-----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, CJRBXB+obnwuRya99LW+x/lcA5IByKSGxIhXYZF1ocJ3GMQ4bza1dZRfEMQ3LTy2 UjbTHvgyQs3hLyxb6FI/Aw== 0000950144-98-003102.txt : 19980417 0000950144-98-003102.hdr.sgml : 19980417 ACCESSION NUMBER: 0000950144-98-003102 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 42 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980323 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN HOMEPATIENT INC CENTRAL INDEX KEY: 0000879181 STANDARD INDUSTRIAL CLASSIFICATION: 8082 IRS NUMBER: 621474680 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-19532 FILM NUMBER: 98571119 BUSINESS ADDRESS: STREET 1: 5200 MARYLAND WAY STREET 2: MARYLAND FARMS OFFICE PARK CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6152218884 MAIL ADDRESS: STREET 1: MARYLAND FARMS OFFICE PARK STREET 2: 5200 MARYLAND WAY CITY: BRENTWOOD STATE: TN ZIP: 37027 FORMER COMPANY: FORMER CONFORMED NAME: DIVERSICARE INC /DE DATE OF NAME CHANGE: 19930328 10-K 1 AMERICAN HOMEPATIENT, INC FORM 10-K 12-31-97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K CHECK ONE: [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ______ TO _____. COMMISSION FILE NUMBER 0-19532 AMERICAN HOMEPATIENT, INC. (Exact name of registrant as specified in its charter) DELAWARE 62-1474680 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 5200 MARYLAND WAY, SUITE 400 37027-5018 BRENTWOOD TN (Zip Code) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 221-8884 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ---------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of class) 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 the filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of registrant's voting stock held by non-affiliates of the registrant, computed by reference to the price at which the stock was sold, or average of the closing bid and asked prices, as of March 17, 1998 was $315,218,314. On March 17, 1998, 14,921,577 shares of the registrant's $0.01 par value Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- The following documents are incorporated by reference into Part III, Items 10, 11, 12 and 13 of this Form 10-K: Portions of the Registrant's definitive proxy materials for its 1998 Annual Meeting of Stockholders. 1 2 PART I ITEM 1. BUSINESS INTRODUCTORY SUMMARY American HomePatient, Inc. (the "Company") was incorporated in Delaware in September 1991. The Company's principal executive offices are located at 5200 Maryland Way, Suite 400, Brentwood, Tennessee 37027-5018, and its telephone number at that address is (615) 221-8884. The Company provides home health care services and products consisting primarily of respiratory and infusion therapies and the rental and sale of home medical equipment and home health care supplies. These services and products are paid for primarily by Medicare, Medicaid and other third-party payors. As of December 31, 1997, the Company provided these services to patients primarily in the home through 329 centers in 35 states. Since its inception the Company has experienced substantial growth primarily as a result of its strategy of acquiring successful, operating home healthcare businesses and entering into joint venture relationships and strategic alliances with hospitals and hospital systems. MATERIAL 1997 CORPORATE DEVELOPMENTS. Medicare Oxygen Reimbursement Reductions and Related Restructuring. In August, Congress enacted and President Clinton signed the Balanced Budget Act of 1997 which will reduce the Medicare reimbursement rate for oxygen related services by 25 percent beginning January 1, 1998, and by another five percent beginning January 1, 1999. In addition, Consumer Price Index increases in oxygen reimbursement rates will not resume until the year 2003. American HomePatient is one of the nation's largest providers of home oxygen services to patients, many of whom are Medicare recipients, and is therefore significantly affected by this legislation. Medicare oxygen reimbursements account for approximately 23.5 percent of the Company's revenues. On September 25, 1997, the Company announced initiatives to aggressively respond to planned Medicare reimbursement reductions by fundamentally reshaping the Company for long-term growth (the "Restructuring"). More than 100 of the Company's total operating and billing locations will be impacted by the planned activities. The specific actions resulted in pre-tax accounting charges in the third quarter of 1997 of $65.0 million due to the closure, consolidation, or scaling back of approximately 20 percent of the Company's total operating centers, the closure or scaling back of nine billing centers, the elimination of four operating regions, the scaling back or elimination of marginal products and services at numerous locations, and the related termination of approximately 350 employees in the affected operating and billing centers. These activities are expected to be substantially completed by June 1998. 2 3 The $65.0 million pre-tax charges recorded in the third quarter of 1997 specifically related to the write-down of goodwill and other non current assets ($8.2 million), the closure, consolidation, scaling back, or elimination of services at selected locations ($44.8 million), and the negative impact on the remaining operating locations ($12.0 million). The write-off of goodwill and other non current assets is required under SFAS No. 121 based upon management's estimate of the impact of the announced Medicare oxygen reimbursement reductions on the Company's continuing operations. Management's projections of future operations considering the reduced reimbursement rates for oxygen related services indicated that the carrying value of goodwill and other non current assets should be written down by $8.2 million. The closure, consolidation, scaling back, or elimination of services at more than 100 of the Company's operating and billing centers resulted in the write-off of goodwill and other intangible assets specifically identified with affected locations ($12.2 million), the accrual of estimated employee severance and related exit costs ($6.7 million), the accrual of estimated facility exit costs including future lease costs, the write-off of leasehold improvements, and the write-down of furniture and equipment ($6.1 million), the write-down of accounts receivable to estimated realizable value ($8.7 million), the write-down of inventory to estimated realizable value ($2.2 million), the write-down of rental equipment to estimated realizable value ($2.8 million), the termination of related management contracts ($3.0 million), and other exit costs ($3.1 million). The accounting charges discussed above are recorded in the accompanying 1997 consolidated statements of operations as cost of sales ($2,204,000), operating expenses ($8,729,000), restructuring charge ($33,829,000), and goodwill impairments ($8,165,000). Due to the comprehensive nature of this restructuring, including the consolidation of regional responsibilities, refinements and modifications of existing procedures in all locations, reorganization of the field management structure, and additional management attention required to accomplish the restructuring in the desired timeframe, negative impacts are anticipated in the remaining operating businesses relative to realization of accounts receivable, inventories and rental equipment, for which an additional $12.0 million charge was recorded. This accounting charge is recorded in the accompanying 1997 consolidated statements of operations as cost of sales ($3,051,000) and operating expenses ($9,022,000). The total accounting charges discussed above are recorded in the accompanying 1997 consolidated statements of operations in the following classifications:
Cost of sales $ 5,255,000 Operating expenses 17,751,000 Restructuring charge 33,829,000 Goodwill impairments 8,165,000 ------------- $ 65,000,000 =============
3 4 The expected cash payments related to the restructuring charge accrued on September 25, 1997 were approximately $17.7 million. During the fourth quarter of 1997, $4.1 million was charged against the related accruals as costs were incurred and payments were made. The remaining accrual at December 31, 1997 primarily represents estimated employee severance and related exit costs ($4.1 million), estimated facility exit costs ($4.5 million), termination of management contracts ($3.0 million) and other exit costs ($2.0 million). During the fourth quarter of 1997, the following actions occurred related to the restructuring: (i) 323 employees were terminated or notified of upcoming termination in 1998; (ii) 47 operating centers were closed; (iii) 5 billing locations were closed and (iv) 44 operating centers were consolidated, scaled back or eliminated marginal products and services. The Company also drastically reduced and streamlined its field organization during the fourth quarter of 1997. The Company moved from three operating areas with over 20 regions to 11 areas. One of these areas is solely dedicated to the development and operations of the Company's hospital joint venture partnerships. Changes to Bank Credit Facility. On June 6, 1997, the Company amended and restated its Bank Credit Facility (the "Bank Credit Facility") to increase commitments thereunder from $225.0 million to $325.0 million. The Bank Credit Facility included a $150.0 million five-year term loan and a $175.0 million five-year revolving line of credit. On December 19, 1997, the Company amended and restated its Bank Credit Facility to increase commitments thereunder from $325.0 million to $400.0 million. The Bank Credit Facility includes a $75.0 million five-year term loan and a $325.0 million five-year revolving line of credit. Borrowings under the Bank Credit Facility may be used to finance acquisitions and for other general corporate purposes, subject to the terms and conditions of the credit and security agreements. Most of the Company's operating assets have been pledged as security for borrowings under the Bank Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources". Home Health Care Acquisitions. Effective in December 1997, the Company acquired the stock of National Medical Systems, Inc. ("NMS") for $34.1 million in notes payable to sellers and $9.9 million in assumed liabilities. In February 1998, $33.1 million of the notes payable to sellers was funded from operations and draws on the Bank Credit Facility. NMS consists of 35 centers in Arkansas, Oklahoma and Texas. Additionally, effective in 1997, the Company acquired 27 home health care businesses consisting of 63 centers. The aggregate purchase price included cash of $88.2 million, assumed liabilities of $18.2 million and notes payable to sellers of $7.6 million. The cash amounts have been funded from operations and draws on the Bank Credit Facility. Of the 98 centers acquired in 1997, the Company has consolidated 10 centers within other Company locations. 4 5 BUSINESS The Company provides home health care services and products consisting primarily of respiratory therapy services, infusion therapy services and the rental and sale of home medical equipment and home health care supplies. For the year ended December 31, 1997, such services represented 47%, 18% and 35%, respectively, of net revenues. These services and products are paid for primarily by Medicare, Medicaid and other third-party payors. The Company's objective is to be a leading provider of diversified home health care services in the markets in which it operates. Management seeks to establish regional concentrations of centers to develop the market penetration necessary for the Company to be a cost-effective provider of comprehensive home health care services to managed care and other third-party payors. The Company has long relied on its five "strategic imperatives" to guide its successful growth. These imperatives have included: (i) growth by acquisition in small to mid-size markets; (ii) building regional density; (iii) development of joint ventures and strategic alliances with major integrated health care delivery systems; (iv) same-store revenue growth, and (v) cost containment. In response to the Medicare oxygen reimbursement reductions, the Company has redefined its strategic imperatives. The new imperatives include: - Continuing to be an active consolidator in the home health care market to take advantage of the increased acquisition opportunities presented by current market conditions. - Maximizing operating leverage by (i) achieving cost-efficiencies, (ii) initiating process and structure improvements at all levels of the Company's operations, and (iii) streamlining field operations to create a new operating model. - Accelerating the development of joint ventures and strategic alliances with major hospitals and integrated health care delivery systems. - Increasing local market share by focusing on the Company's core product categories of respiratory and infusion services. - Continuing the Company's commitment to provide Personal Caring Service, its value system, which keeps quality patient care at the forefront of all activities. As of December 31, 1997, the Company provided services to patients primarily in the home through 329 centers in the following 35 states: Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, 5 6 Tennessee, Texas, Virginia, Washington, and Wisconsin. The Company had approximately 4,800 employees at December 31, 1997. The Company has significantly expanded its operations over the past three years through a combination of acquisitions, joint ventures and strategic alliances with integrated health care systems and internal growth. During this period, the Company generated a compound annual growth rate of approximately 63% in net revenues, from $90.2 million in 1994 to $387.3 million in 1997, while expanding from 141 centers in 20 states at December 31, 1994 to 329 centers in 35 states at December 31, 1997. The acquisition of home health care companies in both existing and contiguous markets has been a key component of the Company's growth strategy. During 1997, the Company acquired 28 home health care companies, consisting of 98 centers with annualized net revenues of over $110 million, and entered 4 new states. In 1997, the Company continued its strategy of developing joint venture relationships and strategic contractual alliances with hospitals and hospital systems to make the Company a provider of home care services in integrated health care delivery networks. Internal growth in net revenues and operating income has been achieved by expanding the range of services offered, implementing branch level cost controls and aggressively seeking to increase the sources of patient referrals. SERVICES AND PRODUCTS The Company provides a diversified range of home health care services and products. The following table sets forth the percentage of net revenues represented by each line of business for the periods presented:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ---- ---- Home respiratory therapy services . . . . . . . . . 53% 49% 47% Home infusion therapy services . . . . . . . . . . . 20 18 18 Home medical equipment and medical supplies. . . . . 27 33 35 --- --- --- Total 100% 100% 100% === === ===
Home Respiratory Therapy Services. The Company provides a wide variety of home respiratory services primarily to patients with severe and chronic pulmonary diseases. Patients are referred to a Company center most often by primary care and pulmonary physicians as well as by hospital discharge planners and case managers. After reviewing pertinent medical records on the patient and confirming insurance coverage information, a Company respiratory therapist or technician visits the patient's home to deliver and to prepare the prescribed therapy or equipment. Company representatives coordinate the prescribed therapy with the patient's physician, train the patient and caregiver in the correct use of the equipment, and make periodic follow-up visits to the 6 7 home to provide additional instructions, required equipment maintenance and oxygen and other supplies. The respiratory services that the Company provides include the following: - Oxygen systems to assist patients with breathing. There are three types of oxygen systems: (i) oxygen concentrators, which are stationary units that filter ordinary air to provide a continuous flow of oxygen; (ii) liquid oxygen systems, which are portable, thermally-insulated containers of liquid oxygen; and (iii) high pressure oxygen cylinders, which are used for portability with oxygen concentrators. Oxygen systems are used to treat patients with chronic obstructive pulmonary disease, cystic fibrosis and neurologically-related respiratory problems. - Nebulizers to deliver aerosol medications to patients. Nebulizers are used to treat patients with asthma, chronic obstructive pulmonary disease, cystic fibrosis and neurologically-related respiratory problems. - Home ventilators to sustain a patient's respiratory function mechanically in cases of severe respiratory failure when a patient can no longer breathe normally. - Non-invasive positive pressure ventilation ("NPPV") to provide ventilation support via a face mask for patients with chronic respiratory failure. This therapy enables patients to receive positive pressure ventilation without the invasive procedure of intubation. - Continuous positive airway pressure ("CPAP") therapy to force air through respiratory passage-ways during sleep. This treatment is used on adults with obstructive sleep apnea (OSA), a condition in which a patient's normal breathing patterns are disturbed during sleep. - Apnea monitors to monitor and to warn parents of apnea episodes in newborn infants as a preventive measure against sudden infant death syndrome. - Home sleep screenings and studies to detect sleep disorders and the magnitude of such disorders. The provision of oxygen-related services and systems comprised approximately 56% of the Company's 1997 respiratory revenues with the balance generated from nebulizers and related aerosol medication services, home ventilators, CPAP therapy, home sleep studies and infant apnea monitors. The Company provides respiratory therapy services at all but 8 of its centers, and, until recently, has historically focused its acquisition strategy almost entirely on home respiratory services companies. The Company continues to acquire home respiratory services companies. 7 8 Home Infusion Therapy Services. The Company provides a wide range of home infusion therapy services. Patients are referred to a Company center most often by primary care and specialist physicians (such as infectious disease physicians and oncologists) as well as by hospital discharge planners and case managers. After confirming the patient's treatment plan with the physician, the pharmacist mixes the medications and coordinates with the nurse the delivery of necessary equipment, medication and supplies to the patient's home. The Company provides the patient and caregiver with detailed instructions on the patient's prescribed medication, therapy, pump and supplies. The Company also schedules follow-up visits and deliveries in accordance with physicians' orders. Home infusion therapy involves the administration of nutrients, antibiotics and other medications intravenously (into the vein), subcutaneously (under the skin), intramuscularly (into the muscle), intrathecally or epidurally (via spinal routes) or through feeding tubes into the digestive tract. The primary infusion therapy services that the Company provides include the following: - Enteral nutrition is the infusion of nutrients through a feeding tube inserted directly into the functioning portion of a patient's digestive tract. This long-term therapy is often prescribed for patients who are unable to eat or to drink normally as a result of a neurological impairment such as a stroke or a neoplasm (tumor). - Antibiotic therapy is the infusion of antibiotic medications into a patient's bloodstream typically for two to four weeks to treat a variety of serious infections and diseases. - Total parenteral nutrition ("TPN") is the long-term provision of nutrients through central vein catheters that are surgically implanted into patients who cannot absorb adequate nutrients enterally due to a chronic gastrointestinal condition. - Pain management involves the infusion of certain drugs into the bloodstream of patients, primarily terminally or chronically ill patients, suffering from acute or chronic pain. The Company's other infusion therapies include chemotherapy, hydration, growth hormone and immune globulin therapies. Enteral nutrition services account for approximately 32% of the Company's infusion revenues, while antibiotic therapy, TPN, and pain management and other medications accounted for approximately 27%, 9% and 14%, respectively. The Company's remaining infusion revenues were derived from the provision of infusion nursing services, prescription drug sales and other miscellaneous infusion therapies. Enteral nutrition services are provided at most of the Company's centers, and the Company currently provides other infusion therapies in 85 of its 329 centers. The Company acquired over $27 million in infusion revenues in 1997 and expects to evaluate the acquisitions of selective home infusion services companies 8 9 primarily in larger markets in 1998 in order to increase net revenues attributable to infusion therapy services. Home Medical Equipment and Supplies. The Company provides a full line of equipment and supplies to serve the needs of home care patients. Revenues from home equipment services are derived principally from the rental and sale of wheelchairs, hospital beds, ambulatory aids, bathroom aids and safety equipment, patient lifts and rehabilitation equipment. In many of the Company's markets, the Company maintains a retail store and showroom where patients may purchase or rent supplies and miscellaneous equipment. The Company benefits from opportunities to provide home medical equipment to its customers who also are receiving respiratory therapy or infusion therapy. OPERATIONS Organization. A major component of the Company's reshaping activities was the reorganization and streamlining of the field structure. Currently, the Company's operations are divided into ten geographic areas, each headed by an area vice president. The Company has also developed an eleventh special area which is specifically dedicated to the operations of the Company's 21 hospital joint ventures. See "Hospital Joint Ventures and Strategic Alliances". Each area vice president oversees the operations of approximately 25 - 35 centers. Management believes this regional organizational structure enhances management flexibility and facilitates communication. Specifically, it provides for a greater focus on local market operations and control at the operating level, while enabling the Company's management to be close to the patients and concentrate on achieving the Company's strategic goals. Area vice presidents focus on cost control, participate in the identification and integration of new acquisitions and assist local management with decision making to improve responsiveness in local markets. The Company's centers are typically staffed with a general manager, a business office manager, a director of patient services (normally a registered nurse or respiratory therapist), registered nurses, clinical coordinators, respiratory therapists, service technicians and customer service representatives. In addition, the Company employs a licensed pharmacist in all centers that provide a significant amount of infusion therapy. The Company has achieved what management believes is a successful balance between centralized and decentralized management. Management believes that home care is a local business dependent in large part on personal relationships and, therefore, provides the Company's operating managers with a significant degree of autonomy to encourage prompt and effective responses to local market demands. In conjunction with this local operational authority, the Company provides, through its corporate office (the "Support Center"), sophisticated management support, marketing and managed care expertise, sales training and support, product development and financial and information systems that typically are not readily available to independent operators. The Company retains centralized control over those functions necessary to monitor quality of patient care and to maximize operational efficiency. Services performed at the Support 9 10 Center level include financial and accounting functions, clinical policy and procedure development, system design and corporate acquisitions and development. The Company has moved certain functions previously performed at the Support Center or local level to the area level, such as quality improvement oversight, billing, collections and purchasing, in an effort to maximize efficiencies and performance. Commitment to Quality. The Company's quality improvement programs are designed to ensure that its service standards are properly implemented. Management believes that the Company has developed and implemented service and procedure standards that not only comply with, but often exceed, the standards required by the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO"). All of the Company's centers are JCAHO-accredited or are in the process of being reviewed for accreditation from the JCAHO. The Company's goal is for all newly-acquired centers to become accredited within one year of joining the Company. The Company has Quality Advisory Boards at many of its centers, and center general managers conduct quarterly quality improvement reviews. Area quality improvement ("QI") specialists conduct quality compliance audits at each center to ensure compliance with state and federal regulations, JCAHO, FDA and internal standards. The QI specialist also helps train all new clinical personnel on the Company's policies and procedures. The Company's corporate philosophy for service excellence is its Personal Caring Service Promise, which characterizes the Company's standards for quality care and customer service. The Company's Governing Body which consists of the President and Chief Executive Office, Chief Operating Officer, Chief Financial Officer, Senior Vice President of Marketing, Vice President of Clinical & Regulatory Affairs and three Area Vice Presidents meets quarterly to review and oversee the Company's quality assurance and corporate compliance programs. The Personal Caring Service Promise is as follows: We promise to serve our customers with personal caring service. We do this by treating them with dignity and respect, just like members of our own family, giving each of them the individual attention they deserve. Training and Retention of Quality Personnel. Management recognizes that home health care is by nature a localized business. In addition to retaining its existing management team, the Company also seeks to retain certain members of management from its acquisitions. General managers recruit knowledgeable local account executives capable of gaining new business from the local medical community. In addition, the Company provides training to all new nurses, respiratory therapists and pharmacy personnel as well as continuing education for existing employees. Management Information Systems. Management believes that periodic refinement and upgrading of its management information systems, which permit management to monitor closely the activities of the Company's centers is important to the Company's continuing success. These systems provide monthly budget analyses, financial comparisons to prior periods and comparisons among Company centers, thus enabling management to identify areas for improvement. Medicare and many third-party payor claims are billed electronically, thereby facilitating the collection of accounts receivable. In addition, the Company's financial reporting system monitors certain key data for each center, such as accounts receivable, payor mix, cash collections, net revenues and 10 11 operating trends. The Company also has focused upon integrating the information systems of acquired centers as a part of its overall integration efforts. During 1997, the Company installed a new general ledger system to provide expanded capacity and functionality. In so doing, Year 2000 compliance was also accomplished. Remaining actions for Year 2000 involve primarily upgrading field support software and desktop computers as part of an overall Year 2000 plan. The remaining costs are not material to the Company. The Company's Allowable Branch Cost Model(TM) is a productivity tool that allows local and area managers use to track the cost of delivering a specific product or service. The model is currently operating in 198 of the Company's 329 centers representing over 60% of the Company's revenues. HOSPITAL JOINT VENTURES AND STRATEGIC ALLIANCES As of December 31, 1997, the Company had 21 home health care joint ventures with hospitals or hospital systems. The Company intends to continue forming joint ventures with hospitals and hospital systems in order to enter larger markets with reduced financial risk and capitalize on the trend toward integrated health care delivery networks that provide a full range of health care services, including physician services, in-patient hospital care, out-patient surgery, diagnostics and home health care. The Company's joint ventures with hospitals set forth below typically are 50/50% equity partnerships with an initial term of between three and ten years and with the following typical provisions: (i) the Company contributes assets of an existing business in the designated market or contributes cash to fund half of the initial working capital required for the hospital joint venture to commence operations; (ii) the hospital partner contributes an amount of cash equal to the Company's net contribution; (iii) the Company is the managing partner for the hospital joint venture and receives a monthly management and administrative fee; and (iv) distributions, to the extent made, are generally made on a quarterly basis and are consistent with each partners capital contributions. Within the hospital joint venture's designated market, all net revenues generated by the Company from the provision of those services for which the joint venture was formed are deemed to be net revenues of the hospital joint venture, including revenues from sources other than the hospital joint venture partner. 11 12 The following table lists the Company's hospital joint venture partners and locations:
HOSPITAL JOINT VENTURE PARTNER LOCATION ------------------------------ -------- Baptist Medical Center Columbia, SC Baptist Medical Center Montgomery, AL Baptist Medical System (3 hospitals) Little Rock, AR Baylor Health System (10 hospitals) Dallas, TX Central Carolina Hospital Sanford, NC Centura Health (6 hospitals) Denver, CO Columbia/HCA Gainesville, FL Columbia/HCA Jackson, TN Columbia/HCA (10 hospitals) Nashville, TN Columbia/HCA (5 hospitals) Richmond, VA Columbia/HCA Roanoke, VA Conway Hospital Conway, SC East Alabama Medical Center Opelika, AL Fort Sanders Alliance (5 hospitals) Knoxville, TN Frye Regional Medical Center/Grace Hickory, Maiden, Hospital/Caldwell Memorial Morganton, NC High Plains Baptist Hospital (2 hospitals) Amarillo, TX Otsego Memorial Hospital Gaylord, MI Piedmont Medical Center Rock Hill, SC Spruce Pine Community Hospital Spruce Pine, NC Tolfree Memorial Hospital West Branch, MI Wallace Thompson Hospital Union, SC
To further its strategy of aligning with hospitals and hospital systems, the Company also has developed numerous multi-year strategic alliance contracts. These contracts enable the Company to be the preferred provider of home respiratory services, home infusion services and home medical equipment and supplies for certain hospitals in selected markets. REVENUES AND COLLECTIONS The Company derives substantially all of its net revenues from third-party payors, including Medicare, private insurers and Medicaid. Medicare is a federally funded and administered health insurance program that provides coverage for beneficiaries who require certain medical services and products. Medicaid is a state administered reimbursement program that provides reimbursement for certain medical services and products. 12 13 The following table sets forth the percentage of the Company's net revenues from each source indicated for the years presented:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ---- ---- Medicare. . . . . . . . . . . . . . . . . . . . . 46% 46% 44% Private pay, primarily private insurance. . . . . 42 41 44 Medicaid. . . . . . . . . . . . . . . . . . . . . 12 13 12 --- --- --- Total 100% 100% 100% === === ===
The Omnibus Budget Reconciliation Act of 1987 ("OBRA 1987") created six categories for home medical equipment reimbursement under the Medicare Part B program, for which the Company qualifies. OBRA 1987 also defined whether products would be paid for on a rental or sale basis and established fixed monthly payment rates for oxygen service regardless of the type of service (i.e. concentrators, liquid oxygen, etc.) as well as a 15-month rental ceiling on certain medical equipment. After 15 months of rental, rental payments cease for HME and the Company receives a "maintenance fee" each six months equivalent to one-month's rental. The Omnibus Budget Reconciliation Act of 1990 ("OBRA 1990") made new changes to Medicare Part B reimbursement. The substantive changes relating to OBRA 1990 included a national standardization of Medicare rates for certain equipment categories, which vary slightly state by state and further reductions in amounts paid for HME rentals. In August 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993 ("OBRA 1993"), which included approximately $56 billion in reimbursement reductions to the Medicare program over the following five years. The specific reimbursement changes that became effective for fiscal 1994 related to the recategorization of certain respiratory products, to the capped rental program, coupled with a reduction in reimbursement rates for these same products. In August 1997, President Clinton signed a Balanced Budget Act that will reduce the Medicare reimbursement rate for oxygen by 25% beginning January 1, 1998 and by another 5% beginning January 1, 1999. Medicare oxygen reimbursement rates will be held steady thereafter as Consumer Price Index increases for oxygen and durable medical equipment will not resume until the year 2003. The Medicare oxygen reimbursement reductions affect approximately 23.5% of the Company's net revenues. As a result, the Company announced in September that it will close, consolidate or scale back 20% of its operating centers and nine of its billing centers; and scale back or eliminate marginal products and services for an additional 12% of its locations. The restructuring affected over 100 of the Company's total operating and billing locations. The Company's significant growth in net revenues has been accompanied by corresponding growth in net accounts receivable. Net patient accounts receivable at December 31, 1997 were $102.4 million compared to net accounts receivable of $76.1 million at December 31, 1996. The Company attempts to minimize days' sales in outstanding net accounts receivable ("DSO") by 13 14 screening new patient cases for adequate sources of reimbursement and by providing complete and accurate claims data to relevant payor sources. The table below shows the Company's DSO for the periods indicated:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ---- ---- Days' sales outstanding. . . . . 91 days 93 days 88 days
The decrease in DSO between 1997 and 1996 is primarily attributable to the accounts receivable reserved in September, 1997 for restructured centers. The increase in DSO between 1996 and 1995 is primarily attributable to slightly extended collection time frames for Medicare receivables associated with revised rules regarding physician completion of Certificates of Medical Necessity. SALES AND MARKETING Sales. The Company has recorded strong sales revenue growth over the past three years. However, as part of the Company's fundamental reshaping and in anticipation of the needs of a changing market, it recently reorganized its field sales function to provide greater support for the Company's marketing to its three key "trade channels"--traditional sources (physicians, hospital discharge planners, nursing agencies), strategic alliance/joint ventures and managed care. Local market selling to traditional sources is the primary responsibility of account executives who report directly to a branch general manager. The Company's 1998 sales and marketing plan includes the addition of 50% more selling resources for local sales efforts. Managed Care Sales. The Company takes a selective approach to managed care contracts utilizing its local operating and market strengths, supplemented by area and corporate managed care expertise. The Company utilizes the CURE(TM) Report (Comprehensive Utilization Report and Evaluation), the Company's managed care reporting system that provides a detailed accounting of home care utilization and cost indicators to keep managed care organizations informed of physician home care related practice patterns and costs. Hospital Joint Ventures and Strategic Alliances Development. The Company has a senior level, experienced operating team to lead its efforts to develop additional hospital joint ventures and strategic alliances as well as to manage and operate new joint ventures. The team also consists of six former key operations managers providing it significant depth in leadership and experience. In targeting hospital joint ventures and strategic alliances, this team markets arrangements to regional and senior executives in hospital systems and the chief executive and financial officers of hospitals. See -- "Hospital Joint Ventures and Strategic Alliances." Corporate Marketing Support. The Company's corporate marketing department provides product and services planning and development, market research, marketing communications, 14 15 public and community relations and educational program development for all of the Company's centers. The Company has primarily expanded services by adding infusion, rehabilitation equipment and services, pediatric and other services as well as repackaging and marketing existing services as branded products, such as the Company's Resource(TM), Aermeds(TM) and EnterCare(TM) programs. Additionally, the Company introduce its new clinical and marketing programs such as NPPV (non-invasive positive pressure ventilators) program designed to treat chronic respiratory failure patients. This therapy provides patients an innovative method of treatment that helps reduce hospitalization and improve the patients' quality of life. The Company has added many new NPPV patients to its patient base during 1997. All marketing programs introduced by the corporate marketing department are designed to meet the needs of the Company's traditional referral sources as well as managed care organizations and integrated health care delivery networks. COMPETITION The home health care industry is rapidly consolidating but remains highly fragmented and competition varies significantly from market to market. In the small and mid-size markets in which the Company primarily operates, the majority of its competition comes from local independent operators or hospital-based facilities, whose primary competitive advantage is market familiarity. In the larger markets, regional and national providers account for a significant portion of competition. In addition, there are still relatively few barriers to entry in the local markets served by the Company, and it may encounter substantial competition from new market entrants. Management believes that the competitive factors most important in the Company's lines of business are quality of care and service, reputation with referring sources, ease of doing business with the provider, ability to develop and to maintain relationships with referral sources, competitive prices, and the range of services offered. Third party payors and their case managers actively monitor and direct the care delivered to their beneficiaries. Accordingly, relationships with such payors and their case managers and inclusion within preferred provider and other networks of approved or accredited providers has become a prerequisite, in many cases, to the Company's ability to serve many of the patients treated by it. Similarly, the ability of the Company and its competitors to align themselves with other health care service providers may increase in importance as managed care providers and provider networks seek out providers who offer a broad range of services and geographic coverage. 15 16 BRANCH LOCATIONS Following is a list of the Company's 329 home health care centers as of December 31, 1997. ALABAMA Waterbury Ottumwa Joplin Marion Lock Haven Houston(2) Alexander City Sioux City Kansas City Morehead City McKees Rocks Irving(a) Andalusia DELAWARE Waterloo Kirksville Morganton(a) Mt. Pleasant Lake Jackson Birmingham Dover Mexico Morrisville Phillipsburg Laredo Dothan Newark KANSAS Mountain Grove Newland Philadelphia Longview Fayette Wilmington Pittsburg Osage Beach Salisbury Pottsville Lubbock Florence Potosi Sanford(a) Sharon Lufkin Foley FLORIDA KENTUCKY Rolla Spruce Pine(a) State College McAllen Huntsville Crawfordville Bowling Green Salem Sylva Titusville Mexia Mobile Crystal River Corbin Springfield Wadesboro Trevose Mount Pleasant Montgomery(a) Daytona Beach Danville St. Louis(2) Whiteville Warminster Nacogdoches Opelika(a) Ft. Lauderdale Eddyville St. Robert Winston-Salem Waynesboro Pampa(a) Russellville Ft. Myers Elizabethtown Warrensburg Warren Paris Sylacauga(a) Ft. Walton Beach Florence OHIO York Pasadena Troy Gainesville(a) Jackson NEBRASKA Bryan Pittsburgh Tuscaloosa Jacksonville Lexington Omaha Cambridge SOUTH CAROLINA Plainview Leesburg London Chillicothe Columbia(a) San Antonio ARIZONA Marianna Louisville NEVADA Cincinnati Conway(a) San Angelo Bullhead City Orlando Mayfield Boulder City Columbus Florence Temple Globe Panama City Paducah Las Vegas(2) Dayton Greenville Texarkana Lake Havasu Pensacola Pineville Pahrump Mansfield N. Charleston Tyler Phoenix Port St. Lucie Somerset Maumee Rock Hill(a) Victoria Safford Rockledge Whitley City NEW JERSEY Newark Union(a) Waco Tucson(b) St. Augustine Cranbury Springfield Van Tallahassee LOUISIANA Flemington Twinsburg TENNESSEE ARKANSAS Tampa Bogalusa Cedar Grove Zanesville Chattanooga VIRGINIA Batesville Hammond Cookeville Farmville Benton GEORGIA Slidell NEW MEXICO OKLAHOMA Dayton Salem(a) Berryville Albany Alamogordo Antlers Jackson(a) Onley Dardanelle Americus MAINE Albuquerque Bartlesville Johnson City Richmond(a) El Dorado(a) Brunswick Auburn Clovis Claremore Kingsport Chesapeake Ft. Smith Camilla Bangor Farmington Enid Knoxville(a) Harrison Dublin Rumford Grants Grove Manchester WASHINGTON Hot Springs Eastman Hobbs Hugo Nashville(a) Bremerton Jonesboro(2) Ft. Oglethorpe MARYLAND Las Cruces Lawton Oak Ridge(a) Seattle Little Rock(a)(2) Martinez/Augusta Cumberland Roswell Muskogee Oneida(a) Tacoma Mena Nashville Frederick McAlester Rogersville Yakima Mtn. Home Savannah Salisbury NEW YORK Tulsa Union City Newport Valdosta Albany Wagoner Morristown WISCONSIN Rogers Waycross MICHIGAN Buffalo(2) Murfreesboro Burlington Paragould Detroit E. Syracuse OREGON Eau Claire Pine Bluff ILLINOIS Gaylord(a) Geneva Eugene TEXAS Elkhorn Salem Alsip West Branch(a) Marcy Medford Abilene Kenosha Springdale Arlington Heights Oneonta Amarillo(a) La Crosse Warren Peoria MINNESOTA Skaneateles PENNSYLVANIA Austin Marshfield Springfield Rochester Watertown Bradford Bay City Milwaukee COLORADO Webster Brookville Beaumont Minocqua Cortez IOWA MISSISSIPPI Utica Burnham Borger(a) Monona Denver(a) Cedar Rapids Tupelo Carlisle Brownwood Racine Durango Clarinda NORTH CAROLINA Clearfield Bryan Pagosa Springs Coralville MISSOURI Asheboro Erie Conroe Davenport Cameron Asheville Everett Corpus Christi CONNECTICUT Decorah Columbia Bakersville Harrisburg Dallas(a)(2) Brookfield Des Moines Festus Charlotte Hazelton Ennis(a) Danielson Dubuque Florissant Hickory(a) Houtzdale Ft. Worth New Britain Marshalltown Hannibal Kannapolis Johnstown Hereford New Milford Mason City Ironton Maiden(a) Kane Harlingen
- - ---------------------------------- (a) Owned by a joint venture. (b) Managed but not owned by the Company. 16 17 SUPPLIES AND EQUIPMENT The Company purchases medical equipment, drugs, solutions and other materials and leases certain equipment required in connection with the Company's business from many suppliers. The Company has not experienced, and management does not anticipate that the Company will experience, any significant difficulty in purchasing supplies or leasing equipment from current suppliers. In the event that such suppliers are unable or fail to sell supplies or lease equipment to the Company, management believes that other suppliers are available to meet the Company's needs at comparable prices. INSURANCE The Company's professional liability policies are on an occurrence basis and are renewable annually with per claim coverage limits of up to $1,000,000 per occurrence and $3,000,000 in the aggregate. The Company maintains a commercial general liability policy which includes product liability coverage on the medical equipment that it sells or rents with per claim coverage limits of up to $1,000,000 per occurrence with a $1,000,000 product liability annual aggregate and a $2,000,000 general liability annual aggregate. The Company also maintains excess liability coverage with a limit of $50,000,000 per occurrence and $50,000,000 in the aggregate. While management believes the manufacturers of the equipment it sells or rents currently maintain their own insurance, and in some cases the Company has received evidence of such coverage and has been added by endorsement as additional insured, there can be no assurance that such manufacturers will continue to do so, that such insurance will be adequate or available to protect the Company, or that the Company will not have liability independent of that of such manufacturers and/or their insurance coverage. There can be no assurance that any of the Company's insurance will be sufficient to cover any judgments, settlements or cost relating to any pending or future legal proceedings or that any such insurance will be available to the Company in the future on satisfactory terms, if at all. If the insurance carried by the Company is not sufficient to cover any judgments, settlements or cost relating to pending or future legal proceedings, the Company's business and financial condition could be materially, adversely affected. EMPLOYEES The retention of qualified employees is a high priority for the Company. At December 31, 1997, the Company employed approximately 3,700 full-time, 450 part-time and 650 PRN individuals. Of these individuals, approximately 125 were employed at the corporate support center. As of December 31, 1997, approximately 323 employees were terminated or notified of upcoming termination in 1998 as part of the Restructuring. Management believes that the Company's employee relations are good. None of the Company's employees are represented by a labor union. 17 18 TRADEMARKS The Company owns and uses a variety of marks, including American HomePatient, AerMeds, EnterCare, Resource and Extracare, which have either been registered at the federal or state level, are currently being considered for such registration or are being used pursuant to common law rights. GOVERNMENT REGULATION The Company, as a participant in the healthcare industry, is subject to extensive federal, state and local regulation. The operations of the Company's home health care centers are subject to federal laws covering the repackaging and dispensing of drugs and regulating interstate motor-carrier transportation. Such centers also are subject to state laws governing pharmacies, nursing services and certain types of home health agency activities. Additionally, certain of the Company's employees are subject to state laws and regulations governing the professional practice of respiratory therapy, pharmacy and nursing. Currently, the Company is licensed as a home health agency in Florida and New York. The Company's operations are also subject to a series of laws and regulations dating back to the Omnibus Budget Reconciliation Act of 1987 ("OBRA 1987") which have been enacted and apply to the Company's operation. Periodic changes have occurred from time to time since the 1987 Act including reimbursement reduction and changes to payment rules. As a provider of services under the Medicare and Medicaid programs, the Company is subject to the Medicare and Medicaid anti-kickback statute, also known as the "fraud and abuse law." This law prohibits any bribe, kickback, rebate or remuneration of any kind in return for, or as an inducement for, the referral of Medicare or Medicaid patients. The Company may also be affected by the federal physician self-referral prohibition, known as the "Stark" law, which, with certain exceptions, prohibits physicians from referring patients to entities in which they have a financial interest. Many states in which the Company operates have adopted similar self-referral laws, as well as laws that prohibit certain direct or indirect payments or fee-splitting arrangements between health care providers, under the theory that such arrangements are designed to induce or to encourage the referral of patients to a particular provider. The Company regularly reviews and updates its policies and procedures in an effort to comply with applicable laws and regulations. The Company must follow strict requirements with paperwork and billing. As required by law, it is Company policy that all service charges falling under Medicare Part B are confirmed with a Certificate for Medical Necessity prescribed by a physician. In recent years, various state and federal regulatory agencies have stepped up investigative and enforcement activities with respect to the health care industry, and many health care providers and DME suppliers have received subpoenas and other requests for information in connection with such activities. On February 12, 1998, a subpoena from the Office of Inspector General of the 18 19 Department of Health and Human Services ("OIG") was served on the Company at its Pineville, Kentucky center in connection with an investigation relating to possible improper claims for Medicare payment. The Company has retained experienced health care counsel to represent it in this connection and intends to fully cooperate. Although the Company's counsel has conducted an initial meeting with governmental officials, this matter is still in its preliminary stages. In addition the Company from time to time receives notices and subpoenas from various governmental agencies concerning their plans to audit the Company or requesting information regarding certain aspects of the Company's business, and the Company cooperates with the various agencies in responding to such requests. While the government has broad authority to enforce applicable laws and regulations, and therefore the scope and outcome of these investigations and inquiries cannot be predicted with certainty, management does not believe at the present time that any pending investigations or inquiries will have a material adverse impact on the Company. As evidence of the past efforts of the Company in successfully working with the government, in 1997 the Company was the recipient of the prestigious Hammer Award by Vice President Al Gore in recognition of the support of the Company in working with the Federal Food and Drug Administration in developing compliance protocols. Healthcare law is an area of extensive and dynamic regulatory change. Changes in laws or regulations or new interpretations of existing laws or regulations can have a dramatic effect on permissible activities, the relative costs associated with doing business, and the amount and availability of reimbursement by government and third-party payors. There can be no assurance that either the federal, state or local governments will not impose additional regulations upon the Company's activities which might adversely affect the Company's business so that the Company will be unable to comply with all regulations in the geographic areas in which it wishes to commence, or presently conducts its business. RISK FACTORS This section summarizes certain risks, among others, that should be considered by stockholders and prospective investors in the Company. Many of these risks are discussed in other sections on this report. Medicare Reimbursement for Oxygen Therapy Services. In 1997 oxygen therapy services reimbursement from Medicare accounted for approximately 23.5% of the Company's revenues. The Balanced Budget Act of 1997, as amended, reduced Medicare reimbursement rates for oxygen and certain oxygen equipment to 75% of their 1997 levels beginning January 1, 1998 and to 70% of their 1997 levels beginning January 1, 1999. In addition, Consumer Price Index increases in Medicare oxygen reimbursement rates will not resume until the year 2003. The Company cannot be certain that additional reimbursement reductions for oxygen therapy services or other services and products provided by the Company will not occur. Any such reductions could have a material adverse effect on the Company's net revenues and net income. See "Business - Material 1997 Corporate Developments," "Business - Revenues and Collections" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Medicare Reimbursement for Oxygen Therapy Services." 19 20 Dependence on Reimbursement by Third-Party Payors. In 1997, the percentage of the Company's net revenues derived from Medicare, Medicaid and private pay was 44%, 12% and 44%, respectively. The net revenues and profitability of the Company are affected by the continuing efforts of all payors to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services, increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels under Medicare, Medicaid or private pay programs and any changes in applicable government regulations could have a material adverse effect on the Company's net revenues. Changes in the mix of the Company's patients among Medicare, Medicaid and private pay categories and among different types of private pay sources, may also affect the Company's net revenues and profitability. There can be no assurance that the Company will continue to maintain its current payor or revenue mix. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business - Revenues and Collections." Role of Managed Care. As managed care assumes an increasingly significant role in markets in which the Company operates, the Company's success will, in part, depend on retaining and obtaining managed care contracts. There can be no assurance that the Company will retain or continue to obtain such managed care contracts. In addition, reimbursement rates under managed care contracts are likely to continue experiencing downward pressure as a result of payors' efforts to contain or reduce the costs of health care by increasing case management review of services and negotiating reduced contract pricing. Therefore, even if the Company is successful in retaining and obtaining managed care contracts, unless the Company also decreases its cost for providing services and increases higher margin services, it will experience declining profit margins. See "Business." Government Regulation. The Company is subject to extensive and frequently changing federal, state and local regulation. In addition, new laws and regulations are adopted periodically to regulate new and existing products and services in the health care industry. Changes in laws or regulations or new interpretations of existing laws or regulations can have a dramatic effect on operating methods, costs and reimbursement amounts provided by government and other third-party payors. Federal laws governing the Company's activities include regulation of the repackaging and dispensing of drugs, Medicare reimbursement and certification and certain financial relationships with physicians and other health care providers. Although the Company intends to comply with all applicable fraud and abuse laws, there can be no assurance that administrative or judicial interpretation of existing laws or regulations or enactments of new laws or regulations will not have a material adverse effect on the Company's business. The Company is subject to state laws governing Medicaid, professional training, certificates of need, licensure, financial relationships with physicians and the dispensing and storage of pharmaceuticals. The facilities operated by the Company must comply with all applicable laws, regulations and licensing standards. In addition, many of the Company's employees must maintain licenses to provide some of the services offered by the Company. There can be no assurance that federal, state or local governments will not change existing standards or impose additional standards. Any failure to comply with existing or future standards could have a material adverse effect on the Company's results of operations, financial condition or prospects. 20 21 No Assurance of Successful Integration of Acquisitions or Continued Growth. The Company intends to continue to expand its business through acquisitions of home health care companies, growth in internal net revenues and the formation of additional hospital joint ventures and strategic alliances. There can be no assurance that suitable acquisitions will be identified, that consent from the Company's lenders, where required, will be obtained or that acquisitions will be consummated on acceptable terms. In addition, there can be no assurance that these companies, once acquired, will be integrated successfully into the Company's operations or that any acquisition will not have a material adverse effect upon the Company's results of operations, financial condition or prospects, especially in the fiscal quarters immediately following such transactions. In addition, although the Company intends to expand its business through hospital joint ventures and strategic alliances, there can be no assurance that the Company will be able to maintain such relationships. Finally, there can be no assurance that the Company can increase or maintain growth in net revenues, enter into additional hospital joint ventures and strategic alliances or increase net revenues at existing hospital joint ventures and strategic alliances. The price of the Company's common stock may fluctuate substantially in response to quarterly variations in the Company's operating and financial results, announcements by the Company or other developments affecting the Company, as well as general economic and other external factors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and "Business." Management of Growth. As the Company's business develops and expands, the Company may need to implement enhanced operational and financial systems and may require additional employees and management, operational and financial resources. There can be no assurance that the Company will successfully (i) implement and maintain any such operational and financial systems, or (ii) apply the human, operational and financial resources needed to manage a developing and expanding business. Failure to implement such systems successfully and use such resources effectively could have a material adverse effect on the Company's results of Operations, financial condition or prospects. See "Business." Competition. The home health care market is highly fragmented and competition varies significantly from market to market. In the small and mid-size markets in which the Company primarily operates, the majority of its competition comes from local independent operators or hospital-based facilities, whose primary competitive advantage is market familiarity. In the larger markets, regional and national providers account for a significant portion of competition. Some of the Company's present and potential competitors are significantly larger than the Company and have, or may obtain, greater financial and marketing resources than the Company. In addition, there are relatively few barriers to entry in the local markets served by the Company, and it may encounter substantial competition from new market entrants. As the industry consolidates, the Company also faces competition for acquisitions from current and new market participants that could increase acquisition prices or inhibit the Company's acquisition strategy. See "Business - Competition." 21 22 Impact of Health Care Reform. The health care industry continues to undergo dramatic changes. Although proposed federal legislation to impose greater control on health care spending has not been enacted by Congress to date, there can be no assurance that federal health care legislation will not be adopted in the future. Some states are adopting health care programs and initiatives as a replacement for Medicaid. It is also possible that proposed federal legislation will include language which provides incentives to further encourage Medicare recipients to shift to Medicare at-risk managed care programs. There can be no assurance that the adoption of such legislation or other changes in the administration or interpretation of governmental health care programs or initiatives will not have a material adverse effect on the Company. Liability and Adequacy of Insurance. The provision of health care services entails an inherent risk of liability. Certain participants in the home health care industry may be subject to lawsuits which may involve large claims and significant defense costs. It is expected that the Company periodically will be subject to such suits as a result of the nature of its business. The Company currently maintains product and professional liability insurance intended to cover such claims in amounts which management believes are in keeping with industry standards. There can be no assurance that the Company will be able to obtain liability insurance coverage in the future on acceptable terms, if at all. There can be no assurance that claims in excess of the Company's insurance coverage or claims not covered by the Company's insurance coverage will not arise. A successful claim against the Company in excess of the Company's insurance coverage could have a material adverse effect upon the results of operations, financial condition or prospects of the Company. Claims against the Company, regardless of their merit or eventual outcome, may also have a material adverse effect upon the Company's ability to attract patients or to expand its business. See "Business - Insurance." Influence of Executive Officers, Directors and Principal Stockholder. On March 20, 1998, the Company's executive officers, directors and principal stockholder, Counsel Corporation ("Counsel"), in the aggregate, beneficially owned approximately 35% of the outstanding shares of the common stock of the Company. As a result of such equity ownership and their positions in the Company, if the executive officers, directors and principal stockholder were to vote all or substantially all of their shares in the same manner, they could significantly influence the management and policies of the Company, including the election of the Company's directors and the outcome of matters submitted to stockholders of the Company for approval. The Company is highly dependent upon its senior management, and competition for qualified management personnel is intense. The inability to attract and retain qualified personnel could adversely affect the Company's business. 22 23 ITEM 2. PROPERTIES The Company's corporate headquarters occupy approximately 31,000 square feet leased in the Parklane Building, Maryland Farms, Brentwood, Tennessee. The lease has a seven year term with base monthly rent of $39,000. The Company owns its centers in Tallahassee, Florida, Waterloo, Iowa, Harrisburg, Pennsylvania and North Charleston, South Carolina which consist of approximately 15,000, 35,000, 43,000 and 10,000 square feet, respectively and owns a 50% interest in its center in Little Rock, Arkansas, which consists of approximately 15,000 square feet. The Company leases the operating space required for its remaining 324 home health care centers. A typical center occupies between 2,000 and 6,000 square feet and generally combines showroom, office and warehouse space, with approximately two-thirds of the square footage consisting of warehouse space. Lease terms on most of the leased centers range from three to five years. Management believes that the Company's owned and leased properties are adequate for its present needs and that suitable additional or replacement space will be available as required. ITEM 3. LEGAL PROCEEDINGS As with any health care provider, the Company is engaged in routine litigation incidental to its business and which is not material to the Company. Additionally, in recent years, the health care industry has come under increasing scrutiny from various state and federal regulatory agencies, which are stepping up investigative and enforcement activities. While these activities cannot be predicted with certainty, management does not believe that they will have a material adverse impact on the Company. For a description of these activities, see "Governmental Regulation." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None. 23 24 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The common stock of the Company is traded on the Nasdaq National Market System ("NASDAQ Stock Market") under the designation "AHOM". The following table sets forth representative bid quotations of the common stock for each quarter of calendar years 1996 and 1997 as provided by NASDAQ Stock Market. The following bid quotations reflect interdealer prices without retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. In June 1996 the Company effectuated a 3-for-2 split of its common stock.
BID QUOTATIONS -------------- FISCAL PERIOD HIGH LOW ------------- ----- --- 1996 1st Quarter $26.17 $16.17 1996 2nd Quarter $31.83 $25.33 1996 3rd Quarter $30.38 $19.50 1996 4th Quarter $27.50 $20.00 1997 1st Quarter $28.25 $20.75 1997 2nd Quarter $25.25 $16.75 1997 3rd Quarter $25.50 $16.25 1997 4th Quarter $27.00 $18.50
On March 17, 1998, there were 650 holders of record of the common stock and the closing bid quotation for the common stock was $21.125 per share, as reported by NASDAQ Stock Market. Most of the Company's stockholders have their holdings in the street name of their broker/dealer. The Company has not paid cash dividends on its common stock and anticipates that, for the foreseeable future, any earnings will be retained for use in its business and no cash dividends will be paid. The Company is prohibited from issuing dividends under its Bank Credit Facility. See - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." Pursuant to a Warrant Agreement issued to Robert A. Clasen in 1994 in connection with one of the Company's acquisitions, Mr. Clasen purchased 2,500, 2,500, 1,500 and 1,000 shares of the Company's common stock for $12 per share on January 24, March 13, May 19 and July 21, 1997, respectively. The common stock was issued to Mr. Clasen in reliance upon Section 4(2) of the Securities Act of 1933, as amended, and upon Rule 505 of Regulation D. Less than 24 25 $5,000,000 of the Company's common stock was issued and no general solicitation or advertising was made. 25 26 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA FINANCIAL STATEMENTS PRESENTED AND DERIVATION OF INFORMATION The following selected financial data below is derived from the audited financial statements of the Company and should be read in conjunction with those statements, including the related notes thereto. The addition of new operations through acquisitions materially affects the comparability of the financial data presented. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The historical operating data reflects the operations of the Company's home health care business as continuing operations and its long-term care management business as discontinued operations.
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net revenues $ 61,315 $ 90,185 $ 162,371 $ 268,348 $ 387,277 Cost of sales and related services, excluding depreciation and amortization expense 13,677 17,445 34,031 58,575 97,418 Operating expenses 31,307 47,081 82,608 138,213 216,532 General and administrative expenses 5,520 7,829 11,704 14,664 15,953 Depreciation and amoritization expense 4,532 6,656 14,081 23,845 33,736 Interest expense 542 2,132 4,829 8,294 16,494 Restructuring charge -- -- -- -- 33,829 Goodwill impairment -- -- -- -- 8,165 ---------- ---------- ----------- ----------- ------------ Total expenses 55,578 81,143 147,253 243,591 422,127 ---------- ---------- ----------- ----------- ------------ Income (Loss) from continuing operations before taxes 5,737 9,042 15,118 24,757 (34,850) Provision (Benefit) for income taxes 2,254 3,476 6,029 9,556 (8,942) ---------- ---------- ----------- ----------- ------------ Income (Loss) from continuing operations $ 3,483 $ 5,566 $ 9,089 $ 15,201 $ (25,908) ========== ========== =========== =========== ============ Income (Loss) from continuing operations per share - basic $ 0.46 $ 0.68 $ 0.86 $ 1.13 $ (1.75) ========== ========== =========== =========== ============ Income (Loss) from continuing operations per share - diluted $ 0.45 $ 0.67 $ 0.84 $ 1.10 $ (1.75) ========== ========== =========== =========== ============ Weighted average shares outstanding - basic 7,621,000 8,131,000 10,550,000 13,473,000 14,839,000 Weighted average shares outstanding - diluted 7,734,000 8,344,000 10,838,000 13,841,000 14,839,000
DECEMBER 31, ------------------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- BALANCE SHEET DATA: Working capital $14,961 $ 20,848 $ 46,272 $ 84,012 $112,721 Total assets 60,065 110,965 232,516 395,611 558,366 Total debt and capital leases, including current portion 17,472 35,908 93,606 149,703 301,324 Shareholders' equity 36,950 58,096 119,431 215,642 194,089
26 27 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS ANNUAL REPORT ON FORM 10-K INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS," "EXPECTS," "ESTIMATES," "MAY," "WILL" AND WORDS OF SIMILAR IMPORT. SUCH STATEMENTS INCLUDE STATEMENTS CONCERNING THE COMPANY'S BUSINESS STRATEGY, ACQUISITION STRATEGY, OPERATIONS, COST SAVINGS INITIATIVES, INDUSTRY, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES, EXISTING GOVERNMENT REGULATIONS AND CHANGES IN, OR THE FAILURE TO COMPLY WITH, GOVERNMENTAL REGULATIONS, LEGISLATIVE PROPOSALS FOR HEALTHCARE REFORM, THE ABILITY TO ENTER INTO JOINT VENTURES, STRATEGIC ALLIANCES AND ARRANGEMENTS WITH MANAGED CARE PROVIDERS ON AN ACCEPTABLE BASIS AND CHANGES IN REIMBURSEMENT POLICIES. SUCH STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS BECAUSE OF A NUMBER OF FACTORS, INCLUDING THOSE IDENTIFIED IN THE "RISK FACTORS" SECTION AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. THE FORWARD-LOOKING STATEMENTS ARE MADE AS OF THE DATE OF THIS ANNUAL REPORT ON FORM 10-K AND THE COMPANY DOES NOT UNDERTAKE TO UPDATE THE FORWARD-LOOKING STATEMENTS OR TO UPDATE THE REASONS THAT ACTUAL RESULTS COULD DIFFER FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. The Company has three principal services or product lines: home respiratory services, home infusion services and home medical equipment and supplies. Home respiratory services include oxygen systems, nebulizers and home ventilators and are provided primarily to patients with severe and chronic pulmonary diseases. Home infusion services are used to administer nutrients, antibiotics and other medications to patients with medical conditions such as neurological impairments, infectious diseases or cancer. The Company also sells and rents a variety of home medical equipment and supplies, including wheelchairs, hospital beds and ambulatory aids. The following table sets forth the percentage of the Company's net revenues represented by each line of business for the periods presented:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ---- ---- Home respiratory therapy services 53% 49% 47% Home infusion therapy services 20 18 18 Home medical equipment and medical supplies 27 33 35 --- --- --- Total 100% 100% 100% === === ===
Changes in the Company's business mix over the periods indicated resulted primarily from the increase in medical equipment and medical supplies revenues generated by acquired operations. From 1995 through 1997, the Company acquired 85 home health care companies (17, 40 and 28 companies in 1995, 1996 and 1997, respectively). The Company's goal is to maintain a diversified offering of home health care services, including a higher percentage of infusion therapy services 27 28 than it has currently in order to provide the comprehensive array of services that managed care organizations are likely to require. The Company continues to implement a variety of initiatives designed to lower its costs. The Company is currently focused upon: (i) leveraging corporate purchasing agreements to reduce supply and equipment costs, (ii) consolidating same-market and overlapping centers; (iii) decreasing collection periods and associated billing costs; and (iv) moving certain functions to the area level. The Company reports its net revenues as follows: (i) sales and related services; (ii) rentals and other; and (iii) earnings from joint ventures. Sales and related services revenues are derived from the provision of infusion therapies, the sale of home health care equipment and supplies, the sale of aerosol and respiratory therapy equipment and supplies and services related to the delivery of these products. Rentals and other revenues are derived from the rental of home health care equipment, enteral pumps and equipment related to the provision of respiratory therapies. The majority of the Company's hospital joint ventures are not consolidated for financial statement reporting purposes. Earnings from hospital joint ventures represent the Company's equity in earnings from unconsolidated hospital joint ventures and management and administrative fees for unconsolidated joint ventures. Cost of sales and related services includes the cost of equipment, drugs and related supplies sold to patients. Operating expenses include operating center labor costs, delivery expenses, selling costs, occupancy costs, costs related to rentals other than depreciation, billing center costs, provision for doubtful accounts and other operating costs. General and administrative expenses include corporate and area management expenses and costs. The Company annually evaluates the realizability of goodwill by utilizing an operating income realization test for the applicable businesses acquired. In addition, the Company considers the effects of external changes to the Company's business environment, including competitive pressures, market erosion and technological and regulatory changes. The Company believes its estimated goodwill life is reasonable given the continuing movement of patient care to noninstitutional settings, expanding demand due to demographic trends, the emphasis of the Company on establishing significant coverage in each local and regional market, the goodwill life recognized by other home care companies and other factors. MEDICARE REIMBURSEMENT FOR OXYGEN THERAPY SERVICES The Balanced Budget Act of 1997 will reduce the Medicare oxygen reimbursement rates by 25 percent beginning January 1, 1998, and by another five percent beginning January 1, 1999. In addition, Consumer Price Index increases in Medicare oxygen reimbursement rates will not resume until the year 2003. The Company is one of the nation's largest providers of home oxygen services to patients, many of whom are Medicare recipients, and is therefore significantly affected by this legislation. Medicare oxygen reimbursements account for approximately 23.5 percent of the Company's revenues. 28 29 On September 25, 1997, the Company announced initiatives to respond to the Medicare oxygen reimbursement reductions by fundamentally reshaping the Company for long-term growth. The Restructuring impacted more than 100 of the Company's total operating and billing centers. Specific actions resulted in pre-tax accounting charges of $65.0 million due to the closure, consolidation, or scaling down of approximately 20 percent of the Company's operating centers, the closure or scaling back of nine billing centers, the elimination of four operating regions, the scaling back or elimination of marginal products and services at numerous locations, and the related termination of approximately 350 employees. RESULTS OF OPERATIONS The Company's net revenues from continuing operations have grown at a compound annual growth rate of approximately 63% during the period from January 1, 1994 through December 31, 1997. In addition, since 1991, the Company has expanded its operations from 24 home health care centers in four states to 329 home health care centers in 35 states. This growth has been achieved through a combination of internal growth, acquisitions, start-up operations, hospital joint ventures and strategic alliances. The Company acquired 81, 101 and 98 centers during 1995, 1996 and 1997, respectively. Throughout this expansion, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") has remained constant at 21% of revenues. As more fully discussed in "Material 1997 Corporate Developments" and Note 3 of the December 31, 1997 consolidated financial statements, the Company recorded $65.0 million of accounting charges in the quarter ended September 30, 1997 related to the Medicare oxygen reimbursement reductions and related restructuring. In addition to the $65.0 million charge, the Company also recorded $2.0 million of unusual charges in the third quarter of 1997 as follows: (i) the Company finalized the results of physical inventory counts for certain acquired locations primarily in Oklahoma and Texas and recorded a charge to income of $1.0 million, and (ii) in connection with the Company's analysis of locations during the planning for the restructuring discussed above, management determined that an additional charge of $1.0 million was required to appropriately state the required franchise tax accrual. The impact of these charges on the various classifications within the consolidated statements of operations is as follows:
Cost of sales $ 6,255,000 Operating expenses 18,751,000 Restructuring charge 33,829,000 Goodwill impairment 8,165,000 ------------ $ 67,000,000 ============
29 30 Due to the comprehensive restructuring and reshaping program that occurred in the fourth quarter of 1998, the Company purposefully slowed its pace of acquisitions during the quarter and experienced higher than normal operating expenses in select markets. Concurrently, it completely revamped its field management structure and eliminated an entire layer of management. These activities adversely affected the financial results for the fourth quarter. The following table and discussion set forth items from the income statement as a percentage of net revenues before the 1997 unusual charges for the periods indicated:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ---- ---- Net revenues 100% 100% 100% Cost of sales and related services, excluding depreciation and amortization expense 21 22 24 Operating expenses 51 52 51 General and administrative expense 7 5 4 Depreciation and amortization expense 9 9 9 Interest expense 3 3 4 ---- ---- ---- Total expenses 91 91 92 ---- ---- ---- Income from operations before taxes 9 9 8 Provision for income taxes 3 3 3 ---- ---- ---- Income from operations 6 6 5 ==== ==== ==== OTHER DATA: EBITDA 21% 21% 21%
Historically, the Company reported same-store growth. Due to the restructuring activity that occurred during the fourth quarter of 1997, the Company determined that internal growth is a more accurate representation of revenue growth than same-store growth. The Company has moved to an internal growth calculation which still reflects the strength of operations excluding acquired revenues. YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 The operations of acquired centers are included in the operations of the Company from the effective date of each acquisition. Because of the substantial acquisition activity, the comparison of the results of operations between 1997 and 1996 is materially impacted by the operations of these acquired businesses. NET REVENUES. Net revenues increased from $268.3 million in 1996 to $387.3 million in 1997, an increase of $119.0 million, or 44%. The Company estimates that $94.0 million of this increase in net revenues is attributable to the acquired businesses. The remainder of the increase is primarily attributable to internal revenue growth generated through the Company's sales and marketing efforts. Internal revenue growth, including net revenues of hospital joint ventures 30 31 managed by the Company and accounted for under the equity method, was 13% for 1997. Following is a discussion of the components of net revenues: Sales and Related Services Revenues. Sales and related services revenues increased from $119.3 million in 1996 to $180.2 million in 1997, an increase of $60.9 million, or 51%. This increase is primarily attributable to the acquisition of home health care businesses and internal revenue growth. Rentals and Other Revenues. Rentals and other revenues increased from $142.7 million in 1996 to $200.3 million in 1997, an increase of $57.6 million, or 40%. This increase is primarily attributable to the acquisition of home health care businesses and internal revenue growth. Earnings from Joint Ventures. Earnings from joint ventures increased from $6.4 million in 1996 to $6.9 million in 1997, an increase of $500,000, which was primarily attributable to internal growth, acquired and newly-formed joint ventures. Internal revenue growth of joint ventures was 23% in 1997 compared to 1996, increasing the Company's total internal revenue growth rate by 1%. COST OF SALES AND RELATED SERVICES. Cost of sales and related services increased from $58.6 million in 1996 to $91.2 million in 1997, an increase of $32.6 million, or 56%. This increase was primarily attributable to acquisitions. As a percentage of sales and related services revenues, cost of sales and related services increased from 49% in 1996 to 51% in 1997. This percentage increase was attributable to the change in the mix of sales and related service revenues primarily attributable to the acquired home health care businesses. OPERATING EXPENSES. Operating expenses increased from $138.2 million in 1996 to $197.8 million in 1997, an increase of $59.6 million, or 43%. This increase was primarily attributable to increased costs associated with the Company's increased net revenues. As a percentage of net revenues, operating expenses decreased from 52% in 1996 to 51% in 1997. During the fourth quarter of 1997, operating expenses were higher than budgeted primarily due to the reorganization of the field management structure and management's focus on implementing the restructuring plan. The higher operating expenses were partially offset by the improvement in bad debt expense. Bad debt expense as a percentage of net revenue decreased from 4.3% in 1996 to 3.3% in 1997 as a result of the Company's increased focus on accounts receivable management. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased from $14.7 million in 1996 to $16.0 million in 1997, an increase of $1.3 million, or 9%. As a percentage of net revenues, general and administrative expenses decreased from 5% in 1996 to 4% in 1997 as a result of a larger base of revenues to which to spread the general and administrative expenses. The larger base of revenues is due to internal growth and acquisitions. DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expenses increased from $23.8 million in 1996 to $33.7 million in 1997, an increase of $9.9 million. This 31 32 increase was primarily attributable to depreciation expense and the amortization of goodwill recorded in connection with acquisitions. INTEREST EXPENSE. Interest expense increased from $8.3 million in 1996 to $16.5 million in 1997, an increase of $8.2 million. This increase was attributable to interest expense on increased borrowings under the Bank Credit Facility to fund acquisitions of home healthcare business during 1996 and 1997. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 The operations of acquired centers are included in the operations of the Company from the effective date of each acquisition. Because of the substantial acquisition activity, the comparison of the results of operations between 1996 and 1995 is materially impacted by the operations of these acquired businesses. NET REVENUES. Net revenues increased from $162.4 million in 1995 to $268.3 million in 1996, an increase of $105.9 million, or 65%. The Company estimates that $97.0 million of this increase in net revenues is attributable to the acquired businesses. The remainder of the increase is primarily attributable to Same-store growth generated through the Company's sales and marketing efforts. Same store growth, including net revenues of hospital joint ventures managed by the Company and accounted for under the equity method, was 9% for 1996. Following is a discussion of the components of net revenues: Sales and Related Services Revenues. Sales and related services revenues increased from $70.2 million in 1995 to $119.3 million in 1996, an increase of $49.1 million, or 70%. This increase is primarily attributable to the acquisition of home health care businesses and Same-store revenue growth. Rentals and Other Revenues. Rentals and other revenues increased from $88.2 million in 1995 to $142.7 million in 1996, an increase of $54.5 million, or 62%. This increase is primarily attributable to the acquisition of home health care businesses and Same-store revenue growth. Earnings from Joint Ventures. Earnings from joint ventures increased from $4.0 million in 1995 to $6.4 million in 1996, an increase of $2.4 million. Of this increase, $1.2 million was attributable to acquired and newly-formed joint ventures and $1.2 million was attributable to growth in the Company's existing joint ventures. Same-store revenue growth of joint ventures was 37% in 1996 compared to 1995, increasing the Company's total Same-store revenue growth rate by 4%. COST OF SALES AND RELATED SERVICES. Cost of sales and related services increased from $34.0 million in 1995 to $58.6 million in 1996, an increase of $24.6 million, or 72%. This increase was primarily attributable to acquisitions. As a percentage of sales and related services revenues, cost of sales and related services increased from 48% in 1995 to 49% in 1996. This percentage 32 33 increase was attributable to the change in mix of sales and related service revenues primarily attributable to the acquired home health care businesses. OPERATING EXPENSES. Operating expenses increased from $82.6 million in 1995 to $138.2 million in 1996, an increase of $55.6 million, or 67%. This increase was primarily attributable to increased costs associated with the Company's increased net revenues. As a percentage of net revenues, operating expenses increased from 51% in 1995 to 52% in 1996. Even though field operating expenses remained constant as a percentage of net revenues, slightly higher bad debt expense as a percentage of net revenue was the primary factor contributing to the overall operating expense percentage increase. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased from $11.7 million in 1995 to $14.7 million in 1996, an increase of $3.0 million, or 26%. This increase was primarily attributable to increases in personnel expenses associated with providing support for acquisitions and continued growth. As a percentage of net revenues, general and administrative expenses decreased from 7% in 1995 to 5% in 1996. DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expenses increased from $14.1 million in 1995 to $23.8 million in 1996, an increase of $9.7 million, or 69%. This increase was primarily attributable to depreciation expense and the amortization of goodwill recorded in connection with acquisitions. INTEREST EXPENSE. Interest expense increased from $4.8 million in 1995 to $8.3 million in 1996, an increase of $3.5 million. This increase was due to interest expense on increased borrowings used under the Bank Credit Facility to fund acquisitions of home health care businesses during 1995 and 1996. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company had current assets of $170.8 million and current liabilities of $58.1 million, resulting in working capital of $112.7 million and a current ratio of 2.9x. This compares to working capital of $84.0 million and a current ratio of 3.4x at December 31, 1996. The Company's future liquidity will continue to be dependent upon the relative amounts of current assets (principally cash, accounts receivable and inventories) and current liabilities (principally accounts payable and accrued expenses). In that regard, accounts receivable can have a significant impact on the Company's liquidity. The Company has various types of accounts receivable, such as receivables from patients, contracts, and former owners of acquisitions. The majority of the Company's accounts receivables are patient receivables. Accounts receivable are generally outstanding for longer periods of time in the health care industry than many other industries because of requirements to provide third party payors with additional information subsequent to billing and the time required by such payors to process claims. Certain accounts receivable frequently are outstanding for more than 90 days, particularly where the account 33 34 receivable relates to services for a patient receiving a new medical therapy or covered by private insurance or Medicaid. Net patient accounts receivable were $76.1 million and $102.4 million at December 31, 1996 and December 31, 1997, respectively. This increase is primarily attributable to the acquisitions of home health care businesses and the internal revenue growth net of the $17.7 million in accounts receivable related charges associated with the Medicare oxygen reimbursement reduction response. Average days' sales in accounts receivable was approximately 93 and 88 days' sales outstanding at December 31, 1996, and December 31, 1997, respectively. The decrease is primarily attributable to the accounts receivable reserved in September, 1997 for restructured centers. Net cash provided by operating activities increased from $13.2 million in 1996 to $14.3 million in 1997, an increase of $1.1 million. Net cash used in investing activities increased from $116.2 million in 1996 to $134.1 million in 1997, an increase of $17.9 million. Acquisition expenditures increased from $93.8 million in 1996 to $103.3 million in 1997, an increase of $9.5 million. Capital expenditures increased from $21.2 million in 1996 to $32.5 million in 1997, an increase of $11.3 million. Net cash provided from financing activities increased from $106.1 million in 1996 to $124.6 million in 1997, an increase of $18.5 million. The cash provided from financing activities in 1997 primarily related to proceeds from the Bank Credit Facility, while $68.5 million of the proceeds in 1996 were provided from a public sale of Company stock. The Company's principal capital requirements are for acquisitions of additional home health care companies and expansion of the services provided through its existing home health care centers. The Company has financed and intends to continue to finance these requirements, its net revenue growth, and working capital needs with net cash provided by operations and with borrowings under the Bank Credit Facility. On June 6, 1997, the Company amended and restated its Bank Credit Facility to increase commitments thereunder from $225.0 million to $325.0 million. On December 19, 1997, the Company amended and restated its Bank Credit Facility to increase commitments thereunder from $325.0 million to $400.0 million. The Bank Credit Facility currently includes a $75.0 million five-year term loan and a $325.0 million revolving line of credit. Borrowings under the Bank Credit Facility may be used to finance acquisitions and for other general corporate purposes, subject to the terms and conditions of the credit and security agreements. Most of the Company's operating assets have been pledged as security for borrowings under the Bank Credit Facility. Interest is payable on borrowings under the Bank Credit Facility, at the election of the Company, at either a "Base Lending Rate" or an "Adjusted Eurodollar Rate" (each as defined in the Bank Credit Facility), plus a margin from 0% to 0.625% and from 0.375% to 1.375%, respectively. The Company's ability to borrow under the Bank Credit Facility terminates on December 16, 2002, subject to exceptions set forth therein. As of December 31, 1997, the total loans outstanding under the Bank Credit Facility was approximately $255.4 million and the weighted average borrowing rate was 7.029%. A commitment fee of up to 0.375% per annum (0.375% as of December 31, 1997) is payable by the Company on the undrawn balance. The interest rate and commitment fee vary depending on the Company's leverage ratio, as defined in the Bank Credit Facility. 34 35 The Bank Credit Facility contains various financial covenants, the most restrictive of which relate to measurements of leverage, shareholders' equity, debt-to-equity ratios and interest coverage ratios. The Bank Credit Facility also contains certain covenants which, among other things, impose certain limitations or prohibitions on the Company with respect to the incurrence of certain indebtedness, the creation of security interests on the assets of the Company, the payment of dividends on and the redemption or repurchase of securities of the Company, investments, acquisitions, investments in joint ventures, capital expenditures and sales of Company assets. The Company must generally obtain bank consent for any single acquisition with an aggregate purchase price of $30.0 million or more, and any acquisition which, when combined with all acquisitions completed in the prior 12 months, exceeds $100.0 million and certain other transactions. The Company was in compliance with the covenants at December 31, 1997. IMPLEMENTATION OF FINANCIAL ACCOUNTING STANDARDS Statement of Financial Accounting Standards, "Earnings per Share" ("SFAS 128") has been issued effective for fiscal years ending after December 15, 1997. SFAS No. 128 establishes standards for computing and presenting earnings per share. The Company adopted SFAS No. 128 in the fourth quarter of 1997 and restated all prior year earnings per share. Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") has been issued effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company is required to adopt the provisions of SFAS 130 in 1998 and does not expect adoption thereof to have a material effect on the Company's financial position or results of operations. Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131") has been issued effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that these enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company is required to adopt the provisions of SFAS 131 in the fourth quarter of 1998 and does not expect adoption thereof to have a material effect on the Company's financial position or results of operations. 35 36 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements are contained on pages 40 through 74 of this Report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning directors and executive officers of the Company is incorporated by reference to the Company's definitive proxy statement dated April 8, 1998 ("Proxy Statement") for the annual meeting of stockholders to be held on May 28, 1998. ITEM 11. EXECUTIVE COMPENSATION Executive compensation information is incorporated by reference to the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security ownership of certain beneficial owners and management information is incorporated by reference to the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions of the Company is incorporated by reference to the Proxy Statement. 36 37 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements are contained on pages 40 through 74 of this Report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning directors and executive officers of the Company is incorporated by reference to the Company's definitive proxy statement dated April 8, 1998 ("Proxy Statement") for the annual meeting of stockholders to be held on May 28, 1998. ITEM 11. EXECUTIVE COMPENSATION Executive compensation information is incorporated by reference to the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security ownership of certain beneficial owners and management information is incorporated by reference to the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions of the Company is incorporated by reference to the Proxy Statement. PART IV 36 38 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Financial statements and schedules of the Company and its subsidiaries required to be included in Part II, Item 8 are listed below.
FINANCIAL STATEMENTS FORM 10-K PAGES --------------- Report of Independent Public Accountants 41 Consolidated Balance Sheets, December 31, 1996 and 1997 42 - 43 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996, and 1997 44 - 45 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1995, 1996, and 1997 46 - 48 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996, and 1997 49 - 51 Notes to Consolidated Financial Statements, December 31, 1997 52 - 74 FINANCIAL STATEMENT SCHEDULES Report of Independent Public Accountants S-1 Schedule II -- Valuation and Qualifying Accounts S-2
EXHIBITS The Exhibits filed as part of the Report on Form 10-K are listed in the Index to Exhibits immediately following the financial statement schedules. REPORTS ON FORM 8-K DURING THE LAST QUARTER OF THE YEAR ENDED DECEMBER 31, 1997. None. 37 39 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN HOMEPATIENT, INC. /s/EDWARD K. WISSING --------------------------------------- Edward K. Wissing, President and Chief Executive Officer and Director /s/MARY ELLEN RODGERS --------------------------------------- Mary Ellen Rodgers Chief Financial Officer Date: March 20, 1998 38 40 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/Morris Perlis Chairman March 20, 1998 - - ---------------------------------- Morris A. Perlis /s/Allan Silber Director March 20, 1998 - - ---------------------------------- Allan C. Silber /s/Henry T. Blackstock Director March 20, 1998 - - ---------------------------------- Henry T. Blackstock /s/Joseph Furlong III Director March 20, 1998 - - ---------------------------------- Joseph Furlong III /s/Thomas Dattilo Director March 20, 1998 - - ---------------------------------- Thomas Dattilo /s/Edward Sonshine Director March 20, 1998 - - ---------------------------------- Edward Sonshine /s/Mark Manner Director March 20, 1998 - - ---------------------------------- Mark Manner /s/Edward K. Wissing Chief Executive March 20, 1998 - - ---------------------------------- Officer Edward K. Wissing /s/Mary Ellen Rodgers Chief Financial March 20, 1998 - - ---------------------------------- Officer and Mary Ellen Rodgers Chief Accounting Officer
39 41 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 40 42 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To American HomePatient, Inc.: We have audited the accompanying consolidated balance sheets of AMERICAN HOMEPATIENT, INC. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American HomePatient, Inc. and subsidiaries as of December 31, 1997 and 1996 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Arthur Andersen LLP Nashville, Tennessee February 23, 1998 41 43 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996 ------------- ------------ ------------- CURRENT ASSETS: Cash and cash equivalents $ 12,050,000 $ 7,299,000 Restricted cash 50,000 425,000 Accounts receivable, less allowance for doubtful accounts of $43,862,000 and $18,755,000, respectively 114,386,000 79,460,000 Inventories 25,824,000 21,921,000 Prepaid expenses and other assets 1,423,000 1,353,000 Income tax receivable 8,099,000 872,000 Deferred tax asset 8,998,000 7,470,000 ------------ ------------ Total current assets 170,830,000 118,800,000 ------------ ------------ PROPERTY AND EQUIPMENT, at cost: 146,803,000 95,254,000 Less accumulated depreciation and amortization (66,729,000) (38,384,000) ------------ ------------ Net property and equipment 80,074,000 56,870,000 ------------ ------------ OTHER ASSETS: Excess of cost over fair value of net assets acquired, net 262,294,000 198,193,000 Investment in joint ventures 14,974,000 12,405,000 Deferred financing costs, net 3,967,000 2,761,000 Other assets 26,227,000 6,582,000 ------------ ------------ Total other assets 307,462,000 219,941,000 ------------ ------------ $558,366,000 $395,611,000 ============ ============
(Continued) 42 44 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 ------------------------------------ ------------ ------------ CURRENT LIABILITIES: Current portion of long-term debt and capital leases $ 9,361,000 $ 10,245,000 Trade accounts payable 13,484,000 8,698,000 Other payables 1,343,000 775,000 Accrued expenses: Payroll and related benefits 9,553,000 6,672,000 Restructuring accrual 13,604,000 -- Other 10,764,000 8,398,000 ------------ ------------ Total current liabilities 58,109,000 34,788,000 ------------ ------------ NONCURRENT LIABILITIES: Long-term debt and capital leases, less current portion 291,963,000 139,458,000 Deferred tax liabilities 2,046,000 4,578,000 Other noncurrent liabilities 12,159,000 1,145,000 ------------ ------------ Total noncurrent liabilities 306,168,000 145,181,000 ------------ ------------ COMMITMENTS, CONTINGENCIES AND GUARANTEES SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value; authorized, 5,000,000 shares; none issued and outstanding -- -- Common stock, $.01 par value; authorized, 35,000,000 shares; issued and outstanding, 14,901,000 and 14,677,000 shares, respectively 149,000 147,000 Paid-in capital 171,133,000 166,780,000 Retained earnings 22,807,000 48,715,000 ------------ ------------ Total shareholders' equity 194,089,000 215,642,000 ------------ ------------ $558,366,000 $395,611,000 ============ ============
The accompanying notes are an integral part of these consolidated balance sheets. 43 45 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ----------- ------------- ------------ REVENUES: Sales and related service revenues $180,176,000 $119,266,000 $ 70,240,000 Rentals and other revenues 200,251,000 142,660,000 88,170,000 Earnings from joint ventures 6,850,000 6,422,000 3,961,000 ------------ ------------ ------------ Total revenues 387,277,000 268,348,000 162,371,000 ------------ ------------ ------------ EXPENSES: Cost of sales and related services, excluding depreciation and amortization 97,418,000 58,575,000 34,031,000 Operating 216,532,000 138,213,000 82,608,000 General and administrative 15,953,000 14,664,000 11,704,000 Depreciation and amortization 33,736,000 23,845,000 14,081,000 Interest 16,494,000 8,294,000 4,829,000 Restructuring charge 33,829,000 -- -- Goodwill impairment 8,165,000 -- -- ------------ ------------ ------------ Total expenses 422,127,000 243,591,000 147,253,000 ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES (34,850,000) 24,757,000 15,118,000 ------------ ------------ ------------ PROVISION (BENEFIT) FOR INCOME TAXES: Current (5,979,000) 8,866,000 7,378,000 Deferred (2,963,000) 690,000 (1,349,000) ------------ ------------ ------------ (8,942,000) 9,556,000 6,029,000 ------------ ------------ ------------ NET INCOME (LOSS) $(25,908,000) $ 15,201,000 $ 9,089,000 ============ ============ ============
(Continued) 44 46 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (Continued)
1997 1996 1995 ----------- ----------- ------------ NET INCOME (LOSS) PER COMMON SHARE - BASIC $ (1.75) $ 1.13 $ .86 =========== =========== =========== DILUTED $ (1.75) $ 1.10 $ .84 =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC 14,839,000 13,473,000 10,550,000 =========== =========== =========== DILUTED 14,839,000 13,841,000 10,838,000 =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 45 47 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
COMMON STOCK ----------------------- PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS TOTAL ---------- -------- ----------- ----------- ------------ BALANCE, DECEMBER 31, 1994 8,375,204 $ 83,000 $33,588,000 $24,425,000 $ 58,096,000 ---------- -------- ----------- ----------- ------------ Issuance of shares through exercise of employee stock options 362,475 5,000 3,468,000 -- 3,473,000 Issuance of shares through employee stock purchase plan 26,486 -- 245,000 -- 245,000 Tax benefit of stock options exercised -- -- 1,297,000 -- 1,297,000 Issuance of shares, net of issuance costs 2,722,500 27,000 47,204,000 -- 47,231,000 Net income -- -- -- 9,089,000 9,089,000 ---------- -------- ----------- ----------- ------------ BALANCE, DECEMBER 31, 1995 11,486,665 $115,000 $85,802,000 $33,514,000 $119,431,000 ---------- -------- ----------- ----------- ------------
(Continued) 46 48 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (Continued)
COMMON STOCK ----------------------- PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS TOTAL BALANCE, DECEMBER 31, 1995 11,486,665 $115,000 $ 85,802,000 $33,514,000 $119,431,000 ---------- -------- ------------ ----------- ------------ Issuance of shares through exercise of employee stock options 168,004 2,000 1,981,000 -- 1,983,000 Issuance of shares through employee stock purchase plan 34,007 -- 423,000 -- 423,000 Issuance of shares through exercise of stock warrants 66,600 -- 516,000 -- 516,000 Issuance of shares in connection with an acquisition 446,460 5,000 11,603,000 -- 11,608,000 Tax benefit of stock options exercised -- -- 450,000 -- 450,000 Issuance of shares, net of issuance costs 2,475,000 25,000 66,005,000 -- 66,030,000 Net income -- -- -- 15,201,000 15,201,000 ---------- -------- ------------ ----------- ------------ BALANCE, DECEMBER 31, 1996 14,676,736 $147,000 $166,780,000 $48,715,000 $215,642,000 ========== ======== ============ =========== ============
(Continued) 47 49 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (Continued)
COMMON STOCK ----------------------- PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS TOTAL ---------- -------- ------------ ----------- ------------ BALANCE, DECEMBER 31, 1996 14,676,736 $147,000 $166,780,000 $ 48,715,000 $215,642,000 ========== ======== ============ ============ ============ Issuance of shares through exercise of employee stock options 184,862 2,000 3,125,000 -- 3,127,000 Issuance of shares through employee stock purchase plan 32,152 -- 608,000 -- 608,000 Issuance of shares through exercise of stock warrants 7,500 -- 90,000 -- 90,000 Tax benefit of stock options exercised -- -- 530,000 -- 530,000 Net loss -- -- -- (25,908,000) (25,908,000) ---------- -------- ------------ ------------ ------------ BALANCE, DECEMBER 31, 1997 14,901,250 $149,000 $171,133,000 $ 22,807,000 $194,089,000 ========== ======== ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 48 50 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ------------ ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(25,908,000) $ 15,201,000 $ 9,089,000 Adjustments to reconcile net income (loss) to net cash provided from operating activities: Depreciation and amortization 33,736,000 23,845,000 14,081,000 Equity in earnings of unconsolidated joint ventures (3,476,000) (3,375,000) (2,138,000) Deferred income taxes (2,963,000) 690,000 (1,349,000) Minority interest 244,000 161,000 135,000 Goodwill impairment and write-off 20,411,000 -- -- Other non-cash charges 44,589,000 -- -- Change in assets and liabilities, net of acquisitions: Restricted cash 375,000 (50,000) -- Accounts receivable, net (31,944,000) (14,920,000) (5,956,000) Inventories (999,000) (2,303,000) (1,370,000) Prepaid expenses and other assets 416,000 348,000 (573,000) Income tax receivable (8,520,000) (940,000) -- Trade accounts payable, accrued expenses and other current liabilities (5,982,000) (4,196,000) (6,889,000) Restructuring accrual (4,108,000) -- -- Deferred costs (51,000) (30,000) (55,000) Other assets and liabilities (1,475,000) (1,281,000) 158,000 ------------ ------------ ------------ Net cash provided from operating activities 14,345,000 13,150,000 5,133,000 ------------ ------------ ------------
(Continued) 49 51 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (Continued)
1997 1996 1995 ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired $(103,289,000) $ (93,800,000) $ (94,353,000) Additions to property and equipment, net (32,530,000) (21,157,000) (13,964,000 Distributions to minority interest owners (166,000) (65,000) (135,000) Distributions from (advances to) unconsolidated joint ventures, net 1,839,000 (1,193,000) 240,000 ------------- ------------- ------------- Net cash used in investing activities (134,146,000) (116,215,000) (108,212,000) ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Deferred financing costs (1,859,000) (1,299,000) (1,255,000) Proceeds from long-term debt 133,766,000 47,196,000 56,765,000 Principal payments on debt and capital leases (10,228,000) (8,286,000) (2,614,000) Proceeds from sale of stock, net of issuance costs 2,873,000 68,529,000 50,703,000 ------------- ------------- ------------- Net cash provided from financing activities 124,552,000 106,140,000 103,599,000 ------------- ------------- -------------
(Continued) 50 52 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (Continued)
1997 1996 1995 ----------- ---------- ---------- INCREASE IN CASH AND CASH EQUIVALENTS $ 4,751,000 $3,075,000 $ 520,000 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,299,000 4,224,000 3,704,000 ----------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $12,050,000 $7,299,000 $4,224,000 =========== ========== ========== SUPPLEMENTAL INFORMATION: Cash payments of interest $16,675,000 $8,042,000 $4,171,000 =========== ========== ========== Cash payments of income taxes $ 2,985,000 $9,866,000 $9,573,000 =========== ========== ==========
In connection with the acquisitions of home health care businesses, the Company issued 446,460 shares of common stock in 1996, and debt of $41.7 million, $22.4 million, and $13.5 million in 1997, 1996 and 1995, respectively. The accompanying notes are an integral part of these consolidated financial statements. 51 53 AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 1. ORGANIZATION AND BACKGROUND American HomePatient, Inc. and subsidiaries (the "Company" or "American HomePatient") is a health care services company engaged in the provision of home health care services. The Company's home health care services are comprised of the rental and sale of home medical equipment and home health care supplies, and the provision of infusion therapies and respiratory therapies. As of December 31, 1997, the Company provides these services to patients in the home through 329 branches in 35 states. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations of companies and other entities acquired in purchase transactions are included from the effective dates of their respective acquisitions. Investments in 50% owned joint ventures are accounted for using the equity method. REVENUES The Company's principal continuing business is the operation of home health care centers. Approximately 56%, 59% and 58% of the Company's net revenues in 1997, 1996 and 1995, respectively, are from participation in Medicare and state Medicaid programs. Amounts paid under these programs are generally based on a fixed rate. Revenues are recorded at the expected reimbursement rates when the services are provided, merchandise delivered or equipment rented to patients. Amounts earned under the Medicare and Medicaid programs are subject to review by such third party payors. In the opinion of management, adequate provision has been made for any adjustment that may result from such reviews. Any differences between estimated settlements and final determinations are reflected in operations in the year finalized. Sales and related service revenues are derived from the provision of infusion therapies, the sale of home health care equipment and supplies, the sale of aerosol medications and respiratory therapy equipment and supplies and services related to the delivery of these products. Rentals and other patient revenues are derived from the rental of home health care equipment, enteral pumps and equipment related to the provision of respiratory therapy. 52 54 CASH EQUIVALENTS Cash equivalents consist of highly liquid investments that have an original maturity of less than three months. ACCOUNTS RECEIVABLE The Company's accounts receivable, before allowances, consists of the following components:
DECEMBER 31, --------------------------- 1997 1996 ------------ ----------- Patient receivables: Medicare $ 45,077,000 $31,388,000 All other, principally commercial insurance 101,137,000 63,439,000 ------------ ----------- 146,214,000 94,827,000 Other receivables, principally due from vendors and former owners 12,034,000 3,388,000 ------------ ----------- Total $158,248,000 $98,215,000 ============ ===========
The Company provides credit for a substantial portion of its non-third party reimbursed revenues and continually monitors the creditworthiness and collectibility of amounts due from its clients. The Company is subject to accounting losses from uncollectible receivables in excess of its reserves. PROVISION FOR DOUBTFUL ACCOUNTS The Company includes provisions for doubtful accounts in operating expenses in the accompanying consolidated statements of operations. The provisions for doubtful accounts excluding the restructuring and other special charges of $17,750,000 in 1997 were $12,791,000, $11,450,000 and $5,934,000 in 1997, 1996 and 1995, respectively. INVENTORIES All inventories represent goods or supplies and are priced at the lower of cost (on a first-in, first-out basis) or net realizable value. PROPERTY AND EQUIPMENT Property and equipment are depreciated or amortized primarily using the straight-line method over the estimated useful lives of the assets for financial reporting purposes and the accelerated cost recovery method for income tax reporting purposes. Assets under capital leases are amortized over the term of the lease for financial reporting purposes. The estimated useful lives are as follows: buildings and improvements, 18-30 years; rental equipment, 3-7 years; furniture, fixtures and equipment, 4-5 years; leasehold improvements, 5 years; and delivery equipment, 3-5 years. The provision for depreciation includes the amortization of equipment and vehicles under capital leases. 53 55 In 1997, 1996 and 1995, depreciation expense includes $20,344,000, $15,059,000 and $9,645,000, respectively, related to the depreciation of rental equipment. Maintenance and repairs are charged against income as incurred, and major betterments and improvements are capitalized. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and the resulting gain or loss is reflected in the consolidated statements of operations. Property and equipment obtained through purchase acquisitions are stated at their estimated fair value determined on their respective dates of acquisition. EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED The excess of cost over fair value of net assets acquired ("goodwill") is amortized over 40 years using the straight-line method. Accumulated amortization related to goodwill totaled $12,296,000 and $6,968,000 as of December 31, 1997 and 1996, respectively. The Company annually evaluates the realizability of goodwill by utilizing an operating income realization test for the applicable businesses acquired and by instituting plans and strategies to improve performance and realization. In addition, the Company considers the effects of external changes to the Company's business environment, including competitive pressures, market erosion and technological and regulatory changes. The Company believes its estimated goodwill life is reasonable given the continuing movement of patient care to noninstitutional settings, expanding demand due to demographic trends, the emphasis of the Company on establishing significant coverage in each local and regional market, the consistent practice with other home care companies and other factors. In connection with the restructuring as described in Note 3, the Company wrote-down $8.1 million of goodwill as required under SFAS No. 121 based upon management's estimate of the impact of the announced Medicare oxygen reimbursement reductions on the Company's continuing operations. Also, the Company wrote off $12.2 million of goodwill related to the closure of certain operating centers which is reflected as part of the restructuring charge in the consolidated statements of operations. DEFERRED FINANCING COSTS Financing costs are amortized primarily using the straight-line method over the periods of the related indebtedness. OTHER ASSETS The estimated value of non-compete agreements, net of accumulated amortization of $1,850,000 and $1,504,000 as of December 31, 1997 and 1996, respectively, are amortized over the lives of the agreements, generally periods of up to seven years. As of December 31, 1997 and 1996, the net amounts of non-compete agreements of $711,000 and $1,056,000, respectively, are reflected in other assets in the accompanying consolidated balance sheets. Other intangibles are amortized over their expected benefit period of two to three years. The net balance at December 31, 1997 and 1996 is $1,902,000 and $1,791,000, 54 56 respectively, and is reflected in other assets in the accompanying consolidated balance sheets. Receivables under split dollar value life insurance arrangements of $14,957,000 at December 31, 1997, were recorded in connection with the acquisitions of certain home health care businesses and are reflected in other assets. The Company owes premiums on the split dollar value life insurance policies of $10,770,000 at December 31, 1997 which are classified as other noncurrent liabilities. INCOME TAXES The Company has adopted Statement of Financial Accounting Standards No. 109 which requires an asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for differences between financial reporting and tax bases of assets and liabilities, with the primary differences related to the allowance for doubtful accounts, accrued liabilities, depreciation methods and periods and deferred cost amortization methods. See Note 9 for additional information related to the provisions for income taxes. STOCK BASED COMPENSATION Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method as prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), and related Interpretations. Under APB Opinion No. 25, no compensation cost related to stock options has been recognized because all options are issued with exercise prices equal to the fair market value at the date of grant. See Note 8 for further discussion. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accruals approximate fair value because of the short-term nature of these items. Based on the current market rates offered for similar debt of the same maturities, the carrying amount of the Company's long-term debt, including current portion, also approximates fair value at December 31, 1997. 55 57 ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") has been issued effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company is required to adopt the provisions of SFAS 130 in 1998 and does not expect adoption thereof to have a material effect on the Company's financial position or results of operations. Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131") has been issued effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and require that these enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company is required to adopt the provisions of SFAS 131 in the fourth quarter of 1998 and does not expect adoption thereof to have a material effect on the Company's financial position or results of operations. RECLASSIFICATIONS Certain reclassifications have been made to the 1995 and 1996 consolidated financial statements to conform to the 1997 presentation. 3. MEDICARE OXYGEN REIMBURSEMENT REDUCTIONS AND RELATED RESTRUCTURING In August, Congress enacted and President Clinton signed the Balanced Budget Act of 1997 which will reduce the Medicare reimbursement rate for oxygen related services by 25 percent on January 1, 1998, and by another five percent in 1999. In addition, Consumer Price Index increases in oxygen reimbursement rates will not resume until the year 2003. American HomePatient is one of the nation's largest providers of home oxygen services to patients, many of whom are Medicare recipients, and is therefore significantly affected by this legislation. Medicare oxygen reimbursements account for approximately 23.5 percent of the Company's revenues. On September 25, 1997, the Company announced initiatives to aggressively respond to planned Medicare oxygen reimbursement reductions by fundamentally reshaping the Company for long-term growth and value creation. More than 100 of the Company's total operating and billing locations will be impacted by the planned activities. The specific actions resulted in pre-tax accounting charges in the third quarter of 1997 of $65.0 million due to the closure, consolidation, or scaling back of approximately 20 percent of the Company's total operating centers, the closure or scaling back of nine billing centers, the elimination of four operating regions, the scaling back or elimination of marginal products and services at numerous locations, and the related termination of approximately 350 employees in the affected operating and billing centers. These activities are expected to be substantially completed by June 1998. 56 58 The $65.0 million pre-tax charges recorded in the third quarter of 1997 specifically related to the write-down of goodwill and other non current assets ($8.2 million), the closure, consolidation, scaling back, or elimination of services at selected locations ($44.8 million), and the anticipated negative impact on assets of the remaining operating locations ($12.0 million). The write-off of goodwill and other non current assets is required under SFAS No. 121 based upon management's estimate of the impact of the announced Medicare oxygen reimbursement reductions on the Company's continuing operations. Management's projections of future operations considering the reduced reimbursement rates for oxygen related services indicated that the carrying value of goodwill and other non current assets should be written down by $8.2 million. The closure, consolidation, scaling back, or elimination of services at more than 100 of the Company's operating and billing centers resulted in the write-off of goodwill and other intangible assets specifically identified with affected locations ($12.2 million), the accrual of estimated employee severance and related exit costs ($6.7 million), the accrual of estimated facility exit costs including future lease costs, the write-off of leasehold improvements, and the write-down of furniture and equipment ($6.1 million), the write-down of accounts receivable to estimated realizable value ($8.7 million), the write-down of inventory to estimated realizable value ($2.2 million), the write-down of rental equipment to estimated realizable value ($2.8 million), the termination of related management contracts ($3.0 million), and other exit costs ($3.1 million). The accounting charges discussed in this paragraph are recorded in the accompanying 1997 consolidated statements of operations as cost of sales ($2,204,000), operating expenses ($8,729,000), and restructuring charge ($33,829,000). Due to the comprehensive nature of this restructuring, including the consolidation of regional responsibilities, reorganization of the field management structure, refinements and modifications of existing procedures in all locations and additional management attention required to accomplish the restructuring in the desired timeframe, negative impacts are anticipated in the remaining operating locations relative to realization of accounts receivable, inventories and rental equipment, for which an additional $12.0 million charge was recorded. This accounting charge is recorded in the accompanying 1997 consolidated statements of operations as cost of sales ($3,051,000) and operating expenses ($9,022,000). The total accounting charges discussed above are recorded in the accompanying 1997 consolidated statements of operations in the following classifications: Cost of sales $ 5,255,000 Operating expenses 17,751,000 Restructuring charge 33,829,000 Goodwill and other intangible impairments 8,165,000 ----------- $65,000,000 ===========
57 59 During the fourth quarter of 1997, the following actions occurred related to the restructuring: (i) 155 employees were terminated; (ii) 47 operating centers were closed; (iii) 5 billing locations were closed and (iv) 44 operating centers were consolidated, scaled back or had marginal products and services eliminated. Also, the Company revamped its field management structure and eliminated an entire layer of management. The expected cash payments related to the restructuring charge accrued on September 25, 1997 were approximately $17.7 million. During the fourth quarter of 1997, $4.1 million was charged against the related accruals as costs were incurred and payments were made. The remaining accrual at December 31, 1997 primarily represents estimated employee severance and related exit costs ($4.1 million), estimated facility exit costs ($4.5 million), termination of management contracts ($3.0 million) and other exit costs ($2.0 million). 4. INVESTMENT IN JOINT VENTURE PARTNERSHIPS The Company owns 50% of sixteen home health care businesses (the "Partnerships"). The remaining 50% of each business is owned by local hospitals within the same community as the joint ventures. The Company is solely responsible for the management of these businesses and receives management fees ranging from 3% to 15% based on revenues or cash collections. The Company provides accounting and receivable billing services to the Partnerships. The Partnerships are charged for their share of such costs based on contract terms. The Company's earnings from joint ventures include equity in earnings, management fees and fees for accounting and receivable billing services. The Company's investment in unconsolidated joint ventures includes receivables from joint ventures of $2,289,000 and $1,807,000 at December 31, 1997 and 1996, respectively. The Company guarantees a mortgage payable of one of the Partnerships. The balance of the guaranteed debt at December 31, 1997 is $469,000. 58 60 Summarized financial information of the Partnerships from the respective effective dates on a combined basis is as follows:
DECEMBER 31, DECEMBER 31, 1997 1996 ------------ ------------ Accounts receivable, net $12,902,000 $10,112,000 Other current assets 5,512,000 1,682,000 Property and equipment, net 12,551,000 9,351,000 Other assets 1,364,000 813,000 ----------- ----------- Total assets $32,329,000 $21,958,000 =========== =========== Accounts payable $ 1,236,000 $ 740,000 Accrued payroll and other 5,600,000 1,084,000 Partners' capital 25,493,000 20,134,000 ----------- ----------- Total liabilities and partners' capital $32,329,000 $21,958,000 =========== =========== Net sales and rental revenues $44,898,000 $34,756,000 ----------- ----------- Cost of sales 7,513,000 7,696,000 Operating and management fees 25,952,000 17,519,000 Depreciation, amortization and interest expense 4,342,000 2,793,000 ----------- ----------- Total expenses 37,807,000 28,008,000 ----------- ----------- Pre-tax income $ 7,091,000 $ 6,748,000 =========== ===========
The Company's ownership percentage of undistributed earnings of the Partnerships at December 31, 1997 and 1996 is $6,653,000 and $4,823,000, respectively. For federal and state income tax reporting purposes, each partner reports their share of the profits and losses of the Partnerships. 5. ACQUISITIONS 1997 ACQUISITIONS Effective in December 1997, the Company acquired the stock of National Medical Systems, Inc. ("NMS") for $34.1 million in notes payable to sellers and $9.9 million in assumed liabilities. In February 1998, $33.1 million of the notes payable to sellers was funded from operations and draws on the Bank Credit Facility (see discussion at Note 7). NMS consists of 35 branches. Additionally, effective in 1997, the Company acquired 27 home health care businesses consisting of 63 branches. The aggregate purchase price included cash of $88.2 million, assumed liabilities of $18.2 million and notes payable to sellers of $7.6 million. The cash amounts have been funded from operations and draws on the Bank Credit Facility (see discussion at Note 7). Of the 98 branches acquired in 1997, the Company has consolidated 10 branches within other Company locations. 59 61 1996 ACQUISITIONS Effective in 1996, the Company acquired 40 home health care businesses consisting of 101 branches. The aggregate purchase price included cash of $103.2 million, assumed liabilities of $15.4 million, notes payable to sellers of $7.6 million and 446,460 shares of the Company's common stock. The cash amounts have been funded from operations, draws on the Bank Credit Facility (see discussion at Note 7) and the public offering of common shares (see discussion at Note 8). Of the 101 branches acquired in 1996, the Company has consolidated 20 branches with other Company locations. The allocation of the aggregate purchase price of the 1997 and 1996 acquisitions is summarized as follows:
1997 1996 ------------ ------------ Net current and other assets $ 28,546,000 $ 24,877,000 Fixed assets 23,182,000 16,107,000 Goodwill, noncompete agreements and other intangibles 106,306,000 96,898,000 ------------ ------------ $158,034,000 $137,882,000 ============ ============
The purchase prices for the above acquisitions were allocated to the underlying assets based on their estimated relative fair values. Certain of the assets acquired in 1997 are currently being evaluated and final allocations of the purchase prices will be made in 1998. Management believes that the final allocations will not materially affect the Company's results of operations. The consolidated statements of operations include the results of operations of the acquired businesses from the respective dates of acquisition of the controlling interests. The following unaudited pro forma information assumes the acquisitions described above had occurred as of the beginning of the respective periods:
YEAR ENDED DECEMBER 31, -------------------------- 1997 1996 -------- -------- (in thousands except share data) Net revenues $443,062 $426,985 ======== ======== Net income (loss) from operations $(22,637) $ 22,139 ======== ======== Net income (loss) from operations per common share - basic $ (1.53) $ 1.61 ======== ======== Net income (loss) from operations per common share - diluted $ (1.53) $ 1.57 ======== ======== Weighted average common shares outstanding - basic 14,839 13,772 ======== ======== Weighted average common shares outstanding - diluted 14,839 14,140 ======== ========
60 62 6. PROPERTY AND EQUIPMENT Property and equipment, at cost, consists of the following:
DECEMBER 31, ---------------------------- 1997 1996 ------------ ----------- Land $ 671,000 $ 902,000 Buildings and improvements 7,841,000 6,207,000 Rental equipment 113,166,000 74,234,000 Furniture, fixtures and equipment 20,837,000 11,053,000 Delivery vehicles 4,288,000 2,858,000 ------------ ----------- $146,803,000 $95,254,000 ============ ===========
Property and equipment under capital leases are included under the various equipment categories. 61 63 7. LONG-TERM DEBT AND LEASE COMMITMENTS LONG-TERM DEBT AND CAPITAL LEASES Long-term debt and capital lease obligations consist of the following:
DECEMBER 31, -------------------------- 1997 1996 ------------ ------------ Secured Revolving Line of Credit $213,613,000 $ 36,755,000 Secured Term Loan 75,000,000 100,000,000 Notes payable, primarily secured with acquired assets, with interest rates primarily from 6.5% to 9.5%, principal and interest due monthly or quarterly, maturities through 2016 1,107,000 2,583,000 Mortgage note payable, interest at 8%, principal and interest due monthly, with balloon payment of $442,000 due July 1, 2004 584,000 602,000 Notes payable, primarily secured with acquired assets, with interest rates from 7% to 8%, interest due quarterly, principal payment due at maturity date, final maturities in 1998 7,292,000 7,156,000 Acquisition note payable, interest at 7.0%, principal and interest due on August 26, 1998 1,000,000 -- Acquisition note payable, interest at 7.0%, principal and interest due on February 4, 2000 1,000,000 -- Acquisition note payable, interest at 8.0%, principal and interest due on July 11, 1997 -- 1,500,000 First mortgage note payable, interest at 8.5%, principal and interest due monthly through 2003, with call provisions beginning in 1998 -- 481,000 Capital lease obligations, monthly principal and interest payments until 2001 1,728,000 626,000 ----------- ------------ 301,324,000 149,703,000 Less current portion (9,361,000) (10,245,000) ------------ ------------ $291,963,000 $139,458,000 ============ ============
62 64 Principal payments required on long-term debt (excluding capital leases) for the next five years and thereafter beginning January 1, 1998 are as follows:
1998 $ 8,611,000 1999 3,075,000 2000 10,076,000 2001 21,075,000 2002 255,688,000 Thereafter 1,071,000 ------------ $299,596,000 ============
On December 19, 1997, the Company entered into a Fourth Amended and Restated Bank Credit Facility (the "Bank Credit Facility") to increase commitments thereunder to $400.0 million. This Bank Credit Facility includes a $75.0 million five-year secured term loan (the "Secured Term Loan") and a $325.0 million five-year secured revolving line of credit (the "Secured Revolving Line of Credit"). Interest is payable on borrowings under the Bank Credit Facility, at the election of the Company, at either a "Base Lending Rate" or an "Adjusted Eurodollar Rate" (each as defined in the Bank Credit Facility), plus a margin from 0% to 1.00% and from 0.5% to 2.00%, respectively. As of December 31, 1997, borrowings under the Bank Credit Facility bore interest at the banks' Adjusted Eurodollar Rate plus 1.00%. The weighted average borrowing rate was 7.029%. A commitment fee of up to 0.375% per annum (0.375% as of December 31, 1997) is payable by the Company on the undrawn balance. The interest rate and commitment fee are based on the Company's leverage ratio, as such ratio is defined in the Bank Credit Facility agreement. Subsequent to year end, the Company refinanced $31,000,000 of notes payable to shareholders of acquired companies using the Secured Revolving Line of Credit. The refinanced notes are classified in the consolidated balance sheet according to the terms of the Secured Revolving Line of Credit. The remaining notes to shareholders of acquired companies are classified according to the terms of the notes. Commencing on September 15, 1999, the Company shall make quarterly principal payments on the Secured Term Loan of $1.5 million per quarter through and including June 15, 2000; $3.0 million per quarter through and including March 15, 2001; $6.0 million per quarter through and including June 15, 2002; and $15.0 million per quarter through and including December 16, 2002. The Secured Revolving Line of Credit does not require principal payments until maturity at December 16, 2002. The Bank Credit Facility contains various financial covenants, the most restrictive of which relate to measurements of leverage, shareholders' equity, debt-to-equity ratios and interest coverage ratios. The Bank Credit Facility also contains certain covenants which, among other restrictions, impose certain limitations or prohibitions on the Company with respect to the incurrence of certain indebtedness, the creation of security interests on the assets of the Company, the payment of dividends on and the redemption or repurchase of securities of the Company, investments, acquisitions, advances, capital expenditures and sales of Company assets. The Company must generally obtain bank consent for (i) any single acquisition with an aggregate 63 65 purchase price of $30.0 million or more or (ii) any acquisition which when combined with all acquisitions completed in the prior twelve months exceeds $100.0 million. The Company was in compliance with the covenants as of December 31, 1997. Most of the Company's operating assets have been pledged as security for borrowings under the Bank Credit Facility. CAPITAL LEASE COMMITMENTS The Company leases certain equipment under capital leases. Future minimum rental payments required on capital leases for the next five years beginning January 1, 1998, less amounts representing interest, are as follows:
1998 $ 869,000 1999 617,000 2000 292,000 2001 101,000 2002 52,000 ---------- 1,931,000 Less amounts representing interest 203,000 ---------- $1,728,000 ==========
OPERATING LEASE COMMITMENTS The Company has noncancelable operating leases on certain land, vehicles, buildings and equipment. The approximate minimum future rental commitments on the operating leases for the next five years beginning January 1, 1998 are as follows:
1998 $ 9,796,000 1999 7,628,000 2000 5,187,000 2001 3,234,000 2002 1,581,000 Thereafter 1,459,000 ----------- $28,885,000 ===========
Rent expense for all operating leases was approximately $13,811,000, $8,356,000 and $5,651,000 in 1997, 1996 and 1995, respectively. 64 66 8. SHAREHOLDERS' EQUITY AND STOCK PLANS NONQUALIFIED STOCK OPTION PLANS Under the 1991 Nonqualified Stock Option Plan (the "Plan"), as amended, 3,200,000 shares of common stock have been reserved for issuance upon exercise of options granted thereunder. The maximum term of any option granted pursuant to the Plan is ten years. Shares subject to options granted under the Plan which expire, terminate or are canceled without having been exercised in full become available again for future grants. An analysis of stock options outstanding is as follows:
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE --------- ---------------- OUTSTANDING AT DECEMBER 31, 1994 581,250 $ 9.21 Granted 518,250 $ 16.51 Exercised 362,475 $ 9.28 Canceled 1,125 $ 16.50 --------- --------- OUTSTANDING AT DECEMBER 31, 1995 735,900 $ 14.16 Granted 1,011,500 $ 18.10 Exercised 168,004 $ 11.81 Canceled 4,001 $ 17.50 --------- --------- OUTSTANDING AT DECEMBER 31, 1996 1,575,395 $ 16.93 Granted 267,000 $ 21.64 Exercised 184,862 $ 15.00 Canceled 54,475 $ 19.57 --------- --------- OUTSTANDING AT DECEMBER 31, 1997 1,603,058 $ 17.85 ========= ========= EXERCISABLE AT DECEMBER 31, 1997 1,062,388 =========
31,638 options outstanding at December 31, 1997 have exercise prices of $6 and a weighted average remaining contractual life of 3.75 years. Each of these are exercisable at year end. 37,900 options outstanding at December 31, 1997 have exercise prices of $10 to $11.5, a weighted average exercise price of $10.05 and a weighted average remaining contractual life of 6.45 years. Each of these are exercisable at year end. 1,202,520 options outstanding at December 31, 1997 have exercise prices of $15.83 to $17.5, a weighted average exercise price of $17.18 and a weighted average remaining contractual life of 7.70 years. Of these, 872,308 are exercisable at year end and have a weighted average exercise price of $17.10. 331,000 options outstanding at December 31, 1997 have exercise prices of $20.44 to $28.00 a weighted average exercise price of $22.31 and a weighted average remaining contractual life of 8.83 years. Of these, 120,542 are exercisable at year end and have a weighted average exercise price of $22.95. The options granted prior to 1995 are fully vested and expire in ten years. Options granted during 1995 to all employees except officers and directors have a three year 65 67 vesting period, and expire in ten years. Options granted during 1996 have a two year vesting period, and expire in ten years. Options granted during 1997 have two and three year vesting periods, and expire in ten years. As of December 31, 1997, 408,351 shares remain available for future grants of options under the Plan. Effective May 17, 1995, the Company's Board of Directors approved the adoption of the 1995 Nonqualified Stock Option Plan for Directors (the "1995 Plan"). Under the 1995 Plan, 300,000 shares of common stock have been reserved for issuance upon exercise of options granted thereunder. The maximum term of any option granted pursuant to the 1995 Plan is ten years. Shares subject to options granted under the Plan which expire, terminate or are canceled without having been exercised in full become available for future grants. In 1995, the Company granted 31,500 shares of common stock under the 1995 Plan at exercise prices of $19.67 and $20.67. In 1996, the Company granted 24,000 shares of common stock at an exercise price of $26.25. In 1997, the Company granted 24,000 shares of common stock at an exercise price of $21.06. The issued options are fully vested and expire in ten years. The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company's stock option and employee stock purchase plans been determined based on the fair value at the grant date of awards in 1997, 1996 and 1995 consistent with the provisions of SFAS No. 123, the Company's net income (loss) and net income (loss) per common share would have been reduced to the pro forma amounts indicated below:
1997 1996 1995 ------------ ----------- ---------- Net income (loss) - as reported $(25,908,000) $15,201,000 $9,089,000 Net income (loss) - pro forma (31,326,000) 10,521,000 7,659,000 Net income (loss) per common share - as reported Basic (1.75) 1.13 .86 Diluted (1.75) 1.10 .84 Net income (loss) per common share - pro forma Basic (2.11) .78 .73 Diluted (2.11) .77 .72
Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The weighted average fair value of options granted were $13.31, $11.07 and $10.82 for 1997, 1996 and 1995, respectively. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 1997, 1996 and 1995: dividend yield of 0.0%; expected volatility of 38.0%; expected lives of 10 years; and risk-free interest rate range of 5.7% to 6.5%, 5.6% to 6.8% and 5.5% to 7.7% for 1997, 1996 and 1995, respectively. 66 68 EMPLOYEE STOCK PURCHASE PLAN On November 5, 1992, the Company's Board of Directors approved the Company's 1993 Stock Purchase Plan and reserved 750,000 shares for issuance under the plan. The plan was approved by the Company's shareholders on May 7, 1993. Employees may purchase stock, subject to certain limitations, at 85% of the lower of the closing market price at the beginning or at the end of each plan year, which is the last day of February. As of December 31, 1997, 135,559 shares have been issued under this plan. WARRANTS The Company issued warrants in 1993 for 12,000 shares of common stock at $8.33 per share in relation to consulting services received by the Company. The Company issued stock warrants in 1994 for 96,267 shares of common stock at $7.33 to $12.00 per share in relation to 1994 acquisitions. In 1997, warrants were exercised for 7,500 shares at $12.00 per share. COMMON STOCK In May 1996, the Company issued 1,650,000 shares of its common stock (on a pre-split basis) to the public (the "1996 Secondary Offering") at a price of $42.00 per share before underwriting discounts and expenses. Net of discounts and expenses, the Company realized approximately $66 million from the 1996 Secondary Offering. Of the 1996 Secondary Offering proceeds, approximately $59 million was applied to reduce outstanding borrowings under the Secured Revolving Line of Credit and the remainder was used to fund acquisitions. In April 1995, the Company issued 1,815,000 shares of common stock (on a pre-split basis) to the public (the "Secondary Offering") at a price of $28.00 per share before underwriting discounts and expenses. Net of discounts and expenses, the Company realized approximately $47.2 million from the Secondary Offering. The proceeds were used in part to reduce outstanding borrowings under the Secured Revolving Line of Credit and to fund acquisitions. The Company completed a 3-for-2 common stock split dividend effective with a record date at close of trading on June 28, 1996. All amounts shown in the financial statements related to common shares outstanding, weighted average common shares outstanding, net income per share, stock options, and warrants have been adjusted to reflect this stock split. PREFERRED STOCK The Company's certificate of incorporation was amended in 1996 to authorize the issuance of up to 5,000,000 shares of preferred stock. The Company's board of directors is authorized to establish the terms and rights of each such series, including the voting powers, designations, preferences, and other special rights, qualifications, limitations or restrictions thereof. 67 69 EARNINGS PER SHARE In the fourth quarter of 1997, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS No. 128 establishes standards for computing and presenting earnings per share. Under the standards established by SFAS 128, earnings per share is measured at two levels: basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares after considering the additional dilution related to convertible preferred stock, convertible debt, options and warrants. Net income per common share for prior periods have been restated to comply with SFAS 128. In computing diluted earnings per share, the outstanding stock warrants and stock options are considered dilutive using the treasury stock method. The following table information is necessary to calculate earnings per share for the years ending December 31, 1997, 1996 and 1995:
1997 1996 1995 ------------ ----------- ----------- Net income (loss) $(25,908,000) $15,201,000 $ 9,089,000 ============ =========== =========== Weighted average common shares outstanding 14,839,000 13,473,000 10,550,000 Effect of dilutive options and warrants -- 368,000 288,000 ------------ ----------- ----------- Adjusted diluted common shares outstanding 14,839,000 13,841,000 10,838,000 ============ =========== =========== Net income (loss) per common share - Basic $ (1.75) $ 1.13 $ 0.86 ============ =========== =========== - Diluted $ (1.75) $ 1.10 $ 0.84 ============ =========== ===========
68 70 9. INCOME TAXES The provision (benefit) for income taxes is comprised of the following components:
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------- 1997 1996 1995 ------------ ---------- ---------- Current Federal $(5,702,000) $8,039,000 $ 6,527,000 State (277,000) 827,000 851,000 ----------- ---------- ----------- (5,979,000) 8,866,000 7,378,000 ----------- ---------- ----------- Deferred Federal (2,826,000) 626,000 (1,193,000) State (137,000) 64,000 (156,000) ----------- ---------- ----------- (2,963,000) 690,000 (1,349,000) ----------- ---------- ----------- Provision (benefit) for income taxes $(8,942,000) $9,556,000 $ 6,029,000 =========== ========== ===========
A reconciliation of taxes computed at statutory income tax rates is as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ------------ ---------- ---------- Provision (benefit) for federal income taxes at statutory rate $(12,198,000) $8,665,000 $5,216,000 State income taxes, net of federal tax benefit (592,000) 371,000 545,000 Other, principally non-deductible goodwill 3,848,000 520,000 268,000 ------------ ---------- ---------- Provision (benefit) for income taxes $ (8,942,000) $9,556,000 $6,029,000 ============ ========== ==========
69 71 The net deferred tax assets and liabilities, at the respective income tax rates, are as follows:
DECEMBER 31, -------------------------- 1997 1996 ----------- ------------ Current deferred tax asset: Accrued restructuring liabilities $ 5,346,000 $ -- Accounts receivable reserves 403,000 5,936,000 Accrued liabilities and other 3,249,000 1,534,000 ----------- ----------- Net current deferred tax asset $ 8,998,000 $ 7,470,000 =========== =========== Noncurrent deferred tax asset: Valuation reserves $ 2,163,000 $ 122,000 Employee benefit plan deposits 354,000 101,000 Other 1,155,000 -- ----------- ----------- $ 3,672,000 $ 223,000 ----------- ----------- Noncurrent deferred tax liability: Tax amortization in excess of financial reporting amortization $(1,685,000) $(2,448,000) Acquisition costs (2,575,000) (1,923,000) Tax depreciation in excess of financial reporting depreciation (1,455,000) -- Other (3,000) (430,000) ----------- ----------- (5,718,000) (4,801,000) ----------- ----------- Net noncurrent deferred tax liability $(2,046,000) $(4,578,000) =========== ===========
In 1997, 1996 and 1995 the Company realized tax deductions resulting from employees' exercise of non-qualified stock options. Tax benefits of $530,000, $450,000 and $1,297,000 respectively, have been recorded to paid-in capital. 10. COMMITMENTS AND CONTINGENCIES LITIGATION There is certain known or possible litigation incidental to the Company's business which, in management's opinion, will not have a material adverse effect on the Company's results of operations or financial condition. Professional liability insurance up to certain limits is carried by the Company for coverage of such claims. See Note 11 for further discussion. 70 72 EMPLOYMENT AND CONSULTING AGREEMENTS The Company has employment agreements with certain members of management which provide for the payment to these members of amounts up to one and one-half times their annual compensation in the event of a termination without cause, a constructive discharge (as defined) or upon a change in control of the Company (as defined). In addition, upon such an event, the members may elect to require the Company to purchase options granted to them for a purchase price equal to the difference between the fair market value of the Company's common stock at the date of termination and the stated option exercise price. The terms of such agreements are from one to three years and automatically renew for one year if not terminated by the employee or the Company. The maximum contingent liability under these agreements is approximately $3.4 million. The Company has consulting agreements with certain former owners of businesses acquired by the Company. These agreements require payments to be made to the former owners in the event of cancellation of the consulting agreements without cause. The maximum contingent liability under these agreements is approximately $560,000. CONTINGENCIES The Company is self-insured for the first $250,000, on a per claim basis, for workers' compensation claims and for the first $100,000 or $150,000 (depending on the plan chosen by the employee), on a per claim basis, for health insurance for substantially all employees. The Company provides reserves for the settlement of outstanding claims at amounts believed to be adequate. The differences between actual settlements and reserves are included in expense in the year finalized. LETTERS OF CREDIT The Company has in place a letter of credit totaling $375,000 securing obligations with respect to its workers' compensation self-insurance program. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN The Company has established a Supplemental Executive Retirement Plan (the "SERP") to provide retirement benefits for officers and employees of the Company at the level of manager and above who have been designated for participation by the President of the Company. Participants in the SERP will be eligible to receive benefits thereunder after reaching normal retirement age which is defined in the SERP as either (i) age 65, (ii) age 60 and 10 years of service, or (iii) age 55 and 15 years of service. Under the SERP, participants can defer up to 6% of his or her base pay. The Company makes matching contributions of 100% of the amount deferred by each participant. 71 73 Benefits under the SERP become fully vested upon the participant reaching normal retirement age or the participant's disability or death. In addition, if there is a change in control of the Company as defined in the SERP, all participants shall be fully vested and each participant shall be entitled to receive his or her benefits under the SERP upon termination of employment. The SERP trust funds are at risk of loss. Should the Company become insolvent, its creditors would be entitled to a claim to the funds superior to the claim of SERP participants. 401K RETIREMENT SAVINGS PLAN The Company has a 401K Retirement Savings Plan (the "401K"), administered by Pan American Life Insurance Company, to provide a tax deferred retirement savings plan to its employees. To qualify employees must be 21 years of age and over, with twelve months of continuous employment and must work at least twenty hours per week. The 401K is 100% employee funded with contributions limited to 1% to 15% of compensation each pay period. HEALTH CARE INDUSTRY The health care industry is subject to numerous laws and regulations of Federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Recently, government activity has increased with respect to investigation and allegations concerning possible violations of fraud and abuse statutes and regulations by health care providers. Violations of these laws and regulations could result in expulsion from government health care programs together with the imposition of significant fines and penalties, as well as significant repayment for patient services previously billed. Management believes that the Company is in compliance with fraud and abuse as well as other applicable government laws and regulations. Compliance with such laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time. On February 12, 1998, a subpoena from the Office of Inspector General of the Department of Health and Human Services ("OIG") was served on the Company at its Pineville, Kentucky center in connection with an investigation relating to possible improper claims for Medicare payment. The Company has retained experienced health care counsel to represent it in this connection and intends to fully cooperate. Although the Company's counsel has conducted an initial meeting with governmental officials, this matter is still in its preliminary stages. In addition the Company from time to time receives notices and subpoenas from various governmental agencies concerning their plans to audit the Company or requesting information regarding certain aspects of the Company's business, and the Company cooperates with the various agencies in responding to such requests. While the government has broad authority to enforce applicable laws and regulations, and therefore the scope and outcome of these investigations and inquiries cannot be predicted with certainty, management does not believe at the present time that any pending investigations or inquiries will have a material adverse impact on the Company. 72 74 11. PROFESSIONAL LIABILITY INSURANCE The Company's professional liability policies are on an occurrence basis and are renewable annually with per claim coverage limits of up to $1,000,000 per occurrence and $3,000,000 in the aggregate. The Company maintains a commercial general liability policy which includes product liability coverage on the medical equipment that it sells or rents with per claim coverage limits of up to $1,000,000 per occurrence with a $1,000,000 product liability annual aggregate and a $2,000,000 general liability annual aggregate. The Company also maintains excess liability coverage with a limit of $50,000,000 per occurrence and $50,000,000 in the aggregate. While management believes the manufacturers of the equipment it sells or rents currently maintain their own insurance, and in some cases the Company has received evidence of such coverage and has been added by endorsement as additional insured, there can be no assurance that such manufacturers will continue to do so, that such insurance will be adequate or available to protect the Company, or that the Company will not have liability independent of that of such manufacturers and/or their insurance coverage. There can be no assurance that any of the Company's insurance will be sufficient to cover any judgments, settlements or cost relating to any pending or future legal proceedings or that any such insurance will be available to the Company in the future on satisfactory terms, if at all. If the insurance carried by the Company is not sufficient to cover any judgments, settlements or cost relating to pending or future legal proceedings, the Company's business and financial condition could be materially, adversely affected. 12. RELATED PARTY TRANSACTIONS Colman Furlong & Co., a merchant banking firm ("Colman Furlong") of which a director of the Company is a partner, was engaged in 1995 to assist in an acquisition and an increase in the Secured Revolving Line of Credit for which Colman Furlong was paid $617,000. Effective January 1, 1992 and for a term of one year, the Company entered into a consulting agreement with the then chairman of the Company and the chairman and chief executive officer of Counsel Corporation ("Counsel"). The agreement has been renewed each year through 1997. The agreement provides for a base consulting fee of $20,000 per month, with additional compensation at the discretion of the Board of Directors of up to $60,000 per year. For each year of the agreement, the Company has paid $300,000 pursuant to this agreement. In May 1994, the president of Counsel became chairman of the Company and receives a consulting fee of $8,500 per month for his service as chairman. The Company paid $102,000 under this agreement for 1997, 1996 and 1995. Counsel owns approximately 26% of the Company's common stock at December 31, 1997. A director of the Company is a partner in the law firm of Harwell Howard Hyne Gabbert & Manner, P.C. ("Harwell Howard") which the Company engaged during 73 75 1997, 1996 and 1995 to render legal advice in a variety of activities for which Harwell Howard was paid $1,656,000, $1,400,000 and $1,100,000, respectively. 13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH 1997 QUARTER QUARTER QUARTER QUARTER TOTAL ------------ ------- ------- -------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net Revenues $84,586 $94,789 $102,651 $105,251 $387,277 ======= ======= ======== ======== ======== Net Income (Loss) $ 4,638 $ 4,902 $(40,196)(1) $ 4,748 $(25,908) ======= ======= ======== ======== ======== Basic Income (Loss) Per Share $ 0.31 $ 0.33 $ (2.70)(1) $ 0.32 $ (1.75) ======= ======= ======== ======== ======== Diluted Income (Loss) Per Share $ 0.31 $ 0.33 $ (2.70)(1) $ 0.31 $ (1.75) ======= ======= ======== ======== ========
FIRST SECOND THIRD FOURTH 1996 QUARTER QUARTER QUARTER QUARTER TOTAL --------------- ------- --------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net Revenues $55,053 $62,418 $ 71,980 $ 78,897 $268,348 ======= ======= ======== ======== ======== Net Income $ 2,930 $ 3,541 $ 4,304 $ 4,426 $ 15,201 ======= ======= ======== ======== ======== Basic Income Per Share $ 0.25 $ 0.27 $ 0.29 $ 0.30 $ 1.13 ======= ======= ======== ======== ======== Diluted Income Per Share $ 0.24 $ 0.27 $ 0.29 $ 0.30 $ 1.10 ======= ======= ======== ======== ========
(1) Includes $65.0 million pre-tax charges recorded due to restructuring. (See Note 3) 74 76 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To American HomePatient, Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of American HomePatient, Inc. and have issued our report thereon dated February 23, 1998. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedule listed in the index under Item 14 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Nashville, Tennessee February 23, 1998 S-1 77 AMERICAN HOMEPATIENT, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 1995, 1996 and 1997
Column A Column B Column C Column D Column E - - ----------------------------------- ----------- --------------------------------- ----------- ---------- Additions -------------------------------- Charged Balance at to Costs Charged Balance at Beginning and to other Deductions End of Description of Period Expenses Accounts Other (1) (2) Period - - ------------------------------------- ---------- -------- --------- --------- ---------- ---------- FOR THE YEAR ENDED DECEMBER 31, 1997: Allowances for doubtful accounts $18,755 $30,541(3) $-- $8,408 $13,842 $43,862 ------- ------- --- ------ ------- ------- FOR THE YEAR ENDED DECEMBER 31, 1996: Allowances for doubtful accounts $12,383 $11,450 $-- $6,540 $11,618 $18,755 ------- ------- --- ------ ------- ------- FOR THE YEAR ENDED DECEMBER 31, 1995: Allowances for doubtful accounts $ 5,961 $ 5,934 $-- $6,775 $ 6,287 $12,383 ------- ------- --- ------ ------- -------
- - ---------------- (1) Amounts recorded in connection with acquisitions. (2) Amounts written off as uncollectible accounts, net of recoveries. (3) Includes $17.75 million charge associated with restructuring. S-2 78 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement No. 33-42777 on Form S-1). 3.2 Certificate of Amendment to the Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to Amendment No. 2 to the Company's Registration Statement No. 33-42777 on Form S-1). 3.3 Certificate of Amendment to the Certificate of Incorporation of the Company (incorporated by reference to Registration Statement on Form S-8 dated February 16, 1993). 3.4 Certificate of Ownership and Merger merging American HomePatient, Inc. into Diversicare Inc. dated May 11, 1994 (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement No. 33-89568 on Form S-2). 3.5 Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement No. 33-42777 on Form S-1). 10.1 Revolving Note dated October 26, 1995, by and between Bankers Trust Company and American HomePatient, Inc. (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.2 Revolving Note dated October 26, 1995, by and between NationsBank of Tennessee, N.A. and American HomePatient, Inc. (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.3 Revolving Note dated October 26, 1995, by and between The Boatmen's National Bank of St. Louis and American HomePatient, Inc. (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.4 Revolving Note dated October 26, 1995, by and between BanqueParibas and American HomePatient, Inc. (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.5 Revolving Note dated October 26, 1995, by and between Rabobank Nederland, New York Branch and American HomePatient, Inc. (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.6 Revolving Note dated October 26, 1995, by and between PNC Bank, Kentucky, Inc. and American HomePatient, Inc. (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.7 Revolving Note dated October 26, 1995, by and between AmSouth Bank of Alabama and American HomePatient, Inc. (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.8 Swing Line Note dated October 26, 1995, by and between Bankers Trust Company and American HomePatient, Inc. (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 10.9 Subsidiary Security Agreement dated October 20, 1994 by and among Bankers Trust Company and certain direct and indirect subsidiaries of American HomePatient, Inc. (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.10 Borrower Security Agreement dated October 20, 1994, by and between Bankers Trust Company and American HomePatient, Inc. (incorporated by reference to Exhibit 10.18 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.11 Employment Agreement dated October 1, 1991, by and between the Company and Edward K. Wissing (incorporated by reference to Exhibit 10.24 to Amendment No. 1 to the Company's Registration Statement No. 33-42777 on Form S-1). 10.12 Amendment No. 1 to Employment Agreement dated June 10, 1994, by and between the Company and Edward K. Wissing (incorporated by reference to Exhibit 10.21 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.13 Amendment No. 2 to Employment Agreement dated December 1, 1995, by and between the Company and Edward K. Wissing (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.14 Consulting Agreement dated April 27, 1992, by and between the Company and Allan C. Silber (incorporated by reference to Exhibit 10.24 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.15 1991 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.16 Amendment No. 4 to 1992 Nonqualified Stock Option Plan (incorporated herein by reference to Exhibit A of Schedule 14A dated April 17, 1995). 10.17 1995 Nonqualified Stock Option Plan for Directors (incorporated herein by reference to Exhibit B of Schedule 14A dated April 17, 1995). 10.18 1993 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.26 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.19 Trust Agreement for the Company Master Plan dated January 1, 1992, by and between the Company and C&S/Sovran Trust Company (incorporated by reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). 10.20 Restated Master Agreement and Supplemental Executive Retirement Plan (restated as of December 31, 1993) (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.21 Form of Stock Purchase Warrant dated August 11, 1994, by and between Joseph F. Furlong, III, Kenneth B. Sawyer, and Robert S. Colman, respectively, and American HomePatient, Inc. (incorporated by reference to Exhibit 10.32 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.22 Form of Stock Purchase Warrant dated August 11, 1993, by and between Diversicare Inc. and Age Wave, Inc. (incorporated by reference to Exhibit 10.41 to the Company's Registration Statement No. 33-89568 on Form S-2).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 10.23 Partnership Agreement dated November 1, 1994, by and between HCA Health Services of Tennessee, Inc. and American HomePatient Ventures, Inc. (incorporated by reference to Exhibit 10.42 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.24 Agreement of Partnership of Alliance Home Health Care Partnership d/b/a Medcenters Home Equipment dated January 1, 1994, by and between Medical Centers Home Equipment and American HomePatient Ventures, Inc. (incorporated by reference to Exhibit 10.43 to the Company's Registration statement No. 33-89568 on Form S-2) 10.25 Agreement of Limited Partnership of Health Star DME, Ltd. dated May 19, 1988, by and between Health Star Medical of Amarillo, Inc. and HPBH Enterprises, Inc. as amended by Amendment No. 1 to Certificate of Limited Partnership of Health Star DME, Ltd. dated February 4, 1994, by AHP, L.P., D/B/A AHP Health, L.P. (incorporated by reference to Exhibit 10.44 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.26 Partnership Agreement of Paragon Home Medical Equipment Partnership dated January 15, 1990, by and between Baylor Medical Plaza Services Corporation and Healthstar Medical Equipment of Dallas, Inc. as amended by Amendment to Partnership Agreement dated January 15, 1990, by and between Baylor Medical Plaza Services Corporation and Healthstar Medical Equipment of Dallas and as amended by Amendment to Partnership Agreement dated March 31, 1994, by and between Medical Development Corp. and AHP, L.P. (incorporated by reference to Exhibit 10.45 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.27 Agreement of Partnership of Homelink Home Healthcare Partnership dated February 28, 1985, by and between Med-E-Quip Rental and Leasing, Inc. and Homelink Home Health Care Services, Inc., as amended by First Amendment to Agreement of Partnership of Homelink Home Health Care Partnership dated February 28, 1988, by and between Med-E-Quip Rental and Leasing, Inc. and Homelink Home Healthcare Services, Inc. and Second Amendment to Agreement of Partnership of Homelink Home Health Care Partnership dated October 1, 1988, by and between Med-E-Quip Rental and Leasing, Inc. and Homelink Home Health Care Services, Inc. and Third Amendment to Agreement of Partnership of Homelink Healthcare Partnership dated October 1, 1991, by and between Med-E-Quip Rental and Leasing, Inc. and Homelink Home Health Care Services, Inc. (Incorporated by reference to Exhibit 10.46 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.28 Management Agreement dated December 27, 1994, by and among Rural/Metro Corporation, Coronado Health Services, Inc. and American HomePatient, Inc. (Incorporated by reference to Exhibit 10.49 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.29 Option Agreement dated December 27, 1994, by and among Rural/Metro Corporation, Coronado Health Services, Inc. and American HomePatient, Inc. (incorporated by reference to Exhibit 10.50 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.30 Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the Company's Registration Statement No. 33-89568 on Form S-2). 10.31 First Amendment to Credit Agreement by and among American HomePatient, Inc., The Banks Named Therein, and Bankers Trust Company, as the Agent (incorporated by reference to Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter ending March 31, 1995).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 10.32 Amended and Restated Credit Agreement by and among American HomePatient, Inc., the Banks Named Therein and Bankers Trust Company, as the Agent (incorporated by reference to Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter ending September 30, 1995). 10.33 First Amendment to Amended and Restated Credit Agreement dated December 28, 1995, by and among the Company, Bankers Trust Company and the banks named therein (incorporated by reference to Exhibit 10.68 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.34 Borrower Partnership Security Agreement dated December 28, 1995 by and between Bankers Trust Company and the Company (incorporated by reference to Exhibit 10.69 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.35 Subsidiary Partnership Security Agreement dated December 28, 1995 by and between Bankers Trust Company and certain direct and indirect subsidiaries of the Company (incorporated by reference to Exhibit 10.70 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.36 Amended and Restated Borrower Pledge Agreement dated December 28, 1995 by and between Bankers Trust Company and the Company (incorporated by reference to Exhibit 10.71 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.37 Amended and Restated Subsidiary Pledge Agreement dated December 28, 1995 by and among Bankers Trust Company and certain direct and indirect subsidiaries of the Company (incorporated by reference to Exhibit 10.72 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.38 Subsidiary Guaranty dated October 20, 1994 by certain direct and indirect subsidiaries of the Company (incorporated by reference to Exhibit 10.73 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.39 Second Amended and Restated Credit Agreement dated May 1, 1996 by and among American HomePatient, Inc., the banks named therein and Bankers Trust Company (incorporated by reference to Exhibit 10.3 to the Company's Report on Form 10-Q for the quarter ending June 30, 1996). 10.40 Lease and addendum as amended dated October 25, 1995 by and between Principal Mutual Life Insurance Company and American HomePatient, Inc. (incorporated by reference to Exhibit 10.47 to the Company's Report on Form 10-K for the year ended December 31, 1996). 10.41 Stock Purchase Agreement dated December 23, 1997 among National Medical Systems, Inc., its stockholders named therein, and American HomePatient, Inc. (Incorporated by reference to Exhibit 2.1 to the Company's Report on Form 8-K dated February 17, 1998). 10.42 Amendment to Stock Purchase Agreement dated February 5, 1998 among National Medical Systems, Inc., its stockholders named therein, and American HomePatient, Inc. (Incorporated by reference to Exhibit 2.2 to the Company's Report on Form 8-K dated February 17, 1998).
82
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 10.43 Third Amended and Restated Credit Agreement dated June 6, 1997 by and among American HomePatient, Inc. and banks named therein and Bankers Trust Company (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter ending June 30, 1997). 10.44 Fourth Amended and Restated Credit Agreement dated December 19, 1997 by and among American HomePatient, Inc., the Banks named therein and Bankers Trust Company. 10.45 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Bankers Trust Company. 10.46 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and ABN Amrobank, N.V. 10.47 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and AmSouth Bank. 10.48 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Bank of America, NT & SA. 10.49 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Bank of Montreal. 10.50 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Corestates Bank, N.A. 10.51 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and First American National Bank. 10.52 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and The First National Bank of Chicago. 10.53 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and The Fuji Bank, Limited, Atlanta Agency. 10.54 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and NationsBank, N.A. 10.55 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and PNC Bank, Kentucky, Inc. 10.56 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Cooperative Centrale Raiffesen Boerenleenbank, B.A., "Rabobank Nederland," New York Branch. 10.57 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and the Sakura Bank, Limited. 10.58 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Suntrust Bank, Nashville, N.A. 10.59 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Union Bank of California, N.A. 10.60 Revolving Note dated December 23, 1997 by and between American HomePatient, Inc. and Union Bank of Switzerland, New York Branch. 10.61 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Bankers Trust Company.
83
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 10.62 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and ABN Amrobank, N.V. 10.63 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and AmSouth Bank. 10.64 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Bank of America, NT & SA. 10.65 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Bank of Montreal. 10.66 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Corestates Bank, N.A. 10.67 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and First American National Bank. 10.68 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and The First National Bank of Chicago. 10.69 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and The Fuji Bank, Limited, Atlanta Agency. 10.70 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and NationsBank, N.A. 10.71 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and PNC Bank, Kentucky, Inc. 10.72 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Cooperative Centrale Raiffesen Boerenleenbank, B.A., "Rabobank Nederland," New York Branch. 10.73 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and the Sakura Bank, Limited. 10.74 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Suntrust Bank, Nashville, N.A. 10.75 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Union Bank of California, N.A. 10.76 Term Note dated December 19, 1997 by and between American HomePatient, Inc. and Union Bank of Switzerland, New York Branch. 10.77 Swing Line Note dated December 19, 1997 by and between American HomePatient, Inc. and Bankers Trust Company. 10.78 Master Agreement dated October 11, 1996 by and between American HomePatient, Inc. and Bank of Montreal. 10.79 Severance Agreement dated December 22, 1997 by and between American HomePatient, Inc. and Thomas E. Mills. 10.80 Amendment No. 3 to Employment Agreement dated December 23, 1997 by and between American HomePatient, Inc. and Edward K. Wissing. 10.81 Letter Agreement dated August 7, 1997 by and between American HomePatient, Inc., and DCAmerica, Inc. 21 Subsidiary List.
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EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE ------- ----------------------- ---- 23.1 Consent of Arthur Andersen LLP. 27 Financial Data Schedule (for SEC use only).
EX-10.44 2 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.44 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT BY AND AMONG AMERICAN HOMEPATIENT, INC., THE BANKS NAMED HEREIN AND BANKERS TRUST COMPANY, AS THE AGENT ---------------------------------- DATED AS OF DECEMBER 19, 1997 ---------------------------------- 2 TABLE OF CONTENTS*
Page SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION......................................................... 2 1.01 DEFINED TERMS.................................................................................... 2 1.02 PRINCIPLES OF CONSTRUCTION....................................................................... 23 SECTION 2. AMOUNT AND TERMS OF CREDIT......................................................................... 24 2.01 THE REVOLVING LOANS.............................................................................. 24 2.02 THE SWING LINE LOANS............................................................................. 26 2.03 THE TERM LOANS................................................................................... 29 2.04 DISBURSEMENT OF FUNDS............................................................................ 30 2.05 PREPAYMENT OF LOANS OUTSTANDING ON EFFECTIVE DATE; NOTES......................................... 30 2.06 INTEREST ON THE LOANS............................................................................ 31 2.07 INCREASED COSTS; TAXES........................................................................... 35 2.08 USE OF PROCEEDS.................................................................................. 38 2.09 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS............................................... 39 2.10 LETTERS OF CREDIT................................................................................ 44 SECTION 3. FEES............................................................................................... 52 3.01 FEES .......................................................................................... 52 SECTION 4. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; PAYMENTS................................................ 53 4.01 SCHEDULED PAYMENTS OF TERM LOANS................................................................. 53 4.02 Prepayments and Reductions in Commitments........................................................ 54 4.03 APPLICATION OF PREPAYMENTS....................................................................... 56 4.04 GENERAL PROVISIONS REGARDING PAYMENTS............................................................ 57 SECTION 5. CONDITIONS PRECEDENT............................................................................... 58 5.01 CONDITIONS TO EFFECTIVENESS...................................................................... 58 5.02 CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT.................................................... 63 SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS......................................................... 64 6.01 CORPORATE STATUS................................................................................. 64 6.02 CORPORATE POWER AND AUTHORITY.................................................................... 65 6.03 NO VIOLATION..................................................................................... 65 6.04 GOVERNMENTAL APPROVALS........................................................................... 66 6.05 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED LIABILITIES; ETC.......................... 66 6.06 LITIGATION....................................................................................... 67 6.07 TRUE AND COMPLETE DISCLOSURE..................................................................... 67 6.08 USE OF PROCEEDS; MARGIN REGULATIONS.............................................................. 67
- - -------- *This Table of Contents is provided for convenience only and is not a part of the attached Credit Agreement. i 3
Page 6.09 TAX RETURNS AND PAYMENTS......................................................................... 67 6.10 COMPLIANCE WITH ERISA............................................................................ 67 6.11 CAPITALIZATION................................................................................... 68 6.12 SUBSIDIARIES..................................................................................... 68 6.13 COMPLIANCE WITH STATUTES, ETC.................................................................... 68 6.14 INVESTMENT COMPANY ACT........................................................................... 69 6.15 PUBLIC UTILITY HOLDING COMPANY ACT............................................................... 69 6.16 LABOR RELATIONS.................................................................................. 69 6.17 PATENTS, LICENSES, FRANCHISES AND FORMULAS....................................................... 69 6.18 NO MATERIAL ADVERSE CHANGE....................................................................... 70 6.19 FRAUD AND ABUSE.................................................................................. 70 6.20 TITLE TO PROPERTIES; LIENS....................................................................... 72 6.21 JOINT VENTURES................................................................................... 72 6.22 ACCOUNTS RECEIVABLE COLLATERAL................................................................... 72 6.23 SELLER DEBT...................................................................................... 72 6.24 SURVIVAL OF RIGHTS CREATED UNDER EXISTING CREDIT AGREEMENT....................................... 72 SECTION 7. AFFIRMATIVE COVENANTS.............................................................................. 73 7.01 INFORMATION COVENANTS............................................................................ 73 7.02 BOOKS, RECORDS AND INSPECTIONS................................................................... 76 7.03 MAINTENANCE OF PROPERTY, INSURANCE............................................................... 77 7.04 CORPORATE FRANCHISES............................................................................. 77 7.05 COMPLIANCE WITH STATUTES, ETC.................................................................... 77 7.06 ERISA .......................................................................................... 77 7.07 END OF FISCAL YEARS; FISCAL QUARTERS............................................................. 78 7.08 PERFORMANCE OF OBLIGATIONS....................................................................... 78 7.09 PAYMENT OF TAXES AND CLAIMS...................................................................... 79 7.10 LICENSING........................................................................................ 79 7.11 FURTHER ASSURANCES; NEW SUBSIDIARIES............................................................. 79 7.12 ACCOUNTS RECEIVABLE.............................................................................. 80 SECTION 8. NEGATIVE COVENANTS................................................................................. 80 8.01 LIENS .......................................................................................... 80 8.02 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC....................................................... 82 8.03 DIVIDENDS........................................................................................ 84 8.04 INDEBTEDNESS..................................................................................... 85 8.05 ADVANCES, INVESTMENTS AND LOANS.................................................................. 87 8.06 TRANSACTIONS WITH AFFILIATES..................................................................... 89 8.07 CAPITAL EXPENDITURES............................................................................. 89 8.08 LEVERAGE RATIO................................................................................... 89 8.09 MINIMUM CONSOLIDATED NET WORTH................................................................... 90 8.10 MINIMUM INTEREST COVERAGE RATIO.................................................................. 90 8.11 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY- LAWS AND CERTAIN OTHER AGREEMENTS; ETC.................................................... 90 8.12 RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND OTHER DISTRIBUTIONS..................................... 91
ii 4
Page 8.13 BUSINESS......................................................................................... 91 8.14 TRANSFER OF COPYRIGHTS, PATENTS AND TRADEMARKS................................................... 91 8.15 JOINT VENTURES................................................................................... 91 8.16 COLLECTION BANK AGREEMENTS....................................................................... 92 SECTION 9. EVENTS OF DEFAULT.................................................................................. 92 9.01 PAYMENTS......................................................................................... 92 9.02 REPRESENTATIONS, ETC............................................................................. 92 9.03 COVENANTS........................................................................................ 92 9.04 DEFAULT UNDER OTHER AGREEMENTS................................................................... 92 9.05 BANKRUPTCY, ETC.................................................................................. 93 9.06 ERISA .......................................................................................... 93 9.07 CREDIT DOCUMENTS................................................................................. 94 9.08 CHANGES OF CONTROL............................................................................... 94 9.09 JUDGMENTS........................................................................................ 94 9.10 GOVERNMENTAL POLICIES............................................................................ 94 9.11 LOSS OF LICENSES................................................................................. 95 SECTION 10. THE AGENT......................................................................................... 96 10.01 APPOINTMENT..................................................................................... 96 10.02 NATURE OF DUTIES................................................................................ 96 10.03 LACK OF RELIANCE ON THE AGENT................................................................... 96 10.04 CERTAIN RIGHTS OF THE AGENT..................................................................... 97 10.05 RELIANCE........................................................................................ 97 10.06 INDEMNIFICATION................................................................................. 97 10.07 THE AGENT IN ITS INDIVIDUAL CAPACITY............................................................ 97 10.08 HOLDERS......................................................................................... 98 10.09 RESIGNATION BY THE AGENT AND THE SWING LINE BANK................................................ 98 SECTION 11. MISCELLANEOUS..................................................................................... 99 11.01 PAYMENT OF EXPENSES, ETC........................................................................ 99 11.02 RIGHT OF SETOFF.................................................................................100 11.03 NOTICES.........................................................................................100 11.04 BENEFIT OF AGREEMENT............................................................................101 11.05 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT...................................101 11.06 NO WAIVER; REMEDIES CUMULATIVE..................................................................103 11.07 PAYMENTS PRO RATA...............................................................................104 11.08 CALCULATIONS; COMPUTATIONS......................................................................104 11.09 GOVERNING LAW; WAIVER OF JURY TRIAL.............................................................104 11.10 CONFIDENTIALITY.................................................................................105 11.11 COUNTERPARTS....................................................................................105 11.12 HEADINGS DESCRIPTIVE............................................................................105 11.13 AMENDMENT OR WAIVER.............................................................................105 11.14 SURVIVAL........................................................................................108 11.15 DOMICILE OF LOANS...............................................................................108 11.16 INTEGRATION.....................................................................................108 11.17 SECURED OBLIGATIONS.............................................................................108
iii 5 SCHEDULES SCHEDULE 1.01(a) Pro Rata Shares, Revolving Commitments SCHEDULE 6.05 Undisclosed Liabilities SCHEDULE 6.06 Litigation SCHEDULE 6.11 Rights With Respect to Capital Stock SCHEDULE 6.12 Subsidiaries SCHEDULE 6.13 Statutory Noncompliance SCHEDULE 6.17 Trademarks SCHEDULE 6.18 Material Adverse Changes SCHEDULE 6.21 Joint Ventures SCHEDULE 7.03 Insurance SCHEDULE 8.01 Permitted Liens SCHEDULE 8.01(xvi) Existing Financing Statements SCHEDULE 8.04(ii) Existing Indebtedness; Acquisition Notes EXHIBITS EXHIBIT A Form of Notice of Revolver Borrowing EXHIBIT B Form of Notice of Swing Line Borrowing EXHIBIT C Form of Notice of Term Borrowing EXHIBIT D Form of Notice of Conversion/Continuation EXHIBIT E Form of Notice of Issuance of Letter of Credit EXHIBIT F-1 Form of Revolving Note EXHIBIT F-2 Form of Swing Line Note EXHIBIT F-3 Form of Term Note EXHIBIT G Subsidiary Guaranty EXHIBIT H Borrower Pledge Agreement EXHIBIT I Subsidiary Pledge Agreement EXHIBIT J Borrower Security Agreement EXHIBIT K Subsidiary Security Agreement EXHIBIT L-1 Trademark Security Agreement EXHIBIT L-2 Form of Subsidiary Trademark Security Agreement EXHIBIT M Form of Subordination Agreement EXHIBIT N Form of Collection Bank Agreement EXHIBIT O Concentration Bank Agreement EXHIBIT P Form of Assignment and Acceptance Agreement EXHIBIT Q Form of Compliance Certificate EXHIBIT R Form of Opinion of Counsel to Borrower EXHIBIT S Consent to Amendment and Restatement EXHIBIT T Borrower Partnership Security Agreement EXHIBIT U Subsidiary Partnership Security Agreement iv 6 AMERICAN HOMEPATIENT, INC. FOURTH AMENDED AND RESTATED CREDIT AGREEMENT This FOURTH AMENDED AND RESTATED CREDIT AGREEMENT is dated as of December 19, 1997 and entered into by and among AMERICAN HOMEPATIENT, INC. (the "BORROWER"), a corporation organized and existing under the laws of Delaware, BANKERS TRUST COMPANY and THE OTHER FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each a "BANK" and, collectively, the "BANKS"), and BANKERS TRUST COMPANY, acting in the manner and to the extent described in Section 10 (in such capacity, the "AGENT"). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 1.01 of this Agreement. R E C I T A L S WHEREAS, pursuant to that certain Third Amended and Restated Credit Agreement dated as of June 6, 1997, as amended, supplemented or otherwise modified to the date hereof (said Third Amended and Restated Credit Agreement, as so amended, supplemented or otherwise modified, is referred to hereinafter as the "EXISTING CREDIT AGREEMENT"), by and among the Borrower, Bankers Trust Company and the other financial institutions listed on the signature pages thereof (together with any other financial institutions that have become lenders thereunder to the date hereof, the "EXISTING BANKS"), and Bankers Trust Company, acting as agent for the Existing Banks, the Existing Banks have made certain credit facilities available to the Borrower in accordance with the terms thereof; WHEREAS, the parties hereto desire to amend and restate the Existing Credit Agreement in its entirety for the purposes of, among other things, (i) increasing the maximum amount available to be drawn under the loan facilities provided thereunder, (ii) amending certain provisions thereof relating to the interest rates, maturity and loan amortization schedules applicable to such loan facilities, and (iii) making certain other amendments to and modifications of the provisions of the Existing Credit Agreement as provided herein: A G R E E M E N T NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower, the Banks and the Agent agree to amend and restate the Existing Credit Agreement in its entirety as follows: 1 7 SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION. 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCOUNTS RECEIVABLE" means all accounts receivable pledged as Collateral. "ACQUISITION" means any acquisition of the capital stock of, or all (or substantially all) of the assets of, any Person or any division of such Person permitted pursuant to Section 8.02(v). "ACQUISITION NOTES" means the notes, set forth in Part B of Schedule 8.04(ii) attached hereto, that represent a portion of the purchase price paid by the Borrower to acquire certain healthcare entities. "ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination Date, the rate (rounded upward to the next highest one hundredth of one percent) obtained by dividing (i) the Eurodollar Rate for that date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against "EUROCURRENCY LIABILITIES" as specified in Regulation D of the Board of Governors of the Federal Reserve System (or against any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Loans is determined or any category of extensions of credit or other assets that includes loans by a non-United States office of a bank to United States residents). "AFFECTED BANK" means any Bank affected by any of the events described in Section 2.09(b) or (c). "AFFILIATE" means, with respect to any Person, any other Person (other than an individual) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; provided, however, that for purposes of Section 8.06, an Affiliate of the Borrower shall include any Person (including an individual) that directly or indirectly owns more than 10% of the Borrower and any officer or director of the Borrower or any such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "AGENT" has the meaning assigned to that term in the first paragraph of this Agreement and shall include any successor to the Agent appointed pursuant to Section 10.09. "AGREEMENT" means this Fourth Amended and Restated Credit Agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time. "AHPF" means AHP Finance, Inc., a Tennessee corporation. "AHPT" means American HomePatient, Inc., a Tennessee corporation. 2 8 "APPLICABLE BASE MARGIN" means, as of any date of determination, a percentage per annum as shown in the applicable table set forth below (depending on whether or not the Borrower has consummated a Qualified High-Yield Offering as of such date of determination), in each case determined with reference to the Leverage Ratio then in effect; provided that, if the Borrower has failed to provide a Margin Rate Determination Certificate within the most recent period set forth in Section 5.01 or 7.01, the Leverage Ratio for purposes of determining the Applicable Base Margin shall be deemed to be 3.50:1.00 until such time as the Borrower next delivers a Margin Rate Determination Certificate establishing a Leverage Ratio of less than 3.50:1.00; and provided, further, that in no event shall the Applicable Base Margin exceed 0.25% during the period from the Effective Date through and including the earlier of (i) the High-Yield Cut-Off Date and (ii) the consummation of a Qualified High-Yield Offering. A. PRIOR TO CONSUMMATION OF A QUALIFIED HIGH-YIELD OFFERING:
================================================================================ LEVERAGE RATIO APPLICABLE BASE MARGIN - - -------------------------------------------------------------------------------- x less than 2.75 0.00% - - -------------------------------------------------------------------------------- 2.75 less than or equal to x less than 3.00 0.25% - - -------------------------------------------------------------------------------- 3.00 less than or equal to x less than 3.50 0.50% - - -------------------------------------------------------------------------------- 3.50 less than or equal to x 0.625% ================================================================================
3 9 B. AFTER CONSUMMATION OF A QUALIFIED HIGH-YIELD OFFERING:
================================================================================ LEVERAGE RATIO APPLICABLE BASE MARGIN - - -------------------------------------------------------------------------------- x less than 3.50 0.00% - - -------------------------------------------------------------------------------- 3.50 less than or equal to x 0.25% ================================================================================
"APPLICABLE EURODOLLAR MARGIN" means, as of any date of determination, a percentage per annum as shown in the applicable table set forth below (depending on whether or not the Borrower has consummated a Qualified High-Yield Offering as of such date of determination), in each case determined with reference to the Leverage Ratio then in effect; provided that, if the Borrower has failed to provide a Margin Rate Determination Certificate within the most recent period set forth in Section 5.01 or 7.01, the Leverage Ratio for purposes of determining the Applicable Eurodollar Margin shall be deemed to be 3.50:1.00 until such time as the Borrower next delivers a Margin Rate Determination Certificate establishing a Leverage Ratio of less than 3.50:1.00; and provided, further, that in no event shall the Applicable Eurodollar Margin exceed 1.00% during the period from the Effective Date through and including the earlier of (i) the High-Yield Cut-Off Date and (ii) the consummation of a Qualified High-Yield Offering. A. PRIOR TO CONSUMMATION OF A QUALIFIED HIGH-YIELD OFFERING:
================================================================================ LEVERAGE RATIO APPLICABLE EURODOLLAR MARGIN - - -------------------------------------------------------------------------------- x less than .75 0.375% - - -------------------------------------------------------------------------------- .75 less than or equal to x less than 1.75 0.50% - - -------------------------------------------------------------------------------- 1.75 less than or equal to x less than 2.25 0.625% - - -------------------------------------------------------------------------------- 2.25 less than or equal to x less than 2.50 0.75% - - -------------------------------------------------------------------------------- 2.50 less than or equal to x less than 2.75 0.875% - - -------------------------------------------------------------------------------- 2.75 less than or equal to x less than 3.00 1.125% - - -------------------------------------------------------------------------------- 3.00 less than or equal to x less than 3.50 1.25% - - -------------------------------------------------------------------------------- 3.50 less than or equal to x 1.375% ================================================================================
4 10 B. AFTER CONSUMMATION OF A QUALIFIED HIGH-YIELD OFFERING:
================================================================================ LEVERAGE RATIO APPLICABLE EURODOLLAR MARGIN - - -------------------------------------------------------------------------------- x less than 1.00 0.25% - - -------------------------------------------------------------------------------- 1.00 less than or equal to x less than 1.50 0.35% - - -------------------------------------------------------------------------------- 1.50 less than or equal to x less than 2.00 0.40% - - -------------------------------------------------------------------------------- 2.00 less than or equal to x less than 2.50 0.50% - - -------------------------------------------------------------------------------- 2.50 less than or equal to x less than 3.00 0.625% - - -------------------------------------------------------------------------------- 3.00 less than or equal to x less than 3.25 0.75% - - -------------------------------------------------------------------------------- 3.25 less than or equal to x less than 3.50 0.875% - - -------------------------------------------------------------------------------- 3.50 less than or equal to x 1.125% ================================================================================
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance Agreement entered into by a Bank and an Eligible Assignee, and accepted by the Agent, substantially in the form annexed hereto as EXHIBIT P. "BANK" has the meaning assigned to that term in the first paragraph of this Agreement and shall include each successor and assignee pursuant to Section 11.05. "BANKRUPTCY CODE" has the meaning assigned to that term in Section 9.05. "BASE LENDING RATE" means, at any time, the higher of, (a) the Prime Rate and (b) the rate that is 1/2 of 1% in excess of the Federal Funds Effective Rate. "BASE RATE LOANS" means Loans maintained or made by the Banks bearing interest at rates determined by reference to the Base Lending Rate as provided in Section 2.06. "BORROWER" has the meaning assigned to that term in the first paragraph of this Agreement. "BORROWER PARTNERSHIP SECURITY AGREEMENT" means a Borrower Partnership Security Agreement executed and delivered by the Agent and the Borrower pursuant to the Prior Credit Agreements or this Agreement, substantially in the form annexed hereto as EXHIBIT T, as such Borrower Partnership Security Agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "BORROWER PLEDGE AGREEMENT" means that certain Borrower Pledge Agreement dated as of October 20, 1994, executed and delivered by the Borrower and the Agent pursuant to the Original Credit Agreement, a copy of which is annexed hereto as EXHIBIT H, as such 5 11 Borrower Pledge Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time. "BORROWER SECURITY AGREEMENT" means that certain Borrower Security Agreement dated as of October 20, 1994, executed and delivered by the Borrower and the Agent pursuant to the Original Credit Agreement, a copy of which is annexed hereto as EXHIBIT J, as such Borrower Security Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time. "BUSINESS DAY" means any day except Saturday, Sunday and any day that shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close. "CASH" means money, currency or a credit balance in a Deposit Account. "CASH EQUIVALENTS" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Bank or by any commercial bank organized under the laws of the United States or any state thereof or the District of Columbia that (a) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating then obtainable from either S&P or Moody's. "CERTIFICATE OF EXEMPTION" has the meaning assigned to that term in Section 2.09(g)(iii). "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL" means all the personal and mixed property made subject to a Lien pursuant to the Credit Documents. "COLLECTION BANK AGREEMENTS" means (i) those certain Collection Bank Agreements executed and delivered pursuant to the Prior Credit Agreement by each of the 6 12 Borrower or any of its Subsidiaries and the financial institutions into which the proceeds of Accounts Receivable of such of the Borrower or its Subsidiaries are deposited, as each such Collection Bank Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time, and (ii) any Collection Bank Agreements executed on or after the Effective Date pursuant to Section 8.16 between the Borrower or any of its Subsidiaries and the financial institutions into which the proceeds of Accounts Receivable of such of the Borrower or its Subsidiaries are deposited, substantially in the form annexed hereto as EXHIBIT N, as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time. "COMMITMENTS" means the commitments of Banks to make Loans as set forth in Sections 2.01, 2.02 and 2.03. 7 13 "COMMITMENT FEE PERCENTAGE" means, as of any date of determination, a percentage per annum as shown in the applicable table set forth below (depending on whether or not the Borrower has consummated a Qualified High-Yield Offering as of such date of determination), in each case determined with reference to the Leverage Ratio then in effect; provided that, if the Borrower has failed to provide a Margin Rate Determination Certificate within the most recent period set forth in Section 5.01 or 7.01, the Leverage Ratio for purposes of determining the Commitment Fee Percentage shall be deemed to be at the highest level shown in the applicable table set forth below until such time as the Borrower next delivers a Margin Rate Determination Certificate establishing a Leverage Ratio of less than such highest level: A. PRIOR TO CONSUMMATION OF A QUALIFIED HIGH-YIELD OFFERING:
================================================================================ LEVERAGE RATIO APPLICABLE COMMITMENT FEE PERCENTAGE - - -------------------------------------------------------------------------------- x less than 2.50 0.250% - - -------------------------------------------------------------------------------- 2.50 less than or equal to x 0.375% ================================================================================
B. AFTER CONSUMMATION OF A QUALIFIED HIGH-YIELD OFFERING:
================================================================================ LEVERAGE RATIO APPLICABLE COMMITMENT FEE PERCENTAGE - - -------------------------------------------------------------------------------- x less than 1.50 0.100% - - -------------------------------------------------------------------------------- 1.50 less than or equal to x less than 2.00 0.125% - - -------------------------------------------------------------------------------- 2.00 less than or equal to x less than 2.50 0.150% - - -------------------------------------------------------------------------------- 2.50 less than or equal to x less than 3.00 0.175% - - -------------------------------------------------------------------------------- 3.00 less than or equal to x less than 3.25 0.200% - - -------------------------------------------------------------------------------- 3.25 less than or equal to x less than 3.50 0.225% - - -------------------------------------------------------------------------------- 3.50 less than or equal to x 0.250% ================================================================================
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form annexed hereto as EXHIBIT Q delivered to the Agent and Banks by the Borrower under Section 7.01(f). 8 14 "CONCENTRATION BANK AGREEMENT" means either (i) that certain Concentration Bank Agreement dated as of October 20, 1994, executed and delivered pursuant to the Original Credit Agreement by the Borrower, the Agent and NationsBank of Tennessee, N.A., as concentration bank, a copy of which is annexed hereto as EXHIBIT O, as such Concentration Bank Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time (the "EXISTING CONCENTRATION BANK AGREEMENT"), or (ii) an agreement replacing the Existing Concentration Bank Agreement, substantially in the form annexed hereto as EXHIBIT O, entered into pursuant to Section 12(b) of the Existing Concentration Bank Agreement by and among the Borrower, the Agent and one of the Banks, as the concentration bank, and delivered to the Agent and Banks by the Borrower. "CONFIDENTIAL INFORMATION MEMORANDUM" means the confidential information memorandum dated December 1997 relating to the Borrower and the loan facilities to be made available pursuant to this Agreement. "CONPHARMA NOTE" has the meaning assigned to that term in the Existing Credit Agreement. "CONSENT TO AMENDMENT AND RESTATEMENT" means the Consent to Amendment and Restatement to be executed and delivered by each Guarantor Subsidiary pursuant to Section 5.01(a)(v), substantially in the form annexed hereto as EXHIBIT S. "CONSOLIDATED ADJUSTED EBITDA" means Consolidated EBITDA of the Borrower and its Subsidiaries at the end of any period of determination and shall be calculated on a pro forma basis, in accordance with the balance sheets and related statements of operations provided under Section 7.01(k), as if any Acquisition that occurred during such period and any related Divestiture had taken place on the first day of such period. "CONSOLIDATED EBIT" means, as to any Person and for any period, the Consolidated Net Income of such Person and its Subsidiaries for such period, before interest expense and provision for taxes and without giving effect to (i) any extraordinary gains (or extraordinary noncash losses), (ii) gains (or losses) from sales of assets (other than sales of inventory in the Ordinary Course of Business) to the extent that the gain or loss from all such sales is, in the aggregate, greater than $500,000 for the immediately prior four-quarter period, and (iii) certain one-time restructuring or similar charges and related asset write-downs and/or write-offs, in each case taken or recorded during the fiscal quarter of the Borrower ending September 30, 1997, in an aggregate amount not to exceed $70,000,000. "CONSOLIDATED EBITDA" means, as to any Person and for any consecutive four-quarter period, the Consolidated EBIT of such Person and its Subsidiaries and Joint Ventures for such period, adjusted by (i) adding thereto the amount of all amortization of intangibles and depreciation that was deducted in arriving at such Consolidated EBIT for such period and (ii) excluding therefrom amounts attributable to (x) minority interests held by third Persons and/or their Subsidiaries, (y) the portion of Consolidated EBIT attributable to operations sold or disposed of in Divestitures during such period if the Consolidated EBITDA associated with such operations exceeds $250,000, and (z) Joint Ventures that remain invested in such Joint Ventures and are not distributed to the Borrower. 9 15 "CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense (including that portion attributable to capitalized interest and capital leases in accordance with generally accepted accounting principles consistently applied) of the Borrower and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, any amounts referred to in Section 3 payable to the Agent and Banks on or before the Effective Date. "CONSOLIDATED NET INCOME" means, as to any Person and for any period, the net income (or loss) of such Person and its Subsidiaries, after provisions for taxes, on a consolidated basis for such period taken as a single accounting period determined in conformity with generally accepted accounting principles consistently applied. "CONSOLIDATED NET WORTH" means, as to any Person, the Net Worth of such Person and its Subsidiaries determined on a consolidated basis without deduction for any minority interests in any corporation, association, general partnership or joint venture (including Joint Ventures). "CONTINGENT OBLIGATION" means, as to any Person, (A) any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business; and (B) any obligations of such Person under any Interest Rate Agreement. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "CREDIT DOCUMENTS" means this Agreement, each Note, the Letters of Credit, the Subsidiary Guaranty, the Borrower Pledge Agreement, the Subsidiary Pledge Agreement, the Borrower Security Agreement, the Subsidiary Security Agreement, the Borrower Partnership Security Agreement, the Subsidiary Partnership Security Agreement, the Collection Bank Agreements, the Concentration Bank Agreement, the Consent to Amendment and Restatement, 10 16 the Trademark Security Agreement and the Subsidiary Trademark Security Agreement. "DEFAULT" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "DIVESTITURE" means the resale of any assets or property acquired in any Acquisition within one year of such Acquisition. "DOLLARS" and "$" means the lawful money of the United States of America. "EFFECTIVE DATE" means the first date upon which all of the conditions set forth in Section 5.01 of this Agreement shall have been satisfied or waived. "ELIGIBLE ASSIGNEE" means (i) (A) a commercial bank organized under the laws of the United States or any state thereof; (B) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (C) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (D) any other entity that is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933, as amended) that extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies, and (ii) any Bank and any Affiliate of any Bank or the Issuing Bank; provided that no Affiliate of the Borrower shall be an Eligible Assignee. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Section references to ERISA are to ERISA, as in effect at the date of this Agreement, and to any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA AFFILIATE" means any person (as defined in Section 3(9) of ERISA) that together with the Borrower or any of its Subsidiaries would be a member of the same "CONTROLLED GROUP" within the meaning of Section 414(b), (m), (c) and (o) of the Code. "EURODOLLAR RATE" means, for any Interest Rate Determination Date, the arithmetic average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the offered quotation, if any, to first class banks in the Eurodollar market by Bankers Trust Company for Dollar deposits of amounts in immediately available funds comparable to the principal amount of the Eurodollar Rate Loan of the Agent for which the Eurodollar Rate is being determined with maturities comparable to the Interest Period for which such Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time) two Business Days prior to the commencement of such Interest Period. 11 17 "EURODOLLAR RATE LOANS" means Loans bearing interest at rates determined by reference to the Eurodollar Rate as provided in Section 2.06. "EURODOLLAR RATE TAXES" has the meaning assigned to that term in Section 2.09(g)(i). "EVENT OF DEFAULT" has the meaning assigned to that term in Section 9. "EXISTING BANKS" has the meaning assigned to that term in the Recitals to this Agreement. "EXISTING CREDIT AGREEMENT" has the meaning assigned to that term in the Recitals to this Agreement. "EXISTING INDEBTEDNESS" has the meaning assigned to that term in Section 8.04(ii). "EXISTING NOTES" means the "Revolving Notes", the "Term Notes" and the "Swing Line Note" as defined in the Existing Credit Agreement and issued to the Existing Banks thereunder. "EXISTING BANK LOANS" means the "Revolving Loans" and the "Term Loans" as defined in the Existing Credit Agreement and extended to the Borrower thereunder. "EXISTING SWING LINE LOANS" means the "Swing Line Loans" as defined in the Existing Credit Agreement and extended to the Borrower thereunder. "FDA" means the United States Food and Drug Administration. "FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. "FEES" means all amounts payable pursuant to or referred to in Section 3.01. "FIRST AMENDED AND RESTATED CREDIT AGREEMENT" means that certain Amended and Restated Credit Agreement dated as of October 26, 1995 by and among the Borrower, the "Banks" party thereto and Bankers Trust Company, as the "Agent", as amended, supplemented or otherwise modified prior to the effective date of the Second Amended and Restated Credit Agreement. 12 18 "FISCAL YEAR" means the fiscal year of the Borrower and its Subsidiaries (other than Joint Ventures) ending on December 31 of each calendar year. "FOREIGN BANK" has the meaning assigned to that term in Section 2.09(g)(iii). "FUNDING DATE" means the date of the funding of a Loan or the date of the issuance of a Letter of Credit, as applicable. "GOVERNMENT ACTS" has the meaning assigned to such term in Section 2.10(h). "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GUARANTOR SUBSIDIARY" means each Subsidiary of the Borrower listed in Schedule 6.12 annexed hereto and each other Subsidiary of the Borrower that executes a Subsidiary Guaranty pursuant to Section 7.11(b). "HIGH-YIELD CUT-OFF DATE" means May 15, 1998. "INDEBTEDNESS" means, as to any Person, without duplication, (i) all indebtedness (including principal, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum undrawn amount of or maximum unreimbursed amount under all letters of credit issued for the account of such Person and all drafts drawn thereunder, (iii) all liabilities secured by any Lien on any property owned by such Person, whether or not such liabilities have been assumed by such Person; provided that liabilities that are nonrecourse to the credit of the Borrower and its Subsidiaries, shall be deemed to constitute Indebtedness only in an amount equal to the lesser of (a) the fair market value (on the date of determination of Indebtedness for purposes of this Agreement) of such property or (b) the amount of such liabilities, (iv) the aggregate amount required to be capitalized under generally accepted accounting principles under leases under which such Person is the lessee, (v) all Contingent Obligations of such Person and (vi) the total redemption price (including, without limitation, the liquidation preference, par value, premium and accrued dividends) of any preferred stock of such Person with a mandatory redemption date prior to the Termination Date. "INTERCOMPANY ACQUISITION NOTE" means any promissory note evidencing Indebtedness under a loan or advance by AHPF to AHPT permitted under Section 8.05(xi) to fund an Acquisition by AHPT; provided that the obligations of AHPT under any Intercompany Acquisition Note shall be expressly subordinated, on terms satisfactory in form and substance to the Agent, to the Obligations of AHPT under the Subsidiary Guaranty. 13 19 "INTERCOMPANY ACQUISITION GUARANTY/SECURITY AGREEMENT" means any guaranty, security agreement or guaranty and security agreement pursuant to which (x) a newly-acquired Subsidiary of AHPT guaranties the obligations of AHPT under an Intercompany Acquisition Note issued to AHPF in connection with the Acquisition of such Subsidiary and/or grants a security interest to AHPF in its inventory to secure its obligations under such a guaranty or (y) AHPT grants a security interest to AHPF in its inventory to secure its obligations under an Intercompany Acquisition Note issued to AHPF in connection with an Acquisition of assets; provided that (i) any such guaranty shall be expressly subordinated in right of payment, on terms satisfactory in form and substance to the Agent, to the Obligations of such Subsidiary under the Subsidiary Guaranty, (ii) any such security interest shall be expressly subordinated, on terms satisfactory in form and substance to the Agent, to the security interest in the inventory of such Subsidiary created in favor of the Agent pursuant to the Subsidiary Security Agreement, and (iii) any such guaranty or security interest shall be assigned to the Agent on terms satisfactory in form and substance to the Agent. "INTEREST PAYMENT DATE" means, (i) with respect to any Eurodollar Rate Loan having an Interest Period of one, two or three months, the last day of the Interest Period applicable to such Loan or, (ii) in the case of any Eurodollar Rate Loan having an Interest Period of six or nine months, (a) the date that is three months after the initial date of the Interest Period applicable to such Loan, (b) the date that is six months after the initial date of the Interest Period applicable to such Loan, and (c) the last day of the Interest Period applicable to such Loan. "INTEREST PERIOD" means any period applicable to a Loan as determined pursuant to Section 2.06(b). "INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement or other similar agreement or arrangement designed to protect the Borrower against fluctuations in interest rates. "INTEREST RATE DETERMINATION DATE" means each date for calculating the Eurodollar Rate for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a Eurodollar Rate Loan. "ISSUING BANK" means Bankers Trust Company or its Affiliate or any successor Bank or its Affiliate in the capacity of issuer of Letters of Credit pursuant to Section 2.10. "JOINT VENTURE" means a single-purpose corporation, partnership, joint venture or other similar legal arrangement (whether created pursuant to contract or conducted through a separate legal entity) now or hereafter formed by the Borrower or any of its Subsidiaries with another Person (other than the Borrower or any of its Subsidiaries) in order to conduct a common venture or enterprise with such other Person. "LENDING OFFICE" means, with respect to each Bank, the office of such Bank specified opposite its signature below as its lending office or such other office of such Bank as such Bank may from time to time specify as such to the Borrower and the Agent. 14 20 "LETTER OF CREDIT" means any of the standby letters of credit issued (or deemed issued under Section 2.10(a)) or to be issued by the Issuing Bank for the account of the Borrower pursuant to Section 2.10 and for the purposes described in Section 2.08(b); provided that, notwithstanding anything to the contrary contained herein, any such letter of credit may be issued by an Affiliate of the Issuing Bank; provided, further, that to the extent that a letter of credit is issued by an Affiliate of the Issuing Bank, such Affiliate shall, for all purposes under this Agreement, the Credit Documents and all other instruments and documents referred to herein and therein be deemed to be the "ISSUING BANK" with respect to such letter of credit. "LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount that is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Bank and not theretofore reimbursed by the Borrower. "LETTER OF NON-EXEMPTION" has the meaning assigned to that term in Section 2.09(g)(iii). "LEVERAGE RATIO" means the ratio of Total Debt to Consolidated Adjusted EBITDA of the Borrower and its Subsidiaries on the date of the most recent Margin Rate Determination Certificate. "LIEN" means any mortgage, pledge, hypothecation, assignment for security, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, any agreement to give any security interest and any lease having substantially the same effect as any of the foregoing). "LOAN" or "LOANS" means one or more of the Term Loans or the Revolving Loans or the Swing Line Loans. "MARGIN RATE DETERMINATION CERTIFICATE" means an Officers' Certificate of the Borrower setting forth in reasonable detail the Total Debt and the Consolidated Adjusted EBITDA as of the date on which such Officers' Certificate is delivered pursuant to Section 7.01(j) of the Existing Credit Agreement or Section 7.01(j) of this Agreement with the financial statements required pursuant to Section 7.01(a) or (b) of each such agreement. "MARGIN STOCK" has the meaning provided in Regulation U of the Board of Governors of the Federal Reserve System. "NATIONAL MEDICAL SYSTEMS ACQUISITION" means the acquisition by the Borrower or any of its Subsidiaries of National Medical Systems, Inc. for aggregate consideration not to exceed $36,000,000 on the terms disclosed by the Borrower to the Banks prior to their execution of this Agreement. 15 21 "NET WORTH" means, as to any Person, the sum of its capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account that, in accordance with generally accepted accounting principles consistently applied, constitutes stockholders' equity, excluding any treasury stock. "NOTES" means one or more of the Term Notes or the Revolving Notes or the Swing Line Note. "NOTICE OF REVOLVER BORROWING" means a notice substantially in the form of EXHIBIT A annexed hereto with respect to a proposed Revolving Loan. "NOTICE OF SWING LINE BORROWING" means a notice substantially in the form of EXHIBIT B annexed hereto with respect to a proposed Swing Line Loan. "NOTICE OF TERM BORROWING" means a notice substantially in the form of EXHIBIT C annexed hereto with respect to a proposed Term Loan. "NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in the form of EXHIBIT D annexed hereto with respect to a proposed conversion or continuation of a Loan. "NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice in the form of EXHIBIT E annexed hereto with respect to a proposed issuance of a Letter of Credit. "NOTICE OFFICE" means the office of the Agent located at One Bankers Trust Plaza, 130 Liberty Street, 14th Floor, New York, New York 10006, Attn: Jocelyn Rock in each case with a copy to 300 South Grand Avenue, 41st Floor, Los Angeles, California 90071, Attn: Kate Cook, or such other office or offices as the Agent may hereafter designate in writing as such to the other parties hereto. "OBLIGATIONS" means all amounts now or hereafter owing to the Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. For the purposes of the Credit Documents, the Obligations shall include all "Obligations", as such term is defined in the Existing Credit Agreement, to the extent such Obligations are not otherwise continued pursuant to this Agreement. "OFFICERS' CERTIFICATE" means, as applied to any corporation, association or joint venture, a certificate executed on behalf of such corporation, association or joint venture, by the Chairman of the Board (if an officer) or the President or one of its Vice Presidents and by the Chief Financial Officer or the Chief Accounting Officer or the Treasurer or an Assistant Treasurer of such corporation or the managing partner (or Person with equivalent authority) of such association or joint venture; provided that every Officers' Certificate with respect to the compliance with a condition precedent to the making of any Loans or issuance of any Letters of Credit hereunder shall include (i) a statement that the officer or officers or managing partner (or Person with equivalent authority) making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made 16 22 such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "ORDINARY COURSE OF BUSINESS" means, in respect of any transaction involving the Borrower or any Subsidiary of the Borrower, the ordinary course of such Person's business, as conducted by any such Person in accordance with past practice (including, without limitation, such Person's past practice of consultation with legal counsel) and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Credit Document. "ORIGINAL CREDIT AGREEMENT" means that certain Credit Agreement dated as of October 20, 1994 by and among the Borrower, the "Banks" party thereto, and Banker's Trust Company, as the "Agent", as amended, supplemented or otherwise modified prior to the effective date of the First Amended and Restated Credit Agreement. "OSHA" means the United States Occupational Safety and Health Administration. "PAYMENT OFFICE" means the office of the Agent located at One Bankers Trust Plaza, New York, New York 10006, Attention: Commercial Loan Division Ref: AHP, or such other office as the Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA or any successor thereto. "PERMITTED LIENS" has the meaning assigned to that term in Section 8.01(iii). "PERSON" means any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "PERFORMANCE PLAN" has the meaning assigned to that term in Section 7.01(d). "PLAN" means any multiemployer plan or single-employer plan as defined in Section 4001 of ERISA, that is maintained or contributed to, or at any time during the five calendar years preceding the date of this Agreement was maintained or contributed to, by the Borrower or by a Subsidiary of the Borrower or an ERISA Affiliate. "PRIME RATE" means the rate that Bankers Trust Company announces from time to time as its prime lending rate, and the Prime Rate shall change when and as such prime lending rate changes. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers Trust Company may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "PRIOR CREDIT AGREEMENT" means, collectively, the Original Credit Agreement, the First Amended and Restated Credit Agreement, the Second Amended and Restated Credit Agreement and the Existing Credit Agreement. 17 23 "PRO RATA SHARE" means (i) with respect to all payments, computations and other matters relating to the Term Loan Commitment or the Term Loan of any Bank, the percentage obtained by dividing (x) the Term Loan Exposure of that Bank by (y) the aggregate Term Loan Exposure of all Banks, (ii) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Bank or any Letters of Credit issued or participations therein purchased by any Bank or any participations in any Swing Line Loans purchased by any Bank, the percentage obtained by dividing (x) the Revolving Loan Exposure of that Bank by (y) the aggregate Revolving Loan Exposure of all Banks, and (iii) for all other purposes with respect to each Bank, the percentage obtained by dividing (x) the sum of the Term Loan Exposure of that Bank plus the Revolving Loan Exposure of that Bank by (y) the sum of the aggregate Term Loan Exposure of all Banks plus the aggregate Revolving Loan Exposure of all Banks, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to Section 11.05. The initial Pro Rata Share of each Bank for purposes of each of clauses (i), (ii) and (iii) of the preceding sentence is set forth opposite the name of that Bank in SCHEDULE 1.01(A) annexed hereto and SCHEDULE 1.01(A) shall be amended and the Banks' Pro Rata Shares shall be adjusted from time to time to give effect to the addition of any new Banks and any reallocations among existing Banks necessary to reflect assignments pursuant to Section 11.05. The sum of the Pro Rata Shares of all Banks at any date of determination shall equal 100%. "QUALIFIED HIGH-YIELD DEBT" means Indebtedness of the Borrower subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to the Agent and Required Banks. "QUALIFIED HIGH-YIELD OFFERING" means a public or private offering of Qualified High-Yield Debt with gross proceeds of not less than $200,000,000. "REFUNDED SWING LINE LOANS" has the meaning assigned to that term in Section 2.02(c). "REPORTABLE EVENT" means an event described in Section 4043(b) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "REQUIRED BANKS" means Banks having or holding 51% or more of the sum of the aggregate Term Loan Exposure of all Banks plus the aggregate Revolving Loan Exposure of all Banks. "RESTRUCTURING NOTE" has the meaning assigned to that term in the Existing Credit Agreement. "REVOLVING LOAN COMMITMENT" or "REVOLVING LOAN COMMITMENTS" means the commitment or commitments of a Bank or Banks to make Revolving Loans as set forth in Section 2.01(a). 18 24 "REVOLVING LOAN EXPOSURE" means, with respect to any Bank as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Bank's Revolving Loan Commitment and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Bank plus (b) in the event that Bank is an Issuing Bank, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Bank (in each case net of any participations purchased by other Banks in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) the aggregate amount of all participations purchased by that Bank in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit plus (d) in the case of Swing Line Bank, the aggregate outstanding principal amount of all Swing Line Loans (net of any participations therein purchased by other Banks) plus (e) the aggregate amount of all participations purchased by that Bank in any outstanding Swing Line Loans. "REVOLVING LOANS" means the Revolving Loans made by the Banks on or after the Effective Date pursuant to Section 2.01(a). The term "Revolving Loan" shall not include Swing Line Loans. "REVOLVING NOTES" means the promissory notes of the Borrower issued in favor of the Banks pursuant to Section 2.05 to evidence the Revolving Loans, substantially in the form annexed hereto as EXHIBIT F-1, as they may be amended, supplemented or otherwise modified from time to time. "SEC" has the meaning assigned to that term in Section 7.01(h). "SECOND AMENDED AND RESTATED CREDIT AGREEMENT" means that certain Second Amended and Restated Credit Agreement dated as of May 1, 1996 by and among the Borrower, the "Banks" party thereto and Bankers Trust Company, as the "Agent", as amended, supplemented or otherwise modified prior to the effective date of the Existing Credit Agreement. "SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SUBORDINATION AGREEMENTS" means the Subordination Agreements executed pursuant to the Prior Credit Agreement among the Borrower, the Agent and certain holders of the Unsecured Seller Debt, substantially in the form annexed hereto as EXHIBIT M. "SUBSIDIARY" means, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of 19 25 any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency which has not occurred by the date of determination) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "SUBSIDIARY GUARANTY" means that certain Guaranty Agreement dated as of October 20, 1994, executed and delivered by each Guarantor Subsidiary for the benefit of the Agent pursuant to Section 5.01 of the Prior Credit Agreement and any Guarantor Subsidiary required to deliver the same pursuant to Section 7.11(b) of the Prior Credit Agreement or this Agreement, a copy of which (executed by each Subsidiary of the Borrower which is a Guarantor Subsidiary on the Effective Date) is annexed hereto as EXHIBIT G, as such Guaranty Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY PARTNERSHIP SECURITY AGREEMENT" means a Subsidiary Partnership Security Agreement executed and delivered by the Agent and any Guarantor Subsidiary required to deliver the same pursuant to Section 7.11(b) of the Prior Credit Agreement or this Agreement, substantially in the form annexed hereto as EXHIBIT U, as such Subsidiary Partnership Security Agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY PLEDGE AGREEMENT" means that certain Subsidiary Pledge Agreement dated as of October 20, 1994, executed and delivered by the Agent and each Guarantor Subsidiary pursuant to Section 5.01 of the Prior Credit Agreement and any Guarantor Subsidiary required to deliver the same pursuant to Section 7.11(b) of the Prior Credit Agreement or this Agreement, a copy of which (executed by each Subsidiary of the Borrower which is a Guarantor Subsidiary on the Effective Date) is annexed hereto as EXHIBIT I, as such Subsidiary Pledge Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY SECURITY AGREEMENT" means that certain Subsidiary Security Agreement dated as of October 20, 1994, executed and delivered by the Agent and each Guarantor Subsidiary pursuant to Section 5.01 of the Prior Credit Agreement and any Guarantor Subsidiary required to deliver the same pursuant to Section 7.11(b) of the Prior Credit Agreement or this Agreement, a copy of which (executed by each Subsidiary of the Borrower which is a Guarantor Subsidiary on the Effective Date) is annexed hereto as EXHIBIT K, as such Subsidiary Security Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means the trademark security agreement dated as of May 1, 1996, executed and delivered by the Agent and each Guarantor Subsidiary which is not party to the Trademark Security Agreement pursuant to Section 5.01 of the Prior Credit Agreement, and any Guarantor Subsidiary required to deliver the same pursuant to Section 7.11(b) of the Prior Credit Agreement or this Agreement, a copy of which (executed by each Subsidiary of the Borrower which is a Guarantor Subsidiary on the Effective Date) is 20 26 annexed hereto as EXHIBIT L-2, as such Subsidiary Trademark Security Agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "SWING LINE LOAN COMMITMENT" has the meaning assigned to that term in Section 2.02(a). "SWING LINE BANK" means Bankers Trust Company in its capacity as the holder of the Swing Line Loan Commitment and any entity that assumes Bankers Trust Company's rights and obligations with respect thereto pursuant to Section 11.05. "SWING LINE LOAN" means one or more of the Loans made by the Swing Line Bank pursuant to Section 2.02(a). The term "Swing Line Loan" shall not include Revolving Loans. "SWING LINE NOTE" means (i) the promissory note of the Borrower issued pursuant to Section 2.05 on the Effective Date and (ii) any promissory note issued by the Borrower to any successor Agent and Swing Line Bank pursuant to the last sentence of Section 10.09(d), in each case substantially in the form of EXHIBIT F-2 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "TARGET" means the Person to be acquired, or the Person whose assets are to be acquired, in any Acquisition. "TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person shall be construed as a reference to a tax imposed by the jurisdiction (whether local, state, federal or foreign) in which that Person's principal office (and/or, in the case of a Bank, its lending office) is located or in which that Person is deemed to be doing business on all or part of the net income, profits or gains of that Person (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise). "TERM LOAN COMMITMENT" means the commitment of a Bank to make a Term Loan to the Borrower pursuant to Section 2.03, and "TERM LOAN COMMITMENTS" means such commitments of all Banks in the aggregate. "TERM LOAN EXPOSURE" means, with respect to any Bank as of any date of determination (i) prior to the funding of the Term Loans, that Bank's Term Loan Commitment and (ii) after the funding of the Term Loans, the outstanding principal amount of the Term Loan of that Bank. "TERM LOANS" means the Loans made by Banks to the Borrower pursuant to Section 2.03. "TERM NOTES" means any promissory notes of the Borrower issued in favor of 21 27 the Banks pursuant to Section 2.05 to evidence the Term Loans of any Banks, substantially in the form annexed hereto as EXHIBIT F-3, as they may be amended, supplemented or otherwise modified from time to time. "TERMINATION DATE" means the earlier of (a) December 16, 2002 and (b) the date upon which the Revolving Loan Commitments are terminated pursuant to Section 4.03 or Section 9. "TOTAL DEBT" means all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis outstanding on any date of determination, including, without limitation, any Indebtedness incurred or to be incurred on such date in connection with an Acquisition, but excluding Indebtedness with respect to Letters of Credit and Interest Rate Agreements. "TOTAL REVOLVING LOAN COMMITMENTS" means, as at any date of determination, the aggregate principal amount of all Revolving Loan Commitments then outstanding. "TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans plus (ii) the Letter of Credit Usage plus (iii) the aggregate principal amount of all Swing Line Loans outstanding at such time; provided that Total Utilization of Revolving Loan Commitments shall be determined without duplication of Revolving Loans, the proceeds of which are used simultaneously to refund other Revolving Loans or Swing Line Loans. "TRADEMARK SECURITY AGREEMENT" means that certain Trademark Security Agreement dated as of October 20, 1994, executed and delivered by the Borrower, the Agent and each Guarantor Subsidiary which is a Guarantor Subsidiary prior to the Effective Date pursuant to Section 5.01 of the Prior Credit Agreement, a copy of which is annexed hereto as EXHIBIT L-1, as such Trademark Security Agreement has heretofore been, and as it hereafter may be, amended, amended and restated, supplemented or otherwise modified from time to time. "UCC" means the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "UNFUNDED CURRENT LIABILITY" means, as to any Plan, the amount, if any, by which the present value of the accrued benefits under such Plan as of the close of its most recent plan year determined in accordance with Section 412 of the Code exceeds the fair market value of the assets allocable thereto. "UNSECURED SELLER DEBT" means the Indebtedness represented by the Acquisition Notes and the Indebtedness permitted by Section 8.04(xii). "WHOLLY-OWNED SUBSIDIARY" means, as to any Person, (i) any corporation 100% of whose capital stock is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. 22 28 1.02 PRINCIPLES OF CONSTRUCTION. (a) All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (b) All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles in conformity with those used in the preparation of the financial statements referred to in Sections 6.05(a). Except in connection with the preparation of the financial statements and other information required to be delivered by the Borrower to the Banks pursuant to Sections 7.01(a), (b), (d), (e) and (h), calculations made with respect to the definitions, covenants and other provisions of this Agreement shall give effect to adjustments in component amounts required or permitted by Accounting Principles Board Opinions Nos. 16 and 17 as a result of any Acquisition. SECTION 2. AMOUNT AND TERMS OF CREDIT. 2.01 THE REVOLVING LOANS. (A) THE REVOLVING LOANS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrower set forth herein, each Bank hereby severally agrees, subject to the limitations set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, to make Revolving Loans to the Borrower from time to time during the period from the Effective Date through but excluding the Termination Date in an amount not exceeding its Pro Rata Share of the difference between the (i) aggregate Revolving Loan Commitments (as defined below) then in effect and (ii) the sum of (a) the aggregate principal amount of Swing Line Loans then outstanding (excluding Swing Line Loans to be repaid with the proceeds of such Revolving Loans) and (b) the Letter of Credit Usage for the purposes identified in Section 2.08. Each Bank's commitment to maintain and make Revolving Loans to the Borrower pursuant to this Section 2.01(a) is hereby called its "REVOLVING LOAN COMMITMENT" and such commitments of all the Banks in the aggregate are herein called the "REVOLVING LOAN COMMITMENTS." The initial amount of each Bank's Revolving Loan Commitment is set forth in SCHEDULE 1.01(A) and the aggregate initial amount of all Revolving Loan Commitments is $325,000,000. The amount of the Revolving Loan Commitments shall be reduced by the amount of all reductions thereof made pursuant to Section 4.02 or Section 9 through the date of determination. In no event shall the aggregate principal amount of the Revolving Loans from any Bank outstanding at any time exceed the amount of its Revolving Loan Commitment then in effect. Each Bank's Revolving Loan Commitment shall expire on the Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans, the Revolving Loan Commitments, or otherwise (including, without limitation, any cash deposit required under Section 2.10(a) with respect to any Letter of Credit having an expiration date subsequent to the Termination Date) shall be paid in full no later than that date. 23 29 Notwithstanding the foregoing provisions of this Section 2.01(a) and the provisions of Section 2.01(b), the extensions of credit under the Revolving Loan Commitments shall be subject to the following limitations in the amounts and during the periods indicated: (i) The amount otherwise available for borrowing under the Revolving Loan Commitments as of any time of determination (other than to reimburse the Issuing Bank for the amount of any drawings under any Letter of Credit honored by the Issuing Bank and not theretofore reimbursed by the Borrower or to reimburse the Swing Line Bank for the amount of any Swing Line Loans outstanding) shall be reduced by the Letter of Credit Usage and the aggregate principal amount of the Swing Line Loans then outstanding as of such time of determination; and (ii) In no event shall the Total Utilization of Revolving Loan Commitments exceed the Total Revolving Loan Commitments then in effect. Subject to Section 2.09(d), all Revolving Loans under this Agreement shall be made by the Banks simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Bank shall be responsible for any default by any other Bank in that other Bank's obligation to make Revolving Loans hereunder nor shall the Revolving Loan Commitment of any Bank be increased or decreased as a result of the default by any other Bank in that other Bank's obligation to make Revolving Loans hereunder. Amounts borrowed by the Borrower under this Section 2.01(a) may be repaid and, through but excluding the Termination Date, reborrowed. (B) NOTICE OF REVOLVER BORROWING. Subject to Section 2.01(a), whenever the Borrower desires to borrow Revolving Loans under this Section 2.01, it shall deliver to the Agent at its Notice Office a Notice of Revolver Borrowing no later than 12:00 Noon (New York time) one Business Day in advance of the proposed Funding Date (in the case of a requested Base Rate Loan) and three Business Days in advance of the proposed Funding Date (in the case of a requested Eurodollar Rate Loan). The Notice of Revolver Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount of the proposed borrowing and that the proposed borrowing shall be a Revolving Loan, (iii) in the case of any Revolving Loans requested to be made on or within three days after the Effective Date, that such Revolving Loans shall initially be Base Rate Loans, (iv) in the case of Revolving Loans requested to be made more than three days after the Effective Date, whether such Revolving Loans are initially to consist of Base Rate Loans or Eurodollar Rate Loans or a combination thereof, (v) if such Revolving Loans, or any portion thereof, are initially to be Eurodollar Rate Loans, the amounts thereof and the initial Interest Periods therefor and (vi) that the Total Utilization of Revolving Loan Commitments (after giving effect to the Revolving Loans then requested) will not exceed the Total Revolving Loan Commitments then in effect. Revolving Loans shall be made in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in excess of that amount. Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in Section 2.06(d); provided that unless the Agent otherwise consents in writing, the Revolving Loans made during the period from and including the Effective Date until the date three Business Days after the Effective Date 24 30 may not be converted until three Business Days after the Effective Date. In lieu of delivering the above-described Notice of Revolver Borrowing, the Borrower may give the Agent telephonic notice by the required time of any proposed borrowing of Revolving Loans under this Section 2.01; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Revolver Borrowing to the Agent on or prior to the Funding Date of the requested Revolving Loans. Neither the Agent nor any Bank shall incur any liability to the Borrower in acting upon any telephonic notice referred to above that the Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of the Borrower or for otherwise acting in good faith under this Section 2.01 and upon funding of Revolving Loans by the Banks in accordance with this Agreement pursuant to any such telephonic notice, the Borrower shall have effected Revolving Loans hereunder. Except as provided in Section 2.09(d), a Notice of Revolver Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and the Borrower shall be bound to make a borrowing in accordance therewith. 2.02 THE SWING LINE LOANS. (A) The Swing Line Bank hereby agrees, subject to the limitations set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time and subject to the other terms and conditions hereof, to make a portion of the Revolving Loan Commitments available to the Borrower from time to time during the period from the Business Day immediately following the Effective Date to but excluding the second day prior to the Termination Date by making Swing Line Loans to the Borrower in an aggregate amount not exceeding the amount of the Swing Line Loan Commitment (as defined below) to be used for the purposes identified in Section 2.08(a), notwithstanding the fact that such Swing Line Loans, when aggregated with the Swing Line Bank's outstanding Revolving Loans may exceed its Revolving Loan Commitment. The Swing Line Bank's commitment to make Swing Line Loans to the Borrower pursuant to this Section 2.02(a) is herein called its "SWING LINE LOAN COMMITMENT," and the original amount of the Swing Line Loan Commitment is $15,000,000 and may not be increased without the consent of the Swing Line Bank and the Required Banks. Amounts borrowed under this Section 2.02(a) may be repaid and reborrowed to but excluding the second day prior to the Termination Date on which second day all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full by the Borrower. Anything contained in this Agreement to the contrary notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment shall be subject to the following limitations in the amounts and during the periods indicated: (i) in no event shall the Total Utilization of Revolving Loan Commitments exceed the Total Revolving Loan Commitments then in effect; and 25 31 (ii) any reduction of the Revolving Loan Commitments made pursuant to Section 4.02 that reduces the aggregate Revolving Loan Commitments to an amount less than the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the Swing Line Loan Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of the Swing Line Bank. (B) Whenever the Borrower desires that the Swing Line Bank make a Swing Line Loan under Section 2.02(a), it shall deliver to the Swing Line Bank a Notice of Swing Line Borrowing no later than 12:00 Noon (New York City time) on the proposed Funding Date (which shall be a Business Day). The Notice of Swing Line Borrowing shall specify (i) the proposed Funding Date, (ii) the amount of the Swing Line Loan requested (which shall be in the amount of $100,000 and integral multiples of $10,000 in excess thereof) and (iii) that the Total Utilization of Revolving Loan Commitments (after giving effect to the proposed borrowing) does not exceed the Total Revolving Loan Commitments then in effect. In lieu of delivering the above-described Notice of Swing Line Borrowing, the Borrower may give the Agent telephonic notice by the required time of any proposed borrowing of Swing Line Loans under this Section 2.02; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Swing Line Borrowing to the Agent on or prior to the Funding Date of the requested Loans, which Notice of Swing Line Borrowing may be given by facsimile. (C) With respect to any Swing Line Loans that have not been voluntarily prepaid by the Borrower pursuant to Section 4.02, the Swing Line Bank may at any time (without regard to whether an Event of Default has occurred and is continuing) in its sole and absolute discretion, deliver to each Bank (with a copy to the Borrower), no later than 12:00 Noon (New York City time) at least one Business Day in advance of the proposed Funding Date, a notice (which shall be deemed to be a Notice of Revolver Borrowing given by the Borrower) requesting Banks to make Revolving Loans that are Base Rate Loans on such Funding Date in an aggregate amount equal to the amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date such notice is given that the Swing Line Bank requests the Banks to prepay. Each Bank (other than the Swing Line Bank) shall make the amount of its Revolving Loan available to the Agent by depositing the amount thereof in same day funds at the Agent's Payment Office on the next Business Day. Anything contained in this Agreement to the contrary notwithstanding, (i) the proceeds of such Revolving Loans made by the Banks other than the Swing Line Bank shall be delivered immediately to the Swing Line Bank (and not to the Borrower) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (ii) on the day such Revolving Loans are made, the Swing Line Bank's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by the Swing Line Bank and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note of the Swing Line Bank but shall be outstanding as Revolving Loans and shall be due under the Revolving Note of the Swing Line Bank in its capacity as a Bank. If any portion of any such amount paid (or deemed to be paid) to the Swing Line Bank should be recovered by or on behalf of the Borrower from the Swing Line Bank in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be shared ratably among all the Banks in the manner contemplated by Section 11.07. 26 32 If, as a result of any bankruptcy or similar proceeding with respect to the Borrower, Revolving Loans are not made pursuant to this Section 2.02(c) in an amount sufficient to repay any amounts owed to the Swing Line Bank in respect of any outstanding Swing Line Loans or if the Swing Line Bank shall so request each Bank for any reason, the Swing Line Bank shall be deemed to have sold without recourse or representation or warranty, and each Bank shall be deemed to have purchased and hereby agrees to purchase, a participation in such outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the unpaid amount thereof together with accrued interest thereon. Upon one Business Day's notice from the Swing Line Bank, each Bank (other than the Swing Line Bank) shall deliver to the Swing Line Bank an amount equal to its respective participation in same day funds at the Agent's Payment Office. In the event any such Bank fails to make available to the Swing Line Bank the amount of such Bank's participation as provided in this paragraph, the Swing Line Bank shall be entitled to recover such amount on demand from such Bank together with interest thereon at the Base Lending Rate in effect from time to time. Anything contained herein to the contrary notwithstanding, the obligation of each Bank (other than the Swing Line Bank) to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each such Bank's obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (a) any set-off, counterclaim, recoupment, defense or other right that such Bank may have against the Swing Line Bank, the Borrower or any other Person for any reason whatsoever; (b) the occurrence or continuance of an Event of Default; (c) any adverse change in the business, operations, properties, assets, condition (financial or otherwise), or prospects of the Borrower or any of its Subsidiaries; (d) any breach of this Agreement by any party hereto; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided, however, that no Bank shall have any obligation to make a Revolving Loan for the purpose of repaying, or to purchase any participation in, any Swing Line Loan to the extent such Swing Line Loan increased the Total Utilization of Revolving Loan Commitments (after giving effect to the repayment of any Loans with the proceeds of such Swing Line Loan) and was made even though the Swing Line Bank had actual knowledge that the conditions to making such Swing Line Loan were not satisfied. 2.03 THE TERM LOANS. (A) THE TERM LOANS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrower set forth herein, each Bank severally agrees to lend to the Borrower, in a single borrowing on the Effective Date, an amount not exceeding its Pro Rata Share of the Term Loan Commitments to be used for the purposes identified in Section 2.08. The amount of each Bank's Term Loan Commitment is set forth opposite its name on SCHEDULE 1.01(A) annexed hereto and the aggregate amount of the Term Loan Commitments is $75,000,000. (B) NOTICE OF TERM LOAN BORROWING. Whenever the Borrower desires that Banks 27 33 make Term Loans it shall deliver to Agent a Notice of Term Borrowing no later than 12:00 Noon (New York City time) three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). The Notice of Term Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount requested, (ii) whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (iii) in the case of any Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period requested therefor. Term Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in Section 2.06(d). In lieu of delivering the above-described Notice of Borrowing, the Borrower may give Agent telephonic notice by the required time of any proposed borrowing under Section 2.03(a); provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Agent on or before the applicable Funding Date. Neither Agent nor any Bank shall incur any liability to the Borrower in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of the Borrower or for otherwise acting in good faith under this Section 2.03(b), and upon funding of Loans by Banks in accordance with this Agreement pursuant to any such telephonic notice the Borrower shall have effected Loans hereunder. The Borrower shall notify Agent prior to the funding of any Loans in the event that any of the matters to which the Borrower is required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by the Borrower of the proceeds of any Loans shall constitute a re-certification by the Borrower, as of the applicable Funding Date, as to the matters to which the Borrower is required to certify in the applicable Notice of Borrowing. 2.04 DISBURSEMENT OF FUNDS. Promptly after receipt of a Notice of Revolver Borrowing or a Notice of Term Borrowing (or telephonic notice thereof) pursuant to Section 2.01(b) or 2.03(b), but no later than 4:00 p.m. (New York time) on the date of such receipt, the Agent shall notify each Bank of the proposed borrowing. Each Bank shall make the amount of its applicable Loan available to the Agent, in same day funds, at its Payment Office not later than 12:00 Noon (New York time) on the Funding Date. Upon satisfaction or waiver of the conditions precedent specified in Section 5, as applicable, the Agent shall make the proceeds of such Loans available to the Borrower on such Funding Date by causing an amount of same day funds equal to the proceeds of all such Loans received by the Agent to be credited to the account of the Borrower at such office of the Agent. Unless the Agent shall have been notified by any Bank in writing prior to any Funding Date in respect of any Loans that such Bank does not intend to make available to the Agent such Bank's applicable Loan on such Funding Date (which such notice, if so received by the Agent, promptly shall be communicated to the Borrower), the Agent may assume that such Bank has made such amount available to the Agent on such Funding Date and the Agent in its sole discretion may, but shall not be obligated to, make available to the Borrower a corresponding amount on such Funding Date. If such corresponding 28 34 amount is not in fact made available to the Agent by such Bank, the Agent shall be entitled to recover such corresponding amount on demand from such Bank together with interest thereon, for each day from such Funding Date until the date such amount is paid to the Agent, at the customary rate set by the Agent for the correction of errors among banks for three Business Days and thereafter at the Base Lending Rate. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent promptly shall notify the Borrower, and the Borrower immediately shall pay such corresponding amount to the Agent. Nothing in this Section 2.04 shall be deemed to relieve any Bank from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrower may have against any Bank as a result of any default by such Bank hereunder. 2.05 PREPAYMENT OF LOANS OUTSTANDING ON EFFECTIVE DATE; NOTES. (A) On the Effective Date, the Existing Bank Loans shall be prepaid with the proceeds of the Term Loans together with a portion of the proceeds of the initial Revolving Loans. Based on such assumed prepayment of the Existing Bank Loans, the Agent shall advise each Bank and each Existing Bank as to the net amount of payments to be received by, or Loans to be advanced by, such Bank or Existing Bank on the Effective Date. (B) On and after the Effective Date, the Existing Notes shall be of no further force and effect, and the Swing Line Bank and each Existing Bank that is also a Bank hereunder shall deliver any Existing Notes issued to such Bank, marked to show their cancellation, to the Borrower. The Borrower shall execute and deliver (i) to each Bank (or to the Agent for that Bank) on the Effective Date a Revolving Note substantially in the form of EXHIBIT F-1 to evidence that Bank's Revolving Loans, in the principal amount of that Bank's Revolving Loan Commitment and with other appropriate insertions, (ii) to the Swing Line Bank on the Effective Date a Swing Line Note substantially in the form of EXHIBIT F-2 annexed hereto to evidence the Swing Line Bank's Swing Line Loans, in the principal amount of the Swing Line Loan Commitment and with other appropriate insertions, and (iii ) to each Bank (or to the Agent for that Bank) on the Effective Date a Term Note substantially in the form of EXHIBIT F-3 to evidence that Bank's Term Loan, in the principal amount of that Bank's Term Loan Commitment and with other appropriate insertions. Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and, prior to any transfer of any of its Notes, will endorse on the reverse side thereof the outstanding principal amount of the Loans evidenced thereby. Failure to make any such notation shall not affect the Borrower's obligations in respect of such Loans. 2.06 INTEREST ON THE LOANS. (A) RATE OF INTEREST. Subject to the provisions of Sections 2.06(e) and 2.09(g), each Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to, (i) if a Term Loan or Revolving Loan, the Base Lending Rate or the Adjusted Eurodollar Rate and (ii) if a Swing Line Loan, the Base Lending Rate. The applicable basis for determining the rate of interest for Revolving Loans and Term Loans shall be selected by the Borrower initially at the time a Notice of Revolver Borrowing or Notice of Term Borrowing is given with respect thereto pursuant to Section 2.01(b) or Section 2.03(b), as the case may be. The basis for 29 35 determining the interest rate with respect to any Revolving Loan or Term Loan may be changed from time to time pursuant to Section 2.06(d). If on any day a Revolving Loan or Term Loan is outstanding with respect to which notice has not been delivered to the Agent in accordance with the terms of this Agreement specifying the basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Lending Rate. (i) The Term Loans and the Revolving Loans shall bear interest through maturity as follows: (A) if a Base Rate Loan, then at the sum of the Base Lending Rate plus the Applicable Base Margin; and (B) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus the Applicable Eurodollar Margin; (ii) The Swing Line Loans shall bear interest at a per annum rate equal to the Base Lending Rate plus the Applicable Base Margin minus the Commitment Fee Percentage then in effect. Subject to the maximum amounts specified for the Applicable Base Margin and the Applicable Eurodollar Margin in the definitions thereof, (X) the Applicable Base Margin and the Applicable Eurodollar Margin shall be determined on the Effective Date in accordance with the Leverage Ratio set forth in the Margin Rate Determination Certificate delivered by the Borrower to the Agent pursuant to Section 5.01(e), and (Y) upon delivery of any subsequent Margin Rate Determination Certificate by the Borrower to the Agent pursuant to Section 7.01(j), the Applicable Base Margin and the Applicable Eurodollar Margin shall automatically be adjusted in accordance with the Leverage Ratio set forth therein, such adjustment to become effective on the Business Day next succeeding the Business Day on which the Agent received such Margin Rate Determination Certificate; provided that, in the event a Qualified High-Yield Offering is not consummated on or before the High-Yield Cut-Off Date, the Borrower shall pay to the Agent on the High-Yield Cut-Off Date, for distribution to the applicable Banks, such additional amounts of interest, if any, that the Borrower would have been required to pay in respect of any Base Rate Loans and/or Euro-Dollar Rate Loans outstanding during the period from the Effective Date through the High-Yield Cut-Off Date if the applicable interest rates in respect of such Base Rate Loans and/or Eurodollar Rate Loans had been determined on the basis of the table set forth in the definition of "Applicable Base Margin" or "Applicable Eurodollar Margin", as the case may be, without giving effect to the proviso set forth therein regarding the maximum amount of the Applicable Base Margin or the Applicable Eurodollar Margin, as the case may be, during the period prior to the High-Yield Cut-Off Date. (B) INTEREST PERIODS. In connection with each Eurodollar Rate Loan, the Borrower shall elect an interest period (each an "INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall be either a one, two, three, six or, if available to all Banks making the applicable Loans (as determined by such Banks in good faith based on prevailing market conditions), nine-month period; provided that: 30 36 (i) the initial Interest Period for any Loan shall commence on the Funding Date of such Loan; (ii) in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (v) no Interest Period with respect to any Loan shall extend beyond the Termination Date; (vi) no Interest Period with respect to any portion of the Term Loans shall extend beyond a date on which the Borrower is required to make a scheduled payment of principal of the Term Loans unless the sum of (a) the aggregate principal amount of Term Loans that are Base Rate Loans plus (b) the aggregate principal amount of Term Loans that are Eurodollar Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Term Loans on such date; and (vii) there shall be no more than ten (10) Eurodollar Rate Loans with different maturities outstanding at any time. (C) INTEREST PAYMENTS. Subject to Section 2.06(e), interest shall be payable on the Loans as follows: (i) interest on each Base Rate Loan shall be payable quarterly in arrears on and to the last Business Day of each January, April, July and October commencing on January 31, 1998, on any prepayment of any such Loan pursuant to Section 4.02(c) (to the extent accrued on the amount being prepaid) and at maturity. (ii) interest on each Eurodollar Rate Loan shall be payable in arrears on and to (but not including) each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity. (iii) interest on each Swing Line Loan shall be payable quarterly in arrears on 31 37 and to the last Business Day of each January, April, July and October commencing on January 31, 1998, on any prepayment of such Loan pursuant to Section 4.02(c) and upon maturity. (D) CONVERSION OR CONTINUATION. Subject to the provisions of Section 2.09, the Borrower shall have the option (i) to convert at any time all or any part of the outstanding Loans from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis, or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $1,000,000 and integral multiples of $100,000 in excess of that amount as a Eurodollar Rate Loan and the succeeding Interest Period(s) of such continued Loan shall commence on the last day of the Interest Period of the Loan to be continued; provided, however, Eurodollar Rate Loans may only be converted into Base Rate Loans on the expiration date of an Interest Period applicable thereto; provided further that no outstanding Loan may be continued as, or be converted into, a Eurodollar Rate Loan when any Default or Event of Default has occurred and is continuing; and provided further that the Base Rate Loans made on the Effective Date may not be converted to Eurodollar Rate Loans prior to three Business Days after the Effective Date. The Borrower shall deliver a Notice of Conversion/Continuation to the Agent no later than 12:00 Noon (New York time) at least two Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to a Base Rate Loan), and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall certify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and (v) that no Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/Continuation, the Borrower may give the Agent telephonic notice by the required time of any proposed conversion/continuation under this Section 2.06(d); provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to the Agent on or before the proposed conversion/continuation date. Neither the Agent nor any Bank shall incur any liability to the Borrower in acting upon any telephonic notice referred to above that the Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of the Borrower or for otherwise acting in good faith under this Section 2.06(d) and upon conversion/continuation by the Agent in accordance with this Agreement, pursuant to any telephonic notice the Borrower shall have effected such conversion or continuation, as the case may be, hereunder. Except as provided in Section 2.09(d), a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and the Borrower shall be bound to convert or continue in accordance therewith. 32 38 (E) POST MATURITY INTEREST. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate that is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans; provided that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective, such Eurodollar Rate Loans shall thereupon become Base Rate Loans and thereafter bear interest payable upon demand at a rate that is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. The payment or acceptance of the increased rate provided by this Section 2.06(e) shall not constitute a waiver of any Event of Default or an amendment to this Agreement or otherwise prejudice or limit any rights or remedies of the Agent or any Bank. (F) COMPUTATION OF INTEREST. Interest on the Loans shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. In computing interest on any Revolving Loan (or any de facto loan from the Swing Line Bank to a Bank under Section 2.02(c)), the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, shall be included; and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan, or with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. 33 39 2.07 INCREASED COSTS; TAXES. (A) INCREASED COSTS. If any Bank shall determine that the adoption of any applicable law, rule or regulation concerning capital adequacy or any applicable change therein, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, in each case occurring after the Effective Date, has or will have the effect of reducing the rate of return on such Bank's capital as a consequence of its obligation to make a Loan hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by any amount deemed by such Bank to be material, then from time to time, within fifteen (15) days after demand by such Bank, the Borrower shall pay to such Bank such additional amounts as shall compensate such Bank for such reduction. Each Bank shall promptly notify the Borrower of any of the matters set forth in the preceding sentence. A certificate as to additional amounts owed any such Bank, showing in reasonable detail the basis for the calculation thereof, submitted in good faith to the Borrower and the Agent by such Bank shall be presumed to be correct. (B) WITHHOLDING OF TAXES. (i) Payments to Be Free and Clear. All sums payable by the Borrower under this Agreement and the other Credit Documents shall be paid free and clear of and (except to the extent required by law) without any deduction or withholding on account of any Tax (other than franchise taxes and Taxes on the overall net income of any Bank) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of the Borrower or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (ii) Grossing-up of Payments. If the Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by the Borrower to the Agent or any Bank under any of the Credit Documents: (A) the Borrower shall notify the Agent of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it; (B) the Borrower shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on the Borrower) for its own account or (if that liability is imposed on the Agent or such Bank, as the case may be) on behalf of and in the name of the Agent or such Bank; 34 40 (C) the sum payable by the Borrower in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the Agent or such Bank, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (D) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax that it is required by clause (B) above to pay, the Borrower shall deliver to the Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be required to be paid to any Bank under clause (C) above except to the extent that any change, after the date hereof (in the case of each Bank listed on the signature pages hereof) or after the date of the assignment under Section 11.05 by which such Bank became a Bank (in the case of each other Bank), in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such assignment, as the case may be, in respect of payments to such Bank. (iii) Alternatives. Notwithstanding the provisions of Section 2.07(b)(ii), in lieu of paying a Bank such additional moneys as are required by Section 2.07(b)(ii), the Borrower may exercise any one of the following options: (A) If the requirement to make a deduction or withholding of a Tax referred to in Section 2.07(b)(ii) relates only to Eurodollar Rate Loans then being requested by the Borrower pursuant to a Notice of Revolver Borrowing or a Notice of Conversion/Continuation, the Borrower may by giving notice (by telephone promptly confirmed in writing) to the Agent (who shall promptly give similar notice to each other Bank) no later than the date immediately prior to the date on which such Eurodollar Rate Loans are to be made, withdraw that Notice of Revolver Borrowing or Notice of Conversion/Continuation and the Eurodollar Rate Loans then being requested shall be made by the Banks as Base Rate Loans; or (B) If the requirement to make a deduction or withholding of a Tax referred to in Section 2.07(b)(ii) relates only to Eurodollar Rate Loans outstanding at the time the requirement is discovered, upon written notice to the Agent and each Bank, the Borrower may terminate the obligations of the Banks to make or maintain Loans as, and to convert Loans into, Eurodollar Rate Loans and, in such event, the Borrower shall at the end of the then current Interest Period, convert all of the Eurodollar Rate Loans into Base Rate Loans in the manner contemplated by Section 2.06(d) but without satisfying the advance notice requirements therein in 35 41 which case the Borrower must take the actions referred to in Section 2.07(b)(ii) until such conversion; or (C) If the requirement to make a deduction or withholding of a Tax referred to in Section 2.07(b)(ii) relates to Loans other than Eurodollar Rate Loans, the Borrower may notify each Bank to which such requirement relates that the Borrower will not make the payments required under Section 2.07(b)(ii)(C) with respect to such Loans at the end of the 30 day period described below and each such Bank will have 30 days in which to notify the Agent (which will notify the Borrower) that it will continue as a Bank under this Agreement without such payments or that it refuses so to continue, and, if any such Bank refuses to continue, (i) the Borrower shall pay to such Bank, on a date 15 days after notice of such refusal is made, all interest and fees and other amounts due and owing to such Bank including amounts due under Section 2.07(b)(ii) through the end of such 30 day period (and, to the extent such Bank is the Issuing Bank, any Letters of Credit shall be returned to the Issuing Bank marked "cancelled" or Cash shall be deposited with the Issuing Bank in an amount equal to the maximum amount that may at any time be drawn on such Letters of Credit) on such date and the principal amount of all such Loans of such Bank or (ii) another financial institution that is an Eligible Assignee, shall purchase for cash such Loans of such Bank and become a Bank for all purposes under this Agreement and assume all obligations of such Bank pursuant to an Assignment and Acceptance that shall have become effective pursuant to Section 11.05. 2.08 USE OF PROCEEDS. (A) LOANS. The proceeds of the Term Loans borrowed on the Effective Date, together with a portion of the proceeds of the initial Revolving Loans, shall be applied by the Borrower to prepay all the Existing Bank Loans. The proceeds of any subsequent Revolving Loans and any Swing Line Loans shall be applied by the Borrower for the general corporate purposes of the Borrower and its Subsidiaries, which may include, without limitation, (i) the reimbursement of the Issuing Bank of any amounts drawn under any Letter of Credit as provided in Section 2.10(c), (ii) the reimbursement of the Swing Line Bank of any Swing Line Loans as provided in Section 2.02(c), (iii) the payment of amounts to be expended by the Borrower in connection with any Acquisition, and (iv) payment of any fees and expenses associated with the Loans and the other transactions contemplated hereby. The Borrower hereby represents that the proceeds of the Existing Bank Loans and the Existing Swing Line Loans were used in compliance with Section 2.08(a) of the Existing Credit Agreement. (B) LETTERS OF CREDIT. The Letters of Credit shall be used for the purpose of supporting (x) workers' compensation liabilities of the Borrower or its Subsidiaries, (y) the obligations of the Borrower or its Subsidiaries to third party insurers arising (1) by virtue of the laws of any jurisdiction requiring third party insurers and (2) in lieu of payments in cash of insurance obligations or (z) performance, payment, deposit or surety obligations of the Borrower or its Subsidiaries, in any case if required by law or governmental rule or regulation, by any landlord under any real estate lease, or by custom and practice in the business of the Borrower 36 42 and its Subsidiaries (including in connection with the participation by the Borrower and its Subsidiaries in Medicare or Medicaid programs). (C) MARGIN REGULATIONS. No portion of the proceeds of any borrowing under this Agreement shall be used by the Borrower to purchase or carry any Margin Stock in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of the Board or to violate the Securities Exchange Act of 1934, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.09 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS. Notwithstanding any other provision of this Agreement, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: (A) DETERMINATION OF INTEREST RATE. As soon as practicable after 10:00 A.M. (New York time) on each Interest Rate Determination Date, the Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Borrower and each Bank. (B) SUBSTITUTED RATE OF BORROWING. If on any Interest Rate Determination Date any Bank (including the Agent) shall have determined (which determination shall be final and conclusive and binding upon all parties but, with respect to the following clauses (i) and (ii)(B), shall be made only after consultation with the Borrower and the Agent) that: (i) by reason of any changes arising after the date of this Agreement affecting the Eurodollar market or affecting the position of that Bank in such market, adequate and fair means do not exist for ascertaining the applicable interest rate by reference to the Eurodollar Rate with respect to the Eurodollar Rate Loans as to which an interest rate determination is then being made; or (ii) by reason of (A) any change after the date hereof in any applicable law or governmental rule, regulation or order (or any interpretation thereof and including the introduction of any new law or governmental rule, regulation or order) or (B) other circumstances affecting that Bank or the Eurodollar market or the position of that Bank in such market (such as for example, but not limited to, official reserve requirements required by Regulation D of the Board of Governors of the Federal Reserve System to the extent not given effect in the Eurodollar Rate), the Eurodollar Rate shall not represent the effective pricing to that Bank for Dollar deposits of comparable amounts for the relevant period; then, and in any such event, that Bank shall be an Affected Bank and it shall promptly (and in any event as soon as possible after being notified of a borrowing, conversion or continuation) give notice (by telephone promptly confirmed in writing) to the Borrower and the Agent (which 37 43 notice the Agent shall promptly transmit to each other Bank) of such determination. Thereafter, the Borrower shall pay to the Affected Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Affected Bank in its sole discretion shall reasonably determine) as shall be required to cause the Affected Bank to receive interest with respect to its Eurodollar Rate Loans for the Interest Period following that Interest Rate Determination Date at a rate per annum equal to 1.00% per annum in excess of the effective pricing to the Affected Bank for Dollar deposits to make or maintain its Eurodollar Rate Loans. A certificate as to additional amounts owed the Affected Bank, showing in reasonable detail the basis for the calculation thereof, submitted in good faith to the Borrower and the Agent by the Affected Bank shall be presumed to be correct. (C) REQUIRED TERMINATION AND PREPAYMENT. If on any date any Bank shall have reasonably determined (which determination shall be final and conclusive and binding upon all parties) that the making or continuation of its Eurodollar Rate Loans has become unlawful or impossible by reason of compliance by that Bank in good faith with any law, governmental rule, regulation or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, and in any such event, that Bank shall be an Affected Bank and it shall promptly give notice (by telephone promptly confirmed in writing) to the Borrower and the Agent (which notice the Agent shall promptly transmit to each other Bank) of that determination. Subject to the prior withdrawal of a Notice of Revolver Borrowing or a Notice of Conversion/Continuation or prepayment of the Eurodollar Rate Loans of the Affected Bank as contemplated by the following Section 2.09(d), the obligation of the Affected Bank to make or maintain its Eurodollar Rate Loans during any such period shall be terminated at the earlier of the termination of the Interest Period then in effect or when required by law and the Borrower shall no later than the termination of the Interest Period in effect at the time any such determination pursuant to this Section 2.09(c) is made or, earlier, when required by law, repay or prepay the Eurodollar Rate Loans of the Affected Bank, together with all interest accrued thereon. (D) OPTIONS OF THE BORROWER. In lieu of paying an Affected Bank such additional moneys as are required by Section 2.09(b) or the prepayment of an Affected Bank required by Section 2.09(c), the Borrower may exercise any one of the following options: (i) If the determination by an Affected Bank relates only to Eurodollar Rate Loans then being requested by the Borrower pursuant to a Notice of Revolver Borrowing or a Notice of Conversion/Continuation, the Borrower may by giving notice (by telephone promptly confirmed in writing) to the Agent (who shall promptly give similar notice to each other Bank) no later than the date immediately prior to the date on which such Eurodollar Rate Loans are to be made, withdraw that Notice of Revolver Borrowing or Notice of Conversion/Continuation and the Eurodollar Rate Loans then being requested shall be made by the Banks as Base Rate Loans; or (ii) Upon written notice to the Agent and each Bank, the Borrower may terminate the obligations of the Banks to make or maintain Loans as, and to convert Loans into, Eurodollar Rate Loans and in such event, the Borrower shall, prior to the time any payment pursuant to Section 2.09(c) is required to be made or, if the provisions of 38 44 Section 2.09(b) are applicable, at the end of the then current Interest Period, convert all of the Eurodollar Rate Loans into Base Rate Loans in the manner contemplated by Section 2.06(d) but without satisfying the advance notice requirements therein. (E) COMPENSATION. The Borrower shall compensate each Bank, upon written request by that Bank (which request shall set forth in reasonable detail the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any loss (including interest paid) sustained by that Bank in connection with the re-employment of such funds), that such Bank may sustain: (i) if for any reason (other than a default by that Bank) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Revolver Borrowing, a Notice of Conversion/Continuation or a telephonic request for borrowing or conversion/continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.06(d), (ii) if any prepayment of any of its Eurodollar Rate Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by the Borrower, or (iv) as a consequence of any other default by the Borrower to repay its Eurodollar Rate Loans when required by the terms of this Agreement. (F) QUOTATION OF EURODOLLAR RATE. Anything herein to the contrary notwithstanding, if on any Interest Rate Determination Date the Agent is as a matter of general practice not quoting rates to first class banks in the Eurodollar market for the offering of Dollars for deposit with maturities comparable to the Interest Period and in amounts comparable to the Eurodollar Rate Loans requested, the Agent shall contact the other Banks, if any, for their quotes for rates to first class banks in the Eurodollar market with respect to the requested Eurodollar Rate Loan, such other Banks to be contacted in decreasing order of their respective Pro Rata Shares (and in alphabetical order in the case of two or more Banks having the same Pro Rata Shares). In the event that none of the Banks are making Eurodollar quotes in the applicable amount and with the applicable maturity, the Agent shall give the Borrower and each Bank prompt notice thereof and the Loans requested shall be made as Base Rate Loans. (G) EURODOLLAR RATE TAXES. The Borrower agrees that: (i) Promptly upon notice from any Bank to the Borrower, the Borrower will pay, prior to the date on which penalties attach thereto, all present and future income, stamp and other taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of a Loan solely as a result of the interest rate being determined by reference to the Eurodollar Rate and/or the provisions of this Agreement relating to the Eurodollar Rate and/or the recording, registration, notarization or other formalization of any thereof and/or any payments of principal, interest or other amounts made on or in respect of a Loan when the interest rate is determined by reference to the Eurodollar Rate (all such taxes, levies, costs and charges being herein collectively called "EURODOLLAR RATE TAXES"); provided, however, that Eurodollar Rate Taxes shall not include any other Taxes. The Borrower shall also pay such additional amounts equal to increases in Taxes payable by that Bank which increases are attributable to payments made by the Borrower described in the immediately preceding sentence or this sentence. 39 45 A certificate as to additional amounts owed by the Borrower pursuant to this clause (i), showing in reasonable detail the basis for the calculation thereof, submitted in good faith to the Borrower and the Agent by any Bank shall be presumed to be correct. Promptly after the date on which payment of any such Eurodollar Rate Tax is due pursuant to applicable law, the Borrower will, at the request of that Bank, furnish to that Bank evidence, in form and substance satisfactory to that Bank, that the Borrower has met its obligations under this Section 2.09(g). (ii) The Borrower will indemnify each Bank against, and reimburse each Bank on demand for, any Eurodollar Rate Taxes, as determined by that Bank in its good faith discretion; provided that such Bank shall provide the Borrower with appropriate receipts for any payments or reimbursements made by the Borrower pursuant to this clause (ii) of Section 2.09(g). (iii) Each Bank organized under the laws of a jurisdiction outside of the United States (referred to in this Section 2.09(g) as a "FOREIGN BANK") as to which payments to be made hereunder or under the Notes are exempt from United States withholding tax or are subject to such tax at a reduced rate under an applicable statute or tax treaty shall provide to the Borrower and the Agent (x) a properly completed and executed Internal Revenue Service Form 4224 or Form 1001 or other applicable form, certificate or document prescribed by the Internal Revenue Service of the United States certifying as to such Foreign Bank's entitlement to such exemption or reduced rate with respect to payments to be made to such Foreign Bank hereunder and under the Notes (referred to in this Section 2.09(g) as a "CERTIFICATE OF EXEMPTION") or (y) a letter from such Foreign Bank stating that it is not entitled to any such exemption or reduced rate (referred to in this Section 2.09(g) as a "LETTER OF NON-EXEMPTION"). Each Foreign Bank shall provide such a Certificate of Exemption or a Letter of Non-Exemption before the Effective Date. Each Foreign Bank that becomes a Bank pursuant to an Assignment and Acceptance that has become effective pursuant to Section 11.05 shall provide a Certificate of Exemption or a Letter of Non-Exemption on the date such Foreign Bank becomes a Bank. Until the Borrower and the Agent have received from such Foreign Bank a Certificate of Exemption, the accuracy of which shall be reasonably satisfactory to the Borrower, the Borrower shall, subject to its obligations under Sections 2.09(g)(i), 2.09(g)(ii) and 2.09(i), be entitled to withhold taxes from such payments to such Foreign Bank at the statutory rate applicable to amounts to be paid hereunder to such Foreign Bank. (iv) Notwithstanding anything to the contrary contained in this Section 2.09(g), the Borrower shall not be required to pay any amounts pursuant to this Section 2.09(g) to any Foreign Bank unless such Foreign Bank has provided to the Borrower, within 60 days after the receipt by such Foreign Bank of a written request therefor, either a Certificate of Exemption or a Letter of Non-Exemption. (H) BOOKING OF EURODOLLAR RATE LOANS. Any Bank may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of its branch offices or the office of an Affiliate of that Bank. 40 46 (I) INCREASED COSTS. Except as provided in Section 2.09(b) with respect to certain determinations on Interest Rate Determination Dates, if, after the date hereof by reason of, (x) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in, or in the interpretation of, any law or regulation, or (y) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): (i) any Bank (or its applicable lending office) shall be subject to any tax, duty or other charge with respect to its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans, or shall change the basis of taxation of payments to any Bank of the principal of or interest on its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its applicable lending office imposed by the jurisdiction (whether local, state, federal or foreign) in which such Bank's principal executive office or applicable lending office is located); or (ii) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank's applicable lending office shall be imposed or deemed applicable or any other condition affecting its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans shall be imposed on any Bank or its applicable lending office or the interbank Eurodollar market, and as a result thereof there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining Eurodollar Rate Loans, or there shall be a reduction in the amount received or receivable by that Bank or its applicable lending office, then the Borrower shall from time to time, upon written notice from and demand by that Bank (with a copy of such notice and demand to the Agent), pay to the Agent for the account of that Bank, within five Business Days after receipt of such notice and demand, additional amounts sufficient to indemnify that Bank against such increased cost or reduced amount. A certificate as to the amount of such increased cost or reduced amount, submitted to the Borrower and the Agent by that Bank, shall be presumed to be correct. Any payments to be made by the Borrower under Sections 2.09(b), 2.09(g) or 2.09(i) are to be without duplication. (J) ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation of all amounts payable to a Bank under this Section 2.09 shall be made as though that Bank had actually funded its relevant Eurodollar Rate Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America; provided, however, that each Bank may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 2.09. (K) EURODOLLAR RATE LOANS AFTER DEFAULT. Unless the Agent and the 41 47 Required Banks shall otherwise agree, after the occurrence of and during the continuance of a Default or an Event of Default, the Borrower may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan. (L) AFFECTED BANKS' OBLIGATION TO MITIGATE. Each Bank agrees that, as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would cause it to be an Affected Bank under Section 2.09(b) or 2.09(c) or that would entitle such Bank to receive payments under Section 2.09(g) or 2.09(i), it will, to the extent not inconsistent with such Bank's internal policies, use reasonable efforts to make, fund or maintain the affected Eurodollar Rate Loans of such Bank through another lending office of such Bank if as a result thereof the additional moneys which would otherwise be required to be paid to such Bank pursuant to Section 2.09(b), 2.09(g) or 2.09(i) would be materially reduced or the illegality or other adverse circumstances which would otherwise require prepayment of such Loans pursuant to Section 2.09(c) would cease to exist, and if, as determined by such Bank in its sole discretion, the making, funding or maintaining of such Loans through such other lending office would not otherwise materially adversely affect such Loans or such Bank. The Borrower hereby agrees to pay all reasonable expenses incurred by any Bank in utilizing another lending office of such Bank pursuant to this Section 2.09(l). 2.10 LETTERS OF CREDIT. (A) LETTERS OF CREDIT. In addition to the Borrower requesting that the Banks make Revolving Loans pursuant to Section 2.01(a), the Borrower may request, in accordance with the provisions of this Section 2.10, on and after the Effective Date to and excluding the Termination Date, that the Issuing Bank issue Letters of Credit for the account of the Borrower; provided that the Borrower shall not request that the Issuing Bank issue (and the Issuing Bank shall not issue): (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan Commitments would exceed the Total Revolving Loan Commitments then in effect; or (ii) any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $15,000,000. In no event shall the Issuing Bank issue any Letter of Credit having an expiration date later than the Termination Date or the date that is one year after the issuance thereof except as expressly provided herein; provided, however, that the Issuing Bank may agree to renew any Letter of Credit automatically annually for a period not to exceed one year if the Issuing Bank does not cancel such renewal. If the Issuing Bank, in its sole discretion, determines to issue a Letter of Credit expiring after the scheduled Termination Date, the Borrower shall be required on the third Business Day immediately preceding the Termination Date to deposit with the Issuing Bank cash collateral for the repayment of any drawings under the Letter of Credit, such deposit to be in an amount equal to the maximum amount that may be drawn under such Letter of Credit and to be upon such terms and conditions as the Issuing Bank may require. The issuance of any Letter of Credit 42 48 in accordance with the provisions of this Section 2.10 shall require the satisfaction of each condition set forth in Section 5.02; provided, however, that the obligation of the Issuing Bank to issue any Letter of Credit is subject to the condition that (i) the Issuing Bank believed in good faith that all conditions under this Section 2.10(a) and Section 5.02 to the issuing of such Letter of Credit were satisfied at the time such Letter of Credit was issued or (ii) the satisfaction of any such condition not satisfied had been waived by the Required Banks prior to or at the time such Letter of Credit was issued; provided further that the Issuing Bank shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, including, without limitation, an Officer's Certificate from the Borrower as to the satisfaction of the conditions under Section 5.02 in determining the satisfaction of any conditions to the issuance of any Letter of Credit or the Total Utilization of Revolving Loan Commitments or Letter of Credit Usage then in effect. Immediately upon the issuance of each Letter of Credit, each Bank shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Bank a participation in such Letter of Credit and drawings thereunder in an amount equal to such Bank's Pro Rata Share of the maximum amount that is or at any time may become available to be drawn thereunder. If the Issuing Bank issues a Letter of Credit having an expiration date after the scheduled Termination Date, such participations shall expire without further action by any Bank on the scheduled Termination Date. Each Letter of Credit supporting the payment of Indebtedness may provide that the Issuing Bank may (but shall not be required to) pay the beneficiary thereof upon the occurrence of a Default or an Event of Default and the acceleration of the maturity of the Loans or, if payment is not then due to the beneficiary, provide for the deposit of funds in an account to secure payment to the beneficiary and that any funds so deposited shall be paid to the beneficiary of the Letter of Credit if conditions to such payment are satisfied or returned to the Issuing Bank for distribution to the Banks (or, if all Obligations shall have been indefeasibly paid in full, to the Borrower) if no payment to the beneficiary has been made and the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by the Issuing Bank as provided in this paragraph shall be treated for all purposes of this Agreement as a drawing duly honored by the Issuing Bank under the related Letter of Credit. (B) NOTICE OF ISSUANCE. Whenever the Borrower desires to cause the Issuing Bank to issue a Letter of Credit, it shall deliver to the Issuing Bank and the Agent a Notice of Issuance of Letter of Credit in the form of EXHIBIT E no later than 1:00 P.M. (New York time) at least four Business Days in advance of the proposed date of issuance or such shorter time as may be acceptable to the Issuing Bank (and the Agent shall promptly notify each Bank of the proposed issuance of a Letter of Credit). The Notice of Issuance of Letter of Credit shall specify (i) the proposed date of issuance (which shall be a Business Day), (ii) the face amount of the Letter of Credit, (iii) the expiration date of the Letter of Credit, (iv) the name and address of the beneficiary, (v) such other documents or materials as the Issuing Bank may reasonably request, and (vi) a precise description of the documents and the verbatim text of any certificate to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Bank to make payment under the Letter of Credit; 43 49 provided that the Issuing Bank, in its sole judgment, may require changes in any such documents and certificates. In determining whether to pay any Letter of Credit, the Issuing Bank shall be responsible only to use reasonable care to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. Promptly upon the issuance of a Letter of Credit, the Issuing Bank shall notify each other Bank of the issuance and the amount of each such other Bank's respective participation therein determined in accordance with Section 2.10(a) and such notice shall be accompanied by a copy of such issued Letter of Credit. (C) PAYMENT OF AMOUNTS DRAWN UNDER OR NECESSARY TO COLLATERALIZE LETTERS OF CREDIT. In the event (i) the beneficiary of any Letter of Credit makes a drawing thereunder or (ii) the Borrower is required under Section 2.10(a) to cash collateralize any Letter of Credit, the Issuing Bank immediately shall notify the Borrower and the Agent, and the Borrower shall reimburse the Issuing Bank or make a deposit with the Issuing Bank, as appropriate, on the day on which such drawing is honored or such cash collateral deposit is required in an amount in same day funds equal to the amount of such drawing or, in the case of such a deposit, the maximum amount that may be drawn under the applicable Letter of Credit; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless prior to 1:00 P.M. (New York time) on the date of such drawing or the date the Borrower is required to make such required deposit of cash collateral, as applicable, (A) the Borrower shall have notified the Issuing Bank and the Agent that the Borrower intends to reimburse the Issuing Bank for the amount of such drawing or to make such deposit with funds other than the proceeds of Revolving Loans or (B) the Borrower shall have delivered a Notice of Revolver Borrowing requesting Revolving Loans that are Base Rate Loans in an amount equal to the amount of such drawing or deposit, the Borrower shall be deemed to have given a Notice of Revolver Borrowing to the Agent requesting the Banks to make Revolving Loans that are Base Rate Loans on the date on which such drawing is honored or on which such deposit is required in an amount equal to the amount of such drawing or deposit, and (ii) if so requested by the Agent, the Banks shall, on the date of such drawing or required deposit, make Revolving Loans that are Base Rate Loans in the amount of such drawing or required deposit, the proceeds of which shall be applied directly by the Agent to reimburse the Issuing Bank for the amount of such drawing or to make a deposit with the Issuing Bank in the amount of such required deposit; and provided further that, if for any reason proceeds of Revolving Loans are not received by the Issuing Bank on such date in an amount equal to the amount of such drawing or deposit, the Borrower shall reimburse or make a deposit with the Issuing Bank, on the Business Day immediately following the date of such drawing or such deposit, in an amount in same day funds equal to the excess of the amount of such drawing or deposit over the amount of such Revolving Loans, if any, that are so received, plus accrued interest on such amount at the rate set forth in Section 2.10(e)(ii). (D) PAYMENT BY THE BANKS. If the Borrower shall fail to reimburse the Issuing Bank, for any reason, as provided in Section 2.10(c) (including, without limitation, reimbursement by the making of Revolving Loans by the Banks pursuant to the terms of Section 2.10(c)) in an amount equal to the amount of any drawing honored by the Issuing Bank under a Letter of Credit issued by it, the Issuing Bank promptly shall notify each Bank of the unreimbursed amount of such drawing and of such Bank's respective participation therein based on such Bank's Pro Rata Share. Each Bank shall make available to the Issuing Bank an amount 44 50 equal to its respective participation, in same day funds, at the office of the Issuing Bank specified in such notice, not later than 1:00 P.M. (New York time) on the Business Day after the date notified by the Issuing Bank. If any Bank fails to make available to the Issuing Bank the amount of such Bank's participation in such Letter of Credit as provided in this Section 2.10(d), the Issuing Bank shall be entitled to recover such amount on demand from such Bank together with interest at the customary rate set by the Issuing Bank for the correction of errors among banks for one Business Day and thereafter at the Base Lending Rate. Nothing in this Section 2.10 shall be deemed to prejudice the right of any Bank to recover from the Issuing Bank any amounts made available by such Bank to the Issuing Bank pursuant to this Section 2.10(d) if it is determined in a final judgment by a court of competent jurisdiction that the payment with respect to a Letter of Credit by the Issuing Bank in respect of which payment was made by such Bank constituted gross negligence or willful misconduct on the part of the Issuing Bank. The Issuing Bank shall distribute to each other Bank that has paid all amounts payable by it under this Section 2.10(d) with respect to any Letter of Credit issued by the Issuing Bank such other Bank's Pro Rata Share of all payments received by the Issuing Bank from the Borrower or pursuant to the last paragraph of Section 2.10(a), in each case, in reimbursement of drawings honored by the Issuing Bank under such Letter of Credit when such payments are received. (E) COMPENSATION. The Borrower agrees to pay the following amounts to the Issuing Bank with respect to each Letter of Credit issued by it: (i) with respect to each Letter of Credit, (A) a letter of credit fee (to be distributed to all the Banks according to their respective Pro Rata Shares) equal to the Applicable Eurodollar Margin multiplied by the maximum amount available from time to time for drawing under such Letter of Credit (calculated on the basis of a 360-day year and the actual number of days elapsed) and (B) a facing fee (to be retained by the Issuing Bank) equal to 0.25% per annum multiplied by the maximum amount available from time to time for drawing under such Letter of Credit (calculated on the basis of a 360-day year and the actual number of days elapsed), which amounts payable under clauses (A) and (B) shall be payable to the Issuing Bank quarterly in arrears on and to the last Business Day of each January, April, July and October, commencing January 31, 1998; provided that if the aggregate amount of the facing fee payable under clause (B) in respect of any Letter of Credit will be less than $500, the Borrower shall pay to the Issuing Bank, on the date of issuance of such Letter of Credit, a facing fee of $500 which shall be in lieu of the facing fee otherwise payable pursuant to such clause (B); (ii) with respect to drawings made under any Letter of Credit, interest, payable on demand, on the amount paid by the Issuing Bank in respect of each such drawing from the date of the drawing through the date such amount is reimbursed by the Borrower (including any such reimbursement out of the proceeds of Revolving Loans pursuant to Section 2.09(c)) at a rate that is equal to the sum of the Base Lending Rate and the Applicable Base Margin; provided that if such amount is not paid on demand, such amount shall bear interest thereafter at a rate that is equal to 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans which such rate shall not thereafter be increased pursuant to Section 2.06(e); and 45 51 (iii) with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with the Issuing Bank's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or drawing, as the case may be, or as otherwise agreed to by the Issuing Bank. Promptly upon receipt by the Issuing Bank of any amount described in clauses (i) or (ii) of this Section 2.10(e) (other than amounts specifically designated for distribution to the Issuing Bank) with respect to a Letter of Credit, the Issuing Bank shall distribute to each Bank its Pro Rata Share of such amount. (F) OBLIGATIONS ABSOLUTE. The obligation of the Borrower to reimburse the Issuing Bank for drawings made under the Letters of Credit issued by it and to repay any Revolving Loans made by the Banks pursuant to Section 2.10(c) and the obligations by the Banks under Section 2.10(d) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such transferee may be acting), the Agent, any Bank or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between the Borrower and the beneficiary for which the Letter of Credit was procured); (iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; provided that the Issuing Bank shall use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit; (iv) payment by the Issuing Bank under any Letter of Credit against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit; provided that the Issuing Bank shall use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit; (v) any adverse change in the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower or any of its Subsidiaries; (vi) any breach of this Agreement or any other Credit Document by the Borrower or any of its Subsidiaries, the Agent or any Bank (other than the Issuing Bank); 46 52 (vii) any other circumstance or happening whatsoever, that is similar to any of the foregoing; or (viii) the fact that a Default or an Event of Default shall have occurred and be continuing; provided that the Borrower shall not be required to pay any such amounts to the extent they arise from the gross negligence or willful misconduct of the Issuing Bank (as determined by a court of competent jurisdiction). (G) ADDITIONAL PAYMENTS. IF by reason of: (i) any change in any applicable law, regulation, rule, decree or regulatory requirement or any change in the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement, in each case occurring after the Effective Date; or (ii) compliance by the Issuing Bank or any Bank with any direction, request or requirement (whether or not having the force of law) announced or issued after the Effective Date by any governmental or monetary authority, including, without limitation, any announcements or issuances under Regulation D of the Board of Governors of the Federal Reserve System; THEN: (i) the Issuing Bank or any Bank shall be subject to any tax, levy, charge or withholding of any nature or to any variation thereof or to any penalty with respect to the maintenance or fulfillment of its obligations under this Section 2.10, whether directly or by such being imposed on or suffered by the Issuing Bank or any Bank; (ii) any reserve, special deposit, premium, FDIC assessment, capital adequacy or similar requirement is or shall be applicable, imposed or modified in respect of any Letters of Credit issued by the Issuing Bank or participations therein purchased by any Bank; or (iii) there shall be imposed on the Issuing Bank or any Bank any other condition regarding this Section 2.10, any Letter of Credit or any participation therein; AND the result of the foregoing is to directly or indirectly increase the cost to the Issuing Bank or any Bank of issuing, making or maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce the amount receivable in respect thereof by the Issuing Bank or any Bank, THEN and in any such case the Issuing Bank or such Bank may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify the Borrower and the Agent, and the Borrower shall pay within five Business Days of the date of such notice such amounts as the Issuing Bank or such Bank may specify to be necessary 47 53 to compensate the Issuing Bank or such Bank for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate equal at all times to the Base Lending Rate plus 2.00% per annum. The determination by the Issuing Bank or any Bank, as the case may be, of any amount due pursuant to this Section 2.10(g) as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall be presumed to be correct. (H) INDEMNIFICATION; NATURE OF THE ISSUING BANK'S DUTIES. In addition to amounts payable as elsewhere provided in this Section 2.10, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Bank from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees and reasonable allocated costs of internal counsel) that the Issuing Bank may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of gross negligence or willful misconduct of the Issuing Bank or the Issuing Bank's failure to use reasonable care to determine that the documents and certificates required to be delivered under such Letter of Credit had been delivered and that they complied on their face with the requirements of that Letter of Credit as determined by a court of competent jurisdiction or (ii) the failure of the Issuing Bank to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "GOVERNMENT ACTS"). Each Bank, proportionately to its Pro Rata Share, severally agrees to indemnify the Issuing Bank to the extent the Issuing Bank shall not have been reimbursed by the Borrower or its Subsidiaries, for and against any of the foregoing claims, demands, liabilities, damages, losses, costs, charges and expenses to which the Issuing Bank is entitled to reimbursement from the Borrower. As between the Borrower and the Issuing Bank, the Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Issuing Bank by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank shall not be responsible (absent gross negligence or willful misconduct (as determined by a court of competent jurisdiction)): (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Issuing Bank, including, without limitation, any Government Acts. None of the above shall affect, 48 54 impair, or prevent the vesting of any of the Issuing Bank's rights or powers hereunder; provided that, notwithstanding the foregoing, the Issuing Bank shall use reasonable care to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Bank under or in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith and absent gross negligence or willful misconduct of the Issuing Bank (as determined by a court of competent jurisdiction), shall not put the Issuing Bank under any resulting liability to the Borrower. Notwithstanding anything to the contrary contained in this Section 2.10(h), the Borrower shall have no obligation to indemnify the Issuing Bank in respect of any liability incurred by the Issuing Bank arising solely out of the gross negligence or willful misconduct of the Issuing Bank as determined by a court of competent jurisdiction, or out of the wrongful dishonor by the Issuing Bank of a proper demand for payment made under the Letters of Credit; provided that the Issuing Bank shall use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. (I) COMPUTATION OF INTEREST. Interest payable pursuant to this Section 2.10 shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. SECTION 3. FEES. 3.01 FEES. (A) AGENCY FEE. The Borrower agrees to pay to the Agent on the Effective Date an amount separately agreed to by the Agent and the Borrower. (B) COMMITMENT FEE. The Borrower agrees to pay to the Agent, for distribution to each Bank in proportion to its Pro Rata Share, commitment fees for the period from and including the Effective Date to but excluding the Termination Date equal to the average of the daily unused portion of the Revolving Loan Commitments multiplied by the Commitment Fee Percentage per annum, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on and to the last Business Day of January, April, July and October commencing on January 31, 1998 and upon the termination of the Revolving Loan Commitments. Anything contained in this Agreement to the contrary notwithstanding, for the purposes of calculating the commitment fees payable by the Borrower pursuant to this Section 3.01(b), the "UNUSED PORTION OF THE REVOLVING LOAN COMMITMENTS," as of any date of determination, shall be an amount equal to the aggregate amount of the Revolving Loan Commitments as of such date minus the aggregate principal amount of all outstanding Revolving Loans and the Letter of Credit Usage on such date, and the 49 55 unused portion of the Revolving Loan Commitments shall not be reduced by (i) reason of the Borrower's inability to satisfy the conditions precedent set forth in Section 5 and consequent inability to borrow Loans hereunder or (ii) the aggregate principal amount of all outstanding Swing Line Loans. (C) ADMINISTRATIVE FEE. The Borrower agrees to pay to the Agent an annual administrative fee in the amount and at the times separately agreed to by the Agent and the Borrower. (D) CONSENT FEE. On the Effective Date, the Borrower shall pay to the Agent, for distribution (as appropriate) to Existing Banks, a consent fee as set forth in the term sheet (for purposes of this Section 3.01, the "TERM SHEET") contained in the Confidential Information Memorandum. (E) ADDITIONAL BANK FINANCING FEE. On the Effective Date, the Borrower shall pay to the Agent, for distribution (as appropriate) to the Banks, the "Additional Bank Financing Fees" described in the Term Sheet. SECTION 4. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; PAYMENTS. 4.01 SCHEDULED PAYMENTS OF TERM LOANS. The Borrower shall make principal payments on the Term Loans in installments on the dates and in the amounts set forth below:
=============================================================================== DATE SCHEDULED PAYMENT =============================================================================== September 15, 1999 $ 1,500,000 - - ------------------------------------------------------------------------------- December 15, 1999 $ 1,500,000 - - ------------------------------------------------------------------------------- March 15, 2000 $ 1,500,000 - - ------------------------------------------------------------------------------- June 15, 2000 $ 1,500,000 - - ------------------------------------------------------------------------------- September 15, 2000 $ 3,000,000 - - ------------------------------------------------------------------------------- December 15, 2000 $ 3,000,000 - - ------------------------------------------------------------------------------- March 15, 2001 $ 3,000,000 - - ------------------------------------------------------------------------------- June 15, 2001 $ 6,000,000 - - ------------------------------------------------------------------------------- September 15, 2001 $ 6,000,000 - - ------------------------------------------------------------------------------- December 15, 2001 $ 6,000,000 - - ------------------------------------------------------------------------------- March 15, 2002 $ 6,000,000 - - ------------------------------------------------------------------------------- June 15, 2002 $ 6,000,000 - - ------------------------------------------------------------------------------- September 15, 2002 $15,000,000 - - ------------------------------------------------------------------------------- December 16, 2002 $15,000,000 ===============================================================================
50 56 provided that the scheduled installments of principal of the Term Loans set forth above shall be reduced in connection with (i) any voluntary prepayments of the Term Loans in accordance with Section 4.02(a) and (ii) any mandatory prepayments in accordance with Section 4.02(c); and provided, further that the Term Loans and all other amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Termination Date, and the final installment payable by the Borrower in respect of the Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the Term Loans. 4.02 PREPAYMENTS AND REDUCTIONS IN COMMITMENTS. (A) VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay the Loans, without premium or penalty, in whole or in part from time to time on the following terms and conditions: (i) the Borrower shall deliver to the Agent at its Notice Office prior notice of its intent to prepay the Term Loans or the Revolving Loans and the amount of such prepayment no later than 12:00 Noon (New York time) one Business Day in advance of the proposed prepayment date (in the case of a Base Rate Loan) and three Business Days in advance of the proposed prepayment date (in the case of a Eurodollar Rate Loan), which notice the Agent shall promptly transmit to each of the Banks, (ii) Eurodollar Rate Loans prepaid other than on the expiration of the Interest Period applicable thereto shall be subject to payment of breakage costs by the Borrower and (iii) the Borrower may prepay Swing Line Loans at any time in full or in part without notice or penalty. Any such voluntary prepayment shall be applied as specified in Section 4.03(a). (B) VOLUNTARY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. The Borrower shall have the right, at any time and from time to time, to terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitments in an amount up to the amount by which the Total Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments. The Borrower shall give not less than three Business Days' prior written notice to the Agent designating the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction. Promptly after receipt of a notice of such termination or partial reduction, the Agent shall notify each Bank of the proposed termination or reduction. Such termination or partial reduction of the Revolving Loan Commitments shall be effective on the date specified in the Borrower's notice and shall reduce the Revolving Loan Commitment of each Bank proportionately to its Pro Rata Share. Any such partial reduction of the Revolving Loan Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in excess of that amount unless the remaining amount of the Revolving Loan Commitments is less than $1,000,000 in which case such reduction shall be in the amount of the then remaining Revolving Loan Commitments. 51 57 (C) MANDATORY PREPAYMENTS AND MANDATORY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. The Loans shall be prepaid and/or the Revolving Loan Commitments shall be permanently reduced in the amounts and under the circumstances set forth below, all such prepayments and/or reductions to be applied as set forth below or as more specifically provided in Section 4.03: (I) Prepayments and Reductions Due to Qualified High-Yield Offering. No later than the second Business Day following the date of receipt by the Borrower of the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) from a Qualified High-Yield Offering, the Borrower shall (i) prepay the Term Loans in full utilizing the first $75,000,000 of such proceeds, (ii) prepay first outstanding Swing Line Loans and second outstanding Revolving Loans utilizing the next $125,000,000 of such proceeds with no corresponding reduction in the Revolving Loan Commitments, and (iii) to the extent of any such proceeds in excess of $200,000,000, prepay outstanding Revolving Loans and permanently reduce the Revolving Loan Commitments in an amount equal to such excess. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Loan Commitments pursuant to this Section 4.02(c)(i), the Borrower shall deliver to Agent an Officers' Certificate demonstrating the calculation of the net cash proceeds that gave rise to such prepayment and/or reduction. In the event that the Borrower shall subsequently determine that the actual net cash proceeds were greater than the amount set forth in such Officers' Certificate, the Borrower shall promptly make an additional prepayment of the Loans (and/or, if applicable, the Revolving Loan Commitments shall be permanently reduced) in an amount equal to the amount of such excess, and the Borrower shall concurrently therewith deliver to Agent an Officers' Certificate demonstrating the derivation of the additional net cash proceeds resulting in such excess. (ii) Prepayments and Reductions Due to Issuance of Debt Securities Other Than in Connection With a Qualified High-Yield Offering. No later than the second Business Day following the date of receipt by the Borrower of the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) from the issuance of any debt Securities of the Borrower (other than pursuant to a Qualified High-Yield Offering), the Borrower shall prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to 100% of such net cash proceeds. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Loan Commitments pursuant to this Section 4.02(c)(ii), the Borrower shall deliver to Agent an Officers' Certificate demonstrating the calculation of the net cash proceeds that gave rise to such prepayment and/or reduction. In the event that the Borrower shall subsequently determine that the actual net cash proceeds were greater than the amount set forth in such Officers' Certificate, the Borrower shall promptly make an additional prepayment of the Loans (and/or, if applicable, the Revolving Loan Commitments shall be permanently reduced) in an amount equal to the amount of such excess, and the Borrower shall concurrently therewith deliver to Agent an Officers' Certificate demonstrating the derivation of the additional net cash proceeds resulting in such excess. 52 58 (iii) Prepayments Due to Reductions or Restrictions of Revolving Loan Commitments. The Borrower shall from time to time prepay first the Swing Line Loans and second the Revolving Loans to the extent necessary to give effect to the limitations set forth in Sections 2.01(a) and 2.02(a). 4.03 APPLICATION OF PREPAYMENTS. (A) APPLICATION OF VOLUNTARY PREPAYMENTS BY TYPE OF LOANS AND ORDER OF MATURITY. Any voluntary prepayments pursuant to Section 4.02(a) shall be applied as specified by the Borrower in the applicable notice of prepayment; provided that in the event the Borrower fails to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied first to repay outstanding Swing Line Loans to the full extent thereof, second to repay outstanding Revolving Loans to the full extent thereof, and third to repay outstanding Term Loans to the full extent thereof. Any voluntary prepayments of the Term Loans pursuant to Section 4.02(a) shall be applied to reduce the scheduled installments of principal of the Term Loans set forth in Section 4.01 on a pro rata basis in accordance with the respective outstanding principal amounts thereof. (B) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS BY TYPE OF LOANS. Any amount (the "APPLIED AMOUNT") required to be applied as a mandatory prepayment of the Loans and/or a reduction of the Revolving Loan Commitments pursuant to Section 4.02(c)(ii) shall be applied first to prepay the Term Loans to the full extent thereof, second, to the extent of any remaining portion of the Applied Amount, to prepay the Swing Line Loans to the full extent thereof and to permanently reduce the Revolving Loan Commitments by the amount of such prepayment, third, to the extent of any remaining portion of the Applied Amount, to prepay the Revolving Loans to the full extent thereof and to further permanently reduce the Revolving Loan Commitments by the amount of such prepayment, and fourth, to the extent of any remaining portion of the Applied Amount, to further permanently reduce the Revolving Loan Commitments to the full extent thereof. (C) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS OF TERM LOANS. Any mandatory prepayments of the Term Loans pursuant to Section 4.02(c)(ii) shall be applied to reduce the scheduled installments of principal of the Term Loans set forth in Section 4.01 on a pro rata basis in accordance with the respective outstanding principal amounts thereof. (D) APPLICATION OF PREPAYMENTS TO BASE RATE LOANS AND EURODOLLAR RATE LOANS. Considering Term Loans and Revolving Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Borrower pursuant to subsection 2.09(e). (E) APPLICATION OF PREPAYMENTS TO PRINCIPAL AND INTEREST. Except with respect to prepayments of Revolving Loans pursuant to Section 4.02(a), all payments in respect 53 59 of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. 4.04 GENERAL PROVISIONS REGARDING PAYMENTS. (A) METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made (i) subject to the second paragraph of Section 4.04(c), in the case of any Swing Line Loan to the Swing Line Bank, and (ii) to the Agent for the account of the Bank or the Banks entitled thereto not later than 1:00 P.M. (New York time), on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of the Agent. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or under any Note or of the commitment or other fees hereunder, as the case may be; provided, however, that if the day on which payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in that month, then the due date thereof shall be the next preceding Business Day. The Borrower and the Swing Line Bank shall give the Agent prompt notice of each Swing Line Loan and any payment thereof. All voluntary prepayments shall be made in an aggregate minimum amount of $100,000 and integral multiples of $10,000 in excess of that amount. (B) NET PAYMENTS. All payments made by the Borrower hereunder or under any Note will be made without setoff, counterclaim or other defense. (C) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest payments shall be apportioned among all outstanding Loans to which such payments relate, and such payments shall be apportioned ratably to the Banks, proportionately to the Banks' respective Pro Rata Shares. The Agent promptly shall distribute to each Bank at its primary address set forth below its name on the appropriate signature page hereof or such other address as any Bank may request its share of all such payments received by the Agent and the commitment and loan fees of such Bank when received by the Agent pursuant to Section 3.01. Anything contained in this agreement to the contrary notwithstanding, upon the occurrence and during the continuance of any Event of Default specified in Section 9 or after the acceleration of the maturity of the Loans and the other amounts referred to in Section 9 or termination of the Revolving Loan Commitments, all payments relating to the Loans and the other Obligations shall be made to the Agent for the account of the Banks and all amounts received by the Agent that are to be applied to the payment of the Obligations shall be distributed first to the Swing Line Bank to the extent of the unpaid principal of, and accrued interest on, Swing Line Loans and second to the Banks in such a manner that each Bank receives its proportionate share of such amounts based on the outstanding principal amounts of all Revolving Loans then outstanding and the amount of all other Obligations then payable. 54 60 SECTION 5. CONDITIONS PRECEDENT. 5.01 CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective only upon satisfaction of all of the following conditions: (A) EXECUTION OF AGREEMENT; CREDIT DOCUMENTS; NOTES. The Agent shall have received: (i) an original of this Agreement (whether the same or different copies) duly executed by the Borrower, each Bank and the Agent, (ii) an original Revolving Note and Term Note made to the order of each Bank, duly executed by the Borrower in the amount, maturity and as otherwise provided herein, (iii) an original Swing Line Note made to the order of the Swing Line Bank, duly executed by the Borrower, (iv) an original Consent to Amendment and Restatement duly executed by each Guarantor Subsidiary, and (v) to the extent not already received, signed copies of the other Credit Documents (whether the same or different copies) duly executed by the parties thereto. (B) NO DEFAULT; REPRESENTATION AND WARRANTIES; MATERIAL ADVERSE CHANGES. All representations and warranties of the Borrower and its Subsidiaries set forth in this Agreement and in each of the other Credit Documents shall be true, correct and complete in all material respects on and as of the Effective Date and after giving effect to the transactions contemplated to occur on such date, and the Borrower shall have delivered to the Agent an Officer's Certificate, dated as of the Effective Date, signed by the President or Vice President of the Borrower, and attested to by the Secretary or any Assistant Secretary of the Borrower, in form and substance satisfactory to the Agent, to the effect that on and as of the Effective Date and after giving effect to the transactions contemplated to occur on such date, (i) no Default or Event of Default shall have occurred and be continuing, (ii) all representations and warranties contained herein and in the other Credit Documents are true, correct and complete in all material respects and (iii) no material adverse change has occurred in the business, operations, properties, assets or condition (financial or otherwise) or prospects of any of the Borrower and its Subsidiaries taken as whole since December 31, 1996; provided, however, that the enactment of legislation on August 6, 1997 providing for reductions in Medicare's reimbursement rates for oxygen therapy shall not in and of itself be considered a material adverse change for purposes of this clause (iii). (C) CORPORATE DOCUMENTS; PROCEEDINGS. (i) On the Effective Date, the Agent shall have received a certificate, dated the Effective Date, signed by the President or Vice President of the Borrower, and attested to by the Secretary or any Assistant Secretary of the Borrower, in form and substance satisfactory to the Agent, certifying (A) resolutions of the Board of Directors of the Borrower authorizing and approving this Agreement, the Notes, the other Credit Documents and the transactions contemplated hereby, (B) the signatures and incumbency of the Borrower's officers executing this Agreement, the Notes, any other Credit Documents to which the Borrower is a party and the documents, instruments or other certificates to be delivered in connection with this Agreement and the other Credit 55 61 Documents, and (C) the Certificate of Incorporation and By-Laws of the Borrower together with copies of the Certificate of Incorporation and By-Laws of the Borrower and the resolutions of the Borrower referred to in such certificate. In lieu of delivering a copy of its Certificate of Incorporation or By-Laws to the Agent pursuant to the preceding sentence, the Borrower may certify in its certificate delivered pursuant to this clause (i) that such Certificate of Incorporation or By-Laws, as the case may be, were delivered to the Agent pursuant to the Existing Credit Agreement and that there has been no change in such Certificate of Incorporation or By-Laws, as the case may be, since the date of such delivery. (ii) On the Effective Date, the Agent shall have received a certificate, dated the Effective Date, signed by the President or Vice President of each of the Borrower's Subsidiaries party to any Credit Document, and attested to by the Secretary or any Assistant Secretary of such Subsidiary, in form and substance satisfactory to the Agent, certifying (A) the resolutions adopted by the Board of Directors of such Subsidiary approving and authorizing the Consent to Amendment and Restatement, the Subsidiary Guaranty, the Subsidiary Security Agreement, the Subsidiary Pledge Agreement, the Trademark Security Agreement, the Subsidiary Trademark Security Agreement (if such Subsidiary is a party thereto), the Subsidiary Partnership Security Agreement (if such Subsidiary is a party thereto) and the transactions contemplated thereby and by this Agreement, (B) the signatures and incumbency of the officers such Subsidiary executing the Credit Documents to which such Subsidiary is a party and the documents, instruments or other certificates to be delivered in connection with this Agreement and the other Credit Documents, and (C) the Articles or Certificate of Incorporation or other charter documents and By-Laws of such Subsidiary, together with copies of the Articles or Certificate of Incorporation or other charter documents and By-Laws of such Subsidiary and the resolutions of such Subsidiary referred to in such certificate. In lieu of delivering a copy of its Articles or Certificate of Incorporation or other charter documents or By-Laws to the Agent pursuant to the preceding sentence, any of the Borrower's Subsidiaries may certify in its certificate delivered pursuant to this clause (ii) that such Articles or Certificate of Incorporation, other charter documents or By-Laws, as the case may be, were delivered to the Agent pursuant to the Existing Credit Agreement and that there has been no change in such Articles or Certificate of Incorporation, other charter documents or By-Laws, as the case may be, since the date of such delivery. (iii) On the Effective Date, the Agent shall have received copies of the Articles or Certificate of Incorporation or other charter documents of each of the Borrower and each of the Borrower's Subsidiaries party to any Credit Document, certified as of a recent date prior to delivery by the Secretary of State of its jurisdiction of incorporation, together with a good standing certificate from its jurisdiction of incorporation dated a recent date prior to delivery; provided, however, that the Articles or Certificate of Incorporation or other charter documents of a Subsidiary need not be delivered pursuant to this clause (iii) if such Subsidiary certifies pursuant to clause (ii) above that such Articles or Certificate of Incorporation or other charter documents were delivered to the Agent pursuant to the Existing Credit Agreement and that there has been 56 62 no change in such Articles or Certificate of Incorporation or other charter documents since the date of such delivery. (iv) All corporate, partnership and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Banks, and the Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings and governmental approvals, if any, that any Bank reasonably may have requested in connection therewith, such documents and papers as appropriate to be certified by proper corporate, partnership or governmental authorities. (D) PERFECTION OF SECURITY INTERESTS. The Borrower and its Subsidiaries shall have taken or caused to be taken such actions in such a manner so that the Agent has or maintains a valid and perfected first priority security interest in all Collateral (subject to Liens consented to by the Required Banks with respect to such Collateral and other Liens permitted by Section 8.01) encumbered or to be encumbered under the Credit Documents. Such actions shall include, without limitation: (i) the delivery, to the extent not theretofore delivered, pursuant to the applicable Credit Documents by the Borrower and its Subsidiaries of such certificates (which certificates shall be registered in the name of the Agent or properly endorsed in blank for transfer or accompanied by irrevocable undated stock powers duly endorsed in blank, all in form and substance satisfactory to the Agent) representing all of the capital stock required to be pledged pursuant to the Credit Documents; (ii) the delivery, to the extent not theretofore delivered, pursuant to the applicable Credit Documents by the Borrower and its Subsidiaries of such promissory notes (which promissory notes shall be endorsed to the order of the Agent, all in form and substance satisfactory to the Agent) representing all of the pledged debt required to be pledged pursuant to the Credit Documents; (iii) the delivery, to the extent not theretofore delivered, to the Agent of Uniform Commercial Code financing statements, or amendments thereto, executed by the Borrower and its Subsidiaries as to the Collateral granted by the Borrower and its Subsidiaries for all jurisdictions as may be necessary or desirable to perfect the Agent's security interest in such Collateral; and (iv) evidence reasonably satisfactory to the Agent that all other filings (including, without limitation, filings with the United States Patent and Trademark Office), recordings and other actions the Agent deems necessary or advisable to establish, preserve and perfect the first priority Liens (subject to Liens permitted under this Agreement or consented to by the Required Banks with respect to such Collateral) granted to the Agent in personal and mixed property shall have been made. (E) MARGIN RATE DETERMINATION CERTIFICATE. The Borrower shall have delivered a Margin Rate Determination Certificate calculated using consolidated financial statements of the Borrower dated September 30, 1997. (F) PAYMENT OF FEES. The Borrower shall have paid (i) the Fees required by Section 3.01 to be paid on or prior to the Effective Date, and (ii) to the Agent and the Banks (as such terms are defined in the Existing Credit Agreement) all unpaid fees 57 63 accrued under the Existing Credit Agreement prior to the Effective Date. (G) CONVERSION OF EXISTING REVOLVING LOANS; PAYMENT OF INTEREST, FEES AND EXISTING SWING LINE LOANS. On or before the Effective Date, notwithstanding anything contained in the Existing Credit Agreement or Section 2.04 of this Agreement to the contrary, (i) the Borrower shall repay in full all Existing Swing Line loans, together with all accrued and unpaid interest thereon (ii) the Borrower shall convert all Existing Bank Loans outstanding on the Effective Date as Eurodollar Rate Loans into Base Rate Loans and, in connection therewith, shall pay to Existing Banks such amounts as would have been payable pursuant to Section 2.09(e) of the Existing Credit Agreement if such Eurodollar Rate Loans had been prepaid on the Effective Date, (iii) the Borrower shall pay to Agent, for distribution (as appropriate) to Banks, all accrued and unpaid interest with respect to all Existing Bank Loans outstanding on the Effective date, (iv) the Borrower shall pay to Agent, for distribution (as appropriate) to Banks, all commitment fees and letter of credit fees which are accrued and unpaid as of the Effective Date under Sections 3.01(b) and 2.10(e) of the Existing Credit Agreement, and (v) the Borrower shall pay to Agent, for distribution (as appropriate) to Banks and Agent the fees payable on the Effective Date referred to at Section 3.01. (H) FINANCIAL STATEMENTS. The Banks shall have received (i) audited financial statements of the Borrower and its Subsidiaries for the fiscal years ended December 31, 1994, 1995 and 1996, (ii) unaudited financial statements of the Borrower and its Subsidiaries for the nine-month period ended September 30, 1997, and (iii) final projected financial statements (including balance sheets and statements of operations, stockholders' equity and cash flows) of the Borrower and its Subsidiaries for the five-year period after the Effective Date, all of the foregoing to be (x) substantially consistent with any financial statements for the same periods delivered to the Agent prior to preparation of the Confidential Information Memorandum and, in the case of any such financial statements for subsequent periods, substantially consistent (subject to variances resulting from changes of a general economic nature) with any projected financial results for such periods delivered to the Agent prior to such preparation and (y) otherwise in form and substance satisfactory to the Banks. (I) EXISTING AND CONTINUING INDEBTEDNESS. The Existing Indebtedness that shall remain outstanding after the Effective Date shall be as set forth on SCHEDULE 8.04(II) annexed hereto, and the Borrower shall have delivered to the Agent an Officers' Certificate to such effect. (J) SATISFACTION OF CONDITIONS TO FUNDING. All conditions precedent to the making of Loans and the issuance of Letters of Credit described in Section 5.02 shall be satisfied on and as of the Effective Date with respect to the Term Loans, the Revolving Loans and Swing Line Loans, if any, to be made, and the Letters of Credit to be issued, on such date. (K) NO EVENT OF DEFAULT. Immediately prior to the Effective Date, no "Default" or "Event of Default" (as such terms are defined in the Existing Credit Agreement) shall have occurred and be continuing. 58 64 (L) OPINIONS OF COUNSEL. On the Effective Date, the Agent shall have received from Harwell Howard Hyne Gabbert & Manner, P.C., counsel to the Borrower, an opinion substantially in the form annexed hereto as EXHIBIT R, addressed to each of the Banks and dated the date of delivery, covering such matters incident to the transactions contemplated herein as the Agent may reasonably request. (M) CERTAIN APPROVALS AND AGREEMENTS. Borrower and its Subsidiaries shall have obtained all third party consents, waivers, amendments, and approvals that may be necessary under Borrower's and its Subsidiaries' existing contracts and agreements in connection with the borrowings under this Agreement and all related transactions, and Borrower and its Subsidiaries shall otherwise be in material compliance with such agreements. All the Notes, certificates, legal opinions and other documents and papers referred to in this Section 5, unless otherwise specified, shall be delivered to the Agent for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks and shall be satisfactory in form and substance to the Banks. 5.02 CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT. The obligations of the Banks to make Term Loans and Revolving Loans, the Swing Line Bank to make Swing Line Loans and the Issuing Bank to issue Letters of Credit on each Funding Date are subject to the following further conditions precedent: (A) The Agent or Issuing Bank shall have received, in accordance with the provisions of Sections 2.01(b), 2.03(b) or 2.10(b), as the case may be, before that Funding Date, an originally executed Notice of Term Borrowing, Notice of Revolver Borrowing or Notice of Issuance of Letter of Credit, as the case may be (or, in the case of a Swing Line Loan, the Swing Line Bank shall have received an executed Notice of Swing Line Borrowing), in each case signed by the Chief Executive Officer, the Chief Financial Officer or the Treasurer of the Borrower or by any officer of the Borrower designated by the Board of Directors of the Borrower or any of the above-described officers on behalf of the Borrower in writing delivered to the Agent. The obligation of the Issuing Bank to issue any Letter of Credit is subject to the further condition precedent that on or before the date of issuance of such Letter of Credit, the Issuing Bank shall have received, in accordance with the provisions of Section 2.10(b), all other information specified in Section 2.10(b) and such other documents as the Issuing Bank reasonably may require in connection with the issuance of such Letter of Credit. (B) As of the Funding Date: (i) The representations and warranties contained herein shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date taking into account any amendments to the Schedules or Exhibits hereto as a result of any disclosures 59 65 made by the Borrower to the Agent and the Banks after the Effective Date approved by the Agent and the Required Banks in their reasonable discretion; (ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Revolver Borrowing or the issuance of such Letter of Credit that would constitute a Default or an Event of Default; (iii) The Borrower shall have performed in all material respects all agreements and satisfied all conditions that this Agreement provides shall be performed by it on or before that Funding Date; (iv) No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Bank (or, in the case of a Swing Line Loan, the Swing Line Bank) from making the Revolving Loans, the Term Loans or the Issuing Bank from issuing the Letter of Credit (or, in the case of a Swing Line Loan, making a Swing Line Loan); and (v) The making of the Loans or the issuing of the Letter of Credit requested on such Funding Date shall not violate any law, including, without limitation, Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System. SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce the Banks to enter into this Agreement and to maintain and make the Loans, the Borrower makes the following representations, warranties and agreements, which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans: 6.01 CORPORATE STATUS. Each of the Borrower and its Subsidiaries (i) is a duly organized and validly existing corporation, partnership or association, as the case may be, in good standing under the laws of the jurisdiction of its incorporation (except in the case of each of American HomePatient of Illinois, Inc., Medical Equipment Service, Inc., and American HomePatient Ventures, Inc., each of which the Borrower shall cause to be in good standing within 30 days after the Effective Date), (ii) has the power and authority to own its property and assets and to transact the business in which it is engaged, (iii) is duly qualified as a foreign corporation, partnership or association, as the case may be, and in good standing in ea ch jurisdiction where its ownership, leasing or operation of property or the conduct of its business requires such qualification, except if the failure to be so qualified could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole and (iv) is in compliance with all requirements of law, including, but not limited to, all federal, state and local statutes, regulations and ordinances relating to the delivery of healthcare services of the type provided by the Borrower and its Subsidiaries and payment therefor, except to the extent that the failure to do so could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 60 66 6.02 CORPORATE POWER AND AUTHORITY. The Borrower and each of its Subsidiaries has the corporate, partnership or other power to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is a party and has taken all necessary corporate, partnership or other action to authorize the execution, delivery and performance by it of each of such Credit Documents. The Borrower and each of its Subsidiaries has duly executed and delivered each of the Credit Documents to which it is party, and each of such Credit Documents constitutes the legal, valid and binding obligation of the Borrower or such Subsidiary, as the case may be, enforceable against the Borrower or such Subsidiary, as the case may be, in accordance with its terms except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law). The Borrower and each Subsidiary making any Acquisition shall have the corporate, partnership or other power to consummate such Acquisition upon the consummation thereof, on the terms set forth in any applicable purchase agreement, agreement of merger or other operative agreement. Upon the consummation of any Acquisition, such Acquisition shall have been duly authorized by all necessary action of the Borrower and any of its Subsidiaries participating therein. 6.03 NO VIOLATION. Neither the execution, delivery or performance by the Borrower or a Subsidiary of the Borrower of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions of any such Credit Documents, nor the consummation of any Acquisition, upon the consummation thereof, (i) will contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality (except, in the case of the consummation of any Acquisition, as could not reasonably be expected to have a material adverse effect on the business, operations, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole), (ii) will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under (except, in the case of the consummation of any Acquisition, as could not reasonably be expected to have a material adverse effect on the business, operations, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole), or result in the creation or imposition of (or the obligation to create or impose) any Lien (other than Liens permitted under Section 8.01) upon any of the property or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement, loan agreement or any other agreement, contract or instrument to which the Borrower or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws (or other documents of formation and governance, as the case may be) of the Borrower or any of its Subsidiaries. 6.04 GOVERNMENTAL APPROVALS. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made prior to the Effective Date), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance by the Borrower or any of its Subsidiaries of 61 67 any Credit Document to which the Borrower or any of such Subsidiaries is a party, (ii) the legality, validity, binding effect or enforceability of any such Credit Document or (iii) any Acquisition, except filings, approvals and authorizations that shall have been made or obtained prior to the consummation of such Acquisition or for which arrangements shall have been made for the subsequent issuance thereof within four weeks of the closing of such Acquisition (or, if an additional period is necessary such additional period as is satisfactory to the Agent) except, in any case, filings, approvals and authorizations that could not reasonably be expected to have a material adverse effect on the business, operations, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 6.05 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED LIABILITIES; ETC. (A) The financial statements delivered to the Existing Banks pursuant to Sections 7.01(a) and (b) of the Existing Credit Agreement and to the Banks pursuant to Section 5.01(h) present fairly the consolidated financial condition of the Borrower and its Subsidiaries as at the respective dates thereof and the consolidated results of operations and changes in financial condition of the Borrower and its Subsidiaries for each of the periods covered thereby, subject (in the case of any unaudited interim financial statements) to changes resulting from normal year-end adjustments. All such consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices consistently applied. (B) Except as fully reflected in the financial statements described in Section 6.05(a) or in SCHEDULE 6.05, and except for Interest Rate Agreements permitted hereunder, there were as of the Effective Date no liabilities or obligations with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) that, either individually or in aggregate, would be material to the Borrower and its Subsidiaries taken as a whole. Except as set forth in SCHEDULE 6.05, as of the Effective Date the Borrower does not know of any basis for the assertion against the Borrower or any of its Subsidiaries of any liability or obligation of any nature whatsoever that is not fully reflected in the financial statements described in Section 6.05(a) that, either individually or in the aggregate, would be material to the Borrower and its Subsidiaries taken as a whole. 6.06 LITIGATION. Except as set forth on SCHEDULE 6.06, there is no action, suit or arbitration or other proceeding pending or, to the best knowledge of the Borrower), threatened with respect to (i) any Credit Document, (ii) any tax return, (iii) any Acquisition that has been consummated, if any, or (iv) any other matter that, if adversely determined, is reasonably likely to materially and adversely affect the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 6.07 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a whole) heretofore or contemporaneously furnished by the Borrower or on behalf of the Borrower with its knowledge in writing to any Bank (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein (including, without limitation, any Acquisition) is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the Borrower in writing to any Bank will be, true and accurate in all material respects on the date as of which such 62 68 information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not materially misleading at such time in light of the circumstances under which such information was provided. 6.08 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds of the Loans and any Letters of Credit have been and will be used by the Borrower for the purposes set forth in Section 2.07; provided that no part of the proceeds of any Loan or any Letter of Credit was or will be used by the Borrower to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan or the issuance of any Letter of Credit nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. 6.09 TAX RETURNS AND PAYMENTS. Each of the Borrower and its Subsidiaries has filed all tax returns required to be filed by it and has paid all income taxes payable by it that have become due pursuant to such tax returns and all other taxes and assessments payable by it that have become due, other than those not yet delinquent, those being contested in good faith and those listed on SCHEDULE 6.06. 6.10 COMPLIANCE WITH ERISA. Each Plan is in substantial compliance with ERISA; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability, no Plan has an accumulated or waived funding deficiency or permitted decreases in its funding standard account within the meaning of Section 412 of the Code; neither the Borrower nor any Subsidiary of the Borrower nor ERISA Affiliate has incurred any material liability to or on account of a Plan pursuant to Sections 502(c), (i) or (l), 515, 4062, 4063, 4064, 4071, 4201 or 4204 of ERISA or Chapter 43 of the Code or expects to incur any liability under any of the foregoing sections; no proceedings have been instituted to terminate any Plan; no condition exists that presents a material risk to the Borrower or any of its Subsidiaries of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no Lien imposed under the Code or ERISA on the assets of the Borrower or any of its Subsidiaries exists or is likely to arise on account of any Plan; the Borrower and its Subsidiaries may terminate contributions to any other employee benefit plans maintained by them without incurring any material liability to any Person interested therein; and no Plan has received notice from the Internal Revenue Service of the failure of such Plan to qualify under Section 401(a) of the Code. 6.11 CAPITALIZATION. The authorized capital stock of the Borrower consists of 35,000,000 shares of common stock, $0.01 par value per share, of which 14,893,576 shares were issued and outstanding as of December 12, 1997 and 5,000,000 shares of preferred stock, $0.01 par value per share, of which none are issued and outstanding. All such outstanding shares have been duly and validly issued, are fully paid and non-assessable. The Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock except as described on SCHEDULE 6.11 or as issued under any employee stock option plan of the Borrower and reported to the Agent each fiscal quarter. 63 69 6.12 SUBSIDIARIES. On the Effective Date, the corporations listed on SCHEDULE 6.12 and the associations or joint ventures listed on SCHEDULE 6.21 are the only Subsidiaries of the Borrower. SCHEDULE 6.12 and SCHEDULE 6.21 correctly set forth, as of the Effective Date, the percentage ownership (direct and indirect) of the Borrower in each class of capital stock or partnership interests of each of its Subsidiaries and also identify the direct owner thereof. 6.13 COMPLIANCE WITH STATUTES, ETC. Except as disclosed on SCHEDULE 6.13, each of the Borrower and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as would not, in the aggregate, have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 6.14 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 6.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.16 LABOR RELATIONS. Neither the Borrower nor any of its Subsidiaries nor, to the best of the Borrower's knowledge at the time of any Acquisition, the Target of such Acquisition, is engaged in any unfair labor practice that would (upon giving effect to such Acquisition) have a material adverse effect on the Borrower and its Subsidiaries taken as a whole. There is (i) no significant unfair labor practice complaint pending or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower at the time of any Acquisition, the Target of such Acquisition, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries or, to the best of knowledge of the Borrower at the time of any Acquisition, the Target of such Acquisition, (ii) no significant strike, labor dispute, slowdown or stoppage pending or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower at the time of any Acquisition, the Target of such Acquisition, and (iii) to the best knowledge of the Borrower, no union representation question existing with respect to the employees of the Borrower or any of its Subsidiaries and, to the best knowledge of the Borrower, no union organizing activities are taking place, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as would not (upon giving effect to such Acquisition) have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 64 70 6.17 PATENTS, LICENSES, FRANCHISES AND FORMULAS. Except as set forth on SCHEDULE 6.17, each of the Borrower and its Subsidiaries owns all the patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, necessary for the present conduct of its business. Except as set forth on SCHEDULE 6.17, no proceedings, claims, actions or oppositions have been instituted or are pending or, to the best of the Borrower's and its Subsidiaries' knowledge, after due inquiry, are threatened that challenge the validity of the Borrower's or its Subsidiaries' use of such patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, or rights with respect to the foregoing, that would result in a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 6.18 NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE 6.18, since December 31, 1996, there has been no material adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole other than change due to action expressly permitted by the terms of this Agreement; provided, however, that the enactment of legislation on August 6, 1997 providing for reductions in Medicare's reimbursement rates for oxygen therapy shall not in and of itself be considered a material adverse change for purposes of this Section. 6.19 FRAUD AND ABUSE. Except as disclosed on SCHEDULE 6.13, the Borrower and its Subsidiaries, and, to the knowledge of the Borrower and its Subsidiaries after reasonable inquiry, their respective officers and directors, and persons who provide professional services under agreements with the Borrower or any of its Subsidiaries have been and are in material compliance with federal Medicare and Medicaid statutes, 42 U.S.C. ss.ss. 1320a-7, 1320a-7(a), 1320a-7b and 1395nn, as amended, and the regulations promulgated thereunder or related state and local statutes and regulations and rules of professional conduct, and have not at anytime: (i) knowingly and willfully made or caused to be made a false statement or representation of a material fact in any application for any benefit or payment; (ii) knowingly and willfully made or caused to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (iii) presented or caused to be presented a claim for reimbursement for services under Medicare or Medicaid, or other state health care programs that is for an item or service that is known or should be known to be (a) not provided as claimed, or (b) false or fraudulent; (iv) failed to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent fraudulently to secure such benefit or payment; 65 71 (v) knowingly and willfully illegally offered, paid, solicited or received any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind (a) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or other state health care programs, or (b) in return for purchasing, leasing or ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service, or item for which payment may be made in whole or in part by Medicare or Medicaid or other state health care programs; (vi) knowingly made a payment, directly or indirectly, to a physician as an inducement to reduce or limit services to individuals who are under the direct care of the physician and who are entitled to benefits under Medicare or Medicaid, or other state health care programs; (vii) provided to any person information that is known or should be known to be false or misleading that could reasonably be expected to influence the decision when to discharge a hospital in-patient from the hospital; (viii) knowingly and willfully made or caused to be made or induced or sought to induce the making of any false statement or representation (or omitted to state a fact required to be stated therein or necessary to make the statements contained therein not misleading) of a material fact with respect to (a) the conditions or operations of a facility in order that the facility may qualify for Medicare or Medicaid or other state health care program certification, or (b) information required to be provided under ss. 1124A of the Social Security Act (42 U.S.C. ss.1320a-3); (ix) knowingly and willfully (a) charged for any Medicaid service, money or other consideration at a rate in excess of the rates established by the state, or (b) for services covered (in whole or in part) by Medicaid, charged, solicited, accepted or received, in addition to amounts paid by Medicaid, any gift, money, donation or other consideration (other than a charitable, religious or philanthropic contribution from an organization or from a person unrelated to the patient) (y) as a precondition of treating the patient, or (z) as a requirement for the patient's continued treatment; (x) completed Certificates of Medical Necessity on behalf of physicians in violation of the Health Care Financing Administration's carrier directives prohibiting home health care providers from so doing; (xi) violated the federal Food, Drug and Cosmetic Act and the so-called "pharmacy exemption" contained therein and the FDA's Compliance Policy Guide Number 7132.16 entitled "Manufacture, Distribution, and Promotion of Adulterated, Misbranded, or Unapproved New Drugs for Human Use by State-Licensed Pharmacies;" or (xii) violated the FDA's guidelines or OSHA regulations including those in 66 72 connection with any oxygen filling stations maintained or operated by the Borrower or any of its Subsidiaries and 29 C.F.R. 1910, 1030 Occupational Exposure to Bloodborne Pathogens; such that the actions or inactions in the foregoing clauses (i) through (xii), individually or in the aggregate, would have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole. 6.20 TITLE TO PROPERTIES; LIENS. The Borrower and its Subsidiaries have good, sufficient and legal title to all of their respective properties and assets reflected in the most recent financial statements delivered pursuant to Sections 7.01(a) and (b) of this Agreement (or, if no such financial statements have yet been delivered, the most recent financial statements delivered pursuant to Sections 7.01(a) and (b) of the Existing Credit Agreement), except for assets disposed of since the date of such financial statements in the Ordinary Course of Business or as otherwise permitted under Section 8.02. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. 6.21 JOINT VENTURES. Except as set forth on SCHEDULE 6.21, the Borrower and its Subsidiaries are not party to any Joint Venture other than Joint Ventures permitted under Section 8.05(vi). 6.22 ACCOUNTS RECEIVABLE COLLATERAL. The Accounts Receivable and any related reimbursement contracts with the payor of such Accounts Receivable have not been satisfied, subordinated or rescinded in any manner (other than settlements in the Ordinary Course of Business with payors of such Accounts Receivable reached to facilitate collection); such Accounts Receivable were created through the provision of services or merchandise supplied by either (a) the Borrower and its Subsidiaries and the related charges were usual, customary and reasonable, or (b) a Target of an Acquisition prior to such Acquisition and the Borrower believes, after due investigation, that the related charges were usual, customary and reasonable; such Accounts Receivable are owned by the Borrower and its Subsidiaries free and clear of any adverse claim and the Borrower and its Subsidiaries have the right to assign and transfer such Accounts Receivable except as such assignment or transfer would be prohibited by Section 1815(c) of the Social Security Act, 42 U.S.C. ss. 1395g(c) and the regulations promulgated thereunder; and there are no procedures or investigations pending or threatened before any Governmental Authority seeking a determination or ruling that might affect the validity or enforceability of a material portion of such Accounts Receivable subject to the review or jurisdiction of such Governmental Authority. 6.23 SELLER DEBT. Except as disclosed on SCHEDULE 8.04(XIII), the Acquisition Notes represent unsecured Indebtedness of the Borrower. 6.24 SURVIVAL OF RIGHTS CREATED UNDER EXISTING CREDIT AGREEMENT. Notwithstanding the modification effected by this Agreement of the representations, warranties and covenants of the Borrower contained in the Existing Credit Agreement, the Borrower hereby acknowledges and agrees that any choses in action or other rights created in favor of the Existing 67 73 Banks and the Agent (as defined in the Existing Credit Agreement) and their respective successors and assigns, if any, arising out of the representations and warranties of the Borrower contained in or delivered (including representations and warranties delivered in connection with the making of any loans thereunder) in connection with the Existing Credit Agreement, including all amendments and waivers relating thereto, shall survive the execution and delivery of this Agreement. SECTION 7. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that on and after the Effective Date and until the Loans and the Notes, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full and all Letters of Credit are cancelled, expired or otherwise provided for to the satisfaction of the Issuing Bank: 7.01 INFORMATION COVENANTS. The Borrower will furnish to each Bank: (A) QUARTERLY FINANCIAL STATEMENTS. Within 60 days (or 90 days in the case of the fourth fiscal quarter) after the close of each quarterly accounting period in each Fiscal Year, the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such quarterly period and the related consolidated statements of operations and statements of cash flows for the elapsed portion of the Fiscal Year ended with the last day of such quarterly period and for such quarterly period and setting forth comparative figures for the related periods in the prior Fiscal Year for the statements of operations and cash flows, all of which shall be certified by the Chief Executive Officer or the Chief Financial Officer of the Borrower, subject to normal year-end audit adjustments and, promptly, commencing with the quarter ended September 30, 1997, the financial review provided quarterly to the Board of Directors of the Borrower. (B) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of each Fiscal Year, the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of operations and statements of cash flows for such Fiscal Year, in each case setting forth comparative figures for the preceding fiscal year and certified, in the case of the consolidated financial statements, without qualification by independent certified public accountants of recognized national standing reasonably acceptable to the Required Banks, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of the Borrower, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default related to accounting or financial reporting matters that has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof. (C) MANAGEMENT LETTERS. Promptly after the Borrower's receipt thereof, a copy of any "management letter" received by the Borrower from its certified public accountants. (D) PERFORMANCE PLAN. On or before February 15 of each year (beginning 68 74 February 15, 1998), a performance plan (a "PERFORMANCE PLAN") for such year, in a form no less detailed than the financial projections delivered to the Existing Banks prior to the Effective Date pursuant to the Existing Credit Agreement, for the Borrower and its Subsidiaries as a whole (in each case including forecast consolidated statements of operations and cash flow and balance sheets) and prepared by the Borrower for each quarter of each Fiscal Year beginning with the quarter ending March 31, 1998 and for the elapsed portion of such Fiscal Year ended with the last day of each quarter accompanied by the statement of the Chief Executive Officer or the Chief Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, the Performance Plan is a reasonable estimate and forecast for the period covered thereby. (E) PERFORMANCE REPORTS. Within 60 days after the end of each fiscal quarter (or 90 days after the end of the Fiscal Year), a performance report, in a form reasonably satisfactory to the Banks, containing consolidated balance sheets for the Borrower and its Subsidiaries as a whole as at the end of that quarter and the related consolidated statements of operations and cash flows for the quarter and the elapsed portion of the Fiscal Year then ended, and comparing actual results of operations and financial position to that forecast in the Performance Plan for the quarter and for the elapsed portion of the Fiscal Year ended with the last day of that quarter, as the case may be, setting forth comparative figures for the related periods in the prior Fiscal Year and stating the reasons for any variance between the actual results of operations, financial position and cash flows and forecasted results of operations, financial position and cash flows and explanations of the variances that are adverse to the Borrower or any of its Subsidiaries; provided that with respect to the quarters ended September 30, 1997 and December 31, 1997, such comparative figures shall be based upon the financial projections delivered to the Banks prior to the Effective Date pursuant to Section 7.01(d) of the Second Amended and Restated Credit Agreement. Such performance report shall also contain a statement of receivables (including an aging report) held by the Borrower and its Subsidiaries as a whole. (F) COMPLIANCE CERTIFICATES. At the time of the delivery of the financial statements provided for in Sections 7.01(a) and (b) and the quarterly performance reports provided for in Section 7.01(e), a Compliance Certificate of the Chief Executive Officer or the Chief Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which Compliance Certificate also shall set forth the calculations required to establish whether the Borrower was in compliance with those provisions of Section 8 identified on the Compliance Certificate at the end of such quarter, fiscal quarter or Fiscal Year, as the case may be. (G) NOTICE OF DEFAULT, LITIGATION OR HEALTH CARE COMPLIANCE. Promptly, and in any event within three Business Days after any of the Chief Executive Officer, Chief Financial Officer or Chief Operating Officer of the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event that constitutes a Default or an Event of Default, (ii) any litigation or governmental or arbitration proceeding pending (x) against 69 75 the Borrower or any of its Subsidiaries that could reasonably be expected to materially and adversely affect the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or (y) with respect to any Credit Document or any Acquisition then contemplated or already consummated by the Borrower or its Subsidiaries, (iii) any material adverse changes in the status of any litigation or other proceeding reported by the Borrower pursuant to Section 6.06 or this Section 7.01(g), (iv) any material claim, complaint, notice or request for information received by the Borrower or any of its Subsidiaries with respect to compliance with health care regulatory requirements relating to the delivery of health care services of the type provided by the Borrower and payment therefor (excluding malpractice claims), including, but not limited to, any violation or alleged violation of any federal, state or local statute, regulation, or ordinance relating to the delivery of medical services and payment therefor, including, but not limited to, the requirements set forth under federal Medicare and Medicaid statutes, 42 U.S.C. ss.ss. 1320a-7, 1320a-7a, 1320a-7b and 1395nn, and the regulations promulgated thereunder and related state or local statutes or regulations and (v) any other event that could reasonably be expected to materially and adversely affect the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole. (H) OTHER REPORTS AND FILINGS. Promptly, copies of all financial information, proxy materials and other information and reports, if any, that the Borrower or any of its Subsidiaries shall file with the Securities and Exchange Commission or any governmental agencies substituted therefor (the "SEC"). (I) REPORTS OF ASSET TRANSFERS TO SUBSIDIARIES OR FORMATION OF JOINT VENTURES. No later than 10 Business Days after (A) any transfer to any Joint Venture that is not a Guarantor Subsidiary of (i) any assets of the Borrower or any of its Subsidiaries having a fair market value exceeding $1,000,000 in the aggregate or (ii) any intangible assets material to the business, operations, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries and (B) the formation of any Joint Venture, the Borrower shall notify the Agent of the nature of such transaction and the business purpose therefor. (J) MARGIN RATE DETERMINATION CERTIFICATE. Concurrently with the delivery of the financial statements required under Sections 7.01(a) and (b), the Borrower shall deliver a Margin Rate Determination Certificate. (K) ACQUISITION FINANCIALS. On or before the 15th day of each month (i) an Officer's Certificate (v) describing in reasonable detail each Acquisition consummated in the prior month (including the aggregate consideration paid in such Acquisition), (w) setting forth any anticipated Divestitures, (x) demonstrating compliance with the requirements of Section 8.02(v), (y) setting forth the amount of any notes representing Unsecured Seller Debt and (z) attaching copies of the documentation regarding any Unsecured Seller Debt, (ii) copies of all consolidated balance sheets and consolidating balance sheets (to the extent consolidating balance sheets are available) and related 70 76 statements of operations and statements of cash flows of the Target and its Subsidiaries, if any, acquired in any such Acquisition, that are delivered in connection with such Acquisition, and the amount of Consolidated EBITDA of the Target and its Subsidiaries for each of the immediately preceding four fiscal quarters that will be included by the Borrower in its calculation of Consolidated Adjusted EBITDA under this Agreement, which balance sheets and related statements of operations and statements of cash flows and historical Consolidated EBITDA of the Target and its Subsidiaries shall be reasonably satisfactory in substance to the Agent and the Required Banks (i) to the extent of any adjustments therein, (ii) if unaudited, or (iii) if both clauses (i) and (ii) of this Section 7.01(k) are true; provided that, such financials shall be deemed acceptable to the Required Banks unless Banks sufficient to prevent the approval of the Required Banks shall give notice of disapproval to the Agent within ten Business Days of the delivery of such financials to Banks. (L) OTHER INFORMATION. From time to time, such other information or documents (financial or otherwise) as any Bank reasonably may request. 7.02 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with generally accepted accounting principles consistently applied and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of the Agent or any Bank to visit and inspect, under guidance of officers of the Borrower or such Subsidiary, any of the properties of the Borrower or such Subsidiary, and to examine the books of record and account of the Borrower or such Subsidiary and discuss the affairs, finances and accounts of the Borrower or such Subsidiary with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals, with such reasonable notice and to such reasonable extent as the Agent or such Bank may request. 7.03 MAINTENANCE OF PROPERTY, INSURANCE. SCHEDULE 7.03 sets forth a true and complete listing of all insurance maintained by the Borrower and its Subsidiaries as of the Effective Date and the amounts of such insurance. The Borrower will, and will cause each of its Subsidiaries to, (i) keep all property useful and necessary in its business in good working order and condition, (ii) maintain with financially sound and reputable insurance companies insurance on all its property and its directors and officers in at least such amounts and against at least such risks as are described in SCHEDULE 7.03; provided that the Borrower and its Subsidiaries may self-insure against risks consistent with standard industry practices for companies in the same or similar businesses, and (iii) furnish to each Bank, within 45 days after the end of each Fiscal Year and otherwise, upon written request, full information as to the insurance carried. 7.04 CORPORATE FRANCHISES. Except as permitted by Section 8.02, the Borrower will, and will cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that nothing in this Section 7.04 shall prevent (a) the withdrawal by the Borrower or any of its Subsidiaries of its qualification as a foreign corporation, association 71 77 or joint venture in any jurisdiction where such withdrawal would not have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the merger of AHPT, with and into the Borrower under Section 8.02(vii), or (c) the discontinuance of any Subsidiary of the Borrower if such discontinuance would not have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 7.05 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business, including, without limitation, the laws and regulations referred to in Section 6.19, and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as could not, in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 7.06 ERISA. (a) As soon as possible and, in any event, within 10 days after the Borrower or any of its Subsidiaries or ERISA Affiliates knows or has reason to know any of the following, the Borrower will deliver to each of the Banks a certificate of the Chief Executive Officer or the Chief Financial Officer of the Borrower setting forth details as to such occurrence and such action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a Lien under ERISA or the Code; that proceedings may be or have been instituted to terminate a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that the Borrower, any of its Subsidiaries or ERISA Affiliates will or may incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; that the Borrower, any of its Subsidiaries or ERISA Affiliates will or may incur any liability under Chapter 43 of the Code or under Sections 502(c), (i) or (1) or 4071 of ERISA; that there exists a condition that presents a material risk to the Borrower, any of its Subsidiaries or ERISA Affiliates of incurring a liability to or on account of a Plan pursuant to the assertion of a material claim (other than a routine claim for benefits) against any such Plan; or that any Plan has been determined by the Internal Revenue Service to fail to qualify under Section 401(a) of the Code. (b) The Borrower will deliver to each of the Banks a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. 72 78 (c) In addition to any certificates or notices delivered to the Banks pursuant to the clause (a) of this Section 7.06, copies of annual reports and any other notices received by the Borrower or any of its Subsidiaries required to be delivered to the Banks hereunder shall be delivered to the Banks no later than 10 days after the later of the date such report or notice has been filed with the Internal Revenue Service or the PBGC, given to Plan participants or received by the Borrower or such Subsidiary. 7.07 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower shall cause (i) each of its fiscal years, and the fiscal years of each of its Subsidiaries other than Joint Ventures, to end on December 31 and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31; provided that any Subsidiary acquired subsequent to the Effective Date that has different fiscal year ends, fiscal quarter ends or both than those set forth in this Section 7.07 shall conform such periods to those set forth herein in the ordinary course consistent with past practice. 7.08 PERFORMANCE OF OBLIGATIONS. The Borrower will, and will cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement and other debt instrument by which it is bound, except such non-performances as could not in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 7.09 PAYMENT OF TAXES AND CLAIMS. The Borrower will, and will cause each of its Subsidiaries to, pay or cause to be paid all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any material penalty accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a material Lien upon any of its properties or assets, prior to the time when any material penalty or fine shall be incurred with respect thereto; provided that so long as no property or assets (other than money for such charge or claim and the interest or penalty accruing thereof) of the Borrower or any of its Subsidiaries is in danger of being lost or forfeited as a result thereof, no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with generally accepted accounting principles consistently applied shall have been made therefor. 7.10 LICENSING. The Borrower will and will cause each of its Subsidiaries to be operated at all times in compliance in all material respects with all federal, state and local statutes, regulations and ordinances relating to the licensing of healthcare services of the type provided by the Borrower and to maintain, at all times, accreditation for no less than 90% of the branches owned by the Borrower and its Subsidiaries longer than one year with the Joint Commission on Accreditation of Healthcare Organizations. 73 79 7.11 FURTHER ASSURANCES; NEW SUBSIDIARIES. (A) At any time and from time to time upon the request of the Agent, the Borrower shall and shall cause each of its Wholly-Owned Subsidiaries to execute and deliver such further documents and do such other acts and things as the Agent reasonably may request in order to effect fully the purposes of this Agreement and the other Credit Documents and to provide for payment of the Obligations in accordance with the terms of this Agreement and the other Credit Documents. (B) In the event a Person becomes a Subsidiary of the Borrower (other than as a Joint Venture) after the Effective Date, the Borrower shall, within 10 Business Days of such event, cause such Subsidiary to execute and deliver (i) the Subsidiary Guaranty, the Subsidiary Pledge Agreement and a Subsidiary Partnership Security Agreement and (ii) in the event a Qualified High-Yield Offering has not been consummated by the Borrower, the Subsidiary Security Agreement, Collection Bank Agreements (to the extent required by Section 8.16) and the Subsidiary Trademark Security Agreement, in each case together with such other agreements, pledges, assignments, documents and certificates (including, without limitation, any amendments to the Credit Documents) as may be necessary or desirable or as the Agent may request and do such other acts and things as the Agent reasonably may request in order to have such domestic Subsidiary guaranty and/or secure the Obligations and effect fully the purposes of this Agreement and the other Credit Documents and to provide for payment of the Obligations in accordance with the terms of this Agreement and the other Credit Documents. (C) Notwithstanding any provision contained herein or in any of the Credit Documents, none of the Borrower nor any of its Guarantor Subsidiaries shall be deemed to be in default under (or to have breached any provision of) this Agreement or any Credit Document solely by virtue of permitting to exist any Lien described in Section 8.01(xvi) until such time as such Lien is required to be terminated under such Section. 7.12 ACCOUNTS RECEIVABLE. The Borrower and its Subsidiaries will submit all necessary documentation and supply all necessary information for payment of all Accounts Receivable (other than settlements in the Ordinary Course of Business with payors of such Accounts Receivable reached to facilitate collection to the payor for each of such Accounts Receivable); will not subordinate or rescind any of the Accounts Receivable; and will notify Agent promptly if any procedures or investigations are pending or threatened before any Governmental Authority seeking a determination or ruling that might materially and adversely affect the validity or enforceability of a material portion of such Accounts Receivable subject to the review or jurisdiction of such Governmental Authority. SECTION 8. NEGATIVE COVENANTS. The Borrower covenants and agrees that on and after the Effective Date and until the Loans and the Notes, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full and all Letters of Credit are cancelled, expired or otherwise provided for to the satisfaction of the Issuing Bank: 8.01 LIENS. The Borrower will not, and will not permit any of its Subsidiaries to, 74 80 create, incur, assume or permit to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired; provided that the provisions of this Section 8.01 shall not prevent the creation, incurrence, assumption or existence of: (i) Liens for taxes not yet due, or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established the failure to pay which would not have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; (ii) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law, that were incurred in the Ordinary Course of Business, such as carriers', warehousemen's and mechanics' liens and other similar Liens arising in the Ordinary Course of Business and (x) that do not in the aggregate materially detract from the value of property or assets having a value individually or in the aggregate in excess of $50,000, or materially impair the use thereof in the operation of the business of the Borrower or any of its Subsidiaries or (y) that are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) Liens in existence on the Effective Date that are listed, and the property subject thereto described, in SCHEDULE 8.01 (Liens described in this clause (iii), "PERMITTED LIENS"); (iv) Liens in favor of the Agent; (v) Liens relating to leases and subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (vi) Easements, rights-of-way, restrictions, minor defects or irregularities of title and other similar charges or encumbrances not interfering in any material respect with the Ordinary Course of Business of the Borrower or any of its Subsidiaries; (vii) Liens relating to any interest or title of a lessor under any lease; (viii) Liens relating to Interest Rate Agreements permitted under Section 8.04(xi); (ix) Liens relating to bankers' liens and other rights of setoff; (x) Pledges or deposits in connection with worker's compensation, unemployment insurance and other social security legislation; (xi) Liens on assets purchased using the proceeds of non-recourse purchase money Indebtedness permitted by Section 8.04(ix); 75 81 (xii) Any attachment or judgment Lien not constituting an Event of Default under Section 9.09; (xiii) Any deposit arrangement, made in connection with a transaction to secure performance of obligations in connection with such transaction, not in excess (either individually or in the aggregate) of $5,000,000; provided that such deposit arrangement is terminated on the date upon which such performance obligations are required to be discharged under the terms of the document creating such deposit arrangement; (xiv) Liens created to secure Indebtedness of the Borrower and its Subsidiaries incurred after the Effective Date as permitted in 8.04(xiii); (xv) Liens created to secure Indebtedness of the Target of any Acquisition outstanding on the date of such Acquisition; provided that such Liens were created prior to the date of such Acquisition and were not created in contemplation of such Acquisition and provided that the aggregate amount of such secured Indebtedness outstanding at any time shall not exceed $15,000,000; (xvi) Liens consisting of Uniform Commercial Code financing statements relating to property or assets acquired (whether in Acquisitions or otherwise) after the Effective Date, so long as (A) none of such financing statements shall secure any outstanding Indebtedness and (B) as soon as practicable but in any event within 45 days of the date of any such acquisition, the Borrower shall take all action (including without limitation the filing of termination statements with the appropriate filing offices) necessary to terminate all such financing statements relating to property or assets acquired in such acquisition; and (xvii) Liens in favor of AHPF created pursuant to one or more Intercompany Acquisition Guaranty/Security Agreements. 8.02 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the Ordinary Course of Business) of any Person, or permit any of its Subsidiaries to do any of the foregoing, except that: (i) the Borrower and its Subsidiaries may make sales of inventory in the Ordinary Course of Business and make Divestitures of inventory; (ii) the Borrower and its Subsidiaries may, in the Ordinary Course of Business, dispose of equipment and capital assets that are obsolete or in need of replacement and make Divestitures of equipment and capital assets; 76 82 (iii) the Borrower and its Subsidiaries may, in addition to any sales permitted in clauses (i) and (ii) above, sell (by way of merger or otherwise) for cash and/or promissory notes permitted under Section 8.05(xii), the stock, property or assets of the Borrower or any of its Subsidiaries having an aggregate fair market value (as reasonably determined by the board of directors of the Person making the sale) not to exceed $5,000,000 in any calendar year (without regard to clause (vii) of this Section 8.02); (iv) any Subsidiary of the Borrower may merge or consolidate (a) into the Borrower or (b) with any other domestic Wholly-Owned Subsidiary of the Borrower, so long as such Wholly-Owed Subsidiary is the surviving corporation, association or joint venture, and in the case of any merger or consolidation involving a Guarantor Subsidiary, the Guarantor Subsidiary (or a Subsidiary of the Borrower that will become a Guarantor Subsidiary on or before consummation of such merger) is the surviving corporation; (v) the Borrower and its Wholly-Owned Subsidiaries may (without regard to the limitations set forth in Section 8.07) acquire property and assets of other Persons (including any assets or property acquired in any Acquisition) provided that the aggregate consideration paid by the Borrower or such Subsidiaries consisting of cash or any assets of the Borrower or such Subsidiaries (excluding any common stock of the Borrower and the proceeds of any Divestiture but including the principal amount of any Indebtedness described in Section 8.04(xii) incurred in connection with such Acquisition and the principal amount of any loans made to the applicable seller in connection with such Acquisition in accordance with Section 8.05(xi)) shall not, without the prior written consent of the Required Banks, exceed (if valued at fair market value at the time of such Acquisition, as reasonably determined by the board of directors of the Person making such Acquisition) $30,000,000 per transaction and $100,000,000 in the aggregate over any twelve-month period commencing with the Effective Date (including in such calculation any consideration paid by the Borrower to acquire any Joint Venture to the extent the aggregate book value of all Joint Ventures exceeds $30,000,000) when added to the aggregate amount of all investments made pursuant to this Section 8.02(v) in such twelve-month period; provided further that such per transaction limitation shall not apply to the National Medical Systems Acquisition, and the consideration paid in respect of the National Medical Systems Acquisition shall be excluded from any calculation of the aggregate amount of consideration paid in all Acquisitions during any twelve-month period; provided further no such per transaction limitation on the consideration paid by the Borrower in connection with such an Acquisition shall exist if the ratio of Total Debt to Consolidated Adjusted EBITDA for the consecutive four-fiscal quarter period ending as of the last day of the immediately preceding fiscal quarter before such Acquisition is less than 1.50:1.00, in each case calculated on a pro forma basis to give effect to such Acquisition, or the Acquisition is made under clause (vii) of this Section 8.02; provided further that the ratio of Total Debt to Consolidated Adjusted EBITDA shall be in compliance with the requirement of Section 8.08, in each case calculated on a pro forma basis to give effect to such Acquisition; provided further, that if such acquisition of property and assets is an acquisition of stock, then such acquisition shall, except with respect to Joint Ventures, result in the ownership by the Borrower or a Wholly-Owned 77 83 Subsidiary of a majority interest in the capital stock of the entity whose stock is being acquired; (vi) the Borrower and its Subsidiaries may make capital expenditures to the extent not in violation of Section 8.07; (vii) notwithstanding the provisions of clauses (i) through (vi) of this Section 8.02, AHPT, may merge with and into the Borrower, provided that the Borrower shall acquire any and all assets of such entity, and provided such merger will not have a material adverse effect on (A) the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole, (B) the value of the Collateral, or (C) the ability of the Borrower to pay or the Banks to collect the Obligations; (viii) any Subsidiary of the Borrower may be dissolved if such dissolution will not have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; and (ix) (a) the Borrower may convey, sell or otherwise transfer any assets of the Borrower to any domestic Wholly-Owned Subsidiary and (b) any Subsidiary of the Borrower may convey, sell or otherwise transfer any assets of such Subsidiary to the Borrower or to any domestic Wholly-Owned Subsidiary; provided that, in each case, such sale, conveyance or transfer will not have a material adverse effect on (A) the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, (B) the value of the Collateral, or (C) the ability of the Borrower to pay or the Banks to collect the Obligations. 8.03 DIVIDENDS. (A) The Borrower will not declare or pay any dividends (other than dividends that are payable solely to the holders of any class of stock of the Borrower in shares of that class of stock), or return any capital, to its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any options or warrants issued by the Borrower with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of the Borrower now or hereafter outstanding (or any options or warrants issued by the Borrower with respect to its capital stock), except that the Borrower may acquire stock options or restricted stock from its employees or former employees in an aggregate amount not to exceed $250,000 in any calendar year. (B) The Borrower will not permit any of its Subsidiaries to declare or pay any dividends, or return any capital, to its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or 78 84 otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any options or warrants issued by such Subsidiary with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of such Subsidiary now or hereafter outstanding (or any options or warrants issued by such Subsidiary with respect to its capital stock) (each of the foregoing being a "RESTRICTED SUBSIDIARY PAYMENT"), except that any Subsidiary of the Borrower may make Restricted Subsidiary Payments to the Borrower or any Wholly-Owned Subsidiary of the Borrower and any Joint Venture that is a Subsidiary of the Borrower may make Restricted Subsidiary Payments in proportion to the ownership interests therein. 8.04 INDEBTEDNESS. The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness of the Borrower and its Subsidiaries incurred under the Credit Documents; (ii) Indebtedness listed on SCHEDULE 8.04(II) ("EXISTING INDEBTEDNESS") and Indebtedness incurred by the Borrower or any of its Subsidiaries to renew or refinance the Existing Indebtedness of the Borrower or such Subsidiary; provided that the new Indebtedness shall not exceed the principal amount of the Existing Indebtedness so renewed or refinanced and shall not contain any terms or conditions, taken as a whole, less favorable to the Borrower and the Banks than the Existing Indebtedness being renewed or refinanced; (iii) accrued expenses and current trade accounts payable incurred in the Ordinary Course of Business and obligations under trade letters of credit incurred by the Borrower or any of its Subsidiaries in the Ordinary Course of Business, that are to be repaid in full not more than one year after the date on which such Indebtedness is originally incurred to finance the purchase of goods by the Borrower or such Subsidiary; (iv) obligations under letters of credit incurred by the Borrower or any of its Subsidiaries in the Ordinary Course of Business in support of obligations incurred in connection with worker's compensation, unemployment insurance and other social security legislation, or as a result of participation by the Borrower and its Subsidiaries in Medicare or Medicaid programs; (v) Indebtedness incurred as a result of loans and advances permitted under Section 8.05(ii)-(iv); (vi) obligations under letters of credit incurred by the Borrower or any of its Subsidiaries in the Ordinary Course of Business and to the extent consistent with past practice in support of obligations under leases, bonds posted for judgments being appealed or as a condition to bringing any action, suit or other proceeding not to exceed $500,000 other than letters of credit listed on SCHEDULE 8.04(II); 79 85 (vii) non-recourse Indebtedness payable solely from and secured solely by life insurance policies and annuities (and any related trusts or escrows) maintained by the Borrower and its Subsidiaries for their respective officers, employees and directors; (viii) surety bonds, performance bonds and other completion bonds in the Ordinary Course of Business and consistent with past practice or as required by law; (ix) non-recourse purchase money Indebtedness not exceeding the purchase price of the asset so purchased and secured solely by such asset; (x) capitalized leases; (xi) Interest Rate Agreements (and guaranties thereof) entered into by the Borrower and its Subsidiaries with respect to Indebtedness in an aggregate notional principal amount not to exceed $150,000,000; (xii) the Borrower and its Subsidiaries may become and remain liable, either as primary obligor or as guarantor, with respect to Unsecured Seller Debt owed to the Person selling the capital stock or assets of any Target in any Acquisition permitted under Section 8.02(v); provided such Indebtedness (A) is unsecured, (B) either (x) does not exceed 25% of the purchase price paid for such Target or (y) is subordinated to the Indebtedness created by this Agreement pursuant to the terms of a Subordination Agreement substantially in the form of EXHIBIT M, and, in either case, if guaranteed by the Borrower or any Subsidiary of the Borrower, is guaranteed by a guarantee that is subordinate to, and under which such guarantor does not have any obligation prior to the indefeasible payment in full of, the Obligations and (C) does not at any time exceed $35,000,000 in the aggregate for all Unsecured Seller Debt outstanding at any time; provided, however, that Unsecured Seller Debt in the principal amount of $1,500,000 outstanding as of the date hereof and owed to Respro, Inc., a Kentucky corporation, in connection with a sale of assets by Respro, Inc. to the Borrower need not satisfy the requirements of either clause (x) or (y) of clause (B) of the preceding proviso. The covenants, default provisions, remedies provisions, subordination provisions and all other terms of such Unsecured Seller Debt shall be reasonably satisfactory in form and substance to the Agent; provided that if the subordination provisions in the documentation representing such Unsecured Seller Debt are substantially in the form of EXHIBIT M such subordination provisions shall be deemed satisfactory to the Agent; provided further that if the documentation representing such Unsecured Seller Debt contains no covenants and no default provisions other than default provisions with respect to defaults that arise because of the bankruptcy of the issuer or guarantor of such debt and default provisions with respect to defaults that arise because of the failure to pay such Seller Debt when due, such covenant and default provisions shall be deemed satisfactory to the Agent; (xiii) Indebtedness of the Borrower and its Subsidiaries incurred after the Effective Date in an aggregate amount outstanding at any time not in excess of $7,500,000; 80 86 (xiv) Indebtedness of the Target of any Acquisition outstanding on the date of such Acquisition; provided that such Indebtedness was not incurred in contemplation of such Acquisition; (xv) Contingent Obligations in respect of any guaranty by the Borrower or a Subsidiary of any obligations of any of their respective Subsidiaries permitted under this Agreement; (xvi) Indebtedness incurred as a result of loans permitted under Section 8.05(ix); (xvii) Contingent Obligations created pursuant to any Intercompany Acquisition Guaranty/Security Agreements; and (xviii) Indebtedness of the Borrower in respect of Qualified High-Yield Debt in an aggregate principal amount not to exceed $275,000,000 outstanding at any time; provided that the proceeds thereof shall be applied as required under Section 4.02(c)(i). 8.05 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock or other ownership interest (other than stock or ownership interests issued as part of the formation of a Subsidiary of the Borrower for consideration not to exceed $150,000 in the aggregate with respect to all such Subsidiaries, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, except that the following shall be permitted: (i) the Borrower and its Subsidiaries may each acquire and hold receivables owing to it, if created or acquired in the Ordinary Course of Business and payable or dischargeable in accordance with customary trade terms to the extent consistent with past practice; (ii) loans and advances by any Subsidiary of the Borrower to the Borrower; provided such loans or advances are at all times subordinated to the Obligations of the Borrower on terms satisfactory to the Required Banks; (iii) loans and advances not to exceed $10,000,000 in the aggregate at any time to Joint Ventures to which the Borrower or any of its Subsidiaries is a party; (iv) loans and advances by the Borrower to any Guarantor Subsidiary (or, in connection with any Acquisition, any Subsidiary of the Borrower that becomes a Guarantor Subsidiary on or before consummation of such Acquisition) in the Ordinary Course of Business so long as after giving effect to such loan or advance there shall not have occurred a Default or an Event of Default; (v) loans and advances by any Guarantor Subsidiary to any other Guarantor Subsidiary in the Ordinary Course of Business so long as after giving effect to such loan or advance there shall not have occurred a Default or Event of Default; 81 87 (vi) the Borrower and its Subsidiaries (a) may make new loans and advances to officers, employees and agents in the Ordinary Course of Business (for purposes other than purchasing stock or stock options or exercising stock options) equal, in the aggregate for the Borrower and its Subsidiaries, to no more than $100,000 at any one time outstanding and may make loans to officers, directors and employees in connection with the purchase or exercise of options for the Borrower's common stock, provided that no cash is advanced and (b) may make interest-free loans or advances to officers and employees of the Borrower and its Subsidiaries in the form of payment by the Borrower of premiums in respect of so-called "split-dollar" life insurance policies in an amount which shall not in the aggregate exceed $1,000,000 per annum; (vii) the Borrower and its Subsidiaries may make equity investments in other Persons engaged in the businesses in which the Borrower and its Subsidiaries are engaged as of the Effective Date, in an aggregate amount that, when added to the aggregate consideration paid to acquire assets and property pursuant to Section 8.02(v), does not exceed the amount specified in Section 8.02(v); provided that the Borrower shall provide notice to the Agent of all such investments in accordance with Section 7.01(i) and the aggregate book value of all investments in all Joint Ventures shall not at any time exceed 30% of the aggregate book value of the equity of the Borrower; provided further, that such equity investments shall, except with respect to Joint Ventures, result in the ownership by the Borrower or such Subsidiary of a majority interest in the capital stock of the entity issuing such equity; (viii) the Borrower and its Subsidiaries may make and own investments in Cash Equivalents; provided that such Cash Equivalents are not subject to setoff rights in favor of the financial institution (other than a Bank) issuing or selling any such Cash Equivalents arising from any banking relationship of the Borrower and its Subsidiaries; (ix) cash capital contributions by the Borrower to AHPF to fund loans by AHPF to AHPT to finance Acquisitions; provided, that the amount of any such capital contribution is loaned by AHPF to AHPT as permitted under Section 8.05(x); (x) loans made by AHPF to AHPT and evidenced by one or more Intercompany Acquisition Notes; (xi) in connection with any Acquisition consummated by the Borrower or any of its Subsidiaries, the Borrower or such Subsidiary may make loans to the applicable seller, as part of the consideration payable in connection with such Acquisition, for the purpose of financing such seller's purchase of so-called "split dollar" life insurance; provided, that the Borrower or such Subsidiary shall enter into a split dollar agreement and collateral assignment of life insurance proceeds with such seller; (xii) investments consisting of promissory notes, in an aggregate principal amount not to exceed $1,000,000 at any time outstanding, received as part of the 82 88 consideration in connection with sales of stock, property or assets of any of its Subsidiaries permitted under Section 8.02(iii); and (xiii) loans to Coronado Health Services, Inc., an Arizona corporation under management by the Borrower, in an aggregate amount not to exceed $850,000. 8.06 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the Ordinary Course of Business, with any Affiliate of the Borrower, other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate. 8.07 CAPITAL EXPENDITURES. Except for expenditures made by the Borrower and its Subsidiaries during any Fiscal Year to acquire assets in Acquisitions permitted under Section 8.02(v) or (vii), the Borrower will not, and will not permit any of its Subsidiaries to, make any expenditure for fixed or capital assets (including, without limitation, expenditures for product development and maintenance and repairs that should be capitalized in accordance with generally accepted accounting principles consistently applied and including capitalized lease obligations) during any Fiscal Year set forth below that would cause the aggregate amount of all such expenditures for the Borrower and its Subsidiaries to exceed the correlative amount set forth below opposite such Fiscal Year:
================================================================================ FISCAL YEAR AMOUNT - - -------------------------------------------------------------------------------- 1997 $35,000,000 - - -------------------------------------------------------------------------------- 1998 $38,000,000 - - -------------------------------------------------------------------------------- 1999 $43,000,000 - - -------------------------------------------------------------------------------- 2000 $46,000,000 - - -------------------------------------------------------------------------------- 2001 $49,000,000 - - -------------------------------------------------------------------------------- 2002 $53,000,000 ================================================================================
8.08 LEVERAGE RATIO. The Borrower shall not permit the ratio of Total Debt to Consolidated Adjusted EBITDA for any consecutive four-fiscal quarter period ending as of the last day of any fiscal quarter of the Borrower to be more than (i) 3.75:1.00 if the applicable date of determination occurs prior to the consummation of a Qualified High-Yield Offering and (ii) 4.00:1.00 if the applicable date of determination occurs after the consummation of a Qualified High-Yield Offering. 8.09 MINIMUM CONSOLIDATED NET WORTH. The Borrower will not permit Consolidated Net Worth of the Borrower and its Subsidiaries at any time to be less than the sum of (i) $151,000,000 plus (ii) 75% of Consolidated Net Income of the Borrower and its 83 89 Subsidiaries for each fiscal quarter in which Consolidated Net Income is a positive number and which ends during the period from October 1, 1997 to and including the end of the then most recently ended fiscal quarter of the Borrower plus (iii) 100% of any additions to Net Worth from any issuance of, or any exercise of an option to purchase, or any conversion of any debt Securities into, any equity Securities of the Borrower on or after the Effective Date. 8.10 MINIMUM INTEREST COVERAGE RATIO. The Borrower shall not permit the ratio of (i) Consolidated EBITDA of the Borrower and its Subsidiaries to (ii) Consolidated Interest Expense for any consecutive four-fiscal quarter period to be less than (a) 3.75:1.00 if the applicable date of determination occurs prior to the consummation of a Qualified High-Yield Offering and (b) 3.50:1.00 if the applicable date of determination occurs after the consummation of a Qualified High-Yield Offering. 8.11 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN OTHER AGREEMENTS; ETC. The Borrower will not, and will not permit any of its Subsidiaries to, (i) make any voluntary or optional payment or prepayment on or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) (x) any Qualified High-Yield Debt or (y) any other Indebtedness on which it is an obligor which payment, prepayment or redemption or acquisition for value (in the case of this clause (y)) is in excess of $100,000 per year in the aggregate except (in the case of this clause (y)) with respect to payments or prepayments on or redemptions or acquisitions for value of the (A) Obligations under the terms of this Agreement or (B) any Indebtedness for which failure to make such payment, prepayment, redemption or acquisition for value would constitute a violation of a law or regulation enacted, adopted or becoming effective after the Effective Date, (C) any trade payables prepaid in the Ordinary Course of Business to take advantage of favorable prepayment terms, or (D) Indebtedness of the Target of any Acquisition permitted pursuant to Section 8.04(xiv), (ii) amend or modify, or permit the amendment or modification of, any provision of any Indebtedness or of any agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any of the foregoing other than amendments that (A) only extend the maturity of or lower the interest rate on Indebtedness and amendments of this Agreement permitted by its terms or (B) are immaterial and would not have a material adverse effect on the business, operations, property, assets, liabilities (contingent or otherwise), condition (financial or otherwise) or prospects of the Borrower or any of its Subsidiaries, (iii) amend the subordination provisions with respect to any Qualified High-Yield Debt or make any payment in violation of the terms thereof, or (iv) amend, modify or change the Certificate or Articles of Incorporation (including, without limitation, by the filing or modification of any certificate of designation) or the By-Laws (or any other documents of formation and governance, as the case may be) of the Borrower or any of its Subsidiaries party to any of the Credit Documents or any Subsidiary of such Subsidiaries (except to reflect a name change previously noticed to the Agent, except as permitted under Section 8.02(vii) and except to amend the Certificate or Articles of Incorporation or the By-Laws of a Target as the Borrower deems reasonably necessary, provided that such amendment shall not adversely affect the Banks' position as creditors hereunder). 84 90 8.12 RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND OTHER DISTRIBUTIONS. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction, other than as set forth in this Agreement, on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the Borrower or (c) transfer any of its properties or assets to the Borrower, except for such encumbrances or restrictions existing under or by reasons of (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower that exists on the Effective Date and (iv) customary provisions restricting transactions with affiliates of Persons party to a Joint Venture. The Borrower will not, and will not permit any of its Subsidiaries to, amend, modify or otherwise change the terms of, or permit the modification of, any provision of any Restructuring Note, any Intercompany Term Note, the ConPharma Note, any Intercompany Acquisition Note or any Intercompany Acquisition Guaranty/Security Agreement if the effect of such change is to change the subordination provisions thereof (or of any guaranty thereof) or to change any collateral therefor (other than to release such collateral). 8.13 BUSINESS. The Borrower will not, and will not permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than the business in which it was engaged on the Effective Date and any business directly related to such business. 8.14 TRANSFER OF COPYRIGHTS, PATENTS AND TRADEMARKS. The Borrower will not, and will not permit any of its Subsidiaries to, transfer any of their respective copyrights, licenses, patents, trademarks, permits, service marks, trade names, franchises and formulas, or rights with respect to the foregoing, except transfers pursuant to licenses granted in the Ordinary Course of Business that would not have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 8.15 JOINT VENTURES. The Borrower shall not, and shall not suffer or permit any of its Subsidiaries to enter into any Joint Venture, other than in the Ordinary Course of Business. 8.16 COLLECTION BANK AGREEMENTS. Prior to the consummation of a Qualified High-Yield Offering, the Borrower shall not, and shall not suffer nor permit any of its Subsidiaries that are not Joint Ventures to, (i) maintain any Deposit Account with an average daily balance in excess of $100,000 in any given month with any financial institution that has not executed and delivered to the Agent a Collection Bank Agreement, (ii) maintain amounts in excess of $5,000,000 in the aggregate at any time outstanding in Deposit Accounts that are not subject to Collection Bank Agreements, or (iii) deposit any amount into a Deposit Account that is the subject of a Collection Bank Agreement that does not represent proceeds of Collateral. SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the following specified events (each an "EVENT OF DEFAULT"); 85 91 9.01 PAYMENTS. The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note, (ii) default in the payment when due of any amount payable to the Issuing Bank in reimbursement of any drawing under a Letter of Credit, or (iii) default, and such default shall continue unremedied for two Business Days, in the payment when due of interest on any Loan, any Fees or any other amounts owing hereunder or under any Note; or 9.02 REPRESENTATIONS, ETC. Any representation, warranty or statement made by the Borrower or any of its Subsidiaries herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 COVENANTS. The Borrower shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.01(g)(i) or Section 8 or (ii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Sections 9.01 and 9.02 and clause (i) of this Section 9.03) contained in this Agreement and such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Agent; or 9.04 DEFAULT UNDER OTHER AGREEMENTS. The Borrower or any of its Subsidiaries shall (i) default in any payment of Indebtedness in an aggregate principal amount equal to or exceeding $1,500,000 (other than the Notes, the Restructuring Notes, the Intercompany Term Notes, the ConPharma Note and the Intercompany Acquisition Notes) beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to Indebtedness in an aggregate principal amount equal to or exceeding $3,750,000 (other than the Notes, the Restructuring Notes, the Intercompany Term Notes, the ConPharma Note and the Intercompany Acquisition Notes) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity; or Indebtedness of the Borrower or any of its Subsidiaries, in an aggregate principal amount equal to or exceeding $3,750,000, shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or 9.05 BANKRUPTCY, ETC. The Borrower or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "BANKRUPTCY," as now or hereafter in effect, or any successor thereto (the "BANKRUPTCY CODE"); or an involuntary case is commenced against the Borrower or any of its Subsidiaries, and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case (provided that the Borrower expressly authorizes the Agent and each Bank to appear in any court conducting any such proceeding during such 60 day period to preserve, protect and defend their rights under this Agreement and the other Credit Documents); or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, 86 92 adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Subsidiaries; or there is commenced against the Borrower or any of its Subsidiaries any such proceeding that remains undismissed for a period of 60 days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt, or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 30 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate, partnership or other action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 9.06 ERISA. Any Plan shall fail to maintain the minimum funding standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code; any Plan is, shall have been or is likely to be terminated or the subject of a termination proceeding under ERISA; any Plan shall have an Unfunded Current Liability, or the Borrower or any of its Subsidiaries or ERISA Affiliates has incurred or is likely to incur a liability to or on account of a Plan under Sections 502(c), (i) or (l), 515, 4062, 4063, 4064, 4071, 4201 or 4204 of ERISA or Chapter 43 of the Code; and there shall result from any such event or events the imposition of a Lien upon or the granting of a security interest in the assets of the Borrower or any of its Subsidiaries, or a liability or a material risk of incurring a liability to the PBGC or a Plan or a trustee appointed under ERISA, that will have a material adverse effect upon the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; or 9.07 CREDIT DOCUMENTS. Any of the Credit Documents or any material provision thereof shall cease to be in full force and effect for any reason, other than the satisfaction in full of all Obligations and the termination of this Agreement or otherwise in accordance with the provisions of Section 10.10, or is declared to be null and void, or any Guarantor Subsidiary shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to any of the Credit Documents to which it is a party, or any Guarantor Subsidiary denies that it has any further liability under any of the Credit Documents to which it is a party or gives notice to such effect, or any junior creditor claims or asserts the invalidity or unenforceability of any subordination provisions of any Unsecured Seller Debt; or 9.08 CHANGES OF CONTROL. (i) Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of the Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of the Borrower representing 20% or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors; or (ii) during any period of up to 12 consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such 12-month period were directors of the Borrower shall cease for any reason to constitute a majority of the Board of Directors of the Borrower; or (iii) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that upon consummation shall result in its or their acquisition of or 87 93 control over, securities of the Borrower representing 20% or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors; or 9.09 JUDGMENTS. One or more judgments, decrees or arbitration awards shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate for the Borrower and its Subsidiaries a liability (not paid or fully covered by insurance as to which the insurer has acknowledged coverage in writing) of $3,000,000 or more, and all such judgments, decrees or awards shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days after the entry thereof; or 9.10 GOVERNMENTAL POLICIES. Any change shall occur in state or federal laws, rules or governmental regulations or budgetary allocations that reasonably could be expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; provided, however, that the enactment of legislation on August 6, 1997 providing for reductions in Medicare's reimbursement rates for oxygen therapy shall not in and of itself be considered an Event of Default hereunder; or 9.11 LOSS OF LICENSES. Any Governmental Authority shall finally revoke or fail to renew any license, permit or franchise of the Borrower or the Borrower shall for any reason lose any license, permit or franchise or the Borrower or any of its Subsidiaries shall suffer the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any license, permit or franchise which event could reasonably be expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; THEN, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agent, upon the written request of the Required Banks, shall by written notice to the Borrower, (provided, that, if an Event of Default specified in Section 9.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Agent to the Borrower as hereafter shall occur automatically without the giving of any such notice) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and the obligation of each Bank to make any Loan and the obligation of the Issuing Bank to issue any Letter of Credit shall thereupon terminate; provided, that the foregoing shall not affect in any way the obligations of the Banks to make Revolving Loans to reimburse drawings under Letters of Credit as provided in Section 2.10(c), to repay Refunded Swing Line Loans as provided in Section 2.02(c), to purchase participations from the Swing Line Bank in any unpaid Swing Line Loans as provided in Section 2.02(c), or to purchase participations from the Issuing Bank in the unreimbursed amount of any drawings under any Letters of Credit as provided in Section 2.10(d). So long as any Letter of Credit shall remain outstanding, any amounts received by the Agent shall be held by the Agent, pursuant to such documentation as the Agent shall request, as cash collateral for the obligation of the Borrower to reimburse the Issuing Bank in the event of any drawing under any outstanding 88 94 Letters of Credit, and so much of such funds shall at all times remain on deposit as cash collateral as aforesaid as shall equal the maximum amount available at any time for drawing under all Letters of Credit (the "MAXIMUM AVAILABLE AMOUNT"); provided that in the event of cancellation or expiration of any Letter of Credit or any reduction in the Maximum Available Amount, the Agent shall apply the difference between the cash collateral held by the Agent immediately prior to such cancellation, expiration or reduction and the Maximum Available Amount immediately after such cancellation, expiration or reduction first to the payment of any outstanding Obligations, and second to the payment to whomsoever shall be lawfully entitled to receive such funds. SECTION 10. THE AGENT. 10.01 APPOINTMENT. The Banks hereby designate Bankers Trust Company as the Agent (for purposes of this Section 10, the term "AGENT" shall include Bankers Trust Company in its capacity as the Agent pursuant to the other Credit Documents) to act as specified herein and in the other Credit Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through its officers, directors, agents or employees. 10.02 NATURE OF DUTIES. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documents. Neither the Agent nor any of its officers, directors, agents or employees shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Bank or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein. 10.03 LACK OF RELIANCE ON THE AGENT. Independently and without reliance upon the Agent, each Bank and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and, except as expressly provided in this Agreement, the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Bank or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. The Agent shall not be responsible to any Bank or the holder of any Note for any recitals, statements, 89 95 information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrower or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrower or the existence or possible existence of any Default or Event of Default. 10.04 CERTAIN RIGHTS OF THE AGENT. If the Agent shall request instructions from the Required Banks with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Agent shall be entitled to refrain from such act or taking such action unless and until the Agent shall have received instructions from the Required Banks; and the Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank or the holder of any Note shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Banks unless the agreement of all Banks is required by the terms of this Agreement. 10.05 RELIANCE. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by it. 10.06 INDEMNIFICATION. To the extent the Agent is not reimbursed and indemnified by the Borrower, the Banks will reimburse and indemnify the Agent, in proportion to their respective proportionate shares of the aggregate amount of the Revolving Loan Commitments as of the date of determination, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Agent in performing its duties hereunder or under any other Credit Document, or in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgment, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. 10.07 THE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its obligation to maintain and make Loans under this Agreement, the Agent shall have the rights and powers specified herein for a "Bank" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "BANKS," "REQUIRED BANKS," "HOLDERS OF NOTES" or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Borrower or any Affiliate of the Borrower as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower for services in connection with this Agreement and otherwise without having to account for the same to the Banks. 90 96 10.08 HOLDERS. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 10.09 RESIGNATION BY THE AGENT AND THE SWING LINE BANK. (A) The Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days prior written notice to the Borrower and the Required Banks. Such resignation shall take effect upon the appointment of a successor the Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (B) Upon any such notice of resignation, the Banks shall appoint a successor to the Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower. (C) If no successor to the Agent has been appointed pursuant to clause (b) above by the 20th Business Day after the date such notice of resignation was given by the Agent, the Agent's resignation shall become effective and the Banks shall thereafter perform all the duties of the Agent hereunder and/or under any other Credit Document until such time, if any, as the Banks appoint a successor to the Agent as provided above. (D) Any resignation of the Agent pursuant to Section 10.09(a) shall also constitute the resignation of Bankers Trust Company or its successor as Issuing Bank and as Swing Line Bank, and any successor Agent appointed pursuant to Section 10.09(b) shall, upon its acceptance of such appointment, become the successor Issuing Bank and Swing Line Bank for all purposes hereunder. In such event (i) the Borrower shall prepay any outstanding Swing Line Loans made by the retiring or removed Agent in its capacity as the Swing Line Bank, (ii) upon such prepayment, the retiring or removed Agent and the Swing Line Bank shall surrender the Swing Line Note held by it to the Borrower for cancellation, and (iii) the Borrower shall issue a new Swing Line Note to the successor Agent and the Swing Line Bank substantially in the form of EXHIBIT F-2 annexed hereto, in the principal amount of the Swing Line Loan Commitment then in effect and with other appropriate insertions. 10.10 RELEASE OF COLLATERAL. (A) Without further written consent or authorization from Banks, Agent may execute any documents or instruments necessary to release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted by this Agreement or otherwise consented to in accordance with Section 11.13A. 91 97 (B) Anything contained in this Agreement or any of the other Loan Documents to the contrary notwithstanding, in the event the Borrower consummates a Qualified High-Yield Offering and applies the proceeds thereof as provided in Section 4.02(c)(i), (i) the Agent shall, without further written consent or authorization from the Banks, execute any documents or instruments necessary to release all Liens encumbering all items of Collateral other than the Collateral under the Borrower Pledge Agreement, the Subsidiary Pledge Agreement, the Borrower Partnership Security Agreement and the Subsidiary Partnership Security Agreement, and (ii) the Borrower Security Agreement, the Subsidiary Security Agreement, the Collection Bank Agreements, the Concentration Bank Agreement, the Trademark Security Agreement and the Subsidiary Trademark Security Agreement shall be terminated. SECTION 11. MISCELLANEOUS. 11.01 PAYMENT OF EXPENSES, ETC. The Borrower shall: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses (x) of the Agent (including, without limitation, the reasonable fees and disbursements of O'Melveny & Myers, special counsel to the Agent) in connection with the preparation, execution, delivery and syndication of this Agreement and the other Credit Documents and the Existing Credit Agreement and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto and (y) of the Agent and each of the Banks in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of O'Melveny & Myers, special counsel to the Agent, and for each of the Banks whose counsel determines in good faith that joint representation of such Bank along with the other Banks would or reasonably could be expected to result in a conflict of interest under applicable laws or ethical principles) and (z) of any consultants or accountants chosen by the Required Banks, to investigate, test or review such matters relating to the Borrower and its Subsidiaries as the Agent shall designate; provided that the fees of such consultants or accountants shall be subject to the prior approval of the Borrower, which approval shall not be unreasonably withheld; (ii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iii) indemnify the Agent and each Bank, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not the Agent or any Bank is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the use of the proceeds of any Loans or Letters of Credit hereunder or the consummation of any transactions contemplated herein or in any other Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such liabilities, obligations, losses, etc., to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). 92 98 11.02 RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations and liabilities of the Borrower to such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Bank pursuant to Section 11.05(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 11.03 NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, at its address specified opposite its signature below; if to any Bank, at its office specified opposite its signature below; and if to the Agent, at its Notice Office; or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. In addition, a copy of all notices sent to the Borrower or the Agent in accordance with Sections 7.01(g) or 9 shall also be sent to Harwell Howard Hyne Gabbert & Manner, P.C., 1800 First American Center, 315 Deaderick Street, Nashville, Tennessee 37238, Attn: Mark Manner, Esq., and to O'Melveny & Myers, Citicorp Center, 153 East 53rd Street, New York, New York 10022 Attn: Jonathan Williams, Esq. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to the Agent shall not be effective until received by the Agent. 11.04 BENEFIT OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of each Bank. 11.05 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT. (A) GENERAL. Each Bank shall have the right at any time to (i) sell, assign, transfer or negotiate to any Eligible Assignee, or (ii) sell participations to any Eligible Assignee in, all or any part of any Loan or Loans made by it or its Commitments or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided 93 99 that no such sale, assignment, transfer or participation shall, without the consent of the Borrower, require the Borrower to file a registration statement with the SEC, apply to qualify such assignment or participation of the Loans, Letters of Credit or participations therein or the other Obligations under the securities laws of any state or otherwise become subject to any federal or state securities laws requirements with respect thereto; provided, further that no such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment and Acceptance effecting such sale, assignment or transfer shall have been accepted by the Agent and recorded in the Agent's records as provided in Section 11.05(b)(ii); provided, further that no such sale, assignment, transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Revolving Loans of the Bank effecting such sale, assignment, transfer or participation; and provided, further that, anything contained herein to the contrary notwithstanding, the Swing Line Loan Commitment and the Swing Line Loans of the Swing Line Bank may not be sold, assigned or transferred as described in clause (i) above to any Person other than a successor Agent and the Swing Line Bank to the extent contemplated by Section 10.09(d). Except as otherwise provided in this Section 11.05, no Bank or the Issuing Bank shall, as between the Borrower and such Bank or the Issuing Bank, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or any granting of participations in, all or any part of the Loans, the Commitments, Letters of Credit or participations therein or the other Obligations owed to such Bank or the Issuing Bank. (B) ASSIGNMENTS. (i) Amounts and Terms of Assignments. Each Loan, Loan Commitment, Letter of Credit or participation therein or other Obligation may (A) be assigned in any amount (of a constant and not a varying percentage) to another Bank, or to an Affiliate of the assigning Bank or another Bank, with the giving of notice to the Borrower and the Agent or (B) be assigned in an amount of not less than $5,000,000 (or such lesser amount as shall constitute the aggregate amount of the Loans, Commitments, Letters of Credit or participations therein and other Obligations of the assigning Bank), to any other Eligible Assignee with the giving of notice to the Borrower and the Agent and with the consent of the Borrower and the Agent, in the case of an assignment made by a Bank other than the Agent, or with the consent of the Borrower, in the case of an assignment made by the Agent (which consent of the Borrower and the Agent shall not be unreasonably withheld or delayed). To the extent of any such assignment in accordance with this Section 11.05, the assigning Bank shall be relieved of its obligations with respect to its Loans, Commitments, Letters of Credit or participations therein. The parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in its records, an Assignment and Acceptance, together with, with respect to assignments that occur following the Effective Date, a processing and recordation fee of $3,500, and such certificates, documents or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment and Acceptance may be required to deliver to the Agent pursuant to Section 2.09(g)(iii). Upon such execution, delivery and acceptance, from and after the effective date specified in such Assignment and Acceptance, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such 94 100 Assignment and Acceptance, shall have the rights and obligations of a Bank hereunder and (z) the assigning Bank thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Bank and new Notes shall, upon surrender of the assigning Bank's Note, be issued to the assignee and to the assigning Bank, substantially in the form of EXHIBIT F-1 annexed hereto with appropriate insertions, to reflect the new Commitments and/or outstanding Term Loans, as the case may be, of the assignee and the assigning Bank. (ii) Acceptance by the Agent; Recordation in Records. Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee representing that it is an Eligible Assignee, together with the processing and recordation fee referred to in Section 11.05(b)(i) and any certificates, documents or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to the Agent pursuant to Section 2.09(g)(iii), the Agent shall, if such Assignment and Acceptance has been completed and is in the form of EXHIBIT P hereto and if the Agent and the Borrower have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to Section 11.05(b)(i)), (a) accept such Assignment and Acceptance by executing a counterpart thereof as provided therein (which acceptance shall not be unreasonably withheld or delayed and shall evidence any required consent of the Agent to such assignment), (b) record the information contained therein in its records, and (c) give prompt notice thereof to the Borrower. The Agent shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it as provided in this Section 11.05(b)(ii). (C) PARTICIPATIONS. The holder of any participation, other than an Affiliate of the Bank granting such participation, shall not be entitled to require such Bank to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity of any Loan allocated to such participation, (ii) a reduction of the principal amount of or the rate of interest payable on any Loan or payments due in repayment of draws under Letters of Credit allocated to such participation, and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation, (iii) the release of the Liens held by Agent on behalf of the Banks with respect to all or substantially all of the Collateral, or (iv) a reduction of the amount of any fees payable hereunder to the extent subject to such participation. The Borrower hereby acknowledges and agrees that, only for purposes of Sections 2.07, 2.09, 11.02 and 11.07(b), any participation will give rise to a direct obligation of the Borrower to the participant and the participant shall be considered to be a "Bank"; provided that no participant shall be entitled to receive any greater amount pursuant to Section 2.07 or 2.09 than the transferor Bank would have been entitled to receive in respect of the amount of the participation effected by such transferor Bank to such participant had no such participation occurred. 95 101 (D) ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this Section 11.05, any Bank may assign and pledge all or any portion of its Loans, the other Obligations owed to such Bank, and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Bank shall, as between the Borrower and such Bank, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Bank" or be entitled to require the assigning Bank to take or omit to take any action hereunder. (E) INFORMATION. Each Bank and the Issuing Bank may furnish any information concerning the Borrower and its Subsidiaries in the possession of that Bank or the Issuing Bank from time to time to assignees and participants (including prospective assignees and participants). 11.06 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Agent or any Bank or the holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and the Agent or any Bank or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Agent or any Bank or the holder of any Note would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or any Bank or the holder of any Note to any other or further action in any circumstances without notice or demand. 11.07 PAYMENTS PRO RATA. (A) The Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations of the Borrower hereunder, it shall distribute by the next Business Day such payment to the Banks pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (B) Each of the Banks agrees that (except as otherwise specifically provided with respect to Swing Line Loans), if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), that is applicable to the payment of the principal of, or interest on, the Loans, or under any Letter of Credit of a sum which with respect to the related sum or sums received by other the Banks is in a greater proportion than the total amount of such Obligation then owed and due to such Bank bears to the total amount of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other the Banks an interest in the Obligations of the Borrower to such the Banks in such amount as shall result in a 96 102 proportional participation by all the Banks in such amount; provided, however, that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 11.08 CALCULATIONS; COMPUTATIONS. The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks); provided that, except as otherwise specifically provided herein, all computations determining compliance with Section 8 shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements delivered to the Existing Banks pursuant to Section 7.01 of the Existing Credit Agreement. 11.09 GOVERNING LAW; WAIVER OF JURY TRIAL; SERVICE OF PROCESS. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK. THE AGENT, THE BANKS AND THE BORROWER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT. The Borrower hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to the Borrower at its address provided on the signature pages hereto, such service being hereby acknowledged by the Borrower to be sufficient for personal jurisdiction in any action against the Borrower in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Agent or any Bank to bring proceedings against the Borrower in the courts of any other jurisdiction. 11.10 CONFIDENTIALITY. Each Bank shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by the Borrower in accordance with such Bank's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by the Borrower that in any event a Bank may make disclosures to Affiliates of such Bank or disclosures reasonably required by any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Bank of any Loans or any participations therein or disclosures required or requested by any governmental agency or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Bank shall notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Bank by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Bank be obligated or required to return any materials furnished by the Borrower or any of its Subsidiaries. 97 103 11.11 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts by facsimile or otherwise, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Agent. 11.12 HEADINGS DESCRIPTIVE. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.13 AMENDMENT OR WAIVER. A. No approval, consent, amendment or waiver of this Agreement or any of the Credit Documents shall be effective unless it is in writing signed by the Agent and the Required Banks; provided, however, that any such approval, consent, amendment or waiver that (a) reduces the amount of any interest, principal, fees or other amounts owing to any Bank hereunder, including, without limitation, amounts payable under Section 4 (but excluding any waiver of any increase in the interest rate applicable to the Loans pursuant to Section 2.06(e)); (b) releases any Person (except pursuant to any Divestitures and as set forth in Section 8.02(iii), (iv) and (vii)) from all or any portion of its liabilities under the Subsidiary Guaranty; (c) amends any provisions of this Section 11.13; (d) reduces the percentage specified in the definition of the term "REQUIRED BANKS" or changes the definition of "PRO RATA SHARE" (it being understood that, with the consent of Required Banks, additional extensions of credit pursuant to this Agreement may be made on substantially the same basis as the extensions of the Commitments); (e) postpones the scheduled final maturity date (but not the date of any scheduled installment of principal) of any of the Loans or the date on which any interest or any fees are payable under this Agreement or any of the Credit Documents; (f) releases all or substantially all of the Collateral (except as set forth in Sections 8.02(i), (ii) or (iii) or 8.14, or if the sale or disposition of such Collateral is permitted under any of the Credit Documents), or (g) by the terms of any provision of this Agreement requires the approval of all the Banks shall be effective only if it is in writing signed by all the Banks directly affected; provided, further, that no such approval, consent, amendment or waiver shall increase the Commitments of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that approvals, consents, amendments or waivers of conditions precedent, covenants, defaults or events of default or of a mandatory prepayment or reduction in the aggregate Commitments shall not constitute an increase of the Commitment of any Bank); provided further that no amendment, modification or waiver of any provision of this Agreement relating to Swing Line Loans or the Swing Line Commitment shall be effective without the written concurrence of the Swing Line Bank; and provided, further, that no amendment, modification or waiver of any provision of Section 10 or of any other provision of this Agreement expressly requiring the approval or concurrence of the Agent shall be effective without the written concurrence of the Agent. B. If in connection with any proposed approval, consent, amendment or waiver with respect to any of the provisions of this Agreement as contemplated by clauses (a) through (g) of the first proviso of Section 11.13A, the consent of the Required Banks is obtained but the consent of one or more of the other Banks whose consent is also required is not obtained, then the Borrower shall have the right, so long as all non-consenting Banks whose individual 98 104 consent is required are treated as described in either clause (i) or (ii) below, to either (i) replace each such non-consenting Bank or Banks with one or more Replacement Banks (as defined in Section 11.13C) pursuant to Section 11.13C so long as at the time of such replacement, each such Replacement Bank consents to the proposed approval, consent, amendment or waiver, or (ii) terminate such non-consenting Bank's Commitment and repay each outstanding Loan of such Bank, in accordance with Section 4.02(a); provided that unless the Commitments that are terminated, and the Loans that are repaid pursuant to the preceding clause (ii) are immediately replaced in full at such time through the addition of new Banks or the increase of the Commitments and/or outstanding Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to the preceding clause (ii) the Required Banks (determined before giving effect to the proposed action) shall specifically consent thereto; provided, further, that in any event the Borrower shall not have the right to replace a Bank, terminate its Commitment or repay its Loans solely as a result of the exercise of such Bank's right (and the withholding of any required consent by such Bank) pursuant to the second proviso to Section 11.13A. C. In the event of certain refusals by a Bank as provided in Section 11.13B to consent to certain proposed approvals, amendments, consents or waivers with respect to this Agreement which have been approved by the Required Banks, the Borrower may, upon five Business Days' written notice to the Agent (which notice the Agent shall promptly transmit to each of the Banks) repay all Loans, together with accrued and unpaid interest, fees and other amounts owing to such Bank (a "Replaced Bank") in accordance with, and subject to the requirements of, said subsection 11.13B so long as (i) in the case of the repayment of Revolving Loans of any Bank pursuant to this Section 11.13C the Revolving Loan Commitment of such Bank is terminated concurrently with such repayment (at which time Schedule 1.01(a) shall be deemed modified to reflect the changed Revolving Loan Commitments) and (ii) in the case of the repayment of Loans of any Bank the consents required by Section 11.13B in connection with the repayment pursuant to this Section 11.13C have been obtained. (a) At the time of any replacement pursuant to this subsection 11.13C, the lender replacing such Replaced Bank (the "Replacement Bank") shall enter into one or more assignment agreements, in form and substance satisfactory to the Agent, pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans of, and participations in Swing Line Loans and Letters of Credit by, the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank, (B) an amount equal to all unpaid drawings with respect to Letters of Credit that have been funded by (and not reimbursed to) such Replaced Bank, together with all then unpaid interest with respect thereto at such time, and (C) an amount equal to all accrued, but theretofore unpaid, fees owing to the Replaced Bank and (y) the appropriate Issuing Bank an amount equal to such Replaced Bank's Pro Rata Share of any unpaid drawings with respect to Letters of Credit (which at such time remains an unpaid drawing), to the extent such amount was not theretofore funded by such Replaced Bank; and 99 105 (b) all obligations of the Borrower owing to the Replaced Bank (excluding those specifically described in clause (a) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective assignment documentation, the payment of amounts referred to in clauses (a) and (b) above and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed by the Borrower, the Replacement Bank shall become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to the Borrower's obligations regarding the indemnification provisions under this Agreement, which shall survive for the benefit of such Replaced Bank. Notwithstanding anything to the contrary contained above, no Issuing Bank may be replaced hereunder at any time while it has Letters of Credit outstanding hereunder unless arrangements satisfactory to such Issuing Bank (including the furnishing of a standby letter of credit in form and substance, and issued by an issuer satisfactory to such Issuing Bank or the furnishing of cash collateral in amounts and pursuant to arrangements satisfactory to such Issuing Bank) have been made with respect to such outstanding Letters of Credit. 11.14 SURVIVAL. All indemnities set forth herein including, without limitation, in Sections 2.07, 10.06 and 11.01 shall survive the execution and delivery of this Agreement and the Notes and the making and repayment of the Loans and the Letters of Credit. 11.15 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Bank. 11.16 INTEGRATION. This Agreement, together with the exhibits to this Agreement and the other documents described herein, is intended by the parties hereto as a complete statement of the terms and conditions of their agreement. 11.17 SECURED OBLIGATIONS. The Borrower hereby agrees and confirms that on and after the Effective Date each Credit Document to which the Borrower is a party, including, as applicable, the Borrower Security Agreement, the Borrower Pledge Agreement and the Trademark Security Agreement, and all collateral encumbered thereby shall continue to secure to the fullest extent possible the payment and performance of all "Secured Obligations" (as defined in each applicable Credit Document), including without limitation the payment and performance of all such "Secured Obligations" in respect of the Obligations of the Borrower now or hereafter existing under or in respect of this Agreement and the Notes. Without limiting the generality of the foregoing, the Borrower hereby acknowledges and confirms its understanding and intent that, upon the Effective Date and as a result thereof, the definition of "Obligations" contained in this Agreement includes the obligations of the Borrower under the Notes. The Borrower acknowledges and agrees that any of the Credit Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its respective obligations thereunder shall be valid and enforceable and shall not be impaired, limited or otherwise affected by the execution, delivery or effectiveness of this Agreement or any future amendment or modification of this Agreement. The Borrower represents and warrants that all representations and warranties contained in each Credit Document to which it is a party, 100 106 including the Borrower Security Agreement, the Borrower Pledge Agreement and the Trademark Security Agreement, are true, correct and complete in all material respects on and as of the Effective Date to the same extent as though made on and as of that date, except to the extent any such representation or warranty specifically relates to an earlier date, in which case such representation or warranty shall have been true, correct and complete in all material respects on and as of such earlier date. The Borrower hereby acknowledges and agrees that on and after the Effective Date, each reference in the Credit Documents to the "Credit Agreement", "thereunder", "thereof" and words of like import referring to the Existing Credit Agreement shall mean and be a reference to this Agreement. [Remainder of page intentionally left blank] 101 107 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. AMERICAN HOMEPATIENT, INC., a Delaware corporation By: /s/ MARY ELLEN RODGERS ------------------------------------ Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer Notice Address: American HomePatient, Inc. Maryland Farms Office Park 5200 Maryland Way, Suite 400 Brentwood, Tennessee 37027-5018 Attn: Mary Ellen Rodgers S-1 108 BANKERS TRUST COMPANY, Individually and as the Agent By: /s/ MARY JO JOLLY ------------------------------------ Name: Mary Jo Jolly Title: Assistant Vice President Notice Address: BT Alex. Brown Incorporated One Bankers Trust Plaza, 14th Floor New York, New York 10006 Attn: Jocelyn Rock Tel: 212/775-2272 Fax: 212/250-1343 With a copy to: BT Alex. Brown Incorporated 300 S. Grand Ave., 41st Floor Los Angeles, California 90071 Attn: Kate W. Cook Tel: 213/775-2272 Fax: 213/250-1343 Lending Office: BT Alex. Brown Incorporated One Bankers Trust Plaza, 14th Floor New York, New York 10006 Attn: _______________________ Tel: 212/775-2272 Fax: 212/250-1343 S-2 109 ABN AMRO BANK, N.V. By: /s/ ------------------------------------ Name: Title: By: /s/ ------------------------------------ Name: Title: Notice Address and Lending Office: ABN AMRO BANK, N.V. One Ravinia Drive, Suite 1200 Atlanta, GA 30346 Attn: Judy Chiang Tel: 312/904-2549 Fax: 312/904-4456 with a copy to: ABN AMRO N.V., Inc. One Ravinia Drive, Suite 1200 Atlanta, GA 30346 Attn: Tom Thornhill Tel: 770/399-7373 Fax: 770/399-7397 S-3 110 AMSOUTH BANK OF ALABAMA By: /s/ CATHY WIND ------------------------------------ Name: Cathy Wind Title: Vice President Notice Address and Lending Office: AmSouth Bank of Alabama 333 Union Street, Suite 200 Nashville, TN 37201 Attn: Cathy Wind Tel: 615/291-5268 Fax: 615/291-5257 S-4 111 BANK OF AMERICA By: /s/ ------------------------------------ Name: Title: Notice Address and Lending Office: Bank of America, NT & SA 555 S. Flower Street 11th Floor, Unit 9173 Los Angeles, CA 90071 Attn: Geoff Wilson Tel: 213/228-2953 Fax: S-5 112 BANK OF MONTREAL By: /s/ PETER STEELMAN ------------------------------------ Name: Peter Steelman Title: Director Notice Address and Lending Office: Bank of Montreal 115 S. LaSalle, 13 West Chicago, Illinois 60603 Attn: Peter Steelman Tel: 312/750-3812 Fax: 312/750-3783 S-6 113 CORESTATES BANK, N.A. By: /s/ ELIZABETH D. MORRIS ------------------------------------ Name: Elizabeth D. Morris Title: Notice Address and Lending Office: CoreStates Bank, N.A. 1339 Chestnut Street FC 1-8-3-22 Philadelphia, PA 19101 Attn: Elizabeth D. Morris Tel: 215/786-7275 Fax: 215/973-2738 S-7 114 FIRST AMERICAN NATIONAL BANK By: /s/ SANDY HAMRICK ------------------------------------ Name: Sandy Hamrick Title: Vice-President Notice Address and Lending Office: First American National Bank 315 Deadrick Street, 2nd Floor Nashville, Tennessee 37237-0203 Attn: Sandy Hamrick Tel: 615/748-2191 Fax: 615/748-8480 S-8 115 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ ------------------------------------ Name: Title: Notice Address and Lending Office: The First National Bank of Chicago One First National Plaza Mart Suite: 0091 Chicago, IL 60670 Attn: Vincent Kelly Tel: 312/732-6649 Fax: 312/732-2016 S-9 116 THE FUJI BANK, LIMITED By: /s/ ------------------------------------ Name: Title: Notice Address and Lending Office: Fuji Bank Marquis One Tower 245 Peachtree Center, NE Suite 2100 Atlanta, GA 30303 Attn: Clarence Mahovhich Tel: 404/653-2100 Fax: 404/653-2119 S-10 117 NATIONSBANK, N.A. By: /s/ ASHLEY M. CRABTREE ------------------------------------ Name: Ashley M. Crabtree Title: Senior Vice President Notice Address: NationsBank of Tennessee, N.A. One NationsBank Plaza, 5th Floor Nashville, Tennessee 37239 Attn: Ashley M. Crabtree Tel: 615/749-3524 Fax: 615/749-4640 Lending Office: NationsBank of Tennessee, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Corporate Credit Services [Name] Tel: ____________ Fax: ____________ S-11 118 PNC BANK, KENTUCKY, INC. By: /s/ KATHRYN M. BOHR ------------------------------------ Name: Kathryn M. Bohr Title: Vice President Notice Address and Lending Office: PNC Bank, Kentucky, Inc. 500 West Jefferson Louisville, Kentucky 40202 Attn: Katherine M. Bohr Healthcare Corporate Group Tel: 502/581-2995 Fax: 502/581-2302 S-12 119 COOPERATIEVE CENTRALE RAIFFESEN - BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: /s/ ------------------------------------ Name: Title: By: Name: Title: Notice Address and Lending Office: Rabobank Nederland 245 Park Avenue New York, New York 10167 Attn: Corporate Services Department Dave Reisman Tel: 212/916-7863 Fax: 212/916-7880 with a copy to: Rabobank Nederland One Atlantic Center 1201 West Peachtree, Suite 3450 Atlanta, GA 30309-3450 Attn: Terrell Boyle Tel: 404/877-9106 Fax: 404/877-9150 S-13 120 THE SAKURA BANK, LIMITED By: /s/ TAMIHIRO KAWAUCHI ------------------------------------ Name: Tamihiro Kawauchi Title: Senior Vice President Notice Address and Lending Office: Sakura Bank 277 Park Avenue New York, New York 10172 Attn: Phil Schubert Tel: 212/756-6945 Fax: 212/888-7651 S-14 121 SUNTRUST BANK, NASHVILLE, N.A. By: /s/ MARK MATTSON ------------------------------------ Name: Mark Mattson Title: Vice President Notice Address and Lending Office: SunTrust Bank 201 Fourth Avenue North Metro Bank Department MC 411 Nashville, Tennessee 37219 Attn: Mark Mattson Tel: 615/748-4831 Fax: 615/748-5161 S-15 122 UNION BANK OF CALIFORNIA, N.A. By: /s/ ------------------------------------ Name: Title: Notice Address and Lending Office: Union Bank of California, N.A. 445 S. Figueroa Street 16th Floor Los Angeles, CA 90071 Attn: Lynn Vine Tel: 213/236-6566 Fax: 213/236-7636 S-16 123 UNION BANK OF SWITZERLAND By: ----------------------------- Name: Title: Notice Address and Lending Office: Union Bank of Switzerland 299 Park Avenue New York, New York 10171 Attn: Bob Daum Tel: 212/821-6168 Fax: 212/821-4964 S-17 EX-10.45 3 REVOLVING NOTE-BANKERS TRUST 1 Exhibit 10.45 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $28,437,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to BANKERS TRUST COMPANY (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY EIGHT MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($28,437,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously 1 2 made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and 2 3 enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: ----------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.46 4 REVOLVING NOTE- ABN AMROBANK, N.V. 1 Exhibit 10.46 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $21,937,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to ABN AMRO BANK, N.V. (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY ONE MILLION NINE HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($21,937,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.47 5 REVOLVING NOTE- AMSOUTH BANK 1 Exhibit 10.47 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $28,437,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to AMSOUTH BANK (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY EIGHT MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($28,437,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its 1 2 acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. 2 3 The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.48 6 REVOLVING NOTE- BANK OF AMERICA 1 Exhibit 10.48 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $28,437,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to BANK OF AMERICA (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY EIGHT MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($28,437,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its 1 2 acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. 2 3 The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.49 7 REVOLVING NOTE- BANK OF MONTREAL 1 Exhibit 10.49 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $20,312,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to BANK OF MONTREAL, NEW YORK (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY MILLION THREE HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($20,312,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.50 8 REVOLVING NOTE- CORESTATES BANK 1 Exhibit 10.50 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $20,312,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to CORESTATES BANK, N.A. (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY MILLION THREE HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($20,312,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.51 9 REVOLVING NOTE- FIRST AMERICAN NATIONAL BANK 1 Exhibit 10.51 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $12,187,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to FIRST AMERICAN NATIONAL BANK (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWELVE MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($12,187,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.52 10 REVOLVING NOTE- FIRST NATIONAL BANK OF CHICAGO 1 Exhibit 10.52 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $12,187,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to THE FIRST NATIONAL BANK OF CHICAGO (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWELVE MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($12,187,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.53 11 REVOLVING NOTE- THE FUJI BANK 1 Exhibit 10.53 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $12,187,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to THE FUJI BANK, LIMITED, ATLANTA AGENCY (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWELVE MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($12,187,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.54 12 REVOLVING NOTE - NATIONSBANK 1 Exhibit 10.54 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $28,437,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to NATIONSBANK, N.A. (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY EIGHT MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($28,437,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its 1 2 acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. 2 3 The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.55 13 REVOLVING NOTE - PNC BANK, KENTUCKY, INC. 1 Exhibit 10.55 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $28,437,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to PNC BANK, KENTUCKY, INC. (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY EIGHT MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($28,437,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.56 14 REVOLVING NOTE - COOPERATIVE CENTRALE RAIFFESEN 1 Exhibit 10.56 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $26,812,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A. "RABOBANK NEDERLAND", NEW YORK (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY SIX MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($26,812,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.57 15 REVOLVING NOTE - THE SAKURA BANK 1 Exhibit 10.57 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $4,062,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to THE SAKURA BANK, LIMITED (the "PAYEE"), on or before the Termination Date, the lesser of (x) FOUR MILLION SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($4,062,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its 1 2 acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.58 16 REVOLVING NOTE - SUNTRUST BANK 1 Exhibit 10.58 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $28,437,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to SUNTRUST BANK, NASHVILLE, N.A. (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWENTY EIGHT MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($28,437,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and 1 2 holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.59 17 REVOLVING NOTE -UNION BANK 1 Exhibit 10.59 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $12,187,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to UNION BANK OF CALIFORNIA, N.A. (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWELVE MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($12,187,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its 1 2 acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.60 18 REVOLVING NOTE -UNION BANK OF SWITZERLAND 1 Exhibit 10.60 REVOLVING NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $12,187,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), being liable hereunder, promises to pay to UNION BANK OF SWITZERLAND, NEW YORK BRANCH (the "PAYEE"), on or before the Termination Date, the lesser of (x) TWELVE MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($12,187,500.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Revolving Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is one of the Borrower's "Revolving Notes" in the aggregate principal amount of $325,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by Agent as provided in Section 11.05 (b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to deem the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its 1 2 acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day; provided further that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and prepayment at the option of the Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Section 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute 2 3 and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 3 4 TRANSACTIONS ON REVOLVING NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By ---- --------- --------- --------- --------- -------
4 EX-10.61 19 TERM NOTE - BANKERS TRUST COMPANY 1 Exhibit 10.61 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,562,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of BANKERS TRUST COMPANY ("PAYEE") the principal amount of SIX MILLION FIVE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,562,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.62 20 TERM NOTE - ABN ANROBANK N.V. 1 Exhibit 10.62 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $5,062,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of ABN AMRO BANK, N.V. ("PAYEE") the principal amount of FIVE MILLION SIXTY-TWO THOUSAND FIVE HUNDRED AND NO/100 ($5,062,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.63 21 TERM NOTE - AMSOUTH BANK 1 Exhibit 10.63 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,562,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of AMSOUTH BANK ("PAYEE") the principal amount of SIX MILLION FIVE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,562,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.64 22 TERM NOTE - BANK OF AMERICA 1 Exhibit 10.64 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,562,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of BANK OF AMERICA NT & SA ("PAYEE") the principal amount of SIX MILLION FIVE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,562,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.65 23 TERM NOTE - BANK OF MONTREAL 1 Exhibit 10.65 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $4,687,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of BANK OF MONTREAL ("PAYEE") the principal amount of FOUR MILLION SIX HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($4,687,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.66 24 TERM NOTE - CORESTATES BANK 1 Exhibit 10.66 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $4,687,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of CORESTATES BANK, N.A. ("PAYEE") the principal amount of FOUR MILLION SIX HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($4,687,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.67 25 TERM NOTE - FIRST AMERICAN NATIONAL BANK 1 Exhibit 10.67 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $2,812,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of FIRST AMERICAN NATIONAL BANK ("PAYEE") the principal amount of TWO MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($2,812,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation 2 hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.68 26 TERM NOTE - THE FIRST NATIONAL BANK OF CHICAGO 1 Exhibit 10.68 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $2,812,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of THE FIRST NATIONAL BANK OF CHICAGO ("PAYEE") the principal amount of TWO MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($2,812,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation 2 hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.69 27 TERM NOTE - THE FUJI BANK 1 Exhibit 10.69 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $2,812,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of THE FUJI BANK, LIMITED, ATLANTA AGENCY ("PAYEE") the principal amount of TWO MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($2,812,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation 2 hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.70 28 TERM NOTE - NATIONSBANK 1 Exhibit 10.70 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,562,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of NATIONSBANK, N.A. ("PAYEE") the principal amount of SIX MILLION FIVE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,562,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.71 29 TERM NOTE - PNC BANK, KENTUCKY 1 Exhibit 10.71 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,562,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of PNC BANK, KENTUCKY, INC. ("PAYEE") the principal amount of SIX MILLION FIVE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,562,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.72 30 TERM NOTE - COOPERATIVE CENTRALE RAIFFESEN 1 Exhibit 10.72 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,187,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A. "RABOBANK NEDERLAND", NEW YORK ("PAYEE") the principal amount of SIX MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,187,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by 2 its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER 3 IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.73 31 TERM NOTE - SAKURA BANK 1 Exhibit 10.73 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $937,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of THE SAKURA BANK, LIMITED ("PAYEE") the principal amount of NINE HUNDRED THIRTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($937,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon 2 has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.74 32 TERM NOTE - SUNTRUST BANK 1 Exhibit 10.74 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $6,562,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of SUNTRUST BANK, NASHVILLE, N.A. ("PAYEE") the principal amount of SIX MILLION FIVE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($6,562,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation 2 hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.75 33 TERM NOTE - UNION BANK OF CALIFORNIA 1 Exhibit 10.75 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $2,812,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("PAYEE") the principal amount of TWO MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($2,812,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest 2 hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.76 34 TERM NOTE - UNION BANK OF SWITZERLAND 1 Exhibit 10.76 TERM NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $2,812,500.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation ("BORROWER"), promises to pay to the order of UNION BANK OF SWITZERLAND, NEW YORK BRANCH ("PAYEE") the principal amount of TWO MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO/100 ($2,812,500.00) in the installments referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among Borrower, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Fourth Amended and Restated Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined). Commencing on September 15, 1999 and ending on December 16, 2002, Borrower shall make principal payments on this Note in consecutive quarterly installments. Each such installment shall be due on the date specified in the Credit Agreement and in an amount determined in accordance with the provisions thereof; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. This Note is one of Borrower's "Notes" in the aggregate principal amount of $75,000,000.00 and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and Agent shall be entitled to treat Payee as the owner and holder of this Note. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation 2 hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer EX-10.77 35 SWING LINE NOTE - BANKERS TRUST 1 Exhibit 10.77 SWING LINE NOTE AMERICAN HOMEPATIENT, INC. PROMISSORY NOTE $15,000,000.00 New York, New York December 23, 1997 FOR VALUE RECEIVED, AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "BORROWER"), promises to pay to BANKERS TRUST COMPANY (the "PAYEE"), on or before the second day prior to the Termination Date, the lesser of (x) FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) and (y) the unpaid principal amount of all advances made by the Payee to the Borrower as Swing Line Loans under the Credit Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full, at the rates and at the times that shall be determined, and to make principal prepayments on this Note at the times that shall be determined, in accordance with the provisions of that certain Fourth Amended and Restated Credit Agreement dated as of December 19, 1997 by and among the Borrower, the financial institutions party thereto and Bankers Trust Company, as the Agent (the "AGENT") (said Fourth Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). This Note is Borrower's "Swing Line Note" and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Swing Line Loans evidenced hereby were made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent as provided in Section 11.05(b)(ii) of the Credit Agreement, the Borrower and the Agent shall be entitled to treat the Payee as the owner and holder of this Note. Each of the Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure 1 2 to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note; provided, however, that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. Whenever any payment on this Note shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the date of any mandatory prepayment required to be made under the Credit Agreement is not a Business Day such payment shall be made on the immediately preceding Business Day. This Note is subject to mandatory prepayment as provided in Section 4.02(c) of the Credit Agreement and to prepayment at the option of Borrower as provided in Section 4.02(a) of the Credit Agreement. THIS NOTE AND THE OBLIGATIONS OF THE BORROWER AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK) WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer as assignment as provided in Sections 11.05 of the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Section 11.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Borrower and any endorsers of this Note hereby consent to renewals 2 3 and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE BORROWER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATED TO THIS NOTE. 3 4 IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first above written. AMERICAN HOMEPATIENT, INC. By: --------------------------------------- Name: Mary Ellen Rodgers Title: Senior Vice President and Chief Financial Officer 5 TRANSACTIONS ON SWING LINE NOTE
Outstanding Amount of Amount of Principal Loan Made Principal Paid Balance Notation Date This Date This Date This Date Made By ---- --------- --------- --------- -------
EX-10.78 36 MASTER AGREEMENT - BANK OF MONTREAL 1 Exhibit 10.78 (MULTICURRENCY--CROSS BORDER) IDSDA(R) INTERNATIONAL SWAP DEALERS ASSOCIATION, INC. MASTER AGREEMENT dated as of October 11, 1996 ------------------ AMERICAN HOMEPATIENT, INC. and BANK OF MONTREAL - - --------------------------------- ----------------------------------- have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows:- 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change (c) NETTING. If on any date amounts would otherwise be payable:- (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) 2 IDSDA(R) 1992 3 above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) DEDUCTION OR WITHHOLDING FOR TAX. (i) GROSS-UP. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. 3 IDSDA(R) 1992 4 (ii) LIABILITY. If:- (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that;- (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit 4 IDSDA(R) 1992 5 Support Document to which it is a party and has taken all necessary action to authorize such execution, delivery and performance; (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 5 IDSDA(R) 1992 6 4. AGREEMENTS Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:- (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) COMPLY WITH LAWS. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) TAX AGREEMENT. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organized, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax 6 IDSDA(R) 1992 7 Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) CREDIT SUPPORT DEFAULT. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) MISREPRESENTATION. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves 7 IDSDA(R) 1992 8 to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (I) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (I) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in 8 IDSDA(R) 1992 9 each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (I) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:- (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):- 9 IDSDA(R) 1992 10 (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(vii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such 10 IDSDA(R) 1992 11 event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TRANSFER TO A VOID TERMINATION EVENT. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such 11 IDSDA(R) 1992 12 other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)( 1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) RIGHT TO TERMINATE. If:- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected, Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in 12 IDSDA(R) 1992 13 reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default:- (1) First Method and Market Quotation If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non- defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated 13 IDSDA(R) 1992 14 Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non- defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event:- (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties:- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. 14 IDSDA(R) 1992 15 (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. TRANSFER Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. CONTRACTUAL CURRENCY (a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received 15 IDSDA(R) 1992 16 exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. 16 IDSDA(R) 1992 17 (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. OFFICES; MULTIBRANCH PARTIES (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organization of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 17 IDSDA(R) 1992 18 11. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. NOTICES (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 18 IDSDA(R) 1992 19 13. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agree, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 19 IDSDA(R) 1992 20 14. DEFINITIONS As used in this Agreement:- "ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b). "AFFECTED PARTY" has the meaning specified in Section 5(b). "AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "AFFILIATE" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "APPLICABLE RATE" means:- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "BURDENED PARTY" has the meaning specified in Section 5(b). "CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "CONSENT" includes a consent, approval, action, authorization, exemption, notice, filing, registration or exchange control consent. "CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b). 20 IDSDA(R) 1992 21 "CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as such in this Agreement. "CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule. "DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "DEFAULTING PARTY" has the meaning specified in Section 6(a). "EARLY TERMINATION DATE" means the date determined in accordance with Section 6(a) or 6(b)(iv). "EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "ILLEGALITY" has the meaning specified in Section 5(b). "INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organized, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "LAW" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "LAWFUL" and "UNLAWFUL" will be construed accordingly. "LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. 21 IDSDA(R) 1992 22 "LOSS" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "MARKET QUOTATION" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market- makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, 22 IDSDA(R) 1992 23 it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "NON-DEFAULTING PARTY" has the meaning specified in Section 6(a). "OFFICE" means a branch or office of a party, which may be such party's head or home office. "POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organized, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "SET-OFF" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination Date, the sum of:- (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. 23 IDSDA(R) 1992 24 "SPECIFIED ENTITY" has the meaning specified in the Schedule. "SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other patry to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "STAMP TAX" means any stamp, registration, documentation or similar tax. "TAX" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "TAX EVENT" has the meaning specified in Section 5(b). "TAX EVENT UPON MERGER" has the meaning specified in Section 5(b). "TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, ail Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "TERMINATION CURRENCY" has the meaning specified in the Schedule. "TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign 24 IDSDA(R) 1992 25 exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 am. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. AMERICAN HOMEPATIENT, INC. BANK OF MONTREAL (Name of Party) (Name of Party) By: /s/ By: /s/ -------------------------------- ---------------------------- Name: Mary Ellen Rodgers Name: R.J. Mailloux Title: Sr. V.P. and Chief Title: Senior Manager, Financial Officer Documentation Date: March 20, 1997 Date: April 11, 1997 25 IDSDA(R) 1992 26 (MULTICURRENCY - CROSS BORDER) ISDA SCHEDULE TO THE MASTER AGREEMENT dated as of October 11, 1996 between AMERICAN HOMEPATIENT, INC., a Delaware Corporation ("Party A") and BANK OF MONTREAL, a Canadian Chartered Bank ("Party B") PART 1 TERMINATION PROVISIONS (a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:- Section 5(a)(v), Affiliates Section 5(a)(vi), Affiliates Section 5(a)(vii), Affiliates Section 5(b)(iv), Not Applicable and in relation to Party B for the purpose of:- Section 5(a)(v), Not Applicable Section 5(a)(vi), Not Applicable Section 5(a)(vii), Not Applicable Section 5(b,)(iv), Not Applicable. (b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of this Agreement. (c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party A and Party B. 26 27 "SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 but it will not include indebtedness in respect of deposits received or any payment obligation not made because of any event similar to Illegality. "THRESHOLD AMOUNT" means 5% of stockholders' equity (including retained earnings). (d) The "CREDIT EVENT UPON MERGER" provisions of Section 5)(iv) Will apply to Party A and Party B. (e) The "AUTOMATIC EARLY TERMINATION" provisions of Section 6(a) will not apply to Party A or Party B. (f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this Agreement:- (i) Market Quotation will apply. (ii) The Second Method will apply. (g) "TERMINATION CURRENCY" means U.S. Dollars. (h) ADDITIONAL TERMINATION EVENT will not apply. PART 2 TAX REPRESENTATIONS (a) PAYER REPRESENTATION. For the purpose of Section 3(e) of this Agreement, Party A and Party B will each make the following representation:- It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d) (ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on:- (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement; (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and 27 28 (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement; provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f) of this Agreement, Party A and Party B make the representations specified below, if any:- (i) The following representation will not apply to Party A and will apply to Party B:- Each payment received or to be received by it in connection with this Agreement will be effectively connected with its conduct of a trade or business in the Specified Jurisdiction. If such representation applies, then:- "SPECIFIED JURISDICTION" means with respect to Party A: Not Applicable "SPECIFIED JURISDICTION" means with respect to Party B: United States of America (ii) The following representation will apply to Party A and will not apply to Party B:- It has been duly incorporated, created or organized under the laws of the United States of America or of any State of the United States of America, and that it is validly existing under those laws. (iii) Other Payee Representations: - None made. PART 3 AGREEMENT TO DELIVER DOCUMENTS For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:- (a) Each party shall, as soon as practicable after demand, deliver to the other party any form or document reasonably requested by the other party, including without limitation, any form or document required to enable such other party to make payments hereunder without withholding for or on account of Taxes or with such withholding at a reduced rate. 28 29 (b) Other documents to be delivered by each party concurrently with the execution and delivery of this Agreement are:
Party Form/Document Date by which to Covered by - - ----- ------------- ---------------- ---------- required to Certificate be delivered Section 3(d) - - ----------- ----------- ------------ ------------ deliver Representation - - ------- -------------- document - - -------- Party A and Certificate of Incumbency containing Upon execution Yes Party B specimen signatures of each person of this executing the Agreement Agreement, and if requested, each Confirmation Party B Certified copy of a resolution of the Upon execution Yes directors authorizing the execution of this Agreement and delivery of the Agreement Party A Legal opinion substantially in the Upon execution No form of Exhibit I attached herein of this Agreement evidencing capacity and authority to enter into and deliver this Agreement Party B Internal Revenue Service Form 4224, Upon execution N/A or any successor form, completed of this Agreement fully, accurately and in a manner reasonably satisfactory to Party A
29 30 PART 4 MISCELLANEOUS (a) ADDRESSES FOR NOTICES. For the purposes of Section 12(a) of this Agreement:- Address(es) for notices or communications to Party A:- Address: 5200 Maryland Way Suite 400 Brentwood, TN 37027 Attention: Mary Ellen Rodgers Facsimile: (615) 373-1847 Telephone: (615) 221-8884 Address(es) for notices or communications to Party B:- With respect to Swap Transactions: Address: Specialized Deals B-1 Level First Canadian Place Toronto, Ontario M5X lAl Canada Attention: Manager, Confirmations Facsimile: (416) 867-4778/6827 Telephone: (416) 867-7173 Telex: 06-217774 Answerback: MONTFOREX TOR Any notice sent to Party B in connection with this Master Agreement including any notice pursuant to Sections 5, 6 or 9) shall be sent to the following address: Address: Bank of Montreal Treasury Credit B-1 Level First Canadian Place Toronto, Ontario M5X lAl Attention: Director, Documentation Telephone: (416) 867-4178 30 31 (b) PROCESS AGENT. For purposes of Section 13(c) of this Agreement:- Party A appoints as its Process Agent The Prentice-Hall Corporation System, Inc. 500 Central Avenue, Albany, N.Y. 12206-2290. Party B appoints as its Process Agent its Office at 430 Park Avenue, New York, N.Y. 10022. (c) OFFICES. The provisions of Section 10(a) will apply to this Agreement. (d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:- Party A is not a Multibranch Party. Party B is not a Multibranch Party and, for purposes of this Agreement and each Transaction entered into pursuant hereto, will act through its Chicago Office. (e) CALCULATION AGENT. The Calculation Agent is Party B, unless otherwise specified in a Confirmation in relation to the relevant Transaction. (f) CREDIT SUPPORT DOCUMENT. N/A (g) CREDIT SUPPORT PROVIDER means in relation to Party A, None. (h) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine). (i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement will apply. (j) "AFFILIATE" will have the meaning specified in Section 14 of this Agreement. PART 5 OTHER PROVISIONS (a) 1991 ISDA DEFINITIONS. The provisions of the 1991 ISDA Definitions (the "Definitions'), published by the International Swaps and Derivatives Association, Inc., are incorporated by reference in, and will be deemed to be part of, this Agreement and each Confirmation as if set forth in full in this Agreement or in such Confirmation, without regard to any revision or subsequent edition thereof. In the event of any inconsistency between the provisions of this Agreement and the Definition this Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Agreement or the Definitions, such Confirmation will prevail for the purpose of the relevant Transaction. 31 32 (b) SUPERVENING ILLEGALITY. Without prejudice to a party's right to terminate in the event of Illegality, a party shall not be excused from performance hereunder by supervening illegality (whether by reason of passage or promulgation of a new law, regulation or interpretation or of failure to obtain any required governmental consent or approval), impossibility or frustration, with the effect that, while neither party shall be obligated to violate any applicable law by reason of this Section, each party shall retain its right to payment pursuant to Section 6(e) if the other party does not perform because of supervening illegality, impossibility or frustration. (c) SET-OFF. Any amount (the "Early Termination Amount') payable to one party (the "Payee") by the other party (the "Payer") under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section (5)(iv) or 5(b)(v) has occurred, will, at the option of the party ('X') other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any amount(s) (the 'Other Agreement Amount') payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or instrument(s) or undertaking(s) issued or executed by one party to, or in favour of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section. For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. Nothing in this Section shall be effective to create a charge or other security interest. This Section shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (d) RELATIONSHIP BETWEEN THE PARTIES. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): NON-RELIANCE. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being 32 33 understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. STATUS OF PARTIES. The other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction. (e) PAN PASSU. Party A hereby covenants that if, after the date of this Agreement, it secures any Swap Transaction under any other agreement, now or hereafter existing (an "Obligation") by any mortgage, lien, pledge or other charge upon any of its present or future assets or revenues (a "Lien"), it shall immediately take the necessary steps to ensure that its obligations under this Agreement shall share in and be secured by such Lien equally and rateably with such other Obligation and that in the creation of such Lien express provision shall be made to such effect AMERICAN HOMEPATIENT, INC. BANK OF MONTREAL By: /s/ By: /s/ ------------------------------- ------------------------------ Name: Mary Ellen Rodgers Name: R.J. Mailloux ----------------------------- ---------------------------- Title: Sr. V.P. and Chief Financial Title: Senior Manager, Officer Documentation ---------------------------- --------------------------- Date: March 20, 1997 Date: April 11, 1997 ------------------------------ ---------------------------- 33 EX-10.79 37 SEVERANCE AGREEMENT - THOMAS E. MILLS 1 Exhibit 10.79 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT is made and entered into this _____ day of December, 1997 by and between AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "Employer") and THOMAS E. MILLS, a resident of the State of Tennessee (the "Employee"). W I T N E S S E T H: WHEREAS, Employee was previously employed pursuant to that certain February 21, 1992 Employment Agreement with American Home Patient Centers, Inc., a Tennessee corporation and wholly-owned subsidiary of Employer; and WHEREAS, the parties replaced the 1992 Employment Agreement with an Employment Agreement dated February 8, 1995 between Employer and Employee, which Employment Agreement was amended in 1994 (such Agreement, as amended, is hereinafter referred to as the "Employment Agreement"); and WHEREAS, the parties have mutually agreed that Employee's employment with Employer will terminate on December 31, 1997 in connection with the organizational restructuring announced by the Employer on September 25, 1997 (the "Restructuring") and, accordingly, the parties desire to replace the Employment Agreement with this Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows: 1. EMPLOYMENT. Employer and Employee agree that Employee will remain in the employ of Employer through December 31, 1997 (the "Termination Date"). Until such time, Employee shall have the title Senior Vice President - Strategic Alliances. In such capacity, Employee shall, among other things, be responsible for certain assigned aspects of Employer's general business operations and perform such duties as assigned from time to time in accordance with the policies and objectives established by the Board of Directors and Chief Executive Officer of Employer, which duties shall include directing certain aspects of and managing strategic alliances involving the Employer and directing certain aspects of the Restructuring. Employee agrees to devote his full time, attention and skill to his duties hereunder through the Termination Date. 2. COMPENSATION AND BENEFITS. Until the Termination Date, Employee shall receive the same base salary which he is receiving as of the date hereof and will be entitled to such medical, dental, disability and life insurance, and other employee benefits as are provided to employees of similar rank. Notwithstanding the foregoing, Employee will not receive any incentive compensation for services performed during Employer's 1997 fiscal year. 2 3. SEVERANCE PAYMENT. Upon termination of Employee's employment by the Employer pursuant to the Restructuring, Employee will be entitled to receive a severance payment in an amount equal to ten (10) months of Employee's base monthly salary payable in equal monthly installments for a ten (10) month period following such termination. In addition, the Employer agrees to provide medical insurance and life insurance benefits in an amount equal to those enjoyed by the Employee during the Employer's 1997 fiscal year for the ten (10) month period following the termination. 4. NONCOMPETE, ETC. In consideration of the covenants of Employer contained herein, Employee agrees as follows: (a) Employee will, with reasonable notice during or after his employment, furnish information as may be in his possession and cooperate with Employer as may reasonably be requested in connection with any claims or legal actions in which Employer is or may become a party. Employee agrees to not disparage or otherwise comment in a negative way on the Employer or its affairs after the Termination Date. (b) Employee recognizes and acknowledges that all information pertaining to the affairs, business, clients, customers or other relationships of Employer, as hereinafter defined, is confidential and is a unique and valuable asset of Employer. Access to and knowledge of this information are essential to the performance of Employee's duties under this Agreement. Employee will not during his employment or after except to the extent reasonably necessary in performance of the duties under this Agreement, give to any person, firm, association, corporation or governmental agency any information concerning the affairs, business, clients, customers or other relationships of Employer except as required by law. Employee will not make use of this type of information for his own purposes or for the benefit of any person or organization other than Employer. Employee will also use his best efforts to prevent the disclosure of this information by others. All records, memoranda, etc. relating to the Business whether made by Employee or otherwise coming into his possession are confidential and will remain the property of Employer. (c) During his employment and thereafter, Employee will not use his status with Employer to obtain loans, goods or services from another organization on terms that would not be available to him in the absence of his relationship to Employer. During his employment and for a twelve (12) month period following the Termination Date, Employee will not make any statements or perform any acts intended to advance the interest of any existing or prospective competitors of Employer in any way that will injure the interest of Employer; Employee, without express prior written approval by the Board of Directors of Employer, will not directly or indirectly own or hold any proprietary or other interest in, otherwise participate in, be employed by, or receive compensation from any party engaged in the same or any similar business within a one hundred (100) mile radius of any location of Employer as of the Termination Date; and Employee, without express prior written approval from the Board of Directors, will not solicit any members of the then current clients of Employer or discuss with any employee of Employer or of an affiliate of Employer, unless such employee has not been employed by Employer or an affiliate for at least twelve (12) months, 3 information or operation of any business intended to compete with Employer. For the purposes of this Agreement, proprietary interest means legal or equitable ownership, whether through stock holdings or otherwise, of a debt or equity interest (including options, warrants, rights and convertible interests) in a business firm or entity, or ownership of more than five percent (5%) of any class of equity interest in a publicly-held company. For a twelve (12) month period after the Termination Date, Employee will not directly or indirectly hire any employee of Employer or solicit or encourage any such employee to leave the employ of Employer or an affiliate of Employer, unless such employee has not been employed by Employer or an affiliate for at least six (6) months. (d) Employee acknowledges that his breach or threatened or attempted breach of any provision of Section 4 would cause irreparable harm to Employer not compensable in monetary damages and that Employer shall be entitled, in addition to all other applicable remedies, to a temporary and permanent injunction and a decree for specific performance of the terms of Section 4 without being required to prove damages or furnish any bond or other security. (e) The parties hereby acknowledge the necessity of protection against the competition of, and certain other possible adverse actions by, Employee and that the nature and scope of such protection has been carefully considered by the parties. The period provided and the area covered are expressly represented and agreed to be fair, reasonable and necessary. If, however, any court determines that the foregoing restrictions are not reasonable, the court may modify, rewrite or interpret such restrictions to include as much of their nature and scope as will render them enforceable. 5. RELEASE. In exchange for the promises described herein, Employee releases and discharges Employer, its employees, officers, directors, shareholders, agents, attorneys, affiliates, and all related persons or entities ("Releasees"), from any and all losses, causes of action, claims, demands, liabilities, deficiencies, damages or expenses, known or unknown, arising or accruing in favor of Employee including but not limited to those arising in connection with his employment, the Employment Agreement and all related matters, except for obligations expressly set out herein. This release includes, but is not limited to, claims arising under Title VII of the Civil Copyrights Act of 1964, 42 U.S.C. Section 2000e, as amended; the Civil Rights Act of 1991; the Employee Retirement Income Security Act, 29 U.S.C. Sections 1001 - 1461, as amended; any claims for breach of contract, tort, or personal injury of any sort; and any claims under any other state or federal statute, regulation, or common law. 6. MISCELLANEOUS. The rights and obligations of Employee hereunder are non-assignable or delegable, and any assignment or delegation will be deemed null and void. Employer may assign this Agreement. The provisions hereof shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. The invalidity or unenforceability of any provision of this Agreement will not affect any other provision hereof, and this Agreement will be construed in all respects as if such invalid or unenforceable provision was omitted. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there will be automatically added as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable 4 provision as may be possible and be legal, valid and enforceable. The waiver of a breach by either party of a term or provision of this Agreement will not be deemed or construed to be a waiver of any subsequent breach of the same or of any other terms or provisions of this Agreement. This Agreement constitutes the entire understanding and agreement between the parties with respect to the employment of Employee and supersedes all other employment contracts and severance arrangements, including, without limitation, the Employment Agreement. No waiver, modification or amendment to this Agreement will be valid unless it is evidence by a written instrument executed by both parties. This Agreement will be interpreted under subject to and governed by, the substantive laws of the State of Tennessee. IN WITNESS WHEREOF, the parties have executed this Severance Agreement as of the date first above written. AMERICAN HOMEPATIENT, INC. By: ------------------------------- ----------------------------------- THOMAS E. MILLS Title: --------------------------- EX-10.80 38 EMPLOYMENT AGREEMENT AMENDMENT #3 1 Exhibit 10.80 AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 3 to Employment Agreement is made and entered into as of 23rd day of December, 1997 by and between AMERICAN HOMEPATIENT, INC., a Delaware corporation (the "Company") and EDWARD K. WISSING, a resident of the State of Tennessee (the "Executive"). WHEREAS, the Executive and the Company, as the successor of Diversicare, Inc., are parties to that certain Employment Agreement dated October 1, 1991 as amended on June 10, 1994 and December 1, 1995 (the Employment Agreement as so amended is hereinafter referred to as the "Employment Agreement"); and WHEREAS, the parties desire to further amend the Employment Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein and in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows: 1. Section VIII(A) is hereby amended by deleting the current clause in its entirety and substituting in it instead the following: If the Executive's employment terminates due to either a Without Cause Termination or a Constructive Discharge as defined later in this Agreement, the Company will pay the Executive in a lump sum upon such Termination or Constructive Discharge an amount equal to the sum of (1) three hundred percent (300%) of his Base Salary as in effect at the time of such termination, plus (2) the annual incentive compensation Executive received for performance during the Company's immediately preceding fiscal year, multiplied by a fraction, the numerator of which is the total number of full calendar months during which the Executive was employed by the Company during the Company's current fiscal year prior to termination and the denominator of which is twelve (12); provided, however, that if such termination occurs during the first six (6) months of the Company's then current fiscal year, that portion of the severance payment referenced in clause (2) will be reduced by twenty percent (20%) to eighty percent (80%) thereof. For example, if Executive's incentive compensation for the prior fiscal year was Sixty Thousand and No/100 Dollars ($60,000.00) and his employment with the Company was terminated as a result of a Without Cause Termination or a Constructive Discharge five and one-half (5-1/2) months after the beginning of the current fiscal year, that portion of the severance 2 payment due to Executive pursuant to clause (2) above would be Twenty Thousand and No/100 Dollars ($20,000.00), calculated as follows: 80% x $60,000.00 x 5/12 = $20,000.00. Earned but unpaid base salary and any accrued vacation will also be paid in a lump sum at such time. All benefits and perquisites to which Executive was entitled immediately prior to termination, including without limitation, health insurance, participation in the Company's Supplemental Executive Retirement Plan and all other benefits and perquisites described in this Agreement, will be continued for thirty-six (36) months. If the Executive's employment terminates due to either a Without Cause Termination or a Constructive Discharge, or pursuant to Section XI, all stock options ("Options") granted to the Executive under the Company's 1991 Nonqualified Stock Option Plan, the Company's 1995 Nonqualified Stock Option Plan for Directors or any other stock option program or plan (each and collectively, the "Plan") shall be deemed vested, and the Company shall cause the Options to remain exercisable for thirty-six (36) months from the date of termination, subject to the ten (10) year term limit set forth in the governing Plan. 2. The first paragraph of Section XI shall be amended by deleting in its entirety and substituting the following in it instead: In the event there is a Change in Control of the ownership of the Company, the Executive may at any time within 12 months of the Change of Control resign upon written notice to the Company. In this event, the Company shall pay to the Executive in a lump sum upon such resignation an amount equal to the sum of: (1) three hundred percent (300%) of his Base Salary as in effect of the time of such resignation, plus (2) the annual incentive compensation Executive received for performance during the Company's immediately preceding fiscal year, multiplied by a fraction, the numerator of which is the total number of full calendar months during which the Executive was employed by the Company during the Company's current fiscal year prior to termination and the denominator of which is twelve (12); provided, however, that if such termination occurs within six (6) months following such Change of Control, that portion of the severance payment referenced in clause (2) will be reduced by twenty percent (20%) to eighty percent (80%) thereof. For example, if Executive's incentive compensation for the prior fiscal year was Sixty Thousand and No/100 Dollars ($60,000.00) and his employment with the Company was terminated as a result of a Change in Control five and one-half (5-1/2) months after the beginning of the current fiscal year, that portion of the 2 3 severance payment due to Executive pursuant to clause (2) above would be Twenty Thousand and No/100 Dollars ($20,000.00), calculated as follows: 80% x $60,000.00 x 5/12 = $20,000.00. In addition, earned but unpaid Base Salary and any accrued vacation will be paid on a pro-rata basis for the year in which resignation occurs. Any options granted to the Executive prior to the Change of Control will be fully vested upon a Change in Control regardless of whether Executive is terminated or resigns. All benefits and perquisites to which Executive was entitled immediately prior to resignation, including without limitation, health insurance, participation in the Company's Supplemental Retirement Plan and all other benefits and perquisites described in this Agreement, will also be continued for thirty-six (36) months from the effective date of termination pursuant to a Change in Control. 3. Section XI shall be further amended by adding the following as a new third paragraph: Notwithstanding the above, no amount shall be payable hereunder to the extent that it would result in the imposition of an excise tax under Internal Revenue Code Section 4999, and the severance amount payable above shall be automatically reduced to the extent necessary to avoid such result. 4. The Company and Executive agree that, except as expressly set forth herein, the terms and conditions of the Employment Agreement remain unchanged and in full force and effect. This Amendment shall be governed by and construed in accordance with the substantive laws of the State of Tennessee. 3 4 IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 to Employment Agreement as of the date first above written. AMERICAN HOMEPATIENT, INC. By: -------------------------------------------- Title: ----------------------------------------- ------------------------------------------------ EDWARD K. WISSING 4 EX-10.81 39 LETTER AGREEMENT 1 Exhibit 10.81 DCAMERICA, INC. August 7, 1997 Edward K. Wissing American HomePatient, Inc. 5200 Maryland Way, Suite 400 Brentwood, TN 37027-5018 Dear Ed: Pursuant to our recent discussions concerning American HomePatient, Inc. (the "Company"), I have outlined below a suggestion for a working relationship and fee arrangements with DCAmerica, Inc. and its affiliates ("DCA"). DCA is willing to assist the Company in connection with specific significant and strategic transactions and initiatives upon written request from time to time (a "Transaction"). With respect to significant Transactions, our engagement would be on a case by case basis upon written request by the Company to DCA, and we would anticipate entering into a formal engagement letter for each such Transaction. A Transaction of this type may include, but not be limited to, situations involving strategic acquisitions, combinations, dispositions and extraordinary financing transactions related thereto. We would assist in a Transaction in the areas of due diligence, legal, tax, accounting, employment, and other matters. In doing so would utilize numerous individual experts in the DCA and Counsel family of companies. This assistance would include conversations and negotiations in the early stages of a Transaction, extensive financial analysis, valuation analysis, global transaction structuring advice, discussions with key personnel at the target company, price analysis, and structuring of earnout, delayed or contingent payments, and mix of stock or debt consideration. The assistance would not include the provision of a fairness opinion, although we will assist the Company in obtaining one if requested. 2 Edward K. Wissing American HomePatient, Inc. Page 2 Upon completion of a Transaction, we would anticipate a cash fee based on the following:
TRANSACTION VALUE PERCENTAGE FEE ----------------- -------------- On the first $1,000,000 5% On the amount between $1,000,000 - 4% $2,000,000 On the amount between $2,000,000 - 3% $3,000,000 on the amount between $3,000,000 - 2% $4,000,000 On the amount above $4,000,000 1%
"Transaction Value" shall include the gross value of all cash, securities and other properties paid or payable directly or indirectly in one transaction or a series or combination of transactions in connection with a Transaction, including, without limitation, the amounts paid pursuant to covenants not to compete, non-standard employment contracts, amounts paid to holders of warrants, stock purchase rights, convertible securities, options or stock appreciation rights, and the value of long-term liabilities including the principal amount of debt for borrowed money, preferred stock obligations and other liabilities, in each case indirectly or directly assumed or acquired or otherwise repaid or retired in connection with the Transaction. If the Transaction takes the form of a purchase of assets, Transaction Value shall also include the value of current assets not purchased minus the value of current liabilities not assumed. Transaction Value will also include the aggregate amount of any extraordinary dividend or distribution made by the Company from the date of engagement through the closing of the Transaction. The Transaction Value shall include amounts paid into escrow and contingent payments payable in connection with any Transaction, when paid. The Company also will agree to indemnify and hold harmless DCA and its affiliates and each other person, if any, controlling DCA or any of its affiliates from and against any losses, claims, damages or liabilities (including reasonable counsel fees) or actions in respect thereof related to or arising out of such engagement or DCA's role in connection therewith. The Company will not, however, be responsible for any claims, liabilities, losses, damage or expenses that result from the bad faith or gross negligence of DCA or any other party indemnified hereunder. 3 Edward K. Wissing American HomePatient, Inc. Page 3 The Company will also agree that neither DCA, nor any of its affiliates, nor any person, director, employee or agent of DCA or any of its affiliates, nor any person controlling DCA or any of its affiliates shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company or in connection with such engagement except for any such liability for losses, claims, damages, or liabilities or expenses incurred by the Company that result from bad faith or gross negligence of DCA or any other party identified hereunder. Please indicate if this proposal is acceptable to you. Sincerely, DCAMERICA, INC. By: ---------------------------------- AGREED and ACCEPTED: AMERICAN HOMEPATIENT, INC. By: --------------------------------- Date: ------------------------------- EX-21 40 SUBSIDIARY LIST 1 EXHIBIT 21 SUBSIDIARIES OF AMERICAN HOMEPATIENT, INC.
NAME OF STATE OF D/B/A SUBSIDIARY INCORPORATION NAME Designated Companies, Inc. New York CarePlan Total HomeCare of East Alabama (LLC) Alabama AHP Finance, Inc. Delaware American HomePatient of Iowa, Inc. Delaware American HomePatient, Inc. Tennessee American HomePatient of Texas, L.P. Texas AHP, L.P. Tennessee Pronetics Health Care Group, Inc. North Carolina HomeCare Pharmacy, Inc. Alabama Schofield Medical Services, Inc. Alabama Breathing Equipment Incorporated Pennsylvania Hazelton Medical & Breathing Equipment Happy Harry's HealthCare, Inc. Delaware Carter's Homecare, Inc. Florida The Medical Store Connecticut Roy's Pharmacy Texas Lake's Medical The Medical Mart Connecticut RNH, Inc. Connecticut Bonneville General Holdings, Inc. Pennsylvania AM-TEX Medical Corporation Texas Medical Equipment Services, Inc. Illinois ConPharma Home Healthcare, Inc. Massachusetts Critical Care Associates, Inc. New York TPN Pharmacy, Inc. Massachusetts Penn Oxygen Services, Inc. West Virginia Mobile Medical Services, Inc. Pennsylvania Stoll's Medical Rentals, Inc. Connecticut AHP of Illinois, Inc. Illinois Home Medical Services, Inc. Alabama Patient Care Plus, Inc. Alabama Medical Equipment of Southwest Florida Florida ProCare Medical Supply Co., Inc. Missouri American HomePatient of Arkansas, Inc. Arkansas
2
NAME OF STATE OF D/B/A SUBSIDIARY INCORPORATION NAME Clasen Health Services, Inc. Missouri Missouri Home Health Care Consortium, Inc. Missouri Neogenesis, Inc. South Carolina American HomePatient Ventures, Inc. Tennessee American HomePatient of Texas, L.P. Texas limited partnership AHP, L.P. Tennessee limited partnership
EX-23.1 41 CONSENT OF ARTHUR ANDERSEN 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K into American HomePatient, Inc.'s previously filed registration statements No. 33-58310 (1993 Employee Stock Purchase Plan), No. 33-64292 (1991 Non-Qualified Stock Option Plan) and No. 33-93094 (1995 Non-qualified Stock Option Plan for Directors). ARTHUR ANDERSEN LLP Nashville, Tennessee March 20, 1998 EX-27 42 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF AMERICAN HOMEPATIENT, INC. FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 12,100,000 0 158,248,000 43,862,000 25,824,000 170,830,000 146,803,000 66,729,000 558,366,000 58,109,000 301,324,000 0 0 149,000 193,940,000 558,366,000 180,176,000 387,277,000 97,418,000 97,418,000 308,215,000 30,541,000 16,494,000 (34,850,000) (8,942,000) (25,908,000) 0 0 0 (25,908,000) (1.75) (1.75)
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