PROSPECTUS
CHEMED CORPORATION
(FORMERLY ROTO-ROOTER, INC.)
OFFER TO EXCHANGE
UP TO $150,000,000 PRINCIPAL AMOUNT OUTSTANDING OF
8 3/4% SENIOR NOTES DUE 2011
FOR
A LIKE PRINCIPAL AMOUNT OF NEW 8 3/4% SENIOR NOTES DUE 2011
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
______________
We are offering to exchange registered new 8 3/4% Senior Notes due
2011 (the "New Notes") for all of our outstanding unregistered 8 3/4% Senior
Notes due 2011 (the "Original Notes"). The New Notes will be free of the
transfer restrictions that apply to our outstanding unregistered Original
Notes that you currently hold, but will otherwise have substantially the same
terms of such outstanding Original Notes. This offer will expire at 5:00 p.m.,
New York City time, on July 1, 2004, unless we extend it. The New Notes will
not trade on any established exchange.
Each broker-dealer that receives New Notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The letter of
transmittal accompanying this prospectus states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for outstanding Original Notes where such Original Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. We have agreed that, for a period of 180 days after
the expiration of this exchange offer, we will make this prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
______________
SEE "RISK FACTORS" BEGINNING ON PAGE 10 TO READ ABOUT IMPORTANT
FACTORS YOU SHOULD CONSIDER BEFORE TENDERING YOUR ORIGINAL NOTES IN THIS
EXCHANGE OFFER.
______________
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY
UNITED STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________
Prospectus dated June 3, 2004
______________
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION..........................................i
INCORPORATION BY REFERENCE...................................................i
FORWARD-LOOKING STATEMENTS..................................................iv
SUMMARY......................................................................1
RISK FACTORS................................................................10
THE EXCHANGE OFFER..........................................................15
USE OF PROCEEDS.............................................................24
RATIOS OF EARNINGS TO FIXED CHARGES.........................................24
DESCRIPTION OF THE NEW NOTES................................................25
EXCHANGE OFFER AND REGISTRATION RIGHTS......................................80
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.....................83
PLAN OF DISTRIBUTION........................................................84
BOOK-ENTRY; DELIVERY AND FORM...............................................85
LEGAL MATTERS...............................................................88
EXPERTS.....................................................................88
______________
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the
"SEC") a registration statement on Form S-4 with respect to the New Notes
offered in this prospectus. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits to that
registration statement. For further information with respect to us and the New
Notes, we refer you to the registration statement and its exhibits. We also
file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's website at http://www.sec.gov and on our website at
http://www.chemed.com. Reports and other information concerning us can also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005, phone (212) 656-5060. Our capital stock is listed and
traded on the New York Stock Exchange under the trading symbol "CHE." With the
exception of the documents we file with the SEC, the information contained on
our website is not incorporated by reference in this prospectus and you should
not consider it a part of this prospectus.
INCORPORATION BY REFERENCE
We are incorporating by reference the information that we file with
the SEC, which means that we are disclosing important information to you in
those documents. The information incorporated by reference is an important
part of this prospectus, and the information that we subsequently file with
the SEC will automatically update and supercede information in this prospectus
and in our other filings with
i
the SEC. We incorporate by reference into this prospectus the documents listed
below, as amended and supplemented, and any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus and prior to the time the exchange
offer made hereby is completed; we are not, however, incorporating by
reference any documents or portions thereof, whether specifically listed below
or filed in the future, that are not deemed "filed" with the SEC, including
any information furnished pursuant to Items 9 or 12 of Form 8-K:
o Annual Report on Form 10-K for the year ended December 31,
2003, filed on March 12, 2004;
o Quarterly Report on Form 10-Q for the quarter ended March
31, 2004, filed on May 10, 2004; and
o Amended Current Report on Form 8-K/A filed on February 23,
2004, Current Report on Form 8-K filed on February 24,
2004, Current Report on Form 8-K filed on April 7, 2004
and Current Report on Form 8-K filed on May 18, 2004.
Any statement contained in this prospectus, or in a document all or
a portion of which is incorporated by reference in this prospectus, will be
deemed to be modified or superceded for purposes of this prospectus to the
extent that a statement contained in this prospectus modifies or supercedes
the statement. Any such statement or document so modified or superceded will
not be deemed, except as so modified or superceded, to constitute a part of
this prospectus.
You may request a copy of any of our filings with the SEC, or any of
the agreements or other documents that constitute exhibits to those filings,
at no cost, by writing or telephoning us at the following address or phone
number:
Chemed Corporation
c/o Investor Relations
2600 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202-4726
Telephone: (800) 224-3622 or (513) 762-6463
TO OBTAIN TIMELY DELIVERY OF ANY OF OUR FILINGS, AGREEMENTS OR OTHER
DOCUMENTS, YOU MUST MAKE YOUR REQUEST TO US NO LATER THAN FIVE BUSINESS DAYS
BEFORE THE EXPIRATION DATE OF THE EXCHANGE OFFER. THE EXCHANGE OFFER WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON JULY 1, 2004. THE EXCHANGE OFFER
CAN BE EXTENDED BY US IN OUR SOLE DISCRETION. SEE THE SECTION ENTITLED "THE
EXCHANGE OFFER" FOR MORE DETAILED INFORMATION.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE
YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE
ON THE FRONT COVER OF THIS PROSPECTUS.
MARKET DATA
The market data and certain industry forecasts contained or
incorporated by reference in this prospectus are based on internal surveys,
market research, publicly available information, industry publications or good
faith estimates of our management. Industry publications generally state that
the information contained therein has been obtained from sources believed to
be reliable, but that the
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accuracy and completeness of such information is not guaranteed. Similarly,
internal surveys, industry forecasts and market research, while believed to be
reliable, have not been independently verified, and we make no representation
as to the accuracy of such information.
______________
"Chemed," "Roto-Rooter," "Service America" and "Vitas" are
trademarks of Chemed Corporation. All other trademarks, service marks or trade
names referred to in this prospectus are the property of their respective
owners.
iii
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the
meaning of the federal securities laws. These forward-looking statements
generally can be identified by use of statements that include words such as
"anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and
other words and terms of similar meaning, although not all forward-looking
statements contain such words. Statements that describe our objectives, plans
or goals are also forward-looking statements. These forward-looking statements
are subject to risks and uncertainties which could cause actual results to
differ materially from those currently anticipated. Factors that could
materially affect these forward-looking statements can be found in our
periodic reports filed with the SEC and herein under the heading "Risk
Factors." Potential investors and other readers are urged to consider these
factors carefully in evaluating the forward-looking statements and are
cautioned not to place undue reliance on these forward-looking statements. The
forward-looking statements included in this prospectus are made only as of the
date of this prospectus, and we undertake no obligation to publicly update
these forward-looking statements to reflect new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events might or might not occur. We cannot assure you that
projected results or events will be achieved.
iv
SUMMARY
This summary highlights some of the information included in other
parts of this prospectus and the documents we incorporate by reference herein.
This summary may not contain all the information that may be important to you.
You should carefully read the entire prospectus, including the "Risk Factors"
section and the financial data and related notes, and the documents
incorporated by reference herein, before investing in New Notes. As used in
this prospectus, unless otherwise indicated or the context otherwise requires,
the terms "Chemed," "we," "the Company," "us" and "our" refer to Chemed
Corporation together with its subsidiaries.
BUSINESS
We are involved in three lines of business: plumbing and drain
cleaning services, heating/air-conditioning repair, and hospice care. We
entered the hospice care business when we acquired the remaining 63% of Vitas
Healthcare Corporation ("Vitas") that we did not previously own on February
24, 2004.
We believe our Roto-Rooter business is the largest provider of
plumbing and drain cleaning services in North America, providing repair and
maintenance services to residential and commercial accounts. We operate
through more than 100 company-owned branches and independent contractors and
500 franchisees. We offer services to more than 90% of the U.S. population and
approximately 55% of the Canadian population. We also have licensed master
franchisees in Australia, China, Indonesia, Japan, Mexico, the Philippines and
the United Kingdom.
Our Service America business provides residential and commercial
appliance and heating/air-conditioning repair, maintenance and replacement
services. Service America also sells air conditioning equipment and duct
cleaning services.
Vitas is the nation's largest provider of hospice services for
patients with severe, life-limiting illnesses. This type of care is aimed at
making the terminally ill patient's final days as comfortable and pain free as
possible. Hospice care is typically available to patients who have been
initially certified as terminally ill (i.e., a prognosis of six months or
less).
Vitas' hospice operations began in South Florida in 1978 and Vitas
was incorporated as a for-profit corporation in 1983. Today, Vitas provides a
comprehensive range of hospice services through 26 operating programs covering
many of the large population areas in the U.S., including Florida, California,
Texas and Illinois. Vitas has over 6,000 employees including approximately
2,400 nurses and 1,500 home health aides.
We are a holding company and derive all of our operating income from
our subsidiaries.
The Company's name was Roto-Rooter, Inc. until May 17, 2004, when
its name became Chemed Corporation.
OUR ADDRESS
Our executive offices are located at 225 E. Fifth Street,
Cincinnati, Ohio 45202 and our telephone number is (513) 762-6900. Our website
is located at http://www.chemed.com. The information on our website is not
part of this prospectus.
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EXCHANGE OFFER
Background.................... On February 24, 2004, we completed a private
placement of the Original Notes. In connection
with that private placement, we entered into a
registration rights agreement in which we
agreed, among other things, to complete an
exchange offer.
The Exchange Offer............ We are offering to exchange our New Notes which
have been registered under the Securities Act of
1933 (the "Securities Act") for a like principal
amount of our outstanding, unregistered Original
Notes.
As of the date of this prospectus, $150,000,000
in aggregate principal amount of our Original
Notes are outstanding.
Resale of New Notes........... We believe that New Notes issued pursuant to the
exchange offer in exchange for Original Notes
may be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that:
o you are acquiring the New Notes in the
ordinary course of your business;
o you have not engaged in, do not intend to
engage in, and have no arrangement or
understanding with any person to participate
in the distribution of the New Notes; and
o you are not our affiliate as defined under
Rule 405 of the Securities Act.
Each participating broker-dealer that receives
New Notes for its own account pursuant to the
exchange offer in exchange for Original Notes,
where such Original Notes were acquired as a
result of market-making activities or other
trading activities, must acknowledge that it
will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of
Distribution."
Any holder of Original Notes who:
o is our affiliate;
o does not acquire New Notes in the ordinary
course of its business;
o tenders in the exchange offer with the
intention to participate, or for the purpose
of participating, in a distribution of New
Notes; or
o is a broker-dealer that acquired the Original
Notes directly from us,
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with the resale of New Notes.
2
0
Consequences If You Do
Not Exchange Your Original
Notes......................... Original Notes that are not tendered in the
exchange offer or are not accepted for exchange
will continue to bear legends restricting their
transfer. You will not be able to offer or sell
the Original Notes unless:
o pursuant to an exemption from the
requirements of the Securities Act;
o the Original Notes are registered under the
Securities Act; or
o the transaction requires neither such an
exemption nor registration.
After the exchange offer is closed, we will no
longer have an obligation to register the
Original Notes, except for some limited
exceptions. See "Risk Factors - Failure to
Exchange Your Original Notes."
Expiration Date............... 5:00 p.m., New York City time, on July 1, 2004,
unless we extend the exchange offer.
Certain Conditions to the
Exchange Offer................ The exchange offer is subject to
certain customary conditions, which we may
waive.
Special Procedures for
Beneficial Holders............ If you beneficially own Original Notes that are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender in the exchange offer,
you should contact such registered holder
promptly and instruct such person to tender on
your behalf. If you wish to tender in the
exchange offer on your own behalf, you must,
prior to completing and executing the letter of
transmittal and delivering your Original Notes,
either arrange to have the Original Notes
registered in your name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take a
considerable time.
Withdrawal Rights............. You may withdraw your tender of Original Notes
at any time before the offer expires.
Accounting Treatment.......... We will not recognize any gain or loss for
accounting purposes upon the completion of the
exchange offer. The expenses of the exchange
offer that we pay will increase our deferred
financing costs in accordance with generally
accepted accounting principles. See "The
Exchange Offer - Accounting Treatment."
Certain Tax Consequences...... The exchange pursuant to the exchange offer
generally should not be a taxable event for U.S.
Federal income tax purposes.
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Use of Proceeds............... We will not receive any proceeds from the
exchange or the issuance of New Notes in
connection with the exchange offer.
Exchange Agent................ LaSalle Bank National Association is serving as
exchange agent with respect to the New Notes in
connection with the exchange offer.
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SUMMARY DESCRIPTION OF THE NEW NOTES
The New Notes have the same financial terms and covenants as the
Original Notes, which are as follows below. For a more complete description of
the New Notes, please refer to the section of this prospectus entitled
"Description of the New Notes."
Issuer........................ Chemed Corporation.
New Notes Offered............. $150,000,000 aggregate principal amount of
8 3/4% Senior Notes due 2011.
Maturity Date................. February 24, 2011.
Issue Price................... 100% plus accrued interest, if any, from the
issue date.
Interest...................... 8 3/4% per year, payable semi-annually in
arrears on February 15 and August 15 of each
year, beginning on August 15, 2004.
Optional Redemption........... On or after February 24, 2007, we may redeem
some or all of the New Notes at the redemption
prices listed in the "Description of the New
Notes - Optional Redemption" section of this
prospectus, plus accrued but unpaid interest to
the redemption date.
At any time prior to February 24, 2007, we may
redeem all, but not less than all, the New Notes
at a redemption price equal to 100% of the
principal amount plus a make-whole premium
described in the "Description of the New Notes -
Optional Redemption" section of this prospectus.
At any time prior to February 24, 2007, we may,
on any one or more occasions, redeem up to 35%
of the aggregate principal amount of New Notes
issued at a redemption price equal to 108.750%
of the principal amount thereof, plus accrued
but unpaid interest to the redemption date, with
the net cash proceeds of one or more equity
offerings of Chemed, provided that:
(1) at least 65% of the aggregate principal
amount of New Notes issued remains
outstanding immediately after the
occurrence of that redemption; and
(2) the redemption occurs within 60 days of the
date of the closing of the equity offering.
In addition, to the extent that we have not
redeemed up to 35% of the New Notes with the net
cash proceeds of sales of our equity as
described in the previous sentence, we may also
use the net cash proceeds of a Qualifying
Subsidiary Stock Sale to redeem such principal
amount of New Notes on the same terms as
provided above. A Qualifying Subsidiary Stock
Sale is a sale of the capital stock of, at our
option, either Vitas or
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Roto-Rooter Management Company (but not both),
provided such sale meets certain conditions. See
"Description of the New Notes - Certain
Definitions - Qualifying Subsidiary Stock Sale."
Change of Control............. If a Change of Control (as defined in
"Description of the New Notes -- Change of
Control") occurs, subject to certain conditions,
we must offer to purchase the New Notes at a
purchase price in cash equal to 101% of each New
Note, plus accrued but unpaid interest to the
redemption date.
Ranking....................... The New Notes will rank:
o equal in right of payment with our existing
and future senior debt; and
o senior in right of payment to our existing
and future debt subordinated to the New
Notes.
The New Notes will not be secured by our assets
or those of any of our subsidiaries. As a
result, the New Notes will be effectively
subordinated to our existing and future secured
debt to the extent of the value of the
collateral securing such debt.
The New Notes will not be guaranteed by any of
our existing or future subsidiaries. As a
result, the New Notes will be effectively
subordinated to the liabilities and preferred
stock of our subsidiaries with respect to the
assets and earnings of such subsidiaries.
As of March 31, 2004, we had approximately
$335.6 million of indebtedness, of which $170.0
million was secured indebtedness and $1.6
million was indebtedness of our subsidiaries. At
such date, our subsidiaries had total
indebtedness and other liabilities of $294.0
million, including $170.0 million of guarantees
of indebtedness under our senior secured credit
facilities governed by the Credit Agreement
dated February 24, 2004, among us, certain of
our subsidiaries, and Bank One, NA, as
Administrative Agent (the "Credit Agreement"),
which document is filed as an exhibit hereto and
incorporated by reference herein, and
$110,000,000 principal amount of our Floating
Rate Senior Secured Notes due 2010 (the
"Floating Rate Notes") issued pursuant to the
Indenture dated February 24, 2004, among us,
certain of our subsidiaries, and Wells Fargo
Bank N.A., as Trustee, which document is filed
as an exhibit hereto and incorporated by
reference herein.
Certain Covenants............. The indenture governing the New Notes contains
covenants that, among other things, limit our
and certain of our subsidiaries' ability to:
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o incur additional debt;
o pay dividends, make redemptions and purchases
of capital stock and make other restricted
payments;
o issue and sell capital stock of subsidiaries;
o sell assets;
o engage in transactions with affiliates;
o restrict distributions from subsidiaries;
o incur liens;
o engage in businesses other than permitted
businesses;
o engage in sale/leaseback transactions; and
o engage in mergers or consolidations.
All of these covenants are subject to a number
of important exceptions and qualifications
described under "Description of the New Notes -
Certain Covenants."
Designation of Subsidiaries as
Unrestricted Subsidiaries..... We have the right to designate Vitas and its
subsidiaries or Roto-Rooter Management Company
and its subsidiaries (but not both) as
unrestricted subsidiaries if certain conditions
are met, including that we meet an adjusted
leverage ratio excluding the indebtedness and
EBITDA of the subsidiaries to be so designated.
We may also, in certain circumstances, sell the
capital stock of Vitas or Roto-Rooter Management
Company, or permit Vitas or Roto-Rooter
Management Company to sell its capital stock, or
distribute the capital stock of Roto-Rooter
Management Company to our stockholders. If we
designate Vitas and its subsidiaries or
Roto-Rooter Management Company and its
subsidiaries as unrestricted subsidiaries, they
would not be required to comply with the
restrictive covenants in the indenture governing
the New Notes, except in very limited instances.
See "Risk Factors ? Under the indenture for the
New Notes, we may, in certain circumstances,
designate either Vitas and its subsidiaries or
Roto-Rooter Management Company and its
subsidiaries as unrestricted subsidiaries of
ours, allowing them not to comply with many
restrictive covenants contained in the indenture
for the New Notes" and "Description of the New
Notes - Certain Covenants - Limitation on
Designation of Subsidiaries as Unrestricted
Subsidiaries."
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Exchange Offer and
Registration Rights........... Under a registration rights agreement, we agreed
to:
o file a registration statement within 90 days
after the issue date of the Original Notes
enabling the holders of the Original Notes to
exchange the Original Notes for publicly
registered notes with substantially the same
terms;
o use our reasonable best efforts to cause the
registration statement to become effective
within 180 days after the issue date of the
Original Notes;
o use our reasonable best efforts to consummate
the exchange offer by the earlier of 210 days
after the issue date of the Original Notes
and 60 days after the registration statement
becomes effective, subject to certain
exceptions;
o file a shelf registration statement for the
resale of the Original Notes if we cannot
effect an exchange offer within the time
period listed above and in some other
circumstances; and
o if a shelf registration statement is
required, use our reasonable best efforts to
cause the shelf registration statement to be
declared effective and to keep the shelf
registration statement effective until the
earlier of two years from the date of the
effectiveness of the shelf registration
statement or the time when all the Original
Notes covered by the shelf registration
statement have been sold or when they may be
sold pursuant to Rule 144 under the
Securities Act, subject to certain exceptions.
See "Exchange Offer and Registration Rights."
Book-Entry; Delivery and
Form.......................... Initially, the New Notes will be represented by
one or more permanent global certificates in
definitive, fully registered form deposited with
a custodian for, and registered in the name of,
a nominee of The Depository Trust Company. See
"Book-Entry; Delivery and Form."
Absence of a Public Market
for the New Notes............. There is no public trading market for the New
Notes and we do not intend to apply for listing
of the New Notes on any national securities
exchange or for quotation of the New Notes on
any automated dealer quotation system. See "Risk
Factors -- Risks Related to the New Notes -- An
active trading market may not develop for the
New Notes, which could reduce their value."
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RISK FACTORS
Prior to acquiring any of the New Notes or exchanging any of the
Original Notes, you should consider carefully all the information contained
and incorporated by reference in this prospectus and, in particular, should
evaluate the specific factors under the section "Risk Factors" beginning on
page 10.
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RISK FACTORS
You should carefully consider the following risk factors and all the
information and risk factors set forth in this prospectus and incorporated
herein before deciding to acquire any of the New Notes or to exchange any of
the Original Notes.
RISKS RELATED TO THE NEW NOTES
IF YOU FAIL TO EXCHANGE YOUR ORIGINAL NOTES, THEY WILL CONTINUE TO BE
RESTRICTED SECURITIES AND MAY BECOME LESS LIQUID.
Original Notes which you do not tender or we do not accept will,
following the exchange offer, continue to be restricted securities, and you
may not offer to sell them except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
law. We will issue New Notes in exchange for the Original Notes pursuant to
the exchange offer only following the satisfaction of the procedures and
conditions set forth in "The Exchange Offer -- Procedures for Tendering." Such
procedures and conditions include timely receipt by the exchange agent of such
Original Notes and of a properly completed and duly executed letter of
transmittal.
Because we anticipate that most holders of Original Notes will elect
to exchange such Original Notes, we expect that the liquidity of the market
for any Original Notes remaining after the completion of the exchange offer
may be substantially limited. Any Original Notes tendered and exchanged in the
exchange offer will reduce the aggregate principal amount at maturity of the
Original Notes outstanding. Following the exchange offer, if you did not
tender your Original Notes you generally will not have any further
registration rights, and such Original Notes will continue to be subject to
certain transfer restrictions. Accordingly, the liquidity of the market for
such Original Notes could be adversely affected. The Original Notes are
currently eligible for sale pursuant to Rule 144A through the Private
Offerings, Resale and Trading through Automated Linkages market of the
National Association of Securities Dealers, Inc. ("PORTAL").
THE NEW NOTES WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED DEBT TO THE
EXTENT OF THE VALUE OF THE COLLATERAL SECURING THAT DEBT.
Although the New Notes will be our general obligations that rank
equal in right of payment with all of our existing and future senior
indebtedness, they will not be secured. Debt outstanding under our Credit
Agreement and the Floating Rate Notes will be secured by a first priority
security interest (subject to certain exceptions) in substantially all of our
assets and, through secured guarantees, the assets of our subsidiaries. As of
March 31, 2004, the total amount of our secured debt was $170.0 million
excluding $43.6 million in revolving credit availability and $31.4 million in
outstanding letters of credit. In addition, we may in the future incur
additional debt which may be secured. Therefore, the New Notes will be
effectively subordinated to all of our secured debt, including indebtedness
under our Credit Agreement and the Floating Rate Notes, to the extent of the
value of the collateral securing that debt. Because the New Notes will be
unsecured obligations, your right of payment may be compromised if any of the
following were to occur:
o a bankruptcy, liquidation, reorganization or other winding up
involving us or any of our subsidiaries;
10
o a default in the payment under our Credit Agreement, the
Floating Rate Notes or other secured debt; or
o an acceleration of any debt under our Credit Agreement, the
Floating Rate Notes or other secured debt.
If any of these events were to occur, the holders of the secured debt could
have the right to foreclose on their collateral. Upon the occurrence of any of
these events, there may not be sufficient funds to pay amounts due on the New
Notes.
WE ARE A HOLDING COMPANY, AND WE MAY NOT HAVE ACCESS TO SUFFICIENT CASH TO
MAKE PAYMENTS ON THE NEW NOTES. IN ADDITION, THE NEW NOTES WILL BE EFFECTIVELY
SUBORDINATED TO THE LIABILITIES AND ANY PREFERRED STOCK OF OUR SUBSIDIARIES
BECAUSE THEY WILL NOT BE GUARANTEED BY OUR SUBSIDIARIES.
We are a holding company with no direct operations. Our principal
assets are the equity interests we hold in our operating subsidiaries. As a
result, we are dependent upon dividends and other payments from our
subsidiaries to generate the funds necessary to meet our outstanding debt and
other obligations. Our subsidiaries are legally distinct from us and have no
obligation to pay amounts due on our debt or to make funds available to us for
such payment. Our subsidiaries may not generate sufficient cash from
operations to enable us to make principal and interest payments on our
indebtedness, including the New Notes. Our subsidiaries are permitted under
the terms of our indebtedness to incur additional indebtedness that may
restrict payments from our subsidiaries to us. We cannot assure you that
agreements governing current and future indebtedness of our subsidiaries will
permit those subsidiaries to provide us with sufficient cash to fund payments
on the New Notes when due.
In addition, the New Notes will not be guaranteed by our
subsidiaries. Our Credit Agreement and the Floating Rate Notes will be
guaranteed by our subsidiaries. The ability of the holders of the New Notes to
participate in any distribution of assets of any of our subsidiaries upon
liquidation or bankruptcy will be subject to the prior claims of that
subsidiary's creditors, including trade creditors, secured creditors and
creditors holding indebtedness, preferred stock or guarantees issued by those
subsidiaries, including guarantees under our Credit Agreement and the Floating
Rate Notes. The New Notes, therefore, will be effectively subordinated to all
existing and future indebtedness and other liabilities, including trade
payables and preferred stock of our subsidiaries. As of March 31, 2004, our
subsidiaries had total indebtedness and other liabilities of $294.0 million,
including guarantees of indebtedness of $170.0 million, and no preferred stock
outstanding.
UNDER THE INDENTURE FOR THE NEW NOTES, WE MAY, IN CERTAIN CIRCUMSTANCES,
DESIGNATE EITHER VITAS AND ITS SUBSIDIARIES OR ROTO-ROOTER MANAGEMENT COMPANY
AND ITS SUBSIDIARIES AS UNRESTRICTED SUBSIDIARIES OF OURS, ALLOWING THEM NOT
TO COMPLY WITH MANY RESTRICTIVE COVENANTS CONTAINED IN SUCH INDENTURE.
Under the indenture governing the New Notes, we may designate either
Vitas and its subsidiaries or Roto-Rooter Management Company and its
subsidiaries (but not both) as unrestricted subsidiaries of ours if certain
conditions are met, including that we meet an adjusted leverage ratio
excluding the indebtedness and EBITDA of the subsidiaries to be so designated.
We may also, in certain circumstances, sell the capital stock of Vitas or
Roto-Rooter Management Company, or permit Vitas or Roto-Rooter Management
Company to sell its capital stock, or distribute the capital stock of
Roto-Rooter Management Company to our stockholders. If we
11
designate Vitas or Roto-Rooter Management Company and its respective
subsidiaries as unrestricted subsidiaries, they would not be required to
comply in general with the restrictive covenants in the indenture governing
the New Notes, including the following:
o the limit on debt, which means that these subsidiaries could
incur an unlimited amount of debt, provided such debt is
non-recourse to us and our restricted subsidiaries;
o the limit on restricted payments, except with respect to
dividends or distributions of the capital stock of Vitas by the
Company;
o the limit on restrictions on distributions from restricted
subsidiaries, which means that there could be restrictions, for
example, in the agreements governing the debt of those
subsidiaries that could restrict the ability of these
subsidiaries to pay dividends to us;
o the limit on sales of assets and capital stock, except with
respect to certain sales by us of capital stock of Vitas or its
subsidiaries (but not including any subsequent sales by Vitas
of its own capital stock);
o the limit on transactions with affiliates;
o the limit of the sale or issuance of capital stock of
restricted subsidiaries;
o the limit on liens;
o the limit on sale/leaseback transactions; and
o the limit on mergers and consolidations.
We cannot assure you that sufficient funds will be available to pay
amounts due on the New Notes if Vitas or Roto-Rooter Management Company and
its respective subsidiaries become unrestricted subsidiaries.
HOLDERS OF THE NEW NOTES WILL FACE ADDITIONAL RISKS THAN HOLDERS OF THE
FLOATING RATE NOTES.
Although the New Notes will each be our contractually senior
obligations and will benefit from similar restrictive covenants, holders of
the New Notes will face additional risks than holders of the Floating Rate
Notes. For example:
o The New Notes will be structurally subordinated to the
liabilities and preferred stock of our subsidiaries, whereas
the Floating Rate Notes will be guaranteed on a senior, secured
basis by our subsidiaries.
o The New Notes will have a maturity date that is one year longer
than the Floating Rate Notes.
o The New Notes will be effectively subordinated to the extent of
the value of the collateral securing borrowings under our
Credit Agreement and the Floating Rate Notes and any other
permitted secured indebtedness, whereas the Floating Rate Notes
will be secured, subject to permitted
12
liens, on a first priority basis with our Credit Agreement,
subject to certain exceptions.
o Under the indenture for the New Notes, we are permitted if
certain conditions are met to designate Vitas and its
subsidiaries or Roto-Rooter Management Company and its
subsidiaries as unrestricted subsidiaries, in which case they
would not be subject to most of the restrictive covenants under
such indenture, whereas the indenture for the Floating Rate
Notes does not contain these provisions. In addition, under the
New Notes, we will have a greater ability to sell the capital
stock of Vitas or Roto-Rooter Management Company or make a
distribution of capital stock of Roto-Rooter Management
Company.
WE MAY BE UNABLE TO PURCHASE THE NEW NOTES UPON A CHANGE OF CONTROL OR TO
RAISE THE FUNDS NECESSARY TO FINANCE SUCH PURCHASES.
Upon a change of control event, holders of the New Notes may require
us to purchase the New Notes for cash at a price equal to 101% of their
aggregate principal amount, plus accrued and unpaid interest, if any.
Our Credit Agreement provide that the occurrence of certain events
that would constitute a change in control for the purposes of the indenture
governing the New Notes will constitute a default under such facilities. Other
future debt may contain prohibitions of events that would constitute a change
in control or would require such debt to be repurchased upon a change in
control. Moreover, the exercise by holders of New Notes of their right to
require us to repurchase their New Notes could cause a default under our
existing or future debt, even if the change in control itself does not result
in a default under existing or future debt, due to the financial effect of
such repurchase on us. Finally, our ability to pay cash to holders of New
Notes upon a repurchase may be limited by our financial resources at the time
of such repurchase. Therefore, we cannot assure you that we will be permitted
to comply with the change of control or that sufficient funds will be
available when necessary to make any required repurchases. Our failure to
purchase New Notes in connection with a change in control would result in a
default under the indentures governing the New Notes. Such a default may, in
turn, constitute a default under future debt as well.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE NEW NOTES, WHICH COULD REDUCE
THEIR VALUE.
There is no existing trading market for the New Notes. We do not
intend to apply for listing of the New Notes on a securities exchange or for
inclusion of the New Notes in any automated quotation system. The Original
Notes currently trade in the PORTAL market. However, there can be no assurance
that an active trading market will develop for the New Notes. If an active
trading market does not develop or is not maintained, the market prices of the
New Notes may decline and you may not be able to sell your New Notes.
UNDER UNITED STATES FEDERAL AND STATE FRAUDULENT TRANSFER OR CONVEYANCE
STATUTES, A COURT COULD VOID OUR OBLIGATIONS OR TAKE OTHER ACTIONS DETRIMENTAL
TO THE HOLDERS OF THE NEW NOTES.
The issuance of the New Notes may be subject to review under U.S.
bankruptcy law and comparable provisions of state fraudulent transfer or
conveyance laws if a bankruptcy case or lawsuit is commenced by or against us
or if a lawsuit is commenced against us by unpaid
13
creditors. Under these laws, if a court were to find in such a bankruptcy or
reorganization case or lawsuit that, at the time the Company issued the New
Notes:
(1) it issued the New Notes with the intent to delay, hinder or
defraud present or future creditors; or
(2) (a) it received less than reasonably equivalent value or fair
consideration for issuing the New Notes; and
(b) at the time it issued the New Notes:
(i) it was insolvent or rendered insolvent by reason of
issuing the New Notes;
(ii) it was engaged, or about to engage, in a business or
transaction for which its remaining assets
constituted unreasonably small capital to carry on
its businesses; or
(iii) it intended to incur, or believed or reasonably
should have believed that it would incur, debts
beyond its ability to pay such debts as they matured
or became due;
then, in either case, a court of competent jurisdiction could (1) void, in
whole or in part, the New Notes and direct the repayment of any amounts paid
thereunder to our other creditors, (2) subordinate the New Notes to our other
debt or (3) take other actions detrimental to the holders of the New Notes.
The measure of insolvency will vary depending upon the law applied
in the case. Generally, however, a person would be considered insolvent if the
sum of its debts, including contingent liabilities, was greater than all of
its assets at fair valuation or if the present fair saleable value of its
assets was less than the amount that would be required to pay the probable
liability on its existing debts, including contingent liabilities, as they
become absolute and matured. An entity may be presumed to be insolvent if it
is not paying its debts as they became due.
We cannot predict:
o what standard a court would apply in order to determine
whether we were insolvent as of the date we issued the New
Notes or that regardless of the method of valuation, a
court would determine that we were insolvent on that date;
or
o whether a court would determine that the payments
constituted fraudulent transfers or conveyances on other
grounds.
In addition, under U.S. federal bankruptcy law, if a bankruptcy case
were initiated by or against us within 90 days after a payment by us with
respect to the New Notes, if we were insolvent at the time of such payment,
and if certain other conditions were met, all or a portion of such payment
could be avoided as a preferential transfer and the recipient of such payment
could be required to return such payment to us for distribution to other
creditors. Certain states have enacted similar insolvency statutes with
varying periods and other provisions.
14
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Notes, we entered into a
registration rights agreement with the purchasers, under which we agreed to
use our best efforts to file and have declared effective an exchange offer
registration statement under the Securities Act.
We are making the exchange offer in reliance on the position of the
SEC as set forth in certain no-action letters. However, we have not sought our
own no-action letter. Based upon these interpretations by the SEC, we believe
that a holder of New Notes, but not a holder who is our "affiliate" within the
meaning of Rule 405 of the Securities Act, who exchanges Original Notes for
New Notes in the exchange offer, generally may offer the New Notes for resale,
sell the New Notes and otherwise transfer the New Notes without further
registration under the Securities Act and without delivery of a prospectus
that satisfies the requirements of Section 10 of the Securities Act. We also
believe that a holder may offer, sell or transfer the New Notes only if the
holder acquires the New Notes in the ordinary course of its business and is
not participating, does not intend to participate and has no arrangement or
understanding with any person to participate in a distribution of the New
Notes.
Any holder of the Original Notes using the exchange offer to
participate in a distribution of New Notes cannot rely on the no-action
letters referred to above. A broker-dealer that acquired Original Notes
directly from us, but not as a result of market-making activities or other
trading activities must comply with the registration and prospectus delivery
requirements of the Securities Act in the absence of an exemption from such
requirements.
Each broker-dealer that receives New Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Original Notes where such
Original Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The letter of
transmittal states that by acknowledging and delivering a prospectus, a
broker-dealer will not be considered to admit that it is an "underwriter"
within the meaning of the Securities Act. We have agreed that for a period of
180 days after the expiration date, we will make this prospectus available to
broker-dealers for use in connection with any such resale. See "Plan of
Distribution."
Except as described above, this prospectus may not be used for an
offer to resell, resale or other transfer of New Notes.
The exchange offer is not being made to, nor will we accept tenders
for exchange from, holders of Original Notes in any jurisdiction in which the
exchange offer or the acceptance of it would not be in compliance with the
securities or blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the exchange offer,
we will accept any and all Original Notes validly tendered prior to 5:00 p.m.,
New York City time, on the expiration date. The date of acceptance for
exchange of the Original Notes, and completion of the exchange
15
offer, is the exchange date, which will be the first business day following
the expiration date (unless extended as described in this document). We will
issue, on or promptly after the exchange date, an aggregate principal amount
of up to $150,000,000 of New Notes for a like principal amount of outstanding
Original Notes tendered and accepted in connection with the exchange offer.
The New Notes issued in connection with the exchange offer will be delivered
on the earliest practicable date following the exchange date. Holders may
tender some or all of their Original Notes in connection with the exchange
offer, but only in $1,000 increments of principal amount at maturity.
The terms of the New Notes are identical in all material respects to
the terms of the Original Notes, except that the New Notes have been
registered under the Securities Act and are issued free from any covenant
regarding registration, including the payment of liquidated damages upon a
failure to file or have declared effective an exchange offer registration
statement or to complete the exchange offer by certain dates. The New Notes
will evidence the same debt as the Original Notes and will be issued under the
same indenture and entitled to the same benefits under that indenture as the
Original Notes being exchanged. As of the date of this prospectus,
$150,000,000 in aggregate principal amount of Original Notes are outstanding.
In connection with the issuance of the Original Notes, we arranged
for the Original Notes originally purchased by qualified institutional buyers
under the Securities Act to be issued and transferable in book-entry form
through the facilities of The Depository Trust Company ("DTC"), acting as
depositary. Except as described under "Book-Entry, Delivery and Form," the New
Notes will be issued in the form of global notes registered in the name of DTC
or its nominee and each beneficial owner's interest in it will be transferable
in book-entry form through DTC. See "Book-Entry, Delivery and Form."
Holders of Original Notes do not have any appraisal or dissenters'
rights in connection with the exchange offer. Original Notes which are not
tendered for exchange or are tendered but not accepted in connection with the
exchange offer will remain outstanding and be entitled to the benefits of the
indenture under which they were issued, but will not be entitled to any
registration rights under the registration rights agreement.
We shall be considered to have accepted validly tendered Original
Notes if and when we have given oral or written notice to the exchange agent.
The exchange agent will act as agent for the tendering holders for the
purposes of receiving the New Notes from us.
If any tendered old Original Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other events described
in this prospectus or otherwise, we will return the Original Notes, without
expense, to the tendering holder as quickly as possible after the expiration
date.
Holders who tender Original Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes on exchange of Original Notes in connection with
the exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See
"-- Fees and Expenses."
16
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date for the exchange offer is 5:00 p.m., New York
City time, on July 1, 2004, unless extended by us in our sole discretion (but
in no event to a date later than August 2, 2004), in which case the term
"expiration date" shall mean the latest date and time to which the exchange
offer is extended.
We reserve the right, in our sole discretion:
o to delay accepting any Original Notes, to extend the offer or
to terminate the exchange offer if, in our reasonable judgment,
any of the conditions described below shall not have been
satisfied, by giving oral or written notice of the delay,
extension or termination to the exchange agent, or
o to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner that we consider
material, we will disclose such amendment by means of a prospectus supplement,
and we will extend the exchange offer for a period of five to ten business
days.
If we determine to make a public announcement of any delay,
extension, amendment or termination of the exchange offer, we will do so by
making a timely release through an appropriate news agency.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be
required to accept for exchange, or exchange New Notes for, any Original Notes
and may terminate the exchange offer as provided in this prospectus before the
acceptance of the Original Notes, if:
o any action or proceeding is instituted or threatened in any
court or by or before any governmental agency relating to the
exchange offer which, in our reasonable judgment, might
materially impair our ability to proceed with the exchange
offer or materially impair the contemplated benefits of the
exchange offer to us, or any material adverse development has
occurred in any existing action or proceeding relating to us or
any of our subsidiaries;
o any change, or any development involving a prospective change,
in our business or financial affairs or any of our subsidiaries
has occurred which, in our reasonable judgment, might
materially impair our ability to proceed with the exchange
offer or materially impair the contemplated benefits of the
exchange offer to us;
o any law, statue, rule or regulation is proposed, adopted or
enacted, which in our reasonable judgment, might materially
impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange
offer to us; or
17
o any governmental approval has not been obtained, which approval
we, in our reasonable discretion, consider necessary for the
completion of the exchange offer as contemplated by this
prospectus.
The conditions listed above are for our sole benefit and may be
asserted by us regardless of the circumstances giving rise to any of these
conditions. We may waive these conditions in our reasonable discretion in
whole or in part at any time and from time to time. The failure by us at any
time to exercise any of the above rights shall not be considered a waiver of
such right, and such right shall be considered an ongoing right which may be
asserted at any time and from time to time.
If we determine in our reasonable discretion that any of the
conditions are not satisfied, we may:
o refuse to accept any Original Notes and return all tendered
Original Notes to the tendering holders;
o extend the exchange offer and retain all Original Notes
tendered before the expiration of the exchange offer, subject,
however, to the rights of holders to withdraw these Original
Notes (see "--Withdrawal of Tenders" below); or
o waive unsatisfied conditions relating to the exchange offer and
accept all properly tendered Original Notes which have not been
withdrawn.
PROCEDURES FOR TENDERING
Unless the tender is being made in book-entry form, to tender in the
exchange offer, a holder must
o complete, sign and date the letter of transmittal, or a
facsimile of it,
o have the signatures guaranteed if required by the letter of
transmittal, and
o mail or otherwise deliver the letter of transmittal or the
facsimile, the Original Notes and any other required documents
to the exchange agent prior to 5:00 p.m., New York City time,
on the expiration date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Original Notes by
causing DTC to transfer the Original Notes into the exchange agent's account.
Although delivery of Original Notes may be effected through book-entry
transfer into the exchange agent's account at DTC, the letter of transmittal
(or facsimile), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by
the exchange agent at its address set forth under the caption "Exchange Agent"
below, prior to 5:00 p.m., New York City time, on the expiration date.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
The tender by a holder of Original Notes will constitute an
agreement between us and the holder in accordance with the terms and subject
to the conditions set forth in this prospectus and in the letter of
transmittal.
18
The method of delivery of Original Notes and the letter of
transmittal and all other required documents to the exchange agent is at the
election and risk of the holders. Instead of delivery by mail, we recommend
that holders use an overnight or hand delivery service. In all cases, holders
should allow sufficient time to assure delivery to the exchange agent before
the expiration date. No letter of transmittal of Original Notes should be sent
to us. Holders may request their respective brokers, dealers, commercial
banks, trust companies or nominees to effect the tenders for such holders.
Any beneficial owner whose Original Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on behalf of the beneficial owner. If the
beneficial owner wishes to tender on that owner's own behalf, the owner must,
prior to completing and executing the letter of transmittal and delivery of
such owner's Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in the owners' name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signature on a letter of transmittal or a notice of withdrawal must
be guaranteed by an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, unless the Original Notes
tendered pursuant thereto are tendered:
o by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
o for the account of an eligible guarantor institution.
In the event that signatures on a letter of transmittal or a notice
of withdrawal are required to be guaranteed, such guarantee must be by:
o a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc.,
o a commercial bank or trust company having an office or
correspondent in the United States, or
o an "eligible guarantor institution."
If the letter of transmittal is signed by a person other than the
registered holder of any Original Notes, the Original Notes must be endorsed
by the registered holder or accompanied by a properly completed bond power, in
each case signed or endorsed in blank by the registered holder.
If the letter of transmittal or any Original Notes or bond powers
are signed or endorsed by trustees, executors, administrators, guardians,
attorney-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by us, submit evidence satisfactory to us of their authority to
act in that capacity with the letter of transmittal.
19
We will determine all questions as to the validity, form,
eligibility (including time of receipt) and acceptance and withdrawal of
tendered Original Notes in our sole discretion. We reserve the absolute right
to reject any and all Original Notes not properly tendered or any Original
Notes whose acceptance by us would, in the opinion of our U.S. counsel, be
unlawful. We also reserve the right to waive any defects, irregularities or
conditions of tender as to any particular Original Notes either before or
after the expiration date. Our interpretation of the terms and conditions of
the exchange offer (including the instructions in the letter of transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Original Notes must be cured
within a time period we will determine. Although we intend to request the
exchange agent to notify holders of defects or irregularities relating to
tenders of Original Notes, neither we, the exchange agent nor any other person
will have any duty or incur any liability for failure to give such
notification. Tenders of Original Notes will not be considered to have been
made until such defects or irregularities have been cured or waived. Any
Original Notes received by the exchange agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the exchange agent to the tendering holders, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In addition, we reserve the right, as set forth above under the
caption "Conditions to the Exchange Offer," to terminate the exchange offer.
By tendering, each holder represents to us, among other things,
that:
o the New Notes acquired in connection with the exchange offer
are being obtained in the ordinary course of business of the
person receiving the New Notes, whether or not such person is
the holder;
o neither the holder nor any such other person has an arrangement
or understanding with any person to participate in the
distribution of such New Notes; and
o neither the holder nor any such other person is our "affiliate"
(as defined in Rule 405 under the Securities Act).
If the holder is a broker-dealer which will receive New Notes for
its own account in exchange for Original Notes, it will acknowledge that it
acquired such Original Notes as the result of market-making activities or
other trading activities and it will deliver a prospectus in connection with
any resale of such New Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender its Original Notes and:
o whose Original Notes are not immediately available;
o who cannot deliver the holder's Original Notes, the letter of
transmittal or any other required documents to the exchange
agent prior to the expiration date; or
o who cannot complete the procedures for book-entry transfer
before the expiration date
20
may effect a tender if
o the tender is made through an eligible guarantor institution;
o before the expiration date, the exchange agent receives from
the eligible guarantor institution:
o a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or
hand delivery,
o the name and address of the holder, and
o the certificate number(s) of the Original Notes and the
principal amount at maturity of Original Notes tendered,
stating that the tender is being made and guaranteeing
that, within three New York Stock Exchange trading days
after the expiration date, the letter of transmittal and
the certificate(s) representing the Original Notes (or a
confirmation of book-entry transfer), and any other
documents required by the letter of transmittal will be
deposited by the eligible guarantor institution with the
exchange agent; and
o the exchange agent receives, within three New York Stock
Exchange trading days after the expiration date, a
properly completed and executed letter of transmittal or
facsimile, as well as the certificate(s) representing all
tendered Original Notes in proper form for transfer or a
confirmation of book-entry transfer, and all other
documents required by the letter of transmittal.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.
To withdraw a tender of Original Notes in connection with the
exchange offer, a written facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth herein prior to 5:00
p.m., New York City time, on the expiration date. Any such notice of
withdrawal must:
o specify the name of the person who deposited the Original Notes
to be withdrawn,
o identify the Original Notes to be withdrawn (including the
certificate number or numbers and principal amount at maturity
of such Original Notes),
o be signed by the depositor in the same manner as the original
signature on the letter of transmittal by which such Original
Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer
sufficient to have the trustee register the transfer of such
Original Notes into the name of the person withdrawing the
tender, and
21
o specify the name in which any such Original Notes are to be
registered, if different from that of the depositor.
We will determine all questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices. Any
Original Notes so withdrawn will be considered not to have been validly
tendered for purposes of the exchange offer, and no New Notes will be issued
unless the Original Notes withdrawn are validly re-tendered. Any Original
Notes which have been tendered but which are not accepted for exchange or
which are withdrawn will be returned to the holder without cost to such holder
as soon as practicable after withdrawal, rejection of tender or termination of
the exchange offer. Properly withdrawn Original Notes may be re-tendered by
following one of the procedures described above under the caption "Procedures
for Tendering" at any time prior to the expiration date.
EXCHANGE AGENT
LaSalle Bank National Association has been appointed as exchange
agent for the New Notes. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to LaSalle Bank National Association, at its offices at 135 South
LaSalle Street, Suite 1960, Chicago, IL 60603, Attention: Erik R. Benson.
LaSalle Bank National Association's telephone number is (312) 904-2970 and
facsimile number is (312) 904-2236.
FEES AND EXPENSES
We will not make any payment to brokers, dealers or others
soliciting acceptances of the exchange offer. We will pay certain other
expenses to be incurred in connection with the exchange offer, including the
fees and expenses of the exchange agent and certain accounting and legal fees.
Holders who tender their Original Notes for exchange will not be
obligated to pay transfer taxes. If, however:
o New Notes are to be delivered to, or issued in the name of, any
person other than the registered holder of the Original Notes
tendered, or
o if tendered Original Notes are registered in the name of any
person other than the person signing the letter of transmittal,
or
o if a transfer tax is imposed for any reason other than the
exchange of Original Notes in connection with the exchange
offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption from them is not
submitted with the letter of transmittal, the amount of such transfer taxes
will be billed directly to the tendering holder.
22
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the
Original Notes as reflected in our accounting records on the date of the
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes upon the completion of the exchange offer. The expenses of the
exchange offer that we pay will increase our deferred financing costs in
accordance with generally accepted accounting principles.
CONSEQUENCES OF FAILURES TO PROPERLY TENDER ORIGINAL NOTES IN THE EXCHANGE
Issuance of the New Notes in exchange for the Original Notes under
the exchange offer will be made only after timely receipt by the exchange
agent of such Original Notes, a properly completed and duly executed letter of
transmittal and all other required documents. Therefore, holders of the
Original Notes desiring to tender such Original Notes in exchange for New
Notes should allow sufficient time to ensure timely delivery. We are under no
duty to give notification of defects or irregularities of tenders of Original
Notes for exchange. Original Notes that are not tendered or that are tendered
but not accepted by us will, following completion of the exchange offer,
continue to be subject to the existing restrictions upon transfer thereof
under the Securities Act, and, upon completion of the exchange offer, certain
registered rights under the registration rights agreement will terminate.
In the event the exchange offer is completed, we will not be
required to register the remaining Original Notes. Remaining Original Notes
will continue to be subject to the following restrictions on transfer:
o the remaining Original Notes may be resold only if registered
pursuant to the Securities Act, if any exemption from
registration is available, or if neither such registration nor
such exemption is required by law, and
o the remaining Original Notes will bear a legend restricting
transfer in the absence of registration or an exemption.
We do not currently anticipate that we will register the remaining
Original Notes under the Securities Act. To the extent that Original Notes are
tendered and accepted in connection with the exchange offer, any trading
market for remaining Original Notes could be adversely affected.
23
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the
registration rights agreement entered into in connection with the issuance of
the Original Notes. We will not receive any cash proceeds from the issuance of
the New Notes in the exchange offer.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges for the periods indicated:
For the Years Ended December 31,
-------------------------------------------------- For the Three Months Ended
2003 March 31, 2004
------------------ --------------------------
Pro
1999 2000 2001 2002 Historical Forma Historical Pro Forma
------ ------ ------ ------ ---------- ------ ----------- ------------
Ratio of Earnings to Fixed Charges 3.4x 3.7x - 0.6x 1.1x 1.2x 0.1x 0.7x
For purposes of computing the above ratios: (1) earnings consist of
income/(loss) from continuing operations before income taxes plus fixed
charges plus amortization of deferred financing costs less capitalized
interest; and (2) fixed charges consist of interest expense (excluding
amortization of deferred financing costs), the interest component of rent
expense and capitalized interest. In the years ended December 31, 2001 and
2002, and the three months ended March 31, 2004 (historical and pro forma),
our earnings were insufficient to cover fixed charges by $15,727,000,
$2,403,000, $3,284,000 and $2,170,000, respectively.
24
DESCRIPTION OF THE New NOTES
Definitions of certain terms used in this Description of the New
Notes may be found under the heading "Certain Definitions." For purposes of
this section, the term "Company" refers only to Chemed Corporation (or any
successor thereto) and not to any of its Subsidiaries.
The Company issued the Original Notes under an Indenture dated as of
February 24, 2004 (the "Indenture"), between the Company and LaSalle Bank
National Association, as trustee (the "Trustee"). The terms of the Original
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the TIA. The New Notes will be issued under the same
Indenture and will be identical in all material respects to the Original
Notes, except that the New Notes will be registered under the Securities Act
and will be free of any obligation regarding registration, including the
payments of liquidated damages upon failure to file or have declared effective
an exchange offer registration statements or to consummate an exchange offer
by certain dates. Unless specifically stated to the contrary, the following
description applies equally to the New Notes and the Original Notes.
The Indenture contains provisions which define your rights under the
New Notes. In addition, the Indenture governs the obligations of the Company
regarding the New Notes. The terms of the New Notes include those stated in
the Indenture and those made part of the Indenture by reference to the TIA.
The following description is meant to be only a summary of certain
provisions of the Indenture. It does not restate the terms of the Indenture in
their entirety. We urge that you carefully read the Indenture as it, and not
this description, governs your rights as Holders.
OVERVIEW OF THE NEW NOTES
The New Notes:
o will be general unsecured obligations of the Company;
o will rank equally in right of payment with all existing
and future Senior Indebtedness of the Company;
o will be senior in right of payment to all existing and
future Subordinated Obligations of the Company;
o will be effectively subordinated to any Secured
Indebtedness of the Company and its Subsidiaries,
including Indebtedness under the Credit Agreement and the
Floating Rate Notes, to the extent of the value of the
assets securing such Indebtedness; and
o will be effectively subordinated to all liabilities
(including Trade Payables) and Preferred Stock of each
Subsidiary of the Company.
PRINCIPAL, MATURITY AND INTEREST
We will initially issue New Notes in an aggregate principal amount
of $150.0 million. The New Notes will mature on February 24, 2011. We will
issue the New Notes in fully
25
registered form, without coupons, in denominations of $1,000 and any integral
multiple of $1,000.
Each New Note we issue will bear interest at a rate of 8 3/4% per
annum beginning on February 24, 2004, or from the most recent date to which
interest has been paid or provided for. We will pay interest semiannually to
Holders of record at the close of business on the February 1 or August 1
immediately preceding the interest payment date on February 15 and August 15
of each year (each an "Interest Payment Date"). We will begin paying interest
to Holders on August 15, 2004. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. We will pay interest on
overdue principal at 1% per annum in excess of such rate, and we will pay
interest on overdue installments of interest at such higher rate to the extent
lawful.
We will also pay additional interest on the Original Notes to
holders of the Original Notes if we fail to file a registration statement
relating to the New Notes or if the registration statement is not declared
effective on a timely basis or if certain other conditions are not satisfied.
These provisions are more fully explained under the heading "Exchange and
Registration Rights Agreement." References to "interest" in this description
include any such additional interest.
INDENTURE MAY BE USED FOR FUTURE ISSUANCES
We may issue up to $150.0 million aggregate principal amount of
additional New Notes having identical terms and conditions to the New Notes we
are currently offering (the "Additional New Notes"). We will only be permitted
to issue such Additional New Notes if at the time of such issuance we are in
compliance with the covenants contained in the Indenture and any other
agreements governing the Company's debt, such as the Credit Agreement and the
indenture governing the Floating Rate Notes. Any Additional Notes will be part
of the same issue as the New Notes that we are currently offering and will
vote on all matters with such New Notes.
PAYING AGENT AND REGISTRAR
We will pay the principal of, premium, if any and interest on the
New Notes at any office of ours or any agency designated by us which is
located in the Borough of Manhattan, The City of New York. We have initially
designated the corporate trust office of the Trustee to act as the agent of
the Company in such matters. We, however, reserve the right to pay interest to
Holders by check mailed directly to Holders at their registered addresses.
Holders may exchange or transfer their New Notes at the same
location given in the preceding paragraph. No service charge will be made for
any registration of transfer or exchange of New Notes. We, however, may
require Holders to pay any transfer tax or other similar governmental charge
payable in connection with any such transfer or exchange.
OPTIONAL REDEMPTION
Except as set forth in the following paragraphs, we may not redeem
the New Notes prior to February 24, 2007. After this date, we may redeem the
New Notes, in whole or in part, on not less than 30 nor more than 60 days'
prior notice, at the following redemption prices (expressed as percentages of
principal amount), plus accrued and unpaid interest to, but excluding, the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest, if any, due on the relevant Interest Payment
Date), if redeemed during the 12-month period commencing on February 24 of the
years set forth below:
26
Redemption
Year Price
---- ----------
2007 104.375%
2008 102.917%
2009 101.458%
2010 and thereafter 100.000%
In addition, prior to February 24, 2007, we may, on one or more
occasions, redeem up to a maximum of 35% of the original aggregate principal
amount of the New Notes (calculated after giving effect to any issuance of
Additional New Notes), on not less than 30 nor more than 60 days' prior
notice, with the Net Cash Proceeds of one or more Equity Offerings by the
Company or Qualifying Subsidiary Stock Sales, at a redemption price equal to
108.750% of the principal amount thereof, plus accrued and unpaid interest,
to, but excluding, the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
Interest Payment Date); provided, however, that after giving effect to any
such redemption:
(1) at least 65% of the original aggregate principal amount of the
New Notes (calculated giving effect to any issuance of
Additional New Notes) remains outstanding; and
(2) any such redemption by the Company must be made within 60 days
of such Equity Offering or Qualifying Subsidiary Stock Sale and
must be made in accordance with certain procedures set forth in
the Indenture.
In addition, prior to February 24, 2007, the Company may redeem all,
but not less than all, the New Notes, on not less than 30 nor more than 60
days' prior notice, at a redemption price equal to 100% of the principal
amount of the New Notes to be redeemed plus the Applicable Premium as of, and
accrued and unpaid interest to, but excluding, the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date). Any notice to Holders of such
redemption must include the appropriate calculation of the redemption price,
but does not need to include the redemption price itself. The actual
redemption price must be set forth in an Officers' Certificate delivered to
the Trustee no later than two Business Days prior to the redemption date.
"Applicable Premium" means, with respect to any New Note on any
redemption date, the excess (but not less than zero) of (i) the present value
at such redemption date of all remaining scheduled payments of interest
(excluding accrued interest) and principal on such New Note (discounted at the
equivalent of the on Treasury Rate plus 50 basis points over (ii) the then
outstanding principal amount of such New Note.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two Business Days prior
to the date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining average life to February 24, 2007, provided,
however, that if the average life to February 24, 2007 of the New Notes is not
equal to the constant maturity of a United States Treasury security for which
a weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such
yields are given, except that if
27
the average life to February 24, 2007, of the New Notes is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
Any notice of an optional redemption may provide that the redemption
will be subject to specified conditions, provided, that such conditions are
not solely within our control, such as the consummation of other transactions.
MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES
We are not required to make any mandatory redemption or sinking fund
payments with respect to the New Notes. However, under certain circumstances,
we may be required to offer to purchase New Notes as described under the
captions "Change of Control" and "Certain Covenants -- Limitation on Sales of
Assets and Subsidiary Stock." We may at any time and from time to time
purchase New Notes in the open market or otherwise.
SELECTION
If we partially redeem New Notes, the Trustee will select the New
Notes to be redeemed on a pro rata basis, by lot or by such other method as
the Trustee in its sole discretion shall deem to be fair and appropriate,
although no New Note of $1,000 in original principal amount or less will be
redeemed in part. If we redeem any New Note in part only, the notice of
redemption relating to such New Note shall state the portion of the principal
amount thereof to be redeemed. A New Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancelation of the original New Note. On and after the redemption date,
interest will cease to accrue on New Notes or portions thereof called for
redemption so long as we have deposited with the Paying Agent funds sufficient
to pay the principal of, plus accrued and unpaid interest and any premium on,
the New Notes to be redeemed.
RANKING
The New Notes will be unsecured Senior Indebtedness of the Company,
will rank equally in right of payment with all existing and future Senior
Indebtedness of the Company and will be senior in right of payment to all
existing and future Subordinated Obligations of the Company. The New Notes
will be effectively subordinated to any Secured Indebtedness of the Company,
including Indebtedness under the Credit Agreement and the Floating Rate Notes,
to the extent of the value of the assets securing such Indebtedness.
As of March 31, 2004, the Company had $320.0 million of Senior
Indebtedness, of which $170.0 million was Secured Indebtedness (exclusive of
unused commitments of $43.6 million and $31.4 million in outstanding letters
of credit under the Credit Agreement). The Indebtedness under the Credit
Agreement and the Floating Rate Notes represented all of such Secured
Indebtedness. The foregoing amounts do not include Indebtedness of
Subsidiaries of the Company.
The New Notes will not be guaranteed by our Subsidiaries. We
currently conduct all our operations through our Subsidiaries. Creditors of
such Subsidiaries, including trade creditors, and preferred stockholders (if
any) of such Subsidiaries generally will have priority with respect to the
assets and earnings of such Subsidiaries over the claims of the Company's
creditors, including Holders. The Indebtedness under the Credit Agreement and
the Floating Rate Notes are
28
guaranteed by all our Domestic Subsidiaries other than VNF and Chemed Capital
Trust. The New Notes, therefore, will be effectively subordinated to the
claims of creditors, including the holders of Indebtedness under the Credit
Agreement and the Floating Rate Notes, as well as trade creditors and
preferred stockholders (if any) of the Company's Subsidiaries. As of and for
the twelve months ended March 31, 2004, after eliminating intercompany
activity, our Subsidiaries:
o had total liabilities of approximately $124.0 million,
including Trade Payables but excluding the guarantees of
Indebtedness under the Credit Agreement and the Floating
Rate Notes,
o had approximately 89% of the Company's Consolidated
assets; and
o generated approximately 100% of the Company's Consolidated
revenues and 100% of its EBITDA.
Although the Indenture will limit the Incurrence of Indebtedness by and the
issuance of preferred stock of our Subsidiaries, such limitation is subject to
a number of significant qualifications. See "Certain Covenants -- Limitation
on Indebtedness."
We will have the right if certain conditions are met to designate
either VHC and its Subsidiaries, or RRM and its Subsidiaries, as Unrestricted
Subsidiaries. Such a designation would result in such Subsidiaries no longer
being subject to the restrictive covenants of the Indenture in practically all
respects. One of these conditions is that our Adjusted Consolidated Leverage
Ratio, which is our Consolidated Leverage Ratio excluding the Indebtedness and
EBITDA of the Subsidiaries to be designated as Unrestricted Subsidiaries, be
not more than 5.0 to 1 with respect to our ability to designate VHC and its
Subsidiaries as Unrestricted Subsidiaries and 4.0 to 1 with respect to our
ability to designate RRM and its Subsidiaries as Unrestricted Subsidiaries. As
of and for the twelve months ended March 31, 2004, we had an Adjusted
Consolidated Leverage Ratio of 12.7 to 1 (excluding VHC and its Subsidiaries)
and of 9.1 to 1 (excluding RRM and its Subsidiaries). See "-- Limitation on
Designation of Subsidiaries as Unrestricted Subsidiaries."
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change
of Control"), each Holder will have the right to require the Company to
purchase all or any part of such Holder's New Notes at a purchase price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest to (but excluding) the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest, if any, due
on the relevant Interest Payment Date); provided, however, that
notwithstanding the occurrence of a Change of Control, the Company shall not
be obligated to purchase the New Notes pursuant to this section in the event
that it has exercised its right to redeem all the New Notes under the terms of
the section titled "Optional Redemption":
(1) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that, for purposes of this clause, such
person or group shall be deemed to have "beneficial ownership"
of all shares that any such person or group has the right to
acquire, whether such right is exercisable immediately or
29
only after the passage of time), directly or indirectly, of
more than 50% of the total voting power of the Voting Stock of
the Company;
(2) the Company ceasing to be the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that, for
purposes of this clause, the Company shall be deemed to have
"beneficial ownership" of all shares that the Company or any
Restricted Subsidiary has the right to acquire, whether such
right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total
voting power of the Voting Stock of Vitas; or
(3) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors
of the Company (together with any new directors whose election
by the Board of Directors or whose nomination for election by
the shareholders of the Company was approved by a vote of 66
2/3% of the directors of the Company then still in office who
were either directors at the beginning of such period or whose
election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the applicable
board of directors then in office;
(4) the adoption of a plan relating to the liquidation or
dissolution of the Company; or
(5) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the
Company, or the sale, lease, transfer, conveyance or other
disposition of all or substantially all the assets of the
Company, to another Person and, in the case of any such merger
or consolidation, other than a transaction following which
holders of securities that represented 100% of the Voting Stock
of the Company outstanding immediately prior to such
transaction (or other securities into which such securities are
converted as part of such merger or consolidation transaction)
own directly or indirectly at least a majority of the voting
power of the Voting Stock of the surviving Person in such
merger or consolidation transaction immediately after such
transaction and in substantially the same proportion as before
the transaction.
Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee (the "Change of
Control Offer") stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or any part of
such Holder's New Notes at a purchase price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to, but excluding, the date of purchase
(subject to the right of Holders of record on the relevant
record date to receive interest on the relevant Interest
Payment Date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
30
(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions, determined by the Company, consistent with
this covenant, that a Holder must follow in order to have its
New Notes purchased.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all New Notes validly tendered and not withdrawn under
such Change of Control Offer.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the purchase of New Notes pursuant to
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
The Change of Control purchase feature is a result of negotiations
between the Company, the Placement Agent and the initial holders of the New
Notes. Management has no present intention to engage in a transaction
involving a Change of Control, although it is possible that the Company would
decide to do so in the future. Subject to the limitations discussed below, the
Company could, in the future, enter into certain transactions, including
acquisitions, refinancings or recapitalizations, that would not constitute a
Change of Control under the Indenture, but that could increase the amount of
indebtedness outstanding at such time or otherwise affect the Company's
capital structure, credit worthiness or credit ratings. Restrictions on the
ability of the Company to Incur additional Indebtedness are contained in the
covenants described under "Certain Covenants -- Limitation on Indebtedness",
"-- Limitation on Liens" and "-- Limitation on Sale/Leaseback Transactions."
Such restrictions can only be waived with the consent of the Holders of a
majority in principal amount of the New Notes then outstanding. Except for the
limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford Holders protection in the
event of a highly leveraged transaction.
The occurrence of certain of the events which would constitute a
Change of Control would constitute a default under the Credit Agreement. Upon
the occurrence of a Change of Control, the Company would also be required,
under the terms of the Floating Rate Notes, to offer to repurchase the
Floating Rate Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued but unpaid interest. Future Senior Indebtedness of
the Company may contain prohibitions of certain events which would constitute
a Change of Control or require such Senior Indebtedness to be repurchased or
repaid upon a Change of Control. Moreover, the exercise by the Holders of
their right to require the Company to purchase the New Notes could cause a
default under such Senior Indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders upon a purchase may
be limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required purchases. The provisions under the Indenture relative to the
Company's obligation to make an offer to purchase the New Notes as a result of
a Change of Control may be waived or modified with the written consent of the
Holders of a majority in principal amount of the New Notes.
31
The definition of Change of Control includes a phrase relating to
the sale, lease or transfer of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a Holder to require
the Company to purchase such New Notes as a result of a sale, lease or
transfer of less than all of the assets of the Company may be uncertain.
CERTAIN COVENANTS
The Indenture will contain covenants applicable to the Company and
certain of its Subsidiaries including, among others, those described below.
Limitation on Indebtedness. (a) The Company will not, and will not
permit any Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness; provided, however, that the Company and its Restricted
Subsidiaries may Incur Indebtedness if on the date of such Incurrence and
after giving effect thereto the Consolidated Leverage Ratio would be no
greater than (i), prior to any designation of the Specified Subsidiary Group
as Unrestricted Subsidiaries, (x) 5.75 to 1, if such Incurrence occurs on or
prior to December 31, 2004 and (y) 5.5 to 1, if such Incurrence occurs after
December 31, 2004 and (ii) on or following any designation of the Specified
Subsidiary Group as Unrestricted Subsidiaries, (x) 5.0 to 1, if the Specified
Subsidiary is VHC and (y) 4.0 to 1, if the Specified Subsidiary is RRM.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Credit Agreement in an
aggregate principal amount not to exceed $135.0 million less
the aggregate amount of all Net Available Cash applied by the
Company or any of its Restricted Subsidiaries to repay
Indebtedness under the Credit Agreement pursuant to clause (A)
of the covenant described under "-- Limitation on Sales of
Assets and Subsidiary Stock" solely to the extent the
corresponding commitments relating to such Indebtedness are
permanently reduced;
(2) Indebtedness of the Company owed to and held by any Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owed to
and held by the Company or any Restricted Subsidiary; provided,
however, that (A) any subsequent issuance or transfer of any
Capital Stock or any other event that results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of any such Indebtedness (except to the
Company or a Restricted Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the
issuer thereof and (B) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to
the prior payment in full in cash of all obligations with
respect to the New Notes;
(3) Indebtedness represented by (A) the New Notes (not including
any Additional New Notes) and any Exchange Notes and (B) the
Floating Rate Notes and the Guarantees of the Floating Rate
Notes by Subsidiaries of the Company (but not including any
additional Floating
32
Rate Notes but including any exchange notes under the
indenture for the Floating Rate Notes);
(4) Indebtedness outstanding on the Closing Date (other than the
Indebtedness described in clauses (1), (2) or (3) above);
(5) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness
Incurred in contemplation of, in connection with, as
consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such
Restricted Subsidiary became a Subsidiary of or was otherwise
acquired by the Company); provided, however, that on the date
that such Restricted Subsidiary is acquired by the Company,
either (x) the Company would have been able to incur $1.00 of
additional indebtedness pursuant to the foregoing paragraph (a)
after giving effect to such acquisition or (y) the Consolidated
Leverage Ratio after giving effect to such acquisition and any
related transactions would be no greater than the Consolidated
Leverage Ratio as of such date without giving effect to such
acquisition and any related transactions;
(6) Refinancing Indebtedness in respect of any Indebtedness
Incurred pursuant to paragraph (a) or clause (3), (4), this
clause (6) or clause (9) of this paragraph (b);
(7) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds
provided by the Company and the Restricted Subsidiaries in the
ordinary course of their business, and (B) under Interest Rate
Agreements entered into for bona fide hedging purposes of the
Company in the ordinary course of business; provided, however,
that such Interest Rate Agreements do not increase the
Indebtedness of the Company outstanding at any time other than
as a result of fluctuations in interest rates or by reason of
fees, indemnities and compensation payable thereunder;
(8) Purchase Money Indebtedness, mortgage financings and
Capitalized Lease Obligations in an aggregate principal amount
not in excess of $3.0 million at any time outstanding;
(9) Indebtedness Incurred at a Restricted Subsidiary, to the extent
the proceeds of such Indebtedness are used to repay
Indebtedness under the Credit Agreement and/or the Floating
Rate Notes;
(10) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of
business, provided that such Indebtedness is extinguished
within five Business Days of its Incurrence;
(11) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness constituting reimbursement
obligations with respect to
33
letters of credit issued in the ordinary course of business;
provided, however, that upon the drawing of such letters of
credit, such obligations are reimbursed within 30 days
following such drawing;
(12) obligations arising from or representing deferred compensation
to employees of the Company or its Subsidiaries that constitute
or are deemed to be Indebtedness under GAAP and that are
Incurred in the ordinary course of business; or
(13) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of
this paragraph (b)) in an aggregate principal amount on the
date of Incurrence that, when added to all other Indebtedness
Incurred pursuant to this clause (13) and then outstanding,
will not exceed $5.0 million.
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations unless such Indebtedness will be
subordinated to the New Notes to at least the same extent as such Subordinated
Obligations.
(d) Notwithstanding any other provision of this covenant, the
maximum amount of Indebtedness that the Company or any Restricted Subsidiary
may Incur pursuant to this covenant shall not be deemed to be exceeded solely
as a result of fluctuations in the exchange rates of currencies. For purposes
of determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this covenant:
(1) Indebtedness Incurred pursuant to the Credit Agreement prior to
or on the Closing Date shall be treated as Incurred pursuant to
clause (1) of paragraph (b) above,
(2) Indebtedness permitted by this covenant need not be permitted
solely by reference to one provision permitting such
Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this covenant
permitting such Indebtedness, and
(3) in the event that Indebtedness meets the criteria of more than
one of the types of Indebtedness described in this covenant,
the Company, in its sole discretion, shall classify such
Indebtedness and only be required to include the amount of such
Indebtedness in one of such clauses.
(e) In addition, the Company will not permit any of its Unrestricted
Subsidiaries to incur any Indebtedness other than Non-Recourse Debt (or issue
any shares of Disqualified Stock that is either mandatorily redeemable by the
Company or convertible or exchangeable for Indebtedness other than
Non-Recourse Debt). If at any time an Unrestricted Subsidiary becomes a
Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to
be Incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be Incurred as of such date under this
clause (e), the Company shall be in Default of this covenant).
34
Limitation on Restricted Payments. (a) The Company will not, and
will not permit any Restricted Subsidiary, directly or indirectly, to:
(1) declare or pay any dividend, make any distribution on or in
respect of its Capital Stock or make any similar payment
(including any payment in connection with any merger or
consolidation involving the Company or any Subsidiary of the
Company) to the direct or indirect holders of its Capital
Stock, except (x) dividends or distributions payable solely in
its Capital Stock (other than Disqualified Stock or Preferred
Stock) and (y) dividends or distributions payable to the
Company or a Restricted Subsidiary (and, if such Restricted
Subsidiary has shareholders other than the Company or other
Restricted Subsidiaries, to its other shareholders on a pro
rata basis),
(2) purchase, repurchase, redeem, retire or otherwise acquire for
value any Capital Stock of the Company or any Restricted
Subsidiary held by Persons other than the Company or a
Restricted Subsidiary,
(3) purchase, repurchase, redeem, retire, defease or otherwise
acquire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase, redemption,
retirement, defeasance or other acquisition for value of
Subordinated Obligations acquired in anticipation of satisfying
a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of
acquisition), or
(4) make any Investment (other than a Permitted Investment) in any
Person;
(any such dividend, distribution, payment, purchase, redemption, repurchase,
defeasance, retirement, or other acquisition or Investment described in
clauses (1) through (4) above being herein referred to as a "Restricted
Payment") if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment:
(A) a Default will have occurred and be continuing (or would
result therefrom);
(B) after giving effect, on a pro forma basis, to such
Restricted Payment, the Company could not Incur at least
$1.00 of additional Indebtedness under paragraph (a) of
the covenant described under "-- Limitation on
Indebtedness"; or
(C) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if
other than in cash, shall be the Fair Market Value of the
property or other non-cash assets that constitute such
Restricted Payment) declared or made subsequent to the
Closing Date would exceed the sum, without duplication,
of:
(i) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the
35
beginning of the fiscal quarter immediately following
the fiscal quarter during which the Closing Date
occurs to the end of the most recent fiscal quarter
ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net
Income will be a deficit, minus 100% of such
deficit);
(ii) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital
Stock (other than Disqualified Stock) subsequent to
the Closing Date (other than an issuance or sale to
(x) a Subsidiary of the Company or (y) an employee
stock ownership plan or other trust established by
the Company or any of its Subsidiaries);
(iii) the amount by which Indebtedness of the Company or
its Restricted Subsidiaries is reduced on the
Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company)
subsequent to the Closing Date of any Indebtedness of
the Company or its Restricted Subsidiaries issued
after the Closing Date which is convertible or
exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount
of any cash or the Fair Market Value of other
property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); and
(iv) an amount equal to the sum of (x) the net reduction
in any Investments (excluding Permitted Investments,
except as provided in the next sentence) made by the
Company or any Restricted Subsidiary in any Person
resulting from repurchases, repayments or redemptions
of such Investments by such Person, net cash proceeds
realized on the sale of such Investment and net cash
proceeds representing the return of capital
(excluding dividends and distributions), in each case
received by the Company or any Restricted Subsidiary,
and (y) to the extent such Person is an Unrestricted
Subsidiary, the portion (proportionate to the
Company's equity interest in such Subsidiary) of the
Fair Market Value of the net assets of such
Unrestricted Subsidiary if such Unrestricted
Subsidiary is designated a Restricted Subsidiary,
with such Fair Market Value measured at the time of
any such designation; provided, however, that the
foregoing sum shall not exceed, in the case of any
such Person or Unrestricted Subsidiary, the amount of
Investments (excluding Permitted Investments, except
as provided in the next sentence) previously made by
the Company or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary and included in the
calculation of the amount of Restricted Payments.
36
After any designation of the Specified Subsidiary Group as Unrestricted
Subsidiaries in accordance with the covenant described under "-- Limitation on
Designation of Subsidiaries as Unrestricted Subsidiaries," the remaining
Investment of the Company and its Restricted Subsidiaries in the Specified
Subsidiary Group shall be included in the calculation of the amount available
for Restricted Payments as provided in clause (C) above as if it were not a
Permitted Investment; provided, that, if RRM is the Specified Subsidiary, such
inclusion shall only be made if at the time of such designation the amount
available for Restricted Payments under clause (C) above is greater than zero,
in which case the amount otherwise available for Restricted Payments shall be
reduced by the amount of such Investment but not below zero. For the avoidance
of doubt, the inclusion of the Investment in the Specified Subsidiary Group
after designation of the Specified Subsidiary Group as Unrestricted
Subsidiaries shall not be taken into account in determining whether the
Company is permitted to designate such Subsidiaries as Unrestricted
Subsidiaries under the covenant described under "-- Limitation on Designation
of Subsidiaries as Unrestricted Subsidiaries."
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any purchase, repurchase, redemption, retirement or other
acquisition for value of Capital Stock of the Company made by
exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold
to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its
Subsidiaries); provided, however, that:
(A) such purchase, repurchase, redemption, retirement or other
acquisition for value will be excluded in the calculation
of the amount of Restricted Payments, and
(B) the Net Cash Proceeds from such sale applied in the manner
set forth in this clause (1) will be excluded from the
calculation of amounts under clause (4)(C)(ii) of
paragraph (a) above;
(2) any prepayment, repayment, purchase, repurchase, redemption,
retirement, defeasance or other acquisition for value of
Subordinated Obligations of the Company made by exchange for,
or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company that is permitted to be Incurred
pursuant to paragraph (b) of the covenant described under "--
Limitation on Indebtedness"; provided, however, that such
prepayment, repayment, purchase, repurchase, redemption,
retirement, defeasance or other acquisition for value will be
excluded in the calculation of the amount of Restricted
Payments;
(3) any prepayment, repayment, purchase, repurchase, redemption,
retirement, defeasance or other acquisition for value of
Subordinated Obligations from Net Available Cash to the extent
permitted by the covenant described under "-- Limitation on
Sales of Assets and Subsidiary Stock"; provided, however, that
such prepayment, repayment, purchase, repurchase, redemption,
retirement, defeasance or other acquisition for value will be
excluded in the calculation of the amount of Restricted
Payments;
37
(4) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividends would
have complied with this covenant; provided, however, that such
dividends will be included in the calculation of the amount of
Restricted Payments;
(5) any purchase, repurchase, redemption, retirement or other
acquisition for value of shares of, or options to purchase
shares of, Capital Stock of the Company or any of its
Subsidiaries from employees, former employees, directors or
former directors of the Company or any of its Subsidiaries (or
permitted transferees of such employees, former employees,
directors or former directors), pursuant to the terms of
agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under
which such individuals purchase or sell or are granted the
option to purchase or sell, shares of such Capital Stock;
provided, however, that the aggregate amount of such purchases,
repurchases, redemptions, retirements and other acquisitions
for value will not exceed $2.0 million in any calendar year;
provided further, however, that such purchases, repurchases,
redemptions, retirements and other acquisitions for value shall
be excluded in the calculation of the amount of Restricted
Payments;
(6) repurchases of Capital Stock deemed to occur upon exercise of
stock options if such Capital Stock represents a portion of the
exercise price of such options and repurchases of Capital Stock
of Subsidiaries consisting of directors' qualifying shares or
shares issued to third parties in the ordinary course to the
extent necessary to satisfy any licensing requirements under
applicable law with respect to the Company's or any of its
Subsidiary's business; provided, however, that such Restricted
Payments shall be excluded in the calculation of the amount of
Restricted Payments;
(7) cash payments in lieu of the issuance of fractional shares in
connection with the exercise of warrants, options or other
securities convertible into or exchangeable for Capital Stock
of the Company; provided, however, that any such cash payment
shall not be for the purpose of evading the limitation of the
covenant described under this subheading (as determined in good
faith by the Board of Directors); provided further, however,
that such payments shall be included in the calculation of the
amount of Restricted Payments;
(8) payments of intercompany subordinated Indebtedness, the
Incurrence of which was permitted under clause (2) of paragraph
(b) of the covenant described under "-- Limitation on
Indebtedness; provided, however, that no Default has occurred
and is continuing or would otherwise result therefrom; provided
further, however, that such payments shall be excluded in the
calculation of the amount of Restricted Payment;
(9) a Qualifying Subsidiary Stock Distribution to the extent
permitted by the covenant described under "-- Limitation on
Designation of Subsidiaries as Unrestricted Subsidiaries";
provided, however, that the amount of
38
such distribution shall not be included in the calculation of
the amount of Restricted Payments;
(10) the payment of cash dividends on the Capital Stock of the
Company in an amount not to exceed (x) $0.48 per share per
fiscal year and (y) $7.0 million in the aggregate for such
dividends in any fiscal year; provided that, after a
designation of the Specified Subsidiary Group as Unrestricted
Subsidiaries, no such dividend shall be declared or paid
unless, for the most recently ended four full fiscal quarters
for which internal financial statements are available preceding
the date of declaration of any such dividend or distribution
after giving effect to such dividend or distribution as a fixed
charge on a pro forma basis, the Company and its Restricted
Subsidiaries would have had a Consolidated Fixed Charge
Coverage Ratio of at least 1.35 to 1; provided further that if
(x) the Specified Subsidiary is VHC, (y) the Specified
Subsidiary Group has been designated as Unrestricted
Subsidiaries and (z) the Company may not otherwise pay such
dividends because of a failure to satisfy the Consolidated
Fixed Charge Coverage Ratio described in the preceding proviso,
the Company may pay cash dividends from cash proceeds of a
Qualifying Subsidiary Stock Sale, in an amount not to exceed
$7.0 million; and provided further that dividends paid under
this clause (10) shall be included in the amount of Restricted
Payments;
(11) the payment of scheduled, quarterly cash dividends on the
Chemed Preferred Securities declared on or prior to December
31, 2004 in an amount not to exceed $2.00 per share per year,
and the redemption of the Chemed Preferred Securities and the
Subordinated Chemed Debentures at the applicable scheduled
redemption prices on or prior to December 31, 2004; provided
that such dividends and redemption amounts shall not be
included in the amount of Restricted Payments;
(12) dividends or distributions of Capital Stock subject to the
Closing Date Stock Award Plan, so long as the aggregate amount
of such dividends or distributions made pursuant to this clause
12 does not exceed $2.8 million; provided, that such dividends
or distributions shall be excluded in the amount of Restricted
Payments; and
(13) other Restricted Payments in an aggregate amount not to exceed
$5.0 million; provided, however, that such Restricted Payments
shall be included in the calculation of the amount of
Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the
Company;
(2) make any loans or advances to the Company; or
39
(3) transfer any of its property or assets to the Company, except:
(A) with respect to clauses (1), (2) or (3):
(i) any encumbrance or restriction pursuant to applicable
law or an agreement in effect at or entered into on
the Closing Date;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such
Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration
in, in contemplation of, or to provide all or any
portion of the funds or credit support utilized to
consummate the transaction or series of related
transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was
otherwise acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Indebtedness
Incurred pursuant to an agreement referred to in
clause (i) or (ii) of this covenant or this clause
(iii) or contained in any amendment to an agreement
referred to in clause (i) or (ii) of this covenant or
this clause (iii); provided, however, that the
encumbrances and restrictions contained in any such
Refinancing agreement or amendment, taken as a whole,
are not materially more disadvantageous to the
Holders than the encumbrances and restrictions
contained in such predecessor agreements (as
determined by the Company in good faith);
(iv) any encumbrance or restriction contained in the terms
of any Indebtedness Incurred pursuant to clause
(b)(9) of the covenant described under "-- Limitation
on Indebtedness" or any agreement pursuant to which
such Indebtedness was Incurred; provided, however,
that the encumbrances and restrictions contained in
such Indebtedness, taken as a whole, are not
materially more disadvantageous to the holders of the
New Notes than the encumbrances and restrictions
contained in the agreements for the Indebtedness
being repaid (as determined by the Company in good
faith);
(v) with respect to a Restricted Subsidiary, any
encumbrance or restriction imposed pursuant to an
agreement entered into in connection with the sale or
disposition of all or substantially all the Capital
Stock or
40
assets of such Restricted Subsidiary or in addition,
in the case of the Specified Subsidiary Group, any
encumbrance or restriction imposed pursuant to a
purchase and sale, underwriting or other disposition
agreement in connection with a Qualifying Subsidiary
Stock Sale or Qualifying Subsidiary Stock
Distribution; provided that in any such case such
encumbrance or restriction is in effect only for the
period pending the closing of such sale, disposition
or distribution; and
(B) in the case of clause (3), any encumbrance or restriction
(i) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that
is subject to a lease, license or similar contract,
or
(ii) contained in security agreements securing
Indebtedness of a Restricted Subsidiary to the extent
such encumbrance or restriction restricts the
transfer of the property subject to such security
agreements.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company
will not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless:
(1) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other
Person assuming sole responsibility for, any liabilities,
contingent or otherwise) at the time of such Asset Disposition
at least equal to the Fair Market Value of the shares and
assets subject to such Asset Disposition,
(2) at least 75% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or
cash equivalents, and
(3) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be)
(A) first, to the extent the Company elects (or is required by
the terms of any Indebtedness), to prepay, repay,
purchase, repurchase, redeem, retire, defease or otherwise
acquire for value Senior Indebtedness of the Company or
Indebtedness (other than obligations in respect of
Preferred Stock) of a Restricted Subsidiary (in each case
other than Indebtedness owed to the Company or an
Affiliate of the Company and other than obligations in
respect of Disqualified Stock) within one year from the
later of the date of such Asset Disposition or the receipt
of such Net Available Cash;
(B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the
extent the Company or such Restricted Subsidiary elects,
to reinvest in
41
Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another
Restricted Subsidiary) within one year from the later of
such Asset Disposition or the receipt of such Net
Available Cash;
(C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and
(B), to make an Offer (as defined in paragraph (b) of this
covenant below) to purchase New Notes pursuant to and
subject to the conditions set forth in paragraph (b) of
this covenant; provided, however, that if the Company so
elects (or is required by the terms of any other Senior
Indebtedness), such Offer may be made ratably to purchase
the New Notes and other Senior Indebtedness of the
Company; and
(D) fourth, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A), (B)
and (C), for any general corporate purpose permitted by
the terms of the Indenture;
provided, however that in connection with any prepayment,
repayment, purchase, repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness
pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary will retire such Indebtedness and will
cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid,
repaid, purchased, repurchased, redeemed, retired, defeased or
otherwise acquired for value.
Notwithstanding the foregoing provisions of this covenant, the
Company and the Restricted Subsidiaries will not be required to apply any Net
Available Cash in accordance with the preceding paragraph of this covenant
except to the extent that the aggregate Net Available Cash from Asset
Dispositions that is not otherwise applied in accordance with the preceding
paragraph exceeds (i) $25.0 million, in the case of Net Available Cash that
constitutes Net Cash Proceeds from Qualifying Subsidiary Stock Sales (not
including the initial Qualifying Subsidiary Stock Sale) or (ii) $5.0 million,
in the case of Net Available Cash from all other Asset Dispositions.
For the purposes of this covenant, the following are deemed to be
cash or cash equivalents:
o the assumption of Indebtedness of the Company (other than
obligations in respect of Disqualified Stock of the
Company) or any Restricted Subsidiary and the release of
the Company or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such
Asset Disposition and
o securities received by the Company or any Restricted
Subsidiary from the transferee that within 90 days are
converted by the Company or such Restricted Subsidiary
into cash.
42
(b) In the event of an Asset Disposition that requires the purchase
of New Notes pursuant to clause (a)(3)(C) of this covenant, the Company will
be required (i) to purchase New Notes tendered pursuant to an offer by the
Company for the New Notes (the "Offer") at a purchase price of 100% of their
principal amount plus accrued and unpaid interest to the date of purchase
(subject to the right of Holders of record on the relevant date to receive
interest due on the relevant Interest Payment Date) in accordance with the
procedures (including prorating in the event of oversubscription), set forth
in the Indenture and (ii) to purchase other Senior Indebtedness of the Company
on the terms and to the extent contemplated thereby (provided that in no event
shall the Company offer to purchase such other Senior Indebtedness of the
Company at a purchase price in excess of 100% of its principal amount (without
premium), plus accrued and unpaid interest thereon). If the aggregate purchase
price of New Notes (and other Senior Indebtedness) tendered pursuant to the
Offer is less than the Net Available Cash allotted to the purchase of the New
Notes (and other Senior Indebtedness), the Company will apply the remaining
Net Available Cash in accordance with clause (a)(3)(D) of this covenant. The
Company will not be required to make an Offer for New Notes (and other Senior
Indebtedness) pursuant to this covenant if the Net Available Cash available
therefor (after application of the proceeds as provided in clauses (a)(3)(A)
and (B)) is less than $5.0 million for any particular Asset Disposition or
related series of Asset Dispositions (which lesser amount will be carried
forward for purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition). Upon
completion of such an offer to purchase, Net Available Cash will be deemed to
be reduced by the aggregate amount of such offer.
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of New Notes pursuant to
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
enter into or conduct any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless such transaction is on terms that:
(1) are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate;
(2) in the event such Affiliate Transaction involves an aggregate
amount in excess of $5.0 million,
(A) are set forth in writing, and
(B) have been approved by a majority of the members of the
Board of Directors and by a majority of the members of
such Board of Directors having no personal stake in such
transaction, if any (and such majority or majorities, as
the case may be, determines
43
that such Affiliate Transaction satisfies the criteria in
clause (1) above); and
(3) in the event such Affiliate Transaction involves an amount in
excess of $20.0 million, have been determined by a nationally
recognized appraisal or investment banking firm to be fair,
from a financial standpoint, to the Company and its Restricted
Subsidiaries or is not less favorable to the Company and its
Restricted Subsidiaries than could reasonably be expected to be
obtained at the time in an arms length transaction with a
Person who is not an Affiliate.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any Investment or other Restricted Payment permitted to be made
pursuant to the covenant described under "-- Limitation on
Restricted Payments,"
(2) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors,
(3) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the
Board of Directors,
(4) loans or advances to employees in the ordinary course of
business of the Company or its Restricted Subsidiaries and
consistent with prudent practices and applicable law, not to
exceed $2.0 million outstanding at any one time,
(5) the payment of reasonable and customary fees, compensation or
employee benefit arrangements to and any indemnity provided for
the benefit of directors, officers or employees of the Company
and its Subsidiaries in the ordinary course of business,
(6) any transaction with a Restricted Subsidiary which would
constitute an Affiliate Transaction solely because the Company
or a Restricted Subsidiary owns an equity interest in, or
otherwise controls, such Restricted Subsidiary,
(7) transactions reasonably contemplated by any Customary
Transition Agreement,
(8) the Transactions, or
(9) the making of severance payments to directors, officers or
employees of Vitas that are required pursuant to arrangements
in effect prior to the date that the Company acquired Vitas, in
an aggregate amount not to exceed $14.5 million (which
arrangements may be modified so long as such aggregate amount
is not exceeded).
44
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company will not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary to any Person (other than the Company
or a Wholly Owned Subsidiary), and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of any shares of
its Capital Stock (other than directors' qualifying shares or shares issued to
third parties in the ordinary course to the extent necessary to satisfy any
licensing requirements under applicable law with respect to the Company's or
any of its Subsidiary's business) to any Person (other than the Company or a
Wholly Owned Subsidiary), except, in each case, with respect to dispositions
in connection with a Qualifying Subsidiary Stock Sale or Qualifying Subsidiary
Stock Distribution; provided, however, that the foregoing shall not prohibit
any such issuance, sale or disposition if:
(1) immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Restricted
Subsidiaries owns any Capital Stock of such Restricted
Subsidiary; or
(2) immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made
under the covenant described under "-- Limitation on Restricted
Payments" if made on the date of such issuance, sale or other
disposition (and such Investment shall be deemed to be an
Investment for the purposes of such covenant as of the
effective date of the applicable transaction).
The proceeds of any sale of such Capital Stock permitted under
clause (1) or (2) above will be treated as Net Available Cash from an Asset
Disposition and must be applied in accordance with the terms of the covenant
described under "-- Limitation on Sales of Assets and Subsidiary Stock."
For avoidance of doubt, the Company will not be permitted to issue,
directly or indirectly, any of its Capital Stock that is exchangeable or
convertible, with or without conditions, into any Capital Stock of any
Restricted Subsidiary without complying with this covenant.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien (the "Initial Lien") of any nature whatsoever on any of its property or
assets (including Capital Stock of a Restricted Subsidiary, but excluding
Capital Stock of an Unrestricted Subsidiary), whether owned at the Closing
Date or thereafter acquired, other than Permitted Liens, without effectively
providing that the New Notes shall be secured equally and ratably with (or
prior to) the obligations so secured for so long as such obligations are so
secured. Any Lien created for the benefit of the Holders of the New Notes
pursuant to the foregoing sentence shall provide by its terms that such Lien
will be automatically and unconditionally released upon the release and
discharge of the Initial Lien.
SEC Reports. Whether or not required by the SEC's rules and
regulations, so long as any New Notes are outstanding, the Company will
furnish to the Holders, within the time periods specified in the SEC's rules
and regulations:
(1) all quarterly and annual reports that would be required to be
filed with the SEC on Forms 10-Q and 10-K if the Company was
required to file such reports; and
45
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if the Company was required to file such
reports.
All such reports will be prepared in all material respects in accordance with
all of the SEC's rules and regulations applicable to such reports, and each
annual report on Form 10-K will include a report on the Company's consolidated
financial statements by the Company's certified independent accountants. The
Company's reporting obligations with respect to clauses (1) and (2) above
shall be deemed satisfied in the event the Company files these reports with
the SEC on EDGAR.
If, at any time, the Company is no longer subject to the periodic
reporting requirements of the Exchange Act for any reason, the Company will
nevertheless be required to continue to file the reports specified in the
preceding paragraph with the SEC within the time periods specified above
unless the SEC will not accept such a filing. The Company agrees that it will
not take any action for the sole purpose of causing the SEC not to accept any
such filings (it being understood and agreed that, if the Company is entitled
to suspend its reporting obligations under the Exchange Act, the Company shall
not be prevented from making any filings necessary to suspend such
obligations). If, notwithstanding the foregoing, the SEC will not accept the
Company's filings for any reason, the Company will post the reports referred
to in the preceding paragraph on its website within the time periods that
would apply if the Company was required to file those reports with the SEC.
In addition, the Company agrees that, for so long as any New Notes
remain outstanding, at any time they are not required to file the reports
required by the preceding paragraphs with the SEC, they will furnish to the
Holders and to securities analysts and prospective investors, upon their
written request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
Limitation on Lines of Business. The Company will not, and will not
permit any Restricted Subsidiary to, engage in any business, other than a
Permitted Business.
Limitation on Sale/Leaseback Transactions. The Company will not, and
will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless:
(1) the Company or such Restricted Subsidiary would be entitled to:
(A) Incur Indebtedness in an amount equal to the Attributable
Debt with respect to such Sale/Leaseback Transaction
pursuant to the covenant described under "-- Limitation on
Indebtedness" and
(B) create a Lien on such property securing such Attributable
Debt without equally and ratably securing the New Notes
pursuant to the covenant described under "Limitation on
Liens",
(2) the net proceeds received by the Company or such Restricted
Subsidiary in connection with such Sale/Leaseback Transaction
are at least equal to the Fair Market Value of such property
and
46
(3) the transfer of such property is permitted by, and the Company
applies the proceeds of such transaction in compliance with,
the covenant described under "Limitation on Sale of Assets and
Subsidiary Stock."
Limitation on Designation of Subsidiaries as Unrestricted
Subsidiaries. (a) Except as set forth below, the Company shall not designate
any Subsidiary as an Unrestricted Subsidiary at any time; provided, however,
that the Company may designate any Subsidiary of the Company (including any
newly acquired or newly formed Subsidiary of the Company) to be an
Unrestricted Subsidiary if:
(1) such Subsidiary and its Subsidiaries do not own any Capital
Stock or Indebtedness of, and do not own or hold any Lien on
any property of, the Company or any other Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so
designated, and either:
(2) (A) with respect to the Specified Subsidiary Group, such
designation is permitted under clause (b) below; or
(B) with respect to any other Subsidiary, the Subsidiary to be
so designated has total Consolidated assets of $1,000 or
less, or if such Subsidiary has Consolidated assets
greater than $1,000, then such designation would be
permitted under the covenant entitled "Certain Covenants--
Limitation on Restricted Payments", with the aggregate
Fair Market Value of all outstanding Investments owned by
the Company and its Restricted Subsidiaries in the
Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and
either reducing the amount available for Restricted
Payments under the first paragraph of clause (a)(4)(c)(iv)
of the covenant described above under the caption
"--Limitation on Restricted Payments" or reducing the
amount available for future Investments under one or more
clauses of the definition of Permitted Investments, as the
Company shall determine.
(b) (1) The Company may designate all Subsidiaries that constitute
part of the Specified Subsidiary Group as Unrestricted Subsidiaries for all
purposes under the Indenture except as set forth below in clause (b)(2) below
at any time after or in connection with a Qualifying Subsidiary Stock Sale or
a Qualifying Subsidiary Stock Distribution if at such time, after giving
effect thereto and to any transactions (including any refinancings of
Indebtedness) occurring concurrently with such designation, the criteria in
clause (a)(1) above is satisfied and the following additional conditions are
met:
(A) the Adjusted Consolidated Leverage Ratio shall be not more
than (x) 5.0 to 1 if the Specified Subsidiary is VHC and
(y) 4.0 to 1 if the Specified Subsidiary is RRM;
(B) no Default has occurred and is continuing;
47
(C) all the Indebtedness of such Subsidiary and its
Subsidiaries shall, at the date of designation, and will
at all times thereafter, consist of Non-Recourse Debt;
(D) such Subsidiary, either alone or in the aggregate with all
other Unrestricted Subsidiaries, does not operate,
directly or indirectly, all or substantially all of the
business of the Company and its Subsidiaries;
(E) such Subsidiary is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation:
(i) to subscribe for additional Capital Stock of such
Person; or
(ii) to maintain or preserve such Person's financial
condition or to cause such Person to achieve any
specified levels of operating results; and
(F) on the date such Subsidiary is designated an Unrestricted
Subsidiary any agreement or transaction between such
Subsidiary and the Company or any Restricted Subsidiary is
permitted under the covenant described under "--
Limitation on Transactions with Affiliates."
For the avoidance of doubt, the designation of the Specified
Subsidiary Group as Unrestricted Subsidiaries shall not require compliance
with the covenant described under "-- Limitation on Restricted Payments" with
respect to the Investment of the Company and its Restricted Subsidiaries in
the Specified Subsidiary Group at the time of designation, but such Investment
shall be included in the calculation of the amount available for Restricted
Payments thereafter as provided in such covenant.
(2) The Company shall not be entitled to revoke the designation of
the Specified Subsidiary Group as Unrestricted Subsidiaries
after its effectiveness. Immediately upon the effectiveness of
such designation and for all purposes thereafter under the
Indenture, the covenants, events of defaults and other terms of
the Indenture applicable to the Restricted Subsidiaries of the
Company will not apply to the Specified Subsidiary Group except
as follows:
(A) the covenant described under "-- Limitations on Restricted
Payments" will continue to apply to the making by the
Company or any Restricted Subsidiary of any dividend,
distribution or any similar payment to the holders of its
Capital Stock that is payable in the Capital Stock of VHC,
and
(B) the covenant described under "-- Limitation on Sales of
Assets and Subsidiary Stock" will continue to apply, to
the extent provided therein, to any Asset Disposition by
the Company or
48
any Restricted Subsidiary of any Capital Stock of VHC or
its Subsidiaries.
(c) The Company shall have the right, on one occasion at any time,
to designate either (but not both) of VHC or RRM as the "Specified
Subsidiary." Such designation shall be made by action of the Board of
Directors and shall be effective upon notification in writing to the Trustee.
The designation of VHC or RRM as the Specified Subsidiary may be made at any
time prior to designating the Specified Subsidiary Group as Unrestricted
Subsidiaries, and it shall not obligate the Company thereafter to designate
the Specified Subsidiary Group as Unrestricted Subsidiaries; provided that the
designation of the Specified Subsidiary shall be irrevocable and must be made
prior to or concurrently with the designation of the Specified Subsidiary
Group as Unrestricted Subsidiaries.
(d) The Board of Directors may designate any Unrestricted Subsidiary
(other than a member of the Specified Subsidiary Group that has been
designated an Unrestricted Subsidiary) to be a Restricted Subsidiary;
provided, however, that:
(x) such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if such Indebtedness
is permitted under the covenant described under "-- Limitation
on Indebtedness," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter
reference period; and
(y) immediately after giving effect to such designation, no Default
shall have occurred and be continuing.
(e) Any designation of a Subsidiary as a Restricted Subsidiary or
Unrestricted Subsidiary, any designation of the Specified Subsidiary, and any
designation of the Specified Subsidiary Group as Unrestricted Subsidiaries
shall be made by the Board of Directors, shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions, and
shall be effective upon such filing.
COVENANT TO OBTAIN RATINGS
As promptly as reasonably practicable after the Closing Date, the
Company will use its reasonable efforts to obtain a rating of the New Notes
from either Standard & Poor's Ratings Group, Inc. or Moody's Investors
Service, Inc.
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") will be a Person organized and existing under the
laws of the United States of America, any State thereof or the
District of Columbia and the Successor Company (if not the
Company) will expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form
49
satisfactory to the Trustee, all the obligations of the Company
under the New Notes and the Indenture;
(2) immediately after giving pro forma effect to such
transaction (and treating any Indebtedness which becomes
an obligation of the Successor Company or any Restricted
Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing;
(3) immediately after giving pro forma effect to such
transaction, the Successor Company would be able to Incur
an additional $1.00 of Indebtedness under paragraph (a) of
the covenant described under "Certain Covenants --
Limitation on Indebtedness";
(4) immediately after giving pro forma effect to such
transaction, the Successor Company will have Consolidated
Net Worth in an amount which is not less than the
Consolidated Net Worth of the Company immediately prior to
such transaction (or, in the event that, concurrently with
such merger or consolidation, the Specified Subsidiary
Group is designated as Unrestricted Subsidiaries in
accordance with and subject to the conditions set forth
under "Certain Covenants -- Limitation on Designation of
Subsidiaries as Unrestricted Subsidiaries", the Successor
Company will have Consolidated Net Worth in an amount
which is not less than the Consolidated Net Worth of the
Company, excluding the Specified Subsidiary Group,
immediately prior to such transaction); and
(5) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with the
Indenture.
The Successor Company will succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture, and
the predecessor Company, except in the case of a lease, shall be released from
the obligation to pay the principal of and interest on the New Notes.
Notwithstanding the foregoing:
(A) any Restricted Subsidiary may consolidate with, merge into
or transfer all or part of its properties and assets to
the Company; and
(B) the Company may merge with an Affiliate incorporated
solely for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits; and
(C) nothing herein shall limit any conveyance, transfer or
lease of assets between or among any of the Company and
its Restricted Subsidiaries.
50
DEFAULTS
Each of the following is an Event of Default:
(1) a default in any payment of interest on any New Note when due
and payable continued for 30 days,
(2) a default in the payment of principal of or any premium on any
New Note when due and payable at its Stated Maturity, upon
optional redemption, upon declaration or acceleration or
otherwise or a failure to repurchase New Notes when required
pursuant to the Indenture or the New Notes,
(3) the failure by the Company or any Restricted Subsidiary to
comply with its obligations under the covenant described under
"Merger and Consolidation" above,
(4) a failure by the Company to comply, in any material respect,
for 60 days after notice with any of its obligations under the
covenants described under "Change of Control" or "Certain
Covenants" above (other than a failure to purchase the New
Notes),
(5) the Company fails to comply with any covenant set forth in the
New Notes or described under "Certain Covenants" above (other
than under clause (1), (2), (3) or (4)) and such failure
continues for 90 days after the notice specified below,
(6) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy
provisions"),
(7) Indebtedness of the Company or any Significant Subsidiary is
not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5.0 million or its foreign currency
equivalent at the time, or
(8) the rendering of any judgment or decree for the payment of
money in excess of $5.0 million or its foreign currency
equivalent against the Company or any Significant Subsidiary
if:
(A) an enforcement proceeding thereon is commenced by any
creditor or
(B) such judgment or decree remains outstanding for a period
of 60 days following such judgment or decree and is not
discharged, waived or stayed (the "judgment default
provision").
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
51
However, a default under clause (4), (5) or (6) will not constitute
an Event of Default until the Trustee notifies the Company or the Holders of
at least 25% in principal amount of the outstanding New Notes notify the
Company and the Trustee of the default and the Company does not cure such
default within the time specified in clause (4), (5) or (6) hereof after
receipt of such notice.
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding New Notes by notice to the Company may
declare the principal of and accrued but unpaid interest on all the New Notes
to be due and payable. Upon such a declaration, such principal, interest and
any premium will be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs, the principal of and interest and any premium on all the New
Notes will become immediately due and payable without any declaration or other
act on the part of the Trustee or any Holders. Under certain circumstances,
the Holders of a majority in principal amount of the outstanding New Notes may
rescind any such acceleration with respect to the New Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such
Holders have offered to the Trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to receive payment
of principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the New Notes unless:
(1) such Holder has previously given the Trustee notice that an
Event of Default is continuing,
(2) Holders of at least 25% in principal amount of the outstanding
New Notes have requested the Trustee in writing to pursue the
remedy,
(3) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense,
(4) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or
indemnity and
(5) the Holders of a majority in principal amount of the
outstanding New Notes have not given the Trustee a direction
inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in
principal amount of the outstanding New Notes will be given the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the
Trustee in personal liability. Prior to taking any action under the Indenture,
the Trustee will be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
52
If a Default occurs and is continuing and is known to the Trustee,
the Trustee must mail to each Holder notice of the Default within the earlier
of 90 days after it occurs or 30 days after it is known to a Trust Officer or
written notice of it is received by the Trustee. Except in the case of a
Default in the payment of principal of, premium (if any) or interest on any
New Note (including payments pursuant to the redemption provisions of such New
Note), the Trustee may withhold notice if and so long as a committee of its
Trust Officers in good faith determines that withholding notice is in the
interests of the Holders. In addition, the Company will be required to deliver
to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Company will also be required to
deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any event which would constitute certain Events of Default, their
status and what action the Company is taking or proposes to take in respect
thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture or the New Notes may be
amended with the written consent of the Holders of a majority in principal
amount of the New Notes then outstanding and any past default or compliance
with any provisions may be waived with the consent of the Holders of a
majority in principal amount of the New Notes then outstanding. However,
without the consent of each Holder of an outstanding New Note affected, no
amendment may, among other things:
(1) reduce the amount of New Notes whose Holders must consent to an
amendment,
(2) reduce the rate of or extend the time for payment of interest
on any New Note,
(3) reduce the principal of or extend the Stated Maturity of any
New Note,
(4) reduce the premium payable upon the redemption of any New Note
or change the time at which any New Note may be redeemed as
described under "Optional Redemption" above,
(5) make any New Note payable in money other than that stated in
the New Note,
(6) impair the right of any Holder to receive payment of principal
of and interest or any premium on such Holder's New Notes on or
after the due dates therefore or to institute suit for the
enforcement of any payment on or with respect to such Holder's
New Notes,
(7) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions, or
(8) waive any default or event of default in the payment of
principal of or interest or any premium on any New Note.
53
Without the consent of any Holder, the Company and the Trustee may
amend the Indenture to:
o cure any ambiguity, omission, defect or inconsistency,
o provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture,
o provide for uncertificated New Notes in addition to or in place
of certificated New Notes (provided, however, that the
uncertificated New Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated New Notes are described in Section
163(f)(2)(B) of the Code),
o add Guarantees with respect to the New Notes,
o secure the New Notes,
o add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power conferred upon the
Company,
o make any change that does not adversely affect the rights of
any Holder, subject to the provisions of the Indenture,
o provide for the issuance of the Exchange Notes or Additional
New Notes or
o comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA.
The consent of the Holders will not be necessary to approve the
particular form of any proposed amendment. It will be sufficient if such
consent approves the substance of the proposed amendment.
After an amendment becomes effective, the Company is required to
mail to Holders a notice briefly describing such amendment. However, the
failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Holder will be able to transfer or exchange New Notes in
accordance with the Indenture. Upon any transfer or exchange, the registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes required by law or permitted by the Indenture. The
Company will not be required to transfer or exchange any New Note selected for
redemption or to transfer or exchange any New Note for a period of 15 days
prior to a selection of New Notes to be redeemed. The New Notes will be issued
in registered form and the Holder will be treated as the owner of such New
Note for all purposes.
54
DEFEASANCE
The Company may at any time terminate all its obligations under the
New Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations
to register the transfer or exchange of the New Notes, to replace mutilated,
destroyed, lost or stolen New Notes and to maintain a registrar and paying
agent in respect of the New Notes.
In addition, the Company may at any time terminate:
(1) its obligations under the covenants described under "Certain
Covenants,"
(2) the operation of the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision
described under "Defaults" above and the limitations contained
in clauses (3) and (4) under the first paragraph of "Merger and
Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the New Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the New Notes may not be
accelerated because of an Event of Default specified in clause (3), (4), (5),
(6) (with respect only to Significant Subsidiaries), (6), (7) and (8) under
"Defaults" above or because of the failure of the Company to comply with
clause (3) or (4) under the first paragraph of "Merger and Consolidation"
above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money
in an amount sufficient or U.S. Government Obligations, the principal of and
interest on which will be sufficient, or a combination thereof sufficient, to
pay the principal, premium (if any) and interest on the New Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that Holders will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amounts and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
The Trustee under the Indenture shall be appointed by the Company as
Registrar and Paying Agent with regard to the New Notes.
GOVERNING LAW
The Indenture and the New Notes will be governed by, and construed
in accordance with, the laws of the State of New York.
55
CERTAIN DEFINITIONS
"Additional Assets" means:
(1) any property or assets (other than Indebtedness and Capital
Stock) to be used by the Company or a Restricted Subsidiary in
a Permitted Business;
(2) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock
by the Company or another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clauses
(2) or (3) above is primarily engaged in a Permitted Business.
"Adjusted Consolidated Leverage Ratio" as of any date of
determination means the Consolidated Leverage Ratio, calculated on a pro forma
basis after giving effect to the designation of the Specified Subsidiary Group
as Unrestricted Subsidiaries (including for purposes of calculating
Consolidated Indebtedness and EBITDA) and to any sales of Capital Stock,
refinancings of Indebtedness or other transactions consummated concurrently
with such designation.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "Certain Covenants
-- Limitation on Transactions with Affiliates" and "Certain Covenants --
Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall
also mean any beneficial owner of Capital Stock representing 5% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of the
Company or of rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means
of a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other
than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or
a Restricted Subsidiary)
(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary or
56
(3) any other assets of the Company or any Restricted Subsidiary
(other than Capital Stock of Unrestricted Subsidiaries) outside
of the ordinary course of business of the Company or such
Restricted Subsidiary
(4) other than, in the case of (1), (2) and (3) above,
(A) disposition by a Restricted Subsidiary to the Company or
by the Company or a Restricted Subsidiary to a Restricted
Subsidiary,
(B) a disposition of directors' qualifying shares or shares
required by applicable law to be held by a Person other
than the Company or a Restricted Subsidiary,
(C) a disposition of Capital Stock of the Specified Subsidiary
pursuant to a Qualifying Subsidiary Stock Sale or
Qualifying Subsidiary Stock Distribution if (x) the Net
Cash Proceeds thereof are used to redeem New Notes
pursuant to the second paragraph of "Optional Redemption"
or (y) the Specified Subsidiary Group is then or has been
designated as Unrestricted Subsidiaries in accordance with
the covenant described under "Certain Covenants--
Limitation on Designation of Subsidiaries as Unrestricted
Subsidiaries"; provided that, notwithstanding the
foregoing, if VHC is the Specified Subsidiary, any sale of
Capital Stock of VHC following an initial Qualifying
Subsidiary Stock Sale shall constitute an Asset
Disposition to the extent that the aggregate Net Cash
Proceeds of all such sales of Capital Stock of VHC
(following such initial sale) exceed $25.0 million, unless
at such time (x) the Company owns less than 50% of the
Voting Stock of VHC or (y) the Company would own less than
50% of the Voting Stock as a result of such sale and the
provisions set forth under "Change of Control" are
complied with,
(D) for purposes of the provisions described under "Certain
Covenants -- Limitation on Sales of Assets and Subsidiary
Stock" only, a disposition subject to the covenant
described under "Certain Covenants -- Limitation on
Restricted Payments", and
(E) a disposition of assets with a Fair Market Value of less
than $100,000.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the New Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing:
57
(1) the sum of the products of the numbers of years from the date
of determination to the dates of each successive scheduled
principal payment of such Indebtedness or scheduled redemption
or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by
(2) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of the Board of
Directors of the Company.
"Business Day" means each day which is not a Legal Holiday.
"Capital Expenditures" means, without duplication, any expenditures
for any purchase or other acquisition of any asset which would be classified
as a fixed or capital asset on a consolidated balance sheet of the Company and
its Consolidated Restricted Subsidiaries prepared in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be prepaid by the
lessee without payment of a penalty.
"Chemed Capital Trust" means Chemed Capital Trust, a Delaware
statutory business trust.
"Chemed Preferred Securities" means the convertible trust preferred
securities of Chemed Capital Trust issued in exchange for shares of Company
capital stock pursuant to an exchange offer completed on February 1, 2000. As
of May 18, 2004, no Chemed Preferred Securities were outstanding.
"Closing Date" means the date of the Indenture.
"Closing Date Stock Award Plan" means the Company's employee stock
award plan in existence on the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Capital Expenditures" means, with reference to any
period, the Capital Expenditures of the Company and its Consolidated
Restricted Subsidiaries calculated on a consolidated basis for such period.
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"Consolidated Current Maturities" means, with reference to any
period, all payments of principal due within twelve (12) calendar months on
and after the last day of such period with respect to all Consolidated
Indebtedness of the Company.
"Consolidated Fixed Charge Coverage Ratio" for any period shall mean
the ratio of (i) EBITDA minus Consolidated Capital Expenditures to (ii)
Consolidated Interest Expense plus Consolidated Current Maturities during such
period plus cash dividends paid on the equity interests of the Company during
such period plus expenses for taxes paid or taxes accrued during such period,
all calculated for the Company and its Consolidated Restricted Subsidiaries on
a consolidated basis.
"Consolidated Indebtedness" means, as of any date of determination,
the total Indebtedness of the Company and its Consolidated Restricted
Subsidiaries, without duplication, other than, at any time prior to January 1,
2005, the Trust Securities.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Consolidated Restricted Subsidiaries,
plus, to the extent Incurred by the Company and its Consolidated Restricted
Subsidiaries in such period but not included in such interest expense, without
duplication:
(1) interest expense attributable to Capitalized Lease Obligations
and the interest expense attributable to leases constituting
part of a Sale/Leaseback Transaction,
(2) amortization of debt discount and debt issuance costs, provided
that the fees paid by the Company to the lenders under the
Credit Agreement and to the placement agent in connection with
the offering and sale, on the Closing Date, of the New Notes
and the Floating Rate Notes shall not be included,
(3) capitalized interest,
(4) noncash interest expense,
(5) commissions, discounts and other fees and charges attributable
to letters of credit and bankers' acceptance financing,
(6) interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by the Company or
any Restricted Subsidiary,
(7) net costs associated with Hedging Obligations (including
amortization of fees),
(8) dividends in respect of all Disqualified Stock of the Company
and all Preferred Stock of any of the Subsidiaries of the
Company, to the extent held by Persons other than the Company
or a Wholly Owned Subsidiary; provided that regular, scheduled
dividends on the Trust Securities declared or paid prior to
January 1, 2005, shall not be included, and
59
(9) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such
plan or trust.
Notwithstanding anything to the contrary herein, any premium paid in
connection with the repayment of Indebtedness of the Company in connection
with the Transactions and interest on the Trust Securities paid on or prior to
January 1, 2005 shall not be included in Consolidated Interest Expense.
"Consolidated Leverage Ratio" as of any date of determination means
the ratio of:
(1) Consolidated Indebtedness at such time to
(2) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days
prior to the date of such determination;
provided, however, that:
(A) if the Company or any Restricted Subsidiary has Incurred
any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if
the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio is an Incurrence of
Indebtedness, EBITDA for such period shall be calculated
after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on
the first day of such period and the discharge of any
other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the
first day of such period,
(B) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any
Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness
Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been
replaced) on the date of the transaction giving rise to
the need to calculate the Consolidated Leverage Ratio,
EBITDA for such period shall be calculated on a pro forma
basis as if such discharge had occurred on the first day
of such period and as if the Company or such Restricted
Subsidiary has not earned the interest income actually
earned during such period in respect of cash or Temporary
Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness,
(C) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced
by an amount equal to the EBITDA (if positive) directly
attributable to the assets that
60
are the subject of such Asset Disposition for such period
or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period,
(D) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have
made an Investment in any Restricted Subsidiary (or any
Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business,
EBITDA for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition
occurred on the first day of such period,
(E) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged
with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have Incurred
any Indebtedness or discharged any Indebtedness or made
any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to
clause (C) or (D) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA for such
period shall be calculated after giving pro forma effect
thereto as if such Incurrence, discharge, Asset
Disposition, Investment or acquisition of assets occurred
on the first day of such period, and
(F) if since the beginning of such period, the Specified
Subsidiary Group has been designated as Unrestricted
Subsidiaries, EBITDA for such period shall be calculated
after giving pro forma effect thereto as if such
designation occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to any calculation under this definition, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
Officer of the Company and (i) shall comply, to the extent not inconsistent
with the provisions of the Indenture, with the requirements of Rule 11-02 of
Regulation S-X of the SEC and (ii) may include adjustments for operating
expense reductions that would be permitted by such Rule.
If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has
a remaining term as at the date of determination in excess of 12 months).
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its Consolidated Subsidiaries for such period;
provided, however, that there shall not be included in such Consolidated Net
Income:
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(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:
(A) subject to the limitations contained in clause (4) below,
the Company's equity in the net income of any such Person
for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually
distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other
distribution made to a Restricted Subsidiary, to the
limitations contained in clause (3) below) and
(B) the Company's equity in a net loss of any such Person for
such period shall be included in determining such
Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by the Company
or a Subsidiary of the Company in a pooling of interests
transaction for any period prior to the date of such
acquisition;
(3) any net income (or loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that:
(A) subject to the limitations contained in clause (4) below,
the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of
cash permitted to be distributed by such Restricted
Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution
made to another Restricted Subsidiary, to the limitation
contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(4) any gain (but not loss) realized upon the sale or other
disposition of any asset of the Company or its Consolidated
Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) that is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any Capital
Stock of any Person;
(5) the net after tax effect of any extraordinary gain or loss
(including all fees and expenses related to such extraordinary
gain or loss) or of any impairment loss on or writedown of
goodwill; and
(6) the cumulative effect of a change in accounting principles.
62
Notwithstanding the foregoing, for the purpose of the covenant
described under "Certain Covenants -- Limitation on Restricted Payments" and
"-- Limitations on Designating Subsidiaries as Unrestricted Subsidiaries"
only, there shall be excluded from Consolidated Net Income any dividends,
repayments of loans or advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under such covenant pursuant to clause (a)(4)(C)(iv) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as
(1) the par or stated value of all outstanding Capital Stock of the
Company plus
(2) paid-in capital or capital surplus relating to such Capital
Stock plus
(3) any retained earnings or earned surplus less
(A) any accumulated deficit and
(B) any amounts attributable to Disqualified Stock.
"Consolidation" means the consolidation of the accounts of each of
the Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement dated as of February
24, 2004, among the Company, Bank One, NA and others, together with any
guarantees, collateral documents, instruments and agreements executed in
connection therewith, in each case, as amended, restated, supplemented,
waived, replaced (whether or not upon termination, and whether with the
original lenders or otherwise), refinanced, restructured or otherwise modified
from time to time (except to the extent that any such amendment, restatement,
supplement, waiver, replacement, refinancing, restructuring or other
modification thereto would be prohibited by the terms of the Indenture, unless
otherwise agreed to by the Holders of at least a majority in aggregate
principal amount of New Notes at the time outstanding).
"Currency Agreement" means with respect to any Person any foreign
exchange contract, currency swap agreements or other similar agreement or
arrangement to which such Person is a party or of which it is a beneficiary.
"Customary Transition Agreement" means any agreement to which both
(x) the Company or any of its Restricted Subsidiaries and (y) any Person that
is part of the Specified Subsidiary Group (or any director or officer of any
such Person) is a party, which is entered into in connection with the carve
out, spin off or split off of the Specified Subsidiary Group from the Company,
including any agreement that provides for the sale, transfer, disposition or
allocation of assets and liabilities (including contingent and tax liabilities
and including indemnification
63
arrangements in connection therewith), the sale or disposition of capital
stock of the Specified Subsidiary Group (including underwriting agreements),
the provision of transition services (including administrative, tax,
accounting and insurance services) or the licensing or leasing of property
(such as intellectual property or real property); provided that:
(1) the Specified Subsidiary Group is (or has been) designated as
Unrestricted Subsidiaries as permitted by the covenant entitled
"-- Limitation on Designation of Subsidiaries as Unrestricted
Subsidiaries";
(2) such agreements are customary in carve out, spin off or split
off transactions; and
(3) the terms of such agreements, taken as a whole, are fair to the
Company and its Restricted Subsidiaries.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock (excluding Capital Stock convertible or exchangeable
solely at the option of the Company or a Restricted Subsidiary;
provided, however, that any such conversion or exchange shall
be deemed an Incurrence of Indebtedness or Disqualified Stock,
as applicable) or
(3) is redeemable at the option of the holder thereof, in whole or
in part,
in the case of each of clauses (1), (2) and (3), on or prior to the first
anniversary of the Stated Maturity of the New Notes; provided, however, that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the first anniversary of the Stated
Maturity of the New Notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital
Stock are not more favorable to the holders of such Capital Stock than the
provisions of the covenants described under "Change of Control" and "Certain
Covenants -- Limitation on Sale of Assets and Subsidiary Stock."
"EBITDA" for any period means the Consolidated Net Income for such
period, plus, without duplication, the following to the extent deducted in
calculating such Consolidated Net Income:
(1) income tax expense of the Company and its Consolidated
Restricted Subsidiaries,
64
(2) Consolidated Interest Expense,
(3) depreciation expense of the Company and its Consolidated
Restricted Subsidiaries,
(4) amortization expense of the Company and its Consolidated
Restricted Subsidiaries (including amortization recorded in
connection with the application of Financial Accounting
Standard No. 142 (Goodwill and Other Intangibles)),
(5) payments made in connection with the Non-Competition and
Consulting Agreement dated as of December 18, 2003, between the
Company and Hugh Westbrook (the "Westbrook Agreement") in the
amount of $25.0 million and transaction fees and expenses paid
in connection with the Transactions,
(6) any severance payments related to the acquisition of Vitas, not
to exceed $14.5 million plus any related employment taxes and
employee benefit charges,
(7) dividends, distributions and payments not in excess of $2.8
million under the Closing Date Stock Award Plan, and
(8) all other noncash charges of the Company and its Consolidated
Restricted Subsidiaries (excluding any such noncash charge to
the extent it represents an accrual of or reserve for cash
expenditures in any future period) less all non-cash items of
income of the Company and its Consolidated Restricted
Subsidiaries,
in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and noncash
charges of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income (loss) of such Restricted Subsidiary was
included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior approval (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Restricted Subsidiary or its stockholders.
"Equity Offering" means a public or private offering of Capital
Stock of the Company pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption to the registration requirements
under the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the debt securities of the Company issued
pursuant to the Indenture in exchange for, and in an aggregate principal
amount equal to, the New Notes, in compliance with the terms of the
Registration Rights Agreement.
65
"Fair Market Value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. For all purposes of the Indenture, the Fair Market Value of
property or assets which involve an aggregate amount in excess of $25.0
million shall be set forth in a resolution approved by the Board of Directors
in good faith; provided that for property or assets, other than cash,
Indebtedness or readily marketable securities, in an aggregate amount in
excess of $50.0 million, Fair Market Value shall be determined in writing by a
nationally recognized appraisal or investment banking firm.
"Floating Rate Notes" means the Floating Rate Senior Secured Notes
due 2010 of the Company issued under the Indenture dated as of February 24,
2004, between the Company, certain of its subsidiaries and Wells Fargo, N.A.,
as trustee, and any exchange notes issued under such indenture.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including those set
forth in:
(1) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public
Accountants,
(2) statements and pronouncements of the Financial Accounting
Standards Board,
(3) such other statements by such other entities as approved by a
significant segment of the accounting profession, and
(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13
of the Exchange Act, including opinions and pronouncements in
staff accounting bulletins and similar written statements from
the accounting staff of the SEC.
All ratios and computations based on GAAP contained in the Indenture
shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such
other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part);
66
provided, however, that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning. The term "Guarantor"
shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means the Person in whose name a New Note is registered on
the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. Solely for
purposes of determining compliance with "Certain Covenants -- Limitation of
Indebtedness":
(1) amortization of debt discount or the accretion of principal
with respect to a non-interest bearing or other discount
security;
(2) the payment of regularly scheduled interest in the form of
additional Indebtedness of the same instrument or the payment
of regularly scheduled dividends on Capital Stock (other than
Disqualified Stock) in the form of additional Capital Stock of
the same class and with the same terms; and
(3) the obligation to pay a premium in respect of Indebtedness
arising in connection with the issuance of a notice of
redemption or the making of a mandatory offer to purchase such
Indebtedness
will not be deemed to be the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
(1) the principal of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
(2) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(3) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement
obligations with respect thereto but excluding obligations in
respect of letters of credit securing obligations (other than
obligations in clauses (1), (2), (4) or (5) hereof) entered
into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to
the extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following payment on the letter of
credit);
67
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables
or other obligations arising in the ordinary course of
business), which purchase price is due more than six months
after the date of placing such property in service or taking
delivery and title thereto or the completion of such services;
(5) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(6) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such
Person, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(7) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided, however, that the amount of
Indebtedness of such Person shall be the lesser of:
(A) the Fair Market Value of such asset at such date of
determination and
(B) the amount of such Indebtedness of such other Persons;
(8) all net obligations of such person in respect of Interest Rate
Agreements or Currency Agreements; and
(9) all obligations of the type referred to in clauses (1) through
(8) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Interest Payment Date" has the meaning assigned to it under
"Principal, Maturity and Interest."
"Interest Period" means, for any Interest Payment Date, a period
from and including the preceding Interest Payment Date to but excluding such
Interest Payment Date, provided, however, that the initial Interest Period
will be the period from and including the series issuance date to but
excluding the August 15, 2004 Interest Payment Date.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement to which such Person is party or of
which it is a beneficiary.
68
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or
other extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. Except as
otherwise provided for the amount of an Investment shall be its fair value at
the time the Investment is made and without giving effect to subsequent
changes in value. For purposes of the definition of "Unrestricted Subsidiary"
and the covenant described under "Certain Covenants -- Limitation on
Restricted Payments":
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair
Market Value of the net assets of any Subsidiary of the Company
at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of
such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to:
(A) the Company's "Investment" in such Subsidiary at the time
of such redesignation less
(B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the Fair Market Value of
the net assets of such Subsidiary at the time of such
redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its Fair Market Value at the time of such
transfer.
"Legal Holiday" means a Saturday, Sunday or other day on which
banking institutions are not required by law or regulation to be open in the
State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and
proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that
are the subject of such Asset Disposition or received in any other noncash
form) therefrom, in each case net of:
(1) all legal, accounting, investment, banking, title and recording
tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes
required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition,
69
(2) all payments made on any Indebtedness other than Indebtedness
under the indenture for the Floating Rate Notes and the Credit
Agreement which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or
other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a
consent to such Asset Disposition, or by applicable law be
repaid out of the proceeds from such Asset Disposition,
(3) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as
a result of such Asset Disposition and
(4) appropriate amounts to be provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated
with the property or other assets disposed of in such Asset
Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition or liabilities under
indemnification obligations associated with such Asset
Disposition or any purchase price adjustments.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Debt" means Indebtedness as to which neither the
Company nor any Restricted Subsidiary (a) provides any Guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity,
agreement or instrument that would constitute Indebtedness) or (b) is directly
or indirectly liable (as guarantor or otherwise); and (c) as to which there is
no recourse against any of the assets of the Company or its Restricted
Subsidiaries (other than assets or Capital Stock of Unrestricted Subsidiaries,
provided however, that Indebtedness of an Unrestricted Subsidiary which
consists of a Guarantee of Indebtedness of the Company or a Restricted
Subsidiary to a Person other than an Unrestricted Subsidiary, or a lien on
property or stock of an Unrestricted Subsidiary that secures Indebtedness of
the Company or a Restricted Subsidiary to a Person other than an Unrestricted
Subsidiary, shall be deemed to constitute Non-Recourse Debt as long as the
Unrestricted Subsidiary does not have recourse against the Company or a
Restricted Subsidiary under such Indebtedness.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Permitted Business" means any business engaged in by the Company or
any Restricted Subsidiary on the Closing Date and any related, ancillary or
complementary business.
70
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of
such Restricted Subsidiary is a Permitted Business;
(2) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or
a Restricted Subsidiary; provided, however, that such Person's
primary business is a Permitted Business;
(3) Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary
if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms may include
such concessionary trade terms as the Company or any such
Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the
ordinary course of business;
(6) loans or advances to employees made in the ordinary course of
business consistent with prudent practices and applicable law
and not exceeding $2.0 million at any time outstanding;
(7) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to
the Company or any Restricted Subsidiary or in satisfaction of
judgments;
(8) any Person to the extent such Investment represents the noncash
portion of the consideration received for an Asset Disposition
that was made pursuant to and in compliance with the covenant
described under "Certain Covenants -- Limitation on Sale of
Assets and Subsidiary Stock";
(9) the Specified Subsidiary Group following any designation of the
Specified Subsidiary Group as Unrestricted Subsidiaries
pursuant to the covenant described under "Certain Covenants --
Limitation on Designation of Subsidiaries as Unrestricted
Subsidiaries";
(10) any Person; provided, that the payment for such Investments
consists solely of Capital Stock of the Company (other than
Disqualified Stock);
71
(11) any Person consisting of the licensing of intellectual property
pursuant to joint ventures, strategic alliances or joint
marketing arrangements with such Person, in each case made in
the ordinary course of business;
(12) a vendor or supplier consisting of loans or advances to such
vendor or supplier in connection with any guarantees to the
Company or any Restricted Subsidiary of supply by, or to fund
the supply capacity of, such vendor or supplier, in any case
not to exceed $2.0 million at any one time outstanding;
(13) loans and other Investments in independent contractors and
subcontractors of the Company or its Restricted Subsidiaries,
not to exceed $4.0 million at any one time outstanding; or
(14) any other Investments to the extent such Investments, when
taken together with all other Investments made pursuant to this
clause (14) outstanding on the date such Investment is made, do
not exceed $5.0 million.
"Permitted Liens" means, with respect to any Person:
(1) pledges or deposits by such Person under worker's compensation
laws, unemployment insurance laws or similar legislation, or
good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Indebtedness) or leases to which
such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or
United States government bonds to secure surety or appeal bonds
to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business;
(2) Liens imposed by law, such as landlords', carriers',
warehousemen's and mechanics' Liens, in each case for sums not
yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards
against such Person with respect to which such Person shall
then be proceeding with an appeal or other proceedings for
review;
(3) Liens for taxes, assessments or governmental charges or levies
either not yet due or payable or subject to penalties for
non-payment or which are being contested in good faith by
appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided,
however, that such letters of credit do not constitute
Indebtedness;
(5) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses,
rights-of-way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other
restrictions as to the use of real property or Liens
72
incidental to the conduct of the business of such Person or to
the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or
materially impair their use in the operation of the business of
such Person;
(6) Liens securing Indebtedness permitted to be Incurred pursuant
to clause (8) of the covenant described under "Certain
Covenants -- Limitation on Indebtedness"; provided, however,
that the Lien may not extend to any other property owned by
such Person or any of its Subsidiaries at the time the Lien is
Incurred;
(7) Liens to secure Indebtedness permitted pursuant to paragraph
(a) or clauses (1), (3)(B), (9) or (13) of paragraph (b) of the
covenant described under "Certain Covenants -- Limitation on
Indebtedness" and other Credit Agreement Obligations;
(8) Liens existing on the Closing Date;
(9) Liens on property or shares of stock of another Person at the
time such other Person becomes a Subsidiary of such Person;
provided, however, that such Liens are not created, Incurred or
assumed in connection with, or in contemplation of, such other
Person becoming such a Subsidiary; provided further, however,
that such Liens do not extend to any other property owned by
such Person or any of its Subsidiaries;
(10) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition
by means of a merger or consolidation with or into such Person
or any Subsidiary of such Person; provided, however, that such
Liens are not created, Incurred or assumed in connection with,
or in contemplation of, such acquisition; provided further,
however, that the Liens do not extend to any other property
owned by such Person or any of its Subsidiaries;
(11) Liens securing obligations under Hedging Obligations so long as
such obligations relate to Indebtedness permitted to be
Incurred pursuant to the covenant described under "Certain
Covenants -- Limitation on Indebtedness" that is, and is
permitted under the Indenture to be, secured by a Lien on the
same property securing such obligations;
(12) Liens to secure any Refinancing (or successive Refinancings) as
a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (6), (7), (8), (9) or
(10); provided, however, that:
(A) such new Lien shall be limited to all or part of the same
property that secured the original Lien (plus improvements
to or on such property) and
(B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of:
73
(x) the outstanding principal amount or, if greater,
committed amount of the Indebtedness secured by Liens
described under clauses (6), (7), (8), (9) or (10) at
the time the original Lien became a Permitted Lien
under the Indenture and
(y) an amount necessary to pay any fees and expenses,
including premiums, related to such Refinancings; and
(13) Liens to secure Indebtedness permitted to be Incurred pursuant
to the covenant described under "Certain Covenants --
Limitation on Indebtedness" or other obligations in an
aggregate principal amount which, when taken together with all
other Indebtedness and obligations secured by Liens pursuant to
this clause (13) and remaining outstanding, does not exceed
$10.0 million at any time.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a New Note means the principal of the New Note plus
the premium, if any, payable on the New Note which is due or overdue or is to
become due at the relevant time.
"Purchase Money Indebtedness" means Indebtedness:
(1) consisting of the deferred purchase price of property,
conditional sale obligations, obligations under any title
retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds, in each
case where the maturity of such Indebtedness does not exceed
the anticipated useful life of the property being financed, and
(2) Incurred to finance the acquisition, construction or lease by
the Company or a Restricted Subsidiary of the property,
including additions and improvements thereto;
provided, however, that the Indebtedness is Incurred within 180 days
after the acquisition, construction or lease of the property by the Company or
Restricted Subsidiary.
"Qualifying Subsidiary Stock Distribution" means a distribution by
the Company to its shareholders of the Capital Stock of RRM (if RRM is the
Specified Subsidiary) if after giving effect thereto (and to any transactions
consummated in connection therewith) (x) at least 10% of such Capital Stock
(calculated on a fully diluted basis) would be held by persons other than the
Company, any Subsidiary of the Company, any director or officer of any of the
foregoing or any employee stock ownership plan or other trust established by
the Company or any of its Subsidiaries; and (y) the Company has designated, or
would then be permitted to designate, the
74
Specified Subsidiary Group as Unrestricted Subsidiaries pursuant to the
conditions set forth in the covenant described under "Certain Covenants --
Limitation on Designation of Subsidiaries as Unrestricted Subsidiaries."
"Qualifying Subsidiary Stock Sale" means a sale of Capital Stock of
the Specified Subsidiary pursuant to an underwritten public offering or
private sale, whether by means of a primary offering or a sale by the Company
or any subsidiary thereof, after which at least 10% of such Capital Stock
(calculated on a fully diluted basis) is held by persons other than the
Company, a subsidiary of the Company, a director or officer of any of the
foregoing or any employee stock ownership plan or other trust established by
the Company or any of its Subsidiaries. The exercise of an underwriter's
overallotment option shall be construed as part of the same Qualifying
Subsidiary Stock Sale with respect to which such option was granted.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
Refinance any Indebtedness of the Company or any Restricted Subsidiary
existing on the Closing Date or Incurred in compliance with the Indenture
(including Indebtedness of the Company that Refinances Refinancing
Indebtedness); provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being
refinanced;
(3) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the
aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding of the
Indebtedness being Refinanced; and
(4) if the Indebtedness being Refinanced is contractually
subordinated in right of payment to the New Notes, such
Refinancing Indebtedness is contractually subordinated in right
of payment to the New Notes at least to the same extent as the
Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include:
(A) Indebtedness of a Restricted Subsidiary that Refinances
Indebtedness of the Company or
(B) Indebtedness of the Company or a Restricted Subsidiary
that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of February 24, 2004, among the Company and the initial
Holders, the initial holders of the Floating Rate Notes and certain other
Persons.
75
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"RRM" means Roto-Rooter Management Company or any successor thereto
by any merger or consolidation which is permitted under the Indenture ("RR
Management") or, at the election of the Company (which shall be specified in
writing to the Trustee) for purposes of the designation of the Specified
Subsidiary, RRM shall mean any Subsidiary of the Company of which RR
Management is a Wholly Owned Subsidiary and which owns no other assets other
than assets incidental to the ownership of RR Management.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Senior Indebtedness" of the Company or any Subsidiary means the
principal of, premium (if any) and accrued and unpaid interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization of the Company or any Subsidiary, regardless of whether or not
a claim for post-filing interest is allowed in such proceedings), and fees and
other amounts owing in respect of, Indebtedness of the Company or any
Subsidiary, as applicable, whether outstanding on the Closing Date or
thereafter Incurred, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is provided that such
obligations are subordinated in right of payment to the New Notes; provided,
however, that Senior Indebtedness of the Company or any Subsidiary shall not
include:
(1) any obligation of the Company to any Subsidiary of the Company
or of such Subsidiary to the Company or any other Subsidiary of
the Company;
(2) any liability for Federal, state, local or other taxes owed or
owing by the Company or such Subsidiary, as applicable;
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities);
(4) any Indebtedness or obligation of the Company (and any accrued
and unpaid interest in respect thereof) that by its terms is
subordinate or junior in any respect to any other Indebtedness
or obligation of the Company or such Subsidiary, as applicable,
including any Senior Subordinated Indebtedness and any
Subordinated Obligations of the Company or such Subsidiary, as
applicable;
(5) any obligations with respect to any Capital Stock; or
(6) any Indebtedness Incurred in violation of the Indenture.
76
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Specified Subsidiary" shall mean the Subsidiary of the Company that
is designated as the Specified Subsidiary pursuant to the covenant described
under "-- Limitation on Designation of Subsidiaries as Unrestricted
Subsidiaries."
"Specified Subsidiary Group" shall mean the Subsidiary of the
Company that is designated as the Specified Subsidiary pursuant to the
covenant described under "-- Limitation on Designation of Subsidiaries as
Unrestricted Subsidiaries", together with all Subsidiaries of such Person.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Chemed Debentures" means the Convertible Junior
Subordinated Debentures due 2030, issued by the Company pursuant to the
indenture dated as of February 7, 2000, between the Company and Firstar Bank,
National Association as trustee.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the New Notes pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by:
(1) such Person,
(2) such Person and one or more Subsidiaries of such Person or
(3) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations Guaranteed by the
United States of America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit
and money market deposits maturing within 180 days of the date
of acquisition thereof issued by a bank or trust company that
is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the
United States of America having capital,
77
surplus and undivided profits aggregating in excess of
$250,000,000 (or the foreign currency equivalent thereof) and
whose long-term debt is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under
the Securities Act);
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1)
above entered into with a bank meeting the qualifications
described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other
than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any foreign
country recognized by the United States of America with a
rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's
Ratings Service, a division of The McGraw-Hill Companies, Inc.
("S&P"); and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by S&P or "A" by Moody's
Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the Closing Date.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Transactions" means, collectively, the following transactions,
which were consummated on or about the date of the closing of the offering of
the Original Notes: (i) the consummation of the merger of Vitas with and into
an indirect Wholly Owned Subsidiary of the Company pursuant to a merger
agreement dated as of December 18, 2003, among the Company, Vitas and Marlin
Merger Corp., (ii) the repayment of approximately $74.4 million of existing
indebtedness of Vitas, plus accrued interest thereon, (iii) the repayment of
approximately $29.4 million of existing indebtedness of the Company (including
a $3.0 million make whole premium), plus accrued interest thereon, (iv) the
assignment of the Westbrook Agreement by the Company to Vitas, the payment of
$25.0 million by Vitas to Hugh A. Westbrook pursuant to the Westbrook
Agreement and the performance of the other obligations under the Westbrook
Agreement, (v) the consummation of the offering and sale of the Floating Rate
Notes, New Notes and the Capital Stock of the Company and the execution and
delivery of notes, indentures and other agreements in connection therewith,
(vi) the Company and certain of its Subsidiaries entering into the Credit
Agreement and the borrowing on the Closing Date of $75.0 million thereunder
(vii) the issuance or deemed issuance of letters of credit under the Credit
Agreement to replace or backstop, or the cash collateralization of, letters of
credit issued for the account of the Company or any of its Subsidiaries or
Vitas or any of its Subsidiaries, (viii) the cancelation of a warrant held by
the
78
Company for shares of Vitas stock and (ix) the payment of fees and expenses in
connection with the foregoing.
"Trustee" means the party named as such in the Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"Trust Securities" means the Chemed Preferred Securities, the
Subordinated Chemed Debentures and the guarantee by the Company to the holders
of the Chemed Preferred Securities of amounts payable thereunder.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided in the covenant described
under "-- Limitation on Designation of Subsidiaries as
Unrestricted Subsidiaries" and
(2) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Vitas" means Vitas Healthcare Corporation or any successor thereto
by any merger, consolidation or other transaction which is permitted
hereunder.
"VHC" means Vitas or, at the election of the Company (which shall be
specified in writing to the Trustee) for purposes of the designation of the
Specified Subsidiary, VHC means any Wholly Owned Subsidiary of the Company of
which Vitas is a Subsidiary and which owns no other assets other than assets
incidental to the ownership of Vitas.
"VNF" means Vitas of North Florida, Inc. a Florida not-for-profit
corporation and a Wholly Owned Subsidiary of Vitas.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
"Westbrook Agreement" has the meaning assigned to such term in the
definition of "EBITDA."
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying
shares or shares issued to third parties to the extent necessary to satisfy
any licensing requirements under applicable law with respect to the Company's
or any of its Subsidiaries' business) is owned by the Company or another
Wholly Owned Subsidiary.
79
EXCHANGE OFFER AND REGISTRATION RIGHTS
We entered into a registration rights agreement relating in
connection with the issuance of the Original Notes. The following description
is meant to be only a summary of certain provisions of the registration rights
agreement. It does not restate the terms of the registration rights agreement
in its entirety.
EXCHANGE OFFER AND REGISTRATION RIGHTS RELATING TO THE ORIGINAL NOTES
Pursuant to the registration rights agreement, we agreed, for the
benefit of the holders of the Original Notes, that we would use our reasonable
best efforts, at our cost, to (i) file with the SEC on or prior to 90 days
after the date of issuance of the Original Notes a registration statement on
Form S-3 or Form S-4, if the use of such form is then available (the "Exchange
Offer Registration Statement"), and if not, on an appropriate form, relating
to a registered exchange offer for the Original Notes (such offer the
"Exchange Offer") under the Securities Act, (ii) use our reasonable best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 180 days after the date of issuance
of the Original Notes and (iii) use our reasonable best efforts to complete
the Exchange Offer by the earlier of 210 days after the date of issuance of
the Original Notes and 60 days after the Exchange Offer Registration Statement
is declared effective. We agreed to offer to the holders of the Original Notes
the opportunity to exchange their Original Notes for a new series of notes
(the "Exchange Notes") that are identical in all material respects to such
Original Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions or additional interest) and that would be
registered under the Securities Act. We agreed to keep the Exchange Offer open
for not less than 20 business days (or longer, if required by applicable law)
after the date on which notice of the Exchange Offer is mailed to the holders
of the Original Notes.
With regard to the Original Notes, if (i) because of any change in
law or applicable interpretations thereof by the staff of the SEC, we are not
permitted to effect the Exchange Offer as contemplated hereby, (ii) the
Exchange Offer is not consummated within 210 days of the issuance of the
Original Notes, or (iii) any holder of Original Notes (other than holders who
are broker-dealers electing to exchange Original Notes, acquired for its own
account as a result of market-making activities or other trading activities,
for applicable Exchange Notes (an "Exchanging Dealer")) is not eligible to
participate in the Exchange Offer or, (iv) in the case of any holder of
Original Notes (other than an Exchanging Dealer) that participates in the
Exchange Offer, and such holder does not receive freely tradable Exchange
Notes on the date of the exchange, then we agreed to file with the SEC at our
expense a shelf registration statement to cover resales of the Original Notes
and/or Exchange Notes that are not freely tradable by holders who satisfy
certain conditions relating to the provision of information in connection with
the shelf registration statement (the "Notes Shelf Registration Statement").
We agreed to use our reasonable best efforts to have the Exchange
Offer Registration Statement or, if applicable, the Notes Shelf Registration
Statement declared effective by the SEC within 180 days after the date of the
issuance of the Original Notes. Unless the Exchange Offer would not be
permitted by a policy of the SEC, we agreed to commence the Exchange Offer and
will use our reasonable best efforts to consummate the Exchange Offer as
promptly as practicable within 210 days after the date of issuance of the
Original Notes. If applicable, we will use our reasonable best efforts to keep
the Notes Shelf Registration Statement continuously effective for a period of
two years from the date of its effectiveness or such shorter period of time
that will terminate when all Original Notes covered by the Notes Shelf
Registration Statement (i) have
80
been sold pursuant thereto or (ii) are no longer restricted securities under
Rule 144 of the Securities Act, or any successor rule thereof.
If (i) the Exchange Offer Registration Statement is not filed with
the SEC within 90 days after the date of the issuance of the Original Notes,
(ii) the Exchange Offer is not commenced or the Notes Shelf Registration
Statement is not filed within 180 days after the date of the issuance of the
Original Notes, (iii) the Exchange Offer is not consummated or the Notes Shelf
Registration Statement is not declared effective within 210 days after the
date of the issuance of the Original Notes or (iv) after either the Exchange
Offer Registration Statement or the Notes Shelf Registration Statement is
declared effective, (a) such registration statement thereafter ceases to be
effective without being succeeded immediately by an additional registration
statement filed and declared effective by the SEC or (b) such registration
statement or the related prospectus ceases to be usable (subject to certain
exceptions in the case of the preceding clause (b)) (each such event referred
to in clauses (i) through (iv), a "Notes Registration Default"), we will be
obligated to pay additional interest to each holder of the Original Notes,
with respect to the first 90-day period immediately following the first Notes
Registration Default, in an amount equal to 0.25% per annum of the principal
amount of Original Notes held by such holder. The amount of additional
interest will increase by an additional 0.25% per annum with respect to each
subsequent 90-day period until all Notes Registration Defaults have been
cured, up to a maximum of 1.0% per annum. All additional interest will be paid
to holders in the same manner as interest payments on the Original Notes on
semi-annual or quarterly payment dates which correspond to interest payment
dates for the Original Notes. Following the cure of all Notes Registration
Defaults, the accrual of additional interest will cease. We believe the
likelihood that we will pay additional interest upon a Registration Default is
remote or incidental (within the meaning of the applicable U.S. Treasury
regulations). We therefore believe that the possible payment of additional
interest will not cause the Original Notes to be treated as having been issued
with original issue discount for U.S. federal income tax purposes and that a
holder will be required to treat the gross amount of any additional interest
as ordinary interest income at the time such amount is received or accrued in
accordance with such holder's method of accounting for U.S. federal income tax
purposes.
The registration rights agreement also provides that we will make
available for a period of 90 days after the consummation of the Exchange Offer
a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any resale of any such Exchange
Notes. Holders of Original Notes will be required to suspend their use of the
prospectus included in the Notes Shelf Registration Statement under certain
circumstances upon receipt of written notice to that effect from us.
Each holder of Original Notes who wishes to exchange such notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any such Exchange Notes to
be received by it will be acquired in the ordinary course of its business;
(ii) it has no arrangement or understanding with any person to participate in
the distribution of such Exchange Notes; and (iii) it is not our "affiliate"
(as defined in Rule 405 under the Securities Act), or if it is an affiliate,
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable. In addition, if the holder is
not a broker-dealer, it will be required to represent that it is not engaged
in, and does not intend to engage in, the distribution of the Exchange Notes.
If the holder is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Original Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
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Holders of Original Notes or Exchange Notes that are not freely
tradable will also be required to deliver information to be used in connection
with any Notes Shelf Registration Statement within certain time periods in
order to have such Original Notes or Exchange Notes included in the Notes
Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding paragraphs. A holder who sells
such Original Notes or Exchange Notes pursuant to the Notes Shelf Registration
Statement generally will be required to be named as a selling securityholder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
exchange and registration rights agreement which are applicable to such a
holder (including certain indemnification obligations).
Original Notes not tendered in the Exchange Offer shall bear
interest at the rate set forth on the cover page of this prospectus and be
subject to all the terms and conditions specified in the indentures governing
the Original Notes and, for a period of two years after their issue date, to
certain transfer restrictions.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. Federal income
tax consequences of the exchange offer to holders of Original Notes, but is
not a complete analysis of all potential tax effects. The summary below is
based upon the Internal Revenue Code of 1986, as amended (the "Code"),
regulations of the Treasury Department, administrative rulings and
pronouncements of the Internal Revenue Service and judicial decisions, all of
which are subject to change, possibly with retroactive effect. This summary
does not address all of the U.S. Federal income tax consequences that may be
applicable to particular holders, including dealers in securities, financial
institutions, insurance companies and tax-exempt organizations. In addition,
this summary does not consider the effect of any foreign, state, local, gift,
estate or other tax laws that may be applicable to a particular holder. This
summary applies only to a holder that acquired Original Notes at original
issue for cash and holds such Original Notes as a capital asset within the
meaning of Section 1221 of the Code.
An exchange of Original Notes for New Notes pursuant to the exchange
offer will not be treated as a taxable exchange or other taxable event for
U.S. Federal income tax purposes. Accordingly, there will be no U.S. Federal
income tax consequences to holders who exchange their Original Notes for New
Notes in connection with the exchange offer and any such holder will have the
same adjusted tax basis and holding period in the New Notes as it had in the
Original Notes immediately before the exchange.
The foregoing discussion of certain U.S. Federal income tax
considerations does not consider the facts and circumstances of any particular
holder's situation or status. Accordingly, each holder of Original Notes
considering this exchange offer should consult its own tax advisor regarding
the tax consequences of the exchange offer to it, including those under state,
foreign and other tax laws.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Original Notes where such Original Notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for
a period of 180 days after the expiration date, we will make this prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until the expiration date, all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the expiration date we will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests such documents in the
letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel for the holders of the
Original Notes) other than commissions of concessions of any brokers or
dealers and will indemnify the holders of the Original Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
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BOOK-ENTRY; DELIVERY AND FORM
GENERAL
Except as provided below, the New Notes will be represented by one
or more fully registered global securities, in denominations of $1,000 and any
integral multiple thereof which will be deposited with, or on behalf of, DTC
and registered in the name of Cede & Co., or "Cede,'' the nominee of DTC.
Beneficial interests in the global securities will be represented through
book-entry accounts of financial institutions acting on behalf of beneficial
owners as direct or indirect participants in DTC. Unless and until physical
New Notes in definitive, fully registered form, or "Definitive Notes," are
issued under the limited circumstances described below, all references in this
prospectus to actions by holders of New Notes will refer to actions taken by
DTC upon instructions from DTC participants, and all references to
distributions, notices, reports and statements to holders of New Notes will
refer, as the case may be, to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the New Notes, or to DTC
participants for distribution to holders of New Notes in accordance with DTC
procedures. The general DTC rules applicable to its participants are on file
with the SEC. More information on DTC is available at http://www.dtcc.com.
Except in the limited circumstances described below, owners of
beneficial interests in global securities will not be entitled to receive
physical delivery of Definitive Notes. The New Notes will not be issuable in
bearer form.
DTC has advised us that DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation'' within the meaning of the New York Uniform Commercial
Code and "clearing agency'' registered pursuant to Section 17A of the
Securities Exchange Act of 1934.
Under the New York Uniform Commercial Code, a "clearing
corporation'' is defined as:
o a person that is registered as a "clearing agency'' under
the federal securities laws;
o a federal reserve bank; or
o any other person that provides clearance or settlement
services with respect to financial assets that would
require it to register as a clearing agency under the
federal securities laws but for an exclusion or exemption
from the registration requirement, if its activities as a
clearing corporation, including promulgation of rules, are
subject to regulation by a federal or state governmental
authority. A "clearing agency'' is an organization
established for the execution of trades by transferring
funds, assigning deliveries and guaranteeing the
performance of the obligations of parties to trades.
DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions among DTC
participants through electronic book-entry transfers between the accounts of
DTC participants. The ability to execute transactions through book-entry
transfers in accounts eliminates the need for transfer of physical
certificates. DTC participants include both U.S. and foreign securities
brokers and dealers, banks, clearing
85
corporations and certain other organizations. DTC is a wholly owned subsidiary
of the Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is
owned by a number of DTC participants and by the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers, Inc.
and certain clearing corporations. Banks, brokers, dealers, trust companies
and other entities that clear through or maintain a custodial relationship
with a DTC participant either directly or indirectly have indirect access to
the DTC system.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers of the
New Notes among DTC participants and to receive and transmit distributions of
principal, premium, if any, and interest with respect to the New Notes. DTC
participants and indirect DTC participants with which holders of New Notes
have accounts similarly are required to make book-entry transfers and receive
and transmit such payments on behalf of their respective customers. Holders of
New Notes that are not DTC participants or indirect DTC participants but
desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the New Notes may do so only through DTC participants and
indirect DTC participants. In addition, holders of New Notes will receive all
distributions of principal, premium, if any, and interest from us through DTC
participants or indirect DTC participants, as the case may be. Under a
book-entry format, holders of New Notes may experience some delay in their
receipt of payments because we will forward payments with respect to the New
Notes to Cede, as nominee for DTC. We expect DTC to forward payments in
same-day funds to each DTC participant who is credited with ownership of the
New Notes in an amount proportionate to the principal amount of that DTC
participant's holdings of beneficial interests in the New Notes, as shown on
the records of DTC or Cede. We also expect that DTC participants will forward
payments to indirect DTC participants or holders of New Notes, as the case may
be, in accordance with standing instructions and customary industry practices.
DTC participants will be responsible for forwarding distributions to holders
of New Notes. Accordingly, although holders of New Notes will not possess
physical certificates representing the New Notes, DTC's rules provide a
mechanism for holders of New Notes to receive payments on the New Notes and to
be able to transfer their interests.
Unless and until Definitive Notes are issued under the limited
circumstances described below, the only physical holder of a New Note will be
Cede, as nominee of DTC. Holders of New Notes will not be recognized by us as
registered owners of New Notes under the indentures governing the New Notes.
Holders of New Notes will be permitted to exercise the rights under the
indentures governing the New Notes only indirectly through DTC and DTC
participants. DTC has advised us that it will take any action permitted to be
taken by a holder of New Notes under the indentures governing the New Notes
only at the direction of one or more DTC participants to whose accounts with
DTC the New Notes are credited. Additionally, DTC has advised us that in the
event any action requires approval by holders of New Notes of a certain
percentage of ownership of the New Notes, DTC will take such action only at
the direction of and on behalf of DTC participants whose holdings include
undivided interests that satisfy any such percentage. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of DTC participants whose holdings include those
undivided interests. DTC will convey notices and other communications to DTC
participants, and DTC participants will convey notices and other
communications to indirect DTC participants and to holders of New Notes in
accordance with arrangements among them. Arrangements among DTC and its direct
and indirect participants are subject to any statutory or regulatory
requirements as may be in effect from time to time. DTC's rules applicable to
itself and DTC participants are on file with the SEC.
86
The laws of some states require that certain purchasers of
securities take physical delivery of such securities. Such limits and such
laws may limit the market for beneficial interests in the global securities.
The ability of a holder of New Notes to pledge the New Notes to
persons or entities that do not participate in the DTC system, or otherwise to
act with respect to such New Notes, may be limited due to the lack of a
physical certificate to evidence ownership of the New Notes and because DTC
can only act on behalf of DTC participants, who in turn act on behalf of
indirect DTC participants.
We will have no liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the New Notes
held by Cede, as nominee for DTC, for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or for the
performance by DTC, any DTC participant or any indirect DTC participant of
their respective obligations under the rules and procedures governing their
obligations.
DEFINITIVE NOTES
Definitive Notes will be issued in paper form to holders of New
Notes or their nominees, rather than to DTC or its nominee, only if we
determine that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the New Notes and we or the
trustee are unable to locate a qualified successor within 90 days of receipt
of such notice.
If Definitive Notes are to be issued by us under the paragraph
immediately above, we will notify all holders of New Notes through DTC of the
availability of Definitive Notes. Upon surrender by DTC of the global
securities and receipt of instructions for re-registration, we will reissue
the New Notes as Definitive Notes to holders of Notes.
After Definitive Notes are issued, we or a paying agent will make
distributions of principal, premium, if any, and interest with respect to New
Notes directly to holders in whose names the New Notes were registered at the
close of business on the applicable record date. Except for the final payment
to be made with respect to a New Note, we or a paying agent will make
distributions by check mailed to the addresses of the registered holders as
they appear on the register maintained by us. We or a paying agent will make
the final payment with respect to any New Note only upon presentation and
surrender of the applicable New Note at the office or agency specified in the
notice of final distribution to holders of New Notes.
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LEGAL MATTERS
Certain legal matters in connection with the New Notes offered
hereby will be passed upon for us by Naomi C. Dallob, Esq., our Vice President
and Secretary.
EXPERTS
The financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
2003 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Vitas as of September 30,
2003 and 2002, and for each of the three years in the period ended September
30, 2003, incorporated by reference from our Form 8-K/A filed on February 23,
2004 with the SEC, have been audited by Ernst & Young LLP, independent
auditors, as stated in their report thereon included therein and are included
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
88
$150,000,000
8 3/4% SENIOR NOTES DUE 2011
CHEMED CORPORATION
(FORMERLY ROTO-ROOTER, INC.)
OFFER TO EXCHANGE
UP TO $150,000,000 PRINCIPAL AMOUNT OUTSTANDING OF
8 3/4% SENIOR NOTES DUE 2011
FOR
A LIKE PRINCIPAL AMOUNT OF NEW 8 3/4% SENIOR NOTES DUE 2011
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
________________
PROSPECTUS
________________
June 3, 2004
Until July 1, 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.