UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001
For the transition period from __________________ to ________________
Commission file number 1-11353
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LABORATORY CORPORATION OF AMERICA HOLDINGS
DELAWARE 13-3757370
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
358 South Main Street, Burlington, North Carolina 27215
(Address of principal executive offices) (Zip Code)
336-229-1127
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(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered ------------------------------ ------------------------------------- Common Stock, $0.10 par value New York Stock Exchange |
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 70,829,522 shares as of February 28, 2002, of which 10,705,074 shares are held by indirect wholly owned subsidiaries of Roche Holdings Ltd.
PART I
Item 1. DESCRIPTION OF BUSINESS
Laboratory Corporation of America Holdings (the "Company"), headquartered in Burlington, North Carolina, is the second largest independent clinical laboratory company in the United States based on 2001 net revenues. Through a national network of laboratories, the Company offers more than 4,000 different clinical laboratory tests which are used by the medical profession in routine testing, patient diagnosis, and in the monitoring and treatment of disease. Since its founding in 1971, the Company has grown into a network of 24 primary testing facilities and approximately 1,200 service sites consisting of branches, patient service centers and STAT laboratories, serving clients in 50 states.
The Clinical Laboratory Testing Industry
Laboratory tests and procedures are used generally by hospitals, physicians and other health care providers and commercial clients to assist in the diagnosis, evaluation, detection, monitoring and treatment of diseases and other medical conditions through the examination of substances in the blood, tissues and other specimens. Clinical laboratory testing is generally categorized as either clinical testing, which is performed on body fluids including blood and urine, or anatomical pathology testing, which is performed on cytologic samples, tissue and other samples, including human cells. Clinical and anatomical pathology procedures are frequently ordered as part of regular physician office visits and hospital admissions in connection with the diagnosis and treatment of illnesses. Certain of these tests and procedures are used principally as tools in the diagnosis and treatment of a wide variety of medical conditions such as cancer, AIDS, endocrine disorders, cardiac disorders and genetic disease. The most frequently requested tests include blood chemistry analyses, urinalyses, blood cell counts, thin layer cytology Pap smears, HIV tests, microbiology cultures and procedures and alcohol and other substance-abuse tests.
The clinical laboratory industry consists primarily of three types of providers: hospital-based laboratories, physician-office laboratories and independent clinical laboratories, such as those owned by the Company.
The Company believes that in 2001 approximately 49% of the clinical testing revenues in the United States were derived by hospital-based laboratories, approximately 12% were derived by physicians in their offices and laboratories, and approximately 39% were derived by independent clinical laboratories. The Health Care Financing Administration ("HCFA") of the Department of Health and Human Services ("HHS") has estimated that in 2001 there were approximately 5,000 independent clinical laboratories in the United States.
Effect of Market Changes on the Clinical Laboratory Business
Many market-based changes in the clinical laboratory business have occurred over the past ten years, primarily as a result of the shift away from traditional, fee-for-service medicine to managed-cost health care. The growth of the managed care sector presents various challenges to the Company and other independent clinical laboratories. Managed care organizations typically contract with a limited number of clinical laboratories and negotiate discounts to the fees charged by such laboratories in an effort to control costs. Such discounts have historically resulted in price erosion and have negatively impacted the Company's operating margins. In addition, managed care organizations have used capitated payment contracts in an attempt to fix the cost of laboratory testing services for their enrollees. Under a capitated payment contract, the clinical laboratory and the managed care organization agree to a per member, per month payment to cover all laboratory tests during the month, regardless of the number or cost of the tests actually performed. Such contracts shift the risks of additional testing beyond that covered by the capitated payment to the clinical laboratory. For the year ended December 31, 2001 such capitated contracts accounted for approximately $106.3 million of the Company's net sales. The increase in managed care and insurance companies' attempts to control utilization of medical services overall has also resulted in declines in the utilization of laboratory testing services.
In addition, Medicare (which principally services patients 65 and older), Medicaid (which principally serves indigent patients) and insurers have increased their efforts to control the cost, utilization and delivery of health care services. Measures to regulate health care delivery in general and clinical laboratories in particular have resulted in reduced prices, added costs and decreased test utilization for the clinical laboratory industry by increasing complexity and adding new regulatory and administrative requirements. From time to time, Congress has also considered changes to the Medicare fee schedules in conjunction with certain budgetary bills. The Company believes that reductions in reimbursement for Medicare services will continue to be implemented from time to time. Reductions in the reimbursement rates of other third-party payors are likely to occur as well.
Despite the market changes discussed above, the Company believes that the volume of clinical laboratory testing will be positively influenced by several factors, including: the expanded base of genomics knowledge, which has led to an enhanced appreciation of the value of gene-based diagnostic assays for guiding both the development and stratification of patient-related data for new therapeutics, as well as an increased awareness by physicians that clinical laboratory testing is a cost-effective means of prevention, early detection of disease and monitoring of treatment. In an effort to better promote this appreciation in the marketplace, the Company recently announced partnerships with Myriad Genetics, Inc., to make Myriad's predictive medicine products broadly available to primary care physicians throughout the United States; and EXACT Sciences, to exclusively license EXACT's proprietary technologies for the detection of colorectal cancer. Additional factors which may lead to future volume growth include: an increase in the number and types of tests which are readily available (due to advances in technology and increased cost efficiencies) on a more affordable basis to physicians; expanded substance-abuse testing by corporations and governmental agencies; increased testing for sexually transmitted diseases such as AIDS; and the general aging of the population in the United States. The impact of these factors is expected to be partially offset by declines in volume as a result of increased controls over the utilization of laboratory services by Medicare and other third-party payors, particularly managed care organizations.
Laboratory Testing Operations and Services
The Company has 24 primary testing facilities, and approximately 1,200 service sites consisting of branches, patient service centers and STAT laboratories. A "branch" is a central office which collects specimens in a region for shipment to one of the Company's laboratories for testing. Test results can be printed at a branch and conveniently delivered to the client. A branch also is used as a base for sales staff. Generally, a "patient service center" is a facility maintained by the Company to serve the physicians in a medical professional building or other strategic location. The patient service center collects the specimens as requested by the physician. The specimens are sent, principally through the Company's in-house courier system (and, to a lesser extent, through independent couriers), to one of the Company's major laboratories for testing. Some of the Company's patient service centers also function as "STAT labs", which are laboratories that have the ability to perform certain routine tests quickly and report results to the physician immediately. The Company processed an average of approximately 281,000 patient specimens per day in 2001. Patient specimens are delivered to the Company accompanied by a test request form. These forms, which are completed by the client, indicate the tests to be performed and provide the necessary billing information.
Each specimen and related request form is checked for completeness and then given a unique identification number. The unique identification number assigned to each specimen helps to assure that the results are attributed to the correct patient. The test request forms are sent to a data entry terminal where a file is established for each patient and the necessary testing and billing information is entered. Once this information is entered into the computer system, the tests are performed and the results are entered through computer interface or manually, depending upon the tests and the type of equipment involved. Most of the Company's computerized testing equipment is directly linked with the Company's information systems. Most routine testing is completed by early the next morning and test results are printed and prepared for distribution by service representatives that day. Some clients have local printing capability and have reports printed out directly in their offices. Clients who request that they be called with a result are so notified in the morning. It is Company policy to notify the client immediately if a life- threatening result is found at any point during the course of the testing process.
Testing Services
Routine Testing
The Company currently offers approximately 4,000 different clinical laboratory tests or procedures. Several hundred of these are frequently used in general patient care by physicians to establish or support a diagnosis, to monitor treatment or medication, or to search for an otherwise undiagnosed condition. The most frequently requested routine tests include blood chemistry analyses, urinalyses, blood cell counts, Pap smears and HIV tests. These routine procedures are most often used by practicing physicians in their outpatient office practices. Physicians may elect to send such procedures to an independent laboratory or they may choose to establish an in-house laboratory to perform some of the tests.
The Company performs this core group of routine tests in each of its 24 primary testing facilities, which constitutes a majority of the testing performed by the Company. The Company generally performs and reports most routine procedures within 24 hours, utilizing a variety of sophisticated and computerized laboratory testing instruments.
Specialty and Niche Testing
While the information provided by many routine tests may be used by nearly all physicians, regardless of specialty, many other procedures are more specialized in nature. One of the primary growth strategies of the Company is the continued expansion of its specialty and niche businesses, which involve certain types of unique testing capabilities and/or client requirements. In general, the specialty and niche businesses are designed to serve two market segments: (i) markets which are not served by the routine clinical testing laboratory and therefore are subject to less stringent regulatory and reimbursement constraints; and (ii) markets which are served by the routine testing laboratory and offer the possibility of adding related services from the same supplier. The Company's research and development group continually seeks new and improved technologies for early diagnosis. For example, the Company's Center for Molecular Biology and Pathology (CMBP) is a leader in molecular diagnostics and polymerase chain reaction (PCR) technologies which are often able to provide earlier and more reliable information regarding HIV, genetic diseases, cancer and many other viral and bacterial diseases. In August 2000, the Company acquired Los Angeles- based National Genetics Institute, Inc. (NGI), a leader in the development of PCR assays for Hepatitis C (HCV). In June 2001, the Company acquired Minneapolis-based Viro-Med, Inc which offers molecular microbial testing using real time PCR platforms. Management believes these technologies may represent a significant savings to managed care organizations by increasing the detection of early stage (treatable) diseases. The following are specialty and niche businesses in which the Company offers testing and related services:
Infectious Disease. The Company provides complete viral load testing as well as HIV genotyping and phenotyping. In 2000, the Company added HIV GenoSure? to its portfolio of HIV resistance testing services. The Company's use of this leading-edge technology puts it in the forefront of HIV drug resistance testing-one of the most important issues surrounding the treatment of HIV. Additionally, the Company provides comprehensive testing for HCV including both PCR testing and genotyping at CMBP, NGI and Viro-Med.
Allergy Testing. The Company offers an extensive range of allergen testing services as well as computerized analysis and a treatment program that enables primary care physicians to diagnose and treat many kinds of allergic disorders.
Clinical Research Testing. The Company regularly performs clinical laboratory testing for pharmaceutical companies conducting clinical research trials on new drugs. This testing often involves periodic testing of patients participating in the trial over several years.
Diagnostic Genetics. The Company offers cytogenetic, molecular cytogenetic, biochemical and molecular genetic tests.
Identity Testing. The Company provides forensic identity testing used in connection with criminal proceedings and parentage evaluation services which are used to assist in the resolution of disputed parentage in child support litigation. Parentage testing involves the evaluation of immunological and genetic markers in specimens obtained from the child, the mother and the alleged father. Management believes it is now the largest provider of identity testing services in the United States.
Oncology Testing. The Company offers an extensive series of testing technologies that aid in diagnosing and monitoring certain cancers and predicting the outcome of certain treatments. At NGI, scientists have novel assays for melanoma and breast cancer in varying stages of clinical trials. During 2001, The Company began offering PreGen-26, a DNA-based colorectal cancer test (using EXACT Sciences Corporation's proprietary genomics-based technology). PreGen-26 is intended to detect colorectal cancer earlier when treatment is most effective.
Occupational Testing Services. The Company provides urine and hair testing for the detection of drugs of abuse for private and government customers, and also provides blood testing services for the detection of drug abuse and alcohol. These testing services are designed to produce "forensic" quality test results that satisfy the rigorous requirements for admissibility as evidence in legal proceedings. The Company also provides other analytical testing and a variety of management support services.
The specialized or niche testing services noted above, as well as other complex procedures, are sent to designated facilities where the Company has concentrated the people, instruments and related resources for performing such procedures so that quality and efficiency can be most effectively monitored. CMBP, NGI and Viro-Med also specialize in new test development and education and training related thereto.
Clients
The Company provides testing services to a broad range of health care providers. During the year ended December 31, 2001, no client or group of clients under the same contract accounted for more than four percent of the Company's net sales. The primary client groups serviced by the Company include:
Independent Physicians and Physician Groups
Physicians requiring testing for their patients who are unaffiliated with a managed care plan are one of the Company's primary sources of testing services. Fees for clinical laboratory testing services rendered for these physicians are billed either to the physician, to the patient or the patient's third party payor such as insurance companies, Medicare and Medicaid. Billings are typically on a fee-for-service basis. If the billings are to the physician, they are based on the wholesale or customer fee schedule and subject to negotiation. Otherwise, the patient is billed at the laboratory's retail or patient fee schedule and subject to third party payor limitations and negotiation by physicians on behalf of their patients. Medicare and Medicaid billings are based on government-set fee schedules.
Hospitals
The Company provides hospitals with services ranging from routine and specialty testing to contract management services. Hospitals generally maintain an on-site laboratory to perform immediately needed testing on patients receiving care. However, they also refer less time sensitive procedures, less frequently needed procedures and highly specialized procedures to outside facilities, including independent clinical laboratories and larger medical centers. The Company typically charges hospitals for any such tests on a fee-for-service basis which is derived from the Company's customer fee schedule. Fees for management services are billed monthly at contractually agreed-upon rates.
HMOs and Other Managed Care Groups
The Company serves HMOs and other managed care organizations. These medical service providers typically contract with a limited number of clinical laboratories and then designate the laboratory or laboratories to be used for tests ordered by participating physicians. The majority of the Company's managed care testing is negotiated on a fee-for-service basis. Testing is sometimes reimbursed on a capitated basis for managed care organizations. Under a capitated payment contract, the Company agrees to cover certain laboratory tests during a given month for which the managed care organization agrees to pay a flat monthly fee for each covered member. The tests covered under agreements of this type are negotiated for each contract, but usually include routine tests and exclude highly specialized tests. Many of the national and large regional managed care organizations prefer to use large independent clinical labs such as the Company because they can monitor service and performance on a national basis.
Other Institutions
The Company serves other institutions, including governmental agencies, large employers and other independent clinical laboratories that do not have the breadth of the Company's testing capabilities. The institutions typically pay on a negotiated fee-for-service basis.
Payors
Most testing services are billed to a party other than the "client" that ordered the test. In addition, tests performed by a single physician may be billed to different payors depending on the medical benefits of a particular patient. Payors other than the direct patient, include, among others, insurance companies, managed care organizations, Medicare and Medicaid. For the year ended December 31, 2001, billings to the Company's respective payors (based on the total volume of accessions) are as follows:
Revenue
Accession Volume as per
a % of Total Accession
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Private Patients 3.5% $111.28
Medicare, Medicaid and
Insurance 17.0% $ 31.59
Commercial Clients 38.9% $ 24.46
Managed Care 40.6% $ 29.27
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Affiliations and Alliances
The Company's development of hospital relationships through traditional and non-traditional business models exceeded all prior year outcomes. The Company increased its focus on the traditional business model with a hospital, whereby the Company enters into a reference service agreement and establishes a Hospital Territory Manger (HTM) role. The addition of this sales/service position sets the Company at an advantage with specialized and targeted attention for the Company's Hospital customers. Significant growth also occurred due to laboratory technical support (management) contracts and shared services agreements.
In 2001 the Company added a number of new traditional and nontraditional relationships with hospitals. These new hospital relationships represent approximately $48.5 million of new annualized sales.
Reference agreements, or traditional business model, provide a means for hospitals to outsource patient laboratory testing services that are not time critical (e.g., test results reported within twenty-four hours of drawing the specimen as opposed to those requiring two to four hour turnaround). These agreements allow the hospital to maintain their own stat/emergency lab on-site, while eliminating certain costs of maintaining a full-service lab on their premises.
A non-traditional business model is where the Company provides technical support services in a variety of health care settings. In these relationships, the Company generally supplies the laboratory manager and other laboratory personnel, as well as equipment and testing supplies, to manage a laboratory that is owned by a hospital, managed care organization or other health care provider. Under the typical laboratory technical support agreement, the laboratory manager, who is employed by the Company, reports to the hospital or clinic administration. Thus, the hospital or clinic ("Provider") maintains control of the laboratory. A pathologist designated by the Provider serves as medical director for the laboratory.
Hospitals are increasingly looking beyond their in-house patient base and seek to provide services to outreach patients within their greater local community. The Company has a focus to develop cooperative testing relationships with such hospitals in which the parties combine efforts to support the needs of a specific community. These non-traditional relationships center around capitalizing on a partner hospital's excess capacity and ability to perform rapid response testing and the Company's ability to provide low cost, high quality esoteric testing. These service agreements create ventures that provide communities with synergistic, high quality testing services within a single infrastructure.
An important advantage the Company offers to its clients is the flexibility of the Company's information systems used for contract management services and for creating bi-directional interfaces to support the Company's cooperative testing arrangements. In addition to the ability to be customized for a particular user's needs, the Company's information systems also interface with several hospital and clinic systems, giving the user more efficient and effective information flow.
The Company's non-traditional business contracts typically have terms between three and five years. However, most contracts contain a clause that permits termination prior to the contract expiration date. The termination terms vary but they generally fall into one of the following categories: (1) termination without cause by either the Company or the contracted Provider after written notice (generally 60 to 120 days prior to termination); (2) termination by the contracted Provider only if there are uncorrected deficiencies in the Company's performance under the contract after notice by the contracted Provider; (3) termination by the contracted Provider if there is a loss of accreditation held by any Company laboratory that services the contracted Provider, which accreditation is not reinstated within 30 days of the loss, or up to 30 days' notice if there is a decline in the quality of services provided under such contract which remains uncorrected after a 15-day period; or (4) should the Company or Provider's service requirements change to the extent that the new service requirements affect the profitability or stability of the alliance relationship and the terms cannot be re-negotiated to the satisfaction of both parties. While the Company believes that it will maintain and renew its existing contracts, there can be no assurance of such maintenance or renewal.
The Company has developed several different pricing formulas under its non-traditional business contracts. The Company generally bills the hospital a monthly contractually-determined management fee in addition to different fixed on-site and off-site fees per test. Highly esoteric tests are generally billed under a separate fee schedule. In certain cases, profitability may depend on the Company's ability to accurately predict test volumes, patient encounters or the number of admissions.
Sales and Marketing and Client Service
The Company offers its services through a combination of direct sales generalists and specialists. Sales generalists market the mainstream or traditional routine laboratory services primarily to physicians, while specialists concentrate on individual market segments, such as hospitals or managed care organizations, or on testing niches, such as identity testing or genetic testing. Specialist positions are established when an in-depth level of expertise is necessary to effectively offer the specialized services. When the need arises, specialists and generalists work cooperatively to address specific opportunities. At December 31, 2001, the Company employed 235 generalists and 114 specialists. The Company's sales generalists and specialists are compensated through a combination of salaries, commissions and bonuses, at levels commensurate with each individual's qualifications and responsibilities. Commissions are primarily based upon the individual's productivity in generating new business for the Company.
The Company also employs regional service managers and account managers ("AMs") to interact with clients on an ongoing basis. AMs monitor the status of the services being provided to clients, act as problem- solvers, provide information on new testing developments and serve as the client's regular point of contact with the Company. At December 31, 2001, the Company employed 290 AMs. AMs are compensated through a combination of salaries and bonuses commensurate with each individual's qualifications and responsibilities.
The Company believes that the clinical laboratory service business is shifting away from the traditional direct sales structure to one in which the purchasing decisions for laboratory services are increasingly being made by managed care organizations, insurance plans, employers and even by patients themselves. In view of these changes, the Company has adapted its sales and marketing structure to more appropriately address the opportunities presented by this shift.
The Company competes primarily on the basis of the quality of its testing, reporting and information systems, its reputation in the medical community, the pricing of its services and its ability to employ qualified personnel. During 2001, one of the Company's goals has been to improve client service. An important factor in improving client service includes the Company's initiatives to improve its billing process. See "-Billing."
Information Systems
The Company has developed and implemented management information systems to monitor operations and control costs. All financial functions are centralized in Burlington, North Carolina including purchasing and accounting. Management believes this provides greater control over spending as well as increased supervision and monitoring of results of operations.
The Company believes that the health care provider's need for data will continue to place high demands on its information systems staff. The Company operates several systems to handle laboratory, billing and financial data and transactions. The Company believes that the efficient handling of information involving clients, patients, payors and other parties will be a critical factor in the Company's future success. The Company's Corporate Information Systems Division manages its information resources and programs on a consolidated basis in order to achieve greater efficiency and economies of scale. The Company employs a Chief Information Officer, whose responsibility is to integrate, manage and develop the Company's information systems.
In 2001, the Company continued to focus on its information systems activities and substantially completed the consolidation of its multiple laboratory and billing systems to standardized laboratory testing and billing systems. The Company has established regional data centers to more effectively handle the information processing needs of the Company. The Company believes that benefits have been realized from the conversion of its multiple billing systems into a centralized system and these benefits will continue in the future as the Company takes advantage of this standardization.
Billing
Billing for laboratory services is a complex process. Laboratories must bill many different payors such as doctors, patients, hundreds of different insurance companies, Medicare, Medicaid and employer groups, all of whom have different billing requirements. The Company believes that a majority of its bad debt expense is the result of non-credit related issues which slow the billing process. A primary cause of bad debt expense is missing or incorrect billing information on requisitions. The Company believes that this experience is similar to that of its primary competitors. The Company performs the requested tests and returns back the test results regardless of whether billing information has been provided at all or has been provided incorrectly. The Company subsequently attempts to obtain any missing information or rectify any incorrect billing information received from the health care provider. Among the many other factors complicating the billing process are more intricate billing arrangements due to contracts with third-party administrators, disputes between payors as to the party responsible for payment of the bill and auditing for specific compliance issues.
During 2001, the Company's days sales outstanding (DSO) were reduced 10 days from December 31, 2000 levels to 58 days as a result of Company- wide efforts to increase cash collections from all payors, as well as on- going improvements to claim submission processes. The Company is continuing to take the steps necessary to improve DSO and cash collections by:
1) Conversion of decentralized billing locations to a centralized billing system. During 2001, the Chicago, San Antonio and Dallas locations were converted.
2) During the first quarter of 2000, the Company implemented an initiative to reduce the number of requisitions received that are missing certain billing information. This initiative involves measuring the number of clinical requisitions received by ordering client, as well as what specific information was not provided. The Company then identifies root causes of why the information was missing and takes steps to ensure that information is provided in the future. These steps include re-educating clients as to what information is needed in order for the Company to bill and collect for the test. During the year, the percentage of requisitions received which were missing billing information was 6%.
Although there can be no assurance of success, the Company has developed a number of initiatives to address the complexity of the billing process and to improve collection rates. These initiatives include: i) installation of personal computer based products in client offices and Company locations to help with the accuracy and completeness of billing information captured on the front-end; ii) establishment of a project group to focus on improvements in order entry; and iii) development and implementation of enhanced eligibility checking to compare information to payor records before billing. Additionally, the Company believes that it can benefit from the conversion of its multiple billing systems into a centralized system. Currently, 90% of the Company's billing is performed on this centralized system. By the end of 2002, the Company plans to have approximately 95% of its billing performed on the centralized system.
Quality Assurance
The Company considers the quality of its tests to be of critical importance, and it has established a comprehensive quality assurance program for all of its laboratories and other facilities, designed to help assure accurate and timely test results. In addition to the compulsory external inspections and proficiency programs demanded by HCFA and other regulatory agencies, Company-wide systems and procedures are in place to emphasize and monitor quality assurance. All of the Company's regional laboratories are subject to on-site evaluations, the College of American Pathologists ("CAP") proficiency testing program, state surveys and the Company's own internal quality control programs.
External Proficiency/ Accreditations. The Company participates in numerous externally-administered, blind quality surveillance programs, including the CAP program. The blind programs supplement all other quality assurance procedures and give Company management the opportunity to review its technical and service performance from the client's perspective.
Internal Quality Control. The Company regularly performs internal quality control testing by running quality control samples with known values with patient samples submitted for testing. All quality control sample test results are entered into the Company's national laboratory computer, which connects the Company's facilities nationwide to a common on-line quality control database. This system helps technologists and technicians check quality control values and requires further prompt verification if any quality control value is out of range. The Company has an extensive, internally administered program of blind sample proficiency testing (i.e. the testing laboratory does not know the sample being tested is a quality control sample), as part of which the Company's locations receive specimens from the Company's Quality Assurance and Corporate Technical Services departments for analysis.
The CAP accreditation program involves both on-site inspections of the laboratory and participation in the CAP's proficiency testing program for all categories in which the laboratory is accredited by the CAP. The CAP is an independent non-governmental organization of board-certified pathologists which offers an accreditation program to which laboratories can voluntarily subscribe. The CAP has been accredited by HCFA to inspect clinical laboratories to determine adherence to the Clinical Laboratory Improvement Act of 1967, and the Clinical Laboratory Improvement Amendments of 1988 (collectively, as amended, "CLIA") standards. A laboratory's receipt of accreditation by the CAP satisfies the Medicare requirement for participation in proficiency testing programs administered by an external source. All of the Company's major laboratories are accredited by the CAP.
The Company's forensic crime laboratory, located at CMBP, is accredited by the American Society of Crime Laboratory Directors, Laboratory Accreditation Board ("ASCLD/LAB") in the category of DNA testing. Under the Crime Laboratory Accreditation Program managed by the ASCLD/LAB, a crime laboratory undergoes a comprehensive and in-depth inspection to demonstrate that its management, operations, employees, procedures and instruments, physical plant and security, and personnel safety procedures meet stringent quality standards. The Company is one of 223 ASCLD accredited crime laboratories worldwide, and is one of only six private crime laboratories holding the accreditation. Accreditation is granted for a period of five years provided that a laboratory continues to meet the standards during that period.
Competition
The clinical laboratory business is intensely competitive. The Company believes that in 2001 the entire United States clinical laboratory testing industry had revenues exceeding $34 billion; approximately 49% of such revenues were attributable to hospital-affiliated laboratories, approximately 39% were attributable to independent clinical laboratories and approximately 12% were attributable to physicians in their offices and laboratories. There are presently two national independent clinical laboratories: the Company; and Quest Diagnostics Incorporated ("Quest"), which had approximately $3.6 billion in revenues from clinical laboratory testing in 2001.
In addition to the other national clinical laboratory, the Company competes on a regional basis with many smaller regional independent clinical laboratories as well as laboratories owned by hospitals and physicians. The Company believes that the following factors, among others, are often used by health care providers in selecting a laboratory: i) pricing of the laboratory's test services; ii) accuracy, timeliness and consistency in reporting test results; iii) number and type of tests performed; iv) service capability and convenience offered by the laboratory; and v) its reputation in the medical community. The Company believes that it competes favorably with its principal competitors in each of these areas and is currently implementing strategies to improve its competitive position.
The Company believes that consolidation will continue in the clinical laboratory testing business. In addition, the Company believes that it and the other large independent clinical laboratory testing companies will be able to increase their share of the overall clinical laboratory testing market due to a number of external factors including cost efficiencies afforded by large-scale automated testing, Medicare reimbursement reductions and the growth of managed health care entities which require low-cost testing services and large service networks. In addition, legal restrictions on physician referrals and the ownership of laboratories as well as increased regulation of laboratories are expected to contribute to the continuing consolidation of the industry.
Employees
At December 31, 2001, the Company had approximately 19,600 full-time equivalent employees. A subsidiary of the Company has one collective bargaining agreement which covers approximately 25 employees. The Company believes that its overall relations with its employees are good.
Regulation and Reimbursement
General
The clinical laboratory industry is subject to significant governmental regulation at the federal, state and sometimes local levels. As described below, these regulations concern licensure and operation of clinical laboratories, payment for laboratory services, health care fraud and abuse, security and confidentiality of health information, and environmental and occupational safety.
Regulation of Clinical Laboratories
The Clinical Laboratory Improvement Amendments of 1988 ("CLIA") extend federal oversight to virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally-approved accreditation agency. Pursuant to CLIA, clinical laboratories must meet quality assurance, quality control and personnel standards. Laboratories also must undergo proficiency testing and are subject to inspections.
Standards for testing under CLIA are based on the complexity of the tests performed by the laboratory, with all tests classified as either high complexity, moderate complexity, or waived. Laboratories performing high complexity testing are required to meet more stringent requirements than moderate complexity laboratories. Labs performing only waived tests, which are tests determined by the Food and Drug Administration to have a low potential for error and requiring little or no oversight, may apply for a certificate of waiver indicating that they need not comply with most of the requirements of CLIA. All major and many smaller Company facilities hold CLIA certificates to perform high complexity testing. The Company's remaining smaller testing sites hold CLIA certificates to perform moderate complexity testing or have a certificate of waiver.
The sanction for failure to comply with CLIA requirements may be suspension, revocation or limitation of a laboratory's CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. The loss or suspension of a license, imposition of a fine or other penalties, or future changes in the CLIA law or regulations (or interpretation of the law or regulations) could have a material adverse effect on the Company.
The Company also is subject to regulation by some states. CLIA provides that a state may adopt regulations different from or more stringent than those under federal law, and a number of states have implemented their own laboratory regulatory schemes. State laws may require that laboratory personnel meet certain qualifications, specify certain quality controls, or require maintenance of certain records. For example, some of the Company's laboratories are subject to the State of New York's clinical laboratory regulations, which contain provisions that are more stringent than those under federal law.
The Company believes that it is in compliance with federal and state laboratory requirements, and the Company's laboratories have continuing programs to ensure that their operations meet all applicable regulatory requirements, but no assurances can be given that the Company's laboratories will pass all future licensure or certification inspections.
Payment of Clinical Laboratory Services
In both 2001 and 2000, the Company derived approximately 16% of its net sales from tests performed for beneficiaries of the Medicare and Medicaid programs. In addition, the Company's other business depends significantly on continued participation in these programs because clients often want a single laboratory to perform all of their testing services. Both governmental and private sector payors have made efforts to contain or reduce health care costs, including payment for clinical laboratory services, in recent years.
In 1984, Congress established a Medicare fee schedule for clinical laboratory services performed for patients covered under Part B of the Medicare program. Subsequently, Congress imposed a national ceiling on the amount that can be paid under the fee schedule. Laboratories bill the program directly and must accept the scheduled amount as payment in full for covered tests performed on behalf of Medicare beneficiaries. In addition, state Medicaid programs are prohibited from paying more than the Medicare fee schedule limitation for clinical laboratory services furnished to Medicaid recipients.
Since 1984, Congress has periodically reduced the ceilings on Medicare payment to clinical laboratories from previously authorized levels. In 1993, pursuant to provisions in the Omnibus Budget and Reconciliation Act of 1993 ("OBRA '93"), Congress reduced, effective January 1, 1994, the Medicare national limitations from 88% of the 1984 national median to 76% of the 1984 national median, which reductions were implemented on a phased-in basis from 1994 through 1996 (to 84% in 1994, 80% in 1995 and 76% in 1996). The 1996 reduction to 76% was implemented as scheduled on January 1, 1996. OBRA '93 also eliminated the provision for annual fee schedule increases based upon the Consumer Price Index for 1994 and 1995. These reductions were partially offset, however, by annual Consumer Price Index fee schedule increases of 3.2% and 2.7% in 1996 and 1997, respectively.
In August 1997, Congress passed and the President signed the Balanced Budget Act of 1997 ("BBA"), which included a provision that reduced, effective January 1, 1998, the Medicare national limitation from 76% of the 1984 national median to 74% of the 1984 national median. An additional provision in the BBA froze the Consumer Price Index update for five years.
Because a significant portion of the Company's costs are relatively fixed, Medicare payment reductions have a direct adverse effect on the Company's net earnings and cash flows. The Company cannot predict whether additional Medicare reductions will be implemented.
On April 1, 1997, Medicare's policy for billing of automated chemistry profiles went into effect. The policy, which was developed by the Health Care Financing Administration ("HCFA"), now known as the Center for Medicare and Medicaid Services ("CMS"), working with the American Medical Association, eliminated the old commonly used "19-22 test" automated chemistry profile, sometimes referred to as a "SMAC" and replaced it with four new panels of "clinically relevant" automated tests (each containing from four to twelve chemistry tests). As a result of this policy, all major laboratory companies, including the Company, were required to eliminate the old chemistry profiles from their standard test requisition forms and standard test offerings by July 1, 1998. The Company developed and implemented a new "universal" test requisition and "standard test offerings" which successfully incorporated all required changes by the July 1, 1998 deadline.
The automated chemistry profile billing policy is intended to reduce the number of non-Medicare covered "screening tests" which Medicare believes have in the past been inappropriately billed to Medicare. The BBA also required the Department of Health and Human Services to adopt uniform coverage, administration and payment policies for lab tests using a negotiated rulemaking process. Consensus was reached by the negotiated rulemaking committee which, among other things, established policies limiting Medicare coverage for certain tests to patients with specified medical conditions or diagnoses. These uniform policies will replace local Medicare coverage policies. The final rules were published on November 23, 2001 and will become generally effective on November 25, 2002. Due to the variety of new rules (including limited coverage rules) which have been adopted or proposed recently, and the lead time before the negotiated rulemaking rule becomes effective, the Company does not believe a meaningful estimate of the potential revenue impact of these developments can be made at this time. The Company will continue to monitor this issue going forward.
Future changes in federal, state and local regulations (or in the interpretation of current regulations) affecting government payment for clinical laboratory testing could have a material adverse effect on the Company. However, based on currently available information, the Company is unable to predict what type of legislation, if any, will be enacted into law.
Security and Confidentiality of Health Information
The Health Insurance Portability and Accountability Act of 1996
("HIPAA") includes the following provisions: 1) Transactions and Code Sets
- standardized format for all electronic claims processing maintained by a
health plan, health care provider or health care data clearinghouse. The
compliance date for this provision is October 16, 2002. However, Congress
has approved a twelve-month extension for covered entities wishing to file
a formal compliance extension plan. 2) Privacy: a) standardize the
protections that must be provided for Protected Health Information ("PHI")
covering all forms and types of PHI and all methods of receipt, delivery
and storage; b) establish a formal privacy program and designate a privacy
officer. The compliance date for this provision is April 14, 2003.
The Company's HIPAA project plans have two phases: 1) assessment of current systems, applications, processes and procedure testing and validation for HIPAA compliance and; 2) remediation of affected systems, applications, processes and procedure testing and validation for HIPAA compliance.
The Company has completed the assessment phase of the Transactions and Code Sets provision. Remediation is currently in progress and the Company expects to meet the October 2002 required implementation date, but will file for an extension if testing cannot be completed with all carriers. It is currently estimated that the total future expenditures relating to the Transactions and Code Sets project will be approximately $13.8, with $0.6 having been spent through December 31, 2001. The Company believes that approximately 80% of this project will add new functionality to existing systems and plans to capitalize these expenditures as incurred.
The Company is in the later stage of the assessment phase of the Privacy provision. Upon completion of the assessment phase, financial projections will be completed and remediation will be initiated. The Company expects to meet the April 2003 required implementation date. The total cost associated with the requirements of HIPAA is not expected to be material to the Company's operations or cash flows.
In addition to the HIPAA provisions described above, which have not yet been implemented, there are a number of state laws regarding the confidentiality of medical information, some of which apply to clinical laboratories. These laws vary widely, and new laws in this area are pending, but they most commonly restrict the use and disclosure of medical information without patient consent. Penalties for violation of these laws include sanctions against a laboratory's state licensure, as well as civil and/or criminal penalties.
Fraud and Abuse Regulations
Existing federal laws governing Medicare and Medicaid, as well as similar state laws, impose a variety of broadly described fraud and abuse prohibitions on healthcare providers, including clinical laboratories. These laws are interpreted liberally and enforced aggressively by multiple government agencies, including the U.S. Department of Justice, the U.S. Department of Health and Human Services Office of the Inspector General ("OIG"), and the states. The federal government's enforcement efforts have been increasing, in part as a result of the enactment of the Health Insurance Portability and Accountability Act of 1996, which, among other things, provided for the establishment of a program to coordinate federal, state and local law enforcement programs, and to conduct investigations, audits and inspections relating to payment for healthcare, and for the establishment of a federal anti-fraud and abuse account for enforcement efforts, funded through collection of penalties and fines for violations of the healthcare anti-fraud and abuse laws. Moreover, over the last several years, the clinical laboratory industry has been the focus of major governmental enforcement initiatives.
The Medicare and Medicaid anti-kickback laws prohibit intentionally providing anything of value to influence the referral of Medicare and Medicaid business. HHS has published safe harbor regulations which specify certain business activities that, although literally covered by the laws, will not violate the Medicare/Medicaid anti-kickback laws if all conditions of the safe harbor are met. Failure to fall within a safe harbor does not constitute a violation of the anti-kickback laws; rather, the arrangement would remain subject to scrutiny by HHS. Most states have their own Medicaid anti-kickback laws, and several states also have anti-kickback laws that apply to attempts to gain referral of patients covered by private insurance as well as federal programs.
In October 1994, the Office of the Inspector General ("OIG") of HHS issued a Special Fraud Alert, which set forth a number of practices allegedly engaged in by clinical laboratories and health care providers that the OIG believes violate the federal anti-kickback laws. These practices include providing employees to collect patient samples at physician offices if the employees perform additional services for physicians that are typically the responsibility of the physicians' staff; selling laboratory services to renal dialysis centers at prices that are below fair market value in return for referrals of Medicare tests which are billed to Medicare at higher rates; providing free testing to a physician's HMO patients in situations where the referring physicians benefit from such reducing laboratory utilizations; providing free pick-up and disposal of bio-hazardous waste for physicians for items unrelated to a laboratory's testing services; providing facsimile machines or computers to physicians that are not exclusively used in connection with the laboratory services performed; and providing free testing for health care providers, their families and their employees (professional courtesy testing). The OIG stressed in the Special Fraud Alert that when one purpose of the arrangements is to induce referral of program-reimbursed laboratory testing, both the clinical laboratory and the health care provider or physician may be liable under the anti-kickback laws, and may be subject to criminal prosecution and exclusion from participation in the Medicare and Medicaid programs.
Recently, the OIG has provided additional guidance regarding arrangements that may violate the anti-kickback laws. In a 1999 Advisory Opinion, the OIG concluded that a proposed arrangement whereby a laboratory would offer physicians significant discounts on laboratory tests billed to the physician might violate the anti-kickback act. The OIG reasoned that if the discounts were greater than could otherwise be justified, the proposed arrangement could be viewed as the laboratory providing discounts to the physician in exchange for referral by the physician of non- discounted Medicare program business. Similarly, in 1999 correspondence, the OIG stated that if any direct or indirect link exists between a price discount that a laboratory offers to a skilled nursing facility ("SNF") for Prospective Payment System ("PPS")-covered services and referrals of Medicare Part B business, the anti-kickback statute would be implicated. Moreover, the OIG stated that it is continuing to monitor the situation regarding potentially unlawful contracts between SNFs and service providers, including laboratories.
Under another federal provision, known as the "Stark" law or "self- referral" prohibition, physicians who have an investment or compensation relationship with a clinical laboratory may not, unless a statutory exception applies, refer Medicare or Medicaid patients for testing to the laboratory, regardless of the intent of the parties. Similarly, laboratories may not bill Medicare or Medicaid or any other party for services furnished pursuant to a prohibited referral. There are federal Stark law exceptions for fair market value compensation to a physician for reasonable and necessary services, and for discounts to physicians purchasing laboratory services. There is also an exception for physician investment in a laboratory company so long as the company's stock is traded on a public exchange, the company has stockholder equity exceeding $75,000,000, and the physician's shares may be purchased on terms generally available to the public. State self-referral laws exist as well, which apply to all patient referrals, not just Medicare and Medicaid.
There are a variety of other types of federal and state anti-fraud and abuse laws, including laws prohibiting submission of false or otherwise improper claims to federal healthcare programs, and laws limiting the extent of any differences between the Company's charges to Medicare and Medicaid and its charges to other parties. The Company seeks to structure its business to comply with the federal and state anti-fraud and abuse laws. However, the Company is unable to predict how these laws will be applied in the future, and no assurances can be given that its arrangements will not be subject to scrutiny under them. Sanctions for violations of these laws may include exclusion from participation in Medicare, Medicaid and other federal healthcare programs, significant criminal and civil fines and penalties, and loss of licensure. Any exclusion from participation in a federal healthcare program, or any loss of licensure, arising from any action by any federal or state regulatory or enforcement authority, would have a material adverse affect on the Company's business. In addition, any significant criminal or civil penalty resulting from such proceedings could have a material adverse affect on the Company's business.
Environmental and Occupational Safety
The Company is subject to licensing and regulation under Federal, state and local laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations relating to the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials as well as to the safety and health of laboratory employees. All Company laboratories are subject to applicable Federal and state laws and regulations relating to biohazard disposal of all laboratory specimens and the Company utilizes outside vendors for disposal of such specimens. In addition, the Federal Occupational Safety and Health Administration ("OSHA") has established extensive requirements relating to workplace safety for health care employers, including clinical laboratories, whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens.
On November 6, 2000, Congress passed the Needlestick Safety and Prevention Act which required, among other things, that companies include in their safety programs the evaluation and use of engineering controls such as safety needles if found to be effective at reducing the risk of needlestick injuries in the workplace. During 2001, the Company voluntarily implemented the use of safety needles at all of its service locations at a cost of over $6.0 million.
Although the Company is not aware of any current material non- compliance with such Federal, state and local laws and regulations, failure to comply could subject the Company to denial of the right to conduct business, fines, criminal penalties and/or other enforcement actions.
Drug Testing
Drug testing for public sector employees is regulated by the Substance Abuse and Mental Health Services Administration ("SAMSHA") (formerly the National Institute on Drug Abuse), which has established detailed performance and quality standards that laboratories must meet to be approved to perform drug testing on employees of Federal government contractors and certain other entities. To the extent that the Company's laboratories perform such testing, each must be certified as meeting SAMSHA standards. The Company's Research Triangle Park, North Carolina; Raritan, New Jersey; Houston, Texas; San Diego, California and Southaven, Mississippi laboratories are SAMSHA certified.
Controlled Substances
The use of controlled substances in testing for drugs of abuse is regulated by the Federal Drug Enforcement Administration.
Compliance Program
Because of evolving interpretations of regulations and the national debate over health care fraud and abuse, compliance with all Medicare, Medicaid and other government-established rules and regulations has become a significant factor throughout the clinical laboratory industry. The Company has implemented a comprehensive company-wide compliance program, in part mandated by a comprehensive five-year Corporate Integrity Agreement with the federal government. This agreement was part of the Company's 1996 settlement of federal and state claims related to billings to Medicare and other federal programs for tests performed by the Company and its predecessors (the "1996 government settlement"). The agreement was similar to corporate integrity agreements arising out of settlements of similar claims by a number of other clinical laboratories following a broad-based government investigation and enforcement initiative. Although the Corporate Integrity Agreement expired on November 21, 2001, the Company continues to operate pursuant to its compliance program. The objective of the Company's compliance program is to develop, implement, and update compliance safeguards as necessary. Emphasis is placed on developing compliance policies and guidelines, personnel training programs and various monitoring and audit procedures to attempt to achieve implementation of all applicable rules and regulations.
The Company seeks to structure its business to comply in all material respects with all statutes, regulations, and other requirements applicable to its clinical laboratory operations. The clinical laboratory testing industry is, however, subject to extensive regulation, and many of these statutes and regulations have not been interpreted by the courts. There can be no assurance therefore that applicable statutes and regulations might not be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect the Company. Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses, certificates, and authorizations, which could have a material adverse affect on the Company's business.
Item 2. PROPERTIES
The following table summarizes certain information as to the Company's principal operating and administrative facilities as of December 31, 2001.
Approximate
Area Nature of
Location (in square feet) Occupancy
-------------------- ---------------- -----------
Operating Facilities:
Birmingham, Alabama 100,000 Lease expires 2005
Phoenix, Arizona 55,000 Lease expires 2009
Los Angeles, California 16,000 Lease expires 2002;
one 5 year
renewal option
19,000 Lease expires 2004
San Diego, California 48,000 Lease expires 2007
14,000 Lease expires 2002
Denver, Colorado 20,000 Lease expires 2002
Tampa, Florida 95,000 Lease expires 2010;
one 5 year
renewal option
Chicago, Illinois 45,000 Lease expires 2003;
two 5 year
renewal options
Louisville, Kentucky 60,000 Lease expires 2002;
three 5 year
renewal options
Detroit, Michigan 32,000 Lease expires 2004;
one 10 year
renewal option
Eden Prairie, Minnesota 49,000 Lease expires 2014
Kansas City, Missouri 78,000 Owned
Reno, Nevada 16,000 Owned
14,000 Lease expires 2003;
one 2 year
renewal option
Portsmouth, New Hampshire 43,000 Lease expires 2006;
one 5 year
renewal option
Raritan, New Jersey 187,000 Owned
Uniondale, New York 108,000 Lease expires 2007;
two 5 year
renewal options
Burlington, North Carolina 275,000 Owned
Charlotte, North Carolina 25,000 Lease expires 2003
Research Triangle Park,
North Carolina 71,000 Lease expires 2008;
three 5 year
renewal options
111,000 Lease expires 2011;
three 5 year
renewal options
Dublin, Ohio 82,000 Owned
Southaven, Mississippi 17,000 Owned
Dallas, Texas 60,000 Lease expires 2004;
two 5 year
renewal option
Houston, Texas 70,000 Lease expires 2012;
two 5 year
renewal options
San Antonio, Texas 44,000 Lease expires 2004;
two 5 year
renewal option
Salt Lake City, Utah 20,000 Lease expires 2002;
two 5 year
renewal options
Chesapeake, Virginia 21,000 Lease expires 2002;
three 5 year
renewal options
Herndon, Virginia 80,000 Lease expires 2004
Richmond, Virginia 34,000 Lease expires 2006
Kent, Washington 42,000 Lease expires 2005;
one 5 year
renewal option
Fairmont, West Virginia 25,000 Lease expires 2005;
three 5 year
renewal options
Mechelen, Belgium 20,000 Lease expires 2007
Administrative facilities:
Raritan, New Jersey 53,000 Owned
Burlington, North Carolina 293,000 Owned
246,000 Leases expire
2002-2010;
various options to
purchase or renew
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All of the Company's major laboratory facilities have been built or improved for the single purpose of providing clinical laboratory testing services. The Company believes that these facilities are suitable and adequate and have sufficient production capacity for its currently foreseeable level of operations. The Company believes that if it were to lose the lease on any of the facilities it presently leases, it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations.
Item 3. LEGAL PROCEEDINGS
The Company is involved in litigation purporting to be a nation-wide class action involving the alledged overbilling of patients who are covered by private insurance. The Company has reached a settlement with the class that will not exceed existing reserves or have a material adverse affect on the Company. On January 9, 2001, the Company was served with a complaint in North Carolina which purports to be a class action and makes claims similar to those referred to above. The claim has been stayed pending appeal of the court approval of the settlement discussed above. The outcome cannot be presently predicted.
The Company is also involved in various claims and legal actions arising in the ordinary course of business. These matters include, but are not limited to, professional liability, employee related matters, and inquiries from governmental agencies and Medicare or Medicaid carriers requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. In the opinion of management, based upon the advice of counsel and consideration of all facts available at this time, the ultimate disposition of these matters is not expected to have a material adverse effect on the financial position, results of operations or liquidity of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock trades on the New York Stock Exchange ("NYSE") under
the symbol "LH". The following table sets forth for the calendar periods
indicated the high and low sales prices for the Common Stock reported on
the NYSE Composite Tape.
High Low
------- -------
2000
First Quarter 23.438 15.625
Second Quarter 40.500 19.688
Third Quarter 66.250 38.125
Fourth Quarter 91.500 54.125
High Low
------- -------
2001
First Quarter 87.500 49.750
Second Quarter 82.500 56.450
Third Quarter 91.350 66.840
Fourth Quarter 90.000 73.000
High Low
------- -------
2002
First Quarter (through February 28, 2002) 88.800 76.300
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During May 2000, the Company's shareholders approved a 1-for-10 reverse stock split and on June 11, 2001, the Company effected a 2-for-1 stock split. The reported sales prices reflect such stock splits.
On February 28, 2002 there were 653 holders of record of the Common Stock.
It is currently the Company's policy not to pay dividends on its common stock in order to increase its flexibility with respect to its acquisition strategy. In addition, the Company's new $300 million senior credit facilities, will place certain limits on the payment of dividends.
Item 6. SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statement of Operations Data" and "Balance Sheet Data" as of and for the five-year period ended December 31, 2001 are derived from consolidated financial statements of the Company, which have been audited by PricewaterhouseCoopers LLP, independent accountants. This data should be read in conjunction with the accompanying notes, the Company's consolidated financial statements and the related notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations," all included elsewhere herein.
Year Ended December 31,
-----------------------------------
2001 2000 1999
---------- ---------- ----------
(Dollars in millions, except per share amounts)
Statement of Operations Data:
-----------------------------
Net sales $ 2,199.8 $ 1,919.3 $ 1,698.7
Gross profit 925.6 766.6 629.1
Operating income (loss) 367.6 245.6(b) 149.7
Earnings (loss) before
extraordinary loss 182.7 112.1 65.4
Extraordinary loss, net of
tax benefit 3.2 -- --
Net earnings (loss) 179.5(a) 112.1 65.4
Basic earnings (loss)
per common share before
extraordinary loss $ 2.63 $ 1.65 $ 0.59
Extraordinary loss per
common share, net
of tax benefit $ 0.05 $ -- $ --
Basic earnings (loss)
per common share $ 2.58 $ 1.65 $ 0.59
Diluted earnings (loss)
per common share before
extraordinary loss $ 2.59 $ 1.61 $ 0.58
Extraordinary loss per
common share, net
of tax benefit $ 0.05 $ -- $ --
Diluted earnings (loss)
per common share $ 2.54 $ 1.61 $ 0.58
Basic weighted average common
shares outstanding
(in thousands) 69,419 47,081 25,332
Diluted weighted average common
shares outstanding
(in thousands) 70,539 48,150 25,754
Balance Sheet Data:
-------------------
Cash and cash
equivalents $ 149.2 $ 48.8 $ 40.3
Intangible assets, net 968.5 865.7 803.9
Total assets 1,929.6 1,666.9 1,590.2
Long-term obligations and
redeemable preferred
stock (c) 509.2 355.8 1,041.5
Total shareholders'
equity 1,085.4 877.4 175.5
1998 1997
---------- ----------
(Dollars in millions, except per share amounts)
Statement of Operations Data:
-----------------------------
Net sales $ 1,612.6 $ 1,579.9
Gross profit 563.4 499.4
Operating income (loss) 127.6 (92.0)(d)
Earnings (loss) before
extraordinary loss 68.8 (106.9)
Extraordinary loss, net of
tax benefit -- --
Net earnings (loss) 68.8 (106.9)
Basic earnings (loss)
per common share before
extraordinary loss $ 0.98 $ (5.30)
Extraordinary loss, net
of tax benefit $ -- $ --
Basic earnings (loss)
per common share $ 0.98 $ (5.30)
Diluted earnings (loss)
per common share before
extraordinary loss $ 0.98 $ (5.30)
Extraordinary loss, net
of tax benefit $ -- $ --
Diluted earnings (loss)
per common share $ 0.98 $ (5.30)
Basic weighted average common
shares outstanding
(in thousands) 24,969 24,648
Diluted weighted average common
shares outstanding
(in thousands) 24,969 24,648
Balance Sheet Data:
-------------------
Cash and cash
equivalents $ 22.7 $ 23.3
Intangible assets, net 836.2 851.3
Total assets 1,640.9 1,658.5
Long-term obligations and
redeemable preferred
stock (c) 1,110.0 1,200.1
Total shareholders'
equity 154.4 129.1
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(a) During the third quarter of 2001, the Company recorded an extraordinary loss of $3.2 million (net of tax benefit) relating to the write-off of unamortized bank fees associated with the Company's term debt, which was repaid in September of 2001. The Company also recorded a charge of $8.9 million as a result of a payment made to a bank to terminate an interest rate swap agreement tied to the Company's term loan.
(b) In the fourth quarter of 2000, the Company recorded a $4.5 million restructuring charge relating to the closing of its Memphis drug testing facility.
(c) Long-term obligations include capital lease obligations of $6.1 million, $7.2 million, $4.4 million, $4.2 million and $5.8 million at December 31, 2001, 2000, 1999, 1998 and 1997, respectively. Long-term obligations also include the long-term portion of the expected value of future contractual amounts to be paid to the former principals of acquired laboratories. Such payments are principally based on a percentage of future revenues derived from the acquired customer lists or specified amounts to be paid over a period of time. At December 31, 2001, 2000, 1999, 1998 and 1997, such amounts were $0.3 million, $2.1 million, $0.0 million, $7.7 million and $9.6 million, respectively. Long-term obligations exclude amounts due to affiliates. On June 6, 2000, the Company called for redemption all of its outstanding redeemable preferred stock, resulting in the conversion of substantially all of the preferred stock into common stock. During 2001, the Company sold $744.0 aggregate principal amount at maturity of its zero coupon convertible subordinated notes due 2021 in a private placement. The Company received approximately $488.6 in net proceeds from the offering. The Company used a portion of the proceeds to repay $412.5 million of its term loan outstanding under its credit agreement
(d) During the fourth quarter of 1997 the Company recorded a provision for doubtful accounts of $182.0 million, which was approximately $160.0 million greater than the amount recorded in the fourth quarter of 1996 and a $22.7 million provision for restructuring certain laboratory operations.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
During 2001, the Company experienced strong growth, primarily as a result of continued implementation of its strategic plan. The Company further expanded its managed care business while strengthening its scientific expertise and market share through acquisitions and strategic partnerships.
The Company completed two important acquisitions during the current year. Path Lab Holdings, Inc., acquired in May 2001, is the largest regional laboratory in New England with annual revenues in 2000 of approximately $51.6 million. This acquisition not only expanded the Company's geographic coverage, but also helped leverage the Company's expertise in esoteric testing. Path Lab has particular skill in servicing hospitals in the New England market. Hospitals generally have a need for higher-value esoteric testing. The acquisition of Minneapolis-based Viro- Med Inc. in June 2001, further strengthened the Company's leadership position in infectious disease testing. In addition, Viro-Med's specialized laboratory space provides significant additional esoteric testing capacity and the flexibility to more efficiently direct testing workflow throughout the country. Viro-Med had clinical laboratory revenues for the twelve months ended December 31, 2000 of approximately $25.2 million.
In December 2001, the Company entered into exclusive licensing and marketing relationships with EXACT Sciences and Myriad Genetics. Under the agreement with EXACT Sciences, the Company will be the only national clinical laboratory to offer testing services based on certain of EXACT Sciences' proprietary technologies for the detection of colorectal cancer. The agreement with Myriad Genetics allows the Company to market Myriad's predictive medicine markers for hypertension, melanoma, breast, ovarian and colorectal cancers to the Company's more than 200,000 primary care physicians. While the Company believes both of these agreements will have a favorable impact on its operating results going forward, it is too early in each relationship to reliably quantify their impact in 2002.
In addition to the acquisitions and relationships discussed above, the Company believes future performance will be positively affected by several factors: 1) The expansion of higher-value genomic tests such as Cystic Fibrosis, HCV and HIV genotyping is occurring, along with the continued growth of HIV viral loads and HPV testing; 2) Continued conversion of traditional pap smears to the newer, high value monolayer technology; 3) Additional product licensing and business relationships (such as Myriad Genetics and Exact Sciences); 4) The Company's ongoing business acquisition strategy; 5) Growing demand for genomic testing will create a positive shift in test mix to higher value testing; and 6) Improving regulatory and reimbursement environment in Washington.
Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", is expected to have a positive impact on the 2002 financial statements. The application of this new statement will result in a decrease in amortization expense of approximately $26.0 million for 2002.
During 2001, the Company was involved in several transactions affecting its capital structure. On May 24, 2001, the Company's shareholders approved an amendment to the restated certificate of incorporation to increase the number of common shares authorized from 52 million shares to 265 million shares. On June 11, 2001, the Company effected a two-for-one stock split through the issuance of a stock dividend of one new share of common stock for each share of common stock held by shareholders of record on June 4, 2001. The Company also assisted in the successful placement of 12.0 million shares of the Company's common stock formerly owned by Roche, and increased the number of shares traded in the open market and available for purchase by other investors. During September and October 2001, the Company sold $744.0 million aggregate principal amount at maturity of its zero coupon convertible subordinated notes (the "Notes") due 2021 in a private placement. The Company received approximately $488.6 million net of approximately $11.2 million in underwriting fees. See "Note 9 to the Consolidated Financial Statements" for a further discussion of the Notes.
In early 2002, Standard & Poor's upgraded the Company's corporate credit and bank loan ratings from BBB to BBB+. This investment-grade rating offers the Company additional financial flexibility as growth opportunities are identified.
On February 21, 2002, the Company filed a Registration Statement on Form S-3, seeking to register approximately 7.7 million shares (including 700,000 shares subject to an overallotment option) of the Company's common stock, currently owned by Roche. It is anticipated that the offering of these shares will be consummated sometime during March 2002 subject to prevailing market conditions. The sale by Roche of these shares will reduce their ownership interest in the Company's common stock to 5.24% (4.25% if the overallotment option is exercised in full) compared to 15.13% as of December 31, 2001.
Seasonality
Volume of testing generally declines during the year-end holiday periods and other major holidays. In addition, volume declines due to inclement weather may reduce net revenues and cash flows. Therefore, comparison of the results of successive quarters may not accurately reflect trends or results for the full year.
Critical Accounting Policies
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 reported periods. Significant estimates include the allowances for doubtful accounts and deferred tax assets, amortization lives for intangible assets and accruals for self-insurance reserves.
The allowance for doubtful accounts is determined based on historical collection trends, the aging of accounts, current economic conditions and regulatory changes.
The deferred tax valuation allowance brings the Company's net deferred tax assets to a level where management believes that it is more likely than not the tax benefits will be realized.
Intangible assets are amortized on a straight-line basis over the expected periods to be benefited, generally ranging from 20 to 40 years for goodwill, legal life for patents and technology, 10 to 25 years for customer lists and contractual lives for non-compete agreements. Management periodically reviews the Company's operating and financial performance in order to determine whether it should revise its estimates of the useful lives or whether circumstances exist that indicate that the carrying amount of the Company's goodwill or other long-lived assets may not be recoverable.
Accruals for self-insurance reserves (including workers compensation, auto, employee medical and professional liability) are determined based on historical payment trends and claims history, along with current and estimated future economic conditions.
While management believes these estimates are reasonable and consistent; they are, by their very nature, estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. See "Note 1 to the Consolidated Financial Statements" for further discussion of significant accounting policies.
Results of Operations
Year ended December 31, 2001 compared with Year ended December 31, 2000.
Net sales for 2001 were $2,199.8 million, an increase of 14.6% from $1,919.3 million reported in the comparable 2000 period. Sales increased approximately 8.2% due to an increase in volume and 5.9% due to an increase in price per accession (which reflects actual price increases and changes in the mix of tests performed). These increases occurred as a result of the Company's success in winning new business as well as retaining and increasing business from existing customers. Excluding acquisitions, revenues would have increased 10.6%.
Cost of sales, which includes primarily laboratory and distribution costs, was $1,274.2 million for 2001 compared to $1,152.7 million in the corresponding 2000 period, an increase of 10.5%. The majority of the increase in cost of sales is due to an increase in volume (approximately $95.0 million), with an additional increase of $13.0 million due to increases in the volume of pap smear tests performed using monolayer technology. In addition, the Company incurred incremental costs of approximately $6.0 million as it implemented a self-mandated safety needle program in all of its patient service centers. Cost of sales as a percentage of net sales was 57.9% for 2001 and 60.0% in the corresponding 2000 period. The decrease in the cost of sales as a percentage of net sales primarily resulted from higher margin test mix, continued cost reduction efforts and economies of scale achieved through volume growth.
Selling, general and administrative expenses increased to $516.5 million in 2001 from $483.0 million in the same period in 2000 representing an increase of $33.5 million or 6.9%. Selling, general and administrative expenses were 23.5% and 25.2% as a percentage of net sales in 2001 and 2000, respectively. The increase in selling, general and administrative expenses is primarily the result of the Company's acquisitions during the year combined with additional bad debt expense as a result of the increase in net sales.
Interest expense was $27.0 million in 2001 compared to $38.5 million in 2000. During September 2001, the Company repaid its outstanding term loan balance of $412.5 million with the proceeds from the sale of zero coupon-subordinated notes. During the third quarter of 2001, the Company recorded an $8.9 million loss relating to a payment made to terminate an interest rate swap agreement tied to the Company's term loan. In addition, the Company recorded a $3.2 million extraordinary loss, net of tax benefit, representing the write-off of unamortized bank fees associated with the retired term debt. See "Note 9 to Consolidated Financial Statements" for a further discussion of zero coupon-subordinated notes. Also, see "Liquidity and Capital Resources."
Provision for income taxes was $149.6 million in 2001 compared to $95.5 million in 2000. The effective tax rate was 45.0% in 2001 and 46.0% in 2000. The decrease in the effective rate reflects the increase in the Company's pre-tax earnings relative to the amount of non-deductible amortization of intangible assets. See "Note 14 to Consolidated Financial Statements" for a further discussion of income taxes.
Year ended December 31, 2000 compared with Year ended December 31, 1999.
Net sales for 2000 were $1,919.3 million, an increase of 13.0% from $1,698.7 million reported in the comparable 1999 period. Sales increased approximately 9.0% due to an increase in volume and 4.0% due to an increase in price per accession (which reflects actual price increases and changes in the mix of tests performed). These increases occurred as a result of the Company's ability to win new business and successfully retain and increase business from existing customers. Excluding acquisitions, revenues would have increased 11.6%.
Cost of sales, which includes primarily laboratory and distribution costs, was $1,152.7 million for 2000 compared to $1,069.6 million in the corresponding 1999 period, an increase of 7.8%. Cost of sales increased approximately $91.0 million due to an increase in volume offset by labor efficiencies due to streamlining of operations. Cost of sales as a percentage of net sales was 60.0% for 2000 and 63.0% in the corresponding 1999 period. The decrease in the cost of sales as a percentage of net sales primarily resulted from continued cost reduction efforts and economies of scale achieved through volume growth.
Selling, general and administrative expenses increased to $483.0 million in 2000 from $448.2 million in the same period in 1999 representing an increase of $34.8 million or 7.8%. Selling, general and administrative expenses were 25.2% and 26.4% as a percentage of net sales in 2000 and 1999, respectively. The increase in selling, general and administrative expenses is primarily the result of the Company's acquisitions during the year combined with billing conversion-related costs such as salaries and telephone expenses.
During the fourth quarter of 2000, the Company recorded a $4.5 million restructuring charge relating to the closing of its Drug Testing laboratory in Memphis, Tennessee. These operations were absorbed by other Company facilities. This restructuring was completed during the second quarter of 2001 and resulted in annualized cost reductions of approximately $7.0 million.
Interest expense was $38.5 million in 2000 compared to $41.6 million in 1999. This decrease is related to the Company's reduction in its outstanding debt of approximately $95.0 million.
Provision for income taxes was $95.5 million in 2000 compared to $40.1 million in 1999. The effective rate was 46.0% in 2000 and 38.0% in 1999. The increase in the effective rate was due primarily to the Company's reduction in its deferred tax asset valuation allowance in 1999. See "Note 14 to Consolidated Financial Statements".
Liquidity and Capital Resources
Net cash provided by operating activities was $316.0 million, $246.7 million and $180.5 million, in 2001, 2000 and 1999, respectively. The increase in cash flow from operations in both 2001 and 2000 primarily resulted from overall improved operating results.
Capital expenditures were $88.1 million, $55.5 million and $69.4 million for 2001, 2000 and 1999, respectively. The Company expects capital expenditures of approximately $85.0 million in 2002. These expenditures are intended to continue to improve information systems and further automate laboratory processes. Such expenditures are expected to be funded by cash flow from operations as well as borrowings under the Company's new senior credit facilities.
The Company's DSO at the end of 2001 improved to 58 days as compared to 68 days at the end of 2000. This improvement was due to Company-wide efforts to increase cash collections from all payors, as well as on-going improvements to claim submission processes. In addition, the Company continued to take steps necessary to improve DSO and cash collections by:
1. Substantially completing the conversion of decentralized billing
locations to a centralized billing system. During 2001, the Chicago,
San Antonio, and Dallas locations were converted.
2. Implementing an initiative to reduce the number of requisitions
received that are missing certain billing information.
The billing system conversions, combined with improvements in front- end processes that enhance data capture for billing, are expected to reduce DSO to the mid 50s by the end of 2002.
During September 2001, the Company repaid its outstanding balance of $412.5 million on its term loan facility with the proceeds from the issuance of zero coupon-subordinated notes. Interest expense on the zero coupon-subordinated notes in the financial statements is computed based on the notes' original issue discount amortization for an effective rate of 2% per year. This non-cash interest expense will total approximately $12.0 million in 2002 as compared to interest expense of $27.0 million in 2001 (primarily related to the Company's retired term debt). As the Company does not pay any interest on the zero coupon-subordinated notes prior to their maturity on September 11, 2021 (unless certain contingencies are met), the replacement of the Company's long-term debt with the zero coupon- subordinated notes will result in increases to the Company's available cash.
This reduction in cash interest expense and the resulting retention of operating cash flows in the business is expected to provide the Company increased flexibility in pursuing strategic investments through possible acquisitions, technology purchases and key business relationships.
In February 2002, the Company entered into two new senior credit facilities with Credit Suisse First Boston, acting as Administrative Agent, and a group of financial institutions totaling $300 million. The new facilities will consist of a 364-day revolving credit facility in the principal amount of $100 million and a three-year revolving credit facility in the principal amount of $200 million. The new facilities will be used for general corporate purposes, including working capital, capital expenditures, funding or share repurchases and other payments, and acquisitions.
Contractual Cash Obligations
Payments Due by Period
-------------------------------------
1 Yr 2-3 Yrs 4-5 Yrs > 5 Yrs
------- ------- -------- --------
Capital lease obligations $ 3.0 $ 5.4 $ 5.7 $ 1.2
Operating leases 43.7 60.2 33.1 38.9
Contingent future acquisition
Payments 17.5 7.0 -- --
Zero coupon-subordinated notes -- 530.5(a) -- --
------ ----- ----- -----
Total contractual cash
obligations $ 64.2 $603.1 $ 38.8 $ 40.1
===== ===== ===== =====
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(a) Holders of the zero coupon-subordinated notes may require the Company to purchase all or a portion of their notes on September 11, 2004, 2006 and 2011 at prices ranging from $712.97 to $819.54 per note. The Company may choose to pay the purchase price in cash or common stock or a combination of cash and common stock. If the holders elect to require the Company to purchase their notes, it is the Company's current intention to retire the notes by a cash payment. Based upon current market conditions, the Company believes that the possibility of the holders of the notes exercising this put feature of the notes is remote. However, future market conditions are subject to change. Should the holders put the notes to the Company on any of the dates above, the Company believes that it will be able to obtain alternate financing to satisfy this contingent cash obligation.
Other Commercial Commitments
At December 31, 2001, the Company provided letters of credit aggregating approximately $36.6 million, primarily in connection with certain insurance programs. These letters of credit are secured by the Company's senior credit facilities and are renewed annually, around mid- year.
Based on current and projected levels of operations, coupled with availability under its new senior credit facilities, the Company believes it has sufficient liquidity to meet both its short-term and long-term cash needs. For a discussion of the Company's zero coupon-subordinated notes, see "Note 9 to Consolidated Financial Statements." For a discussion of the Company's new senior credit facilities, see "Note 10 to Consolidated Financial Statements."
FORWARD-LOOKING STATEMENTS
The Company has made in this report, and from time to time may otherwise make in its public filings, press releases and discussions with Company management, forward-looking statements concerning the Company's operations, performance and financial condition, as well as its strategic objectives. Some of these forward-looking statements can be identified by the use of forward-looking words such as "believes", "expects", "may", "will", "should", "seeks", "approximately", "intends", "plans", "estimates", or "anticipates" or the negative of those words or other comparable terminology. Such forward-looking statements are subject to various risks and uncertainties and the Company claims the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those currently anticipated due to a number of factors in addition to those discussed elsewhere herein and in the Company's other public filings, press releases and discussions with Company management, including:
1. future changes in federal, state, local and third party payor regulations or policies (or in the interpretation of current regulations) affecting governmental and third-party reimbursement for clinical laboratory testing.
2. adverse results from investigations of clinical laboratories by the government, which may include significant monetary damages and/or exclusion from the Medicare and Medicaid programs.
3. loss or suspension of a license or imposition of a fine or penalties under, or future changes in, the law or regulations of the Clinical Laboratory Improvement Act of 1967, and the Clinical Laboratory Improvement Amendments of 1988, or those of Medicare, Medicaid or other federal, state or local agencies.
4. failure to comply with the Federal Occupational Safety and Health Administration requirements and the Needlestick Safety and Prevention Act which may result in penalties and loss of licensure.
5. failure to comply with HIPAA, which could result in significant fines and up to ten years in prison.
6. increased competition, including price competition.
7. changes in payor mix, including an increase in capitated managed-cost health care.
8. our failure to obtain and retain new customers and alliance partners, or a reduction in tests ordered or specimens submitted by existing customers.
9. our failure to integrate newly acquired businesses and the cost related to such integration.
10.adverse results in litigation matters.
11.our ability to attract and retain experienced and qualified personnel.
12.failure to maintain our days sales outstanding levels.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company addresses its exposure to market risks, principally the market risk associated with changes in interest rates, through a controlled program of risk management that has included in the past, the use of derivative financial instruments such as interest rate swap agreements. There were no interest rate swap agreements outstanding as of December 31, 2001. The Company does not hold or issue derivative financial instruments for trading purposes. The Company does not believe that its exposure to market risk is material to the Company's financial position or results of operations. There were no interest rate swap agreements outstanding as of December 31, 2001.
The Company's zero coupon-subordinated notes contain the following three features that are considered to be embedded derivative instruments under FAS No. 133:
1) The Company will pay contingent cash interest on the zero coupon subordinated notes after September 11, 2006, if the average market price of the notes equals 120% or more of the sum of the issue price, accrued original issue discount and contingent additional principal, if any, for a specified measurement period.
2) Contingent additional principal will accrue on the zero coupon- subordinated notes during the two year period from September 11, 2004 to September 11, 2006, if the Company's stock price is at or below specified thresholds.
3) Holders may surrender zero coupon-subordinated notes for conversion during any period in which the rating assigned to the zero coupon- subordinated notes by Standard & Poor's Ratings Services is BB- or lower.
Based upon independent appraisals, these embedded derivatives had no fair market value at December 31, 2001.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index on Page F-1 of the Financial Report included herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
The information required by Part III, Items 10 through 13, of Form 10- K is incorporated by reference to the registrant's definitive proxy statement for its 2002 annual meeting of stockholders, which is to be filed pursuant to Regulation 14A not later than April 30, 2002.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
(1) Consolidated Financial Statements and Independent Auditors' Reports included herein:
See Index on page F-1
(2) Financial Statement Schedules:
See Index on page F-1
All other schedules are omitted as they are inapplicable or the required information is furnished in the Consolidated Financial Statements or notes thereto.
(3) Index to and List of Exhibits
Exhibits:
Exhibits 10.3 through 10.8 and 10.14 through 10.18 are management contracts or compensatory plans or arrangements.
3.1 - Amended and Restated Certificate of Incorporation of the
Company dated May 24, 2001 (incorporated herein by reference
to the Company's Registration Statement on Form S-3, filed
with the Commission on October 19, 2001, File No. 333-
71896).
3.2 - Amended and Restated By-Laws of the Company dated April 28,
1995 (incorporated herein by reference to the Company's
report on Form 8-K, filed with the Commission on May 12
1995).
4.1* - Specimen of the Company's Common Stock Certificate.
4.2 - Indenture dated September 11, 2001 between the Company and
Bank of New York, as trustee (incorporated herein by
reference to the Company's Registration Statement on Form S-
3, filed with the Commission on October 19, 2001, File No.
333-71896).
4.3 - Registration Rights Agreement dated September 11, 2001
between the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (incorporated herein by reference to the
Company's Registration Statement on Form S-3, filed with the
Commission on October 19, 2001, File No. 333-71896).
4.4 - Rights Agreement dated December 13, 2001 between the Company
and American Stock Transfer & Trust Company, as rights Agent
(incorporated herein by reference to the Company's
Registration Statement on Form 8-A, filed with the
Commission on December 21, 2001, File No. 001-11353).
10.1 - National Health Laboratories Incorporated Pension
Equalization Plan (incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992).
10.2 - Settlement Agreement dated November 21, 1996 between the
Company and the United States of America.
10.3 - National Health Laboratories 1988 Stock Option Plan, as
amended (incorporated herein by reference to the Company's
Registration Statement on Form S-1, filed with the
Commission on July 9, 1990, File No. 33-35782).
10.4 - National Health Laboratories 1994 Stock Option Plan
(incorporated herein by reference to the Company's
Registration Statement on Form S-8, filed with the
Commission on August 12, 1994, File No. 33-55065).
10.5 - Laboratory Corporation of America Holdings Master Senior
Executive Severance Plan (incorporated herein by reference
to the report on Form 8-K dated October 24, 1996 (the
"October 24, 1996 8-K") filed with the Commission on October
24, 1996, File No. 1-11353).
10.6 - Special Severance Agreement dated June 28, 1996 between the
Company and Timothy J. Brodnik (incorporated herein by
reference to the October 24, 1996 8-K).
10.7 - Special Severance Agreement dated July 12, 1996 between the
Company and John F. Markus (incorporated herein by reference
to the October 24, 1996 8-K).
10.8 - Special Severance Agreement dated June 28, 1996 between the
Company and Robert E. Whalen (incorporated herein by
reference to the October 24, 1996 8-K).
10.9 - Tax Allocation Agreement dated as of June 26, 1990 between
MacAndrews & Forbes Holding Inc., Revlon Group Incorporated,
New Revlon Holdings, Inc. and the subsidiaries of Revlon set
forth on Schedule A thereto (incorporated herein by
reference to the 1990 S-1).
|
10.10 - Stockholder Agreement dated as of April 28, 1995 among the
Company, HLR Holdings Inc., Hoffmann-La Roche Inc. and Roche
Holdings, Inc. (incorporated herein by reference to the
April 28, 1995 Form 8-K).
10.11 - Exchange Agent Agreement dated as of April 28, 1995 between
the Company and American Stock Transfer & Trust Company
(incorporated herein by reference to the April 28, 1995 Form
8-K).
10.12*- Three-Year Credit Agreement dated February 20, 2002 among
the Company, the lenders named therein and Credit Suisse
First Boston, as administrative agent.
10.13*- 364-Day Credit Agreement dated February 20, 2002 among the
Company, the lenders named therein and Credit Suisse First
Boston, as administrative agent.
10.14 - Laboratory Corporation of America Holdings 1995 Stock Plan
for Non-Employee Directors dated September 26, 1995
(incorporated herein by reference to the Company's
Registration Statement on Form S-8, filed with the
Commission on September 26, 1995, File No. 33-62913).
10.15 - Laboratory Corporation of America Holdings 1997 Employee
Stock Purchase Plan (incorporated herein by reference to
Annex I of the Company's 1996 Annual Proxy Statement filed
with the Commission on October 25, 1996).
10.16 - Amendments to the Laboratory Corporation of America Holdings
1997 Employee Stock Purchase Plan (incorporated herein by
reference to Annex II of the Company's 1999 Annual Proxy
Statement filed with the Commission on June 16, 1999).
10.17 - Laboratory Corporation of America Holdings Amended and
Restated 1999 Stock Incentive Plan (incorporated herein by
reference to Annex I of the Company's 1999 Annual Proxy
Statement filed with the Commission of June 16, 1999).
10.18 - Laboratory Corporation of America Holdings 2000 Stock
Incentive Plan (incorporated herein by reference to Annex I
of the Company's 2000 Annual Proxy Statement filed with the
Commission on April 7, 2000).
10.19 - Support Agreement between Roche Biomedical Laboratories,
Inc. and Hoffmann-La Roche Inc., dated as of April 27, 1995.
10.20 - First Amendment to Support Agreement between Roche
Biomedical Laboratories, Inc. and Hoffmann-La Roche Inc.,
dated as of July 26, 1995.
10.21 - Second Amendment to Support Agreement between Laboratory
Corporation of America Holdings, Hoffmann-La Roche Inc.,
Roche Molecular Systems, Inc. and Roche Diagnostic Systems,
Inc., dated as of January 1, 1997.
10.22 --Third Amendment to Support Agreement between Laboratory
Corporation of America Holdings, Hoffmann-La Roche Inc.,
Roche Molecular Systems, Inc. and Roche Diagnostic Systems,
Inc., dated as of October 1, 1997.
21* - List of Subsidiaries of the Company
23.1*- Consent of PricewaterhouseCoopers LLP 24.1*- Power of Attorney of Jean-Luc Belingard 24.2*- Power of Attorney of Wendy E. Lane 24.3*- Power of Attorney of Robert E. Mittelstaedt, Jr. 24.4*- Power of Attorney of James B. Powell, M.D. 24.5*- Power of Attorney of David B. Skinner 24.6*- Power of Attorney of Andrew G. Wallace, M.D. |
* Filed herewith.
(b) Reports on Form 8-K
(1) A current report on Form 8-K dated November 14, 2001 was filed on November 14, 2001 by the registrant, in connection with the press release dated November 14, 2001 which announced that Thomas P. Mac Mahon, chairman and chief executive officer, was scheduled to speak at the CSFB Health Care Conference in Phoenix, AZ on Thursday, November 15 at 9:30 a.m. Mountain Time.
(2) A current report on Form 8-K date November 28, 2001 was filed on November 28, 2001 by the registrant, in connection with the press release dated November 28, 2001 which announced that Bradford T. Smith, executive vice president of public affairs, was scheduled to speak at the SG Cowen Global Health Care Conference in Paris, France on Thursday, November 29 at 10:20 a.m. (4:20 a.m. EST).
(3) A current report on Form 8-K dated December 4, 2001 was filed on December 4, 2001 by the registrant and Myriad Genetics, Inc., in connection with the press release dated December 4, 2001 which announced their new partnership to make Myriad's predictive medicine products broadly available to primary care physicians throughout the United States.
(4) A current report on Form 8-K date December 6, 2001 was filed on December 6, 2001 by the registrant, in connection with the press release dated December 6, 2001, which announced that PreGen-26? - a DNA-based colorectal cancer test - is now available through its nationwide network to physicians and their patients.
(5) A current report on Form 8-K dated December 12, 2001 was filed on December 13, 2001 by the registrant, in connection with the press release dated December 12, 2001 which announced that its Board of Directors adopted a Stockholder Rights Plan.
(6) A current report on Form 8-K dated January 4, 2002 was filed on January 7, 2002 by the registrant, in connection with the press release dated January 4, 2002 which announced that Bradford T. Smith, executive vice president of public affairs, was scheduled to speak at the JPMorgan H&Q Healthcare Conference in San Francisco on Monday, January 7 at 3:30 p.m. PST (6:30 p.m. EST).
(7) A current report on Form 8-K dated January 15, 2002 was filed on January 16, 2002 by the registrant, in connection with the press release dated January 15, 2002 which announced that the Securities and Exchange Commission declared effective its registration statement on Form S-3 for the registration of the resale by the securityholders listed in the prospectus contained in the registration statement from time to time of up to $744,000,000 aggregate principal amount at maturity of its zero coupon convertible subordinated notes due 2021 and the shares of its common stock issuable upon conversion of the notes and the preferred stock purchase rights included in such shares of common stock.
(8) A current report on Form 8-K dated January 28, 2002 was filed on January 29, 2002 by the registrant, in connection with the press release dated January 28, 2002 which announced that Thomas P. Mac Mahon, chairman and chief executive officer, was scheduled to speak at the US Bancorp Piper Jaffray Healthcare Conference in New York City on Tuesday, January 29, 2002 at 8:30 a.m. Eastern Time.
(9) A current report on Form 8-K dated February 5, 2002 was filed on February 5, 2002 by the registrant, in connection with the press release dated February 5, 2002 which announced that Thomas P. Mac Mahon, chairman and chief executive officer, was scheduled to speak at the UBS Warburg Global Healthcare Services Conference in New York City on Monday, February 6, 2002 at 3:00 p.m. Eastern Time.
(10) A current report on Form 8-K dated February 13, 2002 was filed on February 13, 2002 by the registrant, in connection with the press release dated February 13, 2002 which contained summary information relating to the Company.
(11) A current report on Form 8-K dated February 13, 2002 was filed on February 13, 2002 by the registrant, in connection with the press release dated February 13, 2002 which announced results for the quarter ended December 31, 2001.
(12) A current report on Form 8-K dated February 22, 2002 was filed on February 22, 2002 by the registrant, in connection with the press release dated February 22, 2002 which announced that it has entered into $300 million of new senior credit facilities with Credit Suisse First Boston, acting as Administrative Agent, and a group of financial institutions.
(13) A current report on Form 8-K dated February 26, 2002 was filed on February 26, 2002 by the registrant, in connection with the press release dated February 26, 2002 which announced that it had signed an expanded agreement with Aetna Inc. to provide clinical laboratory testing and certain additional services to Aetna's Commercial HMO and Quality Point-of-Service members in New York and New Jersey.
(14) A current report on Form 8-K/A dated February 13, 2002 was filed on March 6, 2002 by the registrant which amended Form 8-K filed on February 13, 2002.
(15) A current report on Form 8-K dated March 12, 2002 was filed on March 12, 2002 by the registrant, in connection with the press release dated March 12, 2002 which announced an advanced suite of molecular assays developed to improve the management of patients diagnosed with the hepatitis B and/or hepatitis C virus.
(16) A current report on Form 8-K dated March 12, 2002 was filed on March 12, 2002 by the registrant, in connection with the press release dated March 12, 2002 which announced that Bradford T. Smith, executive vice president of public affairs, is scheduled to speak at the SG Cowen Annual Healthcare Conference in Boston on Wednesday, March 13 at 1:15 p.m. Eastern Time.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By: /s/ THOMAS P. MAC MAHON
---------------------------------
Thomas P. Mac Mahon
Chairman of the Board, President
and Chief Executive Officer
Dated: March 18, 2002
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on March 18, 2002 in the capacities indicated.
Signature Title
----------------------- ---------------------
/s/ THOMAS P. MAC MAHON Chairman of the Board,
------------------------------------------ President and Chief
Thomas P. Mac Mahon Executive Officer
(Principal Executive Officer)
/s/ WESLEY R. ELINGBURG Executive Vice President,
------------------------------------------ Chief Financial Officer
Wesley R. Elingburg and Treasurer
(Principal Financial
Officer and Principal
Accounting Officer
/s/ JEAN-LUC BELINGARD* Director
------------------------------------------
Jean-Luc Belingard
/s/ WENDY E. LANE* Director
------------------------------------------
Wendy E. Lane
/s/ ROBERT E. MITTELSTAEDT, JR.* Director
------------------------------------------
Robert E. Mittelstaedt, Jr.
/s/ JAMES B. POWELL, M.D.* Director
------------------------------------------
James B. Powell, M.D.
/s/ DAVID B. SKINNER, M.D.* Director
------------------------------------------
David B. Skinner, M.D.
/s/ ANDREW G. WALLACE, M.D.* Director
------------------------------------------
Andrew G. Wallace, M.D.
|
* Bradford T. Smith, by his signing his name hereto, does hereby sign this report on behalf of the directors of the Registrant after whose typed names asterisks appear, pursuant to powers of attorney duly executed by such directors and filed with the Securities and Exchange Commission.
By:/s/ BRADFORD T. SMITH ---------------------- Bradford T. Smith Attorney-in-fact |
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
Page
----
Report of Independent Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 31, 2001 and 2000 F-3
Consolidated Statements of Operations for
the three-year period ended December 31, 2001 F-4
Consolidated Statements of Changes in Shareholders'
Equity for the three-year period ended
December 31, 2001 F-6
Consolidated Statements of Cash Flows for the
three-year period ended December 31, 2001 F-7
Notes to Consolidated Financial Statements F-9
Financial Statement Schedule:
II - Valuation and Qualifying Accounts and Reserves F-30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Laboratory Corporation of America Holdings
|
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Laboratory Corporation of America Holdings and its subsidiaries (the Company) at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
February 8, 2002, except for Note 10,
as to which the date is February 20, 2002
PART I - FINANCIAL INFORMATION
Item 1. Financial Information
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions, Except Per Share Data)
December 31, December 31,
2001 2000
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 149.2 $ 48.8
Accounts receivable, net 365.5 368.0
Supplies inventories 38.7 31.6
Prepaid expenses and other 16.7 18.5
Deferred income taxes 54.4 44.8
------- -------
Total current assets 624.5 511.7
Property, plant and equipment, net 309.3 272.8
Intangible assets, net 968.5 865.7
Other assets, net 27.3 16.7
--------- --------
$ 1,929.6 $ 1,666.9
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 60.2 $ 52.8
Accrued expenses and other 141.0 127.1
Current portion of long-term debt -- 132.0
--------- --------
Total current liabilities 201.2 311.9
Zero coupon-subordinated notes 502.8 --
Long-term debt, less current portion -- 346.5
Capital lease obligations 6.1 7.2
Other liabilities 134.1 123.9
Commitments and contingent liabilities -- --
Shareholders' equity:
Common stock, $0.10 par value; 265,000,000
shares authorized;70,553,718 and
69,739,246 shares issued and outstanding
at December 31, 2001 and December 31,
2000, respectively 7.1 7.0
Additional paid-in capital 1,088.8 1,048.2
Retained earnings (deficit) 11.5 (168.0)
Unearned restricted stock compensation (13.2) (9.4)
Accumulated other comprehensive loss (8.8) (0.4)
--------- --------
Total shareholders' equity 1,085.4 877.4
--------- --------
$ 1,929.6 $ 1,666.9
========= ========
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The accompanying notes are an integral part of these consolidated financial statements.
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Data)
Years Ended December 31,
------------------------------------
2001 2000 1999
--------- --------- ---------
Net sales $ 2,199.8 $ 1,919.3 $ 1,698.7
Cost of sales 1,274.2 1,152.7 1,069.6
------- ------- -------
Gross profit 925.6 766.6 629.1
Selling, general and
administrative expenses 516.5 483.0 448.2
Amortization of intangibles
and other assets 41.5 33.5 31.2
Restructuring charge -- 4.5 --
-------- ------- -------
Operating income 367.6 245.6 149.7
Other income (expenses):
Loss on sale of assets (1.8) (1.0) (1.7)
Net investment income (loss) 2.4 1.5 (0.9)
Termination of interest rate
swap agreement (8.9) -- --
Interest expense (27.0) (38.5) (41.6)
-------- -------- --------
Earnings before income taxes
and extraordinary loss 332.3 207.6 105.5
Provision for income taxes 149.6 95.5 40.1
-------- -------- --------
Earnings before
extraordinary loss 182.7 112.1 65.4
Extraordinary loss, net of
tax benefit 3.2 -- --
-------- -------- --------
Net earnings 179.5 112.1 65.4
Less preferred stock dividends -- (34.3) (49.6)
Less accretion of mandatorily
redeemable preferred stock -- (0.3) (0.8)
-------- -------- --------
Net earnings attributable to
common shareholders $ 179.5 $ 77.5 $ 15.0
======== ======== ========
Basic earnings per
common share before
extraordinary loss $ 2.63 $ 1.65 $ 0.59
Extraordinary loss, net of
tax benefit 0.05 -- --
--------- --------- ---------
Basic earnings per
common share $ 2.58 $ 1.65 $ 0.59
========= ========= =========
Diluted earnings per
common share before
extraordinary loss $ 2.59 $ 1.61 $ 0.58
Extraordinary loss, net of
tax benefit 0.05 -- --
Diluted earnings per --------- --------- ---------
common share $ 2.54 $ 1.61 $ 0.58
========= ========= =========
|
The accompanying notes are an integral part of these consolidated financial statements.
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Millions)
Additional Retained
Common Paid-in Earnings
Stock Capital (Deficit)
-------- ---------- ---------
BALANCE AT DECEMBER 31, 1998 $ 2.4 $ 414.5 $ (260.5)
Comprehensive earnings:
Net earnings -- -- 65.4
Other comprehensive earnings:
Change in valuation allowance
on securities, net of tax -- -- --
Foreign currency translation
adjustments -- -- --
----- ------- -------
Comprehensive earnings -- -- 65.4
Issuance of common stock 0.2 3.6 --
Issuance of restricted stock
awards -- 4.5 --
Amortization of unearned
restricted stock compensation -- -- --
Preferred stock dividends -- -- (49.6)
Accretion of mandatorily
redeemable preferred stock -- -- (0.8)
----- ------- -------
BALANCE AT DECEMBER 31, 1999 2.6 422.6 (245.5)
Comprehensive earnings:
Net earnings -- -- 112.1
Other comprehensive earnings:
Foreign currency translation
adjustments -- -- --
----- ------- -------
Comprehensive earnings -- -- 112.1
Issuance of common stock 0.2 17.6 --
Issuance of restricted stock
awards -- 9.3 --
Amortization of unearned
restricted stock compensation -- -- --
Income tax benefit from stock
options exercised -- 19.0 --
Conversion of preferred stock
into common stock 4.2 579.7 --
Preferred stock dividends -- -- (34.3)
Accretion of mandatorily
redeemable preferred stock -- -- (0.3)
----- ------- -------
BALANCE AT DECEMBER 31, 2000 7.0 1,048.2 (168.0)
Comprehensive earnings:
Net earnings -- -- 179.5
Other comprehensive earnings:
Cumulative effect of change
in accounting principle
(net of tax) -- -- --
Unrealized derivative loss
on cash flow hedge
(net of tax) -- -- --
Termination of interest
rate swap agreement -- -- --
Foreign currency translation
adjustments -- -- --
Minimum pension liability
adjustment -- -- --
----- ------- -------
Comprehensive earnings -- -- 179.5
Issuance of common stock 0.1 14.9 --
Issuance of restricted stock
awards -- 11.3 --
Amortization of unearned
restricted stock compensation -- -- --
Income tax benefit from stock
options exercised -- 14.4 --
----- ------- --------
BALANCE AT DECEMBER 31, 2001 $ 7.1 $1,088.8 $ 11.5
===== ======= ========
|
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Millions)
Unearned Accumulated
Restricted Other Total
Stock Comprehensive Shareholders'
Compensation Loss Equity
------------- ------------- ------------
BALANCE AT DECEMBER 31, 1998 $ -- $ (2.0) $ 154.4
Comprehensive earnings:
Net earnings -- -- 65.4
Other comprehensive earnings:
Change in valuation allowance
on securities, net of tax -- 2.0 2.0
Foreign currency translation
adjustments -- (0.1) (0.1)
-------- --------- ---------
Comprehensive earnings -- 1.9 67.3
Issuance of common stock -- -- 3.8
Issuance of restricted stock
awards (4.5) -- --
Amortization of unearned
restricted stock compensation 0.4 -- 0.4
Preferred stock dividends -- -- (49.6)
Accretion of mandatorily
redeemable preferred stock -- -- (0.8)
-------- --------- ---------
BALANCE AT DECEMBER 31, 1999 ( 4.1) (0.1) 175.5
Comprehensive earnings:
Net earnings -- -- 112.1
Other comprehensive earnings:
Foreign currency translation
adjustments -- (0.3) (0.3)
-------- --------- ---------
Comprehensive earnings -- (0.3) 111.8
Issuance of common stock -- -- 17.8
Issuance of restricted stock
awards (9.3) -- --
Amortization of unearned
restricted stock compensation 4.0 -- 4.0
Income tax benefit from stock
options exercised -- -- 19.0
Conversion of preferred stock
into common stock -- -- 583.9
Preferred stock dividends -- -- (34.3)
Accretion of mandatorily
redeemable preferred stock -- -- (0.3)
-------- --------- ---------
BALANCE AT DECEMBER 31, 2000 (9.4) (0.4) 877.4
Comprehensive earnings:
Net earnings -- -- 179.5
Other comprehensive earnings:
Cumulative effect of change
in accounting principle
(net of tax) -- 0.6 0.6
Unrealized derivative loss
on cash flow hedge
(net of tax) -- (9.5) (9.5)
Termination of interest
rate swap agreement -- 8.9 8.9
Foreign currency translation
adjustments -- (0.6) (0.6)
Minimum pension liability
adjustment -- (7.8) (7.8)
-------- --------- --------
Comprehensive earnings -- (8.4) 171.1
Issuance of common stock -- -- 15.0
Issuance of restricted stock
awards (11.3) -- --
Amortization of unearned
restricted stock compensation 7.5 -- 7.5
Income tax benefit from stock
options exercised -- -- 14.4
-------- -------- --------
BALANCE AT DECEMBER 31, 2001 $ (13.2) $ (8.8) $ 1,085.4
======== ======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
Years Ended December 31,
-----------------------------
2001 2000 1999
--------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 179.5 $ 112.1 $ 65.4
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 104.0 89.6 83.8
Deferred compensation 7.5 4.0 0.4
Net losses on sale of assets 1.8 1.0 1.7
Accreted interest on zero coupon-
subordinated notes 3.0 -- --
Extraordinary loss, net of
tax benefit 3.2 -- --
Termination of interest rate
swap agreement 8.9 -- --
Deferred income taxes 1.6 (3.2) 37.0
Investment loss -- -- 4.2
Change in assets and liabilities:
Net change in restructuring reserves (5.5) (1.2) (6.2)
Decrease (increase) in accounts
receivable, net 16.2 (15.9) 27.4
(Increase) decrease in inventories (3.6) (2.1) 1.6
Decrease (increase) in prepaid
expenses and other 5.8 21.3 (24.6)
Change in income taxes receivable -- -- 11.2
(Decrease) increase in accounts payable (3.4) 7.9 (6.2)
Increase (decrease) in accrued
expenses and other (2.0) 32.9 (15.4)
Other, net (1.0) 0.3 0.2
------ ------ ------
Net cash provided by operating activities 316.0 246.7 180.5
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (88.1) (55.5) (69.4)
Proceeds from sale of assets 4.4 1.4 1.1
Deferred payments on acquisitions (5.2) (1.0) (8.7)
Acquisition of businesses (141.1) (94.9) --
------ ------ ------
Net cash used for investing activities (230.0) (150.0) (77.0)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit
facilities $ 75.0 $ -- $ 40.0
Payments on revolving credit facilities (75.0) -- (40.0)
Proceeds from zero coupon-subordinated
notes 499.8 -- --
Payments on long-term debt (478.5) (95.0) (70.3)
Debt issuance costs (11.2) -- --
Termination of interest rate swap
agreement (8.9) -- --
Payments on long-term lease obligations (1.1) (1.2) (0.8)
Payment of preferred stock dividends -- (9.5) (18.5)
Net proceeds from issuance of stock to
employees 14.9 17.8 3.8
------ ------ ------
Net cash provided by (used for)
financing activities 15.0 (87.9) (85.8)
------ ------ ------
Effect of exchange rate changes on cash
and cash equivalents (0.6) (0.3) (0.1)
Net increase in cash and
cash equivalents 100.4 8.5 17.6
Cash and cash equivalents at
beginning of period 48.8 40.3 22.7
------ ------ ------
Cash and cash equivalents at
end of period $ 149.2 $ 48.8 $ 40.3
====== ====== ======
Supplemental schedule of cash
flow information:
Cash paid during the period for:
Interest $ 23.2 $ 40.7 $ 41.8
Income taxes, net of refunds 127.7 48.8 23.9
Disclosure of non-cash financing
and investing activities:
Preferred stock dividends -- 24.8 31.1
Accretion of mandatorily redeemable
preferred stock -- 0.3 0.8
Conversion of preferred stock into
common stock -- 583.9 --
|
The accompanying notes are an integral part of these consolidated financial statements.
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation:
Laboratory Corporation of America Holdings and its subsidiaries ("Company") is the second largest independent clinical laboratory company in the United States based on 2001 net revenues. Through a national network of laboratories, the Company offers a broad range of testing services used by the medical profession in the diagnosis, monitoring and treatment of disease and other clinical states. Since its founding in 1971, the Company has grown into a network of 24 primary testing facilities and approximately 1,200 service sites consisting of branches, patient service centers and STAT laboratories, serving clients in 50 states. The Company operates in one business segment.
The consolidated financial statements include the accounts of Laboratory Corporation of America Holdings and its subsidiaries after elimination of all material intercompany accounts and transactions. During 2001, the Company added two new subsidiaries through acquisitions: Path Lab Holdings, Inc. and Viro-Med Inc. Disclosure of certain business combination transactions is included in Note 2 - Business Acquisitions.
The financial statements of the Company's foreign subsidiary are measured using the local currency as the functional currency. Assets and liabilities are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average monthly exchange rates prevailing during the year. Resulting translation adjustments are included in "Accumulated other comprehensive loss".
Cash Equivalents:
Cash equivalents (primarily investments in money market funds, time deposits, commercial paper and Eurodollars which have original maturities of three months or less at the date of purchase) are carried at cost which approximates market. As a result of the Company's cash management system, checks issued but not presented to the banks for payment may create negative book cash balances. Such negative balances are included in trade accounts payable and totaled $9.3 and $11.6 at December 31, 2001 and 2000, respectively.
Inventories:
Inventories, consisting primarily of purchased laboratory supplies, are stated at the lower of cost (first-in, first-out) or market.
Derivative Financial Instruments:
Interest rate swap agreements, which have been used by the Company from time to time in the management of interest rate exposure, are accounted for on an accrual basis. Amounts to be paid or received under such agreements are recognized as interest income or expense in the periods in which they accrue. The Company had no interest rate swap agreements in place at December 31, 2001.
The Company's zero coupon-subordinated notes contain the following three features that are considered to be embedded derivative instruments under FAS No. 133:
1) The Company will pay contingent cash interest on the zero coupon- subordinated notes after September 11, 2006, if the average market price of the notes equals 120% or more of the sum of the issue price, accrued original issue discount and contingent additional principal, if any, for a specified measurement period.
2) Contingent additional principal will accrue on the zero coupon- subordinated notes during the two year period from September 11, 2004 to September 11, 2006, if the Company's stock price is at or below specified thresholds.
3) Holders may surrender zero coupon-subordinated notes for conversion during any period in which the rating assigned to the zero coupon-subordinated notes by Standard & Poor's Ratings Services is BB- or lower.
Based upon independent appraisals, these embedded derivatives had no fair market value at December 31, 2001.
Property, Plant and Equipment:
Property, plant and equipment are recorded at cost. The cost of
properties held under capital leases is equal to the lower of the net
present value of the minimum lease payments or the fair value of the leased
property at the inception of the lease. Depreciation and amortization
expense is computed on all classes of assets based on their estimated
useful lives, as indicated below, using principally the straight-line
method.
Years
-------
Buildings and building improvements 35
Machinery and equipment 3-10
Furniture and fixtures 5-10
|
Leasehold improvements and assets held under capital leases are amortized over the shorter of their estimated lives or the period of the related leases. Expenditures for repairs and maintenance are charged to operations as incurred. Retirements, sales and other disposals of assets are recorded by removing the cost and accumulated depreciation from the related accounts with any resulting gain or loss reflected in operations.
Capitalized Software Costs:
The Company capitalizes purchased software which is ready for service and capitalizes software development costs incurred on significant projects starting from the time that the preliminary project stage is completed and management commits to funding a project until the project is substantially complete and the software is ready for its intended use. Capitalized costs include direct material and service costs and payroll and payroll- related costs. Research and development costs and other computer software maintenance costs related to software development are expensed as incurred. Capitalized software costs are amortized using the straight-line method over the estimated useful life of the underlying system, generally five years.
Fair Value of Financial Instruments:
The carrying amounts of cash and cash equivalents, accounts receivable, income taxes receivable and accounts payable are considered to be representative of their respective fair values due to their short-term nature. The fair market value of the zero coupon- subordinated notes, based on market pricing, was approximately $529.2 as of December 31, 2001.
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable.
The Company maintains cash and cash equivalents with various major financial institutions. The total cash balances on deposit that exceeded the balances insured by the F.D.I.C., was approximately $12.0 at December 31, 2001. Cash equivalents at December 31, 2001, totaled $131.7, which includes amounts invested in treasury bills and short-term bonds.
Substantially all of the Company's accounts receivable are with companies and individuals in the health care industry. However, concentrations of credit risk are limited due to the number of the Company's clients as well as their dispersion across many different geographic regions.
Accounts receivable balances (gross) from Medicare and Medicaid were $91.2 and $87.3 at December 31, 2001 and 2000, respectively.
Revenue Recognition:
Sales are recognized on the accrual basis at the time test results are reported, which approximates when services are provided. Services are provided to certain patients covered by various third-party payor programs including the Medicare and Medicaid programs. Billings for services under third-party payor programs are included in sales net of allowances for contractual discounts and allowances for differences between the amounts billed and estimated program payment amounts. Adjustments to the estimated payment amounts based on final settlement with the programs are recorded upon settlement as an adjustment to revenue. In 2001, 2000 and 1999, approximately 16%, 16% and 20%, respectively, of the Company's revenues were derived from tests performed for beneficiaries of Medicare and Medicaid programs.
Income Taxes:
The Company accounts for income taxes utilizing the asset and liability method. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Future tax benefits, such as net operating loss carryforwards, are recognized to the extent that realization of such benefits are more likely than not.
Stock Splits:
On May 2, 2000, the Company effected a one-for-ten common stock reverse split whereby the number of authorized shares of common stock decreased from 520 million to 52 million and the par value increased from $0.01 to $0.10.
On May 24, 2001, the Company's shareholders approved an amendment to the restated certificate of incorporation to increase the number of common shares authorized from 52 million shares to 265 million shares. On June 11, 2001, the Company effected a two-for-one stock split through the issuance of a stock dividend of one new share of common stock for each share of common stock held by shareholders of record on June 4, 2001. All references to common stock, common shares outstanding, average number of common shares outstanding, stock options, restricted shares and per share amounts in the Consolidated Financial Statements and Notes to Consolidated Financial Statements have been restated to reflect the June 11,2001 two-for-one stock split on a retroactive basis.
Stock Compensation Plans:
The Company accounts for its employee stock option plans using the intrinsic method under APB Opinion No. 25 and related Interpretations. Accordingly, compensation for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. The Company's employee stock purchase plan is also accounted for under APB Opinion No. 25 and is treated as non-compensatory. The Company provides supplementary disclosures using the fair value method under SFAS No. 123.
Compensation cost for restricted stock awards is recorded by allocating their aggregate grant date fair value over their vesting period.
Earnings per Share:
Basic earnings per share is computed by dividing net income, less preferred stock dividends and accretion, by the weighted average number of common shares outstanding. Dilutive earnings per share is computed by dividing net earnings, by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the beginning of the period presented. Potentially dilutive common shares result primarily from the Company's mandatorily redeemable preferred stock (redeemed in 2000), restricted stock awards and outstanding stock options.
The following represents a reconciliation of the weighted average shares used in the calculation of basic and diluted earnings per share:
Years ended December 31,
2001 2000 1999
----------------------------------------
Basic 69,418,875 47,080,668 25,332,376
Assumed conversion/exercise
of:
Stock options 558,199 710,500 245,296
Restricted stock awards 561,647 358,358 176,646
---------- ---------- ----------
Diluted 70,538,721 48,149,526 25,754,318
========== ========== ==========
|
The effect of conversion of the Company's redeemable preferred stock, or exercise of certain of the Company's stock options was not included in the computation of diluted earnings per common share for the years ended December 31, 2001, 2000 and 1999, as it would have been antidilutive.
The following table summarizes the potential common shares not included in the computation of diluted earnings per share because their impact would have been antidilutive:
December 31,
2001 2000 1999
-------- -------- ---------
Stock Options 14,869 234,924 1,745,842
Series A convertible exchangeable
Preferred stock -- -- 15,866,086
Series B convertible pay-in-kind
Preferred stock -- -- 25,352,592
|
The Company's zero-coupon subordinated notes are contingently convertible into 4,988,818 shares of common stock and are not currently included in the earnings per share calculation.
Investments:
Investments in equity securities are reported at fair value with unrealized gains or losses, net of tax, recorded as a separate component of shareholders' equity. During 1999, the Company recorded an other than temporary loss on its investments in equity securities totaling $4.2.
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 reported periods. Significant estimates include the allowances for doubtful accounts and deferred tax assets, amortization lives for intangible assets and accruals for self-insurance reserves. The allowance for doubtful accounts is determined based on historical collection trends, the aging of accounts, current economic conditions and regulatory changes. Actual results could differ from those estimates.
Long-Lived Assets:
Long-lived assets, including goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Recoverability of assets to be held and used is determined by the Company at the entity level by a comparison of the carrying amount of the assets to future undiscounted net cash flows before interest expense and income taxes expected to be generated by the assets. Impairment, if any, is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets (based on market prices in an active market or on discounted cash flows). Assets to be disposed of are reported at the lower of the carrying amount or net realizable value.
Intangible Assets:
Intangible assets, consisting of goodwill and other intangibles (patents and technology, customer lists and non-compete agreements), are amortized on a straight-line basis over the expected periods to be benefited, generally ranging from 20 to 40 years for goodwill, legal life for patents and technology, 10 to 25 years for customer lists and contractual lives for non-compete agreements.
Effective January 1 2002, the Company will adopt Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets". This standard requires that goodwill and other intangibles that are acquired in business combinations and that have indefinite useful lives are not to be amortized and are to be reviewed for impairment annually based on an assessment of fair value. The adoption of this new standard is expected to result in a reduction in annual amortization expense of approximately $26.0.
2. BUSINESS ACQUISITIONS
The Company acquired two important companies in 2001, as described below. Both companies acquired have been accounted for as purchases with the excess of the purchase price over the estimated fair value of the net assets acquired recorded as goodwill. The results of each operation have been included in the consolidated financial results of the Company from the date of acquisition. The impact of these acquisitions is not considered significant to the Company's operations.
On April 30, 2001, the Company completed the acquisition of all of the outstanding stock of Path Lab Holdings, Inc. (Path Lab), which is based in Portsmouth, New Hampshire for approximately $83.0 in cash and contingent future payments of $25.0 ($5.5 earned and paid in 2001) based upon attainment of specific earnings targets. Path Lab's revenues for the year ended December 31, 2000 were approximately $51.6.
On June 4, 2001, the Company completed the acquisition of Minneapolis- based Viro-Med Inc. for approximately $31.7 in cash and contingent future payments of $12.0 ($7.9 earned and paid in 2001) based upon attainment of specific earnings targets. Viro-Med's revenues for the year ended December 31, 2000 were approximately $25.2.
3. RESTRUCTURING AND NON-RECURRING CHARGES
The following represents the Company's restructuring activities for each of the years in the three years ended December 31, 2001:
Lease and
Severance Other Facility
Costs Costs Total
---------- -------------- ------
Balance at January 1, 1999 $ 2.5 $ 30.5 $ 33.0
Cash payments (2.0) (4.2) (6.2)
------ ------ ------
Balance at December 31, 1999 0.5 26.3 26.8
Memphis closure 3.0 1.5 4.5
Reclassifications and
non-cash items -- (3.7) (3.7)
Cash payments (1.6) (4.0) (5.6)
------ ------ ------
Balance at December 31, 2000 1.9 20.1 22.0
Reclassifications and
non-cash items (0.7) 0.2 (0.5)
Cash payments (1.0) (4.5) (5.5)
------ ------ ------
Balance at December 31, 2001 $ 0.2 $ 15.8 $ 16.0
====== ====== ======
Current $ 8.6
Non-current 7.4
------
$ 16.0
======
4. ACCOUNTS RECEIVABLE, NET
December 31, December 31,
2001 2000
------------ ------------
Gross accounts receivable $ 485.0 $ 491.0
Less allowance for doubtful accounts (119.5) (123.0)
-------- --------
$ 365.5 $ 368.0
======== ========
|
The provision for doubtful accounts was $202.5, $195.9 and $191.9 in 2001, 2000 and 1999, respectively.
5. PROPERTY, PLANT AND EQUIPMENT, NET
December 31, December 31,
2001 2000
------------ ------------
Land $ 9.9 $ 9.5
Buildings and building improvements 79.2 68.5
Machinery and equipment 367.5 323.4
Leasehold improvements 66.4 63.0
Furniture and fixtures 19.9 17.8
Construction in progress 22.4 35.6
Buildings under capital leases 5.4 5.4
Equipment under capital leases 3.8 3.8
-------- --------
574.5 527.0
Less accumulated depreciation
and amortization of capital lease assets (265.2) (254.2)
-------- --------
$ 309.3 $ 272.8
======== ========
|
Depreciation expense and amortization of capital lease assets was $59.6, $56.1 and $52.6 for 2001, 2000 and 1999, respectively.
6. INTANGIBLE ASSETS, NET
December 31, December 31,
2001 2000
------------ ------------
Goodwill $ 911.3 $ 860.5
Other intangibles, principally patents,
customer lists, non-compete
agreements, and technology 338.8 245.6
------- -------
1,250.1 1,106.1
Less accumulated amortization (281.6) (240.4)
------- -------
$ 968.5 $ 865.7
======= =======
|
Amortization of intangible assets was $41.5, $33.5 and $31.2 in 2001, 2000 and 1999, respectively.
7. ACCRUED EXPENSES AND OTHER
December 31, December 31,
2001 2000
------------ ------------
Employee compensation and benefits $ 72.6 $ 57.5
Acquisition related accruals 6.9 13.3
Restructuring reserves 8.6 12.4
Accrued taxes 4.2 10.1
Self-insurance reserves 31.5 21.1
Interest payable 0.2 3.7
Royalty payable 5.5 5.1
Other 11.5 3.9
------- -------
$ 141.0 $ 127.1
======= =======
8. OTHER LIABILITIES
December 31, December 31,
2001 2000
------------ ------------
Acquisition related accruals $ 2.0 $ 8.8
Restructuring reserves 7.4 9.6
Deferred income taxes 63.5 28.5
Post-retirement benefit obligation 40.2 36.9
Self-insurance reserves 20.7 37.8
Other 0.3 2.3
------- -------
$ 134.1 $ 123.9
======= =======
|
9. ZERO COUPON-SUBORDINATED NOTES
In September 2001, the Company sold $650.0 aggregate principal amount at maturity of its zero coupon convertible subordinated notes (the "notes") due 2021 in a private placement. The Company received approximately $426.8 (net of underwriter's fees of approximately $9.8) in net proceeds from the offering. In October 2001, the underwriters exercised their rights to purchase an additional $94.0 aggregate principal amount pursuant to an overallotment option from which the Company received approximately $61.8 in net proceeds (net of underwriters fees of approximately $1.4). The notes, which are subordinate to the Company's bank debt, were sold at an issue price of $671.65 per $1,000 principal amount at maturity (representing a yield to maturity of 2.0% per year). Each one thousand dollar principal amount at maturity of the notes is convertible into 6.7054 shares of the Company's common stock, subject to adjustment in certain circumstances, if one of the following conditions occurs:
1) If the sales price of the Company's common stock reaches specified
thresholds during specified measurement periods.
2) If the credit rating assigned to the notes by Standard & Poor's
Ratings Services is at or below BB-.
3) If the notes are called for redemption.
4) If specified corporate transactions have occurred.
Holders of the notes may require the Company to purchase all or a portion of their notes on September 11, 2004, 2006 and 2011 at prices ranging from $712.97 to $819.54, plus any accrued contingent additional principal and any accrued original issue discount thereon. The Company may choose to pay the purchase price in cash, common stock or a combination of cash and common stock. If the holders elect to require the Company to purchase their notes it is the Company's current intention to retire the notes by a cash payment.
The Company may redeem for cash all or a portion of the notes at any time on or after September 11, 2006 at specified redemption prices per one thousand dollar principal amount at maturity of the notes ranging from $741.92 at September 11, 2001 to $1,000.00 at September 11, 2021 (assuming no contingent additional principal accrues on the notes).
The Company used a portion of the proceeds to repay $412.5 of its term loan outstanding under its credit agreement and to pay $8.9 to terminate the interest rate swap agreement tied to the Company's term loan. The Company recorded an extraordinary loss of $3.2 (net of taxes of $2.3) relating to the write-off of unamortized bank fees associated with the Company's term debt.
The Company has registered the notes and the shares of common stock issuable upon conversion of the notes with the Securities and Exchange Commission.
10. SENIOR CREDIT FACILITIES
In February 2002, the Company entered into two new senior credit facilities with Credit Suisse First Boston, acting as Administrative Agent, and a group of financial institutions totaling $300.0. The new facilities will consist of a 364-day revolving credit facility in the principal amount of $100.0 and a three-year revolving credit facility in the principal amount of $200.0. The new facilities will be used for general corporate purposes, including working capital, capital expenditures, funding or share repurchases and other payments, and acquisitions. The Company's existing $450.0 revolving credit facility with a major financial institution had no amounts outstanding and was terminated on the effective date of the new credit facilities.
The new senior credit facilities agreements bear interest at varying rates based upon the Company's credit rating with Standard & Poor's Rating Services. Based upon the Company's current rating, the effective rate under these agreements is LIBOR plus 75 basis points.
The agreements contain certain debt covenants which require that the Company maintain leverage and interest coverage ratios.
11. STOCKHOLDER RIGHTS PLAN
The Company adopted a stockholder rights plan effective as of December 13, 2001 that provides that each common stockholder of record on December 21, 2001, received a dividend of one right for each share of common stock held. Each right entitles the holder to purchase from the Company one-hundredth of a share of a new series of participating preferred stock at an initial purchase price of four hundred dollars. These rights will become exercisable and will detach from the Company's common stock if any person becomes the beneficial owner of 15% or more of the Company's common stock. In that event, each right will entitle the holder, other than the acquiring person, to purchase, for the initial purchase price, shares of the Company's common stock having a value of twice the initial purchase price. The rights will expire on December 13, 2011, unless earlier exchanged or redeemed.
12. LOSS ON INTEREST RATE SWAP AGREEMENT
In conjunction with the early retirement of its long-term debt, the Company terminated its interest rate swap agreement with a bank by making a settlement payment of $8.9 with a portion of the proceeds from the sale of zero coupon-subordinated notes. In accordance with the provisions of SFAS No. 133, as amended, this interest rate swap agreement had been designated as a cash flow hedge and carried on the balance sheet at fair value with a corresponding offset in accumulated other comprehensive loss.
13. MANDATORILY REDEEMABLE PREFERRED STOCK
On June 6, 2000, the Company called for redemption all of its outstanding Series A and Series B preferred stock at $52.83 per share, in accordance with the terms of the Preferred Stock Offering, by July 6, 2000. Substantially all of the holders of the Series A and Series B preferred stock elected to convert their shares into common stock. As of July 31, 2000, the Series A preferred stock was converted into 7,930,174 shares of common stock and the Series B preferred stock was converted into 13,241,576 shares of common stock.
14. INCOME TAXES
The provisions for income taxes in the accompanying consolidated statements of operations consist of the following:
Years Ended December 31,
----------------------------
2001 2000 1999
Current: ------ ------ ------
Federal $ 122.8 $ 85.2 $ 0.5
State 25.2 13.5 2.6
------ ------ ------
148.0 98.7 3.1
------ ------ ------
Deferred:
Federal $ (2.3) $ (8.6) $ 29.1
State 3.9 5.4 7.9
------ ------ ------
$ 1.6 $ (3.2) $ 37.0
------ ------ ------
$ 149.6 $ 95.5 $ 40.1
====== ====== ======
|
The tax benefit associated with dispositions from stock plans reduced taxes currently payable by approximately $14.3 and $19.0 in 2001 and 2000, respectively. Tax benefits related to stock plans in 1999 were immaterial. Such benefits are credited to additional paid-in-capital.
The effective tax rates on earnings before income taxes is reconciled to statutory federal income tax rates as follows:
Years Ended December 31,
----------------------------
2001 2000 1999
------ ------ ------
Statutory federal rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal income tax effect 4.9 5.0 5.1
Non-deductible amortization of
intangible assets 2.3 3.1 5.7
Change in valuation allowance -- -- (9.5)
Other 2.8 2.9 1.7
----- ----- -----
Effective rate 45.0% 46.0% 38.0%
===== ===== =====
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
December 31, December 31,
2001 2000
Deferred tax assets: ------------ ------------
Accounts receivable 25.9 12.0
Self-insurance reserves 20.4 21.7
Postretirement benefit obligation 15.8 13.9
Acquisition and restructuring reserves 9.8 18.8
State net operating loss carryforwards 1.6 6.1
Employee benefits 8.2 7.4
Other 10.8 10.2
-------- --------
92.5 90.1
Less valuation allowance (4.5) (4.5)
-------- --------
Net deferred tax assets 88.0 85.6
-------- --------
Deferred tax liabilities:
Intangible assets (64.0) (46.9)
Property, plant and equipment (29.4) (22.7)
Zero coupon-subordinated notes (4.1) --
Other (1.2) (1.2)
-------- --------
Total gross deferred tax liabilities (98.7) (70.8)
--------- --------
Net deferred tax assets (liabilities) $ (10.7) $ 14.8
======== ========
|
The current valuation allowance brings the Company's net deferred tax assets to a level where management believes that it is more likely than not the tax benefits will be realized.
The years 2000, 1999 and 1998 are currently under examination by the Internal Revenue Service. Management believes that adequate provisions have been recorded relating to the current examinations. The Company has state tax loss carryforwards of approximately $27.1 which expire 2002 through 2018.
15. STOCK COMPENSATION PLANS
The Company has a number of stock option plans which authorize and reserve shares of common stock for issuance pursuant to options and stock appreciation rights that may be granted under these plans.
In May 2000, the shareholders approved the 2000 Stock Incentive Plan. The principal purpose of the 2000 Stock Incentive Plan was to authorize 3.4 million additional shares for issuance under the plan. The effect of the 2000 Incentive Plan was to increase to an aggregate of 5.2 million shares available for issuance under all stock option plans (the 2000 Stock Incentive Plan, the Amended and Restated 1999 Stock Incentive Plan and the 1994 Stock Option Plan).
During 2001, there were 1,048,088 options granted to officers and key employees of the Company. The exercise price for these options ranged from $66.125 to $68.50 per share. Also, during 2001, 170,200 shares of restricted stock were issued to senior management under the 2000 Incentive Plan at a market value on the date of grant of $66.575. Restrictions limit the sale or transfer of these shares during a six-year period when the restrictions lapse. Upon issuance of stock under the 2000 Incentive Plan, unearned compensation of $11.3 was recorded as additional paid-in capital and an opposite amount was charged to shareholders' equity as unearned restricted stock compensation. The plan provides for accelerated vesting of outstanding shares in percentages of 33.3%, 66.7% or 100%, if certain predefined three-year profitability targets are achieved as of December 31, 2003. The unearned restricted stock compensation is being amortized to expense over the applicable vesting periods. For 2001, 2000 and 1999, total restricted stock compensation expense was $7.5, $4.0 and $0.4, respectively. Total restricted shares granted in 2000 and 1999 were 262,800 and 324,000, respectively. At December 31, 2001, there were 1,589,251 additional shares available for grant under the Company's Stock Option Plans.
The proforma weighted average fair values at date of grant for options issued during 2001, 2000 and 1999 were $39.44, $22.36 and $8.40 respectively, and were estimated using the Black-Scholes option pricing model. Weighted average assumptions for the expected life in years, volatility and dividend yield were 7 years (5 years in 1999), .5, and 0% for each of the three years ended December 31, 2001. Interest rate assumptions were 4.3%, 5.0% and 6.0% for the years ended December 31, 2001, 2000 and 1999, respectively.
The Company has an employee stock purchase plan, begun in 1997 and amended in 1999, with 1,500,000 shares of common stock for authorized issuance. The plan permits substantially all employees to purchase a limited number of shares of the Corporation stock at 85% of market value. The Company issues shares to participating employees semi annually in January and July of each year. A summary of shares issued is as follows:
1999 2000 2001 2002
------- ------- ------ ------
January 192,226 105,176 51,314 36,757
July 173,548 91,044 30,876
|
Pro-forma compensation expense is calculated for the fair value of the
employee's purchase right using the Black-Scholes model. Assumptions
include a weighted average life of approximately one-half year, dividend
yield of 0%, risk free interest rates for each six month period as follows:
2001 - 5.8% and 3.5%; 2000 - 5.5% and 6.1%; and 1999 - 5.5% and 4.9% and
volatility rates for each of the following six month periods: 2001 - .4 and
.3; 2000 - .5 and .5; and 1999 - .5 and .4.
The per share weighted average grant date fair value of the benefits under the employee stock purchase plan for the first and second six-month periods is as follows:
2001 2000 1999
------ ------ ------
First six months $23.02 $ 5.09 $1.98
Second six months $17.58 $10.43 $3.74
|
The Company applies the provisions of APB Opinion No. 25 in accounting for its plans and, accordingly, no compensation cost has been recognized for its stock compensation plans in the financial statements. Had the Company determined compensation cost based on the fair value method as defined in SFAS No. 123, the impact on the Company's net earnings on a pro forma basis is indicated below:
Years ended
December 31,
2001 2000 1999
------- ------- -------
Net earnings As reported $ 179.5 $ 112.1 $ 65.4
Pro forma 167.3 108.0 62.8
Basic earnings per
common share As reported $ 2.58 $ 1.65 $ 0.59
Pro forma 2.41 1.56 0.49
Diluted earnings per
common share As reported $ 2.54 $ 1.61 $ 0.58
Pro forma 2.37 1.53 0.48
|
Pro forma net earnings reflects options granted in 1998 through 2001. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma amounts presented above because compensation cost for options granted prior to January 1, 1996 is not considered.
The following table summarizes grants of non-qualified options made by the Company to officers and key employees under all plans. Stock options are generally granted at an exercise price equal to or greater than the fair market price per share on the date of grant. Also, for each grant, options vest ratably over a period of two to three years on the anniversaries of the grant date, subject to their earlier expiration or termination.
Changes in options outstanding under the plans for the periods indicated were as follows:
Weighted-Average
Number Exercise Price
of Options per Option
---------- ----------------
Outstanding at January 1, 1999 1,942,899 $16.278
(564,992 exercisable)
Options granted 178,472 $13.786
Canceled (115,178) $20.813
Exercised (5,028) $11.267
---------
Outstanding at December 31, 1999 2,001,165 $15.807
(1,088,413 exercisable)
Options granted 829,498 $36.696
Canceled (70,724) $23.890
Exercised (1,194,562) $12.738
---------
Outstanding at December 31, 2000 1,565,377 $28.852
(335,969 exercisable)
Options granted 1,048,088 $66.138
Canceled (96,062) $43.363
Exercised (560,952) $19.935
---------
Outstanding at December 31, 2001 1,956,451 $50.671
=========
Exercisable at December 31, 2001 364,786 $31.978
=========
|
The weighted-average remaining life of options outstanding at December 31, 2001 is approximately 8.4 years.
The following table summarizes information concerning currently outstanding and exercisable options.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
---------------------------------------------------------------------------
$ 9.69 - 13.75 204,217 6.66 $12.145 160,084 $11.703
$14.69 - 31.56 190,879 7.98 $20.954 20,915 $19.969
$35.38 - 35.38 248,921 8.43 $35.375 62,710 $35.375
$53.41 - 65.00 283,470 7.58 $55.708 118,501 $58.913
$66.13 - 68.50 1,028,964 9.09 $66.142 2,576 $67.655
--------- -------
1,956,451 364,786
========= =======
|
16. RELATED PARTY TRANSACTIONS
At December 31, 2001 and 2000, 10,705,074 and 22,705,074 shares of the Company's outstanding common stock, or approximately 15.2% at December 31, 2001 and 32.6% at December 31, 2000, were owned by Roche Holdings, Inc. (Roche). The reduction in Roche's ownership of the Company's common stock is a result of the sale by Roche of 12.0 million shares in 2001.
The Company purchases certain items, primarily laboratory testing supplies from various affiliates of Roche. Total purchases from these affiliates, which are recorded in cost of sales, were $62.3, $42.7, and $38.3 in 2001, 2000 and 1999, respectively. In addition, the Company made royalty payments to Roche in the amounts of $4.4 in 2001, $2.8 in 2000 and $2.9 in 1999. Revenue received from Roche for laboratory services was $2.6 in 2001, $1.3 in 2000 and $0.9 in 1999. Amounts owed to Roche and its affiliates at December 31, 2001 and 2000 were $4.6 and $1.4, respectively.
17. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in litigation purporting to be a nation-wide class action involving the alleged overbilling of patients who are covered by private insurance. The Company has reached a settlement with the class that will not exceed existing reserves or have a material adverse affect on the Company. On January 9, 2001, the Company was served with a complaint in North Carolina which purports to be a class action and makes claims similar to those referred to above. The Claim has been stayed pending appeal of the court approval of the settlement discussed above. The outcome cannot be presently predicted.
The Company is also involved in various claims and legal actions arising in the ordinary course of business. These matters include, but are not limited to, professional liability, employee related matters, and inquiries from governmental agencies and Medicare or Medicaid carriers requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. In the opinion of management, based upon the advice of counsel and consideration of all facts available at this time, the ultimate disposition of these matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Company.
The Company believes that it is in compliance in all material respects with all statutes, regulations and other requirements applicable to its clinical laboratory operations. The clinical laboratory testing industry is, however, subject to extensive regulation, and many of these statutes and regulations have not been interpreted by the courts. There can be no assurance therefore that applicable statutes and regulations might not be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect the Company. Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses, certificates and authorizations.
Under the Company's present insurance programs, coverage is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. The Company is responsible for the uninsured portion of losses related primarily to general, professional and vehicle liability, certain medical costs and workers' compensation. The self-insured retentions are on a per occurrence basis without any aggregate annual limit. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregated liability of claims incurred. At December 31, 2001 and 2000, the Company had provided letters of credit aggregating approximately $36.6 and $28.2, respectively, primarily in connection with certain insurance programs.
The Company leases various facilities and equipment under non- cancelable lease arrangements. Future minimum rental commitments for leases with noncancellable terms of one year or more at December 31, 2001 are as follows:
Operating Capital
--------- -------
2002 $ 43.7 $ 3.0
2003 34.2 2.8
2004 26.0 2.6
2005 19.4 2.8
2006 13.7 2.9
Thereafter 38.9 1.2
----- -----
Total minimum lease payments 175.9 15.3
Less:
Amounts included in
restructuring accruals -- 3.9
Amount representing interest -- 4.2
Total minimum operating ----- -----
lease payments and
present value of minimum
capital lease payments $175.9 $ 7.2
===== =====
Current $ 1.1
Non-current 6.1
-----
$ 7.2
=====
|
Rental expense, which includes rent for real estate, equipment and automobiles under operating leases, amounted to $74.8, $71.3 and $67.0 for the years ended December 31, 2001, 2000 and 1999, respectively.
18. PENSION AND POSTRETIREMENT PLANS
The Company maintains a defined contribution pension plan for all eligible employees. Eligible employees are defined as individuals who are age 21 or older and have been employed by the Company for at least six consecutive months and completed 1,000 hours of service. Company contributions to the plan are based on a percentage of employee contributions. The cost of this plan was $8.3, $7.5 and $7.5 in 2001, 2000 and 1999, respectively.
In addition, substantially all employees of the Company are covered by a defined benefit retirement plan (the "Company Plan"). The benefits to be paid under the Company Plan are based on years of credited service and average final compensation. The Company's policy is to fund the Company Plan with at least the minimum amount required by applicable regulations.
The Company has a second defined benefit plan which covers its senior management group that provides for the payment of the difference, if any, between the amount of any maximum limitation on annual benefit payments under the Employee Retirement Income Security Act of 1974 and the annual benefit that would be payable under the Company Plan but for such limitation. This plan is an unfunded plan.
The components of net periodic pension cost for both of the defined benefit plans are summarized as follows:
Company Plans
------------------------
Years ended
December 31,
2001 2000 1999
------------------------
Components of net periodic benefit cost
Service cost $ 11.2 $ 10.6 $ 10.5
Interest cost 11.4 10.6 9.2
Expected return on plan assets (13.5) (12.3) (12.1)
Net amortization and deferral (1.5) (1.5) (1.6)
----- ----- -----
Net periodic pension cost $ 7.6 $ 7.4 $ 6.0
===== ===== =====
Company Plans
----------------
December 31,
2001 2000
----------------
Change in benefit obligation
Benefit obligation at beginning of year $152.3 $138.3
Service cost 11.2 10.6
Interest cost 11.4 10.6
Actuarial loss 9.0 2.1
Benefits paid (10.2) (9.4)
----- -----
Benefit obligation at end of year 173.7 152.2
----- -----
Change in plan assets
Fair value of plan assets at beginning of year 151.1 138.1
Actual return on plan assets -- 13.8
Employer contributions 10.2 8.6
Benefits paid (10.2) (9.4)
----- -----
Fair value of plan assets at end of year 151.1 151.1
----- -----
Funded status, end of year 22.6 1.2
Unrecognized net actuarial loss (33.7) (11.2)
Unrecognized prior service cost 5.5 7.0
Additional minimum liability 15.4 --
----- -----
Accrued pension liability (asset) $ 9.8 $ (3.0)
===== =====
|
At December 31, 2001, the additional minimum liability of the Company's Cash Balance Retirement Plan exceeded the unrecognized prior service cost by $7.8. This amount has been recorded as an increase to accumulated other comprehensive loss.
Assumptions used in the accounting for the defined benefit plans were as follows:
Company Plans
---------------
2001 2000
---------------
Weighted-average discount rate 7.25% 7.75%
Weighted-average rate of increase
in future compensation levels 4.0% 4.0%
Weighted-average expected long-
term rate of return 9.0% 9.0%
|
The Company assumed obligations under a subsidiary's postretirement medical plan. Coverage under this plan is restricted to a limited number of existing employees of the subsidiary. This plan is unfunded and the Company's policy is to fund benefits as claims are incurred. The components of postretirement benefit expense are as follows:
Year ended Year ended Year ended
December 31, December 31, December 31,
2001 2000 1999
------------ ------------ ------------
Service cost $ 1.0 $ 0.8 $ 1.0
Interest cost 3.4 2.5 2.6
Net amortization and deferral (1.1) (0.6) (0.1)
Actuarial loss 0.7 -- --
------- ------- -------
Postretirement benefit costs $ 4.0 $ 2.7 $ 3.5
======= ======= =======
|
A summary of the components of the accumulated postretirement benefit obligation follows:
December 31,
2001 2000
--------------
Retirees $ 13.1 $ 11.3
Fully eligible active plan participants 12.5 12.4
Other active plan participants 20.0 19.4
----- -----
$ 45.6 $ 43.1
===== =====
Reconciliation of the funded status of the December 31,
postretirement benefit plan and accrued liability 2001 2000
-------------
Accumulated postretirement benefit obligation,
beginning of year $ 43.1 $ 31.9
Changes in benefit obligation due to:
Service cost 1.0 0.8
Interest cost 3.4 2.5
Plan participants contributions 0.2 0.2
Actuarial (gain) loss (1.1) 11.9
Amendments -- (3.0)
Benefits paid (1.0) (1.2)
----- -----
Accumulated post retirement benefit obligation,
end of year 45.6 43.1
Unrecognized net actuarial loss (10.4) (12.2)
Unrecognized prior service cost 5.0 6.0
----- -----
Accrued postretirement benefit obligation $ 40.2 $ 36.9
===== =====
|
The weighted-average discount rates used in the calculation of the accumulated postretirement benefit obligation was 7.3% and 7.8% as of December 31, 2001 and 2000, respectively. The health care cost trend rate- medical was assumed to be 7.5% and the trend rate-prescription was assumed to be 12.0% as of December 31, 2001 and 2000, declining gradually to 5.0% in the year 2011. The health care cost trend rate has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by a percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 2001 by $7.7. The impact of a percentage point change on the aggregate of the service cost and interest cost components of the net periodic postretirement benefit cost results in an increase of $0.8 or decrease of $0.6.
19. QUARTERLY DATA (UNAUDITED)
The following is a summary of unaudited quarterly data:
Year ended December 31, 2001
--------------------------------------------------
1st 2nd 3rd 4th Full
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
Net sales $ 525.4 $ 549.7 $ 560.9 $ 563.8 $2,199.8
Gross profit 221.6 240.9 238.0 225.1 925.6
Net earnings 43.5 52.1 43.1 40.8 179.5
Basic earnings per
common share 0.63 0.75 0.62 0.59 2.58
Diluted earnings per
common share 0.62 0.74 0.61 0.58 2.54
Year ended December 31, 2000
---------------------------------------------------
1st 2nd 3rd 4th Full
Quarter Quarter Quarter Quarter Year
------- -------- -------- -------- --------
Net sales $ 462.7 $ 482.4 $ 488.1 $ 486.1 $1,919.3
Gross profit 183.5 201.2 196.7 185.2 766.6
Net earnings 25.7 32.7 32.8 20.9 112.1
Less preferred dividends 14.7 19.6 -- -- 34.3
Less accretion of mandatorily
redeemable preferred stock 0.2 0.1 -- -- 0.3
Net earnings attributable
to common shareholders 10.8 13.0 32.8 20.9 77.5
Basic earnings per common
share 0.42 0.49 0.49 0.30 1.65
Diluted earnings per
common share 0.38 0.47 0.47 0.30 1.61
|
20. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," was issued. This Statement supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38. "Accounting for Preacquisition Contingencies of Purchased Enterprises" and eliminates the pooling method of accounting for business acquisitions. This Statement requires all business combinations to be accounted for using the purchase method for all transactions initiated after June 30, 2001.
In June 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was also issued. This Statement supersedes APB No. 17 "Intangible Assets" and addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be reviewed at least annually for impairment.
Intangible assets that have finite lives will continue to be amortized over their useful lives, but without the constraint of the 40-year useful life amortization ceiling. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001, however, goodwill and intangible assets acquired after June 30, 2001, will be subject immediately to the nonamortization and amortization provisions of this Statement. The impact of the adoption of SFAS No. 142 on the 2002 financial statements, will be a decrease to amortization expense of approximately $26.0.
In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long- lived assets and the associated legal obligations of such asset retirement costs. This Statement is effective for fiscal years beginning after June 15, 2002. The Company does not expect that implementation of this standard will have a significant financial impact.
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued. This Statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This Statement retains the requirements of SFAS No. 121 to recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and to measure an impairment loss as the difference between the carrying amount and the fair value of the asset. However, this standard removes goodwill from its scope and revises the approach for evaluating impairment. This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company is evaluating the impact of the adoption of SFAS No. 144.
Schedule II
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 2001, 2000 and 1999
(Dollars in Millions)
---------------------------------------------------------------------------
Balance Charged Other
at to (Deduct- Balance
beginning Costs and ions) at end
of year Expenses Additions of year
---------------------------------------------------------------------------
Year ended December 31, 2001:
Applied against asset
accounts:
Allowance for
doubtful accounts $ 123.0 $ 202.5 $ (206.0) $ 119.5
======= ======= ======= =======
Valuation allowance-
deferred tax assets $ 4.5 $ -- $ -- $ 4.5
======= ======= ======= =======
Year ended December 31, 2000:
Applied against asset
accounts:
Allowance for
doubtful accounts $ 147.1 $ 195.9 $ (220.0) $ 123.0
======= ======= ======= =======
Valuation allowance-
deferred tax assets $ 4.5 $ -- $ -- $ 4.5
======= ======= ======= =======
Year ended December 31, 1999:
Applied against asset
accounts:
Allowance for
doubtful accounts $ 194.0 $ 191.9 $ (238.8) $ 147.1
======= ======= ======= =======
Valuation allowance-
deferred tax assets $ 14.5 $ (10.0) $ -- $ 4.5
======= ======= ======= =======
|
35
64
FRONT OF STOCK CERTIFICATE
LABORATORY
CORPORATION SHARES
OF AMERICA INCORPORATED UNDER THE LAWS
HOLDINGS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
PAR VALUE $0.10
CUSIP 50540R 40 9
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSSABLE SHARES OF THE COMMON STOCK OF
Laboratory Corporation of America Holdings (hereinafter called the
"Corporation") transferable on the books of the Corporation by said
owner in person or by duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation and all amendments thereto, and the holder
hereof, by acceptance of this certificate, consents to and agrees to be
bound by all of said provisions. This certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and by facsimile the
signature of its duly authorized officers.
Dated
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
BY:/s/ TRANSFER AGENT
----------------------------------------------------
Authorized Signature
Transfer Agent and Registrar
BY:/s/ THOMAS P. MAC MAHON
----------------------------------------------------
Thomas P. Mac Mahon
President
BY:/s/ BRADFORD T. SMITH
----------------------------------------------------
Bradford T. Smith
Secretary
|
BACK OF STOCK CERTIFICATE
LABORATORY CORPORATION OF AMERICA HOLDINGS
The within named Corporation will furnish without charge to each stockholder who so requests a description of the powers, designations, preferences and relative, participating, optional or other special rights of each class or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the office of the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
-------------- ---------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
---------------------
(State)
|
Additional abbreviations may also be used though not in the above list.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------------------------------------Shares of the capital stock represented by the within Certificate, and do(es) hereby irrevocably constitute(s) and appoint(s)
----------------------------------------------------------------------Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Signature(s) Guaranteed:
This certificate also evidences certain Rights as set forth in a Rights Agreement between Laboratory Corporation of America Holdings (the "Company") and American Stock Transfer & Trust Company dated as of December 13, 2001 and as amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive officers of the Company. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge promptly after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be evidenced by separate certificates and no longer be evidenced by this this certificate, may be redeemed or exchanged or may expire. As set forth in the Rights Agreement, Rights issued or transferred to, or held by, any Person who is, was or becomes an Acquiring Person or an Affiliate or associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may be null and void.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILIATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
EXECUTION COPY
$200,000,000
THREE-YEAR CREDIT AGREEMENT
dated as of February 20, 2002,
among
LABORATORY CORPORATION OF AMERICA HOLDINGS,
THE LENDERS NAMED HEREIN
and
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
CREDIT SUISSE FIRST BOSTON,
as Sole Bookrunner and
Sole Lead Arranger
BANK OF AMERICA, N.A.,
DEUTSCHE BANC ALEX. BROWN,
UBS WARBURG LLC AND
WACHOVIA SECURITIES,
as Co-Syndication Agents
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms 1
SECTION 1.02. Terms Generally 15
SECTION 1.03. Classification of Loans and
Borrowings 15
ARTICLE II
The Credits
SECTION 2.01. Commitments 15
SECTION 2.02. Loans 15
SECTION 2.03. Competitive Bid Procedure 17
SECTION 2.04. Borrowing Procedure 19
SECTION 2.05. Evidence of Debt; Repayment
of Loans 19
SECTION 2.06. Fees 20
SECTION 2.07. Interest on Loans 21
SECTION 2.08. Default Interest 22
SECTION 2.09. Alternate Rate of Interest 22
SECTION 2.10. Termination and Reduction of
Commitments 23
SECTION 2.11. Conversion and Continuation of
Borrowings 23
SECTION 2.12. Optional Prepayment 24
SECTION 2.13. Reserve Requirements; Change
in Circumstances 25
SECTION 2.14. Change in Legality 26
SECTION 2.15. Break Funding 27
SECTION 2.16. Pro Rata Treatment 27
SECTION 2.17. Sharing of Setoffs 28
SECTION 2.18. Payments 28
SECTION 2.19. Taxes 28
SECTION 2.20. Assignment of Commitments
Under Certain Circumstances;
Duty to Mitigate 30
SECTION 2.21. Letters of Credit 31
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers 35
SECTION 3.02. Authorization 35
SECTION 3.03. Enforceability 36
SECTION 3.04. Governmental Approvals 36
SECTION 3.05. Financial Statements 36
SECTION 3.06. No Material Adverse Change 36
SECTION 3.07. Subsidiaries 36
SECTION 3.08. Litigation; Compliance
with Laws 36
SECTION 3.09. Federal Reserve Regulations 37
SECTION 3.10. Investment Company Act; Public
Utility Holding Co. Act 37
SECTION 3.11. Use of Proceeds 37
SECTION 3.12. Tax Returns 37
SECTION 3.13. No Material Misstatements 37
SECTION 3.14. Employee Benefit Plans 37
SECTION 3.15. Environmental Matters 38
SECTION 3.16. Senior Indebtedness 38
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events 38
SECTION 4.02. Closing Date 39
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and
Properties 40
SECTION 5.02. Insurance 40
SECTION 5.03. Obligations and Taxes 40
SECTION 5.04. Financial Statements,
Reports, et 41
SECTION 5.05. Litigation and Other Notices 42
SECTION 5.06. Maintaining Records; Access
to Properties and
Inspections 42
SECTION 5.07. Use of Proceeds 42
ARTICLE VI
Negative Covenants
SECTION 6.01. Subsidiary Indebtedness 43
SECTION 6.02. Liens 44
SECTION 6.03. Sale and Lease-Back
Transactions 45
SECTION 6.04. Mergers, Consolidations and
Sales of Assets 45
SECTION 6.05. Restricted Payments 45
SECTION 6.06. Business of Borrower
and Subsidiaries 46
SECTION 6.07. Interest Coverage Ratio 46
SECTION 6.08. Maximum Leverage Ratio 46
SECTION 6.09. Hedging Agreements 46
ARTICLE VII
Events of Default
ARTICLE VIII
The Administrative Agent
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices 50
SECTION 9.02. Survival of Agreement 50
SECTION 9.03. Binding Effect 51
SECTION 9.04. Successors and Assigns 51
SECTION 9.05. Expenses; Indemnity 54
SECTION 9.06. Right of Setoff 55
SECTION 9.07. Applicable Law 56
SECTION 9.08. Waivers; Amendment 56
SECTION 9.09. Interest Rate Limitation 57
SECTION 9.10. Entire Agreement 57
SECTION 9.11. WAIVER OF JURY TRIAL 57
SECTION 9.12. Severability 57
SECTION 9.13. Counterparts 58
SECTION 9.14. Headings 58
SECTION 9.15. Jurisdiction; Consent to
Service of Process 58
SECTION 9.16. Confidentiality 58
SECTION 9.17. Termination of Existing
Credit Agreement 59
Schedule 1.01(a) Existing Letters of Credit
Schedule 2.01 Lenders and Commitments
Schedule 3.07 Subsidiaries
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D-1 Form of Competitive Bid Request
Exhibit D-2 Form of Notice of Competitive Bid Request
Exhibit D-3 Form of Competitive Bid
Exhibit D-4 Form of Competitive Bid Accept/Reject Letter
Exhibit E-1 Form of Opinion of Chief Legal Counsel of the
Borrower
Exhibit E-2 Form of Opinion of Davis Polk & Wardwell
CREDIT AGREEMENT dated as of February 20, 2002, among
LABORATORY CORPORATION OF AMERICA HOLDINGS, a
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Delaware corporation (the "Borrower"), the Lenders (as defined in Article I), and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws of Switzerland, acting through its New York branch, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders.
The Borrower has requested the Lenders to extend credit in the form of Revolving Loans (such term and each other capitalized term used but not defined herein having the meaning given it in Article I) at any time and from time to time prior to the Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $200,000,000. The Borrower has also requested the Lenders to provide a procedure pursuant to which the Borrower may invite the Lenders to bid on an uncommitted basis on short-term borrowings by the Borrower. The Borrower has requested the Issuing Bank to issue Letters of Credit, in an aggregate face amount at any time outstanding not in excess of $75,000,000, to support payment obligations incurred in the ordinary course of business by the Borrower and its Subsidiaries. The proceeds of the Loans are to be used solely for general corporate purposes of the Borrower and its Subsidiaries, including (a) working capital, (b) capital expenditures, (c) the funding of share repurchases and other Restricted Payments permitted hereunder, (d) acquisitions and (e) the repayment of all amounts outstanding or due under the Existing Credit Agreement.
The Lenders are willing to extend such credit to the Borrower and the Issuing Bank is willing to issue Letters of Credit for the account of the Borrower, in each case on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions tc \l1 "ARTICLE IDefinitions
SECTION 1.01. Defined Terms tc \l2 "SECTION 1.01.
Defined Terms . As used in this Agreement, the following terms shall
have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
"Administrative Agent Fees" shall have the meaning assigned to such term in Section 2.06(b).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.
"Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" shall mean, for any day, with respect to any Eurodollar Loan (other than any Eurodollar Competitive Loan) or ABR Loan, or with respect to the Facility Fees, as the case may be, the applicable percentage set forth below under the caption "Eurodollar Spread", "ABR Spread" or "Facility Fee Percentage", as the case may be, based upon the rating by S&P applicable on such date to the Index Debt:
Eurodollar Facility Fee
S&P Rating Spread ABR Spread Percentage
----------- ----------- ---------- -------------
Category 1
Equal to or 0.500% 0.00% 0.125%
Greater than A-
Category 2
BBB+ 0.600% 0.00% 0.150%
Category 3
BBB 0.825% 0.00% 0.175%
Category 4
BBB- 1.150% 0.150% 0.225%
Category 5
Less than
BBB- 1.400% 0.400% 0.350%
|
For purposes of the foregoing, (i) if S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then S&P shall be deemed to have established a rating in Category 5; and (ii) if the rating established or deemed to have been established by S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of S&P), such change shall be effective as of the date on which it is first announced by S&P. Each change in the Applicable Percentage shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of S&P shall change, or if S&P shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the non-availability of a rating from S&P and, pending the effectiveness of any such amendment, the Applicable Percentage shall be determined by reference to the rating most recently in effect prior to such change or cessation.
"Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America.
"Borrowing" shall mean (a) Loans of the same Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Borrowing described in the definition of the term "Competitive Borrowing".
"Borrowing Request" shall mean a request by the Borrower in accordance with the terms of Section 2.04.
"Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
A "Change in Control" shall be deemed to have occurred if
(a) any person or group (within the meaning of Rule 13d-5 of the
Securities Exchange Act of 1934 as in effect on the date hereof) shall own
directly or indirectly, beneficially or of record, shares representing more
than 40% of the aggregate ordinary voting power represented by the
issued and outstanding capital stock of the Borrower or (b) a majority of
the seats (other than vacant seats) on the board of directors of the
Borrower shall at any time be occupied by persons who were neither
(i) nominated by the board of directors of the Borrower nor (ii) appointed
by directors so nominated.
"Change in Law" shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.13, by any lending office of such Lender or by such Lender's or Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.
"Closing Date" shall mean February 20, 2002.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
"Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Loans and to acquire participations
in Letters of Credit hereunder as set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender assumed its
Commitment, as applicable, as the same may be (a) reduced from time to
time pursuant to Section 2.10 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to
Section 9.04.
"Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan pursuant to Section 2.03(b) in the form of Exhibit D-3.
"Competitive Bid Accept/Reject Letter" shall mean a notification made by the Borrower pursuant to Section 2.03(d) in the form of Exhibit D-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid,
(i) in the case of a Eurodollar Loan, the Margin, and (ii) in the case of a
Fixed Rate Loan, the fixed rate of interest offered by the Lender making
such Competitive Bid.
"Competitive Bid Request" shall mean a request made by the Borrower pursuant to Section 2.03(a).
"Competitive Borrowing" shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted by the Borrower under the bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a Loan from a Lender to the Borrower pursuant to the bidding procedure described in Section 2.03. Each Competitive Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan.
"Confidential Information Memorandum" shall mean the Confidential Information Memorandum of the Borrower dated January 2002.
"Consolidated EBITDA" shall mean, for any period,
Consolidated Net Income for such period plus (a) without duplication and
to the extent deducted in determining such Consolidated Net Income, the
sum of (i) consolidated interest expense net of interest income for such
period, (ii) consolidated income tax expense for such period, (iii) all
amounts attributable to depreciation and amortization for such period and
(iv) any extraordinary charges and all non-cash write-offs and write-
downs of amortizable and depreciable items for such period, and minus
(b) without duplication, to the extent included in determining such
Consolidated Net Income, any extraordinary gains and all non-cash items
of income for such period, all determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, the interest expense (including (a) imputed interest expense in respect of Capital Lease Obligations and (b) the amortization of original issue discount in connection with the Subordinated Notes and other Indebtedness issued with original issue discount) of the Borrower and the Subsidiaries for such period, net of interest income, in each case determined on a consolidated basis in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to interest rate Hedging Agreements.
"Consolidated Net Income" shall mean, for any period, the net income or loss of the Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "Controlling" and "Controlled" shall have meanings correlative thereto.
"Credit Event" shall have the meaning assigned to such term in
Section 4.01.
"Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States of America.
"Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments or injunctions issued, promulgated or entered into by any Governmental Authority, relating to the environment, the preservation or reclamation of natural resources, the management or release of Hazardous Materials or to the effect of the environment on human health and safety.
"Environmental Liability" shall mean liabilities, obligations, claims, actions, suits, judgments or orders under or relating to any Environmental Law for any damages, injunctive relief, losses, fines, penalties, fees, expenses (including fees and expenses of attorneys and consultants) or costs, whether contingent or otherwise, including those arising from or relating to (a) any action to address the on- or off-site presence, release of, or exposure to, Hazardous Materials, (b) permitting and licensing, governmental administrative oversight and financial assurance requirements, (c) any personal injury (including death), any property damage (real or personal) or natural resource damage and (d) the violation of any Environmental Law.
"Equity Interests" shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, or any obligations convertible into or exchangeable for, or giving any person a right, option or warrant to acquire such equity interests or such convertible or exchangeable obligations; provided that the Subordinated Notes are deemed not to constitute Equity Interests of the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined
in Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan (other than an event for which the 30-day notice period
is waived); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code or Section 302
of ERISA), whether or not waived; (c) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan;
(d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any
Plan or the withdrawal or partial withdrawal of the Borrower or any of its
ERISA Affiliates from any Plan or Multiemployer Plan; (e) the receipt by
the Borrower or any of its ERISA Affiliates from the PBGC or a plan
administrator of any notice relating to the intention to terminate any Plan
or Plans or to appoint a trustee to administer any Plan; (f) the adoption of
any amendment to a Plan that would require the provision of security
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (g)
the receipt by the Borrower or any of its ERISA Affiliates of any notice,
or the receipt by any Multiemployer Plan from the Borrower or any of its
ERISA Affiliates of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is, or is expected
to be, insolvent or in reorganization, within the meaning of Title IV of
ERISA; or (h) the occurrence of a "prohibited transaction" with respect
to which the Borrower or any of the Subsidiaries is a "disqualified person"
(within the meaning of Section 4975 of the Code) or with respect to which
the Borrower or any such Subsidiary could otherwise be liable.
"Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate.
"Event of Default" shall have the meaning assigned to such term in Article VII.
"Excluded Taxes" shall mean, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment
to be made by or on account of any obligation of the Borrower hereunder,
(a) income, franchise or similar taxes imposed on (or measured by) its net
income by the United States of America, the jurisdiction under the laws of
which such recipient is organized or in which its principal office is located
(or, in the case of any Lender, in which its applicable lending office is
located), or, in the case of a jurisdiction that imposes taxes on the basis of
management or control or other concept or principle of residence, the
jurisdiction in which such recipient is so resident, (b) Taxes imposed by
reason of any present or former connection between such person and the
jurisdiction imposing such Taxes, other than solely as a result of the
execution and delivery of this Agreement, the making of any Loans
hereunder or the performance of any action provided for hereunder, (c) any
branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Borrower is
located and (d) in the case of a Foreign Lender (other than as an assignee
pursuant to a request by the Borrower under Section 2.20(a)), any
withholding tax that (i) is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of
a new lending office (or assignment), to receive additional amounts from
the Borrower with respect to such withholding tax pursuant to Section
2.19(a) or (ii) is attributable to such Foreign Lender's failure to comply
with Section 2.19(e).
"Existing Credit Agreement" shall mean the Amended and Restated Credit Agreement dated as of March 31, 1997, as amended, among the Borrower, the lenders from time to time party thereto, and Credit Suisse First Boston, as administrative agent.
"Existing Letter of Credit" shall mean each Letter of Credit previously issued for the account of the Borrower that (a) is outstanding on the Closing Date and (b) is listed on Schedule 1.01(a).
"Facility Fee" shall have the meaning assigned to such term in
Section 2.06(a).
"Federal Funds Effective Rate" shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding 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 (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
"Fees" shall mean the Facility Fees, the Administrative Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any person shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of such person.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (expressed in the form of a decimal to no more than four decimal places) specified by the Lender making such Loan in its Competitive Bid.
"Foreign Lender" shall mean any Lender that is organized under
the laws of a jurisdiction other than that in which the Borrower is located.
For purposes of this definition, the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" shall mean generally accepted accounting principles applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.
"Granting Lender" shall have the meaning assigned to such term in Section 9.04(i).
"Guarantee" of or by any person (the "guarantor") shall mean
any obligation, contingent or otherwise, of such person guaranteeing or
having the economic effect of guaranteeing any Indebtedness of any other
person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for
the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness or other obligation, (c) to maintain working capital,
equity capital or any other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such
Indebtedness or (d) as an account party in respect of any letter of credit or
letter of guaranty issued to support such Indebtedness; provided,
however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.
"Hazardous Materials" shall mean (a) petroleum products and byproducts, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, radon gas, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance, waste, pollutant or contaminant that is prohibited, limited or regulated by or pursuant to any Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any person shall mean, without duplication,
(a) all obligations of such person for borrowed money, (b) all obligations
of such person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such person under conditional sale or
other title retention agreements relating to property or assets purchased by
such person, (d) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding trade accounts
payable and accrued obligations incurred in the ordinary course of
business), (e) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on property owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (f) all
Guarantees by such person of Indebtedness of others, (g) all Capital Lease
Obligations of such person, (h) all obligations, contingent or otherwise,
of such person as an account party in respect of letters of credit and letters
of guaranty, (i) all obligations, contingent or otherwise, of such person in
respect of bankers' acceptances and (j) all obligations of such person to
make contingent cash payments in respect of any acquisition, to the extent
such obligations are or are required to be shown as liabilities on the
balance sheet of such person in accordance with GAAP. The
Indebtedness of any person shall include the Indebtedness of any other
entity (including any partnership in which such person is a general
partner) to the extent such person is liable therefor as a result of such
person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such
person is not liable therefor.
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Index Debt" shall mean the senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of the Borrower.
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.
"Interest Payment Date" shall mean (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December and (b) with respect to any Eurodollar Loan or Fixed Rate Borrowing, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part or such Fixed Rate Borrowing, as the case may be, and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration or a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' or 90 days' duration, respectively, been applicable to such Borrowing.
"Interest Period" shall mean, (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, and (b) with respect to any Fixed Rate Borrowing, the period commencing on the date of such Borrowing and ending on the date specified in the Competitive Bids in which the offers to make the Fixed Rate Loans comprising such Borrowing were extended, which shall not be earlier than 30 days after the date of such Borrowing or later than 360 days after the date of such Borrowing; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
"Issuing Bank" shall mean, as the context may require, (a) Credit Suisse First Boston, in its capacity as the issuer of Letters of Credit hereunder, (b) with respect to each Existing Letter of Credit, the Lender that issued such Existing Letter of Credit, and (c) any other Lender that may become an Issuing Bank pursuant to Section 2.21(i) or 2.21(k), with respect to Letters of Credit issued by such Lender. The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
"Issuing Bank Fees" shall have the meaning assigned to such term in Section 2.06(c).
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.21.
"L/C Disbursement" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The L/C Exposure of any Lender at any time shall equal its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in Section 2.06(c).
"Lenders" shall mean (a) the persons listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any person that has become a party hereto pursuant to an Assignment and Acceptance.
"Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.21 and any Existing Letter of Credit.
"Leverage Ratio" shall mean, for any period, the ratio of Total Debt on the last day of such period to Consolidated EBITDA for such period.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent which has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which dollar deposits of $10,000,000 are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset or (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
"Loans" shall mean the Revolving Loans and the Competitive Loans. "Margin" shall mean, as to any Eurodollar Competitive Loan, the |
margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the LIBO Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan.
"Margin Stock" shall have the meaning assigned to such term in Regulation U.
"Material Adverse Effect" shall mean a materially adverse effect on the financial condition, results of operations or business of the Borrower and the Subsidiaries, taken as a whole.
"Material Indebtedness" shall mean Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.
"Material Subsidiary" shall mean at any time any Subsidiary, except Subsidiaries which, if aggregated and considered as a single Subsidiary, would not meet the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission.
"Maturity Date" shall mean February 18, 2005.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under this Agreement or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;
(b) investments in foreign and domestic commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a
term of not more than 30 days for securities described in clause
(a) above and entered into with a financial institution satisfying
the criteria of clause (c) above;
(e) investments in "money market funds" within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above;
(f) investments in so-called market auction securities rated Aa2 or higher by Moody's or AA or higher by S&P and which have a reset date not more than 365 days from the date of acquisition thereof; and
(g) investments in readily-marketable obligations of Indebtedness of any State of the United States or any municipality organized under the laws of any State of the United States or any political subdivision thereof which, at the time of acquisition, are accorded either of the two highest ratings by S&P, Moody's or another nationally recognized credit rating agency of similar standard, in any such case maturing no later than one year after the date of acquisition thereof.
"person" shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.
"Plan" shall mean any employee pension benefit plan (other than
a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 307 of ERISA, and in respect of which
the Borrower or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective.
"Pro Rata Percentage" of any Lender at any time shall mean the percentage of the Total Commitment represented by such Lender's Commitment. In the event the Commitments shall have expired or been terminated, the Pro Rata Percentages shall be determined on the basis of the Commitments most recently in effect.
"Register" shall have the meaning assigned to such term in
Section 9.04(d).
"Regulation T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
"Related Parties" shall mean, with respect to any specified person, such person's Affiliates and the respective directors, officers, employees, agents and advisors of such person and such person's Affiliates.
"Required Lenders" shall mean, at any time, Lenders having Commitments (or, if the Commitments have terminated, Loans) representing at least a majority of the Total Commitment (or if the Commitments have terminated, the aggregate amount of Loans outstanding) at such time or, for purposes of acceleration pursuant to clause (ii) of the last paragraph of Article VII, Lenders having Loans, L/C Exposures and unused Commitments representing at least a majority of the sum of all Loans outstanding, L/C Exposure and unused Commitments.
"Restricted Payment" shall mean (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or (b) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, other than a payment to the extent consisting of Equity Interests of equal or junior ranking, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Equity Interests in the Borrower or any Subsidiary. It is understood that the withholding of shares, and the payment of cash to the Internal Revenue Service in an amount not to exceed the value of the withheld shares, by the Company in connection with any of its stock incentive plans shall not constitute Restricted Payments.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving Loans.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender's L/C Exposure.
"Revolving Loans" shall mean the revolving loans made by the Lenders to the Borrower pursuant to Section 2.01. Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"S&P" shall mean Standard & Poor's Ratings Service.
"SPC" shall have the meaning assigned to such term in Section 9.04(i).
"Subordinated Notes" shall mean the Borrower's Zero Coupon Liquid Yield Option (Subordinated Convertible) Notes due 2021, in an aggregate principal amount at maturity of $744,000,000.
"Subordinated Note Documents" shall mean the indenture under which the Subordinated Notes were issued and all other instruments, agreements and other documents evidencing or governing the Subordinated Notes or providing for any Guarantee or other right in respect thereof.
"subsidiary" shall mean, with respect to any person (herein referred to as the "parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Synthetic Purchase Agreement" shall mean any swap,
derivative or other agreement or combination of agreements pursuant to
which the Borrower or any Subsidiary is or may become obligated to make
(a) any payment in connection with a purchase by any third party from a
person other than the Borrower or any Subsidiary of any Equity Interest
or (b) any payment (other than on account of a permitted purchase by it
of any Equity Interest) the amount of which is determined by reference to
the price or value at any time of any Equity Interest; provided that no
phantom stock or similar plan providing for payments only to current or
former directors, officers or employees of the Borrower or the Subsidiaries
(or to their heirs or estates) shall be deemed to be a Synthetic Purchase
Agreement.
"Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges, liabilities or withholdings imposed by any Governmental Authority.
"364-Day Credit Agreement" shall mean the 364-Day Credit Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time), among the Borrower, the lenders from time to time party thereto, and Credit Suisse First Boston, as administrative agent.
"Total Debt" shall mean, at any time, the total Indebtedness of the Borrower and the Subsidiaries at such time (excluding Indebtedness of the type described in clause (h) of the definition of such term, except to the extent of any unreimbursed drawings thereunder).
"Total Commitment" shall mean, at any time, the aggregate amount of the Commitments, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in
Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the LIBO Rate and the Alternate Base Rate.
"wholly owned Subsidiary" of any person shall mean a subsidiary of such person of which securities (except for directors' qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally tc \l2 "SECTION 1.02.
Terms Generally . The definitions in Section 1.01 shall apply equally to
both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding mascu-
line, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning
and effect as the word "shall"; and the words "asset" and "property" shall
be construed as having the same meaning and effect and to refer to any
and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights. All references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references to Articles
and Sections of, and Exhibits and Schedules to, this Agreement unless the
context shall otherwise require. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided,
however, that if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any covenant in Article VI or any related
definition to eliminate the effect of any change in GAAP occurring after
the date of this Agreement on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the Required Lenders
wish to amend Article VI or any related definition for such purpose), then
the Borrower's compliance with such covenant shall be determined on the
basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Borrower and the Required
Lenders.
SECTION 1.03. Classification of Loans and Borrowings tc \l2 "SECTION 1.03. Classification of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
ARTICLE II
The Credits tc \l1 "ARTICLE IIThe Credits
SECTION 2.01. Commitments tc \l2 "SECTION 2.01.
Commitments . Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender agrees,
severally and not jointly, to make Revolving Loans to the Borrower, at any
time and from time to time on or after the date hereof, and until the earlier
of the Maturity Date and the termination of the Commitment of such
Lender in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding that will not result in such Lender's
Revolving Credit Exposure exceeding such Lender's Commitment minus
the amount by which the outstanding Competitive Borrowings shall be
deemed to have utilized such Commitment in accordance with
Section 2.16. Within the limits set forth in the preceding sentence and
subject to the terms, conditions and limitations set forth herein, the
Borrower may borrow, pay or prepay and reborrow Revolving Loans.
SECTION 2.02. Loans tc \l2 "SECTION 2.02. Loans .
(a) Each Loan (other than Competitive Loans) shall be made as part of
a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments; provided, however, that
the failure of any Lender to make any Loan shall not in itself relieve any
other Lender of its obligation to lend hereunder (it being understood,
however, that no Lender shall be responsible for the failure of any other
Lender to make any Loan required to be made by such other Lender).
Each Competitive Loan shall be made in accordance with the procedures
set forth in Section 2.03. Except for Loans deemed made pursuant to
Section 2.02(f), the Loans comprising any Borrowing shall be in an
aggregate principal amount that is (i) an integral multiple of $1,000,000
and not less than $10,000,000 or (ii) equal to the remaining available
balance of the Commitments.
(b) Subject to Sections 2.09 and 2.14, each Competitive Borrowing shall be comprised entirely of Eurodollar Competitive Loans or Fixed Rate Loans, and each other Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than 15 Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to
Section 2.02(f), each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately
available funds to such account in New York City as the Administrative
Agent may designate not later than 11:00 a.m., New York City time, and
the Administrative Agent shall promptly credit the amounts so received
to an account in the name of the Borrower and designated by the Borrower
in the applicable Borrowing Request or Competitive Bid Request or, if a
Borrowing shall not occur on such date because any condition precedent
herein specified shall not have been met, return the amounts so received
to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
(f) If the Issuing Bank shall not have received from the Borrower
the payment required to be made by Section 2.21(e) within the time
specified in such Section, the Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative
Agent will promptly notify each Lender of such L/C Disbursement and its
Pro Rata Percentage thereof. Each Lender shall pay by wire transfer of
immediately available funds to the Administrative Agent not later than
2:00 p.m., New York City time, on such date (or, if such Lender shall have
received such notice later than 12:00 (noon), New York City time, on any
day, not later than 10:00 a.m., New York City time, on the immediately
following Business Day), an amount equal to such Lender's Pro Rata
Percentage of such L/C Disbursement (it being understood that such
amount shall be deemed to constitute an ABR Loan of such Lender and
such payment shall be deemed to have reduced the L/C Exposure), and the
Administrative Agent will promptly pay to the Issuing Bank amounts so
received by it from the Lenders. The Administrative Agent will promptly
pay to the Issuing Bank any amounts received by it from the Borrower
pursuant to Section 2.21(e) prior to the time that any Lender makes any
payment pursuant to this paragraph (f); any such amounts received by the
Administrative Agent thereafter will be promptly remitted by the
Administrative Agent to the Lenders that shall have made such payments
and to the Issuing Bank, as their interests may appear. If any Lender shall
not have made its Pro Rata Percentage of such L/C Disbursement
available to the Administrative Agent as provided above, such Lender and
the Borrower severally agree to pay interest on such amount, for each day
from and including the date such amount is required to be paid in
accordance with this paragraph to but excluding the date such amount is
paid, to the Administrative Agent for the account of the Issuing Bank at
(i) in the case of the Borrower, a rate per annum equal to the interest rate
applicable to Revolving Loans pursuant to Section 2.07(a), and (ii) in the
case of such Lender, for the first such day, the Federal Funds Effective
Rate, and for each day thereafter, the Alternate Base Rate.
SECTION 2.03. Competitive Bid Procedure tc \l2
"SECTION 2.03. Competitive Bid Procedure . (a) In order to request
Competitive Bids, the Borrower shall notify the Administrative Agent of
such request by telephone (i) in the case of a Eurodollar Competitive
Borrowing, not later than 11:00 a.m., New York City time, four Business
Days before the proposed date of such Borrowing and (ii) in the case of
a Fixed Rate Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the proposed date of such Borrowing. Provided
that no two Competitive Bid Requests submitted on the same day shall be
identical, the Borrower may submit up to (but not more than) three
Competitive Bid Requests on the same day, but a Competitive Bid
Request shall not be made within five Business Days after the date of any
previous Competitive Bid Request unless such previous Competitive Bid
Request shall have been rejected by the Administrative Agent, as provided
below. No ABR Loan shall be requested in, or made pursuant to, a
Competitive Bid Request. Each such telephonic Competitive Bid Request
shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Competitive Bid Request substantially
in the form of Exhibit D-1. A Competitive Bid Request that does not
conform substantially to the format of Exhibit D-1 may be rejected by the
Administrative Agent and the Administrative Agent shall notify the
Borrower of such rejection as promptly as practicable. Each Competitive
Bid Request shall refer to this Agreement and specify (i) whether the
Borrowing being requested is to be a Eurodollar Borrowing or a Fixed
Rate Borrowing; (ii) the date of such Borrowing (which shall be a
Business Day); (iii) the number and the location of the account to which
funds are to be disbursed (which shall be an account that complies with
the requirements of Section 2.02(c)); (iv) the aggregate principal amount
of such Borrowing, which shall be a minimum of $10,000,000 and an
integral multiple of $1,000,000, and in any event shall not result in the
sum of the Aggregate Revolving Credit Exposure and the aggregate
outstanding principal amount of Competitive Loans, after giving effect to
such Borrowing, exceeding the Total Commitment; and (v) the Interest
Period with respect thereto (which may not end after the Maturity Date).
Promptly after its receipt of a Competitive Bid Request that is not re-
jected, the Administrative Agent shall invite the Lenders in the form set
forth as Exhibit D-2 to bid to make Competitive Loans pursuant to the
Competitive Bid Request.
(b) Each Lender may make one or more Competitive Bids to the Borrower responsive to a Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Administrative Agent by telecopy, (i) in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before the proposed date of such Competitive Borrowing, and (ii) in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the format of Exhibit D-3 may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall refer to this Agreement and specify (x) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Bor- rowing requested by the Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (y) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans and (z) the Interest Period applicable to such Loan or Loans and the last day thereof.
(c) The Administrative Agent shall promptly notify the Borrower by telecopy of the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid shall have been made and the identity of the Lender that shall have made each bid.
(d) The Borrower may, subject only to the provisions of this
paragraph (d), accept or reject any Competitive Bid. The Borrower shall
notify the Administrative Agent by telephone, confirmed by telecopy in
the form of a Competitive Bid Accept/Reject Letter, whether and to what
extent it has decided to accept or reject each Competitive Bid, (x) in the
case of a Eurodollar Competitive Borrowing, not later than 10:30 a.m.,
New York City time, three Business Days before the date of the proposed
Competitive Borrowing, and (y) in the case of a Fixed Rate Borrowing,
not later than 10:30 a.m., New York City time, on the proposed date of the
Competitive Borrowing; provided, however, that (i) the failure of the
Borrower to give such notice shall be deemed to be a rejection of each
Competitive Bid, (ii) the Borrower shall not accept a Competitive Bid
made at a particular Competitive Bid Rate if the Borrower has decided to
reject a Competitive Bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by the Borrower shall
not exceed the principal amount specified in the Competitive Bid Request,
(iv) if the Borrower shall accept a Competitive Bid or Bids made at a
particular Competitive Bid Rate but the amount of such Competitive Bid
or Bids would cause the total amount to be accepted by the Borrower to
exceed the amount specified in the Competitive Bid Request, then the
Borrower shall accept a portion of such Competitive Bid or Bids in an
amount equal to the amount specified in the Competitive Bid Request less
the amount of all other Competitive Bids so accepted, which acceptance,
in the case of multiple Competitive Bids at such Competitive Bid Rate,
shall be made pro rata in accordance with the amount of each such Bid,
and (v) except pursuant to clause (iv) above, no Competitive Bid shall be
accepted for a Competitive Loan unless such Competitive Loan is in a
minimum principal amount of $5,000,000 and an integral multiple of
$1,000,000; provided further, however, that if a Competitive Loan must
be in an amount less than $5,000,000 because of the provisions of clause
(iv) above, such Competitive Loan may be for a minimum of $1,000,000
or any integral multiple thereof, and in calculating the pro rata allocation
of acceptances of portions of multiple Competitive Bids at a particular
Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded
to integral multiples of $1,000,000 in a manner determined by the
Borrower. A notice given by the Borrower pursuant to this paragraph (d)
shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, upon the terms and subject to the conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a
Competitive Bid in its capacity as a Lender, it shall submit such
Competitive Bid directly to the Borrower at least one quarter of an hour
earlier than the time by which the other Lenders are required to submit
their Competitive Bids to the Administrative Agent pursuant to paragraph
(b) above.
(g) Within the limits set forth in this Section 2.03 and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay and reborrow Competitive Loans.
SECTION 2.04. Borrowing Procedure tc \l2 "SECTION 2.04.
Borrowing Procedure . In order to request a Borrowing (other than a
Competitive Borrowing or a deemed Borrowing pursuant to
Section 2.02(f), as to which this Section 2.04 shall not apply), the
Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before a proposed
Borrowing, and (b) in the case of an ABR Borrowing, not later than 11:00
a.m., New York City time, on the day of a proposed Borrowing. Each
Borrowing Request shall be irrevocable, shall be confirmed promptly by
hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request substantially in the form of Exhibit C or such other
form as shall be acceptable to the Administrative Agent and shall specify
the following information: (i) whether the Borrowing then being requested
is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of
such Borrowing (which shall be a Business Day); (iii) the number and
location of the account to which funds are to be disbursed (which shall be
an account that complies with the requirements of Section 2.02(c));
(iv) the amount of such Borrowing; and (v) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto; provided,
however, that, notwithstanding any contrary specification in any
Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing
shall be an ABR Borrowing. If no Interest Period with respect to any
Eurodollar Borrowing is specified in any such notice, then the Borrower
shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall promptly advise the Lenders of
any notice given pursuant to this Section 2.04 (and the contents thereof),
and of each Lender's portion of the requested Borrowing.
SECTION 2.05. Evidence of Debt; Repayment of Loans tc \l2 "SECTION 2.05. Evidence of Debt; Repayment of Loans . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the then unpaid principal amount of each Competitive Loan of such Lender on the last day of the Interest Period applicable to such Loan and (ii) the then unpaid principal amount of each Revolving Loan of such Lender on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.
(e) Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.
SECTION 2.06. Fees tc \l2 "SECTION 2.06. Fees . (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December in each year, and on the date on which the Commitment of such Lender shall expire or be terminated as provided herein, a facility fee (a "Facility Fee") equal to the Applicable Percentage per annum in effect from time to time on the daily amount of the Commitment of such Lender (whether used or unused) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Maturity Date or the date on which the Commitment of such Lender shall expire or be terminated); provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitment terminates, then the Facility Fee shall continue to accrue (and be payable on demand) on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitment terminates to and including the date on which such Lender ceases to have any Revolving Credit Exposure. All Facility Fees shall be computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) in a year of 360 days. The Facility Fee due to each Lender shall commence to accrue on the date of this Agreement and shall cease to accrue on the later of the date on which the Commitment of such Lender shall expire or be terminated as provided herein and such Lender shall have no Revolving Credit Exposure.
(b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees separately agreed to in writing from time to time by the Borrower and the Administrative Agent (the "Administrative Agent Fees").
(c) The Borrower agrees to pay (i) to each Lender, through the
Administrative Agent, on the last Business Day of March, June,
September and December of each year and on the date on which the
Commitment of such Lender shall be terminated as provided herein, a fee
(an "L/C Participation Fee") at a rate per annum equal to the Applicable
Percentage from time to time used to determine the interest rate on
Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to
Section 2.07, calculated on such Lender's Pro Rata Percentage of the
daily aggregate L/C Exposure (excluding the portion thereof attributable
to unreimbursed L/C Disbursements) during the preceding quarter (or
shorter period commencing with the date hereof or ending with the
Maturity Date or the date on which the Commitment of such Lender shall
expire or be terminated); provided that, if such Lender continues to have
any L/C Exposure after its Commitment terminates, then the L/C
Participation Fee shall continue to accrue (and be payable on demand) on
such Lender's Pro Rata Percentage of the daily aggregate L/C Exposure
from and including the date on which its Commitment terminates to and
including the date on which such Lender ceases to have any
L/C Exposure) and (ii) to the Issuing Bank with respect to each Letter of
Credit, on the last Business Day of March, June, September, and
December of each year and on the date on which the L/C Commitment of
the Issuing Bank shall be terminated as provided herein (or later date on
which all the Letters of Credit issued by such Issuing Bank shall have
been terminated or expired), (x) a fronting fee equal to 0.125% per annum
on the aggregate outstanding face amount of such Letter of Credit and
(y) the standard issuance and drawing fees specified from time to time by
the Issuing Bank (the "Issuing Bank Fees"). All L/C Participation Fees
and Issuing Bank Fees shall be computed on the basis of the actual
number of days elapsed (including the first day but excluding the last day)
in a year of 360 days.
(d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances.
SECTION 2.07. Interest on Loans tc \l2 "SECTION 2.07.
Interest on Loans . (a) Subject to the provisions of Section 2.08, the
Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed (including the first day but
excluding the last day) over a year of 365 or 366 days, as the case may be,
when the Alternate Base Rate is determined by reference to the Prime Rate
and over a year of 360 days at all other times) at a rate per annum equal
to the Alternate Base Rate plus the Applicable Percentage in effect from
time to time.
(b) Subject to the provisions of Section 2.08, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) over a year of 360 days) at a rate per annum equal to (i) in the case of each Revolving Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage in effect from time to time, and (ii) in the case of each Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03.
(c) Subject to the provisions of Section 2.08, each Fixed Rate Loan shall bear interest (computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) over a year of 360 days) at a rate per annum equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03.
(d) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement; provided that (i) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (ii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. The applicable Alternate Base Rate or LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.08. Default Interest tc \l2 "SECTION 2.08.
Default Interest . If the Borrower shall default in the payment of the
principal of or interest on any Loan or any other amount becoming due
hereunder, by acceleration or otherwise, the Borrower shall on demand
from time to time pay interest, to the extent permitted by law, on such
defaulted amount to but excluding the date of actual payment (after as
well as before judgment) (a) in the case of overdue principal, at the rate
otherwise applicable to such Loan pursuant to Section 2.07 plus 2.00%
per annum and (b) in all other cases, at a rate per annum (computed on the
basis of the actual number of days elapsed (including the first day but
excluding the last day) over a year of 365 or 366 days, as the case may be,
when determined by reference to the Prime Rate and over a year of 360
days at all other times) equal to the rate that would be applicable to an
ABR Revolving Loan plus 2.00%.
SECTION 2.09. Alternate Rate of Interest tc \l2 "SECTION
2.09. Alternate Rate of Interest . In the event, and on each occasion, that
on the day two Business Days prior to the commencement of any Interest
Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London
interbank market, or that reasonable means do not exist for ascertaining
the LIBO Rate, or the Administrative Agent shall have been informed by
the Required Lenders (or, in the case of a Eurodollar Competitive Loan,
any Lender required to make such Loan) that the rates at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
the Required Lenders (or such Lender) of making or maintaining their or
its Eurodollar Loan during such Interest Period, the Administrative Agent
shall, as soon as practicable thereafter, give written or telecopy notice
thereof to the Borrower and the Lenders. In the event of any such notice,
until the Administrative Agent shall have advised the Borrower and the
Lenders that the circumstances giving rise to such notice no longer exist,
(i) any request by the Borrower for a Eurodollar Revolving Credit
Borrowing pursuant to Section 2.04 shall be deemed to be a request for an
ABR Borrowing and (ii) any request by the Borrower for a Eurodollar
Competitive Borrowing pursuant to Section 2.03 shall be of no force and
effect and shall be denied by the Administrative Agent; provided that if
the circumstances giving rise to such notice do not affect all the Lenders,
then the Borrower may make requests for Eurodollar Competitive
Borrowings to Lenders that are not affected thereby. Each determination
by the Administrative Agent under this Section 2.09 shall be conclusive
absent manifest error.
SECTION 2.10. Termination and Reduction of Commitments tc \l2 "SECTION 2.10. Termination and Reduction of Commitments . (a) The Commitments and the L/C Commitment shall automatically terminate on the Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitments; provided, however, that (i) each partial reduction of the Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $10,000,000 and (ii) the Total Commitment shall not be reduced to an amount that is less than the sum of the Aggregate Revolving Credit Exposure and the aggregate outstanding principal amount of the Competitive Loans at the time.
(c) Each reduction in the Commitments hereunder shall be made ratably among the Lenders in accordance with their respective Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Facility Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction.
SECTION 2.11. Conversion and Continuation of
Borrowings tc \l2 "SECTION 2.11. Conversion and Continuation of
Borrowings . The Borrower shall have the right at any time upon prior
irrevocable written or telecopy notice (or telephone notice promptly
confirmed by written or telecopy notice) to the Administrative Agent
(a) not later than 11:00 a.m., New York City time, on the day of
conversion, to convert any Eurodollar Borrowing into an ABR Borrowing,
(b) not later than 11:00 a.m., New York City time, three Business Days
prior to conversion or continuation, to convert any ABR Borrowing into
a Eurodollar Revolving Credit Borrowing or to continue any Eurodollar
Revolving Credit Borrowing as a Eurodollar Revolving Credit Borrowing
for an additional Interest Period, and (c) not later than 11:00 a.m., New
York City time, three Business Days prior to conversion, to convert the
Interest Period with respect to any Eurodollar Revolving Credit Borrowing
to another permissible Interest Period, subject in each case to the
following:
(i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15;
(v) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and
(vii) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of a Default or Event of Default, no outstanding Revolving Loan may be converted into, or continued as, a Eurodollar Loan and, unless repaid, each Eurodollar Revolving Borrowing shall be converted into an ABR Borrowing at the end of the Interest Period applicable thereto.
Each notice pursuant to this Section 2.11 shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.11 and of each Lender's portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.11 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.11 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into an ABR Borrowing. The Borrower shall not have the right to continue or convert the Interest Period with respect to any Competitive Borrowing pursuant to this Section 2.11.
SECTION 2.12. Optional Prepayment tc \l2 "SECTION 2.12.
Optional Prepayment . (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing (other than a
Competitive Borrowing), in whole or in part, upon at least three Business
Days' prior written or telecopy notice (or telephone notice promptly
confirmed by written or telecopy notice) in the case of Eurodollar Loans,
or written or telecopy notice (or telephone notice promptly confirmed by
written or telecopy notice) on the day of prepayment in the case of ABR
Loans, to the Administrative Agent before 11:00 a.m., New York City
time; provided, however, that each partial prepayment shall be in an
amount that is an integral multiple of $1,000,000 and not less than
$10,000,000. The Borrower shall not have the right to prepay any
Competitive Borrowing.
(b) In the event of any termination of all the Commitments, the Borrower shall repay or prepay all its outstanding Revolving Credit Borrowings on the date of such termination. If as a result of any partial reduction of the Commitments the sum of the Aggregate Revolving Credit Exposure and the aggregate outstanding principal amount of the Competitive Loans at the time would exceed the Total Commitment after giving effect thereto, then the Borrower shall, on the date of such reduction, repay or prepay Revolving Credit Borrowings in an amount sufficient to eliminate such excess.
(c) Each notice of prepayment shall specify the prepayment date
and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrower to prepay
such Borrowing by the amount stated therein on the date stated therein.
All prepayments under this Section 2.12 shall be subject to Section 2.15
but otherwise without premium or penalty. All prepayments under this
Section 2.12 (other than prepayment of an ABR Loan that does not occur
in connection with, or as a result of, the reduction or termination of the
Commitments) shall be accompanied by accrued and unpaid interest on
the principal amount to be prepaid to but excluding the date of payment.
SECTION 2.13. Reserve Requirements; Change in Circumstances tc \l2 "SECTION 2.13. Reserve Requirements; Change in Circumstances . (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender or the Issuing Bank or shall impose on such Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender of making or main- taining any Eurodollar Loan or Fixed Rate Loan or increase the cost to any Lender or the Issuing Bank of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender or the Issuing Bank to be material, then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that any Change in Law regarding capital adequacy has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy) by an amount deemed by such Lender or the Issuing Bank to be material, then from time to time the Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank the amount shown as due on any such certificate delivered by it within 15 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank
to demand compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital shall not constitute
a waiver of such Lender's or the Issuing Bank's right to demand such
compensation; provided that the Borrower shall not be under any
obligation to compensate any Lender or the Issuing Bank under paragraph
(a) or (b) above with respect to increased costs or reductions with respect
to any period prior to the date that is 120 days prior to such request if such
Lender or the Issuing Bank knew or could reasonably have been expected
to know of the circumstances giving rise to such increased costs or
reductions and of the fact that such circumstances could reasonably be
expected to result in a claim for increased compensation by reason of such
increased costs or reductions; provided further that the foregoing
limitation shall not apply to any increased costs or reductions arising out
of the retroactive application of any Change in Law within such 120-day
period. The protection of this Section shall be available to each Lender
and the Issuing Bank regardless of any possible contention of the
invalidity or inapplicability of the Change in Law that shall have occurred
or been imposed. Notwithstanding any other provision of this Section, no
Lender shall be entitled to demand compensation hereunder in respect of
any Competitive Loan if it shall have been aware of the event or
circumstance giving rise to such demand at the time it submitted the
Competitive Bid pursuant to which such Loan was made.
SECTION 2.14. Change in Legality tc \l2 "SECTION 2.14.
Change in Legality . (a) Notwithstanding any other provision of this
Agreement, if any Change in Law shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan,
then, by written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans), whereupon such Lender shall not submit a Competitive Bid in response to a request for a Eurodollar Competitive Loan and any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or result- ing from the conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.
SECTION 2.15. Break Funding tc \l2 "SECTION 2.15. Break
Funding . The Borrower shall compensate each Lender for any loss or
expense that such Lender may sustain or incur as a consequence of (a)
such Lender receiving or being deemed to receive any amount on account
of the principal of any Fixed Rate Loan or Eurodollar Loan prior to the
end of the Interest Period in effect therefor, (b) the conversion of any
Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period
with respect to any Eurodollar Loan, in each case other than on the last
day of the Interest Period in effect therefor or (c) the failure of the
Borrower to borrow, convert, continue or prepay any Fixed Rate Loan or
Eurodollar Loan made or to be made by such Lender (including any
Eurodollar Loan to be made pursuant to a conversion or continuation
under Section 2.11) after notice of such borrowing, conversion,
continuation or prepayment shall have been given by the Borrower
hereunder (any of the events referred to in this sentence being called a
"Breakage Event"). In the case of any Breakage Event, such loss shall
include an amount equal to the excess, as reasonably determined by such
Lender, of (i) its cost of obtaining funds for the Fixed Rate Loan or
Eurodollar Loan that is the subject of such Breakage Event for the period
from the date of such Breakage Event to the last day of the Interest Period
in effect (or that would have been in effect) for such Loan over (ii) the
amount of interest likely to be realized by such Lender in redeploying the
funds released or not utilized by reason of such Breakage Event for such
period. A certificate of any Lender setting forth any amount or amounts
which such Lender is entitled to receive pursuant to this Section 2.15 shall
be delivered to the Borrower and shall be conclusive absent manifest error.
The Borrower shall pay such Lender the amount due within 15 days of the
receipt of any such certificate.
SECTION 2.16. Pro Rata Treatment tc \l2 "SECTION 2.16.
Pro Rata Treatment . Except as provided below in this Section 2.16 with
respect to Competitive Borrowings and as required under Section 2.14,
each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the
Facility Fees and the L/C Participation Fees, each reduction of the
Commitments and each conversion of any Borrowing to or continuation
of any Borrowing as a Borrowing of any Type shall be allocated pro rata
among the Lenders in accordance with their respective Commitments (or,
if such Commitments shall have expired or been terminated, in accordance
with the respective principal amounts of their outstanding Loans). Each
payment of principal of and interest on any Competitive Borrowing shall
be allocated pro rata among the Lenders participating in such Borrowing
in accordance with the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing. For purposes of
determining the available Commitments of the Lenders at any time, each
outstanding Competitive Borrowing shall be deemed to have utilized the
Commitments of the Lenders (including those Lenders which shall not
have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments. Each Lender agrees that
in computing such Lender's portion of any Borrowing to be made
hereunder, the Administrative Agent may, in its discretion, round each
Lender's percentage of such Borrowing to the next higher or lower whole
dollar amount.
SECTION 2.17. Sharing of Setoffs tc \l2 "SECTION 2.17.
Sharing of Setoffs . Each Lender agrees that if it shall, through the
exercise of a right of banker's lien, setoff or counterclaim against the
Borrower, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by any other
means, obtain payment (voluntary or involuntary) in respect of any Loan
or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Loans and participations in L/C Disbursements shall be
proportionately less than the unpaid principal portion of the Loans and
participations in L/C Disbursements of any other Lender, it shall be
deemed simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to such other Lender the purchase price for,
a participation in the Loans and L/C Exposure of such other Lender, so
that the aggregate unpaid principal amount of the Loans and L/C
Exposure and participations in Loans and L/C Exposure held by each
Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Loans and L/C Exposure then outstanding as the principal
amount of its Loans and L/C Exposure prior to such exercise of banker's
lien, setoff or counterclaim or other event was to the principal amount of
all Loans and L/C Exposure outstanding prior to such exercise of banker's
lien, setoff or counterclaim or other event; provided, however, that if any
such purchase or purchases or adjustments shall be made pursuant to this
Section 2.17 and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded
to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to
the foregoing arrangements and agrees that any Lender holding a
participation in a Loan or L/C Disbursement deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower
to such Lender by reason thereof as fully as if such Lender had made a
Loan directly to the Borrower in the amount of such participation.
SECTION 2.18. Payments tc \l2 "SECTION 2.18. Payments .
(a) The Borrower shall make each payment (including principal of or
interest on any Borrowing or any L/C Disbursement or any Fees or other
amounts) hereunder not later than 12:00 (noon), New York City time, on
the date when due in immediately available dollars, without setoff, defense
or counterclaim. Each such payment (other than Issuing Bank Fees, which
shall be paid directly to the Issuing Bank), shall be made to the
Administrative Agent at its offices at Eleven Madison Avenue, New York,
NY 10010 or as otherwise instructed by the Administrative Agent.
(b) Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.
SECTION 2.19. Taxes tc \l2 "SECTION 2.19. Taxes .
(a) Any and all payments by the Borrower hereunder shall be made free
and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent or such Lender (as the case
may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes not paid pursuant to Section 2.19(a)(iii) to the relevant Governmental Authority in accordance with applicable law. As of the Closing Date, each Foreign Lender intends to make Loans hereunder out of an office located in the United States of America or out of an office so that such Loans would not be subject to Other Taxes.
(c) The Borrower shall indemnify the Administrative Agent and each Lender, within 15 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided, however, that the Borrower shall not be obligated to make a payment pursuant to this Section 2.19 in respect of penalties, interest and other liabilities attributable to any Indemnified Taxes or Other Taxes, if (i) such penalties, interest and other liabilities are attributable to the failure of the Administrative Agent or such Lender, as the case may be, to pay amounts paid to the Administrative Agent or such Lender by the Borrower (for Indemnified Taxes or Other Taxes) to the appropriate taxing authority in a timely manner after receipt of such payment from the Borrower or (ii) such penalties, interest and other liabilities are attributable to the gross negligence or wilful misconduct of the Administrative Agent or such Lender, as the case may be. After the Administrative Agent or a Lender learns of the imposition of Indemnified Taxes or Other Taxes, such person will act in good faith to promptly notify the Borrower of its obligations hereunder. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law and reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Each Foreign Lender, before it signs and delivers this Agreement if listed on the signature pages hereof and before it becomes a Lender in the case of each other Foreign Lender, and from time to time thereafter, before the date any such form expires or becomes obsolete or invalid, shall provide the Borrower and the Administrative Agent with Internal Revenue Service form W-8BEN or W-8ECI (or other appropriate or successor form prescribed by the Internal Revenue Service) in duplicate, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States of America is a party which exempts the Foreign Lender from U.S. withholding tax on payments of interest for the account of such Foreign Lender or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct by such Foreign Lender of a trade or business in the United States of America and exempt from United States withholding tax.
(f) If the Administrative Agent or a Lender determines that it has received a refund or credit in respect of and specifically associated with any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower, or with respect to which the Borrower has paid additional amounts, it shall promptly notify the Borrower of such refund or credit and shall within 15 days from the date of receipt of such refund or benefit of such credit pay over the amount of such refund or benefit of such credit (including any interest paid or credited by the relevant taxing authority or Governmental Authority with respect to such refund or credit) to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower with respect to the Indemnified Taxes or Other Taxes giving rise to such refund of credit), net of all out- of-pocket expenses of such person. If the Administrative Agent or a Lender shall become aware that it is entitled to receive a refund or credit in respect of Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts, it shall promptly notify the Borrower of the availability of such refund or credit and shall, within 15 days after receipt of a request for such by the Borrower (whether as a result of notification that it has made of such to the Borrower or otherwise), make a claim to such taxing authority or Governmental Authority for such refund or credit and contest such Indemnified Taxes, Other Taxes or liabilities if (i) such Lender or the Administrative Agent determines, in its sole discretion, that it would not be materially disadvantaged or prejudiced as a result of such contest (it being understood that the mere existence of fees, charges, costs or expenses that the Borrower has offered to and agreed to pay on behalf of a Lender or the Administrative Agent shall not be deemed to be materially disadvantageous to such person) and (ii) the Borrower furnishes, upon request of the Lender or the Administrative Agent, an opinion of reputable tax counsel (such opinion and such counsel to be acceptable to such Lender or the Administrative Agent) to the effect that such Indemnified Taxes or Other Taxes were wrongfully or illegally imposed.
SECTION 2.20. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate tc \l2 "SECTION 2.20. Assignment of
Commitments Under Certain Circumstances; Duty to Mitigate . (a) In
the event (i) any Lender or the Issuing Bank delivers a certificate
requesting compensation pursuant to Section 2.13, (ii) any Lender or the
Issuing Bank delivers a notice described in Section 2.14 or (iii) the
Borrower is required to pay any additional amount to any Lender or the
Issuing Bank or any Governmental Authority on account of any Lender or
the Issuing Bank pursuant to Section 2.19, the Borrower may, at its sole
expense and effort (including with respect to the processing and
recordation fee referred to in Section 9.04(b)), upon notice to such Lender
or the Issuing Bank and the Administrative Agent, require such Lender or
the Issuing Bank to transfer and assign, without recourse (in accordance
with and subject to the restrictions contained in Section 9.04), all of its
interests, rights and obligations under this Agreement to an assignee that
shall assume such assigned obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (x) such
assignment shall not conflict with any law, rule or regulation or order of
any court or other Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of the
Administrative Agent (and, if a Commitment is being assigned, of the
Issuing Bank), which consent shall not unreasonably be withheld, and (z)
the Borrower or such assignee shall have paid to the affected Lender or the
Issuing Bank in immediately available funds an amount equal to the sum
of the principal of and interest accrued to the date of such payment on the
outstanding Loans or L/C Disbursements of such Lender or the Issuing
Bank, respectively, plus all Fees and other amounts accrued for the
account of such Lender or the Issuing Bank hereunder (including any
amounts under Section 2.13 and Section 2.15); provided further that, if
prior to any such transfer and assignment the circumstances or event that
resulted in such Lender's or the Issuing Bank's claim for compensation
under Section 2.13 or notice under Section 2.14 or the amounts paid
pursuant to Section 2.19, as the case may be, cease to cause such Lender
or the Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or cease to have
the consequences specified in Section 2.14, or cease to result in amounts
being payable under Section 2.19, as the case may be (including as a result
of any action taken by such Lender or the Issuing Bank pursuant to
paragraph (b) below), or if such Lender or the Issuing Bank shall waive
its right to claim further compensation under Section 2.13 in respect of
such circumstances or event or shall withdraw its notice under
Section 2.14 or shall waive its right to further payments under
Section 2.19 in respect of such circumstances or event, as the case may be,
then such Lender or the Issuing Bank shall not thereafter be required to
make any such transfer and assignment hereunder.
(b) If (i) any Lender or the Issuing Bank shall request compensation under Section 2.13, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.14 or (iii) the Borrower is required to pay any additional amount or indemnity payment to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank, pursuant to Section 2.19, then such Lender or the Issuing Bank shall use reasonable efforts (which shall not require such Lender or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.13 or enable it to withdraw its notice pursuant to Section 2.14 or would reduce amounts payable pursuant to Section 2.19, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the Issuing Bank in connection with any such filing or assignment, delegation and transfer.
SECTION 2.21. Letters of Credit tc \l2 "SECTION 2.21.
Letters of Credit . (a) General. The Borrower may request the issuance
of a Letter of Credit for its own account or for the account of any of its
Subsidiaries (in which case the Borrower and such Subsidiary shall be co-
applicants with respect to such Letter of Credit), in a form reasonably
acceptable to the Administrative Agent and the Issuing Bank, at any time
and from time to time while the Commitments remain in effect. This
Section shall not be construed to impose an obligation upon the Issuing
Bank to issue any Letter of Credit that is inconsistent with the terms and
conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not exceed $75,000,000 and (ii) the sum of the Aggregate Revolving Credit Exposure and the aggregate principal amount of outstanding Competitive Borrowings shall not exceed the Total Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of business on the earlier of the date one year after the date of the issuance of such Letter of Credit and the date that is five Business Days prior to the Maturity Date, unless such Letter of Credit expires by its terms on an earlier date; provided, however, that a Letter of Credit may, upon the request of the Borrower, include a provision whereby such Letter of Credit shall be renewed automatically for additional consecutive periods of 12 months or less (but not beyond the date that is five Business Days prior to the Maturity Date) unless the Issuing Bank notifies the beneficiary thereof at least 30 days prior to the then-applicable expiration date that such Letter of Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each such Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit (or, in the case of the Existing Letters of Credit, effective upon the Closing Date). In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower forthwith on the date due as provided in Section 2.02(f). Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall pay to the Administrative Agent an amount equal to such L/C Disbursement not later than 5:00 p.m., New York City time, on the day on which the Borrower shall have received notice from the Issuing Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 11:00 a.m., New York City time, on any Business Day, not later than 12:00 noon, New York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein;
(ii) any amendment or waiver of this Agreement;
(iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a 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;
(v) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of
the Borrower hereunder to reimburse L/C Disbursements will not be
excused by the gross negligence or wilful misconduct of the Issuing Bank.
However, the foregoing shall not be construed to excuse the Issuing Bank
from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by the Issuing Bank's gross
negligence or wilful misconduct in determining whether drafts and other
documents presented under a Letter of Credit comply with the terms
thereof; it is understood that the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and,
in making any payment under any Letter of Credit (i) the Issuing Bank's
exclusive reliance on the documents presented to it under such Letter of
Credit as to any and all matters set forth therein, including reliance on the
amount of any draft presented under such Letter of Credit, whether or not
the amount due to the beneficiary thereunder equals the amount of such
draft and whether or not any document presented pursuant to such Letter
of Credit proves to be insufficient in any respect, if such document on its
face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be
forged or invalid or any statement therein proves to be inaccurate or
untrue in any respect whatsoever and (ii) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute
wilful misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall as promptly as possible give telephonic notification, confirmed by telecopy, to the Administrative Agent and the Borrower of such demand for payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower
shall reimburse such L/C Disbursement in full on such date, the unpaid
amount thereof shall bear interest for the account of the Issuing Bank, for
each day from and including the date of such L/C Disbursement, to but
excluding the earlier of the date of payment by the Borrower or the date
on which interest shall commence to accrue thereon as provided in
Section 2.02(f), at the rate per annum that would apply to such amount if
such amount were an ABR Revolving Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing
Bank may resign at any time by giving 30 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed
at any time by the Borrower by notice to the Issuing Bank, the
Administrative Agent and the Lenders. Subject to the next succeeding
paragraph, upon the acceptance of any appointment as the Issuing Bank
hereunder by a Lender that shall agree to serve as successor Issuing Bank,
such successor shall succeed to and become vested with all the interests,
rights and obligations of the retiring Issuing Bank and the retiring Issuing
Bank shall be discharged from its obligations to issue additional Letters
of Credit hereunder. At the time such removal or resignation shall become
effective, the Borrower shall pay all accrued and unpaid fees pursuant to
Section 2.06(c)(ii). The acceptance of any appointment as the Issuing
Bank hereunder by a successor Lender shall be evidenced by an agreement
entered into by such successor, in a form satisfactory to the Borrower and
the Administrative Agent, and, from and after the effective date of such
agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and (ii)
references herein to the term "Issuing Bank" shall be deemed to refer to
such successor or to any previous Issuing Bank, or to such successor and
all previous Issuing Banks, as the context shall require. After the
resignation or removal of the Issuing Bank hereunder, the retiring Issuing
Bank shall remain a party hereto and shall continue to have all the rights
and obligations of an Issuing Bank under this Agreement with respect to
Letters of Credit issued by it prior to such resignation or removal, but
shall not be required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur
and be continuing, the Borrower shall, on the Business Day it receives
notice from the Administrative Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Lenders holding participations
in outstanding Letters of Credit representing greater than 50% of the
aggregate undrawn amount of all outstanding Letters of Credit) thereof
and of the amount to be deposited, deposit in an account with the
Administrative Agent, for the benefit of the Lenders, an amount in cash
equal to the L/C Exposure as of such date, provided, however that the
obligation to deposit such cash shall become effective immediately, and
such deposit shall become immediately due and payable, without demand
or other notice of any kind, upon the occurrence of any Event of Default
with respect to the Borrower described in clause (g) or (h) of Article VII.
Such deposit shall be held by the Administrative Agent as collateral for
the payment and performance of the obligations of the Borrower under
this Agreement. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such
deposits in Permitted Investments, which investments shall be made at the
option and sole discretion of the Administrative Agent, such deposits shall
not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall (i)
automatically be applied by the Administrative Agent to reimburse the
Issuing Bank for L/C Disbursements for which it has not been reimbursed,
(ii) be held for the satisfaction of the reimbursement obligations of the
Borrower for the L/C Exposure at such time and (iii) if the maturity of the
Loans has been accelerated (but subject to the consent of Lenders holding
participations in outstanding Letters of Credit representing greater than
50% of the aggregate undrawn amount of all outstanding Letters of
Credit), be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default,
such amount (to the extent not applied as aforesaid) shall be returned to
the Borrower within three Business Days after all Events of Default have
been cured or waived.
(k) Additional Issuing Banks. The Borrower may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) and such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of the Agreement. Any Lender designated as an issuing bank pursuant to this paragraph (k) shall be deemed to be an "Issuing Bank" (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender, and, with respect to such Letters of Credit, such term shall thereafter apply to the other Issuing Bank and such Lender.
ARTICLE III
Representations and Warranties tc \l1 "ARTICLE IIIRepresentations and Warranties
The Borrower represents and warrants to the Administrative Agent, the Issuing Bank and each of the Lenders that:
SECTION 3.01. Organization; Powers tc \l2 "SECTION 3.01.
Organization; Powers . The Borrower and each of the Subsidiaries
(a) is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (b) has all requisite power and
authority to own its property and assets and to carry on its business as
now conducted and (c) is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required, except
where the failure so to qualify could not reasonably be expected to result
in a Material Adverse Effect.
SECTION 3.02. Authorization tc \l2 "SECTION 3.02.
Authorization . The execution, delivery and performance by the
Borrower of this Agreement and the transactions contemplated hereby
(including the Borrowings hereunder) (collectively, the "Transactions")
(a) are within the Borrower's corporate powers and have been duly
authorized by all requisite corporate and, if required, stockholder action
and (b) will not (i) violate (A) any provision of law, statute, rule or
regulation, or of the certificate or articles of incorporation or other
constitutive documents or by-laws of the Borrower or any Subsidiary,
(B) any order of any Governmental Authority or (C) any provision of any
indenture, agreement or other instrument to which the Borrower or any
Subsidiary is a party or by which any of them or any of their property is
or may be bound, the effect of which could reasonably be expected to
result in a Material Adverse Effect, (ii) result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under, or give rise
to any right to accelerate or to require the prepayment, repurchase or
redemption of any obligation under any such indenture, agreement or other
instrument, the effect of which could reasonably be expected to result in
a Material Adverse Effect, or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or
hereafter acquired by the Borrower or any Subsidiary.
SECTION 3.03. Enforceability tc \l2 "SECTION 3.03.
Enforceability . This Agreement has been duly executed and delivered
by the Borrower and constitutes a legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforceability of creditors' rights
generally and to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.04. Governmental Approvals tc \l2 "SECTION 3.04. Governmental Approvals . No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for such as have been made or obtained and are in full force and effect.
SECTION 3.05. Financial Statements tc \l2 "SECTION 3.05.
Financial Statements . The Borrower has heretofore furnished to the
Lenders its consolidated balance sheets and related statements of income,
stockholders' equity and cash flows (i) as of and for the fiscal year ended
December 31, 2000, audited by and accompanied by the opinion of
PricewaterhouseCoopers LLP, independent public accountants, and (ii) as
of and for the fiscal quarter and the portion of the fiscal year ended
September 30, 2001, certified by its chief financial officer. Such financial
statements present fairly, in all material respects, the financial condition
and results of operations and cash flows of the Borrower and its
consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to normal year-end audit adjustments and
the absence of footnotes in the case of the statements referred to in clause
(ii) above.
SECTION 3.06. No Material Adverse Change tc \l2 "SECTION 3.06. No Material Adverse Change . Since December 31, 2000, there has been no material adverse change in the financial condition, results of operations or business of the Borrower and the Subsidiaries, taken as a whole.
SECTION 3.07. Subsidiaries tc \l2 "SECTION 3.07.
Subsidiaries . Schedule 3.07 sets forth as of the Closing Date a list of all
Subsidiaries and the percentage ownership interest of the Borrower
therein.
SECTION 3.08. Litigation; Compliance with Laws tc \l2 "SECTION 3.08. Litigation; Compliance with Laws . (a) There are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve this Agreement or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(b) None of the Borrower or any of the Subsidiaries is in violation of any law, rule or regulation, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.09. Federal Reserve Regulations tc \l2 "SECTION 3.09. Federal Reserve Regulations . (a) The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.
SECTION 3.10. Investment Company Act; Public Utility Holding Company Act tc \l2 "SECTION 3.10. Investment Company Act; Public Utility Holding Company Act . None of the Borrower or any of the Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.11. Use of Proceeds tc \l2 "SECTION 3.11. Use of Proceeds . The Borrower will use the proceeds of the Loans and will request the issuance of Letters of Credit only for the purposes specified in the preamble to this Agreement.
SECTION 3.12. Tax Returns tc \l2 "SECTION 3.12. Tax
Returns . Each of the Borrower and the Subsidiaries has filed or caused
to be filed all Federal, state, local and foreign tax returns or materials
required to have been filed by it and has paid or caused to be paid all
Taxes due and payable by it and all assessments received by it, except
(a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable,
shall have set aside on its books adequate reserves or (b) to the extent that
the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.13. No Material Misstatements tc \l2 "SECTION 3.13. No Material Misstatements . None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement contains any material misstate- ment of fact or omits to state any material fact necessary to make the statements therein taken as a whole, in the light of the circumstances under which they were made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule.
SECTION 3.14. Employee Benefit Plans tc \l2 "SECTION 3.14. Employee Benefit Plans . No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. The accumulated benefit obligations (as defined in Statement of Financial Accounting Standards No. 87) under all Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the last annual valuation dates applicable thereto, exceed by more than $50,000,000 the fair market value of the assets of all such Plans.
SECTION 3.15. Environmental Matters tc \l2 "SECTION 3.15.
Environmental Matters . Except with respect to any matters that,
individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect, neither the Borrower nor any of the
Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) is subject to any
Environmental Liability, (iii) has received written notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability of the Borrower or the Subsidiaries.
SECTION 3.16. Senior Indebtedness tc \l2 "SECTION 3.16.
Senior Indebtedness . The Loans and other obligations hereunder
constitute "Senior Indebtedness" under and as defined in the Subordinated
Note Documents.
ARTICLE IV
Conditions of Lending tc \l1 " ARTICLE IV Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions:
SECTION 4.01. All Credit Events tc \l2 "SECTION 4.01. All Credit Events . On the date of each Borrowing or issuance, amendment, extension or renewal of a Letter of Credit (each such event being called a "Credit Event"):
(a) The Administrative Agent shall have received a notice of
such Borrowing as required by Section 2.03 or 2.04, as applicable (or
such notice shall have been deemed given in accordance with
Section 2.04), or, in the case of the issuance, amendment, extension or
renewal of a Letter of Credit, the Issuing Bank and the Administrative
Agent shall have received a notice requesting the issuance, amendment,
extension or renewal of such Letter of Credit as required by
Section 2.21(b).
(b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.
(c) At the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. Closing Date tc \l2 "SECTION 4.02. Closing Date . On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Bank, a favorable written opinion of each of (i) Bradford T. Smith, Chief Legal Counsel of the Borrower, substantially to the effect set forth in Exhibit E-1, and (ii) Davis Polk & Wardwell, special counsel for the Borrower, substantially to the effect set forth in Exhibit E-2, (A) dated the Closing Date, (B) addressed to the Issuing Bank, the Administrative Agent and the Lenders, and (C) covering such other matters relating to this Agreement and the Transactions as the Administrative Agent shall reasonably request, and the Borrower hereby requests such counsel to deliver such opinions.
(c) The Administrative Agent shall have received (i) a
copy of the certificate of incorporation, including all amendments
thereto, of the Borrower, certified as of a recent date by the
Secretary of State of the State of Delaware, and a certificate as to
the good standing of the Borrower as of a recent date, from such
Secretary of State; (ii) a certificate of the Secretary or Assistant
Secretary of the Borrower dated the Closing Date and certifying
(A) that attached thereto is a true and complete copy of the by-
laws of the Borrower as in effect on the Closing Date and at all
times since a date prior to the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and complete
copy of resolutions duly adopted by the Board of Directors of the
Borrower authorizing the execution, delivery and performance of
this Agreement and the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are
in full force and effect, (C) that the certificate of incorporation of
the Borrower has not been amended since the date of the last
amendment thereto shown on the certificate of good standing
furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing this
Agreement or any other document delivered in connection
herewith on behalf of the Borrower; (iii) a certificate of another
officer as to the incumbency and specimen signature of the Secre-
tary or Assistant Secretary executing the certificate pursuant to
(ii) above; and (iv) such other documents relating to the
Borrower, this Agreement or the Transactions as the Lenders, the
Issuing Bank or the Administrative Agent may reasonably
request.
(d) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by a Financial
Officer of the Borrower, confirming compliance with the
conditions precedent set forth in paragraphs (b) and (c) of
Section 4.01.
(e) The Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.
(f) The 364-Day Credit Agreement shall have been
executed and delivered and the conditions precedent set forth in
Section 4.02 thereof satisfied or waived.
(g) All principal, interest, fees and other amounts outstanding or due under the Existing Credit Agreement shall have been paid in full, the commitments thereunder terminated and all guarantees thereof released and discharged, and the Administrative Agent shall have received satisfactory evidence thereof.
(h) The credit facilities provided for by this Agreement and the 364-Day Credit Agreement shall be rated not lower than BBB by S&P, and the Administrative Agent shall have received satisfactory evidence thereof.
ARTICLE V
Affirmative Covenants tc \l1 "ARTICLE VAffirmative Covenants
The Borrower covenants and agrees with each Lender that until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable hereunder shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties tc \l2 "SECTION 5.01. Existence; Businesses and Properties . (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.04.
(b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect its rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names, and comply in all material respects with all applicable laws, rules, regulations and decrees and orders of any Governmental Authority, in each case except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.02. Insurance tc \l2 "SECTION 5.02. Insurance .
Maintain with responsible and reputable insurance companies insurance,
to such extent and against such risks as is customary with companies in
the same or similar businesses operating in the same or similar locations.
SECTION 5.03. Obligations and Taxes tc \l2 "SECTION 5.03.
Obligations and Taxes . Pay its Indebtedness and other obligations,
including Taxes, before the same shall become delinquent or in default,
except where (a) the validity or amount thereof shall be contested in good
faith by appropriate proceedings and the Borrower shall have set aside on
its books adequate reserves with respect thereto in accordance with GAAP
or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.04. Financial Statements, Reports, etc tc \l2 "SECTION 5.04. Financial Statements, Reports, etc . In the case of the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 105 days after the end of each fiscal year, its consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the close of and for such fiscal year, together with comparative figures for the immediately preceding fiscal year, all audited by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the close of and for such fiscal quarter and the then elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer (A) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, (B) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.07 and 6.08 and (C) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.05 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;
(d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be;
(e) promptly after the receipt thereof by the Borrower or any of its Subsidiaries, a copy of any "management letter" received by any such person from its certified public accountants and the management's response thereto; and
(f) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices tc \l2 "SECTION
5.05. Litigation and Other Notices . In the case of the Borrower, furnish
to the Administrative Agent, the Issuing Bank and each Lender prompt
written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;
(b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;
(c) any change in the rating by S&P of the Index Debt; and
(d) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect.
SECTION 5.06. Maintaining Records; Access to Properties and Inspections tc \l2 "SECTION 5.06. Maintaining Records; Access to Properties and Inspections . Keep books of record and account in conformity with GAAP and all requirements of law in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect the financial records and the properties of the Borrower or any Subsidiary at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of the Borrower or any Subsid- iary with the officers thereof and independent accountants therefor.
SECTION 5.07. Use of Proceeds tc \l2 "SECTION 5.07. Use of Proceeds . Use the proceeds of the Loans and request the issuance of Letters of Credit only for the purposes set forth in the preamble to this Agreement.
ARTICLE VI
Negative Covenants tc \l1 "ARTICLE VINegative Covenants
The Borrower covenants and agrees with each Lender that, until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable hereunder have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not cause or permit any of the Subsidiaries to:
SECTION 6.01. Subsidiary Indebtedness tc \l2 "SECTION
6.01. Subsidiary Indebtedness . With respect to the Subsidiaries, incur,
create, issue, assume or permit to exist any Indebtedness or preferred
stock, except:
(a) Indebtedness or preferred stock existing on the date hereof and having an aggregate principal amount (or, in the case of preferred stock, an aggregate liquidation preference) of less than $25,000,000 in the aggregate and, in the case of any such Indebtedness, any extensions, renewals or replacements thereof to the extent the principal amount of such Indebtedness is not increased, and such Indebtedness, if subordinated to the Loans, remains so subordinated on terms no less favorable to the Lenders, and the original obligors in respect of such Indebtedness remain the only obligors thereon;
(b) Indebtedness created or existing (i) hereunder or
(ii) under the 364-Day Credit Agreement;
(c) intercompany Indebtedness or preferred stock to the extent owing to or held by the Borrower or another Subsidiary;
(d) Indebtedness of any Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or
capital assets, and extensions, renewals and replacements of any
such Indebtedness that do not increase the outstanding principal
amount thereof; provided that (i) such Indebtedness is incurred
prior to or within 180 days after such acquisition or the
completion of such construction or improvement and (ii) the
aggregate principal amount of Indebtedness permitted by this
Section 6.01(d), when combined with the aggregate principal
amount of all Capital Lease Obligations incurred pursuant to
Section 6.01(e) and all Indebtedness incurred pursuant to Section
6.01(f), shall not exceed $100,000,000 at any time outstanding;
(e) Capital Lease Obligations in an aggregate principal
amount, when combined with the aggregate principal amount of
all Indebtedness incurred pursuant to Section 6.01(d) and
Section 6.01(f), not in excess of $100,000,000 at any time
outstanding;
(f) Indebtedness of any person that becomes a Subsidiary after the date hereof; provided that (i) such Indebtedness exists at the time such person becomes a Subsidiary and is not created in contemplation of or in connection with such person becoming a Subsidiary, (ii) immediately before and after such person becomes a Subsidiary, no Event of Default or Default shall have occurred and be continuing and (iii) the aggregate principal amount of Indebtedness permitted by this clause (f), when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(d) and all Capital Lease Obligations incurred pursuant to Section 6.01(e), shall not exceed $100,000,000 at any time outstanding;
(g) Indebtedness under performance bonds or with respect to workers' compensation claims, in each case incurred in the ordinary course of business; and
(h) additional Indebtedness or preferred stock of the Subsidiaries to the extent not otherwise permitted by the foregoing clauses of this Section 6.01 in an aggregate principal amount (or, in the case of preferred stock, with an aggregate liquidation preference), when combined (without duplication) with the amount of obligations of the Borrower and its Subsidiaries secured by Liens pursuant to Section 6.02(j), not to exceed $100,000,000 at any time outstanding.
SECTION 6.02. Liens tc \l2 "SECTION 6.02. Liens . Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries existing on the date hereof and encumbering property or assets with a fair market value, and securing obligations having an aggregate principal amount, in each case less than $25,000,000 in the aggregate; provided that (x) such Liens shall secure only those obligations which they secure on the date hereof and extensions, renewals and replacements thereof permitted hereunder and (y) such Liens shall not apply to any other property or assets of the Borrower or any of the Subsidiaries;
(b) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any person that becomes a Subsidiary after the date hereof prior to the time such person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Subsidiary, as the case may be, (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof permitted hereunder;
(c) Liens for taxes not yet due or which are being contested in compliance with Section 5.03;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more than 90 days or which are being contested in compliance with Section 5.03;
(e) pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance and other social security laws or regulations;
(f) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(g) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;
(h) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 180 days after such acquisition (or construction) and (iii) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;
(i) Liens in respect of judgments that do not constitute an Event of Default; and
(j) Liens not otherwise permitted by the foregoing clauses of this Section 6.02 securing obligations otherwise permitted by this Agreement in an aggregate principal and face amount, when combined (without duplication) with the amount of Indebtedness or preferred stock of Subsidiaries incurred pursuant to Section 6.01(h), not to exceed $100,000,000 at any time outstanding.
SECTION 6.03. Sale and Lease-Back Transactions tc \l2
"SECTION 6.03. Sale and Lease-Back Transactions . Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell
or transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the
same purpose or purposes as the property being sold or transferred unless
(a) the sale of such property is permitted by Section 6.04 and (b) any
Capital Lease Obligations or Liens arising in connection therewith are
permitted by Sections 6.01 and 6.02, respectively.
SECTION 6.04. Mergers, Consolidations and Sales of Assets tc \l2 "SECTION 6.04. Mergers, Consolidations and Sales of Assets . Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower, except that, if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing, (a) any person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation and (b) any person, other than the Borrower, may merge into or consolidate with any Subsidiary in a transaction in which the surviving entity is a Subsidiary.
SECTION 6.05. Restricted Payments tc \l2 "SECTION 6.05.
Restricted Payments . Declare or make, or agree to declare or make,
directly or indirectly, any Restricted Payment (including pursuant to any
Synthetic Purchase Agreement), or incur any obligation (contingent or
otherwise) to do so; provided, however, that (i) any Subsidiary may
declare and pay dividends or make other distributions ratably to holders
of Equity Interests in it, (ii) the Borrower may declare and pay dividends
or make other distributions of its Equity Interests and (iii) so long as no
Default or Event of Default shall have occurred and be continuing or
would result therefrom, the Borrower and the Subsidiaries may declare
and make, directly or indirectly, additional Restricted Payments to the
extent not otherwise permitted by the foregoing clauses of this
Section 6.05 in an aggregate amount not to exceed $300,000,000.
SECTION 6.06. Business of Borrower and Subsidiaries tc \l2 "SECTION 6.06. Business of Borrower and Subsidiaries . Engage to any material extent in any business or business activity other than businesses of the type currently conducted by the Borrower and the Subsidiaries and business activities reasonably related thereto.
SECTION 6.07. Interest Coverage Ratio tc \l2 "SECTION
6.07. Interest Coverage Ratio . Permit the Interest Coverage Ratio for
any period of four consecutive fiscal quarters, in each case taken as one
accounting period, to be less than 5.0 to 1.0.
SECTION 6.08. Maximum Leverage Ratio tc \l2 "SECTION
6.08. Maximum Leverage Ratio . Permit the Leverage Ratio for any
period of four consecutive fiscal quarters, in each case taken as one
accounting period, to be greater than 2.5 to 1.0.
SECTION 6.09. Hedging Agreements tc \l2 "SECTION 6.09.
Hedging Agreements . Enter into any Hedging Agreement other than
non-speculative Hedging Agreements entered into to hedge or mitigate
risks to which the Borrower or a Subsidiary is exposed in the ordinary
course of the conduct of its business or the management of its liabilities.
ARTICLE VII
Events of Default tc \l1 "ARTICLE VIIEvents of Default
In case of the happening of any of the following events ("Events of Default"):
(a) any representation or warranty made or deemed made in or in connection with this Agreement or the Borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to this Agreement, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in (b) above) due under this Agreement, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the Borrower), 5.05(a) or 5.07 or in Article VI;
(e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in this Agreement (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);
(f) (i) the Borrower or any Material Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any applicable grace period), or (ii) any other event or condition occurs (after giving effect to any applicable grace period) that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of the Borrower or any Material Subsidiary, or
of a substantial part of the property or assets of the Borrower or a
Material Subsidiary, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Material Subsidiary or for a substantial
part of the property or assets of the Borrower or a Material Subsidiary or
(iii) the winding-up or liquidation of the Borrower or any Material
Subsidiary; and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing
shall be entered;
(h) the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of the property or assets of the Borrower or any Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an amount in excess of $50,000,000 individually or $75,000,000 in the aggregate shall be rendered against the Borrower, any Material Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Material Subsidiary to enforce any such judgment; provided, however, that any such judgment shall not be an Event of Default under this paragraph (i) if and for so long as (i) the entire amount of such judgment is covered by a valid and binding policy of insurance between the defendant and the insurer covering payment thereof and (ii) such insurer, which shall be rated at least "A" by A.M. Best Company, has been notified of, and has not disputed the claim made for payment of the amount of such judgment;
(j) one or more ERISA Events shall have occurred that results in liability of the Borrower and its ERISA Affiliates exceeding $50,000,000 individually or $75,000,000 in the aggregate; or
(k) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained hereinto the contrary notwithstand- ing; and in any event with respect to the Borrower described in para- graph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent tc \l1 "ARTICLE VIIIThe Administrative Agent
Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of this Agreement, together with such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by this Agreement that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08) or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall not be deemed to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank, that is acceptable to the Borrower (which shall not unreasonably withhold its approval). Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for the benefit of such retiring Administrative Agent, its sub- agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous tc \l1 "ARTICLE IXMiscellaneous
SECTION 9.01. Notices tc \l2 "SECTION 9.01. Notices .
Notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 231 Maple Avenue, Burlington, NC 27215, Attention of Wesley R. Elingburg (Telecopy No. (336) 436-1066);
(b) if to the Administrative Agent, to Credit Suisse First Boston, Eleven Madison Avenue, New York, NY 10010, Attention of Ronald Davis, Agency Group (Telecopy No. (212) 325-8304, with a copy to Credit Suisse First Boston, at Eleven Madison Avenue, New York, NY 10010, Attention of Agency Group Manager (Telecopy No. (212) 325- 8304); and
(c) if to a Lender, to it at its address (or telecopy number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Survival of Agreement tc \l2 "SECTION 9.02.
Survival of Agreement . All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Lenders
and the Issuing Bank and shall survive the making by the Lenders of the
Loans and the issuance of Letters of Credit by the Issuing Bank,
regardless of any investigation made by the Lenders or the Issuing Bank
or on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not
been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.05
shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Loans, the
expiration of the Commitments, the expiration of any Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement,
or any investigation made by or on behalf of the Administrative Agent,
any Lender or the Issuing Bank.
SECTION 9.03. Binding Effect tc \l2 "SECTION 9.03.
Binding Effect . This Agreement shall become effective when it shall
have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of the other
parties hereto.
SECTION 9.04. Successors and Assigns tc \l2 "SECTION
9.04. Successors and Assigns . (a) Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the
Administrative Agent, the Issuing Bank or the Lenders that are contained
in this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, (x) the Borrower and the Administrative Agent (and, in the case of any assignment of a Commitment, the Issuing Bank) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed); provided, however, that the consent of the Borrower shall not be required to any such assignment during the continuance of any Event of Default described in paragraph (g) or (h) of Article VII, and (y) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire remaining amount of such Lender's Commitment), (ii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations under this Agreement, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and applicable tax forms. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date speci- fied in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, 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 Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account and not yet paid). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any such Loans so retained until such Loans have been repaid in full in accordance with this Agreement.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be
deemed to confirm to and agree with each other and the other parties
hereto as follows: (i) such assigning Lender warrants that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim and that its Commitment, and the outstanding
balances of its Revolving Loans and Competitive Loans, in each case
without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except
as set forth in (i) above, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto, or the financial condition of the
Borrower or any Subsidiary or the performance or observance by the
Borrower or any Subsidiary of any of its obligations under this Agreement
or any other instrument or document furnished pursuant hereto; (iii) such
assignee represents and warrants that it is legally authorized to enter into
such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements referred to in Section 3.05 or delivered pursuant to
Section 5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Administrative Agent, such assigning Lender or
any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as
are delegated to the Administrative Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower, the Issuing Bank and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the
Issuing Bank or the Administrative Agent sell participations to one or
more banks or other entities in all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and
the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other
entities shall be entitled to the benefit of the cost protection provisions
contained in Sections 2.13, 2.15 and 2.19 to the same extent as if they
were Lenders (but, with respect to any particular participant, to no greater
extent than the Lender that sold the participation to such participant) and
(iv) the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans or L/C Disbursements
and to approve any amendment, modification or waiver of any provision
of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable hereunder or the amount of principal of or the
rate at which interest is payable on the Loans, extending any scheduled
principal payment date or date fixed for the payment of interest on the
Loans or increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16.
(h) Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.
(i) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.
(j) The Borrower shall not assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, the Issuing Bank and each Lender, and any attempted assignment without such consent shall be null and void.
(k) In the event that S&P, Moody's and Thompson's
BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders
that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by Insurance Watch Ratings Service))
shall, after the date that any Lender becomes a Lender, downgrade the
long-term certificate deposit ratings of such Lender, and the resulting
ratings shall be below BBB-, Baa3 and C (or BB, in the case of a Lender
that is an insurance company (or B, in the case of an insurance company
not rated by InsuranceWatch Ratings Service)), then the Issuing Bank
shall have the right, but not the obligation, at its own expense, upon notice
to such Lender and the Administrative Agent, to replace (or to request the
Borrower to use its reasonable efforts to replace) such Lender with an
assignee (in accordance with and subject to the restrictions contained in
paragraph (b) above), and such Lender hereby agrees to transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in paragraph (b) above) all its interests, rights and obligations
in respect of its Commitment to such assignee; provided, however, that
(i) no such assignment shall conflict with any law, rule and regulation or
order of any Governmental Authority and (ii) the Issuing Bank or such
assignee, as the case may be, shall pay to such Lender in immediately
available funds on the date of such assignment the principal of and interest
accrued to the date of payment on the Loans made by such Lender
hereunder and all other amounts accrued for such Lender's account or
owed to it hereunder.
SECTION 9.05. Expenses; Indemnity tc \l2 "SECTION 9.05.
Expenses; Indemnity . (a) The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent and the
Issuing Bank in connection with the syndication of the credit facilities
provided for herein and the preparation and administration of this
Agreement or in connection with any amendments, modifications or
waivers of the provisions hereof (whether or not the transactions hereby
or thereby contemplated shall be consummated) or incurred by the
Administrative Agent or any Lender in connection with the enforcement
or protection of its rights in connection with this Agreement or in
connection with the Loans made or Letters of Credit issued hereunder,
including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Administrative Agent, and, in
connection with any such enforcement or protection, the reasonable fees,
charges and disbursements of any other counsel for the Administrative
Agent or any Lender.
(b) The Borrower agrees to indemnify the Administrative Agent, each Lender, the Issuing Bank and each Related Party of any of the foregoing persons (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee (other than Taxes, Other Taxes or amounts that would be Other Taxes if imposed by the United States of America or any political subdivision thereof) arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment (a "Final Judgment") to have resulted from the gross negligence or wilful misconduct of such Indemnitee or (y) arise from any legal proceedings commenced against any Lender by any other Lender (other than legal proceedings against the Administrative Agent or the Issuing Bank in its capacity as such) or in which a Final Judgment is rendered in the Borrower's favor against such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Issuing Bank, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Issuing Bank in its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the Aggregate Revolving Credit Exposure and unused Commitments at the time.
(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section 9.05 shall be payable not later than 15 days after written demand therefor.
SECTION 9.06. Right of Setoff tc \l2 "SECTION 9.06. Right of Setoff . If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.
SECTION 9.07. Applicable Law tc \l2 "SECTION 9.07.
Applicable Law . THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED,
THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS MOST RECENTLY PUBLISHED AND IN EFFECT, ON
THE DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE
INTERNATIONAL CHAMBER OF COMMERCE (THE "UNIFORM
CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE
UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment tc \l2 "SECTION 9.08.
Waivers; Amendment . (a) No failure or delay of the Administrative
Agent, any Lender or the Issuing Bank in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders hereunder are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which
given. No notice 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.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement, without the prior written consent of each Lender affected thereby, (ii) increase or extend the Commitment or decrease or extend the date for payment of any Fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the pro rata requirements of Section 2.16, the provisions of Section 9.04(j), the provisions of this Section or the definition of the term "Required Lenders", without the prior written consent of each Lender or (iv) modify the protections afforded to an SPC pursuant to the provisions of Section 9.04(i) without the written consent of such SPC; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank hereunder without the prior written consent of the Administrative Agent or the Issuing Bank.
SECTION 9.09. Interest Rate Limitation tc \l2 "SECTION
9.09. Interest Rate Limitation . Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and
other amounts which are treated as interest on such Loan or participation
in such L/C Disbursement under applicable law (collectively the
"Charges"), shall exceed the maximum lawful rate (the "Maximum
Rate") which may be contracted for, charged, taken, received or reserved
by the Lender holding such Loan or participation in accordance with
applicable law, the rate of interest payable in respect of such Loan or
participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and Charges that would have been payable in respect of such
Loan or participation but were not payable as a result of the operation of
this Section 9.09 shall be cumulated and the interest and Charges payable
to such Lender in respect of other Loans or participations or periods shall
be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such
Lender.
SECTION 9.10. Entire Agreement tc \l2 "SECTION 9.10.
Entire Agreement . This Agreement and the Fee Letter dated
November 29, 2001, between the Borrower and Credit Suisse First
Boston, constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement.
Nothing in this Agreement, expressed or implied, is intended to confer
upon any person (other than the parties hereto, their respective successors
and assigns permitted hereunder (including any Affiliate of the Issuing
Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative
Agent, the Issuing Bank and the Lenders) any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 9.11. WAIVER OF JURY TRIAL tc \l2 "SECTION
9.11. WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability tc \l2 "SECTION 9.12.
Severability . In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected
or impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.13. Counterparts tc \l2 "SECTION 9.13.
Counterparts . This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute
a single contract, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.
SECTION 9.14. Headings tc \l2 "SECTION 9.14. Headings .
Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process tc
\l2 "SECTION 9.15. Jurisdiction; Consent to Service of Process .
(a) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. Nothing
in this Agreement shall affect any right that the Administrative Agent, the
Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Borrower or its proper-
ties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 9.16. Confidentiality tc \l2 "SECTION 9.16.
Confidentiality . Each of the Administrative Agent, the Issuing Bank and
the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' officers, directors, employees and agents, including
accountants, legal counsel and other advisors who need to know such
Information in connection with its role as Administrative Agent, Issuing
Bank or Lender (as the case may be) hereunder (it being understood that
the persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority or quasi-regulatory authority (such as the National Association
of Insurance Commissioners) (provided that, to the extent permitted by
applicable law and practicable under the circumstances, such person will
first inform the Borrower of any such request), (c) to the extent required
by applicable laws or regulations or by any subpoena or similar legal
process (provided that, to the extent permitted by applicable law, such
person will promptly notify the Borrower of such requirement as far in
advance of its disclosure as is practicable to enable the Borrower to seek
a protective order and, to the extent practicable, such person will
cooperate with the Borrower in seeking any such order), (d) in connection
with the exercise of any remedies hereunder or any suit, action or
proceeding relating to the enforcement of its rights hereunder, (e) subject
to an agreement containing provisions substantially the same as those of
this Section 9.16, to (i) any actual or prospective assignee of or participant
in any of its rights or obligations under this Agreement or (ii) any actual
or prospective counterparty (or its advisors) to any credit default swap or
similar credit derivative transaction relating to the obligations of the
Borrower under this Agreement, (f) with the consent of the Borrower or
(g) to the extent such Information becomes publicly available other than
as a result of a breach of this Section 9.16. For the purposes of this
Section, "Information" shall mean all information received from the
Borrower and related to the Borrower or its business, other than any such
information that was available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis prior to its disclosure by
the Borrower. Each of the Administrative Agent, the Issuing Bank and the
Lenders agrees that, except as expressly provided in this Section 9.16, it
will use Information only in connection with its role as Administrative
Agent, Issuing Bank or Lender (as the case may be) hereunder.
SECTION 9.17. Termination of Existing Credit Agreement.
The Borrower and each of the Lenders that is also a Lender (as defined in
the Existing Credit Agreement) party to the Existing Credit Agreement
agree that the Commitments (as defined in the Existing Credit Agreement)
shall be terminated in their entirety on the Closing Date in accordance with
the terms thereof, subject only to this Section 9.17. Each of such Lenders
waives (a) any requirement of notice of such termination pursuant to
Section 2.04(a) of the Existing Credit Agreement and (b) any claim to any
facility fees under the Existing Credit Agreement for any day on or after
the Closing Date. The Borrower (i) represents and warrants that (x) after
giving effect to the preceding sentences of this Section 9.17, the
commitments under the Existing Credit Agreement will be terminated
effective not later than the Closing Date and (y) no loans will be, as of the
Closing Date, outstanding under the Existing Credit Agreement and (ii)
covenants that all accrued and unpaid facility fees and other amounts due
and payable under the Existing Credit Agreement shall have been paid on
or prior to the Closing Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
LABORATORY
CORPORATION OF
AMERICA
HOLDINGS,
CREDIT SUISSE
FIRST BOSTON, as
Administrative Agent
and Issuing Bank,
CREDIT SUISSE
FIRST
BOSTON,
CAYMAN ISLANDS BRANCH,
SIGNATURE PAGE TO LABORATORY
CORPORATION OF AMERICA HOLDINGS
THREE-YEAR CREDIT AGREEMENT DATED AS
OF FEBRUARY 20, 2002
NAME OF LENDER: ________________________________
by ________________________________
Name:
Title:
<<NYCORP~2040453.10:4415A:02/19/02-1:10p>>
Page
<<NYCORP~2040453.10:4415A:02/19/02-1:10p>>
EXECUTION COPY
$100,000,000
364-DAY CREDIT AGREEMENT
dated as of February 20, 2002,
among
LABORATORY CORPORATION OF AMERICA HOLDINGS,
THE LENDERS NAMED HEREIN
and
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
CREDIT SUISSE FIRST BOSTON,
as Sole Bookrunner and
Sole Lead Arranger
BANK OF AMERICA, N.A.,
DEUTSCHE BANC ALEX. BROWN,
UBS WARBURG LLC AND
WACHOVIA SECURITIES,
as Co-Syndication Agents
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. 1
SECTION 1.02. Terms Generally. 11
SECTION 1.03. Classification of Loans and Borrowings. 12
ARTICLE II
The Credits
SECTION 2.01. Commitments. 12
SECTION 2.02. Loans. 12
SECTION 2.03. Competitive Bid Procedure. 13
SECTION 2.04. Borrowing Procedure. 15
SECTION 2.05. Evidence of Debt; Repayment of Loans. 15
SECTION 2.06. Fees. 16
SECTION 2.07. Interest on Loans. 16
SECTION 2.08. Default Interest. 17
SECTION 2.09. Alternate Rate of Interest. 17
SECTION 2.10. Termination and Reduction of Commitments 17
SECTION 2.11. Conversion and Continuation of
Borrowings 18
SECTION 2.12. Optional Prepayment. 19
SECTION 2.13. Reserve Requirements; Change in
Circumstances 19
SECTION 2.14. Change in Legality. 20
SECTION 2.15. Break Funding. 20
SECTION 2.16. Pro Rata Treatment. 21
SECTION 2.17. Sharing of Setoffs. 21
SECTION 2.18. Payments. 22
SECTION 2.19. Taxes. 22
SECTION 2.20. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate. 23
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers. 24
SECTION 3.02. Authorization. 24
SECTION 3.03. Enforceability. 25
SECTION 3.04. Governmental Approvals. 25
SECTION 3.05. Financial Statements. 25
SECTION 3.06. No Material Adverse Change. 25
SECTION 3.07. Subsidiaries. 25
SECTION 3.08. Litigation; Compliance with Laws. 25
SECTION 3.09. Federal Reserve Regulations. 25
SECTION 3.10. Investment Company Act; Public Utility
Holding Company Act. 26
SECTION 3.11. Use of Proceeds. 26
SECTION 3.12. Tax Returns. 26
SECTION 3.13. No Material Misstatements. 26
SECTION 3.14. Employee Benefit Plans. 26
SECTION 3.15. Environmental Matters. 26
SECTION 3.16. Senior Indebtedness. 26
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Borrowings. 26
SECTION 4.02. Closing Date. 27
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties. 28
SECTION 5.02. Insurance. 28
SECTION 5.03. Obligations and Taxes. 28
SECTION 5.04. Financial Statements, Reports, etc. 28
SECTION 5.05. Litigation and Other Notices. 29
SECTION 5.06. Maintaining Records; Access to
Properties and Inspections. 29
SECTION 5.07. Use of Proceeds. 30
ARTICLE VI
Negative Covenants
SECTION 6.01. Subsidiary Indebtedness. 30
SECTION 6.02. Liens. 31
SECTION 6.03. Sale and Lease-Back Transactions. 32
SECTION 6.04. Mergers, Consolidations and Sales
of Assets. 32
SECTION 6.05. Restricted Payments. 32
SECTION 6.06. Business of Borrower and Subsidiaries. 32
SECTION 6.07. Interest Coverage Ratio. 32
SECTION 6.08. Maximum Leverage Ratio. 33
SECTION 6.09. Hedging Agreements 33
ARTICLE VII
Events of Default
ARTICLE VIIIThe Administrative Agent
ARTICLE IXMiscellaneous
SECTION 9.01. Notices. 36
SECTION 9.02. Survival of Agreement. 36
SECTION 9.03. Binding Effect. 37
SECTION 9.04. Successors and Assigns. 37
SECTION 9.05. Expenses; Indemnity. 39
SECTION 9.06. Right of Setoff. 40
SECTION 9.07. Applicable Law. 40
SECTION 9.08. Waivers; Amendment. 40
SECTION 9.09. Interest Rate Limitation. 41
SECTION 9.10. Entire Agreement. 41
SECTION 9.11. WAIVER OF JURY TRIAL. 41
SECTION 9.12. Severability. 42
SECTION 9.13. Counterparts. 42
SECTION 9.14. Headings. 42
SECTION 9.15. Jurisdiction; Consent to Service
of Process. 42
SECTION 9.16. Confidentiality. 42
SECTION 9.17. Termination of Existing Credit Agreement 43
Schedule 2.01 Lenders and Commitments
Schedule 3.07 Subsidiaries
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D-1 Form of Competitive Bid Request
Exhibit D-2 Form of Notice of Competitive Bid Request
Exhibit D-3 Form of Competitive Bid
Exhibit D-4 Form of Competitive Bid Accept/Reject Letter
Exhibit E-1 Form of Opinion of Chief Legal Counsel of the
Borrower
Exhibit E-2 Form of Opinion of Davis Polk & Wardwell
CREDIT AGREEMENT dated as
of February 20, 2002, among
LABORATORY CORPORATION OF
AMERICA HOLDINGS, a Delaware
corporation (the "Borrower"), the Lenders
(as defined in Article I), and CREDIT
SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland,
acting through its New York branch, as
administrative agent (in such capacity, the
"Administrative Agent") for the Lenders.
The Borrower has requested the Lenders to extend credit in
the form of Revolving Loans (such term and each other
capitalized term used but not defined herein having the
|
meaning given it in Article I) at any time and from time to
time prior to the Maturity Date, in an aggregate principal
amount at any time outstanding not in excess of
$100,000,000. The Borrower has also requested the Lenders
to provide a procedure pursuant to which the Borrower may
invite the Lenders to bid on an uncommitted basis
on short-term borrowings by the Borrower. The proceeds of
the Loans are to be used solely for general corporate
purposes of the Borrower and its Subsidiaries, including
(a) working capital, (b) capital expenditures, (c) the
funding of share repurchases and other Restricted Payments
permitted hereunder, (d) acquisitions and (e) the repayment
of all amounts outstanding or due under the Existing Credit
Agreement.
The Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
"Administrative Agent Fees" shall have the meaning assigned to such term in Section 2.06(b).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.
"Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" shall mean, for any day, with respect to any Eurodollar Loan (other than any Eurodollar Competitive Loan) or ABR Loan, or with respect to the Facility Fees, as the case may be, the applicable percentage set forth below under the caption "Eurodollar Spread", "ABR Spread" or "Facility Fee Percentage", as the case may be, based upon the rating by S&P applicable on such date to the Index Debt:
Eurodollar Facility Fee
S&P Rating Spread ABR Spread Percentage
----------- ----------- ---------- -------------
Category 1
Equal to or 0.545% 0.00% 0.080%
Greater than A-
Category 2
BBB+ 0.650% 0.00% 0.100%
Category 3
BBB 0.875% 0.00% 0.125%
Category 4
BBB- 1.200% 0.200% 0.175%
Category 5
Less than
BBB- 1.525% 0.525% 0.225%
|
For purposes of the foregoing, (i) if S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then S&P shall be deemed to have established a rating in Category 5; and (ii) if the rating established or deemed to have been established by S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of S&P), such change shall be effective as of the date on which it is first announced by S&P. Each change in the Applicable Percentage shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of S&P shall change, or if S&P shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the non-availability of a rating from S&P and, pending the effectiveness of any such amendment, the Applicable Percentage shall be determined by reference to the rating most recently in effect prior to such change or cessation.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee (with
the consent of any party whose consent is required by
Section 9.04), and accepted by the Administrative Agent, in
the form of Exhibit B or such other form as shall
be approved by the Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America.
"Borrowing" shall mean (a) Loans of the same Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Borrowing described in the definition of the term "Competitive Borrowing".
"Borrowing Request" shall mean a request by the Borrower in accordance with the terms of Section 2.04.
"Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
A "Change in Control" shall be deemed to have occurred if
(a) any person or group (within the meaning of Rule 13d-5
of the Securities Exchange Act of 1934 as in effect on the
date hereof) shall own directly or indirectly, beneficially
or of record, shares representing more than 40% of
the aggregate ordinary voting power represented by the
issued and outstanding capital stock of the Borrower or (b)
a majority of the seats (other than vacant seats) on the
board of directors of the Borrower shall at any time
be occupied by persons who were neither (i) nominated by
the board of directors of the Borrower, nor (ii) appointed
by directors so nominated.
"Change in Law" shall mean (a) the adoption of any law,
rule or regulation after the date of this Agreement, (b)
any change in any law, rule or regulation or in the
interpretation or application thereof by any
Governmental Authority after the date of this Agreement or
(c) compliance by any Lender (or, for purposes of Section
2.13, by any lending office of such Lender or by such
Lender's holding company, if any) with any request,
guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the
date of this Agreement.
"Closing Date" shall mean February 20, 2002.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
"Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.10 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.
"Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan pursuant to Section 2.03(b) in the form of Exhibit D-3.
"Competitive Bid Accept/Reject Letter" shall mean a notification made by the Borrower pursuant to Section 2.03(d) in the form of Exhibit D-4.
"Competitive Bid Rate" shall mean, as to any Competitive
Bid, (i) in the case of a Eurodollar Loan, the Margin, and
(ii) in the case of a Fixed Rate Loan, the fixed rate of
interest offered by the Lender making such Competitive Bid.
"Competitive Bid Request" shall mean a request made by the Borrower pursuant to Section 2.03(a).
"Competitive Borrowing" shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted by the Borrower under the bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a Loan from a Lender to the
Borrower pursuant to the bidding procedure described in
Section 2.03. Each Competitive Loan shall be a Eurodollar
Competitive Loan or a Fixed Rate Loan.
"Confidential Information Memorandum" shall mean the Confidential Information Memorandum of the Borrower dated January 2002.
"Consolidated EBITDA" shall mean, for any period,
Consolidated Net Income for such period plus (a) without
duplication and to the extent deducted in determining such
Consolidated Net Income, the sum of (i) consolidated
interest expense net of interest income for such period,
(ii) consolidated income tax expense for such period, (iii)
all amounts attributable to depreciation and amortization
for such period and (iv) any extraordinary charges and all
non-cash write-offs and write-downs of amortizable and
depreciable items for such period, and minus (b) without
duplication, to the extent included in determining such
Consolidated Net Income, any extraordinary gains and all
non-cash items of income for such period, all determined on
a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, the interest expense (including (a) imputed interest expense in respect of Capital Lease Obligations and (b) the amortization of original issue discount in connection with the Subordinated Notes and other Indebtedness issued with original issue discount) of the Borrower and the Subsidiaries for such period, net of interest income, in each case determined on a consolidated basis in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to interest rate Hedging Agreements.
"Consolidated Net Income" shall mean, for any period, the net income or loss of the Borrower and the Subsidiaries for such period determined on a consolidated basis in ccordance with GAAP.
"Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "Controlling" and "Controlled" shall have meanings correlative thereto.
"Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States of America.
"Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments or injunctions issued, promulgated or entered into by any Governmental Authority, relating to the environment, the preservation or reclamation of natural resources, the management or release of Hazardous Materials or to the effect of the environment on human health and safety.
"Environmental Liability" shall mean liabilities,
obligations, claims, actions, suits, judgments or orders
under or relating to any Environmental Law for any damages,
injunctive relief, losses, fines, penalties, fees,
expenses (including fees and expenses of attorneys and
consultants) or costs, whether contingent or otherwise,
including those arising from or relating to (a) any action
to address the on- or off-site presence, release of, or
exposure to, Hazardous Materials, (b) permitting and
licensing, governmental administrative oversight and
financial assurance requirements, (c) any personal injury
(including death), any property damage (real or personal)
or natural resource damage and (d) the violation of any
Environmental Law.
"Equity Interests" shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, or any obligations convertible into or exchangeable for, or giving any person a right, option or warrant to acquire such equity interests or such convertible or exchangeable obligations; provided that the Subordinated Notes are deemed not to constitute Equity Interests of the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (e) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (g) the receipt by the Borrower or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from the Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; or (h) the occurrence of a "prohibited transaction" with respect to which the Borrower or any of the Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any such Subsidiary could otherwise be liable.
"Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate.
"Event of Default" shall have the meaning assigned to such term in Article VII.
"Excluded Taxes" shall mean, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income, franchise or similar taxes imposed on (or measured by) its net income by the United States of America, the jurisdiction under the laws of which such recipient is organized or in which its principal office is located (or, in the case of any Lender, in which its applicable lending office is located), or, in the case of a jurisdiction that imposes taxes on the basis of management or control or other concept or principle of residence, the jurisdiction in which such recipient is so resident, (b) Taxes imposed by reason of any present or former connection between such person and the jurisdiction imposing such Taxes, other than solely as a result of the execution and delivery of this Agreement, the making of any Loans hereunder or the performance of any action provided for hereunder, (c) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (d) in the case of a Foreign Lender (other than as an assignee pursuant to a request by the Borrower under Section 2.20(a)), any withholding tax that (i) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.19(a) or (ii) is attributable to such Foreign Lender's failure to comply with Section 2.19(e).
"Existing Credit Agreement" shall mean the Amended and Restated Credit Agreement dated as of March 31, 1997, as amended, among the Borrower, the lenders from time to time party thereto, and Credit Suisse First Boston, as administrative agent.
"Facility Fee" shall have the meaning assigned to such term in Section 2.06(a).
"Federal Funds Effective Rate" shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding 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 (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
"Fees" shall mean the Facility Fees and the Administrative Agent Fees.
"Financial Officer" of any person shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of such person.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (expressed in the form of a decimal to no more than four decimal places) specified by the Lender making such Loan in its Competitive Bid.
"Foreign Lender" shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" shall mean generally accepted accounting principles applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.
"Granting Lender" shall have the meaning assigned to such term in Section 9.04(i).
"Guarantee" of or by any person (the "guarantor") shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or other obligation, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business.
"Hazardous Materials" shall mean (a) petroleum products and byproducts, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, radon gas, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance, waste, pollutant or contaminant that is prohibited, limited or regulated by or pursuant to any Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any person shall mean, without
duplication, (a) all obligations of such person for
borrowed money, (b) all obligations of such person
evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such person under
conditional sale or other title retention agreements
relating to property or assets purchased by such person,
(d) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding
trade accounts payable and accrued obligations incurred in
the ordinary course of business), (e) all Indebtedness
of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or
acquired by such person, whether or not the obligations
secured thereby have been assumed, (f) all Guarantees by
such person of Indebtedness of others, (g) all Capital
Lease Obligations of such person, (h) all obligations,
contingent or otherwise, of such person as an account
party in respect of letters of credit and letters of
guaranty, (i) all obligations, contingent or otherwise, of
such person in respect of bankers' acceptances and (j) all
obligations of such person to make contingent cash payments
in respect of any acquisition, to the extent such
obligations are or are required to be shown as liabilities
on the balance sheet of such person in accordance with
GAAP. The Indebtedness of any person shall include the
Indebtedness of any other entity (including any partnership
in which such person is a general partner) to the extent
such person is liable therefor as a result of such person's
ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness
provide that such person is not liable therefor.
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Index Debt" shall mean the senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of the Borrower.
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.
"Interest Payment Date" shall mean (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December and (b) with respect to any Eurodollar Loan or Fixed Rate Borrowing, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part or such Fixed Rate Borrowing, as the case may be, and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration or a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' or 90 days' duration, respectively, been applicable to such Borrowing.
"Interest Period" shall mean, (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, and (b) with respect to any Fixed Rate Borrowing, the period commencing on the date of such Borrowing and ending on the date specified in the Competitive Bids in which the offers to make the Fixed Rate Loans comprising such Borrowing were extended, which shall not be earlier than 30 days after the date of such Borrowing or later than 360 days after the date of such Borrowing; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
"Lenders" shall mean (a) the persons listed on Schedule
2.01 (other than any such person that has ceased to be a
party hereto pursuant to an Assignment and Acceptance) (b)
any person that has become a party hereto pursuant to an
Assignment and Acceptance.
"Leverage Ratio" shall mean, for any period, the ratio of Total Debt on the last day of such period to Consolidated EBITDA for such period.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent which has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which dollar deposits of $10,000,000 are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset or (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
"Loans" shall mean the Revolving Loans and the Competitive Loans. "Margin" shall mean, as to any Eurodollar Competitive Loan, |
the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the LIBO Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan.
"Margin Stock" shall have the meaning assigned to such term in Regulation U.
"Material Adverse Effect" shall mean a materially adverse effect on the financial condition, results of operations or business of the Borrower and the Subsidiaries, taken as a whole.
"Material Indebtedness" shall mean Indebtedness (other than the Loans), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.
"Material Subsidiary" shall mean at any time any Subsidiary, except Subsidiaries which, if aggregated and considered as a single Subsidiary, would not meet the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission.
"Maturity Date" shall mean February 19, 2003.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under this Agreement or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;
(b) investments in foreign and domestic commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term
of not more than 30 days for securities described in clause
(a) above and entered into with a financial institution
satisfying the criteria of clause (c) above;
(e) investments in "money market funds" within the
meaning of Rule 2a-7 of the Investment Company Act of 1940,
as amended, substantially all of whose assets are invested
in investments of the type described in clauses (a) through
(d) above;
(f) investments in so-called market auction securities rated Aa2 or higher by Moody's or AA or higher by S&P and which have a reset date not more than 365 days from the date of acquisition thereof; and
(g) investments in readily-marketable obligations of Indebtedness of any State of the United States or any municipality organized under the laws of any State of the United States or any political subdivision thereof which, at the time of acquisition, are accorded either of the two highest ratings by S&P, Moody's or another nationally recognized credit rating agency of similar standard, in any such case maturing no later than one year after the date of acquisition thereof.
"person" shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.
"Plan" shall mean any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of
Title IV of ERISA or Section 412 of the Code or Section 307
of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective.
"Pro Rata Percentage" of any Lender at any time shall mean the percentage of the Total Commitment represented by such Lender's Commitment. In the event the Commitments shall have expired or been terminated, the Pro Rata Percentages shall be determined on the basis of the Commitments most recently in effect.
"Register" shall have the meaning assigned to such term in
Section 9.04(d)."Regulation T" shall mean Regulation T of
the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
"Related Parties" shall mean, with respect to any specified person, such person's Affiliates and the respective directors, officers, employees, agents and advisors of such person and such person's Affiliates.
"Required Lenders" shall mean, at any time, Lenders having
Commitments (or, if the Commitments have terminated, Loans)
representing at least a majority of the Total Commitment
(or if the Commitments have terminated, the aggregate
amount of Loans outstanding) at such time or, for
purposes of acceleration pursuant to clause (ii) of the
last paragraph of Article VII, Lenders having Loans and
unused Commitments representing at least a majority of the
sum of all Loans outstanding and unused
Commitments.
"Restricted Payment" shall mean (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or (b) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, other than a payment to the extent consisting of Equity Interests of equal or junior ranking, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Equity Interests in the Borrower or any Subsidiary. It is understood that the withholding of shares, and the payment of cash to the Internal Revenue Service in an amount not to exceed the value of the withheld shares, by the Company in connection with any of its stock incentive plans shall not constitute Restricted Payments.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving Loans.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender.
"Revolving Loans" shall mean the revolving loans made by the Lenders to the Borrower pursuant to Section 2.01. Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"S&P" shall mean Standard & Poor's Ratings Service.
"SPC" shall have the meaning assigned to such term in
Section 9.04(i).
"Subordinated Notes" shall mean the Borrower's Zero Coupon Liquid Yield Option (Subordinated Convertible) Notes due 2021, in an aggregate principal amount at maturity of $744,000,000.
"Subordinated Note Documents" shall mean the indenture under which the Subordinated Notes were issued and all other instruments, agreements and other documents evidencing or governing the Subordinated Notes or providing for any Guarantee or other right in respect thereof.
"subsidiary" shall mean, with respect to any person (herein referred to as the "parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Synthetic Purchase Agreement" shall mean any swap, derivative or other agreement or combination of agreements pursuant to which the Borrower or any Subsidiary is or may become obligated to make (a) any payment in connection with a purchase by any third party from a person other than the Borrower or any Subsidiary of any Equity Interest or (b) any payment (other than on account of a permitted purchase by it of any Equity Interest) the amount of which is determined by reference to the price or value at any time of any Equity Interest; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.
"Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges, liabilities or withholdings imposed by any Governmental Authority.
"Three-Year Credit Agreement" shall mean the Three-Year Credit Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time), among the Borrower, the lenders from time to time party thereto, and Credit Suisse First Boston, as administrative agent.
"Total Debt" shall mean, at any time, the total Indebtedness of the Borrower and the Subsidiaries at such time (excluding Indebtedness of the type described in clause (h) of the definition of such term, except to the extent of any unreimbursed drawings thereunder).
"Total Commitment" shall mean, at any time, the aggregate amount of the Commitments, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the LIBO Rate and the Alternate Base Rate.
"wholly owned Subsidiary" of any person shall mean a subsidiary of such person of which securities (except for directors' qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in
Section 1.01 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed
by the phrase "without limitation". The word "will" shall
be construed to have the same meaning and effect as the
word "shall"; and the words "asset" and "property" shall be
construed as having the same meaning and effect and to
refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and
contract rights. All references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time
to time; provided, however, that if the Borrower notifies
the Administrative Agent that the Borrower wishes to amend
any covenant in Article VI or any related definition to
eliminate the effect of any change in GAAP occurring after
the date of this Agreement on the operation of such
covenant (or if the Administrative Agent notifies the
Borrower that the Required Lenders wish to amend Article VI
or any related definition for such purpose), then the
Borrower's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until
either such notice is withdrawn or such covenant is amended
in a manner satisfactory to the Borrower and the Required
Lenders.
"SECTION 1.03. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and
conditions and relying upon the representations and
warranties herein set forth, each Lender agrees,
severally and not jointly, to make Revolving Loans to the
Borrower, at any
time and from time to time on or after the date hereof, and
until the earlier of the Maturity Date and the termination
of the Commitment of such Lender in accordance with the
terms hereof, in an aggregate principal amount at any
time outstanding that will not result in such Lender's
Revolving Credit Exposure exceeding such Lender's
Commitment minus the amount by which the outstanding
Competitive Borrowings shall be deemed to have utilized
such Commitment in accordance with Section 2.16. Within
the limits set forth in the preceding sentence and subject
to the terms, conditions and limitations set forth herein,
the Borrower may borrow, pay or prepay and reborrow
Revolving Loans.
SECTION 2.02. Loans. (a) Each Loan (other than
Competitive Loans) shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments; provided,
however, that the failure of any Lender to make any Loan
shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however,
that no Lender shall be responsible for the failure of any
other Lender to make any Loan required to be made by such
other Lender). Each Competitive Loan shall be made in
accordance with the procedures set forth in Section 2.03.
The Loans
comprising any Borrowing shall be in an aggregate principal
amount that is (i) an integral multiple of $1,000,000 and
not less than $10,000,000 or (ii) equal to the remaining
available balance of the Commitments.
(b) Subject to Sections 2.09 and 2.14, each Competitive
Borrowing shall be comprised entirely of Eurodollar
Competitive Loans or Fixed Rate Loans, and each other
Borrowing shall be comprised entirely of ABR Loans
or Eurodollar Loans as the Borrower may request pursuant to
Section 2.03 or 2.04, as applicable. Each Lender may at
its option make any Eurodollar Loan by causing any domestic
or foreign branch or Affiliate of such Lender
to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of this
Agreement. Borrowings of more than one Type may be
outstanding at the same time; provided, however, that the
Borrower shall not be entitled to request any Borrowing
that, if made, would result in more than 15 Eurodollar
Borrowings outstanding hereunder at any time. For purposes
of the foregoing, Borrowings having different Interest
Periods, regardless of whether they commence on the same
date, shall be considered separate Borrowings.
(c) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 11:00 a.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account in the name of the Borrower and designated by the Borrower in the applicable Borrowing Request or Competitive Bid Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
"SECTION 2.03. Competitive Bid Procedure. (a) In order to
request Competitive Bids, the Borrower shall notify the
Administrative Agent of such request by telephone (i) in
the case of a Eurodollar Competitive Borrowing , not later
than 11:00 a.m., New York City time, four Business
Days before the proposed date of such Borrowing and (ii) in
the case of a Fixed Rate Borrowing, not later than 11:00
a.m., New York City time, one Business Day before the
proposed date of such Borrowing. Provided that no two
Competitive Bid Requests submitted on the same day shall be
identical, the Borrower may submit up to (but not more
than) three Competitive Bid Requests on the same day, but a
Competitive Bid Request shall not be made within five
Business Days after the date of any previous
Competitive Bid Request unless such previous Competitive
Bid Request shall have been rejected by the Administrative
Agent, as provided below. No ABR Loan shall be requested
in, or made pursuant to, a Competitive Bid Request. Each
such telephonic Competitive Bid Request shall be confirmed
promptly by hand delivery or telecopy to the Administrative
Agent of a written Competitive Bid Request substantially in
the form of Exhibit D-1. A Competitive Bid Request that
does not conform substantially to the format of Exhibit D-1
may be rejected by the Administrative Agent and the
Administrative Agent shall notify the Borrower of such
rejection as promptly as practicable. Each Competitive Bid
Request shall refer to this Agreement and specify (i)
whether the Borrowing being requested is to be a Eurodollar
Borrowing or a Fixed Rate Borrowing; (ii) the date of such
Borrowing (which shall be a Business Day); (iii) the number
and the location of the account to which funds are to be
disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)); (iv) the aggregate
principal amount of such Borrowing, which shall be a
minimum of $10,000,000 and an integral multiple of
$1,000,000, and in any event shall not result in the sum of
the Aggregate Revolving Credit Exposure and the aggregate
outstanding principal amount of Competitive Loans, after
giving effect to such Borrowing, exceeding the Total
Commitment; and (v) the Interest Period with respect
thereto (which may not end after the Maturity
Date). Promptly after its receipt of a Competitive Bid
Request that is not rejected, the Administrative Agent
shall invite the Lenders in the form set forth as Exhibit
D-2 to bid to make Competitive Loans pursuant to the
Competitive Bid Request.
(b) Each Lender may make one or more Competitive Bids to the Borrower responsive to a Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Administrative Agent by telecopy, (i) in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before the proposed date of such Competitive Borrowing, and (ii) in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the format of Exhibit D-3 may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall refer to this Agreement and specify (x) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested by the Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (y) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans and (z) the Interest Period applicable to such Loan or Loans and the last day thereof.
(c) The Administrative Agent shall promptly notify the Borrower by telecopy of the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid shall have been made and the identity of the Lender that shall have made each bid.
(d) The Borrower may, subject only to the provisions of this paragraph (d), accept or reject any Competitive Bid. The Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject each Competitive Bid, (x) in the case of a Eurodollar Competitive Borrowing, not later than 10:30 a.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and (y) in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the proposed date of the Competitive Borrowing; provided, however, that (i) the failure of the Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Borrower has decided to reject a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) if the Borrower shall accept a Competitive Bid or Bids made at a particular Competitive Bid Rate but the amount of such Competitive Bid or Bids would cause the total amount to be accepted by the Borrower to exceed the amount specified in the Competitive Bid Request, then the Borrower shall accept a portion of such Competitive Bid or Bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids so accepted, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further, however, that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by the Borrower. A notice given by the Borrower pursuant to this paragraph (d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, upon the terms and subject to the conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Administrative Agent pursuant to paragraph (b) above.
(g) Within the limits set forth in this Section 2.03 and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay and reborrow Competitive Loans.
SECTION 2.04. Borrowing Procedure. In order to request a
Borrowing (other than a Competitive Borrowing, as to which
this Section 2.04 shall not apply), the Borrower shall
notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not
later than 11:00 a.m., New York City time, three Business
Days before a proposed Borrowing, and (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City
time, on the day of a proposed Borrowing. Each Borrowing
Request shall be irrevocable, shall be confirmed promptly
by hand delivery or telecopy to the Administrative Agent of
a written Borrowing Request substantially in the form of
Exhibit C or such other form as shall be acceptable to the
Administrative Agent and shall specify the following
information: (i) whether the Borrowing then being requested
is to be a Eurodollar Borrowing or an ABR Borrowing; (ii)
the date of such Borrowing (which shall be a Business Day);
(iii) the number and location of the account to which funds
are to be disbursed (which shall be an account that
complies with the requirements of Section 2.02(c)); (iv)
the amount of such Borrowing; and (v) if such Borrowing is
to be a Eurodollar Borrowing, the Interest Period with
respect thereto; provided, however, that, notwithstanding
any contrary specification in any Borrowing Request, each
requested Borrowing shall comply with the requirements set
forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the
requested Borrowing shall be an ABR Borrowing. If
no Interest Period with respect to any Eurodollar Borrowing
is specified in any such notice, then the Borrower shall be
deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall promptly advise
the Lenders of any notice given pursuant to this
Section 2.04 (and the contents thereof), and of each
Lender's portion of the requested Borrowing.
"SECTION 2.05. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the then unpaid principal amount of each Competitive Loan of such Lender on the last day of the Interest Period applicable to such Loan and (ii) the then unpaid principal amount of each Revolving Loan of such Lender on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.
(e) Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.
SECTION 2.06. Fees. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December in each year, and on the date on which the Commitment of such Lender shall expire or be terminated as provided herein, a facility fee (a "Facility Fee") equal to the Applicable Percentage per annum in effect from time to time on the daily amount of the Commitment of such Lender (whether used or unused) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Maturity Date or the date on which the Commitment of such Lender shall expire or be terminated); provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitment terminates, then the Facility Fee shall continue to accrue (and be payable on demand) on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitment terminates to and including the date on which such Lender ceases to have any Revolving Credit Exposure. All Facility Fees shall be computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) in a year of 360 days. The Facility Fee due to each Lender shall commence to accrue on the date of this Agreement and shall cease to accrue on the later of the date on which the Commitment of such Lender shall expire or be terminated as provided herein and such Lender shall have no Revolving Credit Exposure.
(b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees separately agreed to in writing from time to time by the Borrower and the Administrative Agent (the "Administrative Agent Fees").
(c) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate,among the Lenders. Once paid, none of the Fees shall be refundable under any circumstances.
SECTION 2.07. Interest on Loans. (a) Subject to the provisions of Section 2.08, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage in effect from time to time.
(b) Subject to the provisions of Section 2.08, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) over a year of 360 days) at a rate per annum equal to (i) in the case of each Revolving Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage in effect from time to time, and (ii) in the case of each Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03.
(c) Subject to the provisions of Section 2.08, each Fixed Rate Loan shall bear interest (computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) over a year of 360 days) at a rate per annum equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03.
(d) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement; provided that (i) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (ii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. The applicable Alternate Base Rate or LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.08. Default Interest. If the Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) (a) in the case of overdue principal, at the rate otherwise applicable to such Loan pursuant to Section 2.07 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed (including the first day but excluding the last day) over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the rate that would be applicable to an ABR Revolving Loan plus 2.00%.
SECTION 2.09. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that reasonable means do not exist for ascertaining the LIBO Rate, or the Administrative Agent shall have been informed by the Required Lenders (or, in the case of a Eurodollar Competitive Loan, any Lender required to make such Loan) that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to the Required Lenders (or such Lender) of making or maintaining their or its Eurodollar Loan during such Interest Period, the Administrative Agent shall, as soon as practicable thereafter, give written or telecopy notice thereof to the Borrower and the Lenders. In the event of any such notice, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any request by the Borrower for a Eurodollar Revolving Credit Borrowing pursuant to Section 2.04 shall be deemed to be a request for an ABR Borrowing and (ii) any request by the Borrower for a Eurodollar Competitive Borrowing pursuant to Section 2.03 shall be of no force and effect and shall be denied by the Administrative Agent; provided that if the ircumstances giving rise to such notice do not affect all the Lenders, then the Borrower may make requests for Eurodollar Competitive Borrowings to Lenders that are not affected thereby. Each determination by the Administrative Agent under this Section 2.09 shall be conclusive absent manifest error.
"SECTION 2.10. Termination and Reduction of Commitments.
(a) The Commitments shall automatically terminate on the
Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitments; provided, however, that (i) each partial reduction of the Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $10,000,000 and (ii) the Total Commitment shall not be reduced to an amount that is less than the sum of the Aggregate Revolving Credit Exposure and the aggregate outstanding principal amount of the Competitive Loans at the time.
(c) Each reduction in the Commitments hereunder shall be made ratably among the Lenders in accordance with their respective Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Facility Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction.
"SECTION 2.11. Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent (a) not later than 11:00 a.m., New York City time, on the day of conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 11:00 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Revolving Credit Borrowing or to continue any Eurodollar Revolving Credit Borrowing as a Eurodollar Revolving Credit Borrowing for an additional Interest Period, and (c) not later than 11:00 a.m., New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Revolving Credit Borrowing to another permissible Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15;
(v) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and
(vii) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of a Default or Event of Default, no outstanding Revolving Loan may be converted into, or continued as, a Eurodollar Loan and, unless repaid, each Eurodollar Revolving Borrowing shall be converted into an ABR Borrowing at the end of the Interest Period applicable thereto.
Each notice pursuant to this Section 2.11 shall refer to
this Agreement and specify (i) the identity and amount of
the Borrowing that the Borrower requests be converted or
continued, (ii) whether such Borrowing is to be converted
to or continued as a Eurodollar Borrowing or an ABR
Borrowing, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and
(iv) if such Borrowing is to be converted to or continued
as a Eurodollar Borrowing, the Interest Period with respect
thereto. If no Interest Period is specified in any such
notice with respect to any conversion to or continuation as
a Eurodollar Borrowing, the Borrower shall be deemed to
have selected an Interest Period of one month's duration.
The Administrative Agent shall advise the Lenders of any
notice given pursuant to this Section 2.11 and of each
Lender's portion of any converted or continued Borrowing.
If the Borrower shall not have given notice in accordance
with this Section 2.11 to continue any Borrowing into
a subsequent Interest Period (and shall not otherwise have
given notice in accordance with this Section 2.11 to
convert such Borrowing), such Borrowing shall, at the end
of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be
continued into an ABR Borrowing. The Borrower shall not
have the right to continue or convert the Interest Period
with respect to any Competitive Borrowing pursuant to this
Section 2.11.
SECTION 2.12. Optional Prepayment. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing (other than a Competitive Borrowing), in whole or in part, upon at least three Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) in the case of Eurodollar Loans, or written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) on the day of prepayment in the case of ABR Loans, to the Administrative Agent before 11:00 a.m., New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000. The Borrower shall not have the right to prepay any Competitive Borrowing.
(b) In the event of any termination of all the Commitments, the Borrower shall repay or prepay all its outstanding Revolving Credit Borrowings on the date of such termination. If as a result of any partial reduction of the Commitments the sum of the Aggregate Revolving Credit Exposure and the aggregate outstanding principal amount of the Competitive Loans at the time would exceed the Total Commitment after giving effect thereto, then the Borrower shall, on the date of such reduction, repay or prepay Revolving Credit Borrowings in an amount sufficient to eliminate such excess.
(c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.12 (other than prepayment of an ABR Loan that does not occur in connection with, or as a result of, the reduction or termination of the Commitments) shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.
"SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender or shall impose on such Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrower will pay to such Lender upon demand such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.(b) If any Lender shall have determined that any Change in Law regarding capital adequacy has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or
amounts necessary to compensate such Lender or its holding
company, as applicable, as specified in paragraph (a) or
(b) above shall be delivered to the Borrower
and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on
any such certificate delivered by it within 15 days after
its receipt of the same.
(d) Failure or delay on the part of any Lender to demand
compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on
capital shall not constitute a waiver of such Lender's
right to demand such compensation; provided that the
Borrower shall not be under any obligation to compensate
any Lender under paragraph (a) or (b) above with respect to
increased costs or reductions with respect to any period
prior to the date that is 120 days prior to such request
if such Lender knew or could reasonably have been expected
to know of the circumstances giving rise to such increased
costs or reductions and of the fact that such circumstances
could reasonably be expected to result in a claim for
increased compensation by reason of such increased costs or
reductions; provided further that the foregoing limitation
shall not apply to any increased costs or reductions
arising out of the retroactive application of any Change
in Law within such 120-day period. The protection of this
Section shall be available to each Lender regardless of any
possible contention of the invalidity or inapplicability of
the Change in Law that shall have occurred or been imposed.
Notwithstanding any other provision of this Section, no
Lender shall be entitled to demand compensation hereunder
in respect of any Competitive Loan if it shall have been
aware of the event or circumstance giving rise to such
demand at the time it submitted the Competitive Bid
pursuant to which such Loan was made.
"SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans), whereupon such Lender shall not submit a Competitive Bid in response to a request for a Eurodollar Competitive Loan and any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.
"SECTION 2.15. Break Funding. The Borrower shall
compensate each Lender for any loss or expense that such
Lender may sustain or incur as a consequence of (a) such
Lender receiving or being deemed to receive any amount on
account of the principal of any Fixed Rate Loan or
Eurodollar Loan prior to the end of the Interest Period in
effect therefor, (b) the conversion of any Eurodollar Loan
to an ABR Loan, or the conversion of the Interest Period
with respect to any Eurodollar Loan, in each case other
than on the last day of the Interest Period in effect
therefor or (c) the failure of the Borrower to borrow,
convert, continue or prepay any Fixed Rate Loan or
Eurodollar Loan made or to be made by such Lender
(including any Eurodollar Loan to be made pursuant to a
conversion or continuation under Section 2.11) after notice
of
such borrowing, conversion, continuation or prepayment
shall have been given by the Borrower hereunder (any of the
events referred to in this sentence being called a
"Breakage Event"). In the case of any Breakage
Event, such loss shall include an amount equal to the
excess, as reasonably determined by such Lender, of (i) its
cost of obtaining funds for the Fixed Rate Loan or
Eurodollar Loan that is the subject of such Breakage Event
for the period from the date of such Breakage Event to the
last day of the Interest Period in effect (or that would
have been in effect) for such Loan over (ii) the amount of
interest likely to be realized by such Lender in
redeploying the funds released or not utilized by reason of
such Breakage Event for such period. A certificate of any
Lender setting forth any amount or amounts which such
Lender is entitled to receive pursuant to this
Section 2.15 shall be delivered to the Borrower and shall
be conclusive absent manifest error. The Borrower shall
pay such Lender the amount due within 15 days of the
receipt of any such certificate.
"SECTION 2.16. Pro Rata Treatment. Except as provided
below in this Section 2.16 with respect to Competitive
Borrowings and as required under Section 2.14, each
Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each
payment of the Facility Fees, each reduction of the
Commitments and each conversion of any Borrowing to or
continuation of any Borrowing as a Borrowing of any Type
shall be allocated pro rata among the Lenders in accordance
with their respective Commitments (or, if such Commitments
shall have expired or been terminated, in accordance with
the respective principal amounts of their outstanding
Loans). Each payment of principal of and interest on any
Competitive Borrowing shall be allocated pro rata among the
Lenders participating in such Borrowing in accordance with
the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing.
For purposes of determining the available Commitments of
the Lenders at any time, each outstanding Competitive
Borrowing shall be deemed to have utilized the Commitments
of the Lenders (including those Lenders which shall not
have made Loans as part of such Competitive Borrowing) pro
rata in accordance with such respective Commitments. Each
Lender agrees that in computing such Lender's portion of
any Borrowing to be made hereunder, the Administrative
Agent may, in its discretion, round each Lender's
percentage of such Borrowing to the next higher or lower
whole dollar amount.
"SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a rightof banker's lien, setoff or counterclaim against the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim,received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a result of which the unpaid principal portion of its Loans shall be proportionately less than the unpaid principal portion of the Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans of such other Lender, so that the aggregate unpaid principal amount of the Loans and participations in Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Loans outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in a Loan deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.
"SECTION 2.18. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder not later than 12:00 (noon), New York City time, on the date when due in immediately available dollars, without setoff, defense or counterclaim. Each such payment shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, NY 10010 or as otherwise instructed by the Administrative Agent.
(b) Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.
"SECTION 2.19. Taxes. (a) Any and all payments by the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or such Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes not paid pursuant to Section 2.19(a)(iii) to the relevant Governmental Authority in accordance with applicable law. As of the Closing Date, each Foreign Lender intends to make Loans hereunder out of an office located in the United States of America or out of an office so that such Loans would not be subject to Other Taxes.
(c) The Borrower shall indemnify the Administrative Agent and each Lender, within 15 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided, however, that the Borrower shall not be obligated to make a payment pursuant to this Section 2.19 in respect of penalties, interest and other liabilities attributable to any Indemnified Taxes or Other Taxes, if (i) such penalties, interest and other liabilities are attributable to the failure of the Administrative Agent or such Lender, as the case may be, to pay amounts paid to the Administrative Agent or such Lender by the Borrower (for Indemnified Taxes or Other Taxes) to the appropriate taxing authority in a timely manner after receipt of such payment from the Borrower or (ii) such penalties, interest and other liabilities are attributable to the gross negligence or wilful misconduct of the Administrative Agent or such Lender, as the case may be. After the Administrative Agent or a Lender learns of the imposition of Indemnified Taxes or Other Taxes, such person will act in good faith to promptly notify the Borrower of its obligations hereunder. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law and reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Each Foreign Lender, before it signs and delivers this Agreement if listed on the signature pages hereof and before it becomes a Lender in the case of each other Foreign Lender, and from time to time thereafter, before the date any such form expires or becomes obsolete or invalid, shall provide the Borrower and the Administrative Agent with Internal Revenue Service form W-8BEN or W-8ECI (or other appropriate or successor form prescribed by the Internal Revenue Service) in duplicate, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States of America is a party which exempts the Foreign Lender from U.S. withholding tax on payments of interest for the account of such Foreign Lender or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct by such Foreign Lender of a trade or business in the United States of America and exempt from United States withholding tax.
(f) If the Administrative Agent or a Lender determines that it has received a refund or credit in respect of and specifically associated with any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower, or with respect to which the Borrower has paid additional amounts, it shall promptly notify the Borrower of such refund or credit and shall within 15 days from the date of receipt of such refund or benefit of such credit pay over the amount of such refund or benefit of such credit (including any interest paid or credited by the relevant taxing authority or Governmental Authority with respect to such refund or credit) to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower with respect to the Indemnified Taxes or Other Taxes giving rise to such refund of credit), net of all out-of-pocket expenses of such person. If the Administrative Agent or a Lender shall become aware that it is entitled to receive a refund or credit in respect of Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts, it shall promptly notify the Borrower of the availability of such refund or credit and shall, within 15 days after receipt of a request for such by the Borrower (whether as a result of notification that it has made of such to the Borrower or otherwise), make a claim to such taxing authority or Governmental Authority for such refund or credit and contest such Indemnified Taxes, Other Taxes or liabilities if (i) such Lender or the Administrative Agent determines, in its sole discretion, that it would not be materially disadvantaged or prejudiced as a result of such contest (it being understood that the mere existence of fees, charges, costs or expenses that the Borrower has offered to and agreed to pay on behalf of a Lender or the Administrative Agent shall not be deemed to be materially disadvantageous to such person) and (ii) the Borrower furnishes, upon request of the Lender or the Administrative Agent, an opinion of reputable tax counsel (such opinion and such counsel to be acceptable to such Lender or the Administrative Agent) to the effect that such Indemnified Taxes or Other Taxes were wrongfully or illegally imposed.
"SECTION 2.20. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate. (a) In the event (i) any
Lender delivers a certificate requesting compensation
pursuant to Section 2.13, (ii) any Lender delivers a
notice described in Section 2.14 or (iii) the Borrower is
required to pay any additional amount to any Lender or any
Governmental Authority on account of any Lender pursuant
to Section 2.19, the Borrower may, at its sole expense
and effort (including with respect to the processing and
recordation fee referred to in Section 9.04(b)), upon
notice to such Lender and the Administrative Agent, require
such Lender to transfer and assign, without recourse (in
accordance with and subject to the restrictions
contained in Section 9.04), all of its interests, rights
and obligations under this Agreement to an assignee that
shall assume such assigned obligations (which assignee may
be another Lender, if a Lender accepts such assignment);
provided that (x) such assignment shall not conflict with
any law, rule or regulation or order of any court or other
Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of
the Administrative Agent, which consent shall not
unreasonably be withheld, and (z) the Borrower or such
assignee shall have paid to the affected Lender in
immediately available funds an amount equal to the sum of
the principal of and interest accrued to the date of such
payment on the outstanding Loans of such Lender,
respectively, plus all Fees and other amounts accrued for
the account of such Lender hereunder (including any
amounts under Section 2.13 and Section 2.15); provided
further that, if prior to any such transfer and assignment
the circumstances or event that resulted in such Lender's
claim for compensation under Section 2.13 or notice under
Section 2.14 or the amounts paid pursuant to Section 2.19,
as the case may be, cease to cause such Lender to suffer
increased costs or reductions in amounts received or
receivable or reduction in return on capital, or cease to
have the consequences specified in Section 2.14, or cease
to result in amounts being payable under Section 2.19, as
the case may be (including as a result of any action taken
by such Lender pursuant to paragraph (b) below), or if
such Lender shall waive its right to claim further
compensation under Section 2.13 in respect of such
circumstances or event or shall withdraw its notice under
Section 2.14 or shall waive its right to further payments
under Section 2.19 in respect of such circumstances or
event, as the case may be, then such Lender shall not
thereafter be required to make any such transfer and
assignment hereunder.
(b) If (i) any Lender shall request compensation under
Section 2.13, (ii) any Lender delivers a notice described
in Section 2.14 or (iii) the Borrower is required to pay
any additional amount or indemnity payment to any Lender
or any Governmental Authority on account of any Lender,
pursuant to Section 2.19, then such Lender shall
use reasonable efforts (which shall not require such Lender
to incur an unreimbursed loss or unreimbursed cost or
expense or otherwise take any action inconsistent with its
internal policies or legal or regulatory restrictions or
suffer any disadvantage or burden deemed by it to be
significant) (x) to file any certificate or document
reasonably requested in writing by the Borrower or (y) to
assign its rights and delegate and transfer its obligations
hereunder to another of its offices, branches or
affiliates, if such filing or assignment would reduce its
claims for compensation under Section 2.13 or enable it to
withdraw its notice pursuant to Section 2.14 or would
reduce amounts payable pursuant to Section 2.19, as the
case may be, in the future. The Borrower hereby agrees to
pay all reasonable costs and expenses incurred by any
Lender in connection with any such filing or assignment,
delegation and transfer.
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Administrative Agent and each of the Lenders that:
"SECTION 3.01. Organization; Powers. The Borrower and each of the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect.
"SECTION 3.02. Authorization. The execution, delivery and performance by the Borrower of this Agreement and the transactions contemplated hereby (including the Borrowings hereunder) (collectively, the "Transactions") (a) are within the Borrower's corporate powers and have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of the Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, the effect of which could reasonably be expected to result in a Material Adverse Effect, (ii) result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument, the effect of which could reasonably be expected to result in a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary.
"SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally and to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
"SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for such as have been made or obtained and are in full force and effect.
"SECTION 3.05. Financial Statements. The Borrower has heretofore furnished to the Lenders its consolidated balance sheets and related statements of income, stockholders' equity and cash flows (i) as of and for the fiscal year ended December 31, 2000, audited by and accompanied by the opinion of PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2001, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.
"SECTION 3.06. No Material Adverse Change. Since December 31, 2000, there has been no material adverse change in the financial condition, results of operations or business of the Borrower and the Subsidiaries, taken as a whole.
"SECTION 3.07. Subsidiaries. Schedule 3.07 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of the Borrower therein.
"SECTION 3.08. Litigation; Compliance with Laws. (a) There are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve this Agreement or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(b) None of the Borrower or any of the Subsidiaries is in violation of any law, rule or regulation, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.
"SECTION 3.09. Federal Reserve Regulations. (a) The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.
"SECTION 3.10. Investment Company Act; Public Utility Holding Company Act. None of the Borrower or any of the Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.
"SECTION 3.11. Use of Proceeds. The Borrower will use the proceeds of the Loans only for the purposes specified in the preamble to this Agreement.
"SECTION 3.12. Tax Returns. Each of the Borrower and the Subsidiaries has filed or caused to be filed all Federal, state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all Taxes due and payable by it and all assessments received by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
"SECTION 3.13. No Material Misstatements. None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein taken as a whole, in the light of the circumstances under which they were made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule.
"SECTION 3.14. Employee Benefit Plans. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. The accumulated benefit obligations (as defined in Statement of Financial Accounting Standards No. 87) under all Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the last annual valuation dates applicable thereto, exceed by more than $50,000,000 the fair market value of the assets of all such Plans.
"SECTION 3.15. Environmental Matters. Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) is subject to any Environmental Liability, (iii) has received written notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability of the Borrower or the Subsidiaries.
"SECTION 3.16. Senior Indebtedness. The Loans and other obligations hereunder constitute "Senior Indebtedness" under and as defined in the Subordinated Note Documents.
ARTICLE IV
IV Conditions of Lending
The obligations of the Lenders to make Loans hereunder are subject to the satisfaction of the following conditions:
"SECTION 4.01. All Borrowings. On the date of each Borrowing:
(a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 or 2.04, as applicable.
(b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Borrowing with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.
(c) At the time of and immediately after such Borrowing, no Event of Default or Default shall have occurred and be continuing.
Each Borrowing shall be deemed to constitute a
representation and warranty by the Borrower on the date of
such Borrowing as to the matters specified in paragraphs
(b) and (c) of this Section 4.01.
"SECTION 4.02. Closing Date. On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received, on behalf of itself and the Lenders a favorable written opinion of each of (i) Bradford T. Smith, Chief Legal Counsel of the Borrower, substantially to the effect set forth in Exhibit E-1, and (ii) Davis Polk & Wardwell, special counsel for the Borrower, substantially to the effect set forth in Exhibit E-2, (A) dated the Closing Date, (B) addressed to the Administrative Agent and the Lenders, and (C) covering such other matters relating to this Agreement and the Transactions as the Administrative Agent shall reasonably request, and the Borrower hereby requests such counsel to deliver such opinions.
(c) The Administrative Agent shall have received (i) a
copy of the certificate of incorporation, including all
amendments thereto, of the Borrower, certified as of a
recent date by the Secretary of State of the State of
Delaware, and a certificate as to the good standing of the
Borrower as of a recent date, from such Secretary of State;
(ii) a certificate of the Secretary or Assistant
Secretary of the Borrower dated the Closing Date and
certifying (A) that attached thereto is a true and complete
copy of the by-laws of the Borrower as in effect on the
Closing Date and at all times since a date prior to the
date of the resolutions described in clause (B) below, (B)
that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of the
Borrower authorizing the execution, delivery and
performance of this Agreement and the borrowings hereunder,
and that such resolutions have not been modified, rescinded
or amended and are in full force and effect, (C) that the
certificate of incorporation of the Borrower has not been
amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen
signature of each officer executing this Agreement or
any other document delivered in connection herewith on
behalf of the Borrower; (iii) a certificate of another
officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate
pursuant to (ii) above; and (iv) such other documents
relating to the Borrower, this Agreement or the
Transactions as the Lenders or the Administrative Agent may
reasonably request.
(d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01.
(e) The Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.
(f) The Three-Year Credit Agreement shall have been executed and delivered and the conditions precedent set forth in Section 4.02 thereof satisfied or waived.
(g) All principal, interest, fees and other amounts outstanding or due under the Existing Credit Agreement shall have been paid in full, the commitments thereunder terminated and all guarantees thereof released and discharged, and the Administrative Agent shall have received satisfactory evidence thereof.
(h) The credit facilities provided for by this Agreement and the Three-Year Credit Agreement shall be rated not lower than BBB by S&P, and the Administrative Agent shall have received satisfactory evidence thereof.
ARTICLE V
Affirmative Covenants
The Borrower covenants and agrees with each Lender that until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable hereunder shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each of the Subsidiaries to:
"SECTION 5.01. Existence; Businesses and Properties. (a)
Do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal
existence, except as otherwise expressly permitted under
Section 6.04.
(b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect its rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names, and comply in all material respects with all applicable laws, rules, regulations and decrees and orders of any Governmental Authority, in each case except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
"SECTION 5.02. Insurance. Maintain with responsible and reputable insurance companies insurance, to such extent and against such risks as is customary with companies in the same or similar businesses operating in the same or similar locations.
"SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations, including Taxes, before the same shall become delinquent or in default, except where (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
"SECTION 5.04. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 105 days after the end of each fiscal year, its consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the close of and for such fiscal year, together with comparative figures for the immediately preceding fiscal year, all audited by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the close of and for such fiscal quarter and the then elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer (A) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, (B) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.07 and 6.08 and (C) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.05 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;
(d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be;
(e) promptly after the receipt thereof by the Borrower or any of its Subsidiaries, a copy of any "management letter" received by any such person from its certified public accountants and the management's response thereto; and
(f) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request.
"SECTION 5.05. Litigation and Other Notices. In the case of the Borrower, furnish to the Administrative Agent and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;
(b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;
(c) any change in the rating by S&P of the Index Debt; and
(d) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect.
"SECTION 5.06. Maintaining Records; Access to Properties and Inspections. Keep books of record and account in conformity with GAAP and all requirements of law in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect the financial records and the properties of the Borrower or any Subsidiary at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of the Borrower or any Subsidiary with the officers thereof and independent accountants therefor.
"SECTION 5.07. Use of Proceeds. Use the proceeds of the Loans only for the purposes set forth in the preamble to this Agreement.
ARTICLE VI
Negative Covenants
The Borrower covenants and agrees with each Lender that, until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable hereunder have been paid in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not cause or permit any of the Subsidiaries to:
"SECTION 6.01. Subsidiary Indebtedness. With respect to the Subsidiaries, incur, create, issue, assume or permit to exist any Indebtedness or preferred stock, except:
(a) Indebtedness or preferred stock existing on the date hereof and having an aggregate principal amount (or, in the case of preferred stock, an aggregate liquidation preference) of less than $25,000,000 in the aggregate and, in the case of any such Indebtedness, any extensions, renewals or replacements thereof to the extent the principal amount of such Indebtedness is not increased, and such Indebtedness, if subordinated to the Loans, remains so subordinated on terms no less favorable to the Lenders, and the original obligors in respect of such Indebtedness remain the only obligors thereon;
(b) Indebtedness created or existing (i) hereunder or
(ii) under the Three-Year Credit Agreement;
(c) intercompany Indebtedness or preferred stock to the extent owing to or held by the Borrower or another Subsidiary;
(d) Indebtedness of any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or
capital assets, and extensions, renewals and replacements
of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (i)
such Indebtedness is incurred prior to or within 180 days
after such acquisition or the completion of such
construction or improvement and (ii) the aggregate
principal amount of Indebtedness permitted by this Section
6.01(d), when combined with the aggregate principal amount
of all Capital Lease Obligations incurred pursuant to
Section 6.01(e) and all Indebtedness incurred pursuant to
Section 6.01(f), shall not exceed $100,000,000 at any
time outstanding;
(e) Capital Lease Obligations in an aggregate principal amount, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(d) and Section 6.01(f), not in excess of $100,000,000 at any time outstanding;
(f) Indebtedness of any person that becomes a Subsidiary after the date hereof; provided that (i) such Indebtedness exists at the time such person becomes a Subsidiary and is not created in contemplation of or in connection with such person becoming a Subsidiary, (ii) immediately before and after such person becomes a Subsidiary, no Event of Default or Default shall have occurred and be continuing and (iii) the aggregate principal amount of Indebtedness permitted by this clause (f), when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(d) and all Capital Lease Obligations incurred pursuant to Section 6.01(e), shall not exceed $100,000,000 at any time outstanding;
(g) Indebtedness under performance bonds or with respect to workers' compensation claims, in each case incurred in the ordinary course of business; and
(h) additional Indebtedness or preferred stock of the
Subsidiaries to the extent not otherwise permitted by the
foregoing clauses of this Section 6.01 in an aggregate
principal amount (or, in the case of preferred stock, with
an aggregate liquidation preference), when combined
(without duplication) with the amount of obligations of the
Borrower and its Subsidiaries secured by Liens pursuant to
Section 6.02(j), not to exceed $100,000,000 at any time
outstanding.
"SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its
Subsidiaries existing on the date hereof and encumbering
property or assets with a fair market value, and securing
obligations having an aggregate principal amount, in each
case less than $25,000,000 in the aggregate; provided that
(x) such Liens shall secure only those obligations which
they secure on the date hereof and extensions, renewals and
replacements thereof permitted hereunder and (y) such
Liens shall not apply to any other property or assets of
the Borrower or any of the Subsidiaries;
(b) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any person that becomes a Subsidiary after the date hereof prior to the time such person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Subsidiary, as the case may be, (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof permitted hereunder;
(c) Liens for taxes not yet due or which are being contested in compliance with Section 5.03;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more than 90 days or which are being contested in compliance with Section 5.03;
(e) pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance and other social security laws or regulations;
(f) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(g) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;
(h) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or,
in the case of improvements, constructed) by the Borrower
or any Subsidiary; provided that (i) such security
interests secure Indebtedness permitted by Section 6.01,
(ii) such security interests are incurred, and the
Indebtedness secured thereby is created, within 180 days
after such acquisition (or construction) and (iii) such
security interests do not apply to any other property or
assets of the Borrower or any Subsidiary;
(i) Liens in respect of judgments that do not constitute an Event of Default; and
(j) Liens not otherwise permitted by the foregoing clauses of this Section 6.02 securing obligations otherwise permitted by this Agreement in an aggregate principal and face amount, when combined (without duplication) with the amount of Indebtedness or preferred stock of Subsidiaries incurred pursuant to Section 6.01(h), not to exceed $100,000,000 at any time outstanding.
"SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred unless (a) the sale of such property is permitted by Section 6.04 and (b) any Capital Lease Obligations or Liens arising in connection therewith are permitted by Sections 6.01 and 6.02, respectively.
"SECTION 6.04. Mergers, Consolidations and Sales of Assets. Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower, except that, if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing, (a) any person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation and (b) any person, other than the Borrower, may merge into or consolidate with any Subsidiary in a transaction in which the surviving entity is a Subsidiary.
"SECTION 6.05. Restricted Payments. Declare or make, or
agree to declare or make, directly or indirectly, any
Restricted Payment (including pursuant to any Synthetic
Purchase Agreement), or incur any obligation (contingent or
otherwise) to do so; provided, however, that (i) any
Subsidiary may declare and pay dividends or make other
distributions ratably to holders of Equity Interests in it,
(ii) the Borrower may declare and pay dividends or make
other distributions of its Equity Interests and (iii) so
long as no Default or Event of Default shall have occurred
and be continuing or would result therefrom, the Borrower
and the Subsidiaries may declare and make, directly or
indirectly, additional Restricted Payments to the extent
not otherwise permitted by the foregoing clauses of this
Section 6.05 in an aggregate amount not to exceed
$300,000,000.
"SECTION 6.06. Business of Borrower and Subsidiaries. Engage to any material extent in any business or business activity other than businesses of the type currently conducted by the Borrower and the Subsidiaries and business activities reasonably related thereto.
"SECTION 6.07.Interest Coverage Ratio. Permit the Interest Coverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, to be less than 5.0 to 1.0.
"SECTION 6.08. Maximum Leverage Ratio. Permit the Leverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, to be greater than 2.5 to 1.0.
"SECTION 6.09. Hedging Agreements . Enter into any Hedging Agreement other than non-speculative Hedging Agreements entered into to hedge or mitigate risks to which the Borrower or a Subsidiary is exposed in the ordinary course of the conduct of its business or the management of its liabilities.
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of Default"):
(a) any representation or warranty made or deemed made in or in connection with this Agreement or the Borrowings hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to this Agreement shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in (b) above) due under this Agreement, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or
performance by the Borrower or any Subsidiary of any
covenant, condition or agreement contained in Section
5.01(a) (with respect to the Borrower), 5.05(a) or 5.07
or in Article VI;
(e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in this Agreement (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);
(f) (i) the Borrower or any Material Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any applicable grace period), or (ii) any other event or condition occurs (after giving effect to any applicable grace period) that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;
(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any Material Subsidiary, or of a substantial part of the property or assets of the Borrower or a Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of the property or assets of the Borrower or a Material Subsidiary or (iii) the winding-up or liquidation of the Borrower or any Material Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(h) the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of the property or assets of the Borrower or any Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an amount in excess of $50,000,000 individually or $75,000,000 in the aggregate shall be rendered against the Borrower, any Material Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Material Subsidiary to enforce any such judgment; provided, however, that any such judgment shall not be an Event of Default under this paragraph (i) if and for so long as (i) the entire amount of such judgment is covered by a valid and binding policy of insurance between the defendant and the insurer covering payment thereof and (ii) such insurer, which shall be rated at least "A" by A.M. Best Company, has been notified of, and has not disputed the claim made for payment of the amount of such judgment;.
(j) one or more ERISA Events shall have occurred that results in liability of the Borrower and its ERISA Affiliates exceeding $50,000,000 individually or $75,000,000 in the aggregate; or
(k) there shall have occurred a Change in Control;then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained hereinto the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent
Each of the Lenders hereby irrevocably appoints the Administrative Agent its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of this Agreement, together with such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or
obligations except those expressly set forth in this
Agreement. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be
subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and
powers expressly contemplated by this Agreement that the
Administrative Agent is required to exercise in writing
by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the
circumstances as provided in Section 9.08),
and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose,
and shall not be liable for the failure to disclose, any
information relating to the Borrower or any of the
Subsidiaries that is communicated to or obtained by the
bank serving as Administrative Agent or any of its
Affiliates in any capacity. The Administrative Agent
shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders
(or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in
Section 9.08) or in the absence of its own gross negligence
or wilful misconduct. The Administrative Agent shall not
be deemed to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent
by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this
Agreement, (ii) the contents of any certificate,
report or other document delivered thereunder or in
connection therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or
conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this
Agreement or any other agreement, instrument or document,
or (v) the satisfaction of any condition set forth in
Article IV or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative
Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required
Lenders shall have the right, with the consent
of the Borrower (such consent not to be unreasonably
withheld or delayed), to appoint a successor. If no
successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent
gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint
a
successor Administrative Agent which shall be a bank with
an office in New York, New York, or an Affiliate of any
such bank, that is acceptable to the Borrower (which shall
not unreasonably withhold its approval). Upon the
acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. The fees payable
by the Borrower to a successor Administrative shall be the
same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor.
After the Administrative Agent's resignation hereunder,
the provisions of this Article and Section 9.05 shall
continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective
Related Parties in respect of any actions taken or omitted
to be taken by any of them while acting as Administrative
Agent.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
"SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 231 Maple Avenue, Burlington, NC 27215, Attention of Wesley R. Elingburg (Telecopy No. (336) 436-1066);
(b) if to the Administrative Agent, to Credit Suisse First Boston, Eleven Madison Avenue, New York, NY 10010, Attention of Ronald Davis, Agency Group (Telecopy No. (212) 325-8304, with a copy to Credit Suisse First Boston, at Eleven Madison Avenue, New York, NY 10010, Attention of Agency Group Manager (Telecopy No. (212) 325-8304); and
(c) if to a Lender, to it at its address (or telecopy number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
"SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement, or any investigation made by or on behalf of the Administrative Agent or any Lender.
"SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.
"SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, the Administrative Agent or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, (x) the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed); provided, however, that the consent of the Borrower shall not be required to any such assignment during the continuance of any Event of Default described in paragraph (g) or (h) of Article VII, and (y) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire remaining amount of such Lender's Commitment), (ii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations under this Agreement, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and applicable tax forms. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, 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 Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account and not yet paid). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any such Loans so retained until such Loans have been repaid in full in accordance with this Agreement.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the
assignee thereunder shall be deemed to confirm to and agree
with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and
beneficial owner of the interest being assigned thereby
free and clear of any adverse claim and that its
Commitment, and the outstanding balances of its Revolving
Loans and Competitive Loans, in each case without giving
effect to assignments thereof which have not become
effective, are as set forth in such Assignment and
Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with
this Agreement, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished
pursuant hereto, or the financial condition of the Borrower
or any Subsidiary or the performance or observance by the
Borrower or any Subsidiary of any of its obligations under
this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into
such Assignment and Acceptance; (iv) such assignee confirms
that it has received a copy of this Agreement, together
with copies of the most recent financial statements
referred to in Section 3.05 or delivered pursuant to
Section 5.04 and such other documents and information as it
has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (v)
such assignee will independently and without reliance upon
the Administrative Agent, such assigning Lender or
any other Lender and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking action under this Agreement; (vi) such assignee
appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance
with their terms all the obligations which by the terms
of this Agreement are required to be performed by it as a
Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive and the Borrower, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if they were Lenders (but, with respect to any particular participant, to no greater extent than the Lender that sold the participation to such participant) and (iv) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16.
(h) Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.
(i) Notwithstanding anything to the contrary contained
herein, any Lender (a "Granting Lender") may grant to a
special purpose funding vehicle (an "SPC"), identified as
such in writing from time to time by the Granting Lender to
the Administrative Agent and the Borrower, the option
to provide to the Borrower all or any part of any Loan that
such Granting Lender would otherwise be obligated to make
to the Borrower pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC
to make any Loan and (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or
any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof.
The making of a Loan by an SPC hereunder shall utilize the
Commitment of the Granting Lender to the same extent, and
as if, such Loan were made by such Granting Lender. Each
party hereto hereby agrees that no SPC shall be liable for
any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the
Granting Lender). In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive
the termination of this Agreement) that, prior to the date
that is one year and one day after the payment in full of
all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or
join any other person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the
United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this
Section 9.04, any SPC may (i) with notice to, but without
the prior written consent of, the Borrower and the
Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any
Loans to the Granting Lender or to any financial
institutions (consented to by the Borrower and
Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the
funding or maintenance of Loans and (ii) disclose on a
confidential basis any non-public information relating to
its Loans to any rating agency, commercial paper dealer or
provider of any surety, guarantee or credit or liquidity
enhancement to such SPC.
(j) The Borrower shall not assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent and each Lender, and any attempted assignment without such consent shall be null and void.
SECTION 9.05. Expenses; Indemnity. tc \l2 "SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent in connection with the syndication of the credit facilities provided for herein and the preparation and administration of this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement or in connection with the Loans made hereunder, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel for the Administrative Agent or any Lender.
(b) The Borrower agrees to indemnify the Administrative
Agent, each Lender and each Related Party of any of the
foregoing persons (each such person being called an
"Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable counsel fees,
charges and disbursements, incurred by or asserted against
any Indemnitee (other than Taxes, Other Taxes or amounts
that would be Other Taxes if imposed by the United States
of America or any political subdivision thereof) arising
out of, in any way connected with, or as a result of (i)
the execution or delivery of this Agreement or any
agreement or instrument contemplated thereby, the
performance by the parties thereto of their respective
obligations thereunder or the consummation of the
Transactions and the other transactions contemplated
thereby, (ii) the use of the proceeds of the Loans, or
(iii) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any
Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities
or related expenses (x) are determined by a court of
competent jurisdiction by final and nonappealable judgment
(a "Final Judgment") to have resulted from the gross
negligence or wilful misconduct of such Indemnitee or (y)
arise from any legal proceedings
commenced against any Lender by any other Lender (other
than legal proceedings against the Administrative Agent in
its capacity as such) or in which a Final Judgment is
rendered in the Borrower's favor against such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the Aggregate Revolving Credit Exposure and unused Commitments at the time.
(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof.
(e) All amounts due under this Section 9.05 shall be payable not later than 15 days after written demand therefor.
SECTION 9.06. Right of Setoff. tc \l2 "SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.
"SECTION 9.07. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
"SECTION 9.08. Waivers; Amendment. (a) No failure or
delay of the Administrative Agent or any Lender in
exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and
remedies of the Administrative Agent and the Lenders
hereunder are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any
departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose
for which given. No notice 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.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement
or agreements in writing entered into by the Borrower and
the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal
payment date or date for the payment of any interest on any
Loan, or waive or excuse any such payment or any part
thereof, or decrease the rate of interest on any Loan,
without the prior written consent of each Lender affected
thereby, (ii) increase or extend the Commitment or decrease
or extend the date for payment of any Fees of any Lender
without the prior written consent of such Lender, (iii)
amend or modify the pro rata requirements of Section 2.16,
the provisions of Section 9.04(j), the provisions of this
Section or the definition of the term "Required Lenders",
without the prior written consent of each Lender or (iv)
modify the protections afforded to an SPC pursuant to the
provisions of Section 9.04(i) without the written consent
of such SPC; provided further that no such agreement shall
amend, modify or otherwise affect the rights or duties of
the Administrative Agent hereunder without the prior
written consent of the Administrative Agent.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.
"SECTION 9.10. Entire Agreement. This Agreement and the Fee Letter dated November 29, 2001, between the Borrower and Credit Suisse First Boston, constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement.
"SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
"SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
"SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
"SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
"SECTION 9.15. Jurisdiction; Consent to Service of Process.
(a) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court
of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that
the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this
Agreement against the Borrower or its properties in the
courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in
Section 9.01. Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in
any other manner permitted by law.
"SECTION 9.16. Confidentiality. Each of the administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' officers, directors, employees and agents, including accountants, legal counsel and other advisors who need to know such Information in connection with its role as Administrative Agent or Lender (as the case may be) hereunder (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners) (provided that, to the extent permitted by applicable law and practicable under the circumstances, such person will first inform the Borrower of any such request), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process (provided that, to the extent permitted by applicable law, such person will promptly notify the Borrower of such requirement as far in advance of its disclosure as is practicable to enable the Borrower to seek a protective order and, to the extent practicable, such person will cooperate with the Borrower in seeking any such order), (d) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to the enforcement of its rights hereunder, (e) subject to an agreement containing provisions substantially the same as those of this Section 9.16, to (i) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any credit default swap or similar credit derivative transaction relating to the obligations of the Borrower under this Agreement, (f) with the consent of the Borrower or (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 9.16. For the purposes of this Section, "Information" shall mean all information received from the Borrower and related to the Borrower or its business, other than any such information that was available to the Administrative Agent or any Lender on a nonconfidential basis prior to its disclosure by the Borrower. Each of the Administrative Agent and the Lenders agrees that, except as expressly provided in this Section 9.16, it will use Information only in connection with its role as Administrative Agent or Lender (as the case may be) hereunder.
"SECTION 9.17. Termination of Existing Credit Agreement .
The Borrower and each of the Lenders that is also a Lender
(as defined in the Existing Credit Agreement) party to the
Existing Credit Agreement agree that the Commitments (as
defined in the Existing Credit Agreement) shall be
terminated in their entirety on the Closing Date in
accordance with the terms thereof, subject only to this
Section 9.17. Each of such Lenders waives (a)
any requirement of notice of such termination pursuant to
Section 2.04(a) of the Existing Credit Agreement and (b)
any claim to any facility fees under the Existing Credit
Agreement for any day on or after the Closing Date.
The Borrower (i) represents and warrants that (x) after
giving effect to the preceding sentences of this Section
9.17, the commitments under the Existing Credit Agreement
will be terminated effective not later than the
Closing Date and (y) no loans will be, as of the Closing
Date, outstanding under the Existing Credit Agreement and
(ii) covenants that all accrued and unpaid facility fees
and other amounts due and payable under the Existing
Credit Agreement shall have been paid on or prior to the
Closing Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
LABORATORY CORPORATION OF AMERICA HOLDINGS,
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent,
by:_______________________
Name:
Title:
by:______________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH,
by:______________________
Name:
Title:
by:_____________________
Name:
Title:
SIGNATURE PAGE TO LABORATORY
CORPORATION OF AMERICA HOLDINGS
364-DAY CREDIT AGREEMENT DATED
AS OF FEBRUARY 20, 2002
NAME OF LENDER: __________________________
by:____________________________
Name:
Title:
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES SUBSIDIARY LISTING
EXHIBIT 21
The following table sets forth the subsidiaries of Laboratory
Corporation of America Holdings on December 31, 2001. The
financial statements of all subsidiaries are included in the
consolidated statements of Laboratory Corporation of America
Holdings and Subsidiaries.
Organized
under the laws
of the state
of:
Laboratory Corporation of America Holdings Delaware Laboratory Corporation of America Delaware Tower Collection Center, Inc. Delaware Executive Tower Travel, Inc. Delaware Lab Delivery Service of New York City, Inc. New York LabCorp Delaware, Inc. Delaware LabCorp Limited United Kingdom LabCorp, BVBA Belgium PoisonLAB, Inc. California National Genetics Institute, Inc. California Path Lab Holdings, Inc. Delaware Path Lab, Inc. New Hampshire LTC Services & Holdings, Inc. New Hampshire Center for Genetic Services, Inc. Texas Viro-Med Laboratories, Inc. Minnesota MWorld, Inc. New York Burt Medical Laboratory, Inc. Connecticut |
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-71896) and Forms S-8 (No. 33-43006, No. 33-55065, No. 333-38608, No. 333-39731, No. 333-39735, No. 333-94329, and No. 333-94331) of Laboratory Corporation of America Holdings of our report dated February 8, 2002, except for Note 10, as to which the date is February 20, 2002 relating to the financial statements and financial statement schedule, which appear in this Form 10-K.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 18, 2002
EXHIBIT 24.1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Bradford T. Smith his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the Laboratory Corporation of America Holdings (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 2001 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 28th day of February, 2002.
By:/s/ JEAN-LUC BELINGARD
--------------------------
Jean-Luc Belingard
|
EXHIBIT 24.2
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Bradford T. Smith his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the Laboratory Corporation of America Holdings (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 2001 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 26th day of February, 2002.
By:/s/ WENDY E. LANE
---------------------
Wendy E. Lane
|
EXHIBIT 24.3
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Bradford T. Smith his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the Laboratory Corporation of America Holdings (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 2001 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 21st day of February, 2002.
By: /s/ ROBERT E. MITTELSTAEDT
-------------------------------
Robert E. Mittelstaedt
|
EXHIBIT 24.4
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Bradford T. Smith his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the Laboratory Corporation of America Holdings (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 2001 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 21st day of February, 2002.
By:/s/ JAMES B. POWELL, MD
---------------------------
James B. Powell, MD
|
EXHIBIT 24.5
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Bradford T. Smith his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the Laboratory Corporation of America Holdings (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 2001 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 21st day of February, 2002.
By:/s/ DAVID B. SKINNER, MD
----------------------------
David B. Skinner, MD
|
EXHIBIT 24.6
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Bradford T. Smith his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the Laboratory Corporation of America Holdings (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 2001 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 26th day of February, 2002.
By:/s/ ANDREW G. WALLACE, MD
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Andrew G. Wallace, MD
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