-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V99sKgpfYWEiJMaJwh9g5cEwWEvAHII4ZdvQ3Gyg9jvR/FeNKKv8Fq8EE7Wfi/Ll wSfeTIh4URY9GViuNeqxyQ== /in/edgar/work/0000950144-00-013549/0000950144-00-013549.txt : 20001114 0000950144-00-013549.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950144-00-013549 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCARE HOLDINGS INC CENTRAL INDEX KEY: 0000882235 STANDARD INDUSTRIAL CLASSIFICATION: [8082 ] IRS NUMBER: 510331330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19946 FILM NUMBER: 761679 BUSINESS ADDRESS: STREET 1: 19337 US 19 N STE 500 CITY: CLEARWATER STATE: FL ZIP: 34624 BUSINESS PHONE: 8135307700 MAIL ADDRESS: STREET 1: 19337 US 19 NORTH STE 500 CITY: CLEARWATER STATE: FL ZIP: 34624 10-Q 1 g64879e10-q.txt LINCARE HOLDINGS, INC. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q --------------------- (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 COMMISSION FILE NUMBER 0-19946 LINCARE HOLDINGS INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 51-0331330 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19337 US 19 NORTH, SUITE 500, 33764 CLEARWATER, FL ---------- - ---------------------------------------- (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (727) 530-7700 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT OCTOBER 31, 2000 ----- ------------------------------- Common Stock, $0.01 par value................... 52,093,046 shares - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 LINCARE HOLDINGS INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1 Financial Statements (unaudited) Condensed consolidated balance sheets....................... 3 Condensed consolidated statements of operations............. 4 Condensed consolidated statements of cash flows............. 5 Notes to condensed consolidated financial statements........ 6 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition.......................... 7 Item 3 Quantitative and Qualitative Disclosure Regarding Market Risk........................................................ 9 PART II. OTHER INFORMATION Item 1 Legal Proceedings........................................... 10 Item 2 Changes in Securities....................................... 10 Item 3 Defaults Upon Senior Securities............................. 10 Item 4 Submission of Matters to a Vote of the Security Holders..... 10 Item 5 Other Information........................................... 10 Item 6 Exhibits and Reports on Form 8-K............................ 10 SIGNATURE........................................................... 11
2 3 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (IN THOUSANDS) Current assets: Cash and cash equivalents................................. $ 620 $ 3,699 Accounts and notes receivable............................. 115,258 104,762 Income tax receivable..................................... 323 5,837 Inventories............................................... 4,202 3,612 Other..................................................... 2,301 1,700 -------- -------- Total current assets.............................. 122,704 119,610 -------- -------- Property and equipment...................................... 350,827 305,168 Less: accumulated depreciation.............................. 165,090 134,041 -------- -------- Net property and equipment........................ 185,737 171,127 -------- -------- Other assets: Goodwill.................................................. 544,312 413,856 Intangible assets......................................... 9,858 8,577 Covenants not to compete.................................. 1,289 951 Other..................................................... 3,561 2,703 -------- -------- Total other assets................................ 559,020 426,087 -------- -------- Total assets................................. $867,461 $716,824 ======== ======== Current liabilities: Current installments of long-term obligations............. $ 9,248 $ 12,436 Accounts payable.......................................... 21,052 20,598 Accrued expenses: Compensation and benefits.............................. 8,020 10,859 Other.................................................. 7,402 5,538 -------- -------- Total current liabilities......................... 45,722 49,431 -------- -------- Long-term obligations, excluding current installments....... 277,000 159,000 Deferred income taxes....................................... 30,125 21,493 Minority interest........................................... 769 789 Stockholders' equity: Common stock.............................................. 585 584 Additional paid-in capital................................ 137,472 135,741 Retained earnings......................................... 552,849 467,825 Less: treasury stock...................................... 177,061 118,039 -------- -------- Total stockholders' equity........................ 513,845 486,111 -------- -------- Total liabilities and stockholders' equity... $867,461 $716,824 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED ----------------------------- ----------------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ------------- ------------- ------------- ------------- (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) Net revenues................................. $ 186,022 $ 150,247 $ 513,140 $ 429,353 ---------- ---------- ---------- ---------- Costs and expenses: Costs of goods and services................ 31,636 23,124 82,122 66,753 Operating expenses......................... 42,318 33,875 115,810 97,278 Selling, general and administrative expenses................................ 38,230 33,144 108,125 94,867 Bad debt expense........................... 2,790 1,803 7,697 5,152 Depreciation expense....................... 12,360 10,710 35,635 30,560 Amortization expense....................... 5,302 4,091 14,296 11,858 ---------- ---------- ---------- ---------- 132,636 106,747 363,685 306,468 ---------- ---------- ---------- ---------- Operating income................... 53,386 43,500 149,455 122,885 ---------- ---------- ---------- ---------- Other income (expense): Interest income............................ 184 194 373 300 Interest expense........................... (5,667) (1,512) (12,491) (2,909) Net gain/(loss) on disposal of property and equipment........................... 31 (142) 21 (187) ---------- ---------- ---------- ---------- (5,452) (1,460) (12,097) (2,796) ---------- ---------- ---------- ---------- Income before income taxes......... 47,934 42,040 137,358 120,089 Income taxes................................. 18,263 16,019 52,334 45,755 ---------- ---------- ---------- ---------- Net income......................... $ 29,671 $ 26,021 $ 85,024 $ 74,334 ========== ========== ========== ========== Basic -- earnings per common share......... $ 0.56 $ 0.46 $ 1.60 $ 1.28 ========== ========== ========== ========== Diluted -- earnings per common share....... $ 0.55 $ 0.45 $ 1.57 $ 1.26 ========== ========== ========== ========== Weighted average number of common shares outstanding................................ 52,847,595 57,067,880 53,290,833 57,910,187 ========== ========== ========== ========== Weighted average number of common shares and common share equivalents outstanding....... 53,737,004 58,291,293 54,236,544 58,893,187 ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. 4 5 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED -------------------------------- SEPTEMBER 30, SEPTEMBER 30, 2000 1999 ------------- ------------- (IN THOUSANDS) Cash from operations........................................ $145,320 $116,808 Investing activities: Proceeds from sale of property and equipment.............. 263 540 Capital expenditures...................................... (43,935) (51,577) Increase in other long-term assets........................ (1,003) (1,934) Business acquisitions, net of cash acquired............... (150,238) (50,500) -------- -------- (194,913) (103,471) -------- -------- Financing activities: Proceeds from long-term obligations....................... 311,000 262,000 Payment of long-term obligations.......................... (206,742) (160,234) Decrease in minority interest............................. (128) (220) Proceeds from issuance of common stock.................... 1,406 1,053 Proceeds from the sale of put options..................... -- 4,454 Treasury stock acquired................................... (59,748) (113,966) Treasury stock issued..................................... 726 836 -------- -------- 46,514 (6,077) -------- -------- Increase (decrease) in cash................................. (3,079) 7,260 Cash and cash equivalents, beginning of period.............. 3,699 5,100 -------- -------- Cash and cash equivalents, end of period.................... $ 620 $ 12,360 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 6 LINCARE HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The accompanying condensed consolidated balance sheet as of September 30, 2000, the condensed consolidated statements of operations for the three and nine month periods ended September 30, 2000 and 1999 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2000 and 1999 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. The accompanying condensed consolidated balance sheet as of December 31, 1999 is derived from the Lincare Holdings Inc. (the "Company") audited balance sheet as of that date. NOTE 2 -- BUSINESS COMBINATIONS During the nine months ended September 30, 2000 the Company acquired, in unrelated acquisitions, certain assets of 15 companies. Each acquisition was accounted for as a purchase. The results of the acquired companies are included in the accompanying consolidated statements of operations since the respective dates of acquisition. The aggregate cost of these acquisitions was as follows:
(IN THOUSANDS) -------------- Cash........................................................ $150,238 Deferred acquisition obligations............................ 9,262 Assumption of liabilities................................... 2,800 -------- $162,300 ========
The aggregate purchase price was allocated as follows: Current assets.............................................. $ 7,271 Property and equipment...................................... 6,552 Intangible assets........................................... 6,122 Goodwill.................................................... 142,355 -------- $162,300 ========
Unaudited pro forma supplemental information on the results of operations for the nine months ended September 30, 2000 and September 30, 1999 are provided below and reflect the acquisitions as if they had been combined at the beginning of each respective period.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 2000 1999 -------- -------- (IN THOUSANDS EXCEPT PER SHARE DATA) Net revenues................................................ $551,311 $491,132 ======== ======== Net income.................................................. $ 86,708 $ 79,541 ======== ======== Income per common share: Basic..................................................... $ 1.63 $ 1.37 ======== ======== Diluted................................................... $ 1.60 $ 1.35 ======== ========
The unaudited pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had the transactions been effected at the beginning of the respective preceding periods or of future results of operations of the combined companies. 6 7 LINCARE HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION MEDICARE REIMBURSEMENT As a supplier of home oxygen and other respiratory therapy services for the home health care market, the Company participates in Medicare Part B, the Supplementary Medical Insurance Program, which was established by the Social Security Act of 1965. Suppliers of home oxygen and other respiratory therapy services have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly suffering from respiratory disease. On August 5, 1997, the Balanced Budget Act of 1997 ("BBA") was signed into law. The legislation, among other things, was intended to reduce Medicare expenditures by $115 billion over five years. The BBA reduced Medicare reimbursement amounts for oxygen and oxygen equipment furnished after January 1, 1998, to 75 percent of the fee schedule amounts in effect during 1997. Reimbursement amounts for oxygen and oxygen equipment furnished after January 1, 1999, and each subsequent year thereafter, were reduced to 70 percent of the fee schedule amounts in effect during 1997. The BBA also reduced payment amounts for covered drugs and biologicals furnished after January 1, 1998 to 95 percent of the average wholesale price of such covered items. The BBA authorizes the Department of Health and Human Services to conduct up to five competitive bidding demonstration projects for the acquisition of durable medical equipment and requires that one such project be established for oxygen and oxygen equipment. Each demonstration project is to be operated over a three-year period and is to be conducted in not more than three competitive acquisition areas. The first demonstration project became effective in Polk County, Florida on October 1, 1999. The second demonstration project is scheduled to become effective January 1, 2001 in the San Antonio, Texas area. The BBA also includes provisions designed to reduce health care fraud and abuse including a surety bond requirement, which has not yet been implemented, for durable medical equipment providers. On November 29, 1999, the Balanced Budget Refinement Act of 1999 ("BBA Refinement Act") was signed into law. This legislation was designed to mitigate the effects of the BBA on health care providers. The BBA Refinement Act restores approximately $1.2 billion in funding in 2000 and $16 billion over five years, and affects a wide range of health care providers. With respect to the services provided by the Company, the BBA Refinement Act provides for temporary increases in Medicare payment rates for durable medical equipment (including oxygen equipment) of 0.3% in 2001 and 0.6% in 2002. Furthermore, the BBA Refinement Act temporarily prohibits the Department of Health and Human Services from exercising its inherent reasonableness authority to reduce payments for non-physician Part B services, including durable medical equipment, and excludes durable medical equipment from the home health consolidated billing requirements established in the BBA. Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry. The Company cannot predict whether new federal and state budgetary proposals will be adopted or the effect, if any, such proposals would have on the Company's business. 7 8 OPERATING RESULTS The following table sets forth for the periods indicated a summary of the Company's net revenues by source:
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- (IN THOUSANDS) (IN THOUSANDS) Oxygen and other respiratory therapy...... $157,069 $135,438 $444,923 $385,696 Home medical equipment and other.......... 28,953 14,809 68,217 43,657 -------- -------- -------- -------- Total........................... $186,022 $150,247 $513,140 $429,353 ======== ======== ======== ========
Net revenues for the three months ended September 30, 2000 increased by $35,775,000 (or 23.8%) compared with the three months ended September 30, 1999. Net revenues for the nine months ended September 30, 2000 increased $83,787,000 (or 19.5%) compared with the nine months ended September 30, 1999. The increase in net revenues is attributable to market gains in the Company's core respiratory business, the acquisition of complementary businesses and geographic expansion through the opening of new operating centers in contiguous and new geographic markets. Cost of goods and services as a percentage of net revenues were 17.0% for the three months ended September 30, 2000 compared with 15.4% for the three months ended September 30, 1999. Costs of goods and services as a percentage of net revenues were 16.0% for the nine months ended September 30, 2000 compared with 15.6% for the nine months ended September 30, 1999. The increase in cost of goods is the result of the Company's purchase of the assets of United Medical, Inc. ("UMI") on June 28, 2000. The UMI locations operated by the Company provide a more broad base of durable medical equipment and supplies which have lower gross margins than the Company's traditional core respiratory business. Operating expenses as a percentage of net revenues were 22.7% for the three months ended September 30, 2000 as compared with 22.6% for the three months ended September 30, 1999. Operating expenses as a percentage of net revenues were 22.6% for the nine months ended September 30, 2000 as compared with 22.7% for the nine months ended September 30, 1999. Selling, general and administrative expenses as a percentage of net revenues were 20.6% for the three months ended September 30, 2000 as compared with 22.1% for the three months ended September 30, 1999. Selling, general and administrative expenses as a percentage of net revenues were 21.1% for the nine months ended September 30, 2000 as compared with 22.1% for the nine months ended September 30, 1999. The Company has been able to maintain a cost structure that, with increases in net revenues, allows the Company to spread its overhead across a larger base of revenue, resulting in improvements in operating income. Amortization expense for the three months ended September 30, 2000 increased to $5,302,000 compared with $4,091,000 for the three month period ended September 30, 1999. Amortization expense for the nine months ended September 30, 2000 increased to $14,296,000 compared with $11,858,000 for the nine month period ended September 30, 1999. The increase is attributable to the amortization of intangible assets associated with business combinations in 1999 and the first nine months of 2000. Operating income for the three months and nine months ended September 30, 2000 increased to $53,386,000 and $149,455,000, respectively, compared with $43,500,000 and $122,885,000 for the three and nine months ended September 30, 1999. The increases in operating income are attributable to the continued revenue growth and efforts to control costs. Interest expense for the three and nine months ended September 30, 2000 increased to $5,667,000 and $12,491,000, respectively, compared with $1,512,000 and $2,909,000 for the three and nine months ended September 30, 1999. The increases in interest expense are attributable to additional long term debt used to repurchase the Company's common stock on the open market and the purchase of the assets of UMI on June 28, 2000. LIQUIDITY AND CAPITAL RESOURCES Net cash provided from operating activities was $145,320,000 for the nine months ended September 30, 2000 compared with $116,808,000 for the nine months ended September 30, 1999. 8 9 Net cash used in investing and financing activities was $148,399,000 for the nine months ended September 30, 2000. Activity during the nine-month period ended September 30, 2000 included the Company's investment of $150,238,000 in business acquisitions, investment in capital equipment of $43,935,000, proceeds of $311,000,000 from long-term obligations, payments of $206,742,000 related to long-term obligations and $59,748,000 to acquire treasury stock. As of September 30, 2000, the Company's principal sources of liquidity consisted of $76,982,000 of working capital and $84,000,000 available under its three-year bank credit facility. The Company's $60,000,000 364-day revolving credit facility expired on August 22, 2000 and was replaced on September 6, 2000 by $125,000,000 of senior secured notes offered through a private placement. The senior secured notes have a fixed interest rate and mature over three, four and five years: $30,000,000 at 8.91% due September 15, 2003, $50,000,000 at 9.01% due September 15, 2004 and $45,000,000 at 9.11% due September 15, 2005. Upon entering into the senior secured note agreement an organization fee of $893,000 was paid and is being amortized over the periods of the notes. The Company believes that internally generated funds, together with funds that may be borrowed under its three-year bank credit facility, will be sufficient to meet the Company's anticipated capital requirements for the foreseeable future. On June 11, 1999, the Company's Board of Directors authorized the Company to repurchase up to $200,000,000 of its outstanding common stock. Purchases are made through open market or privately negotiated transactions, subject to market conditions and trading restrictions. As of September 30, 2000, $178,008,000 of common stock had been repurchased under this program. NEW ACCOUNTING STANDARDS In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133," which deferred, for one year, the effective date for the implementation of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires that an entity recognize all derivative instruments as either assets or liabilities on the balance sheet and measure those instruments at fair values. The Company will be required to adopt this standard for financial statements issued beginning the first quarter of fiscal year 2001. On September 6, 2000 the Company entered into interest rate swap agreements whereby the interest rate on its $125,000,000 of senior secured notes were effectively converted to variable interest rates based on three-month LIBOR plus a fixed spread. At September 30, 2000 the swap-adjusted interest rates on the three, four and five-year senior secured notes were 8.65%, 8.72% and 8.81%. On September 7, 2000, the Company entered into an interest rate collar transaction with an initial notional amount of $125,000,000. The collar has a floor rate of 5.81% and a cap rate of 8.00% with a floating rate option based on three-month LIBOR. The notional amount of the collar amortizes in accordance with the maturity dates of the underlying senior secured notes. The Company has estimated the fair value of its interest rate swap agreements at September 30, 2000 and does not anticipate the implementation of SFAS No. 133 to have a material effect on its financial statements. QUANTITATIVE AND QUALITATIVE DISCLOSURE REGARDING MARKET RISK The Company is exposed to changes in interest rates as a result of its three-year bank credit facility and its interest rate swap contracts associated with the senior secured notes which are based on the London Interbank Offered Rate. A 10% increase in interest rates related to the three-year bank credit facility and the interest rate swap contracts would not have a material effect on the Company's earnings over the next fiscal year or the value of the bank credit facility and the interest swap contracts. FORWARD LOOKING STATEMENTS Statements contained herein that are not based on historical facts are forward-looking statements that are based on projections and estimates regarding the economy in general, the health care industry and other factors which impact the Company. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any results, levels of activity, performance or achievements expressed or implied 9 10 by any forward-looking statements. The estimates relate to reimbursement by government and third party payors for the Company's products and services, the costs associated with government regulation of the health care industry and the effects of competition and industry consolidation. In some cases, forward-looking statements that involve risks and uncertainties contain terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or variations of these terms or other comparable terminology. Key factors that have an impact on the Company's ability to attain these estimates include potential reductions in reimbursement rates by government and third party payors, changes in reimbursement policies, demand for the Company's products and services, the availability of appropriate acquisition candidates and the Company's ability to successfully complete acquisitions, efficient operations of the Company's existing and future operating facilities, regulation and/or regulatory action affecting the Company or its business, economic and competitive conditions and access to borrowed and/or equity capital on favorable terms. In developing its forward-looking statements, the Company has made certain assumptions relating to reimbursement rates and policies, internal growth and acquisitions and the outcome of various legal and regulatory proceedings. If the assumptions used by the Company differ materially from what actually occurs, then actual results could vary significantly from the performance projected in the forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this Form 10-Q. PART II. OTHER INFORMATION Item 1 Legal Proceedings From time to time, the Company receives inquiries from various government agencies requesting patient records and other documents. It has been Lincare's policy to cooperate with all such requests for information. The government has not instituted any proceedings or served Lincare with any complaints as a result of these inquiries. Private litigants may also make claims against the Company for violations of health care laws in actions known as qui tam suits and the government may intervene in, and take control of, such actions. The Company is a defendant in certain qui tam proceedings. Lincare intends to vigorously defend these suits should they proceed. The government has declined to intervene in all unsealed qui tam actions of which the Company is aware. As a health care provider, Lincare is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, billing, documentation and other practices of health care companies are all subject to government scrutiny. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other documents to support claims submitted by the Company for payment of services rendered to patients. Similarly, government agencies periodically open investigations and obtain information from health care providers pursuant to legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs. Items 2-5 Not Applicable. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits included or incorporated herein: See Exhibit Index. (b) The Company filed a Current Report on Form 8-K on July 12, 2000. 10 11 SIGNATURE 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. Lincare Holdings Inc. -------------------------------------- Registrant /s/ PAUL G. GABOS -------------------------------------- Paul G. Gabos Secretary, Chief Financial Officer and Principal Accounting Officer November 13, 2000 11 12 INDEX OF EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE - ------- ------- ------------ +3.1 -- Amended and Restated Certificate of Incorporation of Lincare Holdings Inc.................................................... ++3.1.1 -- Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Lincare Holdings Inc. .......... +3.2 -- Amended and Restated By-Laws of Lincare Holdings Inc............ +10.1 -- Lincare Inc. 401(k) Plan........................................
13
Exhibit Number Exhibit - ------ ------- /10.2- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . /10.3- Employment Agreement dated as of June 1, 1997 between Lincare Holdings Inc. and Paul G. Gabos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . /10.4- Employment Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . /10.5- Form of Non-employee Director Stock Option Agreement . . . . . . . . . . . . . . . /10.6- Form of Non-qualified Stock Option Agreement . . . . . . . . . . . . . . . . . . . //10.7- Three-Year Credit Agreement among Lincare Holdings Inc., as Borrower, Certain Subsidiaries of Borrower from time to time party thereto, as Guarantors, the several Lenders from time to time party thereto and Bank of America, N.A., as Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.7.1- First Amendment to the Three-Year Credit Agreement dated June 20, 2000 . . . . . . 10.7.2- Second Amendment to the Three-Year Credit Agreement dated August 21, 2000. . . . . 10.8- Senior Secured Note Purchase Agreement among Lincare Holdings Inc., as Borrower, and several note holders with Bank of America, N.A., as Agent. . . . . . 10.8.1- Form of Series A Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8.2- Form of Series B Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8.3- Form of Series C Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +++++22.2- List of Subsidiaries of Lincare Holdings Inc . . . . . . . . . . . . . . . . . . . 27.0- Financial Data Schedule 9/30/00 (for SEC use only) . . . . . . . . . . . . . . . .
- --------------- + Incorporated by reference to the corresponding exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-44672) 14 ++ Incorporated by reference to the Registrant's Form 10-Q dated August 12, 1998. / Incorporate by reference to the Registrant's Form 10-K dated March 26, 1998. // Incorporate by reference to the Registrant's Form 10-Q dated November 12, 1999. EX-10.7.1 2 g64879ex10-7_1.txt FIRST AMENDMENT TO THE THREE-YEAR CREDIT AGREEMENT 1 Exhibit 10.7.1 FIRST AMENDMENT TO THREE-YEAR CREDIT AGREEMENT This FIRST AMENDMENT TO THREE-YEAR CREDIT AGREEMENT (this "Amendment"), dated as of June 20, 2000, is by and among LINCARE HOLDINGS INC., a Delaware corporation (the "Borrower"), each of the Borrower's Subsidiaries (individually a "Guarantor" and collectively the "Guarantors"; together with the Borrower, individually a "Credit Party", and collectively the "Credit Parties"), the Required Lenders signatory hereto and BANK OF AMERICA, N. A., as Agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H WHEREAS, the Credit Parties, the Lenders and the Agent have entered into that certain Three-Year Credit Agreement dated as of August 23, 1999 (the "Existing Credit Agreement"); WHEREAS, the Borrower has requested, and the Lenders have agreed, to amend certain provisions of the Existing Credit Agreement as more fully set forth below. NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: PART I DEFINITIONS SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the context otherwise requires, the following terms used in this Amendment, including its preamble and recitals, have the following meanings: "Amended Credit Agreement" means the Existing Credit Agreement as amended hereby. "Amendment No. 1 Effective Date" is defined in Subpart 4.1. SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Amendment, including its preamble and recitals, have the meanings provided in the Existing Credit Agreement. 2 PART II AMENDMENTS TO EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Amendment No. 1 Effective Date, the Existing Credit Agreement is hereby amended in accordance with this Part 2. SUBPART 2.1 Amendments to Section 1.1. Section 1.1 of the Existing Credit Agreement is hereby amended in the following respects: (a) The definition of "Change of Control" is hereby amended in its entirety to read as follows: "Change of Control" means the occurrence of any of the following events: (i) any Person or two or more Persons acting in concert (other than Persons owning 30% or more of the Voting Stock of the Borrower on the Closing Date) 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, control over, Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 30% or more of the combined voting power of all Voting Stock of the Borrower, (ii) any Person or two or more Persons acting in concert (other than Persons owning 30% or more of the Voting Stock of the Borrower on the Closing Date) has the ability directly or indirectly, to elect a majority of the board of directors of the Borrower, (iii) during any period of up to 12 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 12-month period were directors of the Borrower shall cease for any reason (other than the death, disability or retirement of an officer of the Borrower that is serving as a director at such time so long as another officer of the Borrower replaces such Person as a director) to constitute a majority of the board of directors of the Borrower; provided, however to the extent there exist vacancies on the Board of Directors as of the Closing Date or if after the Closing Date, the existing Board of Directors increases the number of directors on the Board of Directors by an amount not more than three, the individuals named to fill such vacancies, if selected by a majority of directors sitting as of the Closing Date, shall be deemed for purposes of this clause (iii) to have been appointed prior to the Closing Date or (iv) the occurrence of a "Change of Control" under the Senior Note Purchase Agreements, the Senior Notes, or other documents evidencing the Senior Notes. (b) The definition of "Permitted Acquisition" is hereby amended in its entirety to read as follows: "Permitted Acquisition" means an Acquisition by the Borrower or any Subsidiary of the Borrower for the fair market value of the Capital Stock or Property acquired, provided that (i) the Capital Stock or Property acquired in such 2 3 Acquisition relates to a line of business similar to the business of the Borrower or any of its Subsidiaries, (ii) in the case of an Acquisition of Capital Stock of another Person, (A) the board of directors (or other comparable governing body) of such other Person shall have duly approved such Acquisition and (B) such Person shall become a wholly-owned direct or indirect Subsidiary of the Borrower, (iii) 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 and no Default or Event of Default exists as of the date of such Acquisition (after giving effect thereto) and (iv)(A) if the aggregate consideration for such Acquisition, exceeds $25,000,000 but is less than $35,000,000, the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect to the Acquisition on a Pro Forma Basis, the Borrower will be in compliance with all of the financial covenants set forth in Section 7.11 or (B) if the aggregate consideration (including cash and non-cash consideration and any assumption of Indebtedness) for such Acquisition exceeds $35,000,000 or if any such Acquisition would cause the aggregate consideration for all Acquisitions in any fiscal year to exceed $150,000,000, the Borrower shall have received the approval of the Required Lenders, which approval shall be given in the Required Lenders' sole discretion; provided, however, that with respect to clause (B) above for fiscal year 2000 only, if the aggregate consideration (including cash and non-cash consideration and any assumption of Indebtedness) for any Acquisition consummated after the consummation of the United Medical Acquisition exceeds $35,000,000 or if any such additional Acquisition would cause the aggregate consideration for all Acquisitions consummated after the consummation of the United Medical Acquisition to exceed $50,000,000, the Borrower shall have received the approval of the Required Lenders. (c) The definition of "Pledge Agreement" is hereby amended in its entirety to read as follows: "Pledge Agreement" means (i) prior to the first date on which the Borrower has issued any Senior Notes, the pledge agreement dated as of the Closing Date in the form of Exhibit 1.1(a), as amended, modified, restated or supplemented from time to time and (ii) thereafter, the "New Pledge Agreement" described in Subpart 3.2(b) of Amendment No. 1, as amended, modified, restated or supplemented from time to time. (d) The following new definitions are added to Section 1.1 of the Existing Credit Agreement in appropriate alphabetical order: "Amendment No. 1" means that certain First Amendment to Three-Year Credit Agreement dated as of June 20, 2000 by and among the Borrower, the Guarantors, the Required Lenders signatory hereto and the Agent. 3 4 "Intercreditor Agreement" means an intercreditor agreement dated as of a date on or before July 31, 2000 and in form and substance reasonably satisfactory to the Agent, defining the relationship between the Agent and the Lenders, on the one hand, and the Noteholders, on the other hand, with respect to the relative rights and priorities with respect to the Pledged Collateral and providing for the sharing of any amounts recovered pursuant to the obligations of the Guarantors under Section 4 and the guaranties of the Senior Notes permitted under Section 8.1(j). "Senior Note Purchase Agreements" means a collective reference to note purchase agreements, dated as of a date on or before July 31, 2000 and in form and substance reasonably satisfactory to the Agent, among the Borrower and each of the Senior Noteholders. "Senior Noteholders" means a collective reference to the holders from time to time of the Senior Notes and "Senior Noteholder" means any one of them. "Senior Notes" means a collective reference to senior notes in an aggregate principal amount of up to $150,000,000, and in form and substance reasonably satisfactory to the Agent, to be issued by the Borrower on or before July 31, 2000 pursuant to the Senior Note Purchase Agreements, as such Senior Notes may be amended, modified, restated or supplemented and in effect from time to time in accordance with the terms thereof. The Senior Notes shall rank pari passu with the Credit Party Obligations in priority of payment and shall be secured by a lien on the Pledged Collateral ranking pari passu with the lien of the Agent therein. "United Medical Acquisition" means the Acquisition by the Borrower, on or prior to June 30, 2000, of substantially all of the assets of United Medical, Inc., an Arkansas corporation, for aggregate consideration of approximately $123,000,000. SUBPART 2.2 Amendments to Section 8.1. Clauses (h) and (i) of Section 8.1 of the Existing Credit Agreement are hereby amended in their entireties to read as follows and the following new clauses (j) and (k) are added to such Section immediately thereafter: 8.1 INDEBTEDNESS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Indebtedness, except: **************** (h) Indebtedness owing by one Credit Party to another Credit Party; 4 5 (i) other Indebtedness hereafter incurred by the Borrower not exceeding $10,000,000 in aggregate principal amount at any time outstanding; (j) Indebtedness of the Borrower arising under the Senior Note Purchase Agreements and the Senior Notes in an aggregate principal amount of up to $150,000,000; provided that (i) the final maturity date of such Senior Notes occurs after the Maturity Date and (ii) such Senior Note Purchase Agreements and Senior Notes do not contain terms and conditions which, when taken as a whole, are more restrictive that the terms and conditions of the Credit Agreement; and (k) Guaranty Obligations of any Guarantor with respect to the Indebtedness of the Borrower permitted under Section 8.1(j). SUBPART 2.3 Amendments to Section 8.11. Section 8.11 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 8.11 LIMITATION ON RESTRICTED ACTIONS. The Credit Parties will not permit any Consolidated Party 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 to any Credit Party 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 owed to any Credit Party, (c) make loans or advances to any Credit Party, (d) sell, lease or transfer any of its properties or assets to any Credit Party, (e) grant a lien on its properties or assets whether now owned or hereafter acquired or (f) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (a)-(d) above) for such encumbrances or restrictions existing under or by reason of (i) this Credit Agreement and the other Credit Documents, (ii) the Senior Note Purchase Agreements and the Senior Notes or (iii) applicable law. SUBPART 2.4 Amendments to Section 8.14. Section 8.14 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 8.14 NO FURTHER NEGATIVE PLEDGES. Except (a) pursuant to this Credit Agreement and the other Credit Documents, (b) pursuant to the Senior Note Purchase Agreements and the Senior Notes and (c) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, the Credit Parties will not permit any Consolidated Party 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 such obligation if security is given for some other obligation. 5 6 PART III CONSENT, AUTHORIZATION, ETC. SUBPART 3.1 United Medical Acquisition. The Required Lenders hereby consent to the United Medical Acquisition. SUBPART 3.2 Execution of Intercreditor Agreement and Restated Pledge Agreement; Indemnification of Collateral Agent. (a) The Required Lenders hereby authorize and direct the Agent, on behalf of the Lenders, at such time as any Senior Notes shall be issued by the Borrower, to execute and deliver (i) the Intercreditor Agreement and (ii) a pledge agreement (the "New Pledge Agreement") amending and restating the Pledge Agreement for the purpose of providing that the Pledged Collateral shall be held by Bank of America as a collateral agent for the ratable benefit of the Lenders and the Senior Noteholders (in such capacity, the "Collateral Agent"). (b) The Credit Parties agree that, at such time as the Intercreditor Agreement and the New Pledge Agreement shall have become effective: (i) to pay to the Collateral Agent all of its out-of-pocket expenses in connection with the preparation, execution and delivery of the Intercreditor Agreement and the New Pledge Agreement and the transactions contemplated thereby, including but not limited to the reasonable charges and disbursements of counsel; (ii) to pay to the Collateral Agent from time to time reasonable compensation for all services rendered by it under the Intercreditor Agreement and the New Pledge Agreement; (iii) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of the Intercreditor Agreement or the New Pledge Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel); and (iv) to indemnify the Collateral Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on the part of the Collateral Agent, arising out of or in connection with the Intercreditor Agreement or the New Pledge Agreement or any action taken or omitted by it thereunder or in connection therewith, including, but not limited to, the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, and any loss, liability, expense or claim arising out of its possession, management, control, use or operation of the Pledged Collateral. 6 7 (c) At such time as the Intercreditor Agreement and the New Pledge Agreement shall have become effective, the Lenders shall be required to indemnify the Collateral Agent (to the extent not reimbursed by the Credit Parties), ratably with the Senior Noteholders, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Collateral Agent, without gross negligence or willful misconduct on the part of the Collateral Agent, arising out of the actions of the Collateral Agent under the Intercreditor Agreement or the New Pledge Agreement or the transactions contemplated thereby or the enforcement of any of the terms thereof. The Lenders shall be subrogated to the rights of the Collateral Agent with respect to all amounts paid by it pursuant to this clause (b), and all such amounts shall constitute Credit Party Obligations. PART IV CONDITIONS TO EFFECTIVENESS SUBPART 4.1 Amendment No. 1 Effective Date. This Amendment shall be and become effective as of June 20, 2000 (the "Amendment No. 1 Effective Date") when all of the conditions set forth in this Part 4 shall have been satisfied, and thereafter this Amendment shall be known, and may be referred to, as "Amendment No. 1." SUBPART 4.2 Execution of Counterparts of Amendment. The Agent shall have received counterparts of this Amendment, which collectively shall have been duly executed on behalf of each of the Borrower, the Guarantors and the Lenders. SUBPART 4.3 Other Items. The Agent shall have received such other documents, agreements or information which may be reasonably requested by the Agent. PART V MISCELLANEOUS SUBPART 5.1 Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders that, after giving effect to this Amendment, (a) no Default or Event of Default exists under the Credit Agreement or any of the other Credit Documents and (b) the representations and warranties set forth in Section 6 of the Existing Credit Agreement are, subject to the limitations set forth therein, true and correct in all material respects as of the date hereof (except for those which expressly relate to an earlier date). SUBPART 5.2 Reaffirmation of Credit Party Obligations. Each Credit Party hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it is bound by all terms of the Credit Agreement applicable to it and (b) that it is responsible for the observance and full performance of its respective Credit Party Obligations. 7 8 SUBPART 5.3 Cross-References. References in this Amendment to any Part or Subpart are, unless otherwise specified, to such Part or Subpart of this Amendment. SUBPART 5.4 Instrument Pursuant to Existing Credit Agreement. This Amendment is a Credit Document executed pursuant to the Existing Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with the terms and provisions of the Existing Credit Agreement. SUBPART 5.5 References in Other Credit Documents. At such time as this Amendment No. 1 shall become effective pursuant to the terms of Subpart 4.1, all references in the Credit Documents to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended by this Amendment No. 1. SUBPART 5.6 Counterparts/Telecopy. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of executed counterparts of the Amendment by telecopy shall be effective as an original and shall constitute a representation that an original shall be delivered. SUBPART 5.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. SUBPART 5.8 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUBPART 5.9 General. Except as amended hereby, the Existing Credit Agreement and all other Credit Documents shall continue in full force and effect. 8 9 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. BORROWER: LINCARE HOLDINGS INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- GUARANTORS: LINCARE INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE PROCUREMENT INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE ASSET MANAGEMENT LP, a Nevada limited partnership BY: LINCARE HOLDINGS INC., A DELAWARE CORPORATION, ITS GENERAL PARTNER By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE OF NEW YORK INC., a New York corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 10 LINCARE PHARMACY SERVICES INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE LICENSING INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- CONVACARE SERVICES INC., an Indiana corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE TRAVEL INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 11 LENDERS: BANK OF AMERICA, N. A., individually in its capacity as a Lender and in its capacity as Agent By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- BANKATLANTIC By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- BANK LEUMI LE - ISRAEL B.M., MIAMI AGENCY By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- COMERICA BANK By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- BANKERS TRUST COMPANY By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- FLEET NATIONAL BANK By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 12 THE FUJI BANK, LIMITED By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- THE INDUSTRIAL BANK OF JAPAN LIMITED By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- MICHIGAN NATIONAL BANK By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- SCOTIABANC INC. By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- CREDIT LYONNAIS NEW YORK BRANCH By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- U.S. BANK NATIONAL ASSOCIATION By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- EX-10.7.2 3 g64879ex10-7_2.txt SECOND AMENDMENT TO THREE-YEAR CREDIT AGREEMENT 1 Exhibit 10.7.2 SECOND AMENDMENT TO THREE-YEAR CREDIT AGREEMENT This SECOND AMENDMENT TO THREE-YEAR CREDIT AGREEMENT (this "Amendment"), dated as of August 21, 2000, is by and among LINCARE HOLDINGS INC., a Delaware corporation (the "Borrower"), each of the Borrower's Subsidiaries (individually a "Guarantor" and collectively the "Guarantors"; together with the Borrower, individually a "Credit Party", and collectively the "Credit Parties"), the Required Lenders signatory hereto and BANK OF AMERICA, N. A., as Agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H WHEREAS, the Credit Parties, the Lenders and the Agent have entered into that certain Three-Year Credit Agreement dated as of August 23, 1999 (as previously amended, the "Existing Credit Agreement"); WHEREAS, the Borrower has requested, and the Lenders have agreed, to amend certain provisions of the Existing Credit Agreement as more fully set forth below. NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: PART I DEFINITIONS SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the context otherwise requires, the following terms used in this Amendment, including its preamble and recitals, have the following meanings: "Amended Credit Agreement" means the Existing Credit Agreement as amended hereby. "Amendment No. 2 Effective Date" is defined in Subpart 4.1. SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Amendment, including its preamble and recitals, have the meanings provided in the Existing Credit Agreement. 2 PART II AMENDMENTS TO EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Amendment No. 2 Effective Date, the Existing Credit Agreement is hereby amended in accordance with this Part 2. SUBPART 2.1 Amendments to Section 1.1. Section 1.1 of the Existing Credit Agreement is hereby amended in the following respects: (a) The following definitions are amended in their entireties to read as follows: "Agent's Fee Letter" means that certain letter agreement, dated as of August 21, 2000, between the Agent and the Borrower, as amended, modified, restated or supplemented from time to time. "Applicable Percentage" means, for purposes of calculating the applicable interest rate for any day for any Revolving Loan, the applicable rate of the Unused Fee for any day for purposes of Section 3.5(b) and the applicable rate of the Letter of Credit Fee for any day for purposes of Section 3.5(c)(i), the appropriate applicable percentage corresponding to the Leverage Ratio in effect as of the most recent Calculation Date as set forth below:
========================================================================================== APPLICABLE PERCENTAGES - ------------------------------------------------------------------------------------------- FOR REVOLVING LOANS ----------------------------- FOR FOR PRICING LEVERAGE RATIO EURODOLLAR BASE RATE LOANS LETTER OF UNUSED LEVEL LOANS CREDIT FEE FEE ------------------------------------------------------------------------------------------ I < 1.0 to 1.0 1.125% 0.125% 1.125% 0.30%* - ------------------------------------------------------------------------------------------ < 1.5 to 1.0 II - but 1.375% 0.375% 1.375% 0.35%* > 1.0 to 1.0 ------------------------------------------------------------------------------------------ < 2.0 to 1.0 III - but 1.625% 0.625% 1.625% 0.40%* > 1.5 to 1.0 ------------------------------------------------------------------------------------------ IV > 2.0 to 1.0 2.00% 1.00% 2.00% 0.50%* ===========================================================================================
* If on any day, the aggregate outstanding principal amount of all Revolving Loans plus LOC Obligations hereunder is less than the product of (A) one-half (1/2) times (B) the Revolving Committed Amount, the applicable Unused Fee (as shown above) shall be increased by an amount equal to 12.5 basis points. The Applicable Percentages shall be determined and adjusted quarterly on the date (each a "Calculation Date") five Business Days after the date by which the Borrower is required to provide the officer's certificate in accordance with the provisions of Section 7.1(c) for the most recently ended fiscal quarter of the Consolidated Parties; provided, however, that (i) the initial Applicable Percentages shall be based on Pricing Level II (as shown above) and shall remain at Pricing Level II until the date six months following the Closing Date, on and after which 2 3 time the Pricing Level shall be determined by the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date and (ii) if the Borrower fails to provide the officer's certificate as required by Section 7.1(c) for the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date, the Applicable Percentage from such Calculation Date shall be based on Pricing Level IV until such time as an appropriate officer's certificate is provided, whereupon the Applicable Percentages shall be determined by the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding such Calculation Date. Each Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Percentages shall be applicable to all existing Revolving Loans and Letters of Credit as well as any new Revolving Loans and Letters of Credit made or issued. "Credit Documents" means a collective reference to this Credit Agreement, the Revolving Notes, the LOC Documents, each Joinder Agreement, the Agent's Fee Letter, the Pledge Agreement and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto (in each case as the same may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time), and "Credit Document" means any one of them. "Credit Party Obligations" means, without duplication, (i) all of the obligations of the Credit Parties to the Lenders (including the Issuing Lender) and the Agent, whenever arising, under this Credit Agreement, the Revolving Notes, the Pledge Agreement 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 the Bankruptcy Code) and (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 or any Equity Swap Agreement. "Intercreditor Agreement" means (i) on and after the Amendment No. 2 Effective Date but prior to the first date on which the Borrower has issued any Senior Notes, an intercreditor agreement in form and substance reasonably satisfactory to the Agent, defining the relationship between the Agent and the Lenders, on the one hand, and the agent and the lenders under the 364-Day Credit Agreement, on the other hand, with respect to the relative rights and priorities with respect to the Pledged Collateral and providing for the sharing of any amounts recovered pursuant to the obligations of the Guarantors under Section 4 and the guaranties of the 364-Day Credit Agreement permitted under Section 8.1(j) and (ii) after the issuance of any Senior Notes, an intercreditor agreement in form and substance reasonably satisfactory to the Agent, defining the relationship between the Agent and the Lenders, on the one hand, and the Senior Noteholders, on the other hand, with respect to the relative rights and priorities with respect to the 3 4 Pledged Collateral and providing for the sharing of any amounts recovered pursuant to the obligations of the Guarantors under Section 4 and the guaranties of the Senior Notes permitted under Section 8.1(j). "Lender" means any of the Persons identified as a "Lender" on the signature pages hereto, and any Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "Permitted Liens" means: (i) Liens in favor of the Agent, for the benefit of the Lenders, to secure the Credit Party Obligations; (ii) Liens in favor of the Collateral Agent, for the ratable benefit of the Lenders and either the lenders under the 364-Day Credit Agreement or the Senior Noteholders, as applicable; (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 Consolidated Party 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 4 5 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; (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 securing purchase money Indebtedness (including Capital Leases and Synthetic Leases) to the extent permitted under Section 8.1(c), provided that any such Lien attaches to such Property 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 Consolidated Party; (x) any interest of 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) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xii) Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection; (xiii) Liens of sellers of goods to the Borrower and any of its Subsidiaries arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable law in the ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses; (xiv) Liens existing as of the Closing Date and set forth on Schedule 1.1(b); provided that no such Lien shall at any time be extended to or cover any Property other than the Property subject thereto on the Closing Date; (xv) Liens on Property in an aggregate amount not to exceed $8,000,000 securing obligations of the Borrower under Equity Swap Agreements permitted under Section 8.1(f); and (xvi) additional Liens not otherwise permitted by the foregoing clauses hereof; provided that such additional Liens permitted by this clause (xvi) do not secure Indebtedness of more than $5,000,000. 5 6 "Pledge Agreement" means (i) prior to the Amendment No. 2 Effective Date, the pledge agreement dated as of the Closing Date in the form of Exhibit 1.1(a), as amended, modified, restated or supplemented from time to time, (ii) on and after the Amendment No. 2 Effective Date but prior to the first date on which the Borrower has issued any Senior Notes, a pledge agreement in form and substance reasonably satisfactory to the Agent, amending and restating the pledge agreement referred to in clause (i) above for the purpose of providing that the collateral thereunder shall be held by Bank of America as a collateral agent for the ratable benefit of the Lenders and the lenders under the 364-Day Credit Agreement, as amended, modified, restated or supplemented from time to time and (iii) thereafter, a pledge agreement in form and substance reasonably satisfactory to the Agent, amending and restating the pledge agreement referred to in clause (i) above for the purpose of providing that the collateral thereunder shall be held by Bank of America as a collateral agent for the ratable benefit of the Lenders and the Senior Noteholders, as amended, modified, restated or supplemented from time to time. "Revolving Committed Amount" means TWO HUNDRED FORTY MILLION DOLLARS ($240,000,000), as such amount may be reduced from time to time as provided in Section 3.4. "Senior Note Purchase Agreements" means a collective reference to note purchase agreements, dated as of a date on or before September 30, 2000 and in form and substance reasonably satisfactory to the Agent, among the Borrower and each of the Senior Noteholders. "Senior Noteholders" means a collective reference to the holders from time to time of the Senior Notes and "Senior Noteholder" means any one of them. "Senior Notes" means a collective reference to senior notes in an aggregate principal amount of up to $150,000,000, and in form and substance reasonably satisfactory to the Agent, to be issued by the Borrower on or before September 30, 2000 pursuant to the Senior Note Purchase Agreements, as such Senior Notes may be amended, modified, restated or supplemented and in effect from time to time in accordance with the terms thereof. The Senior Notes shall rank pari passu with the Credit Party Obligations in priority of payment and shall be secured by a lien on the Pledged Collateral ranking pari passu with the lien of the Agent and Lenders thereon. "364-Day Credit Agreement" means that 364-Day Credit Agreement dated as of August 21, 2000, as amended, modified, restated, refinanced or supplemented from time to time, among the Borrower, each of the Borrower's Subsidiaries, the lenders identified therein and Bank of America, as agent. 6 7 (b) The definitions of "Additional Revolving Commitment" and "New Commitment Agreement" are hereby deleted. (c) The following new definitions are added to Section 1.1 of the Existing Credit Agreement in the appropriate alphabetical order: "Amendment No. 2" means that certain Second Amendment to Three-Year Credit Agreement dated as of August 21, 2000 by and among the Borrower, the Guarantors, the Required Lenders signatory hereto and the Agent. "Amendment No. 2 Effective Date" shall have the meaning assigned to such term in Amendment No. 2. "Collateral Agent" means (i) on and after the Amendment No. 2 Effective Date but prior to the first date on which the Borrower has issued any Senior Notes, Bank of America, N.A., in its capacity as collateral agent for the benefit of the Lenders and the lenders under the 364-Day Credit Agreement, together with its successors and assigns and (ii) thereafter, Bank of America, N.A., in its capacity as collateral agent for the benefit of the Lenders and the Senior Noteholders, together with its successors and assigns. SUBPART 2.2 Amendments to Section 3.4. Section 3.4 is hereby amended in its entirety to read as follows: 3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT. (a) The Borrower may from time to time permanently reduce or terminate the Revolving Committed Amount in whole or in part (in minimum aggregate amounts of $5,000,000 or in integral multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the then applicable Revolving Committed Amount)) upon three Business Days' prior written notice to the Agent; provided, however, no such termination or reduction shall be made which would cause the aggregate principal amount of outstanding Revolving Loans and LOC Obligations to exceed the Revolving Committed Amount, unless, concurrently with such termination or reduction, the Revolving Loans are repaid to the extent necessary to eliminate such excess. The Agent shall promptly notify each affected Lender of receipt by the Agent of any notice from the Borrower pursuant to this Section 3.4(a). (b) Maturity Date. The Commitments of the Lenders and the LOC Commitment of the Issuing Lender shall automatically terminate on the Maturity Date. (c) General. The Borrower shall pay to the Agent for the account of the Lenders in accordance with the terms of Section 3.5(b), on the date of each reduction of the Revolving Committed Amount, the Unused Fee accrued through 7 8 the date of such termination or reduction on the amount of the Revolving Committed Amount so terminated or reduced. SUBPART 2.3 Amendments to Section 3.17. Section 3.17 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 3.17 REPLACEMENT OF AFFECTED LENDERS. If any Lender having a Commitment becomes a Defaulting Lender or if any Lender is owed increased costs under Section 3.8, Section 3.9, or Section 3.6, or the Borrower is required to make any payments under Section 3.11 to any Lender in excess of those to the other Lenders, the Borrower shall have the right, if no Event of Default then exists, to replace such Lender (the "Replaced Lender") with one or more other Eligible Assignee or Eligible Assignees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the "Replacement Lender") reasonably acceptable to the Agent, provided that (i) at the time of any replacement pursuant to this Section 3.17, the Replaced Lender and Replacement Lender shall enter into one or more assignment agreements, in form and substance reasonably satisfactory to such parties and the Agent, pursuant to which the Replacement Lender shall acquire all or a portion, as the case may be, of the Commitments and outstanding Loans of, and participation in Letters of Credit by, the Replaced Lender hereunder and (ii) all obligations of the Borrower owing to the Replaced Lender relating to the Loans so replaced (including, without limitation, such increased costs and excluding those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective assignment documentation, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Revolving Note or Revolving Notes executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder with respect to such replaced Revolving Loans, except with respect to indemnification provisions under this Agreement, which shall survive as to such Replaced Lender. Notwithstanding anything to the contrary contained above, (1) the Lender that acts as the Issuing Lender may not be replaced hereunder at any time that it has Letters of Credit outstanding hereunder unless arrangements satisfactory to the Issuing Lender (including the furnishing of a back-up standby letter of credit in form and substance, and issued by an issuer satisfactory to such Issuing Lender or the depositing of cash collateral into a cash collateral account maintained with the Agent in amounts and pursuant to arrangements satisfactory to such Issuing Lender) have been made with respect to such outstanding Letters of Credit and (2) the Lender that acts as the Agent may not be replaced hereunder except in accordance with the terms of Section 10.7. The Replaced Lender shall be required to deliver for cancellation its applicable Revolving Notes to be canceled on the date of replacement, or if any such Revolving Note is lost or unavailable, such other assurances or indemnification therefor as the Borrower may reasonably request. 8 9 SUBPART 2.4 Amendments to Section 8.1. Section 8.1 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 8.1 INDEBTEDNESS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising under this Credit Agreement and the other Credit Documents; (b) Indebtedness of the Borrower and its Subsidiaries set forth in Schedule 8.1; (c) purchase money Indebtedness (including Capital Leases) or Synthetic Leases hereafter incurred by the Borrower or any of its Subsidiaries to finance the purchase of fixed assets provided that (i) the total of all such Indebtedness for all such Persons taken together shall not exceed an aggregate principal amount of $5,000,000 at any one time outstanding (including any such Indebtedness referred to in subsection (b) above); (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (d) obligations of the Borrower or any of its Subsidiaries in respect of Hedging Agreements entered into in order to manage existing or anticipated interest rate or exchange rate risks and not for speculative purposes; (e) obligations of the Borrower in respect of the Stock Buy-Back Plan; (f) obligations of the Borrower under Equity Swap Agreements provided that (i) the term of any such Equity Swap Agreements shall not exceed 6 months and (ii) the notional amount of all such obligations shall not exceed $45,000,000 in the aggregate at any time outstanding; (g) unsecured Indebtedness payable to the seller of the Capital Stock or Property acquired in a Permitted Acquisition representing all or a portion of the purchase price of the Capital Stock or Property so acquired; (h) Indebtedness owing by one Credit Party to another Credit Party; (i) other Indebtedness hereafter incurred by the Borrower not exceeding $10,000,000 in aggregate principal amount at any time outstanding; (j) prior to the first date on which the Borrower has issued any Senior Notes, Indebtedness of the Borrower arising under the 364-Day Credit Agreement 9 10 in an aggregate principal amount of up to $60,000,000; provided that the 364-Day Credit Agreement does not contain terms and conditions which, when taken as a whole, are more restrictive that the terms and conditions of the Credit Agreement; (k) Indebtedness of the Borrower arising under the Senior Note Purchase Agreements and the Senior Notes in an aggregate principal amount of up to $150,000,000; provided that (i) the final maturity date of such Senior Notes occurs after the Maturity Date and (ii) such Senior Note Purchase Agreements and Senior Notes do not contain terms and conditions which, when taken as a whole, are more restrictive that the terms and conditions of the Credit Agreement; and (l) Guaranty Obligations of any Guarantor with respect to the Indebtedness of the Borrower permitted under Section 8.1(j) or Section 8.1(k). SUBPART 2.5 Amendments to Section 8.8. Section 8.8 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 8.8 PREPAYMENTS OF INDEBTEDNESS, ETC. The Credit Parties will not permit any Consolidated Party to (i) after the issuance thereof, amend or modify (or permit the amendment or modification of) any of the terms of any Indebtedness if such amendment or modification would add or change any terms in a manner adverse to the issuer of such Indebtedness, or shorten the final maturity or average life to maturity or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto or change any subordination provision thereof or (ii) if any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof, make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption 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), refund, refinance or exchange of any other Indebtedness of such Consolidated Party. SUBPART 2.6 Amendments to Section 8.11. Section 8.11 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 8.11 LIMITATION ON RESTRICTED ACTIONS. The Credit Parties will not permit any Consolidated Party 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 to any Credit Party 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 owed to any Credit Party, (c) make loans or advances to any Credit Party, (d) sell, lease or transfer any of its properties or assets to any Credit Party, (e) grant a lien on its properties or assets whether now owned or hereafter acquired or (f) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, 10 11 refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (a)-(d) above) for such encumbrances or restrictions existing under or by reason of (i) this Credit Agreement and the other Credit Documents, (ii) the Senior Note Purchase Agreements and the Senior Notes, (iii) the 364-Day Credit Agreement or (iv) applicable law. SUBPART 2.7 Amendments to Section 8.14. Section 8.14 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 8.14 NO FURTHER NEGATIVE PLEDGES. Except (a) pursuant to this Credit Agreement and the other Credit Documents, (b) pursuant to the Senior Note Purchase Agreements and the Senior Notes, (c) pursuant to the 364-Day Credit Agreement and (d) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, the Credit Parties will not permit any Consolidated Party 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 such obligation if security is given for some other obligation. SUBPART 2.8 Amendments to Section 9.1. Subsection (g) of Section 9.1 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 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"): **************** (g) Defaults under Other Agreements. (i) Any Consolidated Party shall default in the performance or observance (beyond the applicable grace period with respect thereto, if any) of any material obligation or condition of any contract or lease material to the Consolidated Parties, taken as a whole. (ii) With respect to any Indebtedness (other than Indebtedness outstanding under this Credit Agreement) in excess of $2,500,000 in the aggregate for the Consolidated Parties taken as a whole, (A) any Consolidated Party shall (1) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (2) default (after giving effect to any applicable grace period) in the observance or performance of any term, covenant or 11 12 agreement 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 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 (B) 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. SUBPART 2.9 Amendments to Section 11.3. Subsection (b) of Section 11.3 of the Existing Credit Agreement is hereby amended in its entirety to read as follows: 11.3 BENEFIT OF AGREEMENT. **************** (b) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Revolving Loans, its Revolving Notes, and its Commitment); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Credit Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) or an integral multiple of $1,000,000 in excess thereof; (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations under this Credit Agreement; and (iv) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of Exhibit 11.3(b) hereto, together with any Revolving Note subject to such assignment and a processing fee of $3,500. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Credit Agreement. Upon the 12 13 consummation of any assignment pursuant to this Section 11.3(b), the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Revolving Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 3.11. SUBPART 2.10 Deletion of Exhibit 3.4(b). Exhibit 3.4(b) to the Existing Credit Agreement is hereby deleted. PART III CONSENT, AUTHORIZATION, ETC. SUBPART 3.1 Execution of Intercreditor Agreement and Restated Pledge Agreement; Indemnification of Collateral Agent. (a) The Required Lenders hereby authorize and direct the Agent, on behalf of the Lenders to execute and deliver (i) each of the intercreditor agreements referred to in clauses (i) and (ii) of the definition of "Intercreditor Agreement" set forth in Section 1.1 of the Amended Credit Agreement and (ii) each of the pledge agreements referred to in clauses (ii) and (iii) of the definition of "Pledge Agreement" set forth in Section 1.1 of the Amended Credit Agreement. (b) The Credit Parties agree: (i) to pay to the Collateral Agent all of its out-of-pocket expenses (including but not limited to the reasonable charges and disbursements of counsel) in connection with the preparation, execution and delivery of each of the intercreditor agreements referred to in clauses (i) and (ii) of the definition of "Intercreditor Agreement" set forth in Section 1.1 of the Amended Credit Agreement and each of the pledge agreements referred to in clauses (ii) and (iii) of the definition of "Pledge Agreement" set forth in Section 1.1 of the Amended Credit Agreement; (ii) to pay to the Collateral Agent from time to time reasonable compensation for all services rendered by it under each of the intercreditor agreements referred to in clauses (i) and (ii) of the definition of "Intercreditor Agreement" set forth in Section 1.1 of the Amended Credit Agreement and each of the pledge agreements referred to in clauses (ii) and (iii) of the definition of "Pledge Agreement" set forth in Section 1.1 of the Amended Credit Agreement; (iii) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances (including the reasonable compensation and the expenses and disbursements of its agents and counsel) 13 14 incurred or made by the Collateral Agent in accordance with any provision of either of the intercreditor agreements referred to in clauses (i) and (ii) of the definition of "Intercreditor Agreement" set forth in Section 1.1 of the Amended Credit Agreement or either of the pledge agreements referred to in clauses (ii) and (iii) of the definition of "Pledge Agreement" set forth in Section 1.1 of the Amended Credit Agreement; and (iv) to indemnify the Collateral Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on the part of the Collateral Agent, arising out of or in connection with either of the intercreditor agreements referred to in clauses (i) and (ii) of the definition of "Intercreditor Agreement" set forth in Section 1.1 of the Amended Credit Agreement or either of the pledge agreements referred to in clauses (ii) and (iii) of the definition of "Pledge Agreement" set forth in Section 1.1 of the Amended Credit Agreement, or any action taken or omitted by it thereunder or in connection therewith, including, but not limited to, the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, and any loss, liability, expense or claim arising out of its possession, management, control, use or operation of the collateral thereunder. (c) The Lenders shall be required to indemnify the Collateral Agent (to the extent not reimbursed by the Credit Parties), ratably with the lenders under the 364-Day Credit Agreement or the Senior Noteholders, as applicable, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Collateral Agent, without gross negligence or willful misconduct on the part of the Collateral Agent, arising out of the actions of the Collateral Agent under either of the intercreditor agreements referred to in clauses (i) and (ii) of the definition of "Intercreditor Agreement" set forth in Section 1.1 of the Amended Credit Agreement or either of the pledge agreements referred to in clauses (ii) and (iii) of the definition of "Pledge Agreement" set forth in Section 1.1 of the Amended Credit Agreement, or the transactions contemplated thereby or the enforcement of any of the terms thereof. The Lenders shall be subrogated to the rights of the Collateral Agent with respect to all amounts paid by it pursuant to this clause (b), and all such amounts shall constitute Credit Party Obligations. PART IV CONDITIONS TO EFFECTIVENESS SUBPART 4.1 Amendment No. 2 Effective Date. This Amendment shall be and become effective as of the date hereof (the "Amendment No. 2 Effective Date") when all of the conditions set forth in this Part 4 shall have been satisfied, and thereafter this Amendment shall be known, and may be referred to, as "Amendment No. 2." 14 15 SUBPART 4.1.1 Execution of Counterparts of Amendment. The Agent shall have received counterparts of this Amendment which collectively shall have been duly executed on behalf of each of the Borrower, the Guarantors and the Required Lenders. SUBPART 4.1.2 Termination of Existing 364-Day Facility. All outstanding Indebtedness under the 364-Day Credit Agreement referred to in the Existing Credit Agreement shall have been refinanced in full and the commitments of the lenders thereunder shall have been terminated. SUBPART 4.1.3 New 364-Day Facility. The new 364-Day Credit Agreement referred to in the Amended Credit Agreement shall have been refinanced in full and the commitments of the lenders thereunder shall have become effective in accordance with the terms of Section 11.13(a) thereof. PART V MISCELLANEOUS SUBPART 5.1 Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders that, after giving effect to this Amendment, (a) no Default or Event of Default exists under the Credit Agreement or any of the other Credit Documents and (b) the representations and warranties set forth in Section 6 of the Existing Credit Agreement are, subject to the limitations set forth therein, true and correct in all material respects as of the date hereof (except for those which expressly relate to an earlier date). SUBPART 5.2 Reaffirmation of Credit Party Obligations. Each Credit Party hereby ratifies the Amended Credit Agreement and acknowledges and reaffirms (a) that it is bound by all terms of the Amended Credit Agreement applicable to it and (b) that it is responsible for the observance and full performance of its respective Credit Party Obligations. SUBPART 5.3 Cross-References. References in this Amendment to any Part or Subpart are, unless otherwise specified, to such Part or Subpart of this Amendment. SUBPART 5.4 Instrument Pursuant to Existing Credit Agreement. This Amendment is a Credit Document executed pursuant to the Existing Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with the terms and provisions of the Existing Credit Agreement. SUBPART 5.5 References in Other Credit Documents. At such time as this Amendment No. 2 shall become effective pursuant to the terms of Subpart 4.1, all references in the Credit Documents to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended by this Amendment. SUBPART 5.6 Counterparts/Telecopy. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of executed 15 16 counterparts of the Amendment by telecopy shall be effective as an original and shall constitute a representation that an original shall be delivered. SUBPART 5.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. SUBPART 5.8 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUBPART 5.9 General. Except as amended hereby, the Existing Credit Agreement and all other Credit Documents shall continue in full force and effect. 16 17 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. BORROWER: LINCARE HOLDINGS INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- GUARANTORS: LINCARE INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE PROCUREMENT INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE ASSET MANAGEMENT LP, a Nevada limited partnership BY: LINCARE HOLDINGS INC., A DELAWARE CORPORATION, ITS GENERAL PARTNER By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE OF NEW YORK INC., a New York corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 18 LINCARE PHARMACY SERVICES INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE LICENSING INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- CONVACARE SERVICES INC., an Indiana corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LINCARE TRAVEL INC., a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 19 LENDERS: BANK OF AMERICA, N. A., individually in its capacity as a Lender and in its capacity as Agent By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- BANKATLANTIC By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- BANK LEUMI LE - ISRAEL B.M., MIAMI AGENCY By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- COMERICA BANK By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- BANKERS TRUST COMPANY By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- FLEET NATIONAL BANK By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 20 THE FUJI BANK, LIMITED By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- THE INDUSTRIAL BANK OF JAPAN LIMITED By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- MICHIGAN NATIONAL BANK By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- SCOTIABANC INC. By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- CREDIT LYONNAIS NEW YORK BRANCH By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- U.S. BANK NATIONAL ASSOCIATION By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- EX-10.8 4 g64879ex10-8.txt SENIOR SECURED NOTE PURCHASE AGREEMENT 1 EXHIBIT 10.8 CONFORMED COPY ================================================================================ LINCARE HOLDINGS INC. $125,000,000 Senior Secured Notes $30,000,000 8.91% Senior Secured Notes, Series A due September 15, 2003 $50,000,000 9.01% Senior Secured Notes, Series B due September 15, 2004 $45,000,000 9.11% Senior Secured Notes, Series C due September 15, 2005 --------- NOTE PURCHASE AGREEMENT --------- Dated as of September 1, 2000 ================================================================================ Series A PPN: 532791 A* 1 Series B PPN: 532791 A@ 9 Series C PPN: 532791 A# 7 2 TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1. AUTHORIZATION OF NOTES..................................................................................1 2. SALE AND PURCHASE OF NOTES..............................................................................2 3. CLOSING.................................................................................................2 4. CONDITIONS TO CLOSING...................................................................................2 4.1. Representations and Warranties.................................................................2 4.2. Performance; No Default........................................................................3 4.3. Compliance Certificates........................................................................3 4.4. Opinions of Counsel............................................................................3 4.5. Purchase Permitted By Applicable Law, etc......................................................3 4.6. Sale of Other Notes............................................................................3 4.7. Payment of Special Counsel Fees................................................................4 4.8. Private Placement Number.......................................................................4 4.9. Changes in Corporate Structure.................................................................4 4.10. Subsidiary Guaranty............................................................................4 4.11. Intercreditor Agreement........................................................................4 4.12. Pledge Agreement...............................................................................4 4.13. Proceedings and Documents......................................................................4 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................5 5.1. Organization; Power and Authority..............................................................5 5.2. Authorization, etc.............................................................................5 5.3. Disclosure.....................................................................................5 5.4. Organization and Ownership of Shares of Subsidiaries...........................................6 5.5. Financial Statements...........................................................................7 5.6. Compliance with Laws, Other Instruments, etc...................................................7 5.7. Governmental Authorizations, etc...............................................................7 5.8. Litigation; Observance of Statutes and Orders..................................................8 5.9. Taxes..........................................................................................8 5.10. Title to Property; Leases......................................................................8 5.11. Licenses, Permits, etc.........................................................................8 5.12. Compliance with ERISA..........................................................................9 5.13. Private Offering by the Company...............................................................10 5.14. Use of Proceeds; Margin Regulations...........................................................10 5.15. Existing Indebtedness.........................................................................10 5.16. Foreign Assets Control Regulations, etc.......................................................11 5.17. Status under Certain Statutes.................................................................11 5.18. Environmental Matters.........................................................................11 5.19. Solvency of Subsidiary Guarantors.............................................................12
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SECTION PAGE - ------- ---- 6. REPRESENTATIONS OF THE PURCHASERS......................................................................12 6.1. Purchase for Investment.......................................................................12 6.2. Source of Funds...............................................................................12 7. INFORMATION AS TO COMPANY..............................................................................14 7.1. Financial and Business Information............................................................14 7.2. Officer's Certificate.........................................................................16 7.3. Inspection....................................................................................17 8. PREPAYMENT OF THE NOTES................................................................................17 8.1. No Scheduled Prepayments......................................................................17 8.2. Optional Prepayments with Make-Whole Amount...................................................17 8.3. Mandatory Offer to Prepay Upon Change of Control..............................................18 8.4. Allocation of Partial Prepayments.............................................................19 8.5. Maturity; Surrender, etc......................................................................19 8.6. Purchase of Notes.............................................................................19 8.7. Make-Whole Amount.............................................................................20 9. AFFIRMATIVE COVENANTS..................................................................................21 9.1. Compliance with Law...........................................................................21 9.2. Insurance.....................................................................................21 9.3. Maintenance of Properties.....................................................................21 9.4. Payment of Taxes and Claims...................................................................22 9.5. Corporate Existence, etc......................................................................22 9.6. Consolidating Financial Statements............................................................22 10. NEGATIVE COVENANTS.....................................................................................22 10.1. Adjusted Consolidated Net Worth...............................................................23 10.2. Leverage Ratio................................................................................23 10.3. Indebtedness of Restricted Subsidiaries.......................................................23 10.4. Fixed Charge Coverage.........................................................................23 10.5. Restricted Payments; Restricted Investments...................................................24 10.6. Liens.........................................................................................24 10.7. Mergers, Consolidations, etc..................................................................25 10.8. Sale of Assets................................................................................26 10.9. Disposition of Stock of Restricted Subsidiaries...............................................27 10.10. Designation of Restricted and Unrestricted Subsidiaries.......................................27 10.11. Restricted Subsidiary Guaranties..............................................................27 10.12. Nature of Business............................................................................27 10.13. Transactions with Affiliates..................................................................28 11. EVENTS OF DEFAULT......................................................................................28 12. REMEDIES ON DEFAULT, ETC...............................................................................30 12.1. Acceleration..................................................................................30 12.2. Other Remedies................................................................................31
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SECTION PAGE - ------- ---- 12.3. Rescission....................................................................................31 12.4. No Waivers or Election of Remedies, Expenses, etc.............................................32 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................................................32 13.1. Registration of Notes.........................................................................32 13.2. Transfer and Exchange of Notes................................................................32 13.3. Replacement of Notes..........................................................................33 14. PAYMENTS ON NOTES......................................................................................33 14.1. Place of Payment..............................................................................33 14.2. Home Office Payment...........................................................................33 15. EXPENSES, ETC..........................................................................................34 15.1. Transaction Expenses..........................................................................34 15.2. Survival......................................................................................34 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...........................................34 17. AMENDMENT AND WAIVER...................................................................................35 17.1. Requirements..................................................................................35 17.2. Solicitation of Holders of Notes..............................................................35 17.3. Binding Effect, etc...........................................................................35 17.4. Notes held by Company, etc....................................................................36 18. NOTICES................................................................................................36 19. REPRODUCTION OF DOCUMENTS..............................................................................36 20. CONFIDENTIAL INFORMATION...............................................................................37 21. SUBSTITUTION OF PURCHASER..............................................................................38 22. RELEASE OF SUBSIDIARY GUARANTOR........................................................................38 23. MISCELLANEOUS..........................................................................................38 23.1. Successors and Assigns........................................................................38 23.2. Payments Due on Non-Business Days.............................................................39 23.3. Severability..................................................................................39 23.4. Construction..................................................................................39 23.5. Counterparts..................................................................................39 23.6. Governing Law.................................................................................39
iii 5 SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE B-1 -- Investments SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries; Affiliates SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.11 -- Licenses, Permits, etc. SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Indebtedness SCHEDULE 10.6 -- Liens EXHIBIT 1(a) -- Form of Series A Senior Secured Note EXHIBIT 1(b) -- Form of Series B Senior Secured Note EXHIBIT 1(c) -- Form of Series C Senior Secured Note EXHIBIT 1(d) -- Form of Subsidiary Guaranty EXHIBIT 4.4(a)(i) -- Form of Opinion of New York Counsel for the Company EXHIBIT 4.4(a)(ii) -- Form of Opinion of Florida Counsel for the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers iv 6 LINCARE HOLDINGS INC. 19337 US 19 North, Suite 500 Clearwater, Florida 33764 (727) 530-7700 Fax: (727) 532-9692 $125,000,000 Senior Secured Notes $30,000,000 8.91% Senior Secured Notes, Series A, due September 15, 2003 $50,000,000 9.01% Senior Secured Notes, Series B, due September 15, 2004 $45,000,000 9.11% Senior Secured Notes, Series C, due September 15, 2005 Dated as of September 1, 2000 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), agrees with you as follows: 1. AUTHORIZATION OF NOTES. The Company has authorized the issue and sale of $30,000,000 aggregate principal amount of its 8.91% Senior Secured Notes, Series A, due September 15, 2003 (the "Series A Notes"), $50,000,000 aggregate principal amount of its 9.01% Senior Secured Notes, Series B, due September 15, 2004 (the "Series B Notes"), and $45,000,000 aggregate principal amount of its 9.11% Senior Secured Notes, Series C, due September 15, 2005 (the "Series C Notes" and, collectively with the Series A Notes and Series B Notes, the "Notes", such term to include any such Notes issued in substitution therefor pursuant to Section 13 of this Agreement). The Notes shall be substantially in the form set out in Exhibits 1(a), 1(b) and 1(c) with such changes therefrom, if any, as may be approved by you, the Other Purchasers and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. Subject to Section 22, the Notes will be 7 secured by a pledge of common stock of each Subsidiary pursuant to the Pledge Agreement. In addition, and also subject to Section 22, the Notes will be guaranteed by each Subsidiary that now or in the future becomes a signatory to the Bank Guarantees (individually, a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors") pursuant to a guaranty in substantially the form of Exhibit 1(d) (the "Subsidiary Guaranty"). The Notes shall rank pari passu with the Company's Indebtedness to Banks under the Credit Agreements. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and each of the other purchasers named in Schedule A (the "Other Purchasers"), and you and the Other Purchasers will purchase from the Company, at the Closing provided for in Section 3, Notes of the series and in the principal amount specified opposite your names in Schedule A at the purchase price of 100% of the principal amount thereof. Your obligation hereunder and the obligations of the Other Purchasers are several and not joint obligations and you shall have no liability to any Person for the performance or non-performance by any Other Purchaser hereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Gardner, Carton & Douglas, Quaker Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610 at 9:00 a.m., Chicago time, at a closing (the "Closing") on September 6, 2000 or on such other Business Day thereafter on or prior to September 30, 2000 as may be agreed upon by the Company and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $500,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 3751050678 at Bank of America, ABA #111000012, Global Banking, 6th Floor, 715 Peachtree St. NE, Atlanta, Georgia 30308, Attn: Debbie Beaver. If at the Closing the Company fails to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company in this Agreement shall be correct in all material respects when made and at the time of the Closing. 2 8 4.2. PERFORMANCE; NO DEFAULT. The Company shall have performed and complied in all material respects with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. 4.3. COMPLIANCE CERTIFICATES. (a) OFFICER'S CERTIFICATE. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) SECRETARY'S CERTIFICATE. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreement. 4.4. OPINIONS OF COUNSEL. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from (i) Reboul, MacMurray, Hewitt, Maynard & Kristol, New York counsel for the Company, covering the matters set forth in Exhibit 4.4(a)(i) and (ii) Thomas P. McNamara, P.A., Florida counsel for the Company, covering the matters set forth in Exhibit 4.4(a)(ii) (and the Company instructs its counsel to deliver such opinions to you) and (b) from Gardner, Carton & Douglas, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b). 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6. SALE OF OTHER NOTES. Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 3 9 4.7. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements of your special counsel referred to in Section 4.4, to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. 4.8. PRIVATE PLACEMENT NUMBER. Private Placement Numbers issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained by Gardner, Carton & Douglas for each series of the Notes. 4.9. CHANGES IN CORPORATE STRUCTURE. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10. SUBSIDIARY GUARANTY. Each Subsidiary Guarantor shall have executed and delivered the Subsidiary Guaranty in favor of you and the Other Purchasers. 4.11. INTERCREDITOR AGREEMENT. You and each of the Other Purchasers shall have entered into an Intercreditor Agreement (the "Intercreditor Agreement"), on terms satisfactory to you, with Bank of America, N.A., as agent for the banks party to the Credit Agreements, and as collateral agent (the "Collateral Agent") for the banks and the holders of the Notes. 4.12. PLEDGE AGREEMENT. The Company and, if required, each Subsidiary Guarantor shall have executed and delivered the Pledge Agreement, in favor of the Collateral Agent, for the benefit of the banks party to the Credit Agreements and the holders of the Notes, to secure the obligations under the Credit Agreements, this Agreement and the Notes. 4.13. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such 4 10 counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: 5.1. ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement, the Pledge Agreement and the Notes and to perform the provisions hereof and thereof. 5.2. AUTHORIZATION, ETC. This Agreement, the Pledge Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement and the Pledge Agreement constitute, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Subsidiary Guaranty and the Pledge Agreement, to the extent required, have been duly authorized by all necessary corporate action on the part of each Subsidiary Guarantor and upon execution and delivery thereof will constitute the legal, valid and binding obligation of each Subsidiary Guarantor, enforceable against each Subsidiary Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. DISCLOSURE. The Company, through its agent, Banc of America Securities, Inc., has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated June 2000 (the "Memorandum"), relating to the transactions contemplated. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby (which documents, certificates and other writings are set forth in Schedule 5.3) and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the 5 11 statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 31, 1999, there has been no change in the financial condition, operations, business or properties of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of: (i) the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) the Company's Affiliates, other than Subsidiaries, and (iii) the Company's directors and senior officers. Each Subsidiary listed in Schedule 5.4 other than Lincare of Columbia, L.P. is designated a Restricted Subsidiary by the Company. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien other than the Pledge Agreement (except as otherwise disclosed in Schedule 5.4). (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to, any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 6 12 5.5. FINANCIAL STATEMENTS. The Company has delivered to you and each Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial condition of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by the Company of this Agreement, the Pledge Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary (other than the Lien of the Pledge Agreement) under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. The execution, delivery and performance by each Subsidiary Guarantor of the Subsidiary Guaranty and, to the extent required, the Pledge Agreement will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Subsidiary Guarantor (other than the Lien of the Pledge Agreement) under indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which such Subsidiary Guarantor is bound or by which such Subsidiary Guarantor or any of its properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Subsidiary Guarantor or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Subsidiary Guarantor. 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement, the Pledge Agreement or the Notes or the execution, delivery or performance by each Subsidiary Guarantor of the Subsidiary Guaranty, except such as may be required under the blue sky or securities laws of any jurisdiction in connection with the transactions contemplated by this Agreement. 7 13 5.8. LITIGATION; OBSERVANCE OF STATUTES AND ORDERS. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. TAXES. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1993. 5.10. TITLE TO PROPERTY; LEASES. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11. LICENSES, PERMITS, ETC. Except as disclosed in Schedule 5.11, 8 14 (a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material and necessary for the conduct of their business, without known conflict with the rights of others; (b) to the best knowledge of the Company, no product of the Company infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 5.12. COMPLIANCE WITH ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) Neither the Company nor any of its ERISA Affiliates is or within the last five years has been a party to, or contributes to or during the last five years has contributed to, any "defined pension benefit plan" (as such term is defined in Section 3 of ERISA) or any Multiemployer Plan. (c) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (d) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the 9 15 first sentence of this Section 5.12(d) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. 5.13. PRIVATE OFFERING BY THE COMPANY. Neither the Company nor anyone acting on its behalf has offered the Notes, the Subsidiary Guaranty or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person under circumstances that would require the registration of the Notes or the Subsidiary Guaranty under Section 5 of the Securities Act. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes or the execution and delivery of the Subsidiary Guaranty to the registration requirements of Section 5 of the Securities Act. 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will apply the proceeds of the sale of the Notes for general corporate purposes and to refinance Indebtedness as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock (which shall not be deemed to include treasury shares) does not constitute more than 10% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 10% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U. 5.15. EXISTING INDEBTEDNESS. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of July 31, 2000, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its 10 16 property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.6. 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended by the ICC Termination Act, as amended, or the Federal Power Act, as amended. 5.18. ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing, (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 11 17 5.19. SOLVENCY OF SUBSIDIARY GUARANTORS. After giving effect to the transactions contemplated herein and after giving due consideration to any rights of contribution (i) each Subsidiary Guarantor has received fair consideration and reasonably equivalent value for the incurrence of its obligations under the Subsidiary Guaranty, (ii) the fair value of the assets of each Subsidiary Guarantor (both at fair valuation and at present fair saleable value) exceeds its liabilities, (ii) each Subsidiary Guarantor is able to and expects to be able to pay its debts as they mature, and (iii) each Subsidiary Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. 6. REPRESENTATIONS OF THE PURCHASERS. 6.1. PURCHASE FOR INVESTMENT. You represent and warrant to the Company that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and that the Notes must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. You represent that you are an "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 of Regulation D under the Securities Act. 6.2. SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" as such term is defined in the Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) ("PTE 95-60") and as of the date of this Agreement there is no "employee benefit plan" with respect to which the aggregate amount of such general account's reserves and liabilities for the contracts held by or on behalf of such employee benefit plan and all other employee benefit plans maintained by the same employer (and affiliates thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee organization (in each case determined in accordance with the provisions of PTE 95-60) exceeds 10% of the total reserves and liabilities of such general account (as determined under PTE 95-60) (exclusive of separate account liabilities) plus surplus as set forth in the National Association of Insurance Commissioners Annual Statement filed with your state of domicile; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of 12 18 PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (f) the Source is the assets of one or more employee benefit plans that are managed by an "in-house asset manager," as that term is defined in PTE 96-23 and such purchase and holding of the Notes is exempt under PTE 96-23; or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. INFORMATION AS TO COMPANY. 7.1. FINANCIAL AND BUSINESS INFORMATION The Company will deliver to each holder of Notes that is an Institutional Investor: (a) QUARTERLY STATEMENTS -- within 45 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, 13 19 (i) consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, (ii) consolidated statements of income of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and (iii) consolidated statements of cash flows of the Company and its Subsidiaries for such quarter or (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial condition of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) ANNUAL STATEMENTS -- within 90 days after the end of each fiscal year of the Company, duplicate copies of, (i) consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, PROVIDED that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b); (c) UNRESTRICTED SUBSIDIARIES -- if, at the time of delivery of any financial statements pursuant to Section 7.1(a) or (b), Unrestricted Subsidiaries account for more than 10% of (i) the 14 20 consolidated total assets of the Company and its Subsidiaries reflected in the balance sheet included in such financial statements or (ii) the consolidated revenues of the Company and its Subsidiaries reflected in the consolidated statement of income included in such financial statements, an unaudited balance sheet for all Unrestricted Subsidiaries taken as whole as at the end of the fiscal period included in such financial statements and the related unaudited statements of income, stockholders' equity and cash flows for such Unrestricted Subsidiaries for such period, together with consolidating statements reflecting all eliminations or adjustments necessary to reconcile such group financial statements to the consolidated financial statements of the Company and its Subsidiaries shall be delivered together with the financial statements required pursuant to Sections 7.1(a) and (b); (d) SEC AND OTHER REPORTS -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Restricted Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Restricted Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Restricted Subsidiary to the public concerning developments that are Material; (e) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (f) ERISA MATTERS -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or 15 21 (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (g) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority alleging a violation of any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and (h) REQUESTED INFORMATION -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. 7.2. OFFICER'S CERTIFICATE. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or (b) shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) COVENANT COMPLIANCE -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.13, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) EVENT OF DEFAULT -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Restricted Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including any such event or condition resulting from the failure of the Company or any Restricted Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 16 22 7.3. INSPECTION. The Company will permit the representatives of each holder of Notes that is an Institutional Investor: (a) NO DEFAULT -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) DEFAULT -- if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances, and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 8. PREPAYMENT OF THE NOTES. 8.1. NO SCHEDULED PREPAYMENTS. No regularly scheduled prepayments are due on the Notes prior to their stated maturity. 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes in an amount not less than $1,000,000 in the aggregate in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth 17 23 the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 8.3. MANDATORY OFFER TO PREPAY UPON CHANGE OF CONTROL. (a) NOTICE OF CHANGE OF CONTROL OR CONTROL EVENT -- The Company will, within 15 Business Days after any Responsible Officer has knowledge of the occurrence of any Change of Control or Control Event, give notice of such Change of Control or Control Event to each holder of Notes unless notice in respect of such Change of Control (or the Change of Control contemplated by such Control Event) shall have been given pursuant to subparagraph (b) of this Section 8.3. If a Change of Control has occurred, such notice shall contain and constitute an offer to prepay Notes as described in paragraph (c) of this Section 8.3 and shall be accompanied by the certificate described in paragraph (g) of this Section 8.3. (b) CONDITION TO COMPANY ACTION -- The Company will not take any action that consummates or finalizes a Change of Control unless (i) at least 30 days prior to such action it shall have given to each holder of Notes written notice containing and constituting an offer to prepay Notes as accompanied by the certificate described in paragraph (g) of this Section 8.3, and (ii) subject to the provisions of paragraph (d) below, contemporaneously with such action, it prepays all Notes required to be prepaid in accordance with this Section 8.3. (c) OFFER TO PREPAY NOTES -- The offer to prepay Notes contemplated by paragraphs (a) and (b) of this Section 8.3 shall be an offer to prepay, in accordance with and subject to this Section 8.3, all, but not less than all, of the Notes held by each holder (in this case only, "holder" in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the "Proposed Prepayment Date"). If such Proposed Prepayment Date is in connection with an offer contemplated by subparagraph (a) of this Section 8.3, such date shall be not less than 30 days and not more than 60 days after the date of such offer. (d) ACCEPTANCE -- A holder of Notes may accept the offer to prepay made pursuant to this Section 8.3 by causing a notice of such acceptance to be delivered to the Company within 15 Business Days of receipt of the offer to prepay. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.3 shall be deemed to constitute rejection of such offer by such holder. (e) PREPAYMENT -- Prepayment of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of the principal amount of such Notes, together with interest on such Notes accrued to the date of prepayment and shall not require the payment of any Make-Whole Amount. The prepayment shall be made on the Proposed Prepayment Date except as provided in paragraph (f) of this Section 8.3. (f) DEFERRAL PENDING CHANGE IN CONTROL -- The obligation of the Company to prepay Notes pursuant to the offers required by paragraphs (a) and (b) and accepted in accordance with paragraph (d) of this Section 8.3 is subject to the occurrence of the Change of Control in respect of which such offers and acceptances shall have been made. 18 24 In the event that such Change of Control does not occur on the Proposed Prepayment Date in respect thereof, the prepayment shall be deferred until and shall be made on the date on which such Change of Control occurs. The Company shall keep each holder of Notes reasonably and timely informed of (i) any such deferral of the date of prepayment, (ii) the date on which such Change of Control and the prepayment are expected to occur, and (iii) any determination by the Company that efforts to effect such Change of Control have ceased or been abandoned (in which case the offers and acceptances made pursuant to this Section 8.3 in respect of such Change of Control shall be deemed rescinded). Notwithstanding the foregoing, in the event that the prepayment has not been made within 90 days after such Proposed Prepayment Date by virtue of the deferral provided for in this Section 8.3(f), the Company shall make a new offer to prepay in accordance with paragraph (c) of this Section 8.3. (g) OFFICER'S CERTIFICATE -- Each offer to prepay the Notes pursuant to this Section 8.3 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Proposed Prepayment Date, (ii) that such offer is made pursuant to this Section 8.3, (iii) the principal amount of each Note offered to be prepaid, (iv) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date, (v) that the conditions of this Section 8.3 have been fulfilled and (vi) in reasonable detail, the nature and date or proposed date of the Change of Control. 8.4. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.5. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and canceled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.6. PURCHASE OF NOTES. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any 19 25 payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.7. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, .50% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as the "PX Screen" on the Bloomberg Financial Market Service (or such other display as may replace the PX Screen on Bloomberg Financial Market Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) 20 26 that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 9. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 9.1. COMPLIANCE WITH LAW. The Company will, and will cause each Subsidiary to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2. INSURANCE. The Company will, and will cause each Restricted Subsidiary to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. MAINTENANCE OF PROPERTIES. The Company will and will cause each Restricted Subsidiary to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent 21 27 the Company or any Restricted Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each Subsidiary to, file all income tax or similar tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. CORPORATE EXISTENCE, ETC. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.8 through 10.10, inclusive, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Restricted Subsidiaries (unless merged into the Company or a Restricted Subsidiary) and all rights and franchises of the Company and its Restricted Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6. CONSOLIDATING FINANCIAL STATEMENTS. If at any time the Company provides consolidating financial statements to the Banks or any other holder of Indebtedness, the Company will provide copies of the same to you and any other holder of the Notes. 10. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 22 28 10.1. ADJUSTED CONSOLIDATED NET WORTH. The Company will not permit Adjusted Consolidated Net Worth at any time to be less than $420,000,000 plus the cumulative sum of 25% of Consolidated Net Income (but only if a positive number) for each fiscal quarter ending after September 30, 2000. 10.2. LEVERAGE RATIO. The Company will not permit the ratio of Consolidated Indebtedness (as of any date of determination) to Consolidated Operating Cash Flow (for the Company's then most recently completed four fiscal quarters) to be greater than 2.5 to 1.0 at any time 10.3. INDEBTEDNESS OF RESTRICTED SUBSIDIARIES. The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor to create, assume, incur, guarantee or otherwise become liable, directly or indirectly, for any Indebtedness, except: (a) Indebtedness owed to the Company or a Wholly Owned Restricted Subsidiary; (b) Indebtedness outstanding as of the date of this Agreement that is described in Schedule 5.15; (c) Indebtedness secured by Liens permitted under Section 10.6(g); (d) Indebtedness of a Subsidiary outstanding at the time of its acquisition by the Company and initial designation as a Restricted Subsidiary, provided that (i) such Indebtedness was not incurred in contemplation of such Subsidiary becoming a Restricted Subsidiary and (ii) immediately after giving effect to the designation of such Subsidiary as a Restricted Subsidiary, no Default or Event of Default would exist; (e) Indebtedness in addition to that permitted by Sections 10.3(a) through (d), provided that Priority Debt does not at any time exceed 20% of Adjusted Consolidated Net Worth, determined as of the end of the most recently ended fiscal quarter. Any Indebtedness of Subsidiary Guarantor that is released from the Subsidiary Guaranty shall be deemed to have been incurred by such Subsidiary on the date of such release. 10.4. FIXED CHARGE COVERAGE. The Company will not permit the ratio (calculated as of the end of each fiscal quarter) of Consolidated Income Available for Fixed Charges to Consolidated Fixed Charges for the period of four quarters ending as of each fiscal quarter to be less than 2.0 to 1.0. 23 29 10.5. RESTRICTED PAYMENTS; RESTRICTED INVESTMENTS. The Company will not, and will not permit any Restricted Subsidiary to, declare, make, or incur any liability to declare or make, any Restricted Payment or Restricted Investment unless immediately after giving effect thereto no Default or Event of Default would exist. 10.6. LIENS. The Company will not, and will not permit any Restricted Subsidiary to, permit to exist, create, assume or incur, directly or indirectly, any Lien on its properties or assets, whether now owned or hereafter acquired, except: (a) Liens existing on property or assets of the Company or any Restricted Subsidiary as of the date of this Agreement that are described in Schedule 10.6; (b) Liens for taxes, assessments or governmental charges not then due and delinquent or the nonpayment of which is permitted by Section 9.4; (c) encumbrances in the nature of leases, subleases, zoning restrictions, easements, rights of way, minor survey exceptions and other rights and restrictions of record on the use of real property and defects in title arising or incurred in the ordinary course of business, which, individually and in the aggregate, do not materially impair the use or value of the property or assets subject thereto or which relate only to assets that in the aggregate are not material; (d) Liens incidental to the conduct of business or the ownership of properties and assets (including landlords', lessors', carriers', warehousemen's, mechanics', materialmen's and other similar liens) and Liens to secure the performance of bids, tenders, leases or trade contracts, or to secure statutory obligations (including obligations under workers compensation, unemployment insurance and other social security legislation), surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; (e) any attachment or judgment Lien, unless the judgment it secures has not, within 60 days after the entry thereof, been discharged or execution thereof stayed pending appeal, or has not been discharged within 60 days after the expiration of any such stay; (f) Liens securing Indebtedness of a Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary; (g) Liens (i) existing on property at the time of its acquisition by the Company or a Restricted Subsidiary and not created in contemplation thereof, whether or not the Indebtedness secured by such Lien is assumed by the Company or a Restricted Subsidiary; or (ii) on property created contemporaneously with its acquisition or within 180 days of the acquisition or completion of construction thereof to secure or provide for all or a portion of the purchase price or cost of construction of such property after the date of Closing; or (iii) existing on property of a Person at the time such Person is merged or consolidated with, or becomes a Restricted Subsidiary of, or substantially all of its assets are acquired by, the Company or a Restricted Subsidiary and not created in contemplation thereof; provided that in the case of clauses (i), (ii) and (iii) such Liens do 24 30 not extend to additional property of the Company or any Restricted Subsidiary (other than property that is an improvement to or is acquired for specific use in connection with the subject property) and, in the case of clause (ii) only, that (A) the aggregate principal amount of Indebtedness secured by each such Lien does not exceed the lesser of cost of acquisition or construction or the fair market value (determined in good faith by one or more officers of the Company to whom authority to enter into the transaction has been delegated by the board of directors of the Company) of the property subject thereto and (B) in the case of construction or acquisition of improvements to real estate, the land on which such improvements are located need not have been acquired within the 180 day period; (h) the Lien of the Pledge Agreement as of the date of this Agreement and as it may in the future be extended to other property of the Company in compliance with the terms of this Section 10.6; and (i) Liens securing Indebtedness not otherwise permitted by paragraphs (a) through (h) above, provided that Priority Debt does not at any time exceed 20% of Adjusted Consolidated Net Worth determined as of the end of the most recently ended fiscal quarter. Notwithstanding the foregoing, the terms of this Section 10.6 shall not be applicable to treasury shares held by the Company. 10.7. MERGERS, CONSOLIDATIONS, ETC. The Company will not, and will not permit any Restricted Subsidiary to, consolidate with or merge with any other Person or convey, transfer, sell or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except that: (a) the Company may consolidate or merge with any other Person or convey, transfer, sell or lease all or substantially all of its assets in a single transaction or series of transactions to any Person, provided that: (i) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, sale or lease all or substantially all of the assets of the Company as an entirety, as the case may be, is a solvent corporation organized and existing under the laws of the United States or any state thereof (including the District of Columbia), and, if the Company is not such corporation, such corporation (y) shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes and (z) shall have caused to be delivered to each holder of any Notes an 25 31 opinion of independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and (ii) immediately before and after giving effect to such transaction, no Default or Event of Default shall exist; and (b) Any Restricted Subsidiary may (x) merge into the Company (provided that the Company is the surviving corporation) or another Wholly Owned Restricted Subsidiary or (y) sell, transfer or lease all or any part of its assets to the Company or another Wholly Owned Restricted Subsidiary, or (z) merge or consolidate with, or sell, transfer or lease all or substantially all of its assets to, any Person in a transaction that is permitted by Section 10.8 or, as a result of which, such Person becomes a Restricted Subsidiary; provided in each instance set forth in clauses (x) through (z) that, immediately before and after giving effect thereto, there shall exist no Default or Event of Default; No such conveyance, transfer, sale or lease of all or substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 10.7 from its liability under this Agreement or the Notes. 10.8. SALE OF ASSETS. Except as permitted by Section 10.7, the Company will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of, including by way of merger (collectively a "Disposition"), any assets, including capital stock of Restricted Subsidiaries, in one or a series of transactions, to any Person, other than (a) Dispositions in the ordinary course of business, (b) Dispositions by a Restricted Subsidiary to the Company or another Wholly Owned Restricted Subsidiary or (c) Dispositions not otherwise permitted by clauses (a) or (b) of this Section 10.8, provided that (i) each such Disposition is for a consideration at least equal to the fair market value of the property subject thereto, (ii) the aggregate net book value of all assets so disposed of in any fiscal year pursuant to this Section 10.8(c) does not exceed 15% of Consolidated Net Assets as of the end of the immediately preceding fiscal year, (iii) the operations of such assets sold pursuant to this Section 10.8(c) generated less than 15% of the consolidated operating profit of the Company and its Restricted Subsidiaries for the immediately preceding fiscal year, and (iv) after giving effect to such Disposition no Default or Event of Default would exist. Notwithstanding the foregoing, the Company may, or may permit any Restricted Subsidiary to, make a Disposition and the assets subject to such Disposition shall not be subject to or included in the foregoing limitation and computation contained in clause (c) of the preceding sentence to the extent that (i) each such Disposition is for a consideration at least equal to the fair market value of the property subject thereto, and (ii) the net proceeds from such Disposition are within 180 days of such Disposition (A) reinvested in productive assets by the Company or a Restricted Subsidiary or (B) applied to the payment or prepayment of any outstanding Indebtedness of the Company or any Restricted Subsidiary that is PARI PASSU with or senior to the Notes. Any prepayment of Notes pursuant to this Section 10.8 shall be in accordance with Sections 8.2 and 8.3, without regard to the minimum prepayment requirements of Section 8.2. 26 32 10.9. DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Restricted Subsidiary to, issue, sell, transfer or otherwise dispose of any capital stock of a Restricted Subsidiary if such sale would be prohibited by Section 10.8. If a Restricted Subsidiary at any time ceases to be such as a result of issuance or sale of its capital stock, Indebtedness of the Company or any other Restricted Subsidiary owed to such Restricted Subsidiary that is not contemporaneously repaid and any Liens on property of the Company or any Restricted Subsidiary securing such Indebtedness shall be deemed to have been incurred by the Company or such other Restricted Subsidiary, as the case may be, at the time such Restricted Subsidiary ceases to be a Restricted Subsidiary. 10.10. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The Company may designate any Restricted Subsidiary as an Unrestricted Subsidiary and any Unrestricted Subsidiary as a Restricted Subsidiary; provided that, (a) if such Subsidiary initially is designated a Restricted Subsidiary, then such Restricted Subsidiary may be subsequently designated as an Unrestricted Subsidiary and such Unrestricted Subsidiary may be subsequently designated as a Restricted Subsidiary, but no further changes in designation may be made; (b) if such Subsidiary initially is designated an Unrestricted Subsidiary, then such Unrestricted Subsidiary may be subsequently designated as a Restricted Subsidiary and such Restricted Subsidiary may be subsequently designated as an Unrestricted Subsidiary, but no further changes in designation may be made; (c) the Company may not designate a Restricted Subsidiary as an Unrestricted Subsidiary unless: (i) such Restricted Subsidiary does not own, directly or indirectly, any Indebtedness or capital stock of the Company or any other Restricted Subsidiary, (ii) such designation, considered as a sale of assets, is permitted pursuant to Sections 10.7 through 10.9, inclusive, (iii) immediately before and after such designation there exists no Default or Event of Default; and (d) a Subsidiary Guarantor may not be designated an Unrestricted Subsidiary. 10.11. RESTRICTED SUBSIDIARY GUARANTIES. The Company will not permit any Restricted Subsidiary to become a party to the Bank Guarantees or to directly or indirectly guarantee any of the Company's Indebtedness or other obligations unless such Restricted Subsidiary is, or concurrently therewith becomes, a party to the Subsidiary Guaranty. 10.12. NATURE OF BUSINESS. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business if, as a result, the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, 27 33 would then be engaged would be substantially changed from the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum. 10.13. TRANSACTIONS WITH AFFILIATES. The Company will not and will not permit any Restricted Subsidiary to enter into directly or indirectly any transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Restricted Subsidiary), except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in or Sections 10.1 through 10.13; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or (e) any representation or warranty made in writing by or on behalf of the Company or any Subsidiary Guarantor or by any officer of the Company or a Subsidiary Guarantor in this Agreement, the Subsidiary Guaranty or the Pledge Agreement or in any writing furnished in connection with the transactions contemplated hereby or thereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $10,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness that is outstanding in an aggregate principal amount of at least $10,000,000 or of any mortgage, indenture or other 28 34 agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Restricted Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $10,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Restricted Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Restricted Subsidiary, or any such petition shall be filed against the Company or any Restricted Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating at least $10,000,000 are rendered against one or more of the Company and its Restricted Subsidiaries, which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans determined in accordance with Title IV of ERISA, shall be at least $10,000,000, (iv) the Company or any ERISA Affiliate shall have 29 35 incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or (k) any Subsidiary Guarantor defaults in the performance of or compliance with any term contained in the Subsidiary Guaranty or the Subsidiary Guaranty ceases to be in full force and effect as a result of acts taken by the Company or any Subsidiary Guarantor, except as provided in Section 22, or is declared to be null and void in whole or in material part by a court or other governmental or regulatory authority having jurisdiction or the validity or enforceability thereof shall be contested by any of the Company or any Subsidiary Guarantor or any of them renounces any of the same or denies that it has any or further liability thereunder; or (l) the Company or any Subsidiary Guarantor defaults in the performance of or compliance with any term contained in the Pledge Agreement or the Pledge Agreement ceases to be in full force and effect as a result of acts taken by the Company or any Subsidiary Guarantor, except as provided in Section 22, or is declared to be null and void in whole or in material part by a court or other governmental or regulatory authority having jurisdiction or the validity or enforceability thereof shall be contested by any of the Company or any Subsidiary Guarantor or any of them renounces any of the same or denies that it has any or further liability thereunder. As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1. ACCELERATION. (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, holders of a majority or more in principal amount of the Notes at the time outstanding may at any time at its or their option, 30 36 by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3. RESCISSION. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of a majority in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 31 37 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor, promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) of the same series in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1(a), 1(b) or 1(c), as appropriate. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $500,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $500,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. 32 38 13.3. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another Institutional Investor holder of a Note with a minimum net worth of at least $50,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same series, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES. 14.1. PLACE OF PAYMENT. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Chicago, Illinois at the principal office of Bank of America in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 14.2. HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the 33 39 Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of one special counsel for you and the Other Purchasers collectively and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Notes, the Pledge Agreement, the Intercreditor Agreement or the Subsidiary Guaranty (whether or not such amendment, waiver or consent becomes effective), including: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes, the Pledge Agreement, the Intercreditor Agreement or the Subsidiary Guaranty or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes, the Pledge Agreement, the Intercreditor Agreement or the Subsidiary Guaranty, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2. SURVIVAL. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 34 40 17. AMENDMENT AND WAIVER. 17.1. REQUIREMENTS. This Agreement, the Notes, the Subsidiary Guaranty and the Pledge Agreement may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. 17.2. SOLICITATION OF HOLDERS OF NOTES. (a) SOLICITATION. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) PAYMENT. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any 35 41 Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" or "the Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer and Legal Department, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in 36 42 any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified in writing when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 37 43 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 22. RELEASE OF SUBSIDIARY GUARANTOR. You and each subsequent holder of a Note agree to release any Subsidiary Guarantor from the Subsidiary Guaranty or the capital stock of any Restricted Subsidiary from the Pledge Agreement (i) if such Subsidiary Guarantor or Restricted Subsidiary, as the case may be, ceases to be such as a result of a Disposition permitted by Sections 10.7, 10.8 or 10.9 or (ii) at such time as the banks party to the Credit Agreements release such Subsidiary from the Bank Guarantees or release such capital stock from the Pledge Agreement; provided, however, that you and each subsequent holder will not be required to release a Subsidiary Guarantor from the Subsidiary Guaranty or the capital stock of a Restricted Subsidiary from the Pledge Agreement under the circumstances contemplated by clause (ii), if (A) a Default or Event of Default has occurred and is continuing, (B) such Subsidiary Guarantor is to become a borrower under the Credit Agreements or (C) such release is part of a plan of financing that contemplates such Subsidiary Guarantor guaranteeing, or the capital stock of such Restricted Subsidiary securing, any other Indebtedness of the Company. Your obligation to release a Subsidiary Guarantor from the Subsidiary Guaranty or the capital stock of a Restricted Subsidiary from the Pledge Agreement is conditioned upon your prior receipt of a certificate from a Senior Financial Officer of the Company stating that none of the circumstances described in clauses (A), (B) and (C) above are true. 23. MISCELLANEOUS. 23.1. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 38 44 23.2. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 23.3. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 23.4. CONSTRUCTION. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 23.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 23.6. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 39 45 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, LINCARE HOLDINGS INC. By: /s/ PAUL G. GABOS ---------------------------------------- Name: Paul G. Gabos Title: Chief Financial Officer/Secretary S-1 46 The foregoing is agreed to as of the date thereof. ALLSTATE LIFE INSURANCE COMPANY By: /s/ JEFFREY A. MAZER --------------------------------------- Name: Jeffrey A. Mazer By: /s/ DAVID A. WALSH --------------------------------------- Name: David A. Walsh Authorized Signatories ALLSTATE INSURANCE COMPANY By: /s/ JEFFREY A. MAZER --------------------------------------- Name: Jeffrey A. Mazer By: /s/ DAVID A. WALSH --------------------------------------- Name: David A. Walsh Authorized Signatories S-2 47 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ DIANE HOM ------------------------------------------------ Name: Diane Hom Title: Director - Private Placements S-3 48 CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: Cigna Investments, Inc. (authorized agent) By: /s/ LAWRENCE A. DRAKE ------------------------------ Name: Lawrence A. Drake Title: Managing Director LIFE INSURANCE COMPANY OF NORTH AMERICA By: Cigna Investments, Inc. (authorized agent) By: /s/ LAWRENCE A. DRAKE ------------------------------ Name: Lawrence A. Drake Title: Managing Director S-4 49 MONY LIFE INSURANCE COMPANY By: /s/ SUZANNE E. WALTON --------------------------------------- Name: Suzanne E. Walton Title: Managing Director S-5 50 UNITED OF OMAHA LIFE INSURANCE COMPANY By: /s/ EDWIN H. GARRISON JR. ------------------------------------------------ Name: Edwin H. Garrison Jr. Title: First Vice President S-6 51 NATIONWIDE LIFE INSURANCE COMPANY By: /s/ MARK W. POPPELMAN --------------------------------------- Name: Mark W. Poppelman Title: Associate Vice President NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY By: /s/ MARK W. POPPELMAN --------------------------------------- Name: Mark W. Poppelman Title: Associate Vice President S-7 52 SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "ADJUSTED CONSOLIDATED NET WORTH" means, as of any date, consolidated stockholders' equity of the Company and its Restricted Subsidiaries on such date, determined in accordance with GAAP, less the amount by which outstanding Restricted Investments on such date exceed 20% of consolidated stockholders' equity. "AFFILIATE" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "BANK GUARANTEES" means the Guarantees of the Subsidiary Guarantors of Indebtedness outstanding under the Credit Agreements, as such Guarantees or agreements may be amended, restated or otherwise modified, and any successors thereto. "BANKS" means the banks party to the Credit Agreements, including Bank of America, N.A., as agent for such banks. "BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois or Clearwater, Florida are required or authorized to be closed. "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "CHANGE OF CONTROL" means the acquisition through purchase or otherwise by any Person, or group of Persons acting in concert, directly or indirectly, in one or more transactions, of beneficial ownership or control of Schedule B 53 securities representing more than 50% of the combined voting power of the Company's Voting Stock (including the agreement to act in concert by Persons who beneficially own or control securities representing more than 50% of the combined voting power of the Company's Voting Stock). "CLOSING" is defined in Section 3. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "COLLATERAL AGENT" is defined in Section 4.11. "COMPANY" means Lincare Holdings Inc., a Delaware corporation. "CONFIDENTIAL INFORMATION" is defined in Section 20. "CONSOLIDATED FIXED CHARGES" means, for any period, the sum of (i) Consolidated Rentals for such period under all leases other than Capital Leases, (ii) Consolidated Interest Expense for such period and (iii) all capitalized interest of the Company and its Restricted Subsidiaries incurred during such period. "CONSOLIDATED INCOME AVAILABLE FOR FIXED CHARGES" means, for any period, Consolidated Net Income for such period, plus, to the extent deducted in determining such Consolidated Net Income, (i) all provisions for federal, state and other income taxes made by the Company and its Restricted Subsidiaries during such period and (ii) Consolidated Fixed Charges for such period. "CONSOLIDATED INDEBTEDNESS" means, as of any date, outstanding Indebtedness of the Company and its Restricted Subsidiaries as of such date determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, the consolidated interest expense of the Company and its Restricted Subsidiaries for such period determined in accordance with GAAP (including imputed interest on Capital Lease Obligations. "CONSOLIDATED NET ASSETS" means, as of any date, Consolidated Total Assets less Restricted Investments and consolidated current liabilities of the Company and its Restricted Subsidiaries as of such date. "CONSOLIDATED NET INCOME" means, for any period, the net income or loss of the Company and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but in any event excluding (a) extraordinary nonrecurring gains or losses and (b) the income (or loss) of any Person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Company or such Subsidiary in the form of cash dividends or similar cash distributions. 2 Schedule B 54 "CONSOLIDATED OPERATING CASH FLOW" means, for any period, the sum of Consolidated Net Income for such period, plus, to the extent deducted in determining such Consolidated Net Income, (i) Consolidated Interest Expense, (ii) federal, state, local and foreign income, value added and similar taxes, (iii) depreciation and amortization expense and (iv) other extraordinary non-recurring, noncash charges, all as determined in accordance with GAAP. "CONSOLIDATED TOTAL ASSETS" means, as of any date, the assets and properties of the Company and its Restricted Subsidiaries as of such date, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED RENTALS" means, for any period, the rentals of the Company and its Restricted Subsidiaries for such period under all leases, determined on a consolidated basis in accordance with GAAP. "CONTROL EVENT" means: (a) the execution by the Company or any of its Subsidiaries or Affiliates of any agreement with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, may reasonably be expected to result in a Change of Control, (b) the execution of any written agreement which, when fully performed by the parties thereto, would result in a Change of Control, or (c) the making of any written offer by any person (as such term is used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on the date of the Closing) or related persons constituting a group (as such term is used in Rule 13d-5 under the Exchange Act as in effect on the date of each Closing) to the holders of the common stock of the Company, which offer, if accepted by the requisite number of holders, would result in a Change of Control. "CREDIT AGREEMENTS" means, collectively (i) the Three-Year Credit Agreement dated as of August 23, 1999 among the Company, each Subsidiary of the Company, the banks party thereto, and Bank of America, N.A., as agent, and (ii) the 364-Day Credit Agreement dated as of August 21, 2000 among the Company, each Subsidiary of the Company, the banks party thereto, and Bank of America, N.A., as agent; as such agreements have been or may be hereafter amended, modified, restated, supplemented, refinanced, increased or reduced from time to time, and any successor credit agreements or similar facilities. "DEFAULT" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "DEFAULT RATE" means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by Bank of America in Chicago, Illinois as its "base" or "prime" rate. 3 Schedule B 55 "DISTRIBUTION" means, in respect of any Person: (a) dividends or other distributions or payments on capital stock or other equity interests of such Person (except distributions in such stock or other equity interests); and (b) the redemption or acquisition of such stock or other equity interests or of warrants, rights or other options to purchase such stock or other equity interests (except when solely in exchange for such stock or other equity interests) unless made, contemporaneously, from the net proceeds of a sale of such stock or other equity interests. "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "EVENT OF DEFAULT" is defined in Section 11. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. 4 Schedule B 56 "GUARANTY" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polycholorinated biphenyls). "HOLDER" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "INDEBTEDNESS" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable and other 5 Schedule B 57 accrued liabilities arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; and (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); and (f) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (e) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note and (b) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "INTERCREDITOR AGREEMENT" is defined in Section 4.11. "INVESTMENTS" means all investments made, in cash or by delivery of property, directly or indirectly, by any Person, in any other Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise. "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "MAKE-WHOLE AMOUNT" is defined in Section 8.6. "MATERIAL" means material in relation to the business, operations, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole. 6 Schedule B 58 "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, operations, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the ability of any Subsidiary Guarantor to perform its obligations under the Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement, the Pledge Agreement, the Notes or the Subsidiary Guaranty. "MEMORANDUM" is defined in Section 5.3. "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "NOTES" is defined in Section 1. "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "OTHER PURCHASERS" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PLAN" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "PLEDGE AGREEMENT" means the Second Amended and Restated Pledge Agreement dated as of September 6, 2000 among the Company, the Subsidiary Guarantors and Bank of America, N.A., as collateral agent for the benefit of the holders of the Notes and the Banks. "PREFERRED STOCK" means any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "PRIORITY DEBT" means, as of any date, the sum (without duplication) of (a) outstanding Indebtedness of Restricted Subsidiaries not otherwise permitted by Sections 10.3(a) through (d) and (b) Indebtedness of the Company and its Restricted Subsidiaries secured by Liens not otherwise permitted by Sections 10.6(a) through (h). 7 Schedule B 59 "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "PROPOSED PREPAYMENT DATE" is defined in Section 8.3(c). "PURCHASER" means each purchaser listed in Schedule A. "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "REQUIRED HOLDERS" means, at any time, the holders of at least a majority in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this agreement. "RESTRICTED INVESTMENTS" means all Investments of the Company and its Restricted Subsidiaries, other than: (a) property or assets to be used or consumed in the ordinary course of business; (b) current assets arising from the sale of goods or services in the ordinary course of business; (c) Investments in Restricted Subsidiaries or in any Person that, as a result thereof, becomes a Restricted Subsidiary; (d) Investments existing as of the date of this Agreement that are listed in the attached Schedule B-1; (e) Investments in: (i) obligations, maturing within one year from the date of acquisition, of or fully guaranteed by the United States of America or an agency thereof; (ii) state or municipal securities, maturing within one year from the date of acquisition, that are rated in one 8 Schedule B 60 of the top two rating classifications by at least one nationally recognized rating agency; (iii) certificates of deposit or banker's acceptances maturing within one year from the date of acquisition of or issued by Bank of America or other commercial banks whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank) are rated in one of the top two rating classifications by at least one nationally recognized rating agency; (iv) commercial paper maturing within 270 days from the date of issuance that, at the time of acquisition, is rated in one of the top two rating classifications by at least one credit rating agency of recognized national standing; (v) repurchase agreements, having a term of not more than 90 days and fully collateralized with obligations of the type described in clause (i), with a bank satisfying the requirements of clause (iii); and (vi) money market instrument programs or registered investment companies that invest in securities of the type described in this clause (f) that are properly classified as current assets in accordance with GAAP. "RESTRICTED PAYMENT" means any Distribution in respect of the Company or any Restricted Subsidiary of the Company (other than on account of capital stock or other equity interests of a Restricted Subsidiary owned legally and beneficially by the Company or another Restricted Subsidiary), including any Distribution resulting in the acquisition by the Company of securities that would constitute treasury stock. "RESTRICTED SUBSIDIARY" means any Subsidiary (a) of which at least a majority of the voting securities are owned by the Company and/or one or more Wholly Owned Restricted Subsidiaries and (b) that the Company has not designated an Unrestricted Subsidiary by notice in writing given to the holders of the Notes. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "SERIES A NOTES" is defined in Section 1. "SERIES B NOTES" is defined in Section 1. "SERIES C NOTES" is defined in Section 1. "SOURCE" is defined in Section 6.2. "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership, limited liability company or joint venture if more than a 50% interest in the profits or 9 Schedule B 61 capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "SUBSIDIARY GUARANTOR" is defined in Section 1. "SUBSIDIARY GUARANTY" is defined in Section 1. "THIS AGREEMENT" OR "THE AGREEMENT" is defined in Section 17.3. "UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has been so designated by notice in writing given to the holders of the Notes. "VOTING STOCK" means the capital stock of any class or classes of a corporation having power under ordinary circumstances to vote for the election of members of the board of directors of such corporation, or person performing similar functions (irrespective of whether or not at the time stock of any of the class or classes shall have or might have special voting power or rights by reason of the happening of any contingency). "WHOLLY OWNED SUBSIDIARY" or "WHOLLY OWNED RESTRICTED SUBSIDIARY" mean, at any time, any Subsidiary, or Restricted Subsidiary, as the case may be, 100% of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly Owned Subsidiaries or Wholly Owned Restricted Subsidiaries, as the case may be, at such time. 10 Schedule B EX-10.8.1 5 g64879ex10-8_1.txt FORM OF SERIES A NOTE 1 EXHIBIT 10.8.1 [FORM OF SERIES A NOTE] LINCARE HOLDINGS INC. 8.91% SENIOR SECURED NOTE, SERIES A DUE SEPTEMBER 15, 2003 No. A-[_____] [Date] $[_______] PPN: 532791 A* 1 FOR VALUE RECEIVED, the undersigned, LINCARE HOLDINGS INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, promises to pay to [ ], or registered assigns, the principal sum of $[ ] on September 15, 2003, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 8.91% per annum from the date hereof, payable semiannually, on March 15 and September 15 in each year, commencing with the March or September next succeeding the date hereof (except that no interest payment shall be made on September 15, 2000), until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 10.91% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in Chicago, Illinois as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Secured Notes (herein called the "Notes") issued pursuant to a Note Purchase Agreement dated as of September 1, 2000 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement. Exhibit 10.8.1 2 This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, and to mandatory offers to prepay, at the times and on the terms specified in the Note Purchase Agreement but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. Payment of the principal of, and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is guaranteed pursuant to the terms of a Guaranty dated as of September 1, 2000 of certain Subsidiaries of the Company.* This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. LINCARE HOLDINGS INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- - ----------------- * This paragraph must be removed at such time as there are no Subsidiary Guarantors. 2 Exhibit 10.8.1 EX-10.8.2 6 g64879ex10-8_2.txt FORM OF SERIES B NOTE 1 EXHIBIT 10.8.2 [FORM OF SERIES B NOTE] LINCARE HOLDINGS INC. 9.01% SENIOR SECURED NOTE, SERIES B DUE SEPTEMBER 15, 2004 No. B-[_____] [Date] $[_______] PPN: 532791 A@ 9 FOR VALUE RECEIVED, the undersigned, LINCARE HOLDINGS INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, promises to pay to [ ], or registered assigns, the principal sum of $[ ] on September 15, 2004, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 9.01% per annum from the date hereof, payable semiannually, on March 15 and September 15 in each year, commencing with the March or September next succeeding the date hereof (except that no interest payment shall be made on September 15, 2000), until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 11.01% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in Chicago, Illinois as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Secured Notes (herein called the "Notes") issued pursuant to a Note Purchase Agreement dated as of September 1, 2000 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement. Exhibit 10.8.2 2 This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, and to mandatory offers to prepay, at the times and on the terms specified in the Note Purchase Agreement but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. Payment of the principal of, and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is guaranteed pursuant to the terms of a Guaranty dated as of September 1, 2000 of certain Subsidiaries of the Company.* This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. LINCARE HOLDINGS INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- - -------------- * This paragraph must be removed at such time as there are no Subsidiary Guarantors. 2 Exhibit 10.8.2 EX-10.8.3 7 g64879ex10-8_3.txt FORM OF SERIES C NOTE 1 EXHIBIT 10.8.3 [FORM OF SERIES C NOTE] LINCARE HOLDINGS INC. 9.11% SENIOR SECURED NOTE, SERIES C DUE SEPTEMBER 15, 2005 No. C-[_____] [Date] $[_______] PPN: 532791 A# 7 FOR VALUE RECEIVED, the undersigned, LINCARE HOLDINGS INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, promises to pay to [ ], or registered assigns, the principal sum of $[ ] on September 15, 2005, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 9.11% per annum from the date hereof, payable semiannually, on March 15 and September 15 in each year, commencing with the March or September next succeeding the date hereof (except that no interest payment shall be made on September 15, 2000), until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 11.11% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in Chicago, Illinois as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Secured Notes (herein called the "Notes") issued pursuant to a Note Purchase Agreement dated as of September 1, 2000 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement. Exhibit 10.8.3 2 This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, and to mandatory offers to prepay, at the times and on the terms specified in the Note Purchase Agreement but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. Payment of the principal of, and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is guaranteed pursuant to the terms of a Guaranty dated as of September 1, 2000 of certain Subsidiaries of the Company.* This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. LINCARE HOLDINGS INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ - -------------- * This paragraph must be removed at such time as there are no Subsidiary Guarantors. 2 Exhibit 10.8.3 EX-27 8 g64879ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF LINCARE HOLDINGS, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 620 0 126,113 10,855 4,202 122,704 350,827 165,090 867,461 45,722 0 0 0 585 513,260 867,461 513,140 513,140 82,122 82,122 281,563 7,697 12,491 137,358 52,334 85,024 0 0 0 85,024 1.60 1.57
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