affect
the computation of any financial ratio or requirement set forth in any Credit
Document, and either the Borrower or the Required Lenders shall object in
writing to determining compliance based on such change, then such computations
shall continue to be made on a basis consistent with the most recent financial
statements delivered pursuant to Section 7.1(a) or (b) as to which no such
objection has been made.
Notwithstanding the above, the parties hereto acknowledge and agree that,
for purposes of all calculations made under the financial covenants set forth in
Section 7.11 (including without limitation for purposes of the definitions of
"Applicable Percentage" and "Pro Forma Basis"), (i) in connection with any Asset
Disposition referred to in Section 8.5, (A) income statement items (whether
positive or negative) attributable to the Property disposed of shall be excluded
to the extent relating to any period occurring prior to the date of such
transaction and (B) Indebtedness which is retired shall be excluded and deemed
to have been retired as of the day preceding the first day of the applicable
period and (ii) in connection with any merger or consolidation referred to in
Section 8.4 or any Acquisition referred to in the definition of "Permitted
Acquisition", (A) income statement items attributable to the Person or Property
acquired shall, to the extent not otherwise included in such income statement
25
items for the members of the Consolidated Group in accordance with GAAP or in
accordance with any defined terms set forth in Section 1.1, be included to the
extent relating to any period applicable in such calculations, (B) Indebtedness
of the Person or Property acquired shall be deemed to have been incurred as of
the first day of the applicable period and (C) pro forma adjustments may be
included to the extent that such adjustments would be permitted under GAAP and
give effect to items that are (x) directly attributable to such transaction, (y)
expected to have a continuing impact on the Consolidated Group and (z) factually
supportable.
1.5 Rounding.
--------
Any financial ratios required to be maintained by the Borrower pursuant to
this Credit Agreement shall be calculated by dividing the appropriate component
by the other component, carrying the result to one place more than the number of
places by which such ratio is expressed herein and rounding the result up or
down to the nearest number (with a rounding-up if there is no nearest number).
1.6 Times of Day.
------------
Unless otherwise provided, all references herein to times of day shall be
references to Central time (daylight or standard, as applicable).
1.7 Letter of Credit Amounts.
------------------------
Unless otherwise provided, all references herein to the amount of a Letter
of Credit at any time shall be deemed to mean the maximum face amount of such
Letter of Credit after giving effect to all increases thereof contemplated by
such Letter of Credit or the LOC Documents related thereto, whether or not such
maximum face amount is in effect at such time.
SECTION 2
CREDIT FACILITIES
2.1 Commitments.
-----------
(a) Revolving Commitment. During the Commitment Period, subject to the
--------------------
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans (the "Revolving Loans") to the Borrower in Dollars from time to
time in the amount of such Lender's Revolving Commitment Percentage of such
Revolving Loans for the purposes hereinafter set forth; provided that (i) with
regard to the Lenders collectively, the aggregate principal amount of
Obligations outstanding at any time shall not exceed NINETY MILLION DOLLARS
($90,000,000) (as such amount may be reduced from time to time in accordance
with the provisions hereof, the "Aggregate Revolving Committed Amount"), and
(ii) with regard to each Lender individually, such Lender's Revolving Commitment
Percentage of Obligations outstanding at any time shall not exceed such Lender's
Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or
Eurodollar Rate Loans, or a combination thereof, as the Borrower may request,
and may be repaid and reborrowed in accordance with the provisions hereof.
(b) Letter of Credit Commitment. During the Commitment Period subject to
---------------------------
the terms and conditions hereof and of the LOC Documents, if any, and such other
terms and conditions which the Issuing Lender may reasonably require, the
Issuing Lender, in reliance upon the commitments of the Lenders set forth
herein, shall issue, and the Lenders shall participate in, such Letters of
Credit in Dollars as the Borrower may request for its own account or for the
account of another Credit Party as provided herein, in a form acceptable to the
26
Issuing Lender, for the purposes hereinafter set forth; provided that (i) the
aggregate amount of LOC Obligations shall not at any time exceed THIRTY MILLION
DOLLARS ($30,000,000) (as such amount may be reduced from time to time in
accordance with the provisions hereof, the "LOC Committed Amount"), (ii) with
regard to the Lenders collectively, the aggregate principal amount of
Obligations outstanding at any time shall not exceed the Aggregate Revolving
Committed Amount, and (iii) with regard to each Lender individually, such
Lender's Revolving Commitment Percentage of Obligations outstanding at any time
shall not exceed such Lender's Revolving Committed Amount. Letters of Credit
shall not have an original expiry date more than one year from the date of
issuance or extension. No Letter of Credit shall have an expiry date, whether as
originally issued or by extension, extending beyond the Termination Date. Each
Letter of Credit shall comply with the related LOC Documents. The issuance date
of each Letter of Credit shall be a Business Day.
(c) Swingline Commitment. During the Commitment Period, subject to the
--------------------
terms and conditions hereof, in reliance upon the commitments of the other
Lenders set forth herein, the Swingline Lender agrees to make certain revolving
credit loans (the "Swingline Loans") to the Borrower in Dollars from time to
time for the purposes hereinafter set forth; provided that (i) the aggregate
principal amount of Swingline Loans shall not at any time exceed TEN MILLION
DOLLARS ($10,000,000) (as such amount may be reduced from time to time in
accordance with the provisions hereof, the "Swingline Committed Amount"), and
(ii) with regard to the Lenders collectively, the aggregate principal amount of
Obligations outstanding at any time shall not exceed the Aggregate Revolving
Committed Amount. Swingline Loans may consist of Base Rate Loans or Quoted Rate
Swingline Loans, or a combination thereof, as the Borrower may request, and may
be repaid and reborrowed in accordance with the provisions hereof.
(d) Increase in Revolving Commitments. Subject to the terms and conditions
---------------------------------
set forth herein, the Borrower may, at any time, upon written notice to the
Administrative Agent, increase the Aggregate Revolving Committed Amount by up to
THIRTY-FIVE MILLION DOLLARS ($35,000,000) to not more than ONE HUNDRED
TWENTY-FIVE MILLION DOLLARS ($125,000,000); provided that:
(i) the Borrower shall obtain commitments for the amount of the
increase from existing Lenders or other commercial banks and financial
institutions reasonably acceptable to the Administrative Agent, which
other commercial banks and financial institutions shall join in this
Credit Agreement as Lenders by joinder agreement substantially in the form
of Schedule 2.1(d) attached hereto or by other arrangement reasonably
acceptable to the Administrative Agent;
(ii) any such increase shall be in a minimum aggregate principal
amount of $5 million and integral multiples of $1 million in excess
thereof (or the remaining amount, if less);
(iii) if any Revolving Loans are outstanding at the time of any such
increase, the Borrower will make such payments and adjustments on the
Revolving Loans (including payment of any break-funding amounts owing
under Section 3.12) as may be necessary to give effect to the revised
commitment percentages and commitment amounts;
(iv) payment of upfront fees, if any, in respect of the new
commitments so established; and
27
(v) the conditions to the making of a Revolving Loan set forth in
Section 5.2 shall be satisfied.
In connection with any such increase in the Revolving Commitments,
Schedule 2.1 will be revised to reflect the modified commitments and commitment
percentages of the Lenders, and the Borrower will provide supporting
resolutions, legal opinions, promissory notes and other items as may be
reasonably requested by the Administrative Agent and the Lenders in connection
therewith.
2.2 Method of Borrowing.
-------------------
(a) Notice of Request for Extensions of Credit. The Borrower shall request
------------------------------------------
an Extension of Credit by written notice (or telephonic notice promptly
confirmed in writing) as follows:
(i) Revolving Loans. In the case of Revolving Loans, by the Borrower
---------------
to the Administrative Agent not later than 11:00 a.m. on the Business Day
of the requested Borrowing in the case of Base Rate Loans, and on the
third Business Day prior to the date of the requested Borrowing in the
case of Eurodollar Rate Loans. Each such request for Borrowing shall be
irrevocable and shall specify (A) that a Revolving Loan is requested, (B)
the date of the requested Borrowing (which shall be a Business Day), (C)
the aggregate principal amount to be borrowed, and (D) whether the
Borrowing shall be comprised of Base Rate Loans, Eurodollar Rate Loans or
a combination thereof, and if Eurodollar Rate Loans are requested, the
Interest Period(s) therefor. A form of Notice of Borrowing is attached as
Schedule 2.2(a)(i). The Administrative Agent shall give notice to each
Lender promptly upon receipt of each Notice of Borrowing pursuant to this
Section 2.2(a)(i), the contents thereof and each Lender's share of any
Borrowing to be made pursuant thereto.
(ii) Letters of Credit. In the case of Letters of Credit, each
-----------------
Letter of Credit shall be issued or amended, as the case may be, upon the
request of the Borrower delivered to the Issuing Lender (with a copy to
the Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Executive Officer. Such Letter of
Credit Application must be received by the Issuing Lender and the
Administrative Agent not later than 11:00 a.m. at least two (2) Business
Days (or such later date and time as the Issuing Lender and the
Administrative Agent may agree in a particular instance in their sole
discretion) prior to the proposed issuance date or date of amendment, as
the case may be. In the case of a request for an initial issuance of a
Letter of Credit, such Letter of Credit Application shall specify in form
and detail satisfactory to the Issuing Lender: (A) the proposed issuance
date of the requested Letter of Credit (which shall be a Business Day);
(B) the amount thereof; (C) the expiry date thereof; (D) the name and
address of the beneficiary thereof; (E) the documents to be presented by
such beneficiary in case of any drawing thereunder; (F) the full text of
any certificate to be presented by such beneficiary in case of any drawing
thereunder; and (G) such other matters as the Issuing Lender may require.
In the case of a request for an amendment of any outstanding Letter of
Credit, such Letter of Credit Application shall specify in form and detail
satisfactory to the Issuing Lender (A) the Letter of Credit to be amended;
(B) the proposed date of amendment thereof (which shall be a Business
Day); (C) the nature of the proposed amendment; and (D) such other matters
as the Issuing Lender may require. Additionally, the Borrower shall
furnish to the Issuing Lender and the Administrative Agent such other
documents and information pertaining to such requested Letter of Credit
issuance or amendment, including any LOC Documents, as the Issuing Lender
or the Administrative Agent may require. Existing Letters of Credit shall
be deemed to have been issued hereunder and shall be subject to and
governed by the terms and conditions hereof.
28
(iii) Promptly after receipt of any Letter of Credit Application,
the Issuing Lender will confirm with the Administrative Agent (by
telephone or in writing) that the Administrative Agent has received a copy
of such Letter of Credit Application from the Borrower and, if not, the
Issuing Lender will provide the Administrative Agent with a copy thereof.
Unless the Issuing Lender has received written notice from the
Administrative Agent, any Lender or any Credit Party, at least one
Business Day prior to the requested date of issuance or amendment of the
applicable Letter of Credit, that one or more applicable conditions
contained in Section V shall not then be satisfied, then, subject to the
terms and conditions hereof, the Issuing Lender shall, on the requested
date, issue a Letter of Credit for the account of the Borrower (or
Subsidiary) or enter into the applicable amendment, as the case may be, in
each case in accordance with the Issuing Lender's usual and customary
business practices. Immediately upon the issuance of each Letter of
Credit, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Lender a risk
participation in such Letter of Credit in an amount equal to such Lender's
Revolving Commitment Percentage thereof.
(iv) Promptly after its delivery of any Letter of Credit or any
amendment to a Letter of Credit to an advising bank with respect thereto
or to the beneficiary thereof, the Issuing Lender will also deliver to the
Borrower and the Administrative Agent a true and complete copy of such
Letter of Credit or amendment.
(v) Swingline Loans. In the case of Swingline Loans, by the Borrower
---------------
to the Swingline Lender with a copy to the Administrative Agent not later
than 12:00 Noon on the Business Day of the requested Borrowing. Each such
request for Borrowing shall be irrevocable and shall specify (A) that a
Swingline Loan is requested, (B) the date of the requested Borrowing
(which shall be a Business Day), (C) the aggregate principal amount to be
borrowed, and (D) the interest rate option and maturity (up to ten (10)
days) requested therefor. A form of Notice of Borrowing is attached as
Schedule 2.2(a)(i).
(b) Minimum Amounts. Each Revolving Loan advance shall be (i) in the case
---------------
of Eurodollar Rate Loans, in a minimum principal amount of $1 million and
integral multiples of $500,000 in excess thereof and (ii) in the case of Base
Rate Loans, $1 million (or, if less, the remaining Aggregate Revolving Committed
Amount) and integral multiples of $250,000 in excess thereof. Each Swingline
Loan advance shall be in integral multiples of $100,000 (or the remaining amount
of the Swingline Committed Amount, if less).
(c) Information Not Provided. If in connection with any such request for a
------------------------
Revolving Loan, the Borrower shall fail to specify (i) an applicable Interest
Period in the case of a Eurodollar Rate Loan, the Borrower shall be deemed to
have requested an Interest Period of one month, or (ii) the type of loan
requested, the Borrower shall be deemed to have requested a Base Rate Loan.
(d) Maximum Number of Eurodollar Rate Loans. In connection with any
---------------------------------------
request for a Revolving Loan, Revolving Loans may be comprised of no more than
eight (8) Eurodollar Rate Loans outstanding at any time. For purposes hereof,
Eurodollar Rate Loans with separate or different Interest Periods will be
considered as separate Eurodollar Rate Loans even if their Interest Periods
expire on the same date.
29
2.3 Interest.
--------
Subject to Section 3.1, the Loans shall bear interest at a per annum rate,
payable in arrears on each applicable Interest Payment Date (or at such other
times as may be specified herein), as follows:
(a) Base Rate Loans. During such periods as the Loans shall be
---------------
comprised of Base Rate Loans, the Adjusted Base Rate;
(b) Eurodollar Rate Loans. During such periods as the Loans shall be
---------------------
comprised of Eurodollar Rate Loans, the Adjusted Eurodollar Rate; and
(c) Quoted Rate Swingline Loans. During such periods as the
---------------------------
Swingline Loans shall be comprised of Quoted Rate Swingline Loans, the
Quoted Rate.
2.4 Repayment.
---------
(a) Revolving Loans. The principal amount of all Revolving Loans
---------------
shall be due and payable in full on the Termination Date.
(b) Swingline Loans. The principal amount of (i) the Quoted Rate
---------------
Swingline Loans shall be due and payable in full on the earlier of (A) the
maturity date (of up to ten (10) days from the initial Borrowing) agreed
to by the Swingline Lender and the Borrower with respect to such Swingline
Loan and (B) the Termination Date, and (ii) each other Swingline Loan
shall be due and payable in full on the earlier of (A) demand of the
Swingline Lender or (b) the end of the Interest Period with respect to
such Swingline Loan.
2.5 Notes.
-----
The Revolving Loans and Swingline Loans shall be evidenced by the
Revolving Notes.
2.6 Additional Provisions relating to Letters of Credit.
---------------------------------------------------
(a) Obligation to Issue or Amend.
----------------------------
(i) The Issuing Lender shall not issue any Letter of Credit if:
(A) the expiry date of such requested Letter of Credit would
occur more than twelve months after the date of issuance, unless the
Required Lenders have approved such expiry date; or
(B) the expiry date of such requested Letter of Credit would
occur after the LOC Expiration Date, unless all the Lenders have
approved such expiry date;
(ii) The Issuing Lender shall not be under any obligation to issue
any Letter of Credit if:
(A) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Lender from issuing such Letter of Credit, or
any Law applicable to the Issuing Lender or any request or directive
(whether or not having the force of law) from any Governmental
30
Authority with jurisdiction over the Issuing Lender shall prohibit,
or request that the Issuing Lender refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Lender with respect to such Letter
of Credit any restriction, reserve or capital requirement (for which
the Issuing Lender is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Lender
any unreimbursed loss, cost or expense that was not applicable on
the Closing Date and that the Issuing Lender in good faith deems
material to it;
(B) the issuance of such Letter of Credit would violate any
Law or one or more policies of the Issuing Lender;
(C) except as otherwise agreed by the Issuing Lender and the
Administrative Agent, such Letter of Credit is in an initial face
amount less than $100,000, in the case of a commercial Letter of
Credit, or $500,000 , in the case of a standby Letter of Credit;
(D) such Letter of Credit is to be denominated in a currency
other than Dollars;
(E) such Letter of Credit contains provisions for automatic
reinstatement of the stated amount after any drawing thereunder; or
(F) a default of any Lender's obligations to fund under
Section 2.6(b) existing or any Lender is at such time a Defaulting
Lender, unless the Issuing Lender has entered into satisfactory
arrangements with the Borrower or such Lender to eliminate the
Issuing Lender's risk with respect to such Lender.
(iii) The Issuing Lender shall not amend any Letter of Credit if the
Issuing Lender would not be permitted at such time to issue such Letter of
Credit in its amended form under the terms hereof.
(iv) The Issuing Lender shall not be under any obligation to amend
any Letter of Credit if:
(A) the Issuing Lender would have no obligation at such time
to issue such Letter of Credit in its amended form under the terms
hereof; or
(B) the beneficiary of such Letter of Credit does not accept
the proposed amendment to such Letter of Credit.
(b) Drawings and Reimbursements; Funding of Participations.
---------------------------
(i) Upon any drawing under any Letter of Credit, the Issuing Lender
shall notify the Borrower and the Administrative Agent thereof. Not later
than 11:00 a.m. on the date of any payment by the Issuing Lender under a
Letter of Credit (each such date, an "Honor Date"), the Borrower shall
reimburse the Issuing Lender through the Administrative Agent in Dollars
in an amount equal to the amount of such drawing. If the Borrower fails to
so reimburse the Issuing Lender by such time, the Administrative Agent
shall promptly notify each Lender of the Honor Date, the amount of the
31
unreimbursed drawing (the "Unreimbursed Amount"), and the amount of such
Lender's Revolving Commitment Percentage thereof. In such event, the
Borrower shall be deemed to have requested a Borrowing of Base Rate Loans
to be disbursed on the Honor Date in an amount equal to the Unreimbursed
Amount, without regard to the minimum and multiples specified in Section
2.2 for the principal amount of Base Rate Loans, the amount of the
unutilized portion of the Aggregate Revolving Committed Amount or the
conditions set forth in Section 5.02. Any notice given by the Issuing
Lender or the Administrative Agent pursuant to this Section 2.6(b)(i) may
be given by telephone if immediately confirmed in writing; provided that
the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(ii) Each Lender shall upon any notice pursuant to Section 2.6(b)(i)
make funds available to the Administrative Agent for the account of the
Issuing Lender at the Administrative Agent's Office in an amount equal to
its Revolving Commitment Percentage of the Unreimbursed Amount not later
than 1:00 p.m. on the Business Day specified in such notice by the
Administrative Agent, whereupon, subject to the provisions of Section
2.6(b)(iii), each Lender that so makes funds available shall be deemed to
have made a Revolving Loan that is a Base Rate Loan to the Borrower in
such amount. The Administrative Agent shall remit the funds so received to
the Issuing Lender.
(iii) With respect to any Unreimbursed Amount that is not fully
refinanced by a Borrowing of Base Rate Loans for any reason, the Borrower
shall be deemed to have incurred from the Issuing Lender a Letter of
Credit Borrowing in the amount of the Unreimbursed Amount that is not so
refinanced, which Letter of Credit Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at the Default
Rate. In such event, each Lender's payment to the Administrative Agent for
the account of the Issuing Lender pursuant to Section 2.6(b)(ii) shall be
deemed payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a Letter of Credit Advance from such Lender
in satisfaction of its participation obligation under this Section 2.6.
(iv) Until a Lender funds its Revolving Loan or Letter of Credit
Advance pursuant to this Section 2.6(b) to reimburse the Issuing Lender
for any amount drawn under any Letter of Credit, interest in respect of
such Lender's Revolving Commitment Percentage of such amount shall be
solely for the account of the Issuing Lender.
(v) Each Lender's obligation to make Revolving Loans or Letter of
Credit Advances to reimburse the Issuing Lender for amounts drawn under
Letters of Credit, as contemplated by this Section 2.6(b), shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
that such Lender may have against the Issuing Lender, the Borrower or any
other Person for any reason whatsoever; (B) the occurrence or continuance
of a Default or Event of Default, (C) non-compliance with the conditions
set forth in Section 5.2, or (D) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided that the Issuing
Lender shall have complied with the provisions of Section 2.3(b)(ii). No
such making of a Letter of Credit Advance shall relieve or otherwise
impair the obligation of the Borrower to reimburse the Issuing Lender for
the amount of any payment made by the Issuing Lender under any Letter of
Credit, together with interest as provided herein.
(vi) If any Lender fails to make available to the Administrative
Agent for the account of the Issuing Lender any amount required to be paid
by such Lender pursuant to the foregoing provisions of this Section 2.6(b)
by the time specified in Section 2.6(b)(ii), the Issuing Lender shall be
entitled to recover from such Lender (acting through the Administrative
Agent), on demand, such amount with interest thereon for the period from
the date such payment is required to the date on which such payment is
32
immediately available to the Issuing Lender at a rate per annum equal to
the greater of Federal Funds Rate and a rate determined by the Issuing
Lender in accordance with banking industry rules on interbank
compensation. A certificate of the Issuing Lender submitted to any Lender
(through the Administrative Agent) with respect to any amounts owing under
this clause (vi) shall be conclusive absent manifest error.
(c) Repayment of Participations.
---------------------------
(i) At any time after the Issuing Lender has made a payment under
any Letter of Credit and has received from any Lender such Lender's Letter
of Credit Advance in respect of such payment in accordance with Section
2.6(b), if the Administrative Agent receives for the account of the
Issuing Lender any payment in respect of the related Unreimbursed Amount
or interest thereon (whether directly from the Borrower or otherwise,
including proceeds of Cash Collateral applied thereto by the
Administrative Agent), the Administrative Agent will distribute to such
Lender its Revolving Commitment Percentage thereof (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such Lender's Letter of Credit Advance was outstanding) in
the same funds as those received by the Administrative Agent.
(ii) If any payment received by the Administrative Agent for the
account of the Issuing Lender pursuant to Section 2.6(b)(i) is required to
be returned under any of the circumstances described in Section 11.7
(including pursuant to any settlement entered into by the Issuing Lender
in its discretion), each Lender shall pay to the Administrative Agent for
the account of the Issuing Lender its Revolving Commitment Percentage
thereof on demand of the Administrative Agent, plus interest thereon from
the date of such demand to the date such amount is returned by such
Lender, at a rate per annum equal to the Federal Funds Rate from time to
time in effect. The obligations of the Lenders under this clause shall
survive the payment in full of the Obligations and the termination of this
Credit Agreement.
(d) Obligations Absolute. The obligation of the Borrower to reimburse the
--------------------
Issuing Lender for each drawing under each Letter of Credit and to repay each
Letter of Credit Borrowing shall be absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Credit Agreement
under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit,
this Credit Agreement or any other Credit Document;
(ii) the existence of any claim, counterclaim, setoff, defense or
other right that the Borrower or any Subsidiary may have at any time
against any beneficiary or any transferee of such Letter of Credit (or any
Person for whom any such beneficiary or any such transferee may be
acting), the Issuing Lender or any other Person, whether in connection
with this Credit Agreement, the transactions contemplated hereby or by
such Letter of Credit or any agreement or instrument relating thereto, or
any unrelated transaction;
(iii) any draft, demand, certificate or other document presented
under such Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under such
Letter of Credit;
(iv) any payment by the Issuing Lender under such Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit; or any payment made by the
Issuing Lender under such Letter of Credit to any Person purporting to be
a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to
any beneficiary or any transferee of such Letter of Credit, including any
arising in connection with any proceeding under any Debtor Relief Law; or
33
(v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower or any Subsidiary.
The Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to such Borrower and, in the event of
any claim of noncompliance with the Borrower's instructions or other
irregularity, the Borrower will immediately notify the Issuing Lender. The
Borrower shall be conclusively deemed to have waived any such claim against the
Issuing Lender and its correspondents unless such notice is given as aforesaid.
(e) Role of the Issuing Lender in such Capacity. Each Lender and the
-------------------------------------------
Borrower agrees that, in paying any drawing under a Letter of Credit, the
Issuing Lender shall not have any responsibility to obtain any document (other
than any sight draft, certificates and documents expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document. None of the Issuing Lender, the Administrative Agent, any of
their respective Related Parties nor any correspondent, participant or assignee
of the Issuing Lender shall be liable to any Lender for (i) any action taken or
omitted in connection herewith at the request or with the approval of the
Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted
in the absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit or LOC Document. The Borrower hereby
assumes all risks of the acts or omissions of any beneficiary or transferee with
respect to such Borrower's use of any Letter of Credit; provided, however, that
this assumption is not intended to, and shall not, preclude the Borrower's
pursuing such rights and remedies as the Borrower may have against the
beneficiary or transferee at law or under any other agreement. None of the
Issuing Lender, the Administrative Agent, any of their respective Related
Parties nor any correspondent, participant or assignee of the Issuing Lender,
shall be liable or responsible for any of the matters described in clauses (i)
through (v) of Section 2.6(d); provided, however, that anything in such clauses
to the contrary notwithstanding, the Borrower may have a claim against the
Issuing Lender, and the Issuing Lender may be liable to the Borrower, to the
extent, but only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Borrower that such Borrower proves were
caused by the Issuing Lender's willful misconduct or gross negligence or the
Issuing Lender's willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing, the Issuing Lender may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary, and the Issuing Lender shall not be responsible for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason.
(f) Cash Collateral. (i) If the Issuing Lender has honored any full or
---------------
partial drawing request under any Letter of Credit and such drawing has resulted
in a Letter of Credit Borrowing, or (ii) if, as of the LOC Expiration Date, any
LOC Obligation for any reason remains outstanding, the Borrower shall, in each
case, immediately Cash Collateralize the then-Outstanding Amount of its LOC
34
Obligations. The Borrower hereby grants to the Administrative Agent, for the
benefit of the Issuing Lender and the Lenders, a security interest in all such
cash, deposit accounts and all balances therein and all proceeds of the
foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing
deposit accounts at Bank of America.
(g) Designation of other Credit Parties as Account Parties.
------------------------------------------------------
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including Section 2.2(a)(ii) hereof, a Letter of Credit issued hereunder may
contain a statement to the effect that such Letter of Credit is issued for the
account of a Credit Party other than the Borrower, provided that notwithstanding
such statement, the Borrower shall be the actual account party for all purposes
of this Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower's reimbursement obligations hereunder with respect to such
Letter of Credit.
(h) Renewal, Extension. The renewal or extension of any Letter of Credit
------------------
shall, for purposes hereof, be treated in all respects the same as the issuance
of a new Letter of Credit hereunder.
(i) Uniform Customs and Practices. Unless otherwise expressly agreed by
-----------------------------
the Issuing Lender and the Borrower when a Letter of Credit is issued (including
any such agreement applicable to an Existing Letter of Credit), (i) the rules of
the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the
Uniform Customs and Practice for Documentary Credits, as most recently published
by the International Chamber of Commerce at the time of issuance shall apply to
each commercial Letter of Credit.
(j) Indemnification; Nature of Issuing Lender's Duties.
--------------------------------------------------
(i) In addition to its other obligations under this Section 2.6, the
Borrower hereby agrees to protect, indemnify, pay and save the Issuing
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of
Credit or (B) the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not they be in
cipher; (D) for any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under a Letter of Credit or
of the proceeds thereof; and (E) for any consequences arising from causes
beyond the control of the Issuing Lender, including any Government Acts.
None of the above shall affect, impair, or prevent the vesting of the
Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuing Lender, under or in connection with any Letter of Credit or
the related certificates, if taken or omitted in good faith, shall not put
such Issuing Lender under any resulting liability to the Borrower or any
other Credit Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Issuing Lender against any and all risks involved in the issuance of the
Letters of Credit, all of which risks are hereby assumed by the Borrower
(on behalf of itself and each of the other Credit Parties), including any
and all Government Acts. The Issuing Lender shall not, in any way, be
liable for any failure by the Issuing Lender or anyone else to pay any
drawing under any Letter of Credit as a result of any Government Acts or
any other cause beyond the control of the Issuing Lender.
(iv) Nothing in this subsection (h) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (d)
above. The obligations of the Borrower under this subsection (h) shall
survive the termination of this Credit Agreement. No act or omissions of
any current or prior beneficiary of a Letter of Credit shall in any way
affect or impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (h), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing Lender
(A) arising solely out of the gross negligence or willful misconduct of
the Issuing Lender, as determined by a court of competent jurisdiction, or
(B) caused by the Issuing Lender's failure to pay under any Letter of
Credit after presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit, as determined by a court of
competent jurisdiction, unless such payment is prohibited by any law,
regulation, court order or decree.
(k) Responsibility of Issuing Lender. It is expressly understood and
--------------------------------
agreed that the obligations of the Issuing Lender hereunder to the Lenders are
only those expressly set forth in this Credit Agreement and that the Issuing
Lender shall be entitled to assume that the conditions precedent set forth in
Section 5.2 have been satisfied unless it shall have acquired actual knowledge
that any such condition precedent has not been satisfied; provided, however,
that nothing set forth in this Section 2.6 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section 2.6 in
the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit constituted gross negligence or
willful misconduct on the part of the Issuing Lender.
(l) Conflict with LOC Documents. In the event of any conflict between this
---------------------------
Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.7 Additional Provisions relating to Swingline Loans.
-------------------------------------------------
The Swingline Lender may, at any time, in its sole discretion, by written
notice to the Borrower and the Lenders, demand repayment of its Swingline Loans
by way of a Revolving Loan advance, in which case the Borrower shall be deemed
to have requested a Revolving Loan advance comprised solely of Base Rate Loans
in the amount of such Swingline Loans; provided, however, that any such demand
shall be deemed to have been given one Business Day prior to the Termination
Date and on the date of the occurrence of any Event of Default described in
Section 9.1 and upon acceleration of the indebtedness hereunder and the exercise
of remedies in accordance with the provisions of Section 9.2. Each Lender hereby
36
irrevocably agrees to make its Revolving Commitment Percentage of each such
Revolving Loan in the amount, in the manner and on the date specified in the
preceding sentence notwithstanding (I) the amount of such Borrowing may not
comply with the minimum amount for advances of Revolving Loans otherwise
required hereunder, (II) whether any conditions specified in Section 5.2 are
then satisfied, (III) whether a Default or an Event of Default then exists, (IV)
failure of any such request or deemed request for Revolving Loan to be made by
the time otherwise required hereunder, (V) whether the date of such Borrowing is
a date on which Revolving Loans are otherwise permitted to be made hereunder or
(VI) any termination of the Commitments relating thereto immediately prior to or
contemporaneously with such Borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above (including as
a result of the commencement of a proceeding under any Debtor Relief Law with
respect to the Borrower or any other Credit Party), then each Lender hereby
agrees that it shall forthwith purchase (as of the date such Borrowing would
otherwise have occurred, but adjusted for any payments received from the
Borrower on or after such date and prior to such purchase) from the Swingline
Lender such Participation Interests in the outstanding Swingline Loans as shall
be necessary to cause each such Lender to share in such Swingline Loans ratably
based upon its Revolving Commitment Percentage (determined before giving effect
to any termination of the Commitments pursuant to Section 3.4), provided that
(A) all interest payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date as of which the respective Participation
Interest is funded and (B) at the time any purchase of Participation Interests
pursuant to this sentence is actually made, the purchasing Lender shall be
required to pay to the Swingline Lender, to the extent not paid to the Swingline
Lender by the Borrower in accordance with the terms of Section 2.4(b), interest
on the principal amount of Participation Interests purchased for each day from
and including the day upon which such Borrowing would otherwise have occurred to
but excluding the date of payment for such Participation Interests, at the rate
equal to the Federal Funds Rate.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
3.1 Default Rate.
------------
Upon the request of the Required Lenders, while any Event of Default
exists, the Default Rate shall apply.
3.2 Extension and Conversion.
------------------------
The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another interest rate type; provided, however, that (i) except as
provided in Section 3.8, Eurodollar Rate Loans may be converted into Base Rate
Loans or extended as Eurodollar Rate Loans for new Interest Periods only on the
last day of the Interest Period applicable thereto, (ii) Eurodollar Rate Loans
may be extended, and Base Rate Loans may be converted into Eurodollar Rate
Loans, only if the conditions precedent set forth in Section 5.2 are satisfied
on the date of Continuation or Conversion, (iii) Loans extended as, or converted
into, Eurodollar Rate Loans shall be subject to the terms of the definition of
"Interest Period" and shall be in such minimum amounts as provided in Section
2.2(b), and (iv) any request for Continuation or Conversion of a Eurodollar Rate
Loan which shall fail to specify an Interest Period shall be deemed to be a
request for an Interest Period of one month. Each such Continuation or
Conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephonic notice promptly confirmed in writing) to the
office of the Administrative Agent specified in Section 11.1, or at such other
office as the Administrative Agent may designate in writing, prior to 11:00
a.m., on the Business Day of, in the case of the Conversion of a Eurodollar Rate
37
Loan into a Base Rate Loan, and on the third Business Day prior to, in the case
of the Continuation of a Eurodollar Rate Loan as, or Conversion of a Base Rate
Loan into, a Eurodollar Rate Loan, the date of the proposed Continuation or
Conversion, specifying the date of the proposed Continuation or Conversion, the
Loans to be so extended or converted, the types of Loans into which such Loans
are to be converted and, if appropriate, the applicable Interest Periods with
respect thereto. Each request for Continuation or Conversion shall be
irrevocable and shall constitute a representation and warranty by the Borrower
of the matters specified in Section 5.2. In the event the Borrower fails to
request Continuation or Conversion of any Eurodollar Rate Loan in accordance
with this Section, or any such Conversion or Continuation is not permitted or
required by this Section, then such Eurodollar Rate Loan shall be automatically
converted into a Base Rate Loan at the end of the Interest Period applicable
thereto. The Administrative Agent shall give each Lender notice as promptly as
practicable of any such proposed Continuation or Conversion affecting any
Revolving Loan.
3.3 Prepayments.
-----------
(a) Voluntary Prepayments. The Loans may be repaid in whole or in part
---------------------
without premium or penalty; provided that (i) Eurodollar Rate Loans and Quoted
Rate Swingline Loans may be prepaid only upon prior written notice to the
Administrative Agent received prior to 11:00 a.m. on the third Business Day
prior to such prepayment and must be accompanied by payment of accrued interest
thereon and any amounts owing under Section 3.12, (ii) Base Rate Loans may be
prepaid only upon prior written notice to the Administrative Agent received
prior to 11:00 a.m. on the Business Day of such prepayment, (iii) Swingline
Loans (other than Quoted Rate Swingline Loans) may be prepaid only upon prior
written notice to the Administrative Agent received prior to 12:00 Noon on the
Business Day of such prepayment, and (iv) partial prepayments shall be minimum
principal amounts of $1 million, in the case of Eurodollar Rate Loans, and
$500,000, in the case of Base Rate Loans, and in integral multiples of $250,000
in excess thereof.
(b) Mandatory Prepayments.
---------------------
(i) Committed Amounts. If at any time, (i) the aggregate principal
-----------------
amount of Obligations shall exceed the Aggregate Revolving Committed
Amount, (ii) the aggregate amount of LOC Obligations shall exceed the LOC
Committed Amount, or (iii) the aggregate amount of Swingline Loans shall
exceed the Swingline Committed Amount, the Borrower shall immediately make
payment on the Revolving Loans, on the Swingline Loans and/or to a cash
collateral account in respect of the LOC Obligations, in an amount
sufficient to eliminate the excess.
(ii) Asset Dispositions. The Obligations shall be immediately
------------------
prepaid as hereafter provided in an amount equal to one hundred percent
(100%) of the Net Cash Proceeds received from any Asset Disposition to the
extent (A) such Net Cash Proceeds are not reinvested in the same or
similar property or assets within twelve (12) months of the date of such
Asset Disposition, and (B) the aggregate amount of such Net Cash Proceeds
not reinvested in accordance with the foregoing clause (A) shall exceed
$10 million in any fiscal year; provided that no prepayment of Net Cash
Proceeds shall be required for any Asset Disposition with respect to the
Borrower's Investment in InteliStaf Holdings, Inc. or dividends paid in
respect of such Investment.
(iii) Debt Transactions. The Obligations shall be immediately
-----------------
prepaid as hereafter provided in an amount equal to one hundred percent
(100%) of the Net Cash Proceeds received from any Debt Transaction.
38
(iv) Equity Transactions. The Obligations shall be immediately
-------------------
prepaid as hereafter provided in an amount equal to one hundred percent
(100%) of the Net Cash Proceeds received from any Equity Transaction.
(c) Application. Voluntary prepayments shall be applied as specified by
-----------
the Borrower or, if not so specified, first to Base Rate Loans, then to
Eurodollar Rate Loans and Quoted Rate Swingline Loans in direct order of
Interest Period maturities and then to a cash collateral account to secure LOC
Obligations. Mandatory prepayments shall be applied first to Base Rate Loans,
then to Eurodollar Rate Loans and Quoted Rate Swingline Loans in direct order of
Interest Period maturities and then to a cash collateral account to secure LOC
Obligations (with a corresponding reduction in the Aggregate Revolving Committed
Amount in an amount equal to the aggregate amount of prepayments required in
respect of Asset Dispositions, Debt Transactions and Equity Transactions under
clauses (ii), (iii) and (iv), respectively, of Section 3.3(b) hereof.
3.4 Reduction and Termination of Commitments.
----------------------------------------
(a) Voluntary Reduction of Commitments. The Commitments may be terminated
----------------------------------
or permanently reduced in whole or in part by the Borrower upon three (3)
Business Days' prior written notice to the Administrative Agent, provided that
(i) after giving effect to any voluntary reduction the aggregate amount of
Obligations shall not exceed the Aggregate Revolving Committed Amount, as
reduced, and (ii) partial reductions shall be in a minimum principal amount of
$5 million, and in integral multiples of $1 million in excess thereof.
(b) Mandatory Reduction of Commitments. The Aggregate Revolving Committed
----------------------------------
Amount shall be permanently reduced by the aggregate amount of prepayments
required in respect of Asset Dispositions and Debt Transactions under clauses
(ii) and (iii), respectively, of Section 3.3(b) hereof.
(c) Termination of Commitments. The Commitments shall terminate on the
--------------------------
Termination Date.
3.5 Fees.
----
(a) Commitment Fee. In consideration of the Revolving Commitments, the
Borrower agrees to pay to the Administrative Agent for the ratable benefit of
the Lenders a commitment fee (the "Commitment Fee") equal to the Applicable
Percentage per annum on the average daily unused amount of the Aggregate
Revolving Committed Amount for the applicable period. The Commitment Fee shall
be payable quarterly in arrears on the last Business Day of each March, June,
September and December for the immediately preceding quarter (or portion
thereof) beginning with the first such date to occur after the Closing Date (as
well as on the Termination Date). For purposes of computation of the Commitment
Fee, (i) Swingline Loans shall be counted toward, and considered, usage of the
Aggregate Revolving Committed Amount and (ii) LOC Obligations shall be counted
toward and considered usage of the Aggregate Revolving Committed Amount.
(b) Letter of Credit Fees.
---------------------
(i) Letter of Credit Fee. The Borrower shall pay to the
--------------------
Administrative Agent for the account of each Lender in accordance with its
Revolving Commitment Percentage a Letter of Credit fee (the "Letter of
Credit Fee") (i) for each commercial Letter of Credit equal to the
Applicable Percentage times the daily maximum amount available to be drawn
under such Letter of Credit (whether or not such maximum amount is then in
effect under such Letter of Credit), and (ii) for each standby Letter of
Credit equal to the Applicable Percentage times the daily maximum amount
available to be drawn under such Letter of Credit (whether or not such
maximum amount is then in effect under such Letter of Credit). Letter of
39
Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii)
due and payable on the first Business Day after the end of each March,
June, September and December, commencing with the first such date to occur
after the issuance of such Letter of Credit, on the LOC Expiration Date
and thereafter on demand. If there is any change in the Applicable
Percentage during any quarter, the daily maximum amount of each standby
Letter of Credit shall be computed and multiplied by the Applicable
Percentage separately for each period during such quarter that such
Applicable Percentage was in effect.
(ii) Issuing Lender Fees. The Borrower shall pay directly to the
-------------------
Issuing Lender for its own account a fronting fee (i) with respect to each
commercial Letter of Credit, at the rate specified in the Administrative
Agent's Engagement Letter and payable upon the issuance of such Letter of
Credit, (ii) with respect to any amendment of a commercial Letter of
Credit increasing the amount of such Letter of Credit, at a rate
separately agreed between the Borrower and the Issuing Lender, computed on
the amount of such increase, and payable upon the effectiveness of such
amendment and (iii) with respect to each standby Letter of Credit, at the
rate per annum specified in the Administrative Agent's Engagement Letter,
computed on the actual daily maximum amount available to be drawn under
such Letter of Credit (whether or not such maximum amount is then in
effect under such Letter of Credit) and on a quarterly basis in arrears,
and due and payable on the first Business Day after the end of each March,
June, September and December, commencing with the first such date to occur
after the issuance of such Letter of Credit, on the LOC Expiration Date
and thereafter on demand. In addition, the Borrower shall pay directly to
the Issuing Lender for its own account the customary issuance,
presentation, amendment and other processing fees, and other standard
costs and charges, of the Issuing Lender relating to letters of credit as
from time to time in effect. Such customary fees and standard costs and
charges are due and payable on demand and are nonrefundable.
(c) Administrative Fees. The Borrower agrees to pay to the Administrative
-------------------
Agent, for its own account, the fees referred to in the Administrative Agent's
Engagement Letter.
3.6 Capital Adequacy.
----------------
If any Lender or the Issuing Lender determines that any Change in Law
affecting such Lender or the Issuing Lender or any Lending Office of such Lender
or such Lender's or the Issuing Lender's holding company, if any, regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender's or the Issuing Lender's capital or on the capital of such
Lender's or the Issuing Lender's holding company, if any, as a consequence of
this Credit Agreement, the Commitments of such Lender or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Lender, to a level below that which such Lender or
the Issuing Lender or such Lender's or the Issuing Lender's holding company
could have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Lender's policies and the policies of such Lender's or
the Issuing Lender's holding company with respect to capital adequacy), then
from time to time the Borrower will pay to such Lender or the Issuing Lender, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding
company for any such reduction suffered.
40
3.7 Limitation on Eurodollar Rate Loans.
-----------------------------------
If on or prior to the first day of any Interest Period for any Eurodollar
Rate Loan:
(a) the Administrative Agent reasonably determines (which
determination shall be conclusive) that by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Administrative Agent that the Eurodollar Rate
will not adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Rate Loans for such Interest Period;
then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Rate Loans, Continue Eurodollar Rate
Loans, or to Convert Base Rate Loans into Eurodollar Rate Loans with respect to
the affected currency.
3.8 Illegality.
----------
If any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to
determine or charge interest rates based upon the Eurodollar Rate, or any
Governmental Authority has imposed material restrictions on the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to the Borrower through
the Administrative Agent, any obligation of such Lender to make or continue
Eurodollar Rate Loans or to convert Loans that are Base Rate Loans to Eurodollar
Rate Loans shall be suspended until such Lender notifies the Administrative
Agent and the Borrower that the circumstances giving rise to such determination
no longer exist. Upon receipt of such notice, the Borrower shall, upon demand
from such Lender (with a copy to the Administrative Agent), prepay or, if
applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans,
either on the last day of the Interest Period therefor, if such Lender may
lawfully continue to maintain such Eurodollar Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such
Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower
shall also pay accrued interest on the amount so prepaid or converted.
3.9 Requirements of Law.
-------------------
(a) Increased Costs Generally. If any Change in Law shall:
-------------------------
(i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets
of, deposits with or for the account of, or credit extended or
participated in by, any Lender (except any reserve requirement
contemplated by Section 3.9(e)) or the Issuing Lender;
(ii) subject any Lender or the Issuing Lender to any tax of any kind
whatsoever with respect to this Credit Agreement, any Letter of Credit,
any participation in a Letter of Credit or any Eurodollar Rate Loan made
by it, or change the basis of taxation of payments to such Lender or the
Issuing Lender in respect thereof (except for Indemnified Taxes or Other
Taxes covered by Section 3.1 and the imposition of, or any change in the
rate of, any Excluded Tax payable by such Lender or the Issuing Lender);
or
41
(iii) impose on any Lender or the Issuing Lender or the London
interbank market any other condition, cost or expense affecting this
Credit Agreement or Eurodollar Rate Loans made by such Lender or any
Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its
obligation to make any such Loan), or to increase the cost to such Lender or the
Issuing Lender of participating in, issuing or maintaining any Letter of Credit
(or of maintaining its obligation to participate in or to issue any Letter of
Credit), or to reduce the amount of any sum received or receivable by such
Lender or the Issuing Lender hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or the Issuing Lender, the
Borrower will pay to such Lender or the Issuing Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Lender, as the case may be, for such additional costs incurred or reduction
suffered. If any Lender requests compensation by the Borrower under this Section
3.9, the Borrower may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender to make or Continue
Eurodollar Rate Loans, or to Convert Base Rate Loans into Eurodollar Rate Loans,
until the event or condition giving rise to such request ceases to be in effect
(in which case the provisions of Section 3.10 shall be applicable); provided
that such suspension shall not affect the right of such Lender to receive the
compensation so requested. Each Lender shall promptly notify the Borrower and
the Administrative Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Lender to compensation pursuant to this
Section 3.9 and will designate a different applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise disadvantageous to
it. Any Lender claiming compensation under this Section 3.9 shall furnish to the
Borrower and the Administrative Agent a statement setting forth the additional
amount or amounts to be paid to it hereunder which shall be conclusive in the
absence of manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
(b) Certificates for Reimbursement. A certificate of a Lender or the
------------------------------
Issuing Lender setting forth the amount or amounts necessary to compensate such
Lender or the Issuing Lender or its holding company, as the case may be, as
specified in subsection (a) or (b) of this Section and delivered to the Borrower
shall be conclusive absent manifest error. The Borrower shall pay such Lender or
the Issuing Lender, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(c) Delay in Requests. Failure or delay on the part of any Lender or the
-----------------
Issuing Lender to demand compensation pursuant to the foregoing provisions of
this Section shall not constitute a waiver of such Lender's or the Issuing
Lender's right to demand such compensation, provided that the Borrower shall not
be required to compensate a Lender or the Issuing Lender pursuant to the
foregoing provisions of this Section for any increased costs incurred or
reductions suffered more than nine months prior to the date that such Lender or
the Issuing Lender, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Lender's intention to claim compensation therefor (except that, if
the Change in Law giving rise to such increased costs or reductions is
retroactive, then the nine-month period referred to above shall be extended to
include the period of retroactive effect thereof).
3.10 Treatment of Affected Loans.
---------------------------
If the obligation of any Lender to make any Eurodollar Rate Loan or to
Continue, or to Convert Base Rate Loans into, Eurodollar Rate Loans shall be
42
suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Rate
Loans shall be automatically Converted into Base Rate Loans on the last day(s)
of then current Interest Period(s) for such Eurodollar Rate Loans (or, in the
case of a Conversion required by Section 3.8 hereof, on such earlier date as
such Lender may specify to the Borrower with a copy to the Administrative Agent)
and, unless and until such Lender gives notice as provided below that the
circumstances specified in Section 3.8 or 3.9 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Rate Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Rate Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Rate Loans shall be made or Continued instead as Base
Rate Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Eurodollar Rate Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 3.8 or 3.9 hereof that gave
rise to the Conversion of such Lender's Eurodollar Rate Loans pursuant to this
Section 3.10 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Rate Loans made by
other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Rate Loans, to the extent necessary so
that, after giving effect thereto, all Loans held by the Lenders holding
Eurodollar Rate Loans and by such Lender are held pro rata (as to principal
amounts, interest rate basis, and Interest Periods) in accordance with their
respective Commitments.
3.11 Taxes.
-----
(a) Payments Free of Taxes. Any and all payments by or on account of any
----------------------
obligation of the Borrower hereunder or under any other Credit Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes, provided that if the Borrower shall be required by
applicable law to deduct any Indemnified Taxes (including any Other Taxes) from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Lender, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall timely pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable law.
(b) Payment of Other Taxes by the Borrower. Without limiting the
--------------------------------------
provisions of subsection (a) above, the Borrower shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the
-------------------------------
Administrative Agent, each Lender and the Issuing Lender, within 10 days after
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative
Agent, such Lender or the Issuing Lender, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a Lender or
the Issuing Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Lender, shall be conclusive absent manifest error.
43
(d) Evidence of Payments. As soon as practicable after any payment of
--------------------
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.
(e) Status of Lenders. Any Foreign Lender that is entitled to an exemption
-----------------
from or reduction of withholding tax under the law of the jurisdiction in which
the Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any other
Credit Document shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by applicable law or reasonably
requested by the Borrower or the Administrative Agent, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate of withholding. In
addition, any Lender, if requested by the Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to backup withholding or information reporting requirements.
Without limiting the generality of the foregoing, in the event that the Borrower
is resident for tax purposes in the United States, any Foreign Lender shall
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Credit Agreement (and from time to
time thereafter upon the request of the Borrower or the Administrative Agent,
but only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the
United States is a party,
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
(iii) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a "bank"
within the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent
shareholder" of the Borrower within the meaning of section 881(c)(3)(B) of
the Code, or (C) a "controlled foreign corporation" described in section
881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue
Service Form W-8BEN, or
(iv) any other form prescribed by applicable law as a basis for
claiming exemption from or a reduction in United States Federal
withholding tax duly completed together with such supplementary
documentation as may be prescribed by applicable law to permit the
Borrower to determine the withholding or deduction required to be made.
(f) Treatment of Certain Refunds. If the Administrative Agent, any Lender
----------------------------
or the Issuing Lender determines, in its sole discretion, that it has received a
refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section, it shall pay to the Borrower an amount equal to such
44
refund (but only to the extent of indemnity payments made, or additional amounts
paid, by the Borrower under this Section with respect to the Taxes or Other
Taxes giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent, such Lender or the Issuing Lender, as the case may be, and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that the Borrower, upon the
request of the Administrative Agent, such Lender or the Issuing Lender, agrees
to repay the amount paid over to the Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent, such Lender or the Issuing Lender in the event the
Administrative Agent, such Lender or the Issuing Lender is required to repay
such refund to such Governmental Authority. This subsection shall not be
construed to require the Administrative Agent, any Lender or the Issuing Lender
to make available its tax returns (or any other information relating to its
taxes that it deems confidential) to the Borrower or any other Person.
3.12 Compensation.
------------
Upon the request of any Lender (with a copy to the Administrative Agent),
the Borrower shall pay to such Lender such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender) to compensate it for any
loss, cost, or expense (including loss of anticipated profits) incurred by it as
a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Rate Loan for
any reason on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by the Borrower for any reason (including the failure of
any condition precedent specified in Section 5 to be satisfied) to borrow,
Convert, Continue, or prepay a Eurodollar Rate Loan on the date for such
Borrowing, Conversion, Continuation, or prepayment specified in the relevant
notice of Borrowing, prepayment, Continuation, or Conversion under this Credit
Agreement.
With respect to Eurodollar Rate Loans, such indemnification may include an
amount equal to the excess, if any, of (a) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, Converted or
Continued, for the period from the date of such prepayment or of such failure to
borrow, Convert or Continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, Convert or Continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such Eurodollar Rate Loans provided for
herein (excluding, however, the Applicable Percentage included therein, if any)
over (b) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank Eurodollar
market. The covenants of the Borrower set forth in this Section 3.12 shall
survive the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder.
3.13 Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) Designation of a Different Lending Office. If any Lender requests
-----------------------------------------
compensation under Section 3.12, or the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 3.11, or if any Lender gives a notice pursuant to
Section 3.8, then such Lender shall use reasonable efforts to designate a
different Lending Office for funding or booking its Loans hereunder or to assign
its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 3.11 or 3.5,
as the case may be, in the future, or eliminate the need for the notice pursuant
to Section 3.8, as applicable, and (ii) in each case, would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender in connection with any such
designation or assignment.
45
(b) Replacement of Lenders. If any Lender requests compensation under
----------------------
Section 3.08, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 3.11, the Borrower may replace such Lender in accordance with Section
11.11.
3.14 Survival Losses.
---------------
All of the Borrower's obligations under Sections 3.6, 3.8, 3.9, 3.11, 3.12
or 3.13 shall survive termination of the Aggregate Commitments and repayment of
all other Obligations hereunder.
3.15 Pro Rata Treatment.
------------------
Except to the extent otherwise provided herein:
(a) Obligations. Each Revolving Loan advance, each payment or
-----------
prepayment of principal of any Revolving Loan, each payment of interest on
any Revolving Loan, each payment on or in respect of the LOC Obligations
and each payment of interest thereon, each payment of the Commitment Fee,
each payment of the Letter of Credit Fee, each reduction of Aggregate
Revolving Committed Amount, and each conversion or extension of Revolving
Loan shall be allocated pro rata among the Lenders according to the
respective Revolving Commitment Percentages of the Lenders.
(b) Advances. No Lender shall be responsible for the failure or
--------
delay by any other Lender in its obligation to make its ratable share of a
Borrowing hereunder; provided, however, that the failure of any Lender to
fulfill its obligations hereunder shall not relieve any other Lender of
its obligations hereunder. Unless the Administrative Agent shall have been
notified (i) by any Lender prior to the date of any requested Borrowing
that such Lender does not intend to make available to the Administrative
Agent its ratable share of such Borrowing to be made on such date or (ii)
by the Borrower prior to the date of any payment that the Borrower does
not intend to make such payment available to the Administrative Agent, the
Administrative Agent may assume that such Lender or the Borrower, as
applicable, has made such amount available to the Administrative Agent on
the appropriate date, and the Administrative Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to do
so) make available to the Borrower or the Lenders, as applicable, a
corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent, the Administrative Agent shall be
able to recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent will promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding amount
to the Administrative Agent. The Administrative Agent shall also be
entitled to recover from the Lender or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent
to the Borrower to the date such corresponding amount is recovered by the
Administrative Agent at a per annum rate equal to (i) from the Borrower at
the applicable rate for the applicable Borrowing pursuant to the Notice of
Borrowing and (ii) from a Lender, if paid within two (2) Business Days of
the date such amount was made available by the Administrative Agent to the
Borrower, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate.
46
3.16 Sharing of Payments.
-------------------
(a) Lenders. The Lenders agree that, in the event that any Lender shall
-------
obtain payment in respect of any Revolving Loan, LOC Obligation or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of the Bankruptcy Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly purchase from the other
Lenders a participation in such Revolving Loan, LOC Obligation and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all the Lenders share such payment in
accordance with the respective Revolving Commitment Percentages of the Lenders,
as provided for in this Credit Agreement. The Lenders further agree that if
payment to any such Lender obtained by such Lender through the exercise of a
right of setoff, banker's lien, counterclaim or other event as aforesaid shall
be rescinded or must otherwise be restored, each Lender which shall have shared
the benefit of such payment shall, by repurchase of a participation theretofore
sold, return its share of that benefit (together with its share of any accrued
interest payable with respect thereto) to each such Lender whose payment shall
have been rescinded or otherwise restored. The Borrower agrees that any Lender
so purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Revolving Loan, LOC Obligation or other obligation in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section 3.16 applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders under this Section 3.16 to share in the benefits of any recovery
on such secured claim.
(b) Lenders and Administrative Agent. Except as otherwise expressly
--------------------------------
provided in this Credit Agreement, if any Lender or the Administrative Agent
shall fail to remit to the Administrative Agent or any other Lender an amount
payable by such Lender or the Administrative Agent to the Administrative Agent
or such other Lender pursuant to this Credit Agreement on the date when such
amount is due, such payments shall be made together with interest thereon for
each date from the date such amount is due until the date such amount is paid to
the Administrative Agent or such other Lender at a rate per annum equal to the
Federal Funds Rate.
3.17 Payments, Computations, Etc.
----------------------------
(a) Generally. Except as otherwise specifically provided herein, all
---------
payments shall be made to the Administrative Agent in Dollars in
immediately available funds without condition or deduction for any
counterclaim, defense, recoupment, setoff or withholding of any kind, at
the Administrative Agent's Office specified in Section 11.1 not later than
2:00 P.M. on the date when due. Payments received after such time shall be
deemed to have been received on the next succeeding Business Day. Such
Administrative Agent may (but shall not be obligated to) debit the amount
of any such payment which is not made by such time to any ordinary deposit
account of the Borrower maintained with such Administrative Agent (with
notice to the Borrower). The Borrower shall, at the time it makes any
payment under this Credit Agreement, specify to the Administrative Agent
the Loans, LOC Obligations, Fees, interest or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the
event that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Administrative Agent shall
distribute such payment to the Lenders in such manner as the
Administrative Agent may determine to be appropriate in respect of
obligations owing by the Borrower hereunder, subject to the terms of
Section 3.16(a) and Section 3.17(b)). The Administrative Agent will
47
distribute such payments to the Lenders if any such payment is received
prior to 12:00 Noon on a Business Day in like funds as received prior to
the end of such Business Day and otherwise such Administrative Agent will
distribute such payment to the Lenders entitled thereto on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of
interest and Fees for the period of such extension). Except as expressly
provided otherwise herein, all computations of interest and fees shall be
made on the basis of the actual number of days elapsed over a year of 360
days, except with respect to computation of interest on Base Rate Loans
determined by reference to the Prime Rate which shall be calculated based
on a year of 365 or 366 days, as appropriate. Interest shall accrue from
and include the date of Borrowing, but exclude the date of payment.
(b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless
-------------------------------------------------------
the Administrative Agent shall have received notice from a Lender prior to
the proposed date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made
such share available on such date in accordance with Section 2.6 and may,
in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its
share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount in
immediately available funds with interest thereon, for each day from and
including the date such amount is made available to the Borrower to but
excluding the date of payment to the Administrative Agent, at (A) in the
case of a payment to be made by such Lender, the greater of the Federal
Funds Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation and (B) in the case
of a payment to be made by the Borrower, the interest rate applicable to
Base Rate Loans. If the Borrower and such Lender shall pay such interest
to the Administrative Agent for the same or an overlapping period, the
Administrative Agent shall promptly remit to the Borrower the amount of
such interest paid by the Borrower for such period. If such Lender pays
its share of the applicable Borrowing to the Administrative Agent, then
the amount so paid shall constitute such Lender's Loan included in such
Borrowing. Any payment by the Borrower shall be without prejudice to any
claim the Borrower may have against a Lender that shall have failed to
make such payment to the Administrative Agent.
(ii) Payments by Borrower; Presumptions by Administrative Agent.
----------------------------------------------------------
Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Lender
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute
to the Lenders or the Issuing Lender, as the case may be, the amount due.
In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or the Issuing Lender, as the case may be, severally
agrees to repay to the Administrative Agent forthwith on demand the amount
so distributed to such Lender or the Issuing Lender, in immediately
available funds with interest thereon, for each day from and including the
date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Rate and
a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrower with respect
to any amount owing under this subsection (b) shall be conclusive, absent
manifest error.
48
(c) Failure to Satisfy Conditions Precedent. If any Lender makes available
---------------------------------------
to the Administrative Agent funds for any Loan to be made by such Lender as
provided in the foregoing provisions hereunder, and such funds are not made
available to the Borrower by the Administrative Agent because the conditions to
the applicable Credit Extension set forth in Section 5 are not satisfied or
waived in accordance with the terms hereof, the Administrative Agent shall
return such funds (in like funds as received from such Lender) to such Lender,
without interest.
(d) Obligation of the Lenders Several. The obligations of the Lenders
---------------------------------
hereunder to make Loans, to fund participations in Letters of Credit and
Swingline Loans and to make payments pursuant to Section 11.5(c) are several and
not joint. The failure of any Lender to make any Loan, to fund any such
participation or to make any payment under Section 11.5(c) on any date required
hereunder shall not relieve any other Lender of its corresponding obligation to
do so on such date, and no Lender shall be responsible for the failure of any
other Lender to so make its Loan, to purchase its participation or to make its
payment under Section 11.5(c).
(e) Allocation of Payments After Event of Default. Notwithstanding any
---------------------------------------------
other provisions of this Credit Agreement to the contrary, after the occurrence
and during the continuance of an Event of Default, all amounts collected or
received on or in respect of the Obligations (or other amounts owing under the
Credit Documents in connection therewith) shall be paid over or delivered as
follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys'
fees) of the Administrative Agent incurred in connection with the
execution of its duties as Administrative Agent in exercising or
attempting to exercise rights and remedies in respect of the
collateral and all protective advances made with respect thereto;
SECOND, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys'
fees) of the Administrative Agent in connection with enforcing the
rights and remedies of the Lenders under the Credit Documents and
any protective advances made with respect thereto;
THIRD, to payment of any fees owed to the Administrative
Agent;
FOURTH, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys'
fees) of each of the Lenders hereunder in connection with enforcing
its rights under the Credit Documents or otherwise with respect to
the Guaranteed Obligations owing to such Lender;
FIFTH, to the payment of all accrued interest and fees on or
in respect of the Guaranteed Obligations;
SIXTH, to the payment of the outstanding principal amount (or
termination or make-whole amounts) of the Guaranteed Obligations
(including the payment or cash collateralization of the outstanding
LOC Obligations);
SEVENTH, to all other Guaranteed Obligations and other
obligations which shall have become due and payable under the Credit
Documents otherwise and not repaid pursuant to clauses "FIRST"
through "SIXTH" above; and
49
EIGHTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to the
next succeeding category; and (ii) except as otherwise provided, the
Lenders shall receive amounts ratably in accordance with their respective
pro rata share (based on the proportion that then outstanding Guaranteed
Obligations held by such Lenders bears to the aggregate amount of
Guranteed Obligations then outstanding) of amounts available to be applied
pursuant to clauses "FOURTH", "FIFTH", "SIXTH" and "SEVENTH" above; and
(iii) to the extent that any amounts available for distribution pursuant
to clause "SIXTH" above are attributable to the issued but undrawn amount
of outstanding Letters of Credit, such amounts shall be held by the
Administrative Agent in a cash collateral account and applied (A) first,
to reimburse the Issuing Lender for any drawings under such Letters of
Credit and (B) then, following the expiration of all Letters of Credit, to
all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 3.17(b).
3.18 Evidence of Debt.
----------------
(a) Each Lender shall maintain an account or accounts evidencing each
Revolving Loan made by such Lender to the Borrowers from time to time, including
the amounts of principal and interest payable and paid to such Lender from time
to time under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.
(b) The Administrative Agent shall maintain the Register pursuant to
Section 11.3(c)(i), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (A) the amount, type and Interest
Period of each such Revolving Loan hereunder, (B) the amount of any principal or
interest due and payable or to become due and payable to each Lender hereunder
and (C) the amount of any sum received by the Administrative Agent hereunder
from or for the account of the Borrower and each Lender's share thereof. The
Administrative Agent will make reasonable efforts to maintain the accuracy of
the subaccounts referred to in the preceding sentence and to promptly update
such subaccounts from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts maintained
pursuant to subsection (b) of this Section 3.18 (and, if consistent with the
entries of the Administrative Agent, subsection (a)) shall be prima facie
evidence of the existence and amounts of the obligations of the Credit Parties
therein recorded; provided, however, that the failure of any Lender or the
Administrative Agent to maintain any such account, such Register or such
subaccount, as applicable, or any error therein, shall not in any manner affect
the obligation of the Credit Parties to repay the Obligations and other amounts
owing hereunder to such Lender.
SECTION 4
GUARANTY
--------
4.1 The Guaranty.
------------
(a) Each of the Guarantors hereby jointly and severally guarantees to the
Administrative Agent and each of the holders of the Guaranteed Obligations, as
50
primary obligor and not as surety, the prompt payment of the Guaranteed
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) in accordance with the terms of such
extension or renewal.
(b) Notwithstanding any provision to the contrary contained herein, in any
other of the Credit Documents, Hedging Agreements, Treasury Management
Agreements or other documents relating to the Guaranteed Obligations, the
obligations of each Guarantor under this Credit Agreement and the other Credit
Documents shall be limited to the aggregate amount equal to the largest amount
that would not render such obligations subject to avoidance under any Debtor
Relief Laws . In such case or otherwise at the request of the Administrative
Agent, each Credit Party shall take such action and shall execute and deliver
all such further documents required by the Administrative Agent to cause the
obligations of such Guarantor to be enforceable to the extent required by this
Agreement.
4.2 Obligations Unconditional.
-------------------------
The obligations of the Guarantors under Section 4.1 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Credit Documents, Hedging Agreements,
Treasury Management Agreements or any other documents relating to the Guaranteed
Obligations, or any substitution, compromise, release, impairment or exchange of
any other guarantee of or security for any of the Guaranteed Obligations, and,
to the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 4.2 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Each Guarantor agrees that
such Guarantor shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Guarantor for amounts paid under
this Section 4 until such time as the Guaranteed Obligations have been
irrevocably paid in full and the commitments relating thereto have been expired
or been terminated. Without limiting the generality of the foregoing, it is
agreed that, to the fullest extent permitted by law, the occurrence of any one
or more of the following shall not alter or impair the liability of any
Guarantor hereunder which shall remain absolute and unconditional as described
above:
(a) at any time or from time to time, without notice to any Guarantor, the
time for any performance of or compliance with any of the Guaranteed Obligations
shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the
Credit Documents or other documents relating to the Guaranteed Obligations or
any other agreement or instrument referred to therein shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the Credit
Documents or other documents relating to the Guaranteed Obligations or any other
agreement or instrument referred to therein shall be waived or any other
guarantee of any of the Guaranteed Obligations or any security therefor shall be
released, impaired or exchanged in whole or in part or otherwise dealt with;
51
(d) any Lien granted to, or in favor of, the Administrative Agent or any
holders of the Guaranteed Obligations as security for any of the Guaranteed
Obligations shall fail to attach or be perfected; or
(e) any of the Guaranteed Obligations shall be determined to be void or
voidable (including for the benefit of any creditor of any Guarantor) or shall
be subordinated to the claims of any Person (including any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest notice of acceptance
of the guaranty given hereby and of extensions of credit that may constitute
obligations guaranteed hereby, notices of amendments, waivers and supplements to
the Credit Documents and other documents relating to the Guaranteed Obligations,
or the compromise, release or exchange of Collateral or security interests, and
all notices whatsoever, and any requirement that the Administrative Agent or any
holder of the Guaranteed Obligations exhaust any right, power or remedy or
proceed against any Person under any of the Credit Documents or any other
documents relating to the Guaranteed Obligations or any other documents relating
to the Guaranteed Obligations or any other agreement or instrument referred to
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
4.3 Reinstatement.
-------------
Neither the Guarantors' obligations hereunder nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of the Borrower, by reason of the Borrower's bankruptcy or
insolvency or by reason of the invalidity or unenforceability of all or any
portion of the Guaranteed Obligations. The obligations of the Guarantors under
this Section 4 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of any Person in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings
pursuant to any Debtor Relief Law or otherwise, and each Guarantor agrees that
it will indemnify the Administrative Agent and each holder of the Guaranteed
Obligations on demand for all reasonable costs and expenses (including
reasonable fees, expenses and disbursements of any law firm or other counsel)
incurred by the Administrative Agent or such holder of the Guaranteed
Obligations in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any Debtor Relief Law.
4.4 Certain Additional Waivers.
--------------------------
Each Guarantor acknowledges and agrees that (a) the guaranty given hereby
may be enforced without the necessity of resorting to or otherwise exhausting
remedies in respect of any other security or collateral interests, and without
the necessity at any time of having to take recourse against the Borrower
hereunder or against any collateral securing the Guaranteed Obligations or
otherwise, (b) it will not assert any right to require the action first be taken
against the Borrower or any other Person (including any co-guarantor) or pursuit
of any other remedy or enforcement any other right and (c) nothing contained
herein shall prevent or limit action being taken against the Borrower hereunder,
under the other Credit Documents or the other documents and agreements relating
52
to the Guaranteed Obligations or from foreclosing on any security or collateral
interests relating hereto or thereto, or from exercising any other rights or
remedies available in respect thereof, if neither the Borrower nor the
Guarantors shall timely perform their obligations, and the exercise of any such
rights and completion of any such foreclosure proceedings shall not constitute a
discharge of the Guarantors' obligations hereunder unless as a result thereof,
the Guaranteed Obligations shall have been paid in full and the commitments
relating thereto shall have expired or been terminated, it being the purpose and
intent that the Guarantors' obligations hereunder be absolute, irrevocable,
independent and unconditional under all circumstances. Further, each of the
Guarantors expressly waives any right to the benefits of N.C. Gen. Stat.
ss.ss.26-7 through 26-9, inclusive, to the extent applicable.
4.5 Remedies.
--------
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Administrative Agent and the
holders of the Guaranteed Obligations, on the other hand, the Guaranteed
Obligations may be declared to be forthwith due and payable as provided in
Section 9.2 (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 9.2) for purposes of Section 4.1
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing the Guaranteed Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Guaranteed Obligations being deemed to have
become automatically due and payable), the Guaranteed Obligations (whether or
not due and payable by any other Person) shall forthwith become due and payable
by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and
agree that the Guaranteed Obligations are secured in accordance with the terms
of the Collateral Documents and that the Lenders may exercise their remedies
thereunder in accordance with the terms thereof.
4.6 Rights of Contribution.
----------------------
The Guarantors hereby agree as among themselves that, in connection with
payments made hereunder, each Guarantor shall have a right of contribution from
each other Guarantor in accordance with applicable Law. Such contribution rights
shall be subordinate and subject in right of payment to the Guaranteed
Obligations until such time as the Guaranteed Obligations have been irrevocably
paid in full and the commitments relating thereto shall have expired or been
terminated, and none of the Guarantors shall exercise any such contribution
rights until the Guaranteed Obligations have been irrevocably paid in full and
the commitments relating thereto shall have expired or been terminated.
4.7 Guarantee of Payment; Continuing Guarantee.
------------------------------------------
The guarantee in this Section 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Guaranteed
Obligations whenever arising.
SECTION 5
CONDITIONS
----------
5.1 Closing Conditions.
------------------
The obligation of the Lenders to enter into this Credit Agreement and to
make the initial Extensions of Credit shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):
53
(a) Executed Credit Documents. Receipt by the Administrative Agent
-------------------------
of: (i) multiple counterparts of this Credit Agreement, (ii) a Revolving
Note for each Lender and (iii) multiple counterparts of the Collateral
Documents, in each case, dated as of the Closing Date, duly executed by a
Executive Officer of each Credit Party party thereto and by each Lender
party thereto, and in form and substance satisfactory to the
Administrative Agent and each of the Lenders.
(b) Legal Opinions. Receipt by the Administrative Agent of multiple
--------------
counterparts of opinions of counsel for the Credit Parties relating to the
Credit Documents and the transactions contemplated therein, in form and
substance satisfactory to the Administrative Agent and each of the
Lenders, and including, among other things, opinions regarding
enforceability of the Credit Documents and the perfection of the security
interests created thereby.
(c) Financial Information. Receipt by the Lenders of such financial
---------------------
information regarding the members of the Consolidated Group as may be
requested by, and in each case in form and substance satisfactory to, the
Administrative Agent and the Lenders.
(d) Personal Property Collateral. Receipt by the Administrative
----------------------------
Agent of the following:
(i) UCC Financing Statements. Duly executed UCC financing
------------------------
statements for each jurisdiction as is necessary or appropriate, in
the Administrative Agent's discretion, to perfect the security
interests in the Collateral.
(ii) Certificated Interests. Original certificates evidencing
----------------------
the Capital Stock which is the subject of the Pledge Agreement,
together with undated stock transfer powers executed in blank.
(e) Absence of Legal Proceedings. There shall not exist any action,
----------------------------
suit, investigation or proceeding pending in any court or before any
arbitrator or Governmental Authority which could reasonably be expected to
have a Material Adverse Effect.
(f) Corporate Documents. Receipt by the Administrative Agent of the
-------------------
following (or their equivalent) for each of the Credit Parties:
(i) Charter Documents. Copies of the articles or certificates
-----------------
of incorporation or other charter documents of such Credit Party
certified to be true and complete as of a recent date by the
appropriate Governmental Authority of the state or other
jurisdiction of its incorporation and certified by a secretary or
assistant secretary of such Credit Party to be true and correct as
of the Closing Date.
(ii) Bylaws. A copy of the bylaws, operating agreement or
------
equivalent of such Credit Party certified by a secretary or
assistant secretary of such Credit Party to be true and correct and
in force and effect as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the board of
-----------
directors of such Credit Party approving and adopting the Credit
Documents to which it is a party, the transactions contemplated
therein and authorizing execution and delivery thereof, certified by
a secretary or assistant secretary of such Credit Party to be true
and correct and in force and effect as of the Closing Date.
54
(iv) Good Standing. Certificates of good standing, existence
-------------
or its equivalent certified as of a recent date by the appropriate
governmental authorities of the state of incorporation and each
other state in which the failure to so qualify and be in good
standing would be reasonably likely to have a material adverse
effect on the business or operations in such state.
(v) Officer's Certificate. An officer's certificate for each
---------------------
of the Credit Parties dated as of the Closing Date substantially in
the form of Schedule 5.1(f)(v) with appropriate insertions and
attachments.
(g) Evidence of Insurance. Receipt by the Administrative Agent of
---------------------
copies of insurance policies or certificates of insurance of the members
of the Consolidated Group evidencing liability and casualty insurance
meeting the requirements set forth in the Credit Documents.
(h) Priority of Liens. The Administrative Agent shall have received
-----------------
satisfactory evidence that (i) the Administrative Agent, on behalf of the
Lenders, holds a perfected, first priority Lien on all Collateral and (ii)
none of the Collateral is subject to any Liens other than Permitted Liens.
(i) Officer's Certificates. The Administrative Agent shall have
----------------------
received a certificate or certificates executed by an Executive Officer of
the Borrower as of the Closing Date, in form and substance satisfactory to
the Administrative Agent, stating that (A) each Credit Party is in
compliance with all existing financial obligations, (B) all governmental,
shareholder and third party consents and approvals, if any, with respect
to the Credit Documents and the transactions contemplated thereby have
been obtained, (C) no action, suit, investigation or proceeding is pending
or threatened in any court or before any arbitrator or governmental
instrumentality that purports to affect any Credit Party or any
transaction contemplated by the Credit Documents, if such action, suit,
investigation or proceeding could have a Material Adverse Effect, and (D)
immediately after giving effect to the initial Loans made and Letters of
Credit issued on the Closing Date, (1) no Default or Event of Default
exists, (2) all representations and warranties contained herein and in the
other Credit Documents are true and correct in all material respects and
(3) the Credit Parties are in pro forma compliance with each of the
financial covenants set forth in Section 7.11 (assuming for purposes
hereof that such financial covenants were measured as of, and for the
12-month period ending on, such date).
(j) Fees and Expenses. Payment by the Credit Parties of all fees and
-----------------
expenses owed by them to the Lenders and the Administrative Agent,
including payment to the Administrative Agent of the fees set forth in the
Administrative Agent's Engagement Letter.
5.2 Conditions to all Extensions of Credit.
--------------------------------------
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Credit Parties herein and in the other Credit Documents
and which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on and as
of the date of such Extension of Credit as if made on and as of such date
(except for those which expressly relate to an earlier date).
55
(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing on such date or after giving effect to the
Extension of Credit to be made on such date unless such Default or Event of
Default shall have been waived in accordance with this Credit Agreement.
(c) Additional Conditions to Revolving Loans. If a Revolving Loan is
----------------------------------------
requested, all conditions set forth in Section 2 shall have been satisfied.
(d) Additional Conditions to Letters of Credit. If the issuance of a
------------------------------------------
Letter of Credit is requested, all conditions set forth in Section 2 shall have
been satisfied.
(e) Additional Conditions to Swingline Loans. If a Swingline Loan is
----------------------------------------
requested, all conditions set forth in Section 2 shall have been satisfied.
Each request for an Extension of Credit (including Continuations and
Conversions) and each acceptance by the Borrower of an Extension of Credit
(including Continuations and Conversions) shall be deemed to constitute a
representation and warranty by the Borrower as of the date of such Extension of
Credit that the applicable conditions in paragraphs (a) and (b), and in (c), (d)
or (e), of this subsection have been satisfied.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lenders to enter into this Credit Agreement and to make the
Extensions of Credit hereunder, each of the Credit Parties hereby represents and
warrants to the Administrative Agent and to each Lender that:
6.1 Financial Condition.
-------------------
Each of the financial statements described below (copies of which have
heretofore been provided to the Administrative Agent for distribution to the
Lenders) have been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, are complete and correct in all material
respects and present fairly the financial condition (including disclosure of all
material liabilities, contingent or otherwise) and results from operations of
the entities and for the periods specified, subject in the case of interim
company-prepared statements to normal year-end adjustments and the absence of
footnotes:
(i) the audited consolidated balance sheet of the Borrower and its
consolidated subsidiaries dated as of December 31, 2003, together with the
related audited statements of income, stockholders' equity and cash flows
for the fiscal year then ended, certified by a certified public accountant
of national standing reasonably acceptable to the Administrative Agent;
(ii) the unaudited, company-prepared balance sheets of the Borrower
and its consolidated subsidiaries dated as of June 30, 2004, together with
the related unaudited, company-prepared statements of income,
stockholders' equity and cash flows for the fiscal quarter then ended; and
56
(iii) after the Closing Date, the annual and quarterly financial
statements provided in accordance with Sections 7.1(a) and (b).
6.2 No Changes or Restricted Payments.
---------------------------------
Since the date of the most-recent annual audited financial statements
referenced in Section 6.1(i),
(i) for the period to the Closing Date, except as previously
disclosed in writing to the Administrative Agent and the Lenders, (A)
there have been no material sales, transfers or other dispositions of any
material part of the business or property of the members of the
Consolidated Group, nor have there been any material purchases or other
acquisitions of any business or property (including the Capital Stock of
any other person) by the members of the Consolidated Group, which are not
reflected in the annual audited or company-prepared quarterly financial
statements referenced in Section 6.1(i) and (ii) hereof, and (B) no
Restricted Payments have been declared or paid by members of the
Consolidated Group; and
(ii) there has been no circumstance, development or event relating
to or affecting the members of the Consolidated Group which has had or
could reasonably be expected to have a Material Adverse Effect.
6.3 Organization; Existence; Compliance with Law.
--------------------------------------------
Each of the members of the Consolidated Group (a) is duly organized,
validly existing in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the corporate or other necessary power
and authority, and the legal right to own and operate its Property, to lease the
Property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law, except to
the extent that the failure to comply therewith would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
---------------------------------------------
Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate or other
action to authorize the execution, delivery and performance by it of the Credit
Documents to which it is a party. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with acceptance of Extensions of Credit
or the making of the guaranties hereunder or with the execution, delivery or
performance of any Credit Documents by the Credit Parties (other than those
which have been obtained, such filings as are required by the SEC and to fulfill
other reporting requirements with Governmental Authorities) or with the validity
or enforceability of any Credit Document against the Credit Parties (except such
filings as are necessary in connection with the perfection of the Liens created
by such Credit Documents). Each Credit Document to which it is a party
constitutes a legal, valid and binding obligation of such Credit Party
enforceable against such Credit Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
57
6.5 No Legal Bar.
------------
The execution, delivery and performance of the Credit Documents, the
Borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any member of the
Consolidated Group (except those as to which waivers or consents have been
obtained), and will not result in, or require, the creation or imposition of any
Lien on any of its respective properties or revenues pursuant to any Requirement
of Law or Contractual Obligation other than the Liens arising under or
contemplated in connection with the Credit Documents. No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect.
6.6 No Material Litigation and Disputes.
-----------------------------------
(a) No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Credit Parties, threatened by or against, any members of the Consolidated Group
or against any of their respective properties or revenues which (a) relate to
the Credit Documents or any of the transactions contemplated hereby or thereby
or (b) if adversely determined, would reasonably be expected to have a Material
Adverse Effect. Set forth on Schedule 6.6 is a summary of all claims,
litigation, investigations and proceedings pending or, to the best knowledge of
the Credit Parties, threatened by or against the members of the Consolidated
Group or against any of their respective properties or revenues, and none of
such actions, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(b) No default exists and, to the best knowledge of the Credit Parties, no
default has been asserted, under any Contractual Obligations to which any
members of the Consolidated Group are party which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
6.7 No Defaults.
-----------
No Default or Event of Default has occurred and is continuing.
6.8 Ownership and Operation of Property; Licenses and Permits.
---------------------------------------------------------
Each of the members of the Consolidated Group (i) has good record and
marketable title to, or a valid leasehold interest in, all its material real
property, and good title to, or a valid leasehold interest in, all its other
material property, and none of such property is subject to any Lien, except for
Permitted Liens, and (ii) has obtained all material licenses, permits,
franchises or other certifications, consents, approvals and authorizations,
governmental or private, necessary to the ownership of its Property and to the
conduct of its business.
6.9 Intellectual Property.
---------------------
Each of the members of the Consolidated Group owns, or has the legal right
to use, all United States trademarks, tradenames, copyrights, patents,
technology, know-how and processes, if any, necessary for each of them to
conduct its business as currently conducted (the "Intellectual Property") except
for those the failure to own or have such legal right to use would not be
reasonably expected to have a Material Adverse Effect. Set forth on Schedule 6.9
58
is a list of Intellectual Property owned and used by members of the Consolidated
Group. No claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does any Credit Party know
of any such claim, and the use of such Intellectual Property by the members of
the Consolidated Group does not infringe on the rights of any Person, except for
such claims and infringements that, in the aggregate, would not be reasonably
expected to have a Material Adverse Effect.
6.10 No Burdensome Restrictions.
--------------------------
No Requirement of Law or Contractual Obligation of the members of the
Consolidated Group is reasonably expected to have a Material Adverse Effect.
6.11 Taxes.
-----
Each of the members of the Consolidated Group has filed or caused to be
filed all income tax returns (federal, state, local and foreign) and all other
material tax returns which are required to be filed and has paid (i) all amounts
shown therein to be due (including interest and penalties) and (ii) all other
taxes, fees, assessments and other governmental charges (including mortgage
recording taxes, documentary stamp taxes and intangibles taxes) owing, except
for such taxes which are not yet delinquent or as are being contested in good
faith by appropriate proceedings for which adequate reserves determined in
accordance with GAAP have been established unless the failure to make any such
payment could give rise to an immediate right to foreclose on a Lien securing
such amounts. No tax claim or assessment has been asserted against members of
the Consolidated Group which if adversely determined would reasonably be
expected to have a Material Adverse Effect.
6.12 ERISA
-----
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Internal Revenue Code and other federal or
state laws. Each Plan that is intended to qualify under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the IRS
or an application for such a letter is currently being processed by the IRS with
respect thereto and, to the best knowledge of the Borrower, nothing has occurred
which would prevent, or cause the loss of, such qualification. The Borrower and
each ERISA Affiliate have made all required contributions to each Plan subject
to Section 412 of the Internal Revenue Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could reasonably be expected to have a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Sections 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the
Borrower nor any ERISA Affiliate has engaged in a transaction that could be
subject to Sections 4069 or 4212(c) of ERISA.
59
6.13 Governmental Regulations, Etc.
-----------------------------
(a) The Borrower is not engaged and will not engage, principally or as one
of its important activities, in the business of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the FRB), or extending
credit for the purpose of purchasing or carrying margin stock.
(b) None of the Borrower, any Person Controlling the Borrower, or any
Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, or (ii) is or is required to be registered as an "investment
company" under the Investment Company Act of 1940.
6.14 Subsidiaries.
------------
Set forth on Schedule 6.14 are all the Subsidiaries of the Borrower,
including the jurisdiction of organization, classes of Capital Stock (including
options, warrants, rights of subscription, conversion and exchangeability and
other similar rights), ownership and ownership percentages thereof. The
outstanding shares of Capital Stock shown have been validly issued, fully paid
and are non-assessable and owned free of Liens other than Permitted Liens. The
outstanding shares of Capital Stock shown are not the subject of buy-sell,
voting trust or other shareholder agreement except as identified on Schedule
6.14.
6.15 Purpose of Extensions of Credit.
-------------------------------
The Loans will be used by the Borrower solely to finance working capital,
capital expenditures and other lawful corporate purposes of the Borrower and its
Subsidiaries (including, but not limited to, Permitted Acquisitions and
Permitted Investments).
6.16 Environmental Matters.
---------------------
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased or operated by the
members of the Consolidated Group (the "Subject Properties") and all operations
at the Subject Properties are in compliance with all applicable Environmental
Laws, and there is no violation of any Environmental Law with respect to the
Subject Properties or the businesses operated by the members of the Consolidated
Group (the "Businesses"), and there are no conditions relating to the Businesses
or Subject Properties that could give rise to liability under any applicable
Environmental Laws.
(b) None of the Subject Properties contains, or to the best knowledge of
any Credit Party has previously contained, any Materials of Environmental
Concern at, on or under the Subject Properties in amounts or concentrations that
constitute or constituted a violation of, or could give rise to liability under,
Environmental Laws.
(c) None of the members of the Consolidated Group has received any written
or verbal notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential liability
60
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Subject Properties or the Businesses, nor does any member
of the Consolidated Group have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Subject Properties, or generated, treated, stored or
disposed of at, on or under any of the Subject Properties or any other location,
in each case by or on behalf any members of the Consolidated Group in violation
of, or in a manner that would be reasonably likely to give rise to liability
under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any member of the Consolidated Group is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
any member of the Consolidated Group, the Subject Properties or the Businesses.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Subject Properties arising from or related
to the operations (including disposal) of any member of the Consolidated Group
in connection with the Subject Properties or otherwise in connection with the
Businesses, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.
6.17 No Material Misstatements.
-------------------------
None of (i) the information contained in the confidential information
memorandum made available to Lenders, or (ii) any other information, reports,
financial statements, exhibits or schedules, taken as a whole, furnished by or
on behalf of any member of the Consolidated Group to the Administrative Agent or
any Lender in connection with the negotiation of the Credit Documents or
included therein or delivered pursuant thereto contained, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were, are or will be made, not materially
misleading, provided that to the extent any such information, report, financial
statement, exhibit or schedule was based upon or constitutes a forecast or
projection, each of the Credit Parties represents only that it acted in good
faith and utilized reasonable assumptions and due care in the preparation of
such information, report, financial statement, exhibit or schedule.
6.18 Labor Matters.
-------------
Except as set forth in Schedule 6.18,
-------------
(i) There are no strikes or lockouts against any members of the
Consolidated Group pending or, to the best knowledge of the Credit
Parties, threatened;
(ii) the hours worked by and payments made to employees of the
Consolidated Group have not been in violation of the Fair Labor Standards
Act or any other applicable federal, state, local or foreign law dealing
with such matters in any case where a Material Adverse Effect would
reasonably be expected to occur as a result of the violation thereof;
(iii) all payments due from members of the Consolidated Group, or
for which any claim may be made against a member of the Consolidated
61
Group, on account of wages and employee health and welfare insurance and
other benefits, have been paid or accrued as a liability on the books of
the respective members of the Consolidated Group; and
(iv) none of the members of the Consolidated Group is party to a
collective bargaining agreement.
6.19 Security Documents.
------------------
(a) Security Agreement. The Security Agreement is effective to create in
------------------
favor of the Administrative Agent, for the ratable benefit of the holders of the
Secured Obligations identified therein, a legal valid and enforceable security
interest in the Collateral (as defined in the Security Agreement) owned by the
Credit Parties and, when financing statements in appropriate form are filed in
the appropriate offices for the locations specified in Schedule 2 to the
Security Agreement, the Security Agreement shall constitute a fully perfected
Lien on, and security interest in, all right, title and interest of the grantors
thereunder in such Collateral that may be perfected by filing, recording or
registering a financing statement under the Uniform Commercial Code as in
effect, in each case prior and superior in right to any other Lien on any
Collateral other than Permitted Liens.
(b) Pledge Agreement. The Pledge Agreement is effective to create in favor
----------------
of the Administrative Agent, for the ratable benefit of the holders of the
Secured Obligations identified therein, a legal valid and enforceable security
interest in the Collateral (as defined in the Pledge Agreement) and, when such
Collateral is delivered to the Administrative Agent, the Pledge Agreement shall
constitute a fully perfected first priority Lien on, and security interest in,
all right, title and interest of the pledgors thereunder in such Collateral, in
each case prior and superior in right to any other Lien.
(c) Intellectual Property. The Security Agreement together with the Notice
---------------------
of Grant of Security Interest in Trademarks and the Notice of Grant of Security
Interest in Patents filed with the United States Patent and Trademark Office,
and the Notice of Grant of Security Interest in Copyrights filed with the United
States Copyright Office will constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in all
Patents and Patent Licenses, Trademarks and Trademark Licenses and Copyrights
and Copyright Licenses (each as defined in the Security Agreement) and in which
a security interest may be perfected by filing, recording or registration of a
Notice in the United States Patent and Trademark Office and the United States
Copyright Office, in each case prior and superior in right to any other Lien
other than Permitted Liens.
6.20 Location of Real Property and Leased Premises.
---------------------------------------------
Set forth on Schedule 6.20(a) is a complete and correct list of all real
property located in the United States and owned or leased by any member of the
Consolidated Group with street address and state where located. Set forth on
Schedule 6.20(b) is a list of all locations where any tangible personal property
of any member of the Consolidated Group is located, including street address and
state where located. Set forth on Schedule 6.20(c) is the chief executive office
and principal place of business of each member of the Consolidated Group.
62
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding or any Letter of Credit is outstanding,
and until all of the Commitments hereunder shall have terminated:
7.1 Information Covenants.
---------------------
The Credit Parties will furnish, or cause to be furnished, to the
Administrative Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in any event
---------------------------
within 90 days after the close of each fiscal year of the members of the
Consolidated Group, a consolidated and consolidating balance sheet and income
statement of the members of the Consolidated Group as of the end of such fiscal
year, together with related consolidated and consolidating statements of
operations and retained earnings and of cash flows for such fiscal year, in each
case setting forth in comparative form consolidated and consolidating figures
for the preceding fiscal year, all such financial information described above to
be in reasonable form and detail and audited by independent certified public
accountants of recognized national standing reasonably acceptable to the
Administrative Agent and whose opinion shall be to the effect that such
financial statements have been prepared in accordance with GAAP (except for
changes with which such accountants concur) and shall not be limited as to the
scope of the audit or qualified as to the status of the members of the
Consolidated Group as a going concern or any other material qualifications or
exceptions.
(b) Quarterly Financial Statements. As soon as available, and in any event
------------------------------
within 45 days after the close of each fiscal quarter of the members of the
Consolidated Group (other than the fourth fiscal quarter, in which case 90 days
after the end thereof) a consolidated and consolidating balance sheet and income
statement of the members of the Consolidated Group as of the end of such fiscal
quarter, together with related consolidated and consolidating statements of
operations and retained earnings and of cash flows for such fiscal quarter, in
each case setting forth in comparative form consolidated and consolidating
figures for the corresponding period of the preceding fiscal year, all such
financial information described above to be in reasonable form and detail and
reasonably acceptable to the Administrative Agent, and accompanied by a
certificate of an Executive Officer of the Borrower to the effect that such
quarterly financial statements fairly present in all material respects the
financial condition of the members of the Consolidated Group and have been
prepared in accordance with GAAP, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Officer's Compliance Certificate. At the time of delivery of the
--------------------------------
financial statements provided for in Sections 7.1(a) and 7.1(b) above, a
certificate of an Executive Officer of the Borrower substantially in the form of
Schedule 7.1(c), (i) demonstrating compliance with the financial covenants
contained in Section 7.11 by calculation thereof as of the end of each such
fiscal period and (ii) stating that no Default or Event of Default exists, or if
any Default or Event of Default does exist, specifying the nature and extent
thereof and what action the Credit Parties propose to take with respect thereto.
(d) Pro Forma Compliance Certificate. As soon as available, and in any
--------------------------------
event within 45 days after the close of each fiscal quarter during which any
merger or consolidation as referred to in Section 8.4, any Asset Disposition as
referred to in Section 8.5, any Acquisition as referred to in the definition of
"Permitted Acquisition" or any Restricted Payment as referred to in Section 8.7
has occurred, a Pro Forma Compliance Certificate.
63
(e) Research Reports. Within 45 days after the close of each fiscal
----------------
quarter (other than the fourth fiscal quarter, in which case within 90 days
after the end thereof), a research report which, in the business judgment of the
Borrower, is reasonably representative of the business plan and budget of the
members of the Consolidated Group.
(f) Auditor's Reports. Promptly upon receipt thereof, a copy of any report
-----------------
submitted by independent accountants to any member of the Consolidated Group in
connection with any annual, interim or special audit of the books of such
Person.
(g) Reports. Promptly upon transmission or receipt thereof, (i) copies of
-------
any filings and registrations with, and reports to or from, the SEC, or any
successor agency, and copies of all financial statements, proxy statements,
notices and reports as any member of the Consolidated Group shall send to its
shareholders or to a holder of any Indebtedness owed by any member of the
Consolidated Group in its capacity as such a holder and (ii) upon the request of
the Administrative Agent, all reports and written information to and from the
United States Environmental Protection Agency, or any state or local agency
responsible for environmental matters, the United States Occupational Health and
Safety Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(h) Notices. Upon any Executive Officer of a Credit Party obtaining
-------
knowledge thereof, the Credit Parties will give written notice to the
Administrative Agent immediately of (i) the occurrence of an event or condition
consisting of a Default or Event of Default, specifying the nature and existence
thereof and what action the Credit Parties propose to take with respect thereto,
and (ii) the occurrence of any of the following with respect to any member of
the Consolidated Group (A) the pendency or commencement of any litigation,
arbitral or governmental proceeding against such Person which if adversely
determined is likely to have a Material Adverse Effect, (B) the institution of
any proceedings against such Person with respect to, or the receipt of notice by
such Person of potential liability or responsibility for violation, or alleged
violation of any federal, state or local law, rule or regulation, including but
not limited to, Environmental Laws, the violation of which could have a Material
Adverse Effect or (C) the occurrence of an ERISA Event.
(i) Environmental.
-------------
(i) Upon the reasonable written request of the Administrative Agent
following the occurrence of any event or the discovery of any condition
which the Administrative Agent or the Required Lenders reasonably believe
has caused (or could be reasonably expected to cause) the representations
and warranties set forth in Section 6.16 to be untrue in any material
respect, the Credit Parties will furnish or cause to be furnished to the
Administrative Agent, at the Credit Parties' expense, a report of an
environmental assessment of reasonable scope, form and depth, (including,
where appropriate, invasive soil or groundwater sampling) by a consultant
reasonably acceptable to the Administrative Agent as to the nature and
extent of the presence of any Materials of Environmental Concern on any
Subject Properties (as defined in Section 6.16) and as to the compliance
by any member of the Consolidated Group with Environmental Laws at such
Subject Properties. If the Credit Parties fail to deliver such an
environmental report within seventy-five (75) days after receipt of such
written request then the Administrative Agent may arrange for same, and
the members of the Consolidated Group hereby grant to the Administrative
Agent and their representatives access to the Subject Properties to
reasonably undertake such an assessment (including, where appropriate,
invasive soil or groundwater sampling). The reasonable cost of any
assessment arranged for by the Administrative Agent pursuant to this
provision will be payable by the Credit Parties on demand and added to the
obligations secured by the Collateral Documents.
64
(ii) The members of the Consolidated Group will conduct and complete
all investigations, studies, sampling, and testing and all remedial,
removal, and other actions necessary to address all Materials of
Environmental Concern on, from or affecting any of the Subject Properties
to the extent necessary to be in compliance with all Environmental Laws
and with the validly issued orders and directives of all Governmental
Authorities with jurisdiction over such Subject Properties to the extent
any failure could have a Material Adverse Effect.
(j) Additional Patents and Trademarks. At the time of delivery of the
---------------------------------
financial statements and reports provided for in Section 7.1(a), a report signed
by an Executive Officer of the Borrower setting forth (i) a list of registration
numbers for all patents, trademarks, service marks, tradenames and copyrights
awarded to any member of the Consolidated Group since the last day of the
immediately preceding fiscal year and (ii) a list of all patent applications,
trademark applications, service mark applications, trade name applications and
copyright applications submitted by any member of the Consolidated Group since
the last day of the immediately preceding fiscal year and the status of each
such application, all in such form as shall be reasonably satisfactory to the
Administrative Agent.
(k) Other Information. With reasonable promptness upon any such request,
-----------------
such other information regarding the business, properties or financial condition
of any member of the Consolidated Group as the Administrative Agent or the
Required Lenders may reasonably request.
Documents required to be delivered pursuant to Section 7.1(a) or (b) or
Section 7.2(g) (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date (i) on which the
Borrower posts such documents, or provides a link thereto on the Borrower's
website on the internet at the website address listed on Schedule 11.1; or (ii)
on which such documents are posted on the Borrower's behalf on an internet or
intranet website, if any, to which each Lender and the Administrative Agent have
access (whether a commercial, third-party website or whether sponsored by the
Administrative Agent); provided that: (A) the Borrower shall deliver paper
copies of such documents to the Administrative Agent or any Lender that requests
the Borrower to deliver such paper copies until a written request to cease
delivering paper copies is given by the Administrative Agent or such Lender and
(B) the Borrower shall notify (which may be by facsimile or electronic mail) the
Administrative Agent and each Lender of the posting of any such documents and
provide to the Administrative Agent by electronic mail electronic versions
(i.e., soft copies) of such documents. Notwithstanding anything contained
herein, in every instance the Borrower shall be required to provide paper copies
of the Compliance Certificates required by Section 7.2(c) and Pro Form
Compliance Certificates required by Section 7.2(d) to the Administrative Agent.
Except for such Compliance Certificates and Pro Forma Compliance Certificates,
the Administrative Agent shall have no obligation to request the delivery or to
maintain copies of the documents referred to above, and in any event shall have
no responsibility to monitor compliance by the Borrower with any such request
for delivery, and each Lender shall be solely responsible for requesting
delivery to it or maintaining its copies of such documents.
7.2 Preservation of Existence and Franchises.
----------------------------------------
Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, each
Credit Party will, and will cause each of its Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.
65
7.3 Books and Records.
-----------------
Each Credit Party will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).
7.4 Compliance with Laws and Contractual Obligations; ERISA Compliance.
------------------------------------------------------------------
Each Credit Party will, and will cause each of its Subsidiaries to,
(a) comply with all laws, rules, regulations and orders, and all
applicable restrictions imposed by all Governmental Authorities, applicable to
it and its Property if noncompliance with any such law, rule, regulation, order
or restriction could have a Material Adverse Effect,
(b) comply in all material respects with the material Contractual
Obligations, and
(c) do, and cause each of its ERISA Affiliates to do, each of the
following:
(i) maintain each Plan, in all material respects, in compliance with
the applicable provisions of ERISA, the Internal Revenue Code and other
applicable Law;
(ii) cause each Plan that is qualified under Section 401(a) of the
Internal Revenue Code to maintain such qualification; and
(iii) make all required contributions to any Plan subject to Section
412 of the Internal Revenue Code.
7.5 Payment of Taxes and Other Indebtedness.
---------------------------------------
Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that no member of the
Consolidated Group shall be required to pay any such tax, assessment, charge,
levy, claim or Indebtedness which is being contested in good faith by
appropriate proceedings for which adequate reserves determined in accordance
with GAAP have been established, unless the failure to make any such payment (i)
could give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) could have a Material Adverse Effect.
7.6 Insurance.
---------
Each Credit Party will, and will cause each of its Subsidiaries to, at all
times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice (or as otherwise required by the Collateral Documents).
66
The Administrative Agent shall be named as loss payee or mortgagee, as its
interest may appear, and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral, and each provider of
any such insurance shall agree, by endorsement upon the policy or policies
issued by it or by independent instruments furnished to the Administrative
Agent, that it will give the Administrative Agent thirty (30) days prior written
notice before any such policy or policies shall be altered or canceled, and that
no act or default of any member of the Consolidated Group or any other Person
shall affect the rights of the Administrative Agent or the Lenders under such
policy or policies. The present insurance coverage of the members of the
Consolidated Group is outlined as to carrier, policy number, expiration date,
type and amount on Schedule 7.6.
7.7 Maintenance of Property.
-----------------------
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.8 Performance of Obligations.
--------------------------
Each Credit Party will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements and other debt
instruments to which it is a party or by which it is bound.
7.9 Use of Proceeds.
---------------
The Borrower will use the proceeds of Extensions of Credit solely for the
purposes set forth in Section 6.15.
7.10 Audits/Inspections.
------------------
Upon reasonable notice and during normal business hours, each Credit Party
will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Administrative Agent, including independent accountants,
agents, attorneys, and appraisers to visit and inspect its property, including
its books and records, its accounts receivable and inventory, its facilities and
its other business assets, and to make photocopies or photographs thereof and to
write down and record any information such representative obtains and shall
permit the Administrative Agent or its representatives to investigate and verify
the accuracy of information provided to the Lenders and to discuss all such
matters with the officers, employees and representatives of such Person. The
Credit Parties agree that the Administrative Agent, and its representatives, may
conduct an annual audit of the Collateral, at the expense of the Lenders.
7.11 Financial Covenants.
-------------------
(a) Consolidated Senior Leverage Ratio. As of the end of each fiscal
----------------------------------
quarter, the Consolidated Senior Leverage Ratio shall be not greater than
2.50:1.0.
(b) Consolidated Total Leverage Ratio. As of the end of each fiscal
---------------------------------
quarter, the Consolidated Total Leverage Ratio shall be not greater than
3.00:1.0.
67
(c) Consolidated Fixed Charge Coverage Ratio. As of the end of each fiscal
----------------------------------------
quarter, the Consolidated Fixed Charge Coverage Ratio shall be not less than
1.25:1.0.
(d) Consolidated Net Worth. As of the end of each fiscal quarter, the
----------------------
Consolidated Net Worth shall be not less than the sum of (i) $166 million plus
(ii) as of the end of such fiscal quarter and each preceding fiscal quarter to
occur after the Closing Date, an amount equal to eighty-five percent (85%) of
Consolidated Net Income (but not less than zero) for such fiscal quarter, such
increases to be cumulative, plus (iii) an amount equal to one hundred percent
(100%) of net proceeds from Equity Transactions occurring after the Closing
Date, minus an amount equal to the aggregate cash consideration paid in
connection with any acquisition of the Borrower's Capital Stock permitted under
Section 8.7.
7.12 Additional Guarantors and Collateral.
------------------------------------
(a) Domestic Subsidiaries. At any time that the Borrower forms or acquires
---------------------
any Domestic Subsidiary, the Borrower will promptly (but in any event within 30
days) (i) notify the Administrative Agent thereof, (ii) cause any Wholly Owned
Domestic Subsidiary to become a Guarantor by execution of a Guaranty Agreement,
(iii) cause any Wholly Owned Domestic Subsidiary to deliver supporting
resolutions, incumbency certificates, corporate formation and organizational
documentation and opinions of counsel as the Administrative Agent may reasonably
request, (iv) deliver, or cause to be delivered, stock certificates and a Pledge
Agreement evidencing the pledge of 100% of the Voting Stock of all Domestic
Subsidiaries, together with undated stock transfer powers executed in blank and
(v) grant to the Administrative Agent and the Lenders a security interest in all
of its Collateral, as referred in and pursuant to the terms of the Security
Agreement.
(b) Foreign Subsidiaries. The Borrower will not form or acquire any
--------------------
Foreign Subsidiaries without the prior written consent of the Required Lenders.
(c) Additional Collateral. If, subsequent to the Closing Date, a Credit
---------------------
Party shall acquire any other personal property required to be delivered to the
Administrative Agent as Collateral hereunder or under the Security Agreement,
the Borrower shall immediately notify the Administrative Agent of the same. Each
Credit Party shall take such action (including, but not limited to, the
execution of UCC-1 financing statements), as requested by the Administrative
Agent and at such Credit Party's expense, to ensure that the Administrative
Agent and the Lenders have a perfected Lien in such personal property of the
Credit Parties as set forth in the Security Agreement (whether nor owned or
hereafter acquired) and any owned or leased real property (to the extent deemed
material by the Administrative Agent), subject only to Permitted Liens. Each
Credit Party shall adhere to the covenants regarding the location of personal
property as set forth in the Credit Agreement.
7.13 Further Assurances.
------------------
(a) Within thirty (30) days after the Closing Date, the Borrower shall use
its best efforts to deliver (or cause to be delivered) to the Administrative
Agent (a) landlord consents, estoppel letters, consents and waivers, in form and
substance acceptable to the Administrative Agent, in respect of Collateral held
at the Borrower's chief executive office and (b) such other landlord consents,
warehousemen and bailee letters and other agreements, in form and substance
acceptable to the Administrative Agent, in respect of Collateral held on leased
premises, as reasonably required by the Administrative Agent
68
(b) Within thirty (30) days after the Closing Date, the Credit Parties
shall provide evidence of insurance reasonably acceptable to the Administrative
Agent that names the Administrative Agent as additional insured (in the case of
liability insurance) or loss payee (in the case of hazard insurance) on behalf
of the Lenders. Each provider of any such insurance shall agree, by endorsement
upon the policy or policies issued by it or by independent instruments furnished
to the Administrative Agent, that it will give the Administrative Agent thirty
(30) days prior written notice before any such policy or policies shall be
altered or canceled, and that no act or default of any member of the
Consolidated Group or any other Person shall affect the rights of the
Administrative Agent or the Lenders under such policy or policies.
(c) Within thirty (30) days after the Closing Date, the Credit Parties
shall cause Salt Lake Rehabilitation, LLC, a Delaware limited liability company,
to join as a Guarantor and otherwise comply with the terms of Section 7.12
hereof or provide evidence reasonably acceptable to the Administrative Agent
that such entity has been dissolved or does not constitute a Wholly Owned
Domestic Subsidiary.
SECTION 8
NEGATIVE COVENANTS
------------------
Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding or any Letter of Credit is outstanding,
and until all of the Commitments hereunder shall have terminated:
8.1 Indebtedness.
------------
The Credit Parties will not permit any member of the Consolidated Group to
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness existing or arising under this Credit Agreement or
the other Credit Documents;
(b) Indebtedness of the Borrower and its Subsidiaries existing on
the Closing Date and set forth on Schedule 8.1, and renewals, refinancings
and extensions thereof on terms and conditions no less favorable to such
Person than such existing Indebtedness;
(c) obligations of the Borrower or any of its Subsidiaries owing
under interest rate, commodities and foreign currency exchange protection
agreements entered into in the ordinary course of business to manage
existing or anticipated risks and not for speculative purposes;
(d) unsecured intercompany Indebtedness owing by a member of the
Consolidated Group to another member of the Consolidated Group (subject,
however, to the limitations of Section 8.6 in the case of the member of
the Consolidated Group extending the loan, advance or credit);
(e) obligations to make contingent payments (including earn-out
payments) incurred in connection with Permitted Acquisitions and
Acquisitions consummated prior to the Closing Date;
69
(f) secured and unsecured Indebtedness of the Borrower or any of its
Subsidiaries, including term loan indebtedness, mortgage indebtedness,
purchase money indebtedness, Capital Leases, Synthetic Leases and lease
obligations in respect of Sale and Leaseback Transactions, provided that
(i) the aggregate amount of all such Indebtedness shall not at any time
exceed $35 million, and (ii) in the case of secured Indebtedness (and
obligations in respect of Sale and Leaseback Transactions), the liens and
security interests relating thereto shall be limited to the fixed assets
that are the subject of the financing and the aggregate amount of
indebtedness secured thereby shall not exceed the fair value of the fixed
assets that are the subject of the financing, and extensions and
refinancings thereof;
(g) Subordinated Debt;
(h) Support Obligations of the Borrower or any of its Subsidiaries
in respect of the foregoing Indebtedness; provided that Support
Obligations in respect of any Subordinated Debt shall be subordinated in
right and time of payment to the loans and obligations owing hereunder on
the same terms and conditions as the Subordinated Debt to which they
relate;
(i) Support Obligations of Funded Debt of a joint venture that is a
Permitted Investment; provided that (i) the aggregate principal amount of
all such Support Obligations shall not exceed $15 million, and (ii) the
Borrower shall demonstrate compliance with the financial covenants
hereunder after giving effect thereto on a Pro Forma Basis; and
(j) other unsecured Indebtedness of the Borrower in an aggregate
outstanding principal amount of up to $20 million at any time.
8.2 Liens.
-----
The Credit Parties will not permit any member of the Consolidated Group to
contract, create, incur, assume or permit to exist any Lien with respect to any
of its Property, whether now owned or after acquired, except for Permitted
Liens.
8.3 Nature of Business.
------------------
The Credit Parties will not permit any member of the Consolidated Group to
substantively alter the character or conduct of the business conducted by such
Person as of the Closing Date.
8.4 Merger and Consolidation, Dissolution and Acquisitions.
------------------------------------------------------
(a) No member of the Consolidated Group will enter into any transaction of
merger or consolidation, except that
(i) a Credit Party may be party to a transaction of merger or
consolidation with another Credit Party, provided that if the Borrower is
a party to such transaction, it shall be the surviving entity;
(ii) a Domestic Subsidiary of the Borrower may be a party to a
transaction of merger or consolidation with a Person other than a member
of the Consolidated Group, provided that (A) the surviving entity shall be
a Domestic Subsidiary of the Borrower and shall execute and deliver such
joinder and pledge agreements as may be necessary for compliance with the
provisions of Sections 7.12, (B) no Default or Event of Default shall
exist immediately after giving effect thereto, and (C) the transaction
shall otherwise constitute a Permitted Acquisition;
70
(iii) a Subsidiary of the Borrower may enter into a transaction of
merger or consolidation in connection with an Asset Disposition permitted
under Section 8.5.
(b) No member of the Consolidated Group, other than a Wholly Owned
Subsidiary of the Borrower (and then only if no Material Adverse Effect shall
result on account thereof), may dissolve, liquidate or wind up its affairs.
(c) No member of the Consolidated Group shall make any Acquisition,
unless:
(i) in the case of an acquisition of Capital Stock of another
Person, after giving effect to such acquisition,
(A) if the Acquisition is not of a controlling interest in the
subject Person such that after giving effect thereto the subject
Person will not be a Subsidiary, then such Acquisition shall
constitute a Permitted Investment; and
(B) if the Acquisition is of a controlling interest in the
subject Person such that after giving effect thereto the subject
Person will be a Subsidiary, then such Acquisition shall constitute
a Permitted Acquisition;
(ii) in the case of an Acquisition of all or any substantial portion
of the Property (other than Capital Stock) of another Person, then such
Acquisition constitutes a Permitted Acquisition.
8.5 Asset Dispositions.
------------------
The Credit Parties will not permit any member of the Consolidated Group to
make any Asset Disposition (including any Sale and Leaseback Transaction), (a)
unless (i)the consideration paid therefor shall consist solely of cash and Cash
Equivalents, (ii) if the subject transaction is a Sale and Leaseback
Transaction, such transaction shall be permitted by Section 8.13, (iii) if the
subject transaction involves Capital Stock of a Subsidiary, the subject
transaction is of a controlling interest in such Subsidiary, (iv) in any fiscal
year the Property sold, leased or otherwise disposed of in Asset Dispositions
shall not have generated, in the aggregate, more than five percent (5%) of
Consolidated EBITDA on a Pro Forma Basis for the immediately preceding fiscal
year, and (v) no Default or Event of Default shall exist immediately after
giving effect thereto or (b) except any Asset Dispositions with respect to the
Borrower's Investment in InteliStaf Holdings, Inc., which shall not be subject
to the restrictions of this provision; provided that notwithstanding anything to
the contrary contained herein, no member of the Consolidated Group may engage in
any Securitization Transaction without the prior written consent of the Required
Lenders.
The Administrative Agent will promptly deliver to the Borrower upon
request, at the Borrower's expense, such release documentation (including
delivery of applicable stock certificates) as may be reasonably requested to
give effect to the release of subject Property from the security interests
securing the obligations hereunder in connection with Asset Dispositions
permitted hereunder.
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8.6 Investments.
-----------
The Credit Parties will not permit any member of the Consolidated Group to
make or permit to exist Investments in or to any Person, except for Permitted
Investments.
8.7 Restricted Payments.
-------------------
The Credit Parties will not make, or permit any member of the Consolidated
Group to make, any Restricted Payment; provided that the Borrower may (a) make
cash purchases of its own Capital Stock if (i) total cash consideration for such
Capital Stock does not exceed $35 million, (ii) such purchases are not funded
with proceeds from a Loan hereunder and (iii) no Default or Event of Default
shall exist immediately after giving effect to such purchases and (b) make
dividend payments in the amount of any dividends (including proceeds from any
related Asset Disposition) received in respect of the Borrower's Investment in
InteliStaf Holdings, Inc.
8.8 Modifications and Payments in respect of Funded Debt.
----------------------------------------------------
None of the members of the Consolidated Group will
(a) Amend or modify, or permit or acquiesce to the amendment or
modification (including waivers) of, any material provisions of any Subordinated
Debt, including any notes or instruments evidencing any Subordinated Debt and
any indenture or other governing instrument relating thereto;
(b) Make any payment in contravention of the terms of any Subordinated
Debt; or
(c) Except in connection with a refinancing or refunding permitted
hereunder, make any prepayment, redemption, defeasance or acquisition for value
of (including without limitation, by way of depositing money or securities with
the trustee with respect thereto before due for the purpose of paying when due),
or refund, refinance or exchange of any Subordinated Debt other than regularly
scheduled payments of principal and interest on such Subordinated Debt.
8.9 Transactions with Affiliates.
----------------------------
The Credit Parties will not permit any member of the Consolidated Group to
enter into or permit to exist any transaction or series of transactions with any
officer, director, shareholder, Subsidiary or Affiliate of such Person other
than (a) advances of working capital to any Credit Party, (b) transfers of cash
and assets to any Credit Party, (c) transactions permitted by Sections 8.1, 8.4,
8.5, 8.6, 8.7, (d) normal compensation and reimbursement of expenses of officers
and directors and (e) except as otherwise specifically limited in this Credit
Agreement, other transactions which are entered into in the ordinary course of
such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, director, shareholder, Subsidiary or
Affiliate.
8.10 Fiscal Year; Organizational Documents.
-------------------------------------
(a) The Credit Parties will not permit any member of the Consolidated
Group to change its fiscal year or amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or other similar document) without the prior written consent of the
Required Lenders, which consent shall not be unreasonably withheld.
72
(b) The Borrower will not permit any material amendment, modification or
change to its Shareholder Rights Plan without promptly providing a copy thereof
to the Administrative Agent.
8.11 Limitation on Restricted Actions.
--------------------------------
The Credit Parties will not permit any member of the Consolidated Group
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any such
Person to (a) pay dividends or make any other distributions on its Capital Stock
or with respect to any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness or other obligation, (c) make loans, advances
or capital contributions, (d) sell, lease or otherwise transfer any of its
properties or assets, or (e) act as a guarantor or pledge its assets, except for
such encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents and (ii) pursuant to the terms of any
purchase money Indebtedness permitted by Section 8.1(c) to the extent such
limitations relate only to the property which is the subject of such financing.
8.12 Ownership of Subsidiaries.
-------------------------
The Credit Parties will not permit any member of the Consolidated Group to
(i) permit any Person (other than the Borrower or any Wholly Owned Subsidiary of
the Borrower) to own any Capital Stock of any Subsidiary of the Borrower, except
(A) to qualify directors where required by applicable law or to satisfy other
requirements of applicable law with respect to the ownership of Capital Stock of
Foreign Subsidiaries or (B) as a result of or in connection with a dissolution,
merger, consolidation or disposition of a Subsidiary permitted under Section 8.4
or 8.5, (ii) permit any Subsidiary of the Borrower to issue any shares of
preferred Capital Stock or (iii) permit, create, incur, assume or suffer to
exist any Lien on any Capital Stock of any Subsidiary of the Borrower, except
for Permitted Liens.
8.13 Sale Leasebacks.
---------------
Except with the prior written consent of the Required Lenders, the Credit
Parties will not permit any member of the Consolidated Group to enter into any
Sale and Leaseback Transaction unless such Sale and Leaseback Transaction would
be permitted under Section 8.1(f) hereof.
8.14 No Further Negative Pledges.
---------------------------
The Credit Parties will not permit any member of the Consolidated Group to
enter into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of any
security for any obligation if security is given for any other obligation,
except (a) pursuant to this Credit Agreement and the other Credit Documents and
(b) pursuant to the terms of any purchase money Indebtedness permitted by
Section 8.1(c) to the extent such limitations relate only to the property which
is the subject of such financing.
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SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default.
-----------------
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
-------
(i) default in the payment when due of any principal of any of
the Loans or of any reimbursement obligations arising from drawings
under Letters of Credit, or
(ii) default, and such default shall continue for three (3) or
more Business Days, in the payment when due of any interest on the
Loans or on any reimbursement obligations arising from drawings
under Letters of Credit, or of any Fees or other amounts owing
hereunder, under any of the other Credit Documents or in connection
herewith or therewith; or
(b) Representations. Any representation, warranty or statement
---------------
made or deemed to be made by any Credit Party herein, in any of the other
Credit Documents, or in any statement or certificate delivered or required
to be delivered pursuant hereto or thereto shall prove untrue in any
material respect on the date as of which it was deemed to have been made;
or
(c) Covenants. Any Credit Party shall
---------
(i) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.2, 7.9, 7.11, 7.12 or
8.1 through 8.14, inclusive;
(ii) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.1(a), (b), (c) or (d)
and such default shall continue unremedied for a period of at least
five (5) Business Days after the earlier of an Executive Officer of
a Credit Party becoming aware of such default or notice thereof by
the Administrative Agent; or
(iii) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in
subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1)
contained in this Credit Agreement or any other Credit Document and
such default shall continue unremedied for a period of at least 30
days after the earlier of an Executive Officer of a Credit Party
becoming aware of such default or notice thereof by the
Administrative Agent; or
(d) Other Credit Documents. Except as a result of or in connection
----------------------
with a dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4 or 8.5, any Credit Document shall fail to be in full force and
effect or to give the Administrative Agent and/or the Lenders the Liens,
rights, powers and privileges purported to be created thereby, or any
Credit Party shall so state in writing; or
74
(e) Guaranties. Except as the result of or in connection with a
----------
dissolution, merger or disposition of a Subsidiary permitted under Section
8.4 or 8.5, the guaranty given by any Guarantor (including any Person
which becomes a Guarantor after the Closing Date in accordance with
Section 7.12) or any provision thereof shall cease to be in full force and
effect, or any Guarantor (including any Person which becomes a Guarantor
after the Closing Date in accordance with Section 7.12) or any Person
acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under such guaranty, or any Guarantor shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any
guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect
---------------
to any member of the Consolidated Group; or
(g) Defaults under Other Agreements. With respect to any
-------------------------------
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) in excess of $2 million in the aggregate for the members of the
Consolidated Group taken as a whole, (i) any member of the Consolidated
Group shall (A) default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such Indebtedness, or
(B) the occurrence and continuance of a default in the observance or
performance relating to such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
or condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit, the holder or
holders of such Indebtedness (or trustee or agent on behalf of such
holders) to cause (determined without regard to whether any notice or
lapse of time is required), any such Indebtedness to become due prior to
its stated maturity; or (ii) any such Indebtedness shall be declared due
and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be entered
---------
against one or more of the members of the Consolidated Group involving a
liability of $2 million or more in the aggregate (to the extent not paid
or fully covered by insurance provided by a carrier who has acknowledged
coverage and has the ability to perform) and any such judgments or decrees
shall not have been vacated, discharged or stayed or bonded pending appeal
within 30 days from the entry thereof; or
(i) ERISA. An ERISA Event occurs with respect to a Pension Plan or
-----
Multiemployer Plan that has resulted or would reasonably be expected to
result in liability of a Credit Party under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of $1 million, or (ii) a Credit Party or any ERISA Affiliate fails
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess
of $1 million; or
(j) Ownership. There shall occur a Change of Control.
---------
9.2 Acceleration; Remedies.
----------------------
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 11.6) or cured to the
75
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 11.6), the Administrative Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Credit Parties take any of the
following actions:
(a) Termination of Commitments. Declare the Commitments terminated
--------------------------
whereupon the Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any accrued
------------
interest in respect of all Loans, any reimbursement obligations arising
from drawings under Letters of Credit and any and all other indebtedness
or obligations of any and every kind owing by the Credit Parties to the
Administrative Agent and/or any of the Lenders hereunder to be due
whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Credit Parties.
(c) Cash Collateral. Direct the Credit Parties to pay (and the
---------------
Credit Parties agree that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), they will
immediately pay) to the Administrative Agent additional cash, to be held
by the Administrative Agent, for the benefit of the Lenders, in a cash
collateral account as additional security for the LOC Obligations in
respect of subsequent drawings under all then outstanding Letters of
Credit in an amount equal to the maximum aggregate amount which may be
drawn under all Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and interests
---------------------
created and existing under the Credit Documents including all rights and
remedies existing under the Collateral Documents, all rights and remedies
against a Guarantor and all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur with respect to the Borrower, then the Commitments shall
automatically terminate and all Loans, all reimbursement obligations arising
from drawings under Letters of Credit, all accrued interest in respect thereof,
all accrued and unpaid Fees and other indebtedness or obligations owing to the
Administrative Agent and/or any of the Lenders hereunder automatically shall
immediately become due and payable without the giving of any notice or other
action by the Administrative Agent or the Lenders.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 Appointment, Powers and Immunities.
----------------------------------
(a) Each of the Lenders and the Issuing Lender hereby irrevocably appoints
Bank of America to act on its behalf as the Administrative Agent hereunder and
under the other Credit Documents and authorizes the Administrative Agent to take
such actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto. The provisions of this Section
are solely for the benefit of the Administrative Agent, the Lenders and the
Issuing Lender, and neither the Borrower nor any other Credit Party shall have
rights as a third party beneficiary of any of such provisions.
(b) The Issuing Lender shall act on behalf of the Lenders with respect to
any Letters of Credit issued by it and the documents associated therewith, and
76
the Issuing Lender shall have all of the benefits and immunities (i) provided to
the Administrative Agent in this Section 10 with respect to any acts taken or
omissions suffered by the Issuing Lender in connection with Letters of Credit
issued by it or proposed to be issued by it and the applications and agreements
for letters of credit pertaining to such Letters of Credit as fully as if the
term "Administrative Agent" as used in this Section 10 and in the definition of
"Agent-Related Person" included the Issuing Lender with respect to such acts or
omissions, and (ii) as additionally provided herein and in any LOC Documents
with respect to the Issuing Lender.
10.2 Reliance by Administrative Agent.
--------------------------------
The Administrative Agent shall be entitled to rely upon any certification,
notice, instrument, writing, or other communication (including any thereof by
telephone or telecopy) believed by it to be genuine and correct and to have been
signed, sent or made by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel for any Credit Party),
independent accountants, and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until the Administrative Agent
receives and accepts an Assignment and Assumption executed in accordance with
Section 11.3(b) hereof. As to any matters not expressly provided for by this
Credit Agreement, the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding on all of the Lenders; provided, however, that the Administrative Agent
shall not be required to take any action that exposes the Administrative Agent
to personal liability or that is contrary to any Credit Document or applicable
law or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
10.3 Defaults.
--------
The Administrative Agent shall not be deemed to have knowledge or notice
of the occurrence of a Default or Event of Default unless the Administrative
Agent has received written notice from a Lender or a Credit Party specifying
such Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives such a notice of
the occurrence of a Default or Event of Default, the Administrative Agent shall
give prompt notice thereof to the Lenders. The Administrative Agent shall
(subject to Section 10.2) take such action with respect to such Default or Event
of Default as shall reasonably be directed by the Required Lenders (or such
other Lenders as required by Section 11.6), provided 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 advisable in the best interest of the Lenders.
10.4 Rights as a Lender.
------------------
The Person serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the
context otherwise requires, include the Person serving as the Administrative
Agent hereunder in its individual capacity. Such Person and its Affiliates may
accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if such Person were
not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.
77
10.5 Indemnification.
---------------
The Lenders agree to indemnify the Administrative Agent (to the extent not
reimbursed under Section 11.5 hereof, but without limiting the obligations of
the Credit Parties under Section 11.5) ratably (in accordance with their
respective Revolving Commitments (or, if the Revolving Commitments have been
terminated, the outstanding Obligations, including Participation Interests
therein) for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys' fees), or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Administrative Agent (including by any Lender) in any
way relating to or arising out of any Credit Document or the transactions
contemplated thereby or any action taken or omitted by the Administrative Agent
under any Credit Document; provided that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the foregoing,
each Lender agrees to reimburse the Administrative Agent promptly upon demand
for its ratable share of any costs or expenses payable by the Credit Parties
under Section 11.5, to the extent that the Administrative Agent is not promptly
reimbursed for such costs and expenses by the Credit Parties. The agreements in
this Section 10.5 shall survive the repayment of the Loans, LOC Obligations and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.
10.6 Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender and the Issuing Lender acknowledges that it has, independently
and without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Credit Agreement. Each Lender and the Issuing Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Credit
Agreement, any other Credit Document or any related agreement or any document
furnished hereunder or thereunder.
10.7 Successor Administrative Agent.
------------------------------
The Administrative Agent may at any time give notice of its resignation to
the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor, which shall be a bank
with an office in the United States, or an Affiliate of any such bank with an
office in the United States. If no such successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may on behalf of the Lenders and the Issuing
Lender, appoint a successor Administrative Agent meeting the qualifications set
forth above; provided that if the Administrative Agent shall notify the Borrower
and the Lenders that no qualifying Person has accepted such appointment, then
such resignation shall nonetheless become effective in accordance with such
notice and (1) the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder and under the other Credit Documents (except
that in the case of any collateral security held by the Administrative Agent on
behalf of the Lenders or the Issuing Lender under any of the Credit Documents,
the retiring Administrative Agent shall continue to hold such collateral
security until such time as a successor Administrative Agent is appointed) and
(2) all payments, communications and determinations provided to be made by, to
or through the Administrative Agent shall instead be made by or to each Lender
and the Issuing Lender directly, until such time as the Required Lenders appoint
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a successor Administrative Agent as provided for above in this Section. Upon the
acceptance of a successor's appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder or under the other Credit Documents (if not already
discharged therefrom as provided above in this Section). The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the retiring Administrative Agent's resignation hereunder and
under the other Credit Documents, the provisions of this Section and Section
11.5 shall continue in effect for the benefit of such retiring Administrative
Agent, its sub-agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while the retiring
Administrative Agent was acting as Administrative Agent.
Any resignation by Bank of America as Administrative Agent pursuant to
this Section shall also constitute its resignation as Issuing Lender and
Swingline Lender. Upon the acceptance of a successor's appointment as
Administrative Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
Issuing Lender and Swingline Lender, (b) the retiring Issuing Lender and
Swingline Lender shall be discharged from all of their respective duties and
obligations hereunder or under the other Credit Documents, and (c) the successor
Issuing Lender shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other
arrangement satisfactory to the retiring Issuing Lender to effectively assume
the obligations of the retiring Issuing Lender with respect to such Letters of
Credit.
10.8 Exculpatory Provisions.
----------------------
The Administrative Agent shall not have any duties or obligations except
those expressly set forth herein and in the other Credit Documents. Without
limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise
any discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Credit Documents that the Administrative
Agent is required to exercise as directed in writing by the Required Lenders (or
such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Credit Documents), provided that the Administrative
Agent shall not be required to take any action that, in its opinion or the
opinion of its counsel, may expose the Administrative Agent to liability or that
is contrary to any Credit Document or applicable law; and
(c) shall not, except as expressly set forth herein and in the other
Credit Documents, have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Borrower or any of its
Affiliates that is communicated to or obtained by the Person serving as the
Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not
taken by it (i) with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 11.6 and 9.2) or (ii) in the absence of
its own gross negligence or willful misconduct. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent by the Borrower, a
Lender or the Issuing Lender.
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The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Credit Agreement or any other Credit Document, (ii)
the contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Administrative Agreement,
any other Credit Document or any other agreement, instrument or document or (v)
the satisfaction of any condition set forth in Section 5 or elsewhere herein,
other than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
10.9 Reliance By Administrative Agent.
--------------------------------
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to
it orally or by telephone and believed by it to have been made by the proper
Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Loan, or the issuance
of a Letter of Credit, that by its terms must be fulfilled to the satisfaction
of a Lender or the Issuing Lender, the Administrative Agent may presume that
such condition is satisfactory to such Lender or the Issuing Lender unless the
Administrative Agent shall have received notice to the contrary from such Lender
or the Issuing Lender prior to the making of such Loan or the issuance of such
Letter of Credit. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
10.10 Delegation of Duties.
--------------------
The Administrative Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Credit Document by
or through any one or more sub-agents appointed by the Administrative Agent. The
Administrative Agent and any such sub-agent may perform any and all of its
duties and exercise its rights and powers by or through their respective Related
Parties. The exculpatory provisions of this Section shall apply to any such
sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
10.11 No Other Duties.
---------------
Anything herein to the contrary notwithstanding, none of the Syndication
Agent, Documentation Agent, Sole Lead Arranger or Sole Book Manager listed on
the cover page hereof shall have any powers, duties or responsibilities under
this Credit Agreement or any of the other Credit Documents, except in its
capacity, as applicable, as the Administrative Agent, a Lender or the Issuing
Lender hereunder. Without limiting the foregoing, none of the Lenders or other
Persons so identified shall have or be deemed to have any fiduciary relationship
with any Lender. Each Lender acknowledges that it has not relied, and will not
rely, on any of the Lenders or other Persons so identified in deciding to enter
into this Credit Agreement or in taking or not taking action hereunder.
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10.12 Administrative Agent May File Proofs of Claim.
---------------------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to any Credit Party, the Administrative Agent
(irrespective of whether the principal of any Loan or LOC Obligation shall then
be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans, LOC Obligations and all other
Obligations (other than obligations under Swap Contracts or Treasury Management
Agreements to which the Administrative Agent is not a party) that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the Lenders, the Issuing Lender and the
Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders, the Issuing Lender and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders, the Issuing Lender and the Administrative Agent under
Sections 3.5 and 11.5) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the Issuing Lender to make such payments to the Administrative
Agent and, in the event that the Administrative Agent shall consent to the
making of such payments directly to the Lenders and the Issuing Lender, to pay
to the Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and its agents
and counsel, and any other amounts due the Administrative Agent under Sections
3.5 and 11.5.
Nothing contained herein shall be deemed to authorize the Administrative
Agent to authorize or consent to or accept or adopt on behalf of any Lender or
the Issuing Lender any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lender or to
authorize the Administrative Agent to vote in respect of the claim of any Lender
in any such proceeding.
10.13 Collateral and Guaranty Matters.
-------------------------------
The Lenders and the Issuing Lender irrevocably authorize the
Administrative Agent, at its option and in its discretion:
(a) to release any Lien on any property granted to or held by the
Administrative Agent under any Credit Document (i) upon termination of the
Revolving Commitments and payment in full of all Obligations (other than
contingent indemnification obligations) and the expiration or termination of all
Letters of Credit, (ii) that is sold or to be sold as part of or in connection
with any sale permitted hereunder or under any other Credit Document, or (iii)
subject to Section 11.6, if approved, authorized or ratified in writing by the
Required Lenders;
81
(b) to subordinate any Lien on any property granted to or held by the
Administrative Agent under any Credit Document to the holder of any Lien on such
property that is permitted by clause (viii) of the definition of "Permitted
Liens"; and
(c) to release any Guarantor from its obligations under the Guaranty if
such Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder.
Upon request by the Administrative Agent at any time, the Required Lenders
will confirm in writing the authority of the Administrative Agent to release any
Guarantor from its obligations hereunder pursuant to this Section 10.13.
SECTION 11
MISCELLANEOUS
-------------
11.1 Notices.
-------
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Credit Parties and the
Administrative Agent, set forth below, and, in the case of the Lenders, set
forth on Schedule 11.1, or at such other address as such party may specify by
written notice to the other parties hereto:
if to any Credit Party: RehabCare Group, Inc.
7733 Forsyth Blvd., 23rd Floor
St. Louis, Missouri 63105
Attn: Vincent L. Germanese, SVP and Chief
Financial Officer
Phone:(314) 659-2220
Fax: (314) 450-2798
if to the Administrative Agent: Bank of America, N.A.
901 Main Street
Dallas, Texas 75202
Attn: Angela Azu, Officer/Credit Services
Representative
Phone: (214) 209-3099
Fax: (214) 290-9559
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with a copy to: Bank of America, N.A.
231 South LaSalle Street
Chicago, Illinois 60604
Mail Code: IL1-231-08-30
Attn: Bozena Janociak
Phone: (312) 828-3597
Fax: (877) 207-0732
11.2 Right of Set-Off; Adjustments.
-----------------------------
Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of any Credit Party
against any and all of the obligations of such Person now or hereafter existing
under this Credit Agreement, under the Notes, under any other Credit Document or
otherwise, irrespective of whether such Lender shall have made any demand under
hereunder or thereunder and although such obligations may be unmatured. Each
Lender agrees promptly to notify any affected Credit Party after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.2 are in addition
to other rights and remedies (including other rights of set-off) that such
Lender may have.
11.3 Benefit of Agreement.
--------------------
(a) Successors and Assigns Generally. The provisions of this Credit
--------------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that
neither the Borrower nor any other Credit Party may assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Administrative Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of subsection (b) of this Section,
(ii) by way of participation in accordance with the provisions of subsection (d)
of this Section, or (iii) by way of pledge or assignment of a security interest
subject to the restrictions of subsection (f) of this Section (and any other
attempted assignment or transfer by any party hereto shall be null and void).
Nothing in this Credit Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in
subsection (d) of this Section and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Lender and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Credit Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or
----------------------
more Eligible Assignees its rights and obligations under this Credit Agreement,
but, subject to the provisions hereof, each such assignment shall be of all, and
not a portion, of its Commitment and the Loans (including for purposes of this
subsection (b), participations in LOC Obligations and in Swingline Loans) at the
time owing to it, unless the Borrower shall otherwise consent or an Event of
Default has occurred and is continuing, in which case a Lender make an
assignment of partial interests hereunder; provided that
(i) except in the case of an assignment of the entire remaining
amount of the assigning Lender's Commitment and the Loans at the time
owing to it or in the case of an assignment to a Lender or an Affiliate of
a Lender or an Approved Fund with respect to a Lender, the aggregate
83
amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the
principal outstanding balance of the Loans of the assigning Lender subject
to each such assignment, determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the
Administrative Agent or, if "Trade Date" is specified in the Assignment
and Assumption, as of the Trade Date, shall not be less than $5 million
unless each of the Administrative Agent and, so long as no Default or
Event of Default has occurred and is continuing, the Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed);
(ii) any partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations
under this Credit Agreement with respect to the Loans or the Commitment
assigned, except that this clause (ii) shall not apply to rights in
respect of Swingline Loans;
(iii) any assignment of a Commitment must be approved by the
Administrative Agent, the Issuing Lender and the Swingline Lender unless
the Person that is the proposed assignee is itself a Lender (whether or
not the proposed assignee would otherwise qualify as an Eligible
Assignee); and
(iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500, and the Eligible Assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.
Subject to acceptance and recording thereof by the Administrative Agent pursuant
to subsection (c) of this Section, from and after the effective date specified
in each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Credit Agreement and, to the extent of the interest assigned by
such Assignment and Assumption, have the rights and obligations of a Lender
under this Credit Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Assumption, be released
from its obligations under this Credit Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Lender's rights and
obligations under this Credit Agreement, such Lender shall cease to be a party
hereto) but shall continue to be entitled to the benefits of Sections 3.6, 3.9,
3.11, 3.12, and 11.5 with respect to facts and circumstances occurring prior to
the effective date of such assignment. Upon request, the Borrower (at its
expense) shall execute and deliver a Note to the assignee Lender. Any assignment
or transfer by a Lender of rights or obligations under this Credit Agreement
that does not comply with this subsection shall be treated for purposes of this
Credit Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection (d) of this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as
--------
an agent of the Borrower, shall maintain at the Administrative Agent's Office a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans and LOC Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Credit Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by each of the Borrower and the Issuing Lender at any
reasonable time and from time to time upon reasonable prior notice. In addition,
at any time that a request for a consent for a material or substantive change to
the Credit Documents is pending, any Lender wishing to consult with other
Lenders in connection therewith may request and receive from the Administrative
Agent a copy of the Register.
84
(d) Participations. Any Lender may at any time, without the consent of, or
--------------
notice to, the Borrower or the Administrative Agent, sell participations to any
Person (other than a natural person or the Borrower or any of the Borrower's
Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such
Lender's rights and/or obligations under this Credit Agreement (including all or
a portion of its Commitment and/or the Loans (including such Lender's
participations in LOC Obligations and/or Swingline Loans) owing to it); provided
that (i) such Lender's obligations under this Credit Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Lenders and the Issuing Lender shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Credit Agreement.
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Credit Agreement and to approve any amendment, modification or
waiver of any provision of this Credit Agreement; provided that such agreement
or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
clauses (i) through (vi) and clause (ix) of subsection (a) of the proviso to
Section 11.6 that affects such Participant. Subject to subsection (e) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 3.6, 3.9, 3.11, 3.12, and 11.5 to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to subsection
(b) of this Section. To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 11.2 as though it were a Lender, provided
such Participant agrees to be subject to Section 3.16 as though it were a
Lender.
(e) Limitation upon Participant Rights. A Participant shall not be
----------------------------------
entitled to receive any greater payment under Sections 3.6, 3.9 or 3.11 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower's prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 3.11 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 3.11(e) as though it were a
Lender.
(f) Certain Pledges. Any Lender may at any time pledge or assign a
---------------
security interest in all or any portion of its rights under this Credit
Agreement (including under its Note(s), if any) to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank; provided that no such pledge or assignment shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.
(g) Electronic Execution of Assignments. The words "execution", "signed",
-----------------------------------
"signature", and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.
(h) Resignation as Issuing Lender or Swingline Lender after Assignment.
------------------------------------------------------------------
Notwithstanding anything to the contrary contained herein, if at any time Bank
of America assigns all of its Commitment and Loans pursuant to subsection (b)
85
above, Bank of America may, (i) upon thirty (30) days' notice to the Borrower
and the Lenders, resign as Issuing Lender and/or (ii) upon thirty (30) days'
notice to the Borrower, resign as Swingline Lender. In the event of any such
resignation as Issuing Lender or Swingline Lender, the Borrower shall be
entitled to appoint from among the Lenders a successor Issuing Lender or
Swingline Lender hereunder; provided, however, that no failure by the Borrower
to appoint any such successor shall affect the resignation of Bank of America as
Issuing Lender or Swingline Lender, as the case may be. If Bank of America
resigns as Issuing Lender, it shall retain all the rights and obligations of the
Issuing Lender hereunder with respect to all Letters of Credit outstanding as of
the effective date of its resignation as Issuing Lender and all LOC Obligations
with respect thereto (including the right to require the Lenders to make Base
Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to
Section 2.6(b)). If Bank of America resigns as Swingline Lender, it shall retain
all the rights of the Swingline Lender provided for hereunder with respect to
Swingline Loans made by it and outstanding as of the effective date of such
resignation, including the right to require the Lenders to make Base Rate Loans
or fund risk participations in outstanding Swingline Loans pursuant to Section
2.7.
11.4 No Waiver; Remedies Cumulative.
------------------------------
No failure or delay on the part of the Administrative Agent or any Lender
in exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Administrative Agent or any Lender
and any of the Credit Parties shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Administrative Agent or any Lender would otherwise
have. No notice to or demand on any Credit Party in any case shall entitle the
Credit Parties to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative Agent
or the Lenders to any other or further action in any circumstances without
notice or demand.
11.5 Expenses; Indemnification.
-------------------------
(a) Costs and Expenses. The Borrower shall pay (i) all reasonable
------------------
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates
(including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent), in connection with the syndication of the credit
facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Credit Agreement and the other Credit
Documents or any amendments, modifications or waivers of the provisions hereof
or thereof (whether or not the transactions contemplated hereby or thereby shall
be consummated), (ii) all reasonable out-of-pocket expenses incurred by the
Issuing Lender in connection with the issuance, amendment, renewal or extension
of any Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, any Lender or the
Issuing Lender (including the fees, charges and disbursements of any counsel for
the Administrative Agent, any Lender or the Issuing Lender), and all fees and
time charges for attorneys who may be employees of the Administrative Agent, any
Lender or the Issuing Lender, in connection with the enforcement or protection
of its rights (A) in connection with this Credit Agreement and the other Credit
Documents, including its rights under this Section, or (B) in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.
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(b) Indemnification by the Borrower. The Borrower shall indemnify the
-------------------------------
Administrative Agent (and any sub-agent thereof), each Lender and the Issuing
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an "Indemnitee") against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee), and
shall indemnify and hold harmless each Indemnitee from all fees and time charges
and disbursements for attorneys who may be employees of any Indemnitee, incurred
by any Indemnitee or asserted against any Indemnitee by any third party or by
the Borrower or any other Credit Party arising out of, in connection with, or as
a result of (i) the execution or delivery of this Credit Agreement, any other
Credit Document or any agreement or instrument contemplated hereby or thereby,
the performance by the parties hereto of their respective obligations hereunder
or thereunder or the consummation of the transactions contemplated hereby or
thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by the Issuing Lender to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by the Borrower or any other Credit Party, and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or (y) result from a claim
brought by the Borrower or any other Credit Party against an Indemnitee for
breach in bad faith of such Indemnitee's obligations hereunder or under any
other Credit Document, if the Borrower or such Credit Party has obtained a final
and nonappealable judgment in its favor on such claim as determined by a court
of competent jurisdiction.
(c) Reimbursement by Lenders. To the extent that the Borrower for any
------------------------
reason fails to indefeasibly pay any amount required under subsection (a) or (b)
of this Section to be paid by it to the Administrative Agent (or any sub-agent
thereof), the Issuing Lender or any Related Party of any of the foregoing, each
Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), the Issuing Lender or such Related Party, as the case may be, such
Lender's Aggregate Commitment Percentage or, in the case of LOC Obligations,
Revolving Commitment Percentage (determined in each case as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount, provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent (or any such sub-agent) or the Issuing
Lender in its capacity as such, or against any Related Party of any of the
foregoing acting for the Administrative Agent (or any such sub-agent) or Issuing
Lender in connection with such capacity. The obligations of the Lenders under
this subsection (c) are subject to the provisions of Section 3.17(d).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted
------------------------------------
by applicable law, the Borrower shall not assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Credit Agreement,
any other Credit Document or any agreement or instrument contemplated hereby,
the transactions contemplated hereby or thereby, any Loan or Letter of Credit or
the use of the proceeds thereof. No Indemnitee referred to in subsection (b)
above shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in
connection with this Credit Agreement or the other Credit Documents or the
transactions contemplated hereby or thereby.
87
(e) Payments. All amounts due under this Section shall be payable not
--------
later than ten (10) Business Days after demand therefor.
(f) Survival. The agreements in this Section shall survive the resignation
--------
of the Administrative Agent and the Issuing Lender, the replacement of any
Lender, the termination of the Aggregate Commitments and the repayment,
satisfaction or discharge of all the other Obligations.
11.6 Amendments, Waivers and Consents.
--------------------------------
No amendment or waiver of, or any consent to deviation from, any provision
of this Credit Agreement or any other Credit Document shall be effective unless
in writing and signed by the Borrower or the applicable Credit Party, as the
case may be, and the Required Lenders and acknowledged by the Administrative
Agent, and each such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given; provided,
however, that:
(a) unless also consented to in writing by each Lender directly affected
thereby, no such amendment, waiver or consent shall:
(i) extend the final maturity of any Loan or of any reimbursement
obligation, or any portion thereof, arising from drawings under Letters of
Credit,
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any post-default
increase in interest rates) thereon or Fees hereunder,
(iii) reduce or waive the principal amount of any Loan or of any
reimbursement obligation, or any portion thereof, arising from drawings
under Letters of Credit,
(iv) increase the Commitment of a Lender over the amount thereof in
effect (it being understood and agreed that a waiver of any Default or
Event of Default or mandatory reduction in the Commitments shall not
constitute a change in the terms of any Commitment of any Lender),
(v) except as the result of or in connection with a dissolution,
merger or disposition of a member of the Consolidated Group permitted
under Section 8.5, release the Borrower or substantially all of the
Guarantors from its or their obligations under the Credit Documents,
(vi) except as the result of or in connection with an Asset
Disposition expressly permitted hereunder, release all or substantially
all of the collateral,
(vii) amend, modify or waive any provision of this Section 11.6 or
Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.15, 3.16, 3.17, 9.1(a),
11.2, 11.3, 11.5 or 11.10,
(viii) reduce any percentage specified in, or otherwise modify, the
definition of Required Lenders, or
(ix) consent to the assignment or transfer by the Borrower or all or
substantially all of the other Credit Parties of any of its or their
rights and obligations under (or in respect of) the Credit Documents
except as permitted thereby;
88
(b) without the consent of the Administrative Agent, no provision of
Section 10 may be amended; and
(c) without the consent of the Issuing Lender, no provision of Section 2.2
may be amended.
Notwithstanding the fact that the consent of all the Lenders is required
in certain circumstances as set forth above, (x) each Lender is entitled to vote
as such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
11.7 Payments Set Aside.
------------------
To the extent that any payment by or on behalf of the Borrower is made to
the Administrative Agent, the Issuing Lender or any Lender, or the
Administrative Agent, the Issuing Lender or any Lender exercises its right of
setoff, and such payment or the proceeds of such setoff or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the
Administrative Agent, the Issuing Lender or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of
such recovery, the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred, and (b) each Lender
and the Issuing Lender severally agrees to pay to the Administrative Agent on
demand its applicable share (without duplication) of any amount so recovered
from or repaid by the Administrative Agent, plus interest thereon from the date
of such demand to the date such payment is made at a rate per annum equal to the
Federal Funds Rate from time to time in effect. The obligations of the Lenders
and the Issuing Lender under clause (b) of the preceding sentence shall survive
the payment in full of the Obligations and the termination of this Credit
Agreement.
11.8 Counterparts.
------------
This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
11.9 Headings.
--------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.10 Survival.
--------
All indemnities set forth herein, including in those in Section 2.6(f),
3.11, 3.12, 10.5 and 11.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Credit Parties herein shall survive
delivery of the Notes and the making of the Loans hereunder.
89
11.11 Replacement of Lenders.
----------------------
If any Lender requests compensation under Section 3.6 or 3.9, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.11,
or if any Lender is a Defaulting Lender, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by, Section
11.3), all of its interests, rights and obligations under this Credit Agreement
and the related Credit Documents to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment), provided that:
(a) the Borrower shall have paid to the Administrative Agent the
assignment fee specified in Section 11.3(b);
(b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and Letter of Credit Advances, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder and
under the other Credit Documents (including any amounts under Section 3.12) from
the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the Borrower (in the case of all other amounts);
(c) in the case of any such assignment resulting from a claim for
compensation under Section 3.6 or 3.9 or payments required to be made pursuant
to Section 3.11, such assignment will result in a reduction in such compensation
or payments thereafter; and
(d) such assignment does not conflict with applicable Laws.
A Lender shall not be required to make any such assignment or delegation
if, prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.
11.12 Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY PROVIDED
THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any
legal action or proceeding with respect to this Credit Agreement or any other
Credit Document may be brought in the State or Federal courts located in
Charlotte, North Carolina, and, by execution and delivery of this Credit
Agreement, each of the Credit Parties hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the nonexclusive
jurisdiction of such courts. Each of the Credit Parties further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to it at the address set out for notices
pursuant to Section 11.1, such service to become effective three (3) days after
such mailing. Nothing herein shall affect the right of the Administrative Agent
or any Lender to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against any Credit Party in
any other jurisdiction.
90
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE
LENDERS AND EACH OF THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.13 Severability.
------------
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.14 Entirety.
--------
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.15 Binding Effect; Termination.
---------------------------
(a) This Credit Agreement shall become effective at such time on or after
the Closing Date when it shall have been executed by each Credit Party and the
Administrative Agent, and the Administrative Agent shall have received copies
hereof (telefaxed or otherwise) which, when taken together, bear the signatures
of each Lender, and thereafter this Credit Agreement shall be binding upon and
inure to the benefit of each Credit Party, the Administrative Agent and each
Lender and their respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding, no Letters of Credit shall be
outstanding, all of the Guaranteed Obligations have been irrevocably satisfied
in full and all of the Commitments hereunder shall have expired or been
terminated.
11.16 Confidentiality.
---------------
Each of the Administrative Agent, the Lenders and the Issuing Lender
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its Affiliates and to its and
its Affiliates' respective partners, directors, officers, employees, agents,
advisors and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
91
over it (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Credit Document or any action or proceeding
relating to this Credit Agreement or any other Credit Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (i)
any assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Credit Agreement or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower and its obligations, (g) with the consent
of the Borrower or (h) to the extent such Information (x) becomes publicly
available other than as a result of a breach of this Section or (y) becomes
available to the Administrative Agent, any Lender, the Issuing Lender or any of
their respective Affiliates on a nonconfidential basis from a source other than
the Borrower.
For purposes of this Section, "Information" means all information received
from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary
or any of their respective businesses, other than any such information that is
available to the Administrative Agent, any Lender or the Issuing Lender on a
nonconfidential basis prior to disclosure by the Borrower or any Subsidiary,
provided that, in the case of information received from the Borrower or any
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
11.17 Source of Funds.
---------------
Each of the Lenders hereby represents and warrants to the Borrower that at
least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee benefit
plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such Lender
has disclosed to the Borrower the name of each employee benefit plan whose
assets in such account exceed 10% of the total assets of such account as
of the date of such purchase (and, for purposes of this subsection (b),
all employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan);
(c) to the extent that any part of such funds constitutes assets of
an insurance company's general account, such insurance company has
complied with all of the requirements of the regulations issued under
Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific benefit
plans which such Lender has identified in writing to the Borrower.
As used in this Section 11.17, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
92
11.18 Conflict.
--------
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
11.19 Survival of Representations and Warranties.
------------------------------------------
All representations and warranties made hereunder and in any other Credit
Document or other document delivered pursuant hereto or thereto or in connection
herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by
the Administrative Agent and each Lender, regardless of any investigation made
by the Administrative Agent or any Lender or on their behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default at the time of any Credit Extension, and shall continue in full
force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
11.20 Interest Rate Limitation.
------------------------
Notwithstanding anything to the contrary contained in any Credit Document, the
interest paid or agreed to be paid under the Credit Documents shall not exceed
the maximum rate of non-usurious interest permitted by applicable Law (the
"Maximum Rate"). If the Administrative Agent or any Lender shall receive
interest in an amount that exceeds the Maximum Rate, the excess interest shall
be applied to the principal of the Loans or, if it exceeds such unpaid
principal, refunded to the Borrower. In determining whether the interest
contracted for, charged, or received by the Administrative Agent or a Lender
exceeds the Maximum Rate, such Person may, to the extent permitted by applicable
Law, (a) characterize any payment that is not principal as an expense, fee, or
premium rather than interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the contemplated term of the
Obligations hereunder.
11.21 USA PATRIOT Act Notice.
----------------------
Each Lender that is subject to the Act (as hereinafter defined) and the
Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it
is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and
other information that will allow such Lender or the Administrative Agent, as
applicable, to identify such Borrower in accordance with the Act.
[Signature Page to Follow]
93
CREDIT AGREEMENT
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: REHABCARE GROUP, INC.,
- --------
a Delaware Corporation
By:/s/ John H. Short
---------------------------
Name: John H. Short
Title: Chief Executive Officer
GUARANTORS: AMERICAN VITALCARE, INC.,
- ----------
a California corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
MANAGED ALTERNATIVE CARE, INC.,
a California corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
PHASE 2 CONSULTING, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
REHABCARE GROUP OF CALIFORNIA, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
REHABCARE GROUP EAST, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
REHABCARE GROUP MANAGEMENT SERVICES, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
REHABCARE GROUP OF TEXAS, L.P.,
a Texas limited partnership
By:RehabCare Group, Inc.,
a Delaware corporation, as its General Partner
By:/s/ John H. Short
---------------------------
Name: John H. Short
Title: Chief Executive Officer
REHABCARE GROUP OF VIRGINIA LLC,
a Virginia limited liability company
By:RehabCare Group East, Inc.,
a Delaware corporation, as its Managing Member
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
REHABCARE SANTA MONICA, INC.,
a Delaware corporation
By:/s/ Jeff A. Zadoks
---------------------------
Name: Jeff A. Zadoks
Title: Treasurer
REHABCARE TEXAS HOLDINGS, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
RHB, LLC,
a California limited liability company
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Manager
SALT LAKE PHYSICAL THERAPY ASSOCIATES, INC.,
a Utah corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and
Chief Financial Officer
STARMED MANAGEMENT, Inc.,
a Delaware corporation
By:/s/ Vincent L. Germanese
---------------------------
Name: Vincent L. Germanese
Title: Senior Vice President
ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A.,
- --------------------
as Administrative Agent
By:/s/ David A. Johanson
---------------------------
Name: David A. Johanson
Title: Vice President
LENDERS: BANK OF AMERICA, N.A.
- -------
By:/s/ Gregory Mojica
---------------------------
Name: Gregory Mojica
Title: Senior Vice President
US BANK NATIONAL ASSOCIATION
By:/s/ Christian E. Stein III
--------------------------
Name: Christian E. Stein III
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By:/s/ Gloria Compean-Endicott
---------------------------
Name: Gloria Compean-Endicott
Title: Managing Director
SUNTRUST BANK
By:/s/ William D. Priester
---------------------------
Name: William D. Priester
Title: Director
NATIONAL CITY BANK
By:/s/ Joseph L. Sooter, Jr.
---------------------------
Name: Joseph L. Sooter, Jr.
Title: Vice President
COMERICA BANK
By:/s/ Colleen M. Murphy
---------------------------
Name: Colleen M. Murphy
Title: Vice President
EXHIBIT 10.2
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of October 12,
2004, is by and among the parties identified as "Pledgors" on the signature
pages hereto and such other parties as may become Pledgors hereunder after the
date hereof (individually a "Pledgor", and collectively the "Pledgors") and BANK
OF AMERICA, N.A., as Administrative Agent.
W I T N E S S E T H
WHEREAS, credit facilities have been established in favor of RehabCare
Group, Inc., a Delaware corporation (the "Borrower"), pursuant to that credit
agreement, dated as of August 29, 2000 (as amended, modified and supplemented,
the "Existing Credit Agreement"), among the Borrower, the subsidiaries and
affiliates of the Borrower identified therein, as guarantors, the lenders
identified therein and Bank of America, N.A., as administrative agent;
WHEREAS, the Borrower has requested certain modifications to the existing
credit facilities, including, among other things, provision of a replacement
five-year revolving credit facility;
WHEREAS, the Lenders have agreed to make the requested modifications to
the existing credit facilities pursuant to the terms of the Amended and Restated
Credit Agreement, dated as of the date hereof (as amended, modified and
supplemented, the "Credit Agreement"), by and among the Borrower, the
Guarantors, the Lenders and the Collateral Agent; and
WHEREAS, this Pledge Agreement is given in amendment to, restatement of
and substitution for the pledge agreement provided in the Existing Credit
Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions and Interpretive Provisions.
-------------------------------------------
(a) Definitions. Capitalized terms used and not otherwise defined herein
-----------
shall have the meanings provided in the Credit Agreement. In addition, the
following terms, which are defined in the UCC as in effect in the State of North
Carolina on the date hereof, are used herein as so defined: Accession, Financial
Asset, Proceeds and Security. As used herein:
"Pledge Agreement" has the meaning provided in the recitals hereto,
----------------
as the same may be amended and modified from time to time.
"Pledged Collateral" has the meaning provided in Section 2 hereof.
------------------
"Pledged Shares" has the meaning provided in Section 2 hereof.
--------------
"Pledgors" has the meaning provided in the recitals hereto, together
--------
with their respective successors and assigns.
"Secured Obligations" means, without duplication, (a) all advances
-------------------
to, and debts, liabilities, obligations, covenants and duties of, any
Credit Party arising under any Credit Document or otherwise with respect
to any Loan or Letter of Credit, whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become
due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Credit Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming
such Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding, (b) all
obligations under any Hedging Agreement between any Credit Party and any
Lender or Affiliate of a Lender to the extent permitted under the Credit
Agreement, (c) all obligations under any Treasury Management Agreement
between any Credit Party and any Lender or Affiliate of a Lender and (d)
all costs and expenses incurred in connection with enforcement and
collection of the Secured Obligations, including reasonable attorneys'
fees and disbursements.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"UCC" means the Uniform Commercial Code.
---
(b) Interpretive Provisions, etc. Each of the terms and provisions of
----------------------------
Sections 1.3, 1.6 and 1.7 of the Credit Agreement (in each case as the same may
be amended or modified as provided therein) are incorporated herein by reference
to the same extent and with the same effect as if fully set forth herein.
2. Pledge and Grant of Security Interest. To secure the prompt payment and
-------------------------------------
performance in full when due, whether by lapse of time, acceleration, mandatory
prepayment or otherwise, of the Secured Obligations, each Pledgor hereby grants,
pledges and assigns to the Administrative Agent, for the benefit of the holders
of the Secured Obligations, a continuing security interest in, and a right to
set-off against, any and all right, title and interest of such Pledgor in and to
the following, whether now owned or existing or owned, acquired, or arising
hereafter (collectively, the "Pledged Collateral"):
(a) Pledged Shares. (i) 100% (or, if less, the full amount owned by such
--------------
Pledgor) of the issued and outstanding Capital Stock owned by such Pledgor of
each Domestic Subsidiary set forth on Schedule 2(a) attached hereto and (ii) 65%
(or, if less, the full amount owned by such Pledgor) of the issued and
outstanding shares of Capital Stock entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) ("Voting Equity") and 100% (or, if less, the
full amount owned by such Pledgor) of the issued and outstanding Capital Stock
not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("Non-Voting Equity") owned by such Pledgor of each Foreign Subsidiary set forth
on Schedule 2(a) attached hereto, in each case together with the certificates
(or other agreements or instruments), if any, representing such Capital Stock,
and all options and other rights, contractual or otherwise, with respect thereto
(collectively, together with the Capital Stock described in Section 2(b) and
2(c) below, the "Pledged Shares"), including the following:
(A) all shares, securities, membership interests or other
equity interests representing a dividend on any of the Pledged
Shares, or representing a distribution or return of capital upon or
in respect of the Pledged Shares, or resulting from a stock split,
revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to the holder of,
or otherwise in respect of, the Pledged Shares; and
(B) without affecting the obligations of the Pledgors under
any provision prohibiting such action hereunder or under the Credit
Agreement, in the event of any consolidation or merger involving the
issuer of any Pledged Shares and in which such issuer is not the
surviving entity, all Capital Stock of the successor entity formed
by or resulting from such consolidation or merger.
2
(b) Additional Shares. (i) 100% (or, if less, the full amount owned by
-----------------
such Pledgor) of the issued and outstanding Capital Stock owned by such Pledgor
of any Person that hereafter becomes a Domestic Subsidiary and (ii) 65% (or, if
less, the full amount owned by such Pledgor) of the Voting Equity and 100% (or,
if less, the full amount owned by such Pledgor) of the Non-Voting Equity owned
by such Pledgor of any Person that hereafter becomes a Foreign Subsidiary,
including the certificates (or other agreements or instruments) representing
such Capital Stock.
(c) Accessions and Proceeds. All Accessions and all Proceeds of any and
-----------------------
all of the foregoing.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional Capital Stock to the Administrative Agent as
collateral security for the Secured Obligations. Upon delivery to the
Administrative Agent, such additional Capital Stock shall be deemed to be part
of the Pledged Collateral of such Pledgor and shall be subject to the terms of
this Pledge Agreement whether or not Schedule 2(a) is amended to refer to such
additional Capital Stock.
3. Security for Secured Obligations. The security interest created hereby
--------------------------------
in the Pledged Collateral of each Pledgor constitutes continuing collateral
security for all of the Secured Obligations.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
----------------------------------
(a) Such Pledgor shall deliver to the Administrative Agent (i)
simultaneously with or prior to the execution and delivery of this Pledge
Agreement, all certificates representing the Pledged Shares of such Pledgor and
(ii) promptly upon the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a Pledgor. Prior
to delivery to the Administrative Agent, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by such
Pledgor for the benefit of the Administrative Agent pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, substantially in the form provided in Exhibit 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by virtue of its
---------------------
being or having been the owner of any Pledged Collateral, any (i) certificate,
including any certificate representing a dividend or distribution in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares or other equity interests,
stock splits, spin-off or split-off, promissory notes or other instruments; (ii)
option or right, whether as an addition to, substitution for, or an exchange
for, any Pledged Collateral or otherwise; (iii) dividends payable in securities;
or (iv) distributions of securities in connection with a partial or total
liquidation, dissolution or reduction of capital, capital surplus or paid-in
surplus, then such Pledgor shall receive such certificate, instrument, option,
right or distribution in trust for the benefit of the Administrative Agent,
shall segregate it from such Pledgor's other property and shall deliver it
forthwith to the Administrative Agent in the exact form received together with
any necessary endorsement and/or appropriate stock power duly executed in blank,
substantially in the form provided in Exhibit 4(a), to be held by the
Administrative Agent as Pledged Collateral and as further collateral security
for the Secured Obligations.
(c) Financing Statements. Each Pledgor authorizes the Administrative Agent
--------------------
to prepare and file such UCC or other applicable financing statements as may be
reasonably requested by the Administrative Agent in order to perfect and protect
the security interest created hereby in the Pledged Collateral of such Pledgor.
3
5. Representations and Warranties. Each Pledgor hereby represents and
------------------------------
warrants to the Administrative Agent, for the benefit of the holders of the
Secured Obligations, that so long as any of the Secured Obligations remains
outstanding and until all of the commitments relating thereto have been
terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are duly
-------------------------------
authorized and validly issued, are fully paid and nonassessable and are not
subject to the preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the Pledged
-----
Collateral of such Pledgor and will at all times be the legal and beneficial
owner of such Pledged Collateral free and clear of any Lien, other than
Permitted Liens. There exists no "adverse claim" within the meaning of Section
8-102 of the UCC with respect to the Pledged Shares of such Pledgor.
(c) Exercising of Rights. The exercise by the Administrative Agent of its
--------------------
rights and remedies hereunder will not violate any law or governmental
regulation or any material contractual restriction binding on or affecting a
Pledgor or any of its property.
(d) Pledgor's Authority. No authorization, approval or action by, and no
-------------------
notice or filing with any Governmental Authority or with the issuer of any
Pledged Shares is required either (i) for the pledge made by a Pledgor or for
the granting of the security interest by a Pledgor pursuant to this Pledge
Agreement (except as have been already obtained or made) or (ii) for the
exercise by the Administrative Agent or the holders of the Secured Obligations
of their rights and remedies hereunder (except as may be required by laws
affecting the offering and sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates a valid
--------------------------
security interest in favor of the Administrative Agent for the benefit of the
holders of the Secured Obligations, in the Pledged Collateral. The delivery to
the Administrative Agent of certificates evidencing the Pledged Collateral,
together with duly executed stock powers in respect thereof, will perfect and
establish the first priority of the Administrative Agent's security interest in
any certificated Pledged Collateral that constitutes a Security. The filing of
appropriate UCC financing statements in the appropriate filing offices in the
jurisdiction of organization of the applicable Pledgor or obtaining "control"
over such interests in accordance with the provisions of Section 8-106 of the
UCC will perfect and establish the first priority of the Administrative Agent's
security interest in any uncertificated Pledged Collateral that constitutes a
Security. The filing of appropriate UCC financing statements in the appropriate
filing offices in the jurisdiction of organization of the applicable Pledgor
will perfect and establish the first priority of the Administrative Agent's
security interest in any Pledged Collateral that does not constitute a Security.
Except as set forth in this subsection (e), no action is necessary to perfect
the security interests granted by the Pledgors under this Pledge Agreement.
(f) Partnership and Membership Interests. Except as previously disclosed
------------------------------------
to the Administrative Agent, none of the Pledged Shares consisting of
partnership or limited liability company interests (i) is dealt in or traded on
a securities exchange or in a securities market, (ii) by its terms expressly
provides that it is a security governed by Article 8 of the UCC, (iii) is an
investment company security, (iv) is held in a securities account or (v)
constitutes a Security or a Financial Asset.
(g) No Other Interests. No Pledgor owns any Capital Stock in any
------------------
Subsidiary other than as set forth on Schedule 2(a) attached hereto.
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
---------
Secured Obligations remains outstanding and until all of the commitments
relating thereto have been terminated, such Pledgor shall:
4
(a) Defense of Title. Warrant and defend title to and ownership of the
----------------
Pledged Collateral of such Pledgor at its own expense against the claims and
demands of all other parties claiming an interest therein, keep the Pledged
Collateral free from all Liens, except for Permitted Liens, and not sell,
exchange, transfer, assign, lease or otherwise dispose of Pledged Collateral of
such Pledgor or any interest therein, except as permitted under the Credit
Agreement and the other Credit Documents.
(b) Further Assurances. Promptly authorize or execute and deliver at its
------------------
expense all further instruments and documents and take all further action that
may be necessary and desirable or that the Administrative Agent may reasonably
request in order to (i) perfect and protect the security interest created hereby
in the Pledged Collateral of such Pledgor (including any and all action
necessary to satisfy the Administrative Agent that the Administrative Agent has
obtained a first priority perfected security interest in all Pledged
Collateral); (ii) enable the Administrative Agent to exercise and enforce its
rights and remedies hereunder in respect of the Pledged Collateral of such
Pledgor; and (iii) otherwise effect the purposes of this Pledge Agreement,
including and if requested by the Administrative Agent, delivering to the
Administrative Agent irrevocable proxies in respect of the Pledged Collateral of
such Pledgor.
(c) Amendments. Not make or consent to any amendment or other modification
----------
or waiver with respect to any of the Pledged Collateral of such Pledgor or enter
into any agreement or allow to exist any restriction with respect to any of the
Pledged Collateral of such Pledgor other than pursuant hereto or as may be
permitted under the Credit Agreement.
(d) Compliance with Securities Laws. File all reports and other
-------------------------------
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state, federal or
foreign agency in connection with the ownership of the Pledged Collateral of
such Pledgor.
(e) Issuance or Acquisition of Capital Stock. Not, without executing and
----------------------------------------
delivering, or causing to be executed and delivered, to the Administrative Agent
such agreements, documents and instruments as the Administrative Agent may
require, issue or acquire any Capital Stock consisting of an interest in a
partnership or a limited liability company that (i) is dealt in or traded on a
securities exchange or in a securities market, (ii) by its terms expressly
provides that it is a security governed by Article 8 of the UCC, (iii) is an
investment company security, (iv) is held in a securities account or (v)
constitutes a Security or a Financial Asset.
7. Advances and Performance by Holders of the Secured Obligations. On
--------------------------------------------------------------
failure of any Pledgor to perform any of the covenants and agreements contained
herein, the Administrative Agent may, at its sole option and in its sole
discretion, perform the same and in so doing may expend such sums as the
Administrative Agent may reasonably deem advisable in the performance thereof,
including the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures that the
Administrative Agent or the holders of the Secured Obligations may make for the
protection of the security hereof or may be compelled to make by operation of
law. All such sums and amounts so expended shall be repayable by the Pledgors on
a joint and several basis (subject to Section 26 hereof) promptly upon timely
notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the Default Rate for Revolving Loans that are Base Rate Loans. No such
performance of any covenant or agreement by the Administrative Agent or the
holders of the Secured Obligations on behalf of any Pledgor, and no such advance
or expenditure therefor, shall relieve the Pledgors of any default under the
terms of this Pledge Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The holders of the Secured
Obligations may make any payment hereby authorized in accordance with any bill,
5
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by a Pledgor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
8. Remedies.
--------
(a) General Remedies. Upon the occurrence of an Event of Default and
----------------
during the continuation thereof, the Administrative Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Credit Documents, in any other documents relating to the Secured
Obligations, or by law (including levy of attachment and garnishment), the
rights and remedies of a secured party under the UCC of the jurisdiction
applicable to the affected Pledged Collateral.
(b) Sale of Pledged Collateral. Upon the occurrence of an Event of Default
--------------------------
and during the continuation thereof, without limiting the generality of this
Section 8 and without notice, the Administrative Agent may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged Collateral,
or any part thereof, in one or more parcels, at public or private sale, at any
exchange or broker's board or elsewhere, at such price or prices and on such
other terms as the Administrative Agent may deem commercially reasonable, for
cash, credit or for future delivery or otherwise in accordance with applicable
law. To the extent permitted by law, any holder of the Secured Obligations may
in such event, bid for the purchase of such securities. Each Pledgor agrees
that, to the extent notice of sale shall be required by law and has not been
waived by such Pledgor, any requirement of reasonable notice shall be met if
notice, specifying the place of any public sale or the time after which any
private sale is to be made, is personally served on or mailed, postage prepaid,
to such Pledgor, in accordance with the notice provisions of Section 11.1 of the
Credit Agreement at least ten days before the time of such sale. The
Administrative Agent shall not be obligated to make any sale of Pledged
Collateral of such Pledgor regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Private Sale. Upon the occurrence of an Event of Default and during
------------
the continuation thereof, the Pledgors recognize that the Administrative Agent
may deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any of the securities constituting Pledged Collateral and that
the Administrative Agent may, therefore, determine to make one or more private
sales of any such Pledged Collateral to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges that any such private
sale may be at prices and on terms less favorable to the seller than the prices
and other terms that might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be deemed to
have been made in a commercially reasonable manner and that the Administrative
Agent shall have no obligation to delay sale of any such Pledged Collateral for
the period of time necessary to permit the issuer of such Pledged Collateral to
register such Pledged Collateral for public sale under the Securities Act. Each
Pledgor further acknowledges and agrees that any offer to sell such Pledged
Collateral that has been (i) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial community
of New York, New York (to the extent that such offer may be advertised without
prior registration under the Securities Act), or (ii) made privately in the
manner described above shall be deemed to involve a "public sale" under the UCC,
notwithstanding that such sale may not constitute a "public offering" under the
Securities Act, and the Administrative Agent may, in such event, bid for the
purchase of such Pledged Collateral.
6
(d) Retention of Pledged Collateral. To the extent permitted under
-------------------------------
applicable law, in addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default, the Administrative Agent may, after providing
the notices required by Sections 9-620 and 9-621 of the UCC or otherwise
complying with the requirements of applicable law of the relevant jurisdiction,
accept or retain all or any portion of the Pledged Collateral in satisfaction of
the Secured Obligations. Unless and until the Administrative Agent shall have
provided such notices, however, the Administrative Agent shall not be deemed to
have accepted or retained any Pledged Collateral in satisfaction of any Secured
Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale, collection or
----------
realization are insufficient to pay all amounts to which the Administrative
Agent or the holders of the Secured Obligations are legally entitled, the
Pledgors shall be jointly and severally liable for the deficiency (subject to
Section 26 hereof), together with interest thereon at the Default Rate for
Revolving Loans that are Base Rate Loans, together with reasonable costs of
collection and reasonable attorneys' fees and disbursements. Any surplus
remaining after the full payment and satisfaction of the Secured Obligations
shall be returned to the Pledgors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
9. Rights of the Administrative Agent.
----------------------------------
(a) Power of Attorney. In addition to other powers of attorney contained
-----------------
herein, each Pledgor hereby designates and appoints the Administrative Agent, on
behalf of the holders of the Secured Obligations, and each of its designees or
agents, as attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following actions upon
the occurrence and during the continuation of an Event of Default:
(i) to demand, collect, settle, compromise and adjust, and give
discharges and releases concerning the Pledged Collateral, all as the
Administrative Agent may reasonably deem appropriate;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any of the Pledged Collateral and enforcing any
other right in respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Administrative
Agent may reasonably deem appropriate;
(iv) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Pledged
Collateral;
(v) to direct any parties liable for any payment in connection with
any of the Pledged Collateral to make payment of any and all monies due
and to become due thereunder directly to the Administrative Agent or as
the Administrative Agent shall direct;
(vi) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect of
or arising out of any Pledged Collateral;
(vii) to sign and endorse any drafts, assignments, proxies, stock
powers, verifications, notices and other documents relating to the Pledged
Collateral;
(viii) to authorize or to execute and deliver all assignments,
conveyances, statements, financing statements, renewal financing
statements, security and pledge agreements, affidavits, notices and other
7
agreements, instruments and documents that the Administrative Agent may
reasonably deem appropriate in order to perfect and maintain the security
interests and liens granted in this Pledge Agreement and in order to fully
consummate all of the transactions contemplated therein;
(ix) to exchange any of the Pledged Collateral or other property
upon any merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof and, in connection therewith, deposit
any of the Pledged Collateral with any committee, depository, transfer
agent, registrar or other designated agency upon such terms as the
Administrative Agent may reasonably deem appropriate;
(x) to vote for a shareholder resolution, or to sign an instrument
in writing, sanctioning the transfer of any or all of the Pledged
Collateral into the name of the Administrative Agent or one or more of the
holders of the Secured Obligations or into the name of any transferee to
whom the Pledged Collateral or any part thereof may be sold pursuant to
Section 8 hereof; and
(xi) to do and perform all such other acts and things as the
Administrative Agent may reasonably deem appropriate or convenient in
connection with the Pledged Collateral.
This power of attorney is a power coupled with an interest and shall
be irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have
been terminated. The Administrative Agent shall be under no duty to
exercise or withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Administrative Agent in
this Pledge Agreement, and shall not be liable for any failure to do so or
any delay in doing so. The Administrative Agent shall not be liable for
any act or omission or for any error of judgment or any mistake of fact or
law in its individual capacity or its capacity as attorney-in-fact except
acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative
Agent solely to protect, preserve and realize upon its security interest
in the Pledged Collateral.
(b) Assignment by the Administrative Agent. The Administrative Agent may
--------------------------------------
from time to time assign the Secured Obligations and any portion thereof and/or
the Pledged Collateral and any portion thereof in connection with its
resignation as Administrative Agent pursuant to Section 10 of the Credit
Agreement, and the assignee shall be entitled to all of the rights and remedies
of the Administrative Agent under this Pledge Agreement in relation thereto.
(c) The Administrative Agent's Duty of Care. Other than the exercise of
---------------------------------------
reasonable care to assure the safe custody of the Pledged Collateral while being
held by the Administrative Agent hereunder, the Administrative Agent shall have
no duty or liability to preserve rights pertaining thereto, it being understood
and agreed that the Pledgors shall be responsible for preservation of all rights
in the Pledged Collateral, and the Administrative Agent shall be relieved of all
responsibility for the Pledged Collateral upon surrendering it or tendering the
surrender of it to the Pledgors. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property, which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Administrative Agent
shall not have responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relating
to any Pledged Collateral, whether or not the Administrative Agent has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any of the Pledged
Collateral.
8
(d) Voting Rights in Respect of the Pledged Collateral.
--------------------------------------------------
(i) So long as no Event of Default shall have occurred and be
continuing, to the extent permitted by law, each Pledgor may exercise any
and all voting and other consensual rights pertaining to the Pledged
Collateral of such Pledgor or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement or the Credit
Agreement; and
(ii) Upon the occurrence and during the continuance of an Event of
Default and following the Administrative Agent's delivery to such Pledgor
of notice of its intent to exercise such rights, all rights of a Pledgor
to exercise the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to clause (i) of this subsection shall
cease and all such rights shall thereupon become vested in the
Administrative Agent, which shall then have the sole right to exercise
such voting and other consensual rights.
(e) Dividend Rights in Respect of the Pledged Collateral.
----------------------------------------------------
(i) So long as no Event of Default shall have occurred and be
continuing and subject to Section 4(b) hereof, each Pledgor may receive
and retain any and all dividends (other than stock dividends and other
dividends constituting Pledged Collateral addressed herein) or interest
paid in respect of the Pledged Collateral to the extent they are allowed
under the Credit Agreement.
(ii) Upon the occurrence and during the continuance of an Event of
Default:
(A) all rights of a Pledgor to receive the dividends and
interest payments that it would otherwise be authorized to receive
and retain pursuant to clause (i) of this subsection shall cease and
all such rights shall thereupon be vested in the Administrative
Agent, which shall then have the sole right to receive and hold as
Pledged Collateral such dividends and interest payments; and
(B) all dividends and interest payments that are received by a
Pledgor contrary to the provisions of clause (A) of this subsection
shall be received in trust for the benefit of the Administrative
Agent, shall be segregated from other property or funds of such
Pledgor, and shall be forthwith paid over to the Administrative
Agent as Pledged Collateral in the exact form received, to be held
by the Administrative Agent as Pledged Collateral and as further
collateral security for the Secured Obligations.
10. Rights of Required Lenders. All rights of the Administrative Agent
--------------------------
hereunder, if not exercised by the Administrative Agent, may be exercised by the
Required Lenders.
11. Application of Proceeds. Upon the occurrence and during the
-----------------------
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Pledged Collateral, when received by the
Administrative Agent or any of the holders of the Secured Obligations in cash or
its equivalent, will be applied in reduction of the Secured Obligations in the
order set forth in the Credit Agreement or other document relating to the
Secured Obligations, and each Pledgor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Administrative Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Administrative Agent's
sole discretion, notwithstanding any entry to the contrary upon any of its books
and records.
9
12. Release of Pledged Collateral. Upon request, the Administrative Agent
-----------------------------
shall promptly deliver to the Borrower (at the Borrower's expense) appropriate
release documentation to the extent the release of Pledged Collateral is
permitted under, and on the terms and conditions set forth in, the Credit
Agreement; provided that any such release, or the substitution of any of the
Pledged Collateral for other Collateral, will not alter, vary or diminish in any
way the force, effect, lien, pledge or security interest of this Pledge
Agreement as to any and all Pledged Collateral not expressly released or
substituted, and this Pledge Agreement shall continue as a first priority lien
(subject to Permitted Liens) on any and all Pledged Collateral not expressly
released or substituted.
13. Costs and Expenses. At all times hereafter, whether or not upon the
------------------
occurrence of an Event of Default, the Pledgors agree to promptly pay upon
demand any and all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) of the Administrative Agent and the holders
of the Secured Obligations (a) as required under Section 11.5 of the Credit
Agreement and (b) as necessary to protect the Pledged Collateral or to exercise
any rights or remedies under this Pledge Agreement or with respect to any of the
Pledged Collateral. All of the foregoing costs and expenses shall constitute
Secured Obligations hereunder.
14. Continuing Agreement.
--------------------
(a) This Pledge Agreement shall be a continuing agreement in every respect
and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Pledge Agreement shall be
automatically terminated and the Administrative Agent and the holders of the
Secured Obligations shall, upon the request and at the expense of the Pledgors,
forthwith release all of its liens and security interests hereunder and shall
authorize or execute and deliver all UCC termination statements and/or other
documents reasonably requested by the Pledgors evidencing such termination.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including reasonable attorneys' fees and disbursements) incurred
by the Administrative Agent or any holder of the Secured Obligations in
defending and enforcing such reinstatement shall be deemed to be included as a
part of the Secured Obligations.
15. Amendments and Waivers. This Pledge Agreement and the provisions
----------------------
hereof may not be amended, waived, modified, changed, discharged or terminated
except by written agreement of (a) the Pledgors and (b) the Administrative Agent
(with the consent or at the direction of the requisite Lenders under the Credit
Agreement).
16. Successors in Interest. This Pledge Agreement shall create a
----------------------
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns, and shall inure, together with the rights
and remedies of the Administrative Agent and the holders of the Secured
Obligations hereunder, to the benefit of the Administrative Agent and the
holders of the Secured Obligations and their successors and permitted assigns;
provided, however, that none of the Pledgors may assign its rights or delegate
its duties hereunder without the prior written consent of the requisite Lenders
10
under the Credit Agreement. To the fullest extent permitted by law, each Pledgor
hereby releases the Administrative Agent and each holder of the Secured
Obligations, their respective successors, assigns, officers, attorneys,
employees and agents, from any liability for any act or omission or any error of
judgment or mistake of fact or of law relating to this Pledge Agreement or the
Collateral, except for any liability arising from the gross negligence or
willful misconduct of the Administrative Agent or such holder.
17. Notices. All notices required or permitted to be given under this
-------
Pledge Agreement shall be given as provided in Section 11.1 of the Credit
Agreement.
18. Counterparts. This Pledge Agreement may be executed in any number of
------------
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
19. Headings. The headings of the sections and subsections hereof are
--------
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
20. Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, the LAW OF THE STATE OF NORTH CAROLINA applicable to agreements
made and to be performed entirely within such State; PROVIDED THAT The
Administrative Agent SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT
OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NORTH
CAROLINA SITTING IN CHARLOTTE, NORTH CAROLINA OR OF THE UNITED STATES FOR THE
WESTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS PLEDGE
AGREEMENT, EACH PLEDGOR AND THE ADMINISTRATIVE AGENT CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
PLEDGOR AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY OTHER
DOCUMENT RELATED HERETO. EACH PLEDGOR AND THE ADMINISTRATIVE AGENT WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
21. Waiver of Right to Trial by Jury. TO THE EXTENT PERMITTED BY
--------------------------------
APPLICABLE LAW, EACH PARTY TO THIS PLEDGE AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER THIS PLEDGE AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER DOCUMENT RELATED HERETO,
OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR
11
HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS PLEDGE AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
22. Severability. If any provision of this Pledge Agreement is determined
------------
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
23. Entirety. This Pledge Agreement, the other Credit Documents and the
--------
other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.
24. Survival. All representations and warranties of the Pledgors hereunder
--------
shall survive the execution and delivery of this Pledge Agreement, the other
Credit Documents and the other documents relating to the Secured Obligations,
the delivery of the Notes and the extension of credit thereunder or in
connection therewith.
25. Other Security. To the extent that any of the Secured Obligations are
--------------
now or hereafter secured by property other than the Pledged Collateral
(including real and other personal property owned by a Pledgor), or by a
guarantee, endorsement or property of any other Person, then the Administrative
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Administrative
Agent shall have the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Administrative Agent shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or the Secured
Obligations or any of the rights of the Administrative Agent or the holders of
the Secured Obligations under this Pledge Agreement, under any of the other
Credit Documents or under any other document relating to the Secured
Obligations.
26. Joint and Several Obligations of Pledgors.
-----------------------------------------
(a) Subject to subsection (c) of this Section 26, each of the Pledgors is
accepting joint and several liability hereunder in consideration of the
financial accommodation to be provided by the holders of the Secured
Obligations, for the mutual benefit, directly and indirectly, of each of the
Pledgors and in consideration of the undertakings of each of the Pledgors to
accept joint and several liability for the obligations of each of them.
(b) Subject to subsection (c) of this Section 26, each of the Pledgors
jointly and severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with the other
Pledgors with respect to the payment and performance of all of the Secured
Obligations arising under this Pledge Agreement, the other Credit Documents and
any other documents relating to the Secured Obligations, it being the intention
of the parties hereto that all the Secured Obligations shall be the joint and
several obligations of each of the Pledgors without preferences or distinction
among them.
12
(c) Notwithstanding any provision to the contrary contained herein, in any
other of the Credit Documents or in any other documents relating to the Secured
Obligations, the obligations of each Pledgor that is a Guarantor under the
Credit Agreement and the other Credit Documents shall be limited to an aggregate
amount equal to the largest amount that would not render such obligations
subject to avoidance under Section 548 of the Bankruptcy Code of the United
States or any other applicable Debtor Relief Law (including any comparable
provisions of any applicable state law).
[remainder of page intentionally left blank]
13
PLEDGE AGREEMENT
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
PLEDGORS:
- -------- REHABCARE GROUP, INC.,
a Delaware Corporation
By:/s/ John H. Short
-----------------
Name: John H. Short
Title: Chief Executive Officer
AMERICAN VITALCARE, INC.,
a California corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
MANAGED ALTERNATIVE CARE, INC.,
a California corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
PHASE 2 CONSULTING, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
REHABCARE GROUP OF CALIFORNIA, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
REHABCARE GROUP EAST, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
[Signature Pages Continue]
REHABCARE GROUP MANAGEMENT SERVICES, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
REHABCARE GROUP OF TEXAS, L.P.,
a Texas limited partnership
By: RehabCare Group, Inc.,
a Delaware corporation, as its General
Partner
By:/s/ John H. Short
-----------------
Name: John H. Short
Title: Chief Executive Officer
REHABCARE GROUP OF VIRGINIA LLC,
a Virginia limited liability company
By: RehabCare Group East, Inc.,
a Delaware corporation, as its Managing
Member
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief
Financial Officer
REHABCARE SANTA MONICA, INC.,
a Delaware corporation
By:/s/ Jeff A. Zadoks
------------------
Name: Jeff A. Zadoks
Title: Treasurer
REHABCARE TEXAS HOLDINGS, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
[Signature Pages Continue]
RHB, LLC,
a California limited liability company
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Manager
SALT LAKE PHYSICAL THERAPY ASSOCIATES, INC.,
a Utah corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
STARMED MANAGEMENT, Inc.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
Accepted and agreed to as of the date first above written.
BANK OF AMERICA, N.A.,
as Administrative Agent
By:/s/ David A. Johanson
---------------------
Name: David A. Johanson
Title: Vice President
EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement"), dated as of October
12, 2004, is by and among the parties identified as "Grantors" on the signature
pages hereto and such other parties as may become Grantors hereunder after the
date hereof (individually a "Grantor", and collectively the "Grantors") and BANK
OF AMERICA, N.A., as Administrative Agent.
W I T N E S S E T H
WHEREAS, credit facilities have been established in favor of RehabCare
Group, Inc., a Delaware corporation (the "Borrower"), pursuant to that credit
agreement, dated as of August 29, 2000 (as amended, modified and supplemented,
the "Existing Credit Agreement"), among the Borrower, the subsidiaries and
affiliates of the Borrower identified therein, as guarantors, the lenders
identified therein and Bank of America, N.A., as administrative agent;
WHEREAS, the Borrower has requested certain modifications to the existing
credit facilities, including, among other things, provision of a replacement
five-year revolving credit facility;
WHEREAS, the Lenders have agreed to make the requested modifications to
the existing credit facilities pursuant to the terms of the Amended and Restated
Credit Agreement, dated as of the date hereof (as amended, modified and
supplemented, the "Credit Agreement"), by and among the Borrower, the
Guarantors, the Lenders and the Collateral Agent; and
WHEREAS, this Security Agreement is given in amendment to, restatement of
and substitution for the security agreement provided in the Existing Credit
Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions and Interpretive Provisions.
---------------------------------------
(a) Definitions. Capitalized terms used and not otherwise defined herein
-----------
shall have the meanings provided in the Credit Agreement. In addition, the
following terms, which are defined in the UCC as in effect in the State of North
Carolina on the date hereof, are used as defined therein: Accession, Account,
As-Extracted Collateral, Chattel Paper, Commercial Tort Claim, Commingled Goods,
Consumer Goods, Deposit Account, Document, Equipment, Farm Products, Fixtures,
General Intangible, Goods, Instrument, Inventory, Investment Property,
Letter-of-Credit Right, Manufactured Home, Proceeds, Software, Standing Timber,
Supporting Obligation and Tangible Chattel Paper. As used herein:
"Collateral" has the meaning provided in Section 2 hereof.
----------
"Copyright License" means any written agreement, naming any Grantor
-----------------
as licensor, granting any right under any Copyright including any thereof
referred to in Schedule 1(b) attached hereto.
"Copyrights" means (a) all registered United States copyrights in
----------
all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the
United States Copyright Office including any thereof referred to in
Schedule 1(b) attached hereto, and (b) all renewals thereof including any
thereof referred to in Schedule 1(b) attached hereto.
"Grantors" has the meaning provided in the recitals hereto, together
--------
with their respective successors and assigns.
"Patent License" means any agreement, whether written or oral,
--------------
providing for the grant by or to a Grantor of any right to manufacture,
use or sell any invention covered by a Patent, including any thereof
referred to in Schedule 1(b) attached hereto.
"Patents" means (a) all letters patent of the United States or any
-------
other country and all reissues and extensions thereof, including any
letters patent referred to in Schedule 1(b) attached hereto, and (b) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including any thereof referred to in Schedule 1(b) attached hereto.
"Secured Obligations" means, without duplication, (a) all advances
-------------------
to, and debts, liabilities, obligations, covenants and duties of, any
Credit Party arising under any Credit Document or otherwise with respect
to any Loan or Letter of Credit, whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become
due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Credit Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming
such Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding, (b) all
obligations under any Hedging Agreement between any Credit Party and any
Lender or Affiliate of a Lender to the extent permitted under the Credit
Agreement, (c) all obligations under any Treasury Management Agreement
between any Credit Party and any Lender or Affiliate of a Lender and (d)
all costs and expenses incurred in connection with enforcement and
collection of the Secured Obligations, including reasonable attorneys'
fees and disbursements.
"Security Agreement" has the meaning provided in the recitals
------------------
hereto, as the same may be amended and modified from time to time.
"Trademark License" means any agreement, written or oral, providing
-----------------
for the grant by or to a Grantor of any right to use any Trademark,
including any thereof referred to in Schedule 1(b) attached hereto.
"Trademarks" means (a) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications
in connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof, or
otherwise, including any thereof referred to in Schedule 1(b) attached
hereto, and (b) all renewals thereof.
"UCC" means the Uniform Commercial Code.
---
"Work" means any work that is subject to copyright protection
----
pursuant to Title 17 of the United States Code.
2
(b) Interpretive Provisions, etc. Each of the terms and provisions of
----------------------------
Sections 1.2, 1.6 and 1.7 of the Credit Agreement (in each case as the same may
be amended or modified as provided therein) are incorporated herein by reference
to the same extent and with the same effect as if fully set forth herein.
2. Grant of Security Interest in the Collateral. To secure the prompt
--------------------------------------------
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Grantor hereby grants to the Administrative Agent, for the benefit of the
holders of the Secured Obligations, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Grantor
in and to all personal property of the Grantors of whatever type or description,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Collateral"), including the following:
(a) all Accounts;
(b) all cash and currency;
(c) all Chattel Paper;
(d) those Commercial Tort Claims identified on Schedule 2(d) attached
hereto;
(e) all Copyrights;
(f) all Copyright Licenses;
(g) all Deposit Accounts;
(h) all Documents;
(i) all Equipment;
(j) all Fixtures;
(k) all General Intangibles;
(l) all Instruments;
(m) all Inventory;
(n) all Investment Property;
(o) all Letter-of-Credit Rights;
(p) all Patents;
(q) all Patent Licenses;
(r) all Software;
(s) all Supporting Obligations;
(t) all Trademarks;
3
(u) all Trademark Licenses; and
(v) all Accessions and all Proceeds of any and all of the foregoing.
Notwithstanding anything to the contrary contained herein, the security
interests granted under this Security Agreement shall not extend to (i)(A) any
property that is subject to a Lien securing purchase money or sale/leaseback
Indebtedness permitted under the Credit Agreement pursuant to documents that
prohibit such Grantor from granting any other Liens in such property or (B) any
lease, license or other contract if the grant of a security interest in such
lease, license or contract in the manner contemplated by this Security
Agreement, under the terms thereof and under applicable law, is prohibited and
would result in the termination thereof; provided in each case that any such
limitation on the security interests granted hereunder shall only apply to the
extent that (1) after reasonable efforts (which shall not include the payment of
any additional consideration), consent from the relevant party or parties has
not been obtained and (2) any such prohibition could not be rendered ineffective
pursuant to the UCC or any other applicable law (including Debtor Relief Laws)
or principles of equity, (ii) any Pledged Collateral (as such term is defined in
the Pledge Agreement) that is expressly included in the grant of security
interests to the Administrative Agent pursuant to the Pledge Agreement, to the
extent the Administrative Agent holds a valid first-priority perfected security
interest in such Pledged Collateral thereunder and (iii) any Capital Stock of a
Foreign Subsidiary that is expressly excluded from the grant of security
interests in Pledged Collateral under the Pledge Agreement. The Grantors and the
Administrative Agent, on behalf of the holders of the Secured Obligations,
hereby acknowledge and agree that the security interest created hereby in the
Collateral (1) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (2) is not to be
construed as an assignment of any Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks or Trademark Licenses.
3. Provisions Relating to Accounts.
-------------------------------
(a) Anything herein to the contrary notwithstanding, each of the Grantors
shall remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such Account.
Neither the Administrative Agent nor any holder of the Secured Obligations shall
have any obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the receipt
by the Administrative Agent or any holder of the Secured Obligations of any
payment relating to such Account pursuant hereto, nor shall the Administrative
Agent or any holder of the Secured Obligations be obligated in any manner to
perform any of the obligations of a Grantor under or pursuant to any Account (or
any agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts that may have
been assigned to it or to which it may be entitled at any time or times.
(b) Once during each calendar year or at any time after the occurrence and
during the continuation of an Event of Default, the Administrative Agent shall
have the right, but not the obligation, to make test verifications of the
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Grantors shall furnish all such assistance and information as
the Administrative Agent may require in connection with such test verifications.
At any time and from time to time, upon the Administrative Agent's request and
at the expense of the Grantors, the Grantors shall furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Accounts. At any time after the occurrence and during
the continuation of an Event of Default, the Administrative Agent in its own
name or in the name of others may communicate with account debtors on the
Accounts to verify with them to the Administrative Agent's satisfaction, the
existence, amount and terms of any Accounts.
4
4. Representations and Warranties. Each Grantor hereby represents and
------------------------------
warrants to the Administrative Agent, for the benefit of the holders of the
Secured Obligations, that so long as any of the Secured Obligations remains
outstanding and until all of the commitments relating thereto have been
terminated:
(a) Legal Name; Chief Executive Office. As of the date hereof:
----------------------------------
(i) Each Grantor's exact legal name is (and for the prior five years
has been) and state of incorporation or formation, principal place of
business and chief executive office are (and for the prior five months
have been) as set forth on Schedule 4(a)(i) attached hereto.
(ii) Other than as set forth on Schedule 4(a)(ii) attached hereto,
no Grantor has been party to a merger, consolidation or other change in
structure or used any tradename in the prior five years.
(b) Ownership. Each Grantor is the legal and beneficial owner of its
---------
Collateral and has the right to pledge, sell, assign or transfer the same.
(c) Security Interest/Priority. This Security Agreement creates a valid
--------------------------
security interest in favor of the Administrative Agent, for the benefit of the
holders of the Secured Obligations, in the Collateral of such Grantor and, when
properly perfected by filing, shall constitute a valid perfected security
interest in such Collateral, to the extent such security interest can be
perfected by filing under the UCC, free and clear of all Liens except for
Permitted Liens.
(d) Types of Collateral. None of the Collateral consists of, or is the
-------------------
Accessions or the Proceeds of, As-Extracted Collateral, Consumer Goods, Farm
Products, Manufactured Homes, or Standing Timber.
(e) Accounts. (i) Each Account of the Grantors and the papers and
--------
documents relating thereto are genuine and in all material respects what they
purport to be, (ii) each Account arises out of (A) a bona fide sale of goods
sold and delivered by such Grantor (or is in the process of being delivered) or
(B) services theretofore actually rendered by such Grantor to, the account
debtor named therein, (iii) no Account of a Grantor is evidenced by any
Instrument or Chattel Paper unless such Instrument or Chattel Paper has been
theretofore endorsed over and delivered to, or submitted to the control of, the
Administrative Agent and (iv) no surety bond was required or given in connection
with any Account of a Grantor or the contracts or purchase orders out of which
they arose.
(f) Inventory. No Inventory of a Grantor is held by any Person other than
---------
a Grantor pursuant to consignment, sale or return, sale on approval or similar
arrangement.
(g) Copyrights, Patents and Trademarks.
----------------------------------
(i) Schedule 1(b) attached hereto includes all Copyrights, Copyright
-------------
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses
owned by any Grantor in its own name, or to which any Grantor is a party,
as of the date hereof.
(ii) To the best of each Grantor's knowledge, each Copyright, Patent
and Trademark of such Grantor is valid, subsisting, unexpired, enforceable
and has not been abandoned.
5
(iii) Except as set forth in Schedule 1(b) attached hereto, none of
such Copyrights, Patents and Trademarks is the subject of any licensing or
franchise agreement.
(iv) To the best of each Grantor's knowledge, no holding, decision
or judgment has been rendered by any Governmental Authority that would
limit, cancel or question the validity of any such Copyright, Patent or
Trademark.
(v) No action or proceeding is pending seeking to limit, cancel or
question the validity of any Copyright, Patent or Trademark, or that, if
adversely determined, could reasonably be expected to have a material
adverse effect on the value of any Copyright, Patent or Trademark.
(vi) All applications pertaining to the Copyrights, Patents and
Trademarks of each Grantor have been duly and properly filed, and all
registrations or letters pertaining to such Copyrights, Patents and
Trademarks have been duly and properly filed and issued, and all of such
Copyrights, Patents and Trademarks are valid and enforceable.
(vii) No Grantor has made any assignment or agreement in conflict
with the security interest in the Copyrights, Patents or Trademarks of
each Grantor hereunder.
5. Covenants. Each Grantor covenants that, so long as any of the Secured
---------
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated, such Grantor shall:
(a) Other Liens. Defend the Collateral against the claims and demands of
-----------
all other parties claiming an interest therein, keep the Collateral free from
all Liens, except for Permitted Liens, and not sell, exchange, transfer, assign,
lease or otherwise dispose of the Collateral or any interest therein, except as
permitted under the Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good order,
--------------------------
condition and repair and not use the Collateral in violation of the provisions
of this Security Agreement or any other agreement relating to the Collateral or
any policy insuring the Collateral or any applicable statute, law, bylaw, rule,
regulation or ordinance.
(c) Instruments/Tangible Chattel Paper/Documents. If any amount payable
--------------------------------------------
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Tangible Chattel Paper, or if any property constituting
Collateral shall be stored or shipped subject to a Document, such Grantor shall
ensure that such Instrument, Tangible Chattel Paper or Document is either in the
possession of such Grantor at all times or, if requested by the Administrative
Agent, is immediately delivered to the Administrative Agent, duly endorsed in a
manner satisfactory to the Administrative Agent. Such Grantor shall ensure that
any Collateral consisting of Tangible Chattel Paper is marked with a legend
acceptable to the Administrative Agent indicating the Administrative Agent's
security interest in such Tangible Chattel Paper.
(d) Change in Structure, Location or Type. Not, without providing ten days
-------------------------------------
prior written notice to the Administrative Agent and without filing such
financing statements and amendments to any previously filed financing statements
as the Administrative Agent may require, change its name or state of formation
or be party to a merger, consolidation or other change in structure or use any
tradename other than as set forth on Schedule 4(a)(ii) attached hereto.
(e) Inspection. Upon reasonable notice, and during reasonable hours, at
----------
all times allow the Administrative Agent or its representatives to visit and
inspect the Collateral as set forth in Section 7.10 of the Credit Agreement.
6
(f) Authorization. Authorize the Administrative Agent to prepare and file
-------------
such financing statements (including renewal statements), amendments and
supplements or such other instruments as the Administrative Agent may from time
to time reasonably deem necessary, appropriate or convenient in order to perfect
and maintain the security interests granted hereunder in accordance with the
UCC.
(g) Perfection of Security Interest. Authorize or execute and deliver to
-------------------------------
the Administrative Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of existing
documents, as the Administrative Agent may reasonably request) and do all such
other things as the Administrative Agent may reasonably deem necessary,
appropriate or convenient (i) to assure to the Administrative Agent the
effectiveness and priority of its security interests hereunder, including (A)
such financing statements (including renewal statements), amendments and
supplements or such other instruments as the Administrative Agent may from time
to time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC, (B) with regard to
Copyrights, a Notice of Grant of Security Interest in Copyrights for filing with
the United States Copyright Office in the form of Exhibit 5(f)(i) attached
hereto, (C) with regard to Patents, a Notice of Grant of Security Interest in
Patents for filing with the United States Patent and Trademark Office in the
form of Exhibit 5(f)(ii) attached hereto and (D) with regard to Trademarks, a
Notice of Grant of Security Interest in Trademarks for filing with the United
States Patent and Trademark Office in the form of Exhibit 5(f)(iii) attached
hereto, (ii) to consummate the transactions contemplated hereby and (iii) to
otherwise protect and assure the Administrative Agent of its rights and
interests hereunder. To that end, each Grantor agrees that the Administrative
Agent may file one or more financing statements (with collateral descriptions
broader and/or less specific than the description of the Collateral contained
herein) disclosing the Administrative Agent's security interest in any or all of
the Collateral of such Grantor without such Grantor's signature thereon, and
further each Grantor also hereby irrevocably makes, constitutes and appoints the
Administrative Agent, its nominee or any other Person whom the Administrative
Agent may designate, as such Grantor's attorney-in-fact with full power and for
the limited purpose to sign in the name of such Grantor any such financing
statements (including renewal statements), amendments and supplements, notices
or any similar documents that in the Administrative Agent's reasonable
discretion would be necessary, appropriate or convenient in order to perfect and
maintain perfection of the security interests granted hereunder, such power,
being coupled with an interest, being and remaining irrevocable so long as the
Secured Obligations remain unpaid and until the commitments relating thereto
shall have been terminated. Each Grantor hereby agrees that a carbon,
photographic or other reproduction of this Security Agreement or any such
financing statement is sufficient for filing as a financing statement by the
Administrative Agent without notice thereof to such Grantor wherever the
Administrative Agent may in its sole discretion desire to file the same. In the
event for any reason the law of any jurisdiction other than the applicable
jurisdiction as of the Closing Date becomes or is applicable to the Collateral
of any Grantor or any part thereof, or to any of the Secured Obligations, such
Grantor agrees to authorize or to execute and deliver all such instruments and
to do all such other things as the Administrative Agent in its sole discretion
reasonably deems necessary, appropriate or convenient to preserve, protect and
enforce the security interests of the Administrative Agent under the law of such
other jurisdiction (and, if a Grantor shall fail to do so promptly upon the
request of the Administrative Agent, then the Administrative Agent may authorize
or execute any and all such requested documents on behalf of such Grantor
pursuant to the power of attorney granted hereinabove). If any Collateral is in
the possession or control of a Grantor's agents and the Administrative Agent so
requests, such Grantor agrees to notify such agents in writing of the
Administrative Agent's security interest therein and, upon the Administrative
Agent's request, instruct them to hold all such Collateral for the account of
the holders of the Secured Obligations and subject to the Administrative Agent's
instructions. Each Grantor agrees to mark its books and records to reflect the
security interest of the Administrative Agent in the Collateral.
(h) Control. Authorize or execute and deliver all agreements, assignments,
-------
instruments or other documents as the Administrative Agent shall reasonably
7
request for the purpose of obtaining and maintaining control within the meaning
of the UCC with respect to any Collateral consisting of Deposit Accounts,
Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper.
(i) Collateral held by Warehouseman, Bailee, etc. If any Collateral is at
--------------------------------------------
any time in the possession or control of a warehouseman, bailee, agent or
processor of such Grantor, (i) notify the Administrative Agent of such
possession or control, (ii) notify such Person of the Administrative Agent's
security interest in such Collateral, (iii) instruct such Person to hold all
such Collateral for the Administrative Agent's account and subject to the
Administrative Agent's instructions and (iv) use its best efforts to obtain an
acknowledgment from such Person that it is holding such Collateral for the
benefit of the Administrative Agent.
(j) Treatment of Accounts. Not grant or extend the time for payment of any
---------------------
Account, or compromise or settle any Account for less than the full amount
thereof, or release any Person or property, in whole or in part, from payment
thereof, or allow any credit or discount thereon, other than as normal and
customary in the ordinary course of a Grantor's business or as required by law.
(k) Covenants Relating to Copyrights.
--------------------------------
(i) Not do any act or knowingly omit to do any act whereby any
material Copyright may become invalidated and (A) not do any act, or
knowingly omit to do any act, whereby any material Copyright may become
injected into the public domain; (B) notify the Administrative Agent
immediately if it knows that any material Copyright may become injected
into the public domain or of any adverse determination or development
(including the institution of, or any such determination or development
in, any court or tribunal in the United States or any other country)
regarding a Grantor's ownership of any such Copyright or its validity; (C)
take all necessary steps as it shall deem appropriate under the
circumstances, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of each material
Copyright owned by a Grantor including filing of applications for renewal
where necessary; and (D) promptly notify the Administrative Agent of any
material infringement of any material Copyright of a Grantor of which it
becomes aware and take such actions as it shall reasonably deem
appropriate under the circumstances to protect such Copyright, including,
where appropriate, the bringing of suit for infringement, seeking
injunctive relief and seeking to recover any and all damages for such
infringement.
(ii) Not make any assignment or agreement in conflict with the
security interest in the Copyrights of each Grantor hereunder.
(l) Covenants Relating to Patents and Trademarks.
--------------------------------------------
(i) (A) Continue to use each Trademark on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in
full force free from any claim of abandonment for non-use, (B) maintain as
in the past the quality of products and services offered under such
Trademark, (C) employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark that is confusingly similar or
a colorable imitation of such Trademark unless the Administrative Agent,
for the benefit of the holders of the Secured Obligations, shall obtain a
perfected security interest in such mark pursuant to this Security
Agreement, and (E) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may
become invalidated.
8
(ii) Not do any act, or omit to do any act, whereby any Patent may
become abandoned or dedicated.
(iii) Notify the Administrative Agent and the holders of the Secured
Obligations immediately if it knows that any application or registration
relating to any Patent or Trademark may become abandoned or dedicated, or
of any adverse determination or development (including the institution of,
or any such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court or tribunal in any
country) regarding a Grantor's ownership of any Patent or Trademark or its
right to register the same or to keep and maintain the same.
(iv) Whenever a Grantor, either by itself or through an agent,
employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or
any political subdivision thereof, a Grantor shall report such filing to
the Administrative Agent and the holders of the Secured Obligations within
five Business Days after the last day of the fiscal quarter in which such
filing occurs. Upon request of the Administrative Agent, a Grantor shall
authorize or execute and deliver any and all agreements, instruments,
documents and papers as the Administrative Agent may reasonably request to
evidence the security interest of the Administrative Agent and the holders
of the Secured Obligations in any Patent or Trademark and the goodwill and
general intangibles of a Grantor relating thereto or represented thereby.
(v) Take all reasonable and necessary steps, including in any
proceeding before the United States Patent and Trademark Office, or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the Patents
and Trademarks, including filing of applications for renewal, affidavits
of use and affidavits of incontestability.
(vi) Promptly notify the Administrative Agent and the holders of the
Secured Obligations after it learns that any Patent or Trademark included
in the Collateral is infringed, misappropriated or diluted by a third
party and promptly sue for infringement, misappropriation or dilution, to
seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution, or to take
such other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(vii) Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of each Grantor hereunder.
(m) New Patents, Copyrights and Trademarks. Promptly provide the
--------------------------------------
Administrative Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new applications and
issued registrations or letters shall be subject to the terms and conditions
hereunder, and (ii) (A) with respect to Copyrights, a duly executed Notice of
Security Interest in Copyrights, (B) with respect to Patents, a duly executed
Notice of Security Interest in Patents, (C) with respect to Trademarks, a duly
executed Notice of Security Interest in Trademarks or (D) such other duly
executed documents as the Administrative Agent may reasonably request in a form
acceptable to counsel for the Administrative Agent and suitable for recording to
evidence the security interest in the Copyright, Patent or Trademark that is the
subject of such new application.
9
(n) Insurance. Insure, repair and replace the Collateral of such Grantor
---------
as set forth in the Credit Agreement. All insurance proceeds shall be subject to
the security interest of the Administrative Agent hereunder.
(o) Commercial Tort Claims.
----------------------
(i) Promptly notify the Administrative Agent in writing of the
initiation of any Commercial Tort Claim before any Governmental Authority
by or in favor of such Grantor or any of its Subsidiaries.
(ii) Authorize or execute and deliver such statements, documents and notices
and do and cause to be done all such things as the Administrative Agent
may reasonably deem necessary, appropriate or convenient, or as are
required by law, to create, perfect and maintain the Administrative
Agent's security interest in any Commercial Tort Claim.
6. Advances and Performance by Holders of the Secured Obligations. On
--------------------------------------------------------------
failure of any Grantor to perform any of the covenants and agreements contained
herein, the Administrative Agent may, at its sole option and in its sole
discretion, perform the same and in so doing may expend such sums as the
Administrative Agent may reasonably deem advisable in the performance thereof,
including the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures that the
Administrative Agent or the holders of the Secured Obligations may make for the
protection of the security hereof or that may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Grantors
on a joint and several basis (subject to Section 25 hereof) promptly upon timely
notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the Default Rate for Revolving Loans that are Base Rate Loans. No such
performance of any covenant or agreement by the Administrative Agent or the
holders of the Secured Obligations on behalf of any Grantor, and no such advance
or expenditure therefor, shall relieve the Grantors of any default under the
terms of this Security Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The Administrative Agent may make
any payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Grantor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
7. Remedies.
--------
(a) General Remedies. Upon the occurrence of an Event of Default and
----------------
during the continuation thereof, the Administrative Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Credit Documents, in any other documents relating to the Secured
Obligations, or by law (including levy of attachment and garnishment), the
rights and remedies of a secured party under the UCC of the jurisdiction
applicable to the affected Collateral and, further, the Administrative Agent
may, with or without judicial process or the aid and assistance of others, (i)
enter on any premises on which any of the Collateral may be located and, without
resistance or interference by the Grantors, take possession of the Collateral,
(ii) dispose of any Collateral on any such premises, (iii) require the Grantors
to assemble and make available to the Administrative Agent at the expense of the
Grantors any Collateral at any place and time designated by the Administrative
Agent that is reasonably convenient to both parties, (iv) remove any Collateral
from any such premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice, hearing or
process of law, all of which each of the Grantors hereby waives to the fullest
extent permitted by law, at any place and time or times, sell and deliver any or
10
all Collateral held by or for it at public or private sale, by one or more
contracts, in one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Administrative Agent deems advisable, in its
sole discretion (subject to any and all mandatory legal requirements). Each of
the Grantors acknowledges that any private sale referenced above may be at
prices and on terms less favorable to the seller than the prices and terms that
might have been obtained at a public sale and agrees that such private sale
shall be deemed to have been made in a commercially reasonable manner. Neither
the Administrative Agent's compliance with applicable law nor its disclaimer of
warranties relating to the Collateral shall be considered to adversely affect
the commercial reasonableness of any sale. In addition to all other sums due the
Administrative Agent and the holders of the Secured Obligations with respect to
the Secured Obligations, the Grantors shall pay the Administrative Agent and
each of the holders of the Secured Obligations all reasonable documented costs
and expenses incurred by the Administrative Agent or any such holder of the
Secured Obligations (including reasonable attorneys' fees and disbursements and
court costs) in obtaining or liquidating the Collateral, in enforcing payment of
the Secured Obligations, or in the prosecution or defense of any action or
proceeding by or against the Administrative Agent or the holders of the Secured
Obligations or the Grantors concerning any matter arising out of or connected
with this Security Agreement, any Collateral or the Secured Obligations,
including any of the foregoing arising in, arising under or related to a case
under Debtor Relief Laws. To the extent the rights of notice cannot be legally
waived hereunder, each Grantor agrees that any requirement of reasonable notice
shall be met if such notice is personally served on or mailed, postage prepaid,
to the Borrower in accordance with the notice provisions of Section 11.1 of the
Credit Agreement at least ten Business Days before the time of sale or other
event giving rise to the requirement of such notice. The Administrative Agent
and the holders of the Secured Obligations shall not be obligated to make any
sale or other disposition of the Collateral regardless of notice having been
given. To the extent permitted by law, any holder of the Secured Obligations may
be a purchaser at any such sale. To the extent permitted by applicable law, each
of the Grantors hereby waives all of its rights of redemption with respect to
any such sale. Subject to the provisions of applicable law, the Administrative
Agent and the holders of the Secured Obligations may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement
at the time and place of such sale, and such sale may, without further notice,
to the extent permitted by law, be made at the time and place to which the sale
was postponed, or the Administrative Agent and the holders of the Secured
Obligations may further postpone such sale by announcement made at such time and
place.
(b) Remedies relating to Accounts. Upon the occurrence of an Event of
-----------------------------
Default and during the continuation thereof, whether or not the Administrative
Agent has exercised any or all of its rights and remedies hereunder, each
Grantor will promptly upon request of the Administrative Agent instruct all
account debtors to remit all payments in respect of Accounts to a mailing
location selected by the Administrative Agent. In addition, the Administrative
Agent shall have the right to enforce any Grantor's rights against its customers
and account debtors, and the Administrative Agent or its designee may notify any
Grantor's customers and account debtors that the Accounts of such Grantor have
been assigned to the Administrative Agent or of the Administrative Agent's
security interest therein, and may (either in its own name or in the name of a
Grantor or both) demand, collect (including by way of a lockbox arrangement),
receive, take receipt for, sell, sue for, compound, settle, compromise and give
acquittance for any and all amounts due or to become due on any Account, and, in
the Administrative Agent's discretion, file any claim or take any other action
or proceeding to protect and realize upon the security interest of the holders
of the Secured Obligations in the Accounts. Each Grantor acknowledges and agrees
that the Proceeds of its Accounts remitted to or on behalf of the Administrative
Agent in accordance with the provisions hereof shall be solely for the
Administrative Agent's own convenience and that such Grantor shall not have any
right, title or interest in such Accounts or in any such other amounts except as
expressly provided herein. The Administrative Agent and the holders of the
Secured Obligations shall have no liability or responsibility to any Grantor for
acceptance of a check, draft or other order for payment of money bearing the
legend "payment in full" or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness of any
11
remittance. Each Grantor hereby agrees to indemnify the Administrative Agent and
the holders of the Secured Obligations from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges and
reasonable attorneys' fees and disbursements suffered or incurred by the
Administrative Agent or the holders of the Secured Obligations (each, an
"Indemnified Party") because of the maintenance of the foregoing arrangements
except as relating to or arising out of the gross negligence or willful
misconduct of an Indemnified Party or its officers, employees or agents. In the
case of any investigation, litigation or other proceeding, the foregoing
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by a Grantor, its directors, shareholders or creditors or
an Indemnified Party or any other Person or any other Indemnified Party is
otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder, upon the
------
occurrence of an Event of Default and during the continuation thereof, the
Administrative Agent shall have the right to enter and remain upon the various
premises of the Grantors without cost or charge to the Administrative Agent, and
use the same, together with materials, supplies, books and records of the
Grantors for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise. In addition, the Administrative Agent may
remove Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Administrative Agent
-------------------------------
or the holders of the Secured Obligations to exercise any right, remedy or
option under this Security Agreement, any other Credit Document, any other
documents relating to the Secured Obligations, or as provided by law, or any
delay by the Administrative Agent or the holders of the Secured Obligations in
exercising the same, shall not operate as a waiver of any such right, remedy or
option. No waiver hereunder shall be effective unless it is in writing, signed
by the party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Administrative Agent or
the holders of the Secured Obligations shall only be granted as provided herein.
To the extent permitted by law, neither the Administrative Agent, the holders of
the Secured Obligations, nor any party acting as attorney for the Administrative
Agent or the holders of the Secured Obligations, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact or law
other than their gross negligence or willful misconduct hereunder. The rights
and remedies of the Administrative Agent and the holders of the Secured
Obligations under this Security Agreement shall be cumulative and not exclusive
of any other right or remedy that the Administrative Agent or the holders of the
Secured Obligations may have.
(e) Retention of Collateral. To the extent permitted under applicable law,
-----------------------
in addition to the rights and remedies hereunder, upon the occurrence of an
Event of Default, the Administrative Agent may, after providing the notices
required by Sections 9-620 and 9-621 of the UCC or otherwise complying with the
requirements of applicable law of the relevant jurisdiction, accept or retain
all or any portion of the Collateral in satisfaction of the Secured Obligations.
Unless and until the Administrative Agent shall have provided such notices,
however, the Administrative Agent shall not be deemed to have accepted or
retained any Collateral in satisfaction of any Secured Obligations for any
reason.
(f) Deficiency. In the event that the proceeds of any sale, collection or
----------
realization are insufficient to pay all amounts to which the Administrative
Agent or the holders of the Secured Obligations are legally entitled, the
Grantors shall be jointly and severally liable for the deficiency (subject to
Section 25 hereof), together with interest thereon at the Default Rate for
Revolving Loans that are Base Rate Loans, together with the costs of collection
and reasonable attorneys' fees and disbursements. Any surplus remaining after
the full payment and satisfaction of the Secured Obligations shall be returned
to the Grantors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
12
8. Rights of the Administrative Agent.
----------------------------------
(a) Power of Attorney. In addition to other powers of attorney contained
-----------------
herein, each Grantor hereby designates and appoints the Administrative Agent, on
behalf of the holders of the Secured Obligations, and each of its designees or
agents, as attorney-in-fact of such Grantor, irrevocably and with power of
substitution, with authority to take any or all of the following actions upon
the occurrence and during the continuation of an Event of Default:
(i) to demand, collect, settle, compromise and adjust, and give
discharges and releases concerning the Collateral, all as the
Administrative Agent may reasonably deem appropriate;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any of the Collateral and enforcing any other right
in respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Administrative
Agent may reasonably deem appropriate;
(iv) to receive, open and dispose of mail addressed to a Grantor and
endorse checks, notes, drafts, acceptances, money orders, bills of lading,
warehouse receipts or other instruments or documents evidencing payment,
shipment or storage of the goods giving rise to the Collateral on behalf
of and in the name of such Grantor, or securing, or relating to such
Collateral;
(v) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(vi) to direct any parties liable for any payment in connection with
any of the Collateral to make payment of any and all monies due and to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct;
(vii) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect of
or arising out of any Collateral;
(viii) to sell, assign, transfer, make any agreement in respect of,
or otherwise deal with or exercise rights in respect of, any Collateral or
the goods or services that have given rise thereto, as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes;
(ix) to adjust and settle claims under any insurance policy relating
thereto;
(x) to authorize or to execute and deliver all assignments,
conveyances, statements, financing statements, renewal financing
statements, security and pledge agreements, affidavits, notices and other
agreements, instruments and documents that the Administrative Agent may
reasonably deem appropriate in order to perfect and maintain the security
interests and liens granted in this Security Agreement and in order to
fully consummate all of the transactions contemplated therein;
(xi) to institute any foreclosure proceedings that the
Administrative Agent may reasonably deem appropriate; and
13
(xii) to do and perform all such other acts and things as the
Administrative Agent may reasonably deem appropriate or convenient in
connection with the Collateral.
This power of attorney is a power coupled with an interest and shall
be irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have
been terminated. The Administrative Agent shall be under no duty to
exercise or withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Administrative Agent in
this Security Agreement, and shall not be liable for any failure to do so
or any delay in doing so. The Administrative Agent shall not be liable for
any act or omission or for any error of judgment or any mistake of fact or
law in its individual capacity or its capacity as attorney-in-fact except
acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative
Agent solely to protect, preserve and realize upon its security interest
in the Collateral.
(b) Assignment by the Administrative Agent. The Administrative Agent may
--------------------------------------
from time to time assign the Secured Obligations and any portion thereof and/or
the Collateral and any portion thereof in connection with its resignation as
Administrative Agent pursuant to Section 10 of the Credit Agreement, and the
assignee shall be entitled to all of the rights and remedies of the
Administrative Agent under this Security Agreement in relation thereto.
(c) The Administrative Agent's Duty of Care. Other than the exercise of
---------------------------------------
reasonable care to assure the safe custody of the Collateral while being held by
the Administrative Agent hereunder, the Administrative Agent shall have no duty
or liability to preserve rights pertaining thereto, it being understood and
agreed that the Grantors shall be responsible for preservation of all rights in
the Collateral, and the Administrative Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Grantors. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which the Administrative Agent accords its own property, which shall be
no less than the treatment employed by a reasonable and prudent agent in the
industry, it being understood that the Administrative Agent shall not have
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any of the Collateral. In the event of a public or
private sale of Collateral pursuant to Section 7 hereof, the Administrative
Agent shall have no obligation to clean, repair or otherwise prepare the
Collateral for sale.
9. Rights of Required Lenders. All rights of the Administrative Agent
--------------------------
hereunder, if not exercised by the Administrative Agent, may be exercised by the
Required Lenders.
10. Application of Proceeds. Upon the occurrence and during the
-----------------------
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the
Administrative Agent or any of the holders of the Secured Obligations in cash or
its equivalent, will be applied in reduction of the Secured Obligations in the
order set forth in the Credit Agreement or other document relating to the
Secured Obligations, and each Grantor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Administrative Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Administrative Agent's
sole discretion, notwithstanding any entry to the contrary upon any of its books
and records.
11. Release of Collateral. Upon request, the Administrative Agent shall
---------------------
promptly deliver to the Borrower (at the Borrower's expense) appropriate release
documentation to the extent the release of Collateral is permitted under, and on
14
the terms and conditions set forth in, the Credit Agreement; provided that any
such release, or the substitution of any of the Collateral for other Collateral,
will not alter, vary or diminish in any way the force, effect, lien, pledge or
security interest of this Security Agreement as to any and all Collateral not
expressly released or substituted, and this Security Agreement shall continue as
a first priority lien (subject to Permitted Liens) on any and all Collateral not
expressly released or substituted.
12. Costs and Expenses. At all times hereafter, whether or not upon the
------------------
occurrence of an Event of Default, the Grantors agree to promptly pay upon
demand any and all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) of the Administrative Agent and the holders
of the Secured Obligations (a) as required under Section 11.5 of the Credit
Agreement and (b) as necessary to protect the Collateral or to exercise any
rights or remedies under this Security Agreement or with respect to any of the
Collateral. All of the foregoing costs and expenses shall constitute Secured
Obligations hereunder.
13. Continuing Agreement.
--------------------
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement shall be
automatically terminated and the Administrative Agent and the holders of the
Secured Obligations shall, upon the request and at the expense of the Grantors,
forthwith release all of its liens and security interests hereunder and shall
authorize or execute and deliver all UCC termination statements and/or other
documents reasonably requested by the Grantors evidencing such termination.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including reasonable attorneys' fees and disbursements) incurred
by the Administrative Agent or any holder of the Secured Obligations in
defending and enforcing such reinstatement shall be deemed to be included as a
part of the Secured Obligations.
14. Amendments and Waivers. This Security Agreement and the provisions
----------------------
hereof may not be amended, waived, modified, changed, discharged or terminated
except by written agreement of (a) the Grantors and (b) the Administrative Agent
(with the consent or at the direction of the requisite Lenders under the Credit
Agreement).
15. Successors in Interest. This Security Agreement shall create a
----------------------
continuing security interest in the Collateral and shall be binding upon each
Grantor, its successors and assigns, and shall inure, together with the rights
and remedies of the Administrative Agent and the holders of the Secured
Obligations hereunder, to the benefit of the Administrative Agent and the
holders of the Secured Obligations and their successors and permitted assigns;
provided, however, that none of the Grantors may assign its rights or delegate
its duties hereunder without the prior written consent of the requisite Lenders
under the Credit Agreement. To the fullest extent permitted by law, each Grantor
hereby releases the Administrative Agent and each holder of the Secured
Obligations, and their respective successors, assigns, officers, attorneys,
employees and agents, from any liability for any act or omission or any error of
judgment or mistake of fact or of law relating to this Security Agreement or the
Collateral, except for any liability arising from the gross negligence or
willful misconduct of such Administrative Agent or such holder of the Secured
Obligations.
15
16. Notices. All notices required or permitted to be given under this
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Security Agreement shall be given as provided in Section 11.1 of the Credit
Agreement.
17. Counterparts. This Security Agreement may be executed in any number of
------------
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof are
--------
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
19. Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, the LAW OF THE STATE OF NORTH CAROLINA applicable to agreements
made and to be performed entirely within such State; PROVIDED THAT The
Administrative Agent SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT
OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NORTH
CAROLINA SITTING IN CHARLOTTE, NORTH CAROLINA OR OF THE UNITED STATES FOR THE
WESTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS SECURITY
AGREEMENT, EACH GRANTOR AND THE ADMINISTRATIVE AGENT CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
GRANTOR AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS SECURITY AGREEMENT OR ANY
OTHER DOCUMENT RELATED HERETO. EACH GRANTOR AND THE ADMINISTRATIVE AGENT WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
20. Waiver of Right to Trial by Jury. TO THE EXTENT PERMITTED BY
--------------------------------
APPLICABLE LAW, EACH PARTY TO THIS SECURITY AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER DOCUMENT
RELATED HERETO, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS SECURITY AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
16
21. Severability. If any provision of this Security Agreement is
------------
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Security Agreement, the other Credit Documents and the
--------
other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Grantors hereunder
--------
shall survive the execution and delivery of this Security Agreement, the other
Credit Documents and the other documents relating to the Secured Obligations,
the delivery of the Notes and the extension of credit thereunder or in
connection therewith.
24. Other Security. To the extent that any of the Secured Obligations are
--------------
now or hereafter secured by property other than the Collateral (including real
property and securities owned by a Grantor), or by a guarantee, endorsement or
property of any other Person, then the Administrative Agent shall have the right
to proceed against such other property, guarantee or endorsement upon the
occurrence of any Event of Default, and the Administrative Agent shall have the
right, in its sole discretion, to determine which rights, security, liens,
security interests or remedies the Administrative Agent shall at any time
pursue, relinquish, subordinate, modify or take with respect thereto, without in
any way modifying or affecting any of them or the Secured Obligations or any of
the rights of the Administrative Agent or the holders of the Secured Obligations
under this Security Agreement, under any of the other Credit Documents or under
any other document relating to the Secured Obligations.
25. Joint and Several Obligations of Grantors.
-----------------------------------------
(a) Subject to subsection (c) of this Section 25, each of the Grantors is
accepting joint and several liability hereunder in consideration of the
financial accommodation to be provided by the holders of the Secured
Obligations, for the mutual benefit, directly and indirectly, of each of the
Grantors and in consideration of the undertakings of each of the Grantors to
accept joint and several liability for the obligations of each of them.
(b) Subject to subsection (c) of this Section 25, each of the Grantors
jointly and severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with the other
Grantors with respect to the payment and performance of all of the Secured
Obligations arising under this Security Agreement, the other Credit Documents
and any other documents relating to the Secured Obligations, it being the
intention of the parties hereto that all the Secured Obligations shall be the
joint and several obligations of each of the Grantors without preferences or
distinction among them.
(c) Notwithstanding any provision to the contrary contained herein, in any
other of the Credit Documents or in any other documents relating to the Secured
Obligations, the obligations of each Grantor that is a Guarantor under the
Credit Agreement and the other Credit Documents shall be limited to an aggregate
amount equal to the largest amount that would not render such obligations
subject to avoidance under Section 548 of the Bankruptcy Code of the United
States or any other applicable Debtor Relief Law (including any comparable
provisions of any applicable state law).
[remainder of page intentionally left blank]
17
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
GRANTORS:
- -------- REHABCARE GROUP, INC.,
a Delaware Corporation
By:/s/ John H. Short
-----------------
Name: John H. Short
Title: Chief Executive Officer
AMERICAN VITALCARE, INC.,
a California corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
MANAGED ALTERNATIVE CARE, INC.,
a California corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
PHASE 2 CONSULTING, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
REHABCARE GROUP OF CALIFORNIA, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
REHABCARE GROUP EAST, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
[Signature Pages Continue]
REHABCARE GROUP MANAGEMENT SERVICES, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
REHABCARE GROUP OF TEXAS, L.P.,
a Texas limited partnership
By: RehabCare Group, Inc.,
a Delaware corporation, as its General
Partner
By:/s/ John H. Short
-----------------
Name: John H. Short
Title: Chief Executive Officer
REHABCARE GROUP OF VIRGINIA LLC,
a Virginia limited liability company
By: RehabCare Group East, Inc.,
a Delaware corporation, as its Managing
Member
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief
Financial Officer
REHABCARE SANTA MONICA, INC.,
a Delaware corporation
By:/s/ Jeff A. Zadoks
------------------
Name: Jeff A. Zadoks
Title: Treasurer
REHABCARE TEXAS HOLDINGS, INC.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
[Signature Pages Continue]
RHB, LLC,
a California limited liability company
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Manager
SALT LAKE PHYSICAL THERAPY ASSOCIATES, INC.,
a Utah corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
STARMED MANAGEMENT, Inc.,
a Delaware corporation
By:/s/ Vincent L. Germanese
------------------------
Name: Vincent L. Germanese
Title: Senior Vice President and Chief Financial
Officer
Accepted and agreed to as of the date first above written.
BANK OF AMERICA, N.A.,
as Administrative Agent
By:/s/ David A. Johanson
---------------------
Name: David A. Johanson
Title: Vice President
EXHIBIT 31.1
CERTIFICATION
I, John H. Short, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RehabCare Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 8, 2004
By: /s/ John H. Short
---------------------------
John H. Short
President and
Chief Executive Officer
RehabCare Group, Inc.
EXHIBIT 31.2
CERTIFICATION
I, Vincent L. Germanese, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RehabCare Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 8, 2004
By: /s/ Vincent L. Germanese
---------------------------
Vincent L. Germanese
Senior Vice President,
Chief Financial Officer
and Secretary
RehabCare Group, Inc.
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RehabCare Group, Inc. (the "Company")
on Form 10-Q for the period ending September 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, John H.
Short, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
By: /s/ John H. Short
---------------------------
John H. Short
President and
Chief Executive Officer
RehabCare Group, Inc.
November 8, 2004
* A signed original of the written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RehabCare Group, Inc. (the "Company")
on Form 10-Q for the period ending September 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Vincent
L. Germanese, Senior Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
By: /s/ Vincent L. Germanese
---------------------------
Vincent L. Germanese
Senior Vice President,
Chief Financial Officer
and Secretary
RehabCare Group, Inc.
November 8, 2004
* A signed original of the written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.