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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 19, 1999
-------------------------------
MATRIA HEALTHCARE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-20619 58-2205984
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1850 Parkway Place, Marietta, Georgia 30067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 423-4500
------------------------------
Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On January 19, 1999, Matria Healthcare, Inc., a Delaware corporation
("Matria"), completed its acquisition, effective January 1, 1999, of
substantially all of the assets of Gainor Medical Management, L.L.C., a Georgia
limited liability company ("Gainor Medical"), for a purchase price of
approximately $130 million. The acquisition agreement also provides for
additional contingent purchase price of up to $35 million based on 1999
financial performance. The assets acquired included the outstanding capital
stock of, and membership interests and other equity interests in the
subsidiaries of Gainor Medical. The purchase price was determined through arms
length negotiations between the parties.
At the closing of the transaction, Matria paid $83.8 million of the
purchase price in cash, assumed approximately $1.2 million in debt and issued
$45 million in redeemable preferred stock and warrants of Matria. The
transaction also included a cash adjustment payable by Matria of approximately
$6.6 million, one-half of which was paid at the closing and the remaining
one-half of which is payable on April 1, 1999. If earned, the contingent
purchase price is payable by the issuance in the year 2000 of subordinated
notes.
The cash portion of the purchase price was financed partially through a
$125 million five-year credit facility obtained from First Union National Bank.
The credit facility consists of an $80 million term loan facility and a $45
million revolving credit facility.
Prior to the acquisition, there were no material relationships
between Gainor Medical and Matria or any of its affiliates, directors or
officers. Matria will continue to operate the diabetes disease management and
microsampling businesses acquired from Gainor Medical, and Mr. Mark J. Gainor,
chief executive officer of Gainor Medical, will serve as President of Matria's
diabetes division. In addition, Matria's Board of Directors has been expanded to
include Mr. Gainor and Mr. Rod F. Dammeyer, Managing Director of Equity Group
Corporate Investments, a privately held investment firm controlled by Mr. Sam
Zell. On the date of the closing, Matria also entered into a five year agreement
with Mr. Gainor and Sam Zell affiliate SZ Investments, L.L.C. ("SZI"), the two
principal equity holders in Gainor Medical, which allows Mr. Gainor and SZI to
increase their stock ownership in Matria to an aggregate of up to thirty five
percent of Matria Common Stock, on a fully diluted basis (the "Standstill
Agreement"), subject to a requirement that they refrain from any attempt to gain
control of Matria during the term of the Standstill Agreement. Pursuant to this
transaction, Matria has amended its shareholder rights plan to permit the
acquisition of shares by Mr. Gainor, SZI and their respective affiliates and
permitted transferees within the limits set forth in the Standstill Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
It is impracticable for Matria to provide the required audited
financial statements of the acquired business (the "Financial Statements") at
the time this report on Form 8-K is filed. Matria
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will file these Financial Statements as soon as they are available, which will
be not later than 60 days following the date of this report on Form 8-K.
(b) Pro Forma Financial Information
It is impracticable for Matria to provide the required pro forma
financial information reflecting the acquisition of the acquired business at the
time this report on Form 8-K is filed. Matria will file such pro forma financial
information as soon as it is available, which will be not later than 60 days
following the date of this report on Form 8-K.
(c) Exhibits
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<CAPTION>
Exhibit No. Description of Exhibit
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2.1* Purchase and Sale and Agreement dated
December 21, 1998, by and between Matria
Healthcare, Inc. and Gainor Medical
Management, L.L.C. (with Exhibits)
4.1 Certificate of Designations, Preferences and
Relative, Participating, Optional and Other
Special Rights of 4% Series A Convertible
Preferred Stock dated January 15, 1999
4.2 Certificate of Designations, Preferences and
Relative, Participating, Optional and Other
Special Rights of 8% Series B Redeemable
Preferred Stock dated January 15, 1999
4.3 Credit Agreement dated January 19, 1999
among Matria Healthcare, Inc., certain other
borrowers from time to time party thereto,
the banks and other financial institutions
from time to time party thereto, and First
Union National Bank as Administrative Agent.
99 Amendment to Rights Agreement effective
December 21, 1998
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*Confidential treatment has been requested as to certain omitted portions of
this exhibit, which portions have been filed separately with the Securities and
Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Matria has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Matria Healthcare, Inc.
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Registrant
By: /s/ Donald R. Millard
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Donald R. Millard
President and Chief Executive Officer
Date: February 3, 1999
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INDEX TO EXHIBITS
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<CAPTION>
Exhibit No. Description of Exhibit
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2.1* Purchase and Sale and Agreement dated December 21,
1998, by and between Matria Healthcare, Inc. and
Gainor Medical Management, L.L.C. (with Exhibits)
4.1 Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special
Rights of 4% Series A Convertible Preferred Stock
dated January 15, 1999
4.2 Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special
Rights of 8% Series B Redeemable Preferred Stock
dated January 15, 1999
4.3 Credit Agreement dated January 19, 1999 among Matria
Healthcare, Inc., certain other borrowers from time
to time party thereto, the banks and other financial
institutions from time to time party thereto, and
First Union National Bank as Administrative Agent.
99 Amendment to Rights Agreement effective December 21,
1998
</TABLE>
*Confidential treatment has been requested as to certain omitted portions of
this exhibit which portions have been filed separately with the Securities and
Exchange Commission.
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EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
BETWEEN
MATRIA HEALTHCARE, INC., PURCHASER,
AND
GAINOR MEDICAL MANAGEMENT, L.L.C., SELLER
DATED AS OF DECEMBER 21, 1998
*** Indicates information deleted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2.
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TABLE OF CONTENTS
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ARTICLE 1 SALE AND PURCHASE OF STOCK , MEMBERSHIP INTERESTS AND OTHER
ASSETS.............................................................................................................2
1.1 Sale of Stock, Membership Interests and Other Assets at the Closing........................................2
1.2 Purchase Price.............................................................................................5
1.3 Allocation of Purchase Price...............................................................................5
1.4 Payment of Purchase Price..................................................................................5
1.5 Additional Purchase Price Payments.........................................................................6
1.6 Cash Adjustment............................................................................................9
ARTICLE 2 CLOSING.................................................................................................10
2.1 Closing Date..............................................................................................10
2.2 Deliveries of the Seller..................................................................................10
2.3 Deliveries of Purchaser...................................................................................12
ARTICLE 3 ADDITIONAL AGREEMENTS...................................................................................14
3.1 Confidentiality...........................................................................................14
3.2 Access to Premises, Records, Properties, Customers and Employees..........................................14
3.3 Publicity.................................................................................................15
3.4 Acquisition Proposals.....................................................................................15
3.5 Approvals and Consents; Reasonable Efforts................................................................15
3.6 Cooperation of the Parties; Regulatory Approvals..........................................................16
3.7 Expenses..................................................................................................16
3.8 Corporate Names...........................................................................................16
3.9 Hart-Scott-Rodino Filings.................................................................................17
3.10 Standstill and Restrictive Covenant Agreements............................................................17
3.11 Lucor Management Agreement................................................................................17
3.12 Tax Matters...............................................................................................17
3.13 Break-Up Fee..............................................................................................18
3.14 Seller and Subsidiary Permits.............................................................................18
3.15 Bulk Sales Law............................................................................................18
3.16 Discharge of Liabilities..................................................................................18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER................................................................19
4.1 Validity..................................................................................................19
4.2 Definition of Material Adverse Effect.....................................................................19
4.3 Corporate and Financial...................................................................................19
4.3.1 Corporate Status......................................................................................19
4.3.2 Authority; No Violation; Consents.....................................................................20
4.3.3 Ownership and Capitalization..........................................................................21
4.3.4 Title to Interest and Assets..........................................................................22
4.3.5 Corporate or Other Books and Records..................................................................22
4.3.6 Taxes.................................................................................................23
4.3.7 Financial Statements..................................................................................24
4.3.8 Accounts..............................................................................................25
4.3.9 Notes Receivable; Accounts Receivable; Accounts Payable...............................................25
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4.3.10 Liabilities.........................................................................................25
4.3.11 Ordinary Course of Business and Absence of Changes..................................................26
4.3.12 Litigation and Proceedings..........................................................................28
4.3.13 RESERVED............................................................................................28
4.3.14 Inventory...........................................................................................28
4.4 Business Operations.......................................................................................28
4.4.1 Customers and Accounts..............................................................................28
4.4.2 Suppliers...........................................................................................29
4.4.3 Environmental.......................................................................................29
4.4.4 Insurance...........................................................................................29
4.4.5 Powers of Attorney..................................................................................30
4.5 Contracts; Properties and Assets..........................................................................30
4.5.1 Contracts...........................................................................................30
4.5.2 Licenses; Intellectual Property.....................................................................31
4.5.3 Title to Assets.....................................................................................32
4.5.4 Conditions of Properties............................................................................33
4.5.5 Real Property and Leases............................................................................33
4.6 Employees and Benefits....................................................................................34
4.6.1 Directors, Officers and Managers....................................................................34
4.6.2 Employees...........................................................................................34
4.6.3 Compensation Structure - Independent Contractors....................................................35
4.6.4 Employee Benefits...................................................................................36
4.6.5 Labor-Related Matters...............................................................................37
4.6.6 Transactions With Management........................................................................38
4.7 Other.....................................................................................................38
4.7.1 Approvals and Consents..............................................................................38
4.7.2 Fraud and Abuse.....................................................................................38
4.7.3 Medicare, Medicaid, and Other Third-Party Payor Payment Liabilities.................................38
4.7.4 Billing Practices and Referral Sources..............................................................39
4.7.5 Contributions, Payments or Gifts....................................................................39
4.7.6 Physician Self-Referrals............................................................................39
4.7.7 Compliance with Laws................................................................................39
4.7.8 Permits.............................................................................................40
4.7.9 Investment Representations..........................................................................41
4.7.10 Brokers.............................................................................................42
4.7.11 Limitation on Warranties............................................................................42
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................................42
5.1 Organization and Good Standing...........................................................................42
5.2 Power and Authority......................................................................................43
5.3 Binding Effect...........................................................................................43
5.4 No Violation; Consents...................................................................................43
5.5 Capitalization...........................................................................................43
5.6 Exchange Act Reports and Financial Statements............................................................44
5.7 Absence of Certain Changes or Events.....................................................................45
5.8 No Shareholder Vote Required.............................................................................46
5.9 Reporting Company; Form S-3..............................................................................46
5.10 Trading on Nasdaq........................................................................................46
5.11 Brokers..................................................................................................46
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5.12 Absence of Litigation; Compliance........................................................................46
5.13 Takeover Status..........................................................................................47
5.14 Corporate Action.........................................................................................47
5.15 Investment Representations...............................................................................47
5.16 Limitation on Warranties.................................................................................48
5.17 Compliance with Securities Laws..........................................................................48
ARTICLE 6 CONDUCT OF BUSINESS OF COMPANY PENDING CLOSING.........................................................48
6.1 Conduct of Business......................................................................................48
6.2 Maintenance of Properties................................................................................49
6.3 Insurance................................................................................................49
6.4 Issuance of Securities...................................................................................49
6.5 Dividends................................................................................................49
6.6 Amendment of Charter.....................................................................................49
6.7 No Acquisitions..........................................................................................49
6.8 Disposition of Assets....................................................................................49
6.9 Compensation.............................................................................................50
6.10 Banking Arrangements.....................................................................................50
6.11 Indebtedness.............................................................................................50
6.12 Payment of Debt..........................................................................................50
6.13 Benefit Plans............................................................................................50
6.14 Contracts................................................................................................50
6.15 Books and Records........................................................................................50
6.16 Other Actions............................................................................................50
6.17 Seller to Advise Purchaser of Changes....................................................................51
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE PURCHASER.............................................................51
7.1 Representations and Warranties...........................................................................51
7.2 Performance of Agreements................................................................................51
7.3 Deliveries...............................................................................................51
7.4 Approvals................................................................................................51
7.5 Financing Obtained by the Purchaser......................................................................51
7.6 No Injunctions...........................................................................................51
7.7 Consents and Approvals of Third Parties..................................................................52
7.8 Resignations.............................................................................................52
7.9 Opinions of Seller's and SZI's Counsel...................................................................52
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER................................................................52
8.1 Representations and Warranties...........................................................................52
8.2 Performance of Agreements................................................................................52
8.3 Deliveries...............................................................................................52
8.4 Approvals................................................................................................53
8.5 No Injunctions...........................................................................................53
8.6 Actions of Purchaser.....................................................................................53
8.7 Certificates of Designation..............................................................................53
8.8 Opinion of Purchaser's Counsel...........................................................................53
ARTICLE 9 INDEMNIFICATION........................................................................................54
9.1 Survival of Representations..............................................................................54
9.2 Indemnification..........................................................................................55
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ARTICLE 10 TERMINATION...........................................................................................60
10.1 Material Adverse Change - Subsidiaries..................................................................60
10.2 Material Adverse Change - Purchaser.....................................................................60
10.3 Noncompliance of Seller.................................................................................60
10.4 Noncompliance of Purchaser..............................................................................60
10.5 Failure to Disclose - Seller............................................................................60
10.6 Failure to Disclose - Purchaser.........................................................................60
10.7 Adverse Proceedings.....................................................................................60
10.8 Termination Date........................................................................................61
10.9 Effect of Termination...................................................................................61
ARTICLE 11 [RESERVED]............................................................................................61
ARTICLE 12 MISCELLANEOUS.........................................................................................61
12.1 Notices.................................................................................................61
12.2 Entire Agreement........................................................................................63
12.3 Waiver; Amendment.......................................................................................63
12.4 Counterparts, Faxed Signatures, Headings, Etc...........................................................63
12.5 Successors and Assigns..................................................................................63
12.6 Governing Law...........................................................................................63
12.7 Remedies, Damages, Injunctions and Specific Performance.................................................64
12.8 Severability, Interpretation............................................................................64
12.9 Further Assurances......................................................................................64
12.10 Law and GAAP Applicable to Foreign Subsidiaries.........................................................64
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SCHEDULES
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Schedule 1.1(a)(iv) Permitted Liens
Schedule 1.1(c) Excluded Assets
Schedule 1(e) Excluded Contracts
Schedule 1.3 Allocation of Purchase Price
Schedule 1.4(b) Convertible Preferred Stock
Schedule 1.4(c) Redeemable Preferred Stock
Schedule 4.3.1 Subsidiaries and Foreign Qualifications
Schedule 4.3.3 Stock, Equity Interests, Options, Warrants
Schedule 4.3.4 Seller's Exception to Title
Schedule 4.3.6 Tax Matters
Schedule 4.3.7 Financial Statements
Schedule 4.3.8 Accounts
Schedule 4.3.9 Accounts Receivable
Schedule 4.3.10 Liabilities
Schedule 4.3.11 Changes
Schedule 4.3.12 Litigation and Proceedings
Schedule 4.4.1 Customers and Accounts
Schedule 4.4.2 Suppliers and Managed Care Providers
Schedule 4.4.3 Environmental
Schedule 4.4.4 Insurance
Schedule 4.4.5 Powers of Attorney
Schedule 4.5.1 Contracts and Commitments
Schedule 4.5.2 Licenses; Intellectual Property
Schedule 4.5.3 Subsidiaries' Exceptions to Title
Schedule 4.5.5 Real Property and Leases
Schedule 4.6.1 Officers and Directors
Schedule 4.6.2 Compensation Structure - Employees
Schedule 4.6.3 Compensation Structure - Independent Contractors
Schedule 4.6.4 Employee Benefits
Schedule 4.6.5 Labor-Related Matters
Schedule 4.6.6 Transactions With Management
Schedule 4.7.1 Seller's Approvals and Consents
Schedule 4.7.3 Medicare, Medicaid Liabilities
Schedule 4.7.7 Compliance with Laws
Schedule 4.7.8 Permits
Schedule 5.4 Purchaser Approval and Consents
Schedule 5.5(b) Capitalization
Schedule 5.7 Changes to SEC Disclosures
Schedule 5.12 Litigation
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EXHIBITS
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Exhibit A Earn-Out Note
Exhibit B Bill of Sale and Assignment
Exhibit C Lucor Management Agreement
Exhibit D Standstill Agreement
Exhibit E Restrictive Covenant Agreement
Exhibit F Registration Rights Agreement
Exhibit G Common Stock Warrant
Exhibit H Assumption Agreement
Exhibit I Subsidiary Assumption Agreement
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered
into as of the 21st day of December, 1998, by and between MATRIA HEALTHCARE,
INC., a Delaware corporation ("Purchaser"), and GAINOR MEDICAL MANAGEMENT,
L.L.C., a Georgia limited liability company ("GMM" or "Seller").
W I T N E S S E T H:
WHEREAS, GMM owns 100% of the issued and outstanding shares of capital
stock of Gainor Medical Acquisition Corporation, a Georgia corporation
("GMAC"), and GMAC is the owner of 100% of the issued and outstanding shares of
capital stock of USCI-Healthcare Management Solutions, Inc., a Delaware
corporation ("HMS"), and Diabetes Self Care, Inc., a Virginia corporation
("Self Care"); and GMM owns directly or indirectly 100% of the issued and
outstanding shares of capital stock of A.R. Medical Supplies, Inc., a Florida
corporation ("AR Medical") (GMAC, HMS, Self Care, and AR Medical are sometimes
referred to herein collectively as the "Corporation Subsidiaries" and
individually as a "Corporation Subsidiary"); and GMM is the direct or indirect
owner of 100% of the membership interests of the following limited liability
companies: Gainor Medical North America, L.L.C., a Georgia limited liability
company ("Gainor North America"), Gainor Medical Direct, LLC, a Georgia limited
liability company ("Gainor Direct"), Gainor Medical Europe Limited, a limited
company formed under the laws of the United Kingdom ("Gainor Europe"), Gainor
Medical International, L.L.C., a Georgia limited liability company ("Gainor
International"), "David" Achtundesechzigste Beteiligungs und
Verwaltungsgesellschaft GmbH, a limited liability company incorporated in the
Federal Republic of Germany ("Germany") and registered in the commercial
register of the local court of Frankfurt under HRB 45034 ("David 68"), Hans
M.W. Spreth GmbH, a German limited liability company ("Hans MW"), EU Medical
GmbH, a German limited liability company ("EU Medical"), "David"
Eimundsiebsechzigste Beteiligungs und Verwaltungsgesellschaft GmbH, a German
limited liability company ("David 71"), and Dia Real Diabetesservice
Kommanditgesellschaft, a limited partnership ("Kommanditgesellschaft"), duly
organized, validly existing and in good standing under the laws of Germany
("Dia Real") (David 68, Hans MW, EU Medical, David 71 and Dia Real are
sometimes referred to herein collectively, as the "German Subsidiaries" and
individually, as a "German Subsidiary") (Gainor North America, Gainor Direct,
Gainor Europe, Gainor International, and the German Subsidiaries are sometimes
referred to herein collectively as the "LLC Subsidiaries" and individually as
an "LLC Subsidiary") (the Corporation Subsidiaries and the LLC Subsidiaries are
sometimes referred to herein collectively as the "Subsidiaries" and
individually as a "Subsidiary"). The Corporation Subsidiaries, together with
Gainor North America and Gainor International are collectively referred to
herein as the "U.S. Subsidiaries." The German Subsidiaries, together with
Gainor Europe are collectively referred to herein as the "Foreign
Subsidiaries."
WHEREAS, the Seller desires to sell and Purchaser desires to purchase
all of the outstanding capital stock of the Corporation Subsidiaries, all of
the outstanding membership interests of the LLC Subsidiaries and certain other
assets of GMM, and thereby acquire all of the
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properties, assets and business of GMM and the Subsidiaries as a going concern,
all pursuant to the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE 1
SALE AND PURCHASE OF STOCK ,
MEMBERSHIP INTERESTS AND OTHER ASSETS
1.1 SALE OF STOCK, MEMBERSHIP INTERESTS AND OTHER ASSETS AT THE
CLOSING.
(a) Subject to the terms and conditions set forth in this
Agreement and on the basis of and in reliance upon the representations,
warranties, obligations and covenants set forth in this Agreement, at the
"Closing" (as defined in Section 2.1 hereof), the Seller hereby agrees to sell,
assign, transfer, convey and deliver to Purchaser, and Purchaser hereby agrees
to purchase and receive from the Seller, free and clear of any and all Liens
(as defined below), all of the business and assets of GMM on the Effective Date
(as defined below) (other than the "Excluded Assets," as defined in Section
1.1(c)) (hereinafter, the "GMM Assets"), including, without limitation, (i)
100% of the outstanding capital stock of GMAC and 100% of the outstanding
membership or other equity interests of Gainor International, Gainor Europe,
Gainor Direct, Gainor North America and David 68 (collectively, the
"Interests"), (ii) all rights of Seller under contracts and agreements, (iii)
all cash, cash equivalents, deposits and investments ("Cash Items") shown on
the December 31, 1998 balance sheet of Seller delivered to Purchaser pursuant
to Section 2.2(u) (the "December 31, 1998 Balance Sheet") plus any Cash Items
received by Seller in the ordinary course of the Business (as defined below)
from the Effective Date (as defined below) through the Closing Date (as defined
below) (the "Interim Period") and minus any disbursement of Cash Items by
Seller in the ordinary course of business during the Interim Period, and (iv)
all other assets shown on the December 31, 1998 Balance Sheet to the extent not
disposed of after that date in the ordinary course of business, plus all assets
purchased or received by Seller during the Interim Period. For purposes of this
Agreement, "Lien" shall mean all liens, charges, security interests, claims,
pledges, hypothecations and encumbrances of any nature whatsoever, other than
those liens and other encumbrances listed on Schedule 1.1(a)(iv) (the
"Permitted Liens").
(b) Through the Seller's conveyance of the Interests and other
assets described in Section 1.1(a) to the Purchaser, the Seller intends for the
Purchaser to thereby acquire substantially all of the properties, assets and
business of GMM and the Subsidiaries as a going concern, including, without
limitation, all items of personal property and other assets used in connection
with the business of GMM and the Subsidiaries, whether or not any of such
assets have any value for accounting purposes (collectively, the "Assets"),
free and clear of all Liens. The Seller shall deliver custody and control of
the Assets to the Purchaser at the Closing. The "Business" shall mean the
diabetes supply and disease management business, the microsampling business and
all other businesses operated by the Seller and the Subsidiaries on the date
hereof.
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(c) Notwithstanding the foregoing, the term "Assets" shall not
include the following assets, properties and rights of Seller (collectively,
the "Excluded Assets"):
(i) Seller's minute books and membership interest
ledgers; provided that Purchaser may obtain copies of the foregoing
and Seller hereby covenants to provide Purchaser reasonable access to
the foregoing, for all proper purposes;
(ii) Seller's rights under this Agreement and the other
agreements to be executed in connection herewith;
(iii) those assets, properties and rights set forth on
Schedule 1.1(c);
(iv) claims (and benefits to the extent they arise
therefrom) to the extent they relate to any Excluded Liabilities (as
defined below) of Seller and any other Excluded Assets of Seller; and
(v) rights arising from any refunds due Seller as of the
Effective Date with respect to insurance premium payments of Seller
and income tax refunds due Seller for periods ending on or prior to
the Effective Date from federal, state and local income taxing
authorities.
(d) At the Closing, Purchaser shall execute and deliver to the
Seller the "Assumption Agreement" (as defined in Section 2.3(l) hereof),
pursuant to which Purchaser assumes and agrees to perform, pay and discharge in
accordance with their respective terms the following debts, liabilities and
obligations of Seller (collectively, the "Assumed Liabilities"), as of the
Effective Date:
(i) all debts, liabilities and obligations arising after
the Effective Date under the contracts assigned to Purchaser pursuant
to Section 1.1(a)(ii);
(ii) any liabilities and obligations reflected as current
liabilities on the unaudited balance sheet of Seller dated as of
September 30, 1998 delivered to Purchaser pursuant to Section 2.2(t)
(the "September 30, 1998 Balance Sheet") which remain unpaid or
outstanding on the Closing Date, including, without limitation, all
amounts reflected thereon for accounts payable, accrued taxes, accrued
payroll related expense, accrued professional fees, accrued interest,
intercompany accounts incurred in the ordinary course of Business
between Seller and any Subsidiary and other current liabilities,
including deferred revenue, incurred in the ordinary course of the
Business, but specifically excluding liabilities described as Excluded
Liabilities in Section 1.1(e) hereof (the foregoing type of
liabilities are hereafter referred to as "Current Liabilities");
(iii) the Current Liabilities of Seller, incurred in the
ordinary course of the Business from September 30, 1998 through
Closing but expressly excluding the Excluded Liabilities set forth in
Section 1.1(e) hereof; and
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(iv) any other indebtedness for borrowed money or seller
financing, other than capital lease obligations and related accrued
interest ("Funded Debt") of Seller which Purchaser elects to assume
and which results in a reduction in the Purchase Price pursuant to
Section 1.4.
(e) Notwithstanding anything else contained herein to the
contrary, all liabilities and obligations of Seller (whether known or unknown,
liquidated or unliquidated, contingent or fixed) other than the Assumed
Liabilities (collectively, the "Excluded Liabilities") are not assumed by
Purchaser (regardless of whether any such liabilities or obligations are
disclosed in or pursuant to this Agreement) pursuant hereto and all Excluded
Liabilities (other than those assumed by Gainor North America pursuant to the
Subsidiary Assumption Agreement (as defined in Section 2.3(m)) shall remain the
liabilities and obligations of Seller. Seller hereby agrees that it shall fully
and timely pay, perform and discharge all of its Excluded Liabilities (other
than those assumed by Gainor North America pursuant to the Subsidiary
Assumption Agreement) in accordance with their respective terms. Without
limiting the generality of the foregoing, Excluded Liabilities include, without
limitation, the following, whether or not reflected as Current Liabilities on
the September 30, 1998 Balance Sheet or the December 31, 1998 Balance Sheet:
(i) any liability or obligation arising under any
contract of Seller listed on Schedule 1.1(e) hereof;
(ii) any liability or obligation (including, without
limitation, taxes) related to the Excluded Assets;
(iii) any liability or obligation to any employee of
Seller, not employed by Purchaser or any Subsidiary after the Closing;
(iv) except as set forth on Schedule 1.1(e), any
liability or obligation arising out of any termination by Seller of
the employment of any employee as a result of this transaction or
otherwise and any liability or obligation related to any former
employee of Seller who retired effective as of or prior to the Closing
Date, including, without limitation, any liability under the agreement
dated June 13, 1997 between Seller and Raymond D. Gainor;
(v) any liability or obligation under any litigation,
arbitration, investigation or other proceeding brought against Seller
with respect to any matter occurring prior to the Closing Date
(regardless of whether it is pending as of or has been threatened or
asserted prior to the Closing Date);
(vi) any liability or obligation for any income taxes
owed by Seller for any period ending on or prior to the Effective Date
and any liability or obligation for any income, sales, use or other
taxes arising in connection with the consummation of the transactions
contemplated by this Agreement; (except to the extent there is a
transfer tax with respect to the transfer of stock under UK law);
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(vii) any liability or obligation of Seller relating to
any breach of contract, breach of warranty, tort, infringement or
violation of law prior to the Closing Date;
(viii) any liability or obligation payable to any member or
affiliate of Seller;
(ix) any liability or obligation of Seller to indemnify
any person by reason of the fact that such person was an employee,
officer, director or agent of Seller (or such person was serving as an
employee, officer, director or agent of any other entity at the
request of Seller) prior to the Closing Date;
(x) any liability or obligation of Seller for costs and
expenses (including, without limitation, professional fees) incurred
in connection with this Agreement and the transactions contemplated
hereby;
(xi) except as set forth in Section 1.1(d)(iv), any
liability or obligation of Seller relating to any bank loan or other
indebtedness for borrowed money, including any accrued interest
thereon; and
(xii) any liability covered by insurance maintained by
Seller immediately prior to the Closing Date, to the extent of such
coverage.
1.2 PURCHASE PRICE. Subject to the provisions of Sections 1.4,
1.5 and 1.6 hereof, as consideration for all of the Interests and Assets to be
acquired by Purchaser pursuant to Section 1.1, Purchaser shall pay to Seller
the aggregate amount of $130,000,000 (the "Purchase Price"). The Purchase Price
shall be allocated as provided in Section 1.3 hereof and paid as provided in
Section 1.4 hereof.
1.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Interests and Assets as provided on Schedule 1.3 hereof.
Each party hereto covenants and agrees that it will not take a position on any
tax return, before any agency charged with collection of any tax, or in any
judicial or administrative proceeding that is in any way inconsistent with the
allocation set forth on Schedule 1.3.
1.4 PAYMENT OF PURCHASE PRICE.
(a) At the Closing, Purchaser shall deliver to the Seller, in
immediately available U.S. funds, by wire transfer to such banks and accounts
in the United States as shall be designated by Seller, or by certified or
official bank checks, the amount of $85,000,000, less the amount of any Funded
Debt of Seller or any Subsidiary that Purchaser elects to assume pursuant to
Section 1.1(d)(iv) or accepts as a liability of a Subsidiary pursuant to
Section 3.16 by notice to Seller not less than 2 days prior to the Closing.
(b) At the Closing, Purchaser shall deliver to the Seller 10,000
shares of the $.01 par value convertible preferred stock of the Purchaser
having a liquidation value of $1,000 per share (the "Convertible Preferred
Stock"). Such Convertible Preferred Stock shall have the rights and preferences
set forth on Schedule 1.4(b) hereof.
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(c) At the Closing, Purchaser shall deliver to the Seller 35,000
shares of the $.01 par value redeemable preferred stock of the Purchaser having
a liquidation value of $1,000 per share (the "Redeemable Preferred Stock").
Such Redeemable Preferred Stock shall have the rights and preferences set forth
on Schedule 1.4(c) hereof.
1.5 ADDITIONAL PURCHASE PRICE PAYMENTS.
(a) Subject to the terms and conditions set forth in this Section
1.5, Purchaser shall make the following additional payments, if any, to the
Seller in consideration for the Interests and Assets, which payments shall be
in addition to the Purchase Price (any such additional payment is referred to
herein as an "Additional Purchase Price Payment"), as follows:
(i) if the aggregate EBITDA (as defined below) of the
Subsidiaries equals or exceeds U.S.$*** during calendar year 1999,
Purchaser shall pay to the Seller an Additional Purchase Price Payment
of $*** for each dollar of aggregate EBITDA between U.S.$*** and
U.S.$***, for a possible Additional Purchase Price Payment of
U.S.$20,000,000;
(ii) for each additional U.S.$*** of aggregate EBITDA of
the Subsidiaries during calendar year 1999 above U.S.$***, Purchaser
shall pay to the Seller an Additional Purchase Price Payment in the
amount of $5,000,000; provided that such Additional Purchase Price
Payments under this clause (ii) shall not exceed $15,000,000;
(iii) provided that if any amount is owing pursuant to
Section 1.5(a)(i) or 1.5(a)(ii) above, Purchaser shall pay to the
Seller an Additional Purchase Price Payment equal to that amount of
interest (at 4% per annum) that would have accrued on the Additional
Purchase Price Payments payable pursuant to Sections 1.5(a)(i) and
(ii) above, if any, had the Earn-Out Note for such Additional Purchase
Price Payments been issued on January 1, 2000, which amount shall be
added to the principal of the Earn-Out Note on the date of issuance;
(iv) provided that if any amount is owing pursuant to
Section 1.5(a)(i) or (ii) above, Purchaser shall pay to the Seller an
Additional Purchase Price Payment equal to that amount of interest (at
8% per annum) that would have accrued on the Additional Purchase Price
Payments payable pursuant to Sections 1.5(a)(i) and (ii) above, if
any, had the Earn-Out Note for such Additional Purchase Price Payments
been issued on January 1, 2000, which Additional Purchase Price
Payment shall be paid in cash at the time of issuance of the Earn-Out
Note as provided below;
(v) if, due to application of the installment sale rules
of the United States Internal Revenue Code of 1986, as amended (the
"Code"), the determination of the Additional Purchase Price Payments
pursuant to clauses (i) and (ii) above causes the gross profit
percentage attributed to the payments of Purchase Price reported by
the Seller for federal income tax purposes as income received by the
Seller in calendar year 1999 (the "1999 Payments") to be higher than
originally reported, Purchaser shall pay Seller an
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Additional Purchase Price Payment hereunder, in an amount equal to the
lesser of (y) $250,000 or (z) the amount of interest payable to the
Internal Revenue Service with respect to any resulting underpayment of
tax on the 1999 Payments, such interest to be computed through that
date which is 30 days after the date on which the amount of the
Additional Purchase Price Payments payable under clauses (i), (ii) and
(iii) above is determined.
Any Additional Purchase Price Payment payable pursuant to this Section
1.5 shall be allocated among the Interests and Assets as provided in Schedule
1.3. Any Additional Purchase Price Payment payable pursuant to Sections
1.5(a)(i), 1.5(a)(ii) and 1.5(a)(iii) shall be paid by the Purchaser by the
delivery to Seller of a note of the Purchaser substantially in the form
attached hereto as Exhibit A (the "Earn-Out Note"), accompanied by an opinion
of Troutman Sanders LLP, counsel for the Purchaser, dated the date of the
Earn-Out Note, in form and substance reasonably satisfactory to Seller. Any
Additional Purchase Price Payment payable pursuant to Section 1.5(a)(v) shall
be paid by Purchaser in cash, either by wire transfer or certified or official
bank checks within 10 days of Seller's delivery to Purchaser of a detailed
calculation of the amount due. Any Additional Purchase Price Payment payable
pursuant to Section 1.5(a)(iv) shall be paid by Purchaser in cash, either by
wire transfer or certified or official bank checks on the date of issuance of
the Earn-Out Note.
As used in this Section 1.5, the term "EBITDA" of the Subsidiaries
shall mean the 1999 annual consolidated earnings of the Subsidiaries and, to
the extent positive, the earnings of Diabetes Management Services, Inc.'s
diabetes supply business (which business specifically excludes DMS' business of
providing clinical services or any sales of supplies incidental thereto)
("DMS") (whether or not such business is operated through a Subsidiary) before
interest, taxes, depreciation and amortization, as reported at the conclusion
of 1999 in audited consolidated financial statements of the Subsidiaries and
DMS (excluding any financial results of any acquisitions by Purchaser or any
Subsidiary subsequent to the Closing). EBITDA shall be derived from the
applicable amounts that were determined in accordance with generally accepted
accounting principles ("GAAP") applied in a manner consistent with past
practices, provided that the costs of the audit of the Financial Statements, as
defined in Section 4.3.7, of Seller, the Subsidiaries and DMS for the year
ended December 31, 1998 and for any fiscal year prior to December 31, 1998
which Purchaser is required to file with the Securities and Exchange Commission
("Commission") in connection with the Form 8-K report of this transaction shall
be deducted in computing 1999 EBITDA. EBITDA shall not include any allocation
of overhead of Purchaser to the Subsidiaries other than (i) charges for
services actually provided to the Subsidiaries by Purchaser at the request of
Lucor Holdings, LLC ("Lucor") which services shall be charged at a rate
approximating the costs incurred by Purchaser for providing such services, as
set forth below; or (ii) charges for services contemplated in the 1999 Gainor
Medical Budget previously reviewed by Purchaser as the same may subsequently be
revised pursuant to this Section 1.5 (the "Budget"), so long as the amount
charged to EBITDA for services under this Section (ii) shall not exceed the
amount included in the Budget therefor. The costs incurred by Purchaser shall
be determined by considering relevant pricing factors, including, without
limitation, the number of personnel hours required, the hourly cost of the
person or persons providing the services, and the cost of materials, the
allocable overhead to the Subsidiaries (including employee benefits) and the
cost of capital consumed in providing such services. In
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addition to amounts to be billed to Subsidiaries, Subsidiaries shall either pay
directly or reimburse Purchaser for the amount of all expenses for outside
professional services reasonably incurred by Purchaser for and on behalf of
Subsidiaries, including, without limitation, public accounting and outside
legal services. Any compensation paid or expenses reimbursed by Purchaser under
the Lucor Management Agreement shall be charged against EBITDA. If the
Purchaser believes the Subsidiaries should make an expenditure that is not
contemplated in the Budget or is greater than the amount included in the Budget
for such item, and Lucor Management does not agree that the expenditure is
necessary, the matter will be submitted to the Board of Directors of the
Purchaser, and the expenditure will be charged against EBITDA and added to the
Budget only if the Board of Directors by a majority vote concludes that the
expenditure is necessary.
(b) No later than March 31, 2000, Purchaser shall cause to be
prepared in accordance with GAAP and delivered to the Seller audited
consolidated financial statements of the Subsidiaries (including DMS, whether
or not operated through a Subsidiary, but excluding any financial results of
any acquisitions by Purchaser or any Subsidiary subsequent to the Closing) for
the year ended December 31, 1999 (the "Additional Payment Financial
Statements"). Payment of all Additional Purchase Price Payments calculated by
the Purchaser to be due pursuant to Sections 1.5(a)(i) ,1.5(a)(ii) and
1.5(a)(iii) shall be made pursuant to the Earn-Out Note which shall be executed
and delivered by the Purchaser to the Seller within 15 days following the date
such Additional Payment Financial Statements are agreed to by Purchaser and
Seller or finally resolved as hereinafter provided. The Seller and, on the
Seller's behalf, an independent national accounting firm chosen by the Seller)
shall have the right at mutually agreed times during normal business hours
commencing on the Closing Date and ending 60 days after the receipt of the
Additional Payment Financial Statements to inspect the books and records of the
Subsidiaries (and DMS). Seller shall notify Purchaser in writing of any
objections to the Additional Payment Financial Statements (in reasonable
detail) within 65 days after receiving them. If Seller fails to give such
notice by such time, Seller shall be deemed to have agreed with the Additional
Payment Financial Statements as delivered. If Seller gives such notice by such
time, (i) Purchaser shall execute and deliver to the Seller an Earn-Out Note
within 15 days following receipt by Purchaser of the Seller's Notice with
regard to the undisputed portion of any amounts owed to Seller pursuant to this
Section 1.5, and (ii) Seller and Purchaser shall then have 10 business days
after such notice to agree on the amounts of the EBITDA. If Seller and
Purchaser are not able to agree by such time, the Additional Payment Financial
Statements will be submitted to Deloitte & Touche in Atlanta, Georgia (or any
successor accounting firm), who shall have responsibility for determining the
correct EBITDA, which was derived from the applicable amounts that were
determined in accordance with GAAP applied in the manner consistent with
reasonable past practices, within 30 days following such submission. Deloitte &
Touche's (or any such successor accounting firm's) determination shall be final
and binding on Seller and Purchaser. The costs of any such determination shall
be shared equally by Seller and Purchaser.
(c) During 1999, Purchaser shall keep the Business intact as a
separate unit, shall manage it in the ordinary course consistent with past
practice, and shall not, without obtaining the prior written consent of Seller,
take any of the following actions:
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(i) liquidate, consolidate, dissolve or merge any
material Subsidiary or DMS with or into another company other than
another Subsidiary, including without limitation, into a subsidiary or
affiliate of Purchaser;
(ii) cause a material change in the nature of the
Business as presently conducted by the Subsidiaries and DMS;
(iii) transfer assets or incur liabilities in the
Subsidiaries or DMS except in the ordinary course of business
consistent with past practice;
(iv) remove from the premises of the Subsidiaries (other
than to the premises of the Purchaser) any books or records of the
Business reasonably necessary for the continuation of the operation of
the Business; or
(v) fail to honor or perform its obligations under the
Lucor Management Agreement.
1.6 CASH ADJUSTMENT.
(a) Subject to the terms and conditions set forth in this Section
1.6, the Purchase Price for the Interests and Assets shall be increased by the
amount (the "Cash Adjustment") of the average of the cash reported on the
consolidated daily cash balances reports of the Seller and the Subsidiaries for
the period from September 16, 1998 through December 15, 1998 inclusive (the
"Average Cash Balance"), adjusted in accordance with Section 1.6(b) below.
Purchaser shall pay at the Closing one-half of the amount of the "Estimated
Cash Adjustment" determined in accordance with Section 1.6(c) and any remaining
unpaid balance of the Cash Adjustment shall be paid in accordance with Sections
1.6(d) and (e).
(b) The Cash Adjustment shall be an amount equal to the Average
Cash Balance, plus any receipt of Cash Items by Seller related to Excluded
Assets from December 16, 1998 to the Closing Date and minus (i) any
disbursement of Cash Items by Seller or any Subsidiary related to Excluded
Liabilities or Subsidiary Excluded Liabilities (as defined in Section 3.16),
and (ii) distributions to or payments to or on behalf of members of Seller or
their affiliates from December 16, 1998 to the Closing Date (other than
payments of base salary and 1998 bonuses in the aggregate amount of $335,000).
(c) Not later than 10 days prior to the Closing, Purchaser and
Seller shall agree upon the amount of the Estimated Cash Adjustment. If
Purchaser and Seller are unable to agree by such time, then the parties shall
cause a determination to be made of such Estimated Cash Adjustment by Deloitte
& Touche in Atlanta, Georgia (or any successor accounting firm). Seller shall
notify Purchaser in writing of the amounts so determined no later than 2 days
prior to the Closing. The cost of such determination shall be shared equally by
Purchaser and Seller.
(d) On or before February 1, 1999, Lucor, with the assistance of
Purchaser's personnel, shall deliver to Purchaser the December 31, 1998 Balance
Sheet, prepared in accordance with GAAP consistently applied, together with a
detailed calculation of the Cash
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Adjustment determined in accordance with Sections 1.6(a) and 1.6(b). On or
before April 1, 1999, Purchaser shall deliver to Seller (i) the December 31,
1998 (Consolidated) Balance Sheet, prepared in accordance with GAAP
consistently applied and audited by Purchaser's independent certified public
accountants (Purchaser's Accountants), (ii) Purchaser's detailed calculation of
the Cash Adjustment determined in accordance with Sections 1.6(a), and 1.6(b),
and (iii) payment, by wire transfer or certified or official bank check, of the
unpaid balance of the amount of the Cash Adjustment as shown in such
calculation.
(e) Seller shall notify Purchaser in writing of any objections to
Purchaser's calculation of the Cash Adjustment (in reasonable detail) within 15
days after receiving it. If Seller fails to give such notice by such time,
Seller shall be deemed to have agreed with Purchaser's calculation of the Cash
Adjustment as delivered. If Seller gives such notice by such time, Seller and
Purchaser shall then have 10 business days after such notice to agree on the
amounts of the Cash Adjustment. If Seller and Purchaser are not able to agree
by such time, the Cash Adjustment calculation will be submitted to Deloitte &
Touche in Atlanta, Georgia (or any successor accounting firm), who shall have
responsibility for determining the correct Cash Adjustment, under GAAP applied
in a manner consistent with past practices, within 30 days following such
submission. Deloitte & Touche's (or any such successor accounting firm's)
determination shall be final and binding on Seller and Purchaser. The costs of
any such determination shall be shared equally by Seller and Purchaser. If
Deloitte & Touche determines that the actual Cash Adjustment is greater than
Purchaser's calculation of the Cash Adjustment pursuant to Section 1.6(d),
Purchaser shall pay Seller within 15 days following Purchaser's receipt of
Deloitte & Touche's determination, by wire transfer or certified or official
bank check, the additional amount so determined. If Deloitte & Touche
determines that the actual Cash Adjustment is less than Purchaser's calculation
of the Cash Adjustment pursuant to Section 1.6(d), Seller shall pay Purchaser
within 15 days following Seller's receipt of Deloitte & Touche's determination,
by wire transfer or certified or official bank check, the amount of any
overpayment resulting therefrom.
ARTICLE 2
CLOSING
2.1 CLOSING DATE. Subject to the fulfillment of the conditions
precedent specified in Articles 7 and 8 of this Agreement (or the waiver
thereof as provided therein), the purchase and sale of the Interests and Assets
shall be consummated at a closing (the "Closing") to be held at 10:00 a.m.
prevailing Eastern Standard Time at the offices of Troutman Sanders LLP, 600
Peachtree Street, NE, Suite 5200, Atlanta, Georgia 30308, on January 15, 1999,
or at such other time and place as shall be determined by the mutual agreement
of Purchaser and Seller (the "Closing Date"). The Closing shall be deemed
effective as of 12:01 a.m. Eastern Standard Time, January 1, 1999 (the
"Effective Date").
2.2 DELIVERIES OF THE SELLER. At the Closing, the Seller shall
deliver to Purchaser, in form and substance satisfactory to Purchaser, the
following:
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(a) any and all certificates representing the Interests, which
certificates (as to Subsidiaries directly owned by GMM) shall be duly endorsed
in blank for transfer or accompanied by properly executed transfer powers
endorsed in blank, and any other documentation reasonably requested by
Purchaser necessary or appropriate to transfer and assign all of such Interests
to Purchaser;
(b) a Bill of Sale and Assignment executed by the Seller,
substantially in the form of Exhibit B attached hereto (the "Bill of Sale") or
a similar document required by the local law applicable to any Foreign
Subsidiary and such other documents of transfer, assignment and conveyance as
may be reasonably requested by Purchaser to vest in Purchaser good and
marketable title in and to the Interests and Assets;
(c) a certificate, dated as of the Closing Date, signed by Seller
stating that (i) all conditions specified in Sections 7.1 and 7.2 have been
fulfilled; (ii) all authorizations, consents, approvals and waivers or other
action required to be obtained or taken by Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
all agreements and transactions contemplated by this Agreement have been
obtained or taken; and (iii) there has been no material adverse change in the
business, properties or assets of the Seller or Subsidiaries from the date of
this Agreement to the Closing Date;
(d) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel for Seller and Mark J. Gainor ("MJG"), dated the Closing Date, in form
and substance reasonably satisfactory to Purchaser;
(e) an opinion of Rosenberg & Liebentritt, P.C., counsel for SZ
Investments, LLC ("SZI"), dated the Closing Date, in form and substance
reasonably satisfactory to Purchaser;
(f) all minute books, stock record books, corporate seals, client
lists, books of account, bank accounts, leases, contracts, agreements, files
and other documents, instruments, work product, funds, receivables, assets,
papers, and properties, of any kind, of the Subsidiaries and all such
documents, etc. in any way related to their respective businesses, provided
that Seller may retain copies of the foregoing, and Purchaser hereby covenants
to provide Seller reasonable access to the foregoing for all proper purposes;
(g) a Management Agreement, executed by MJG through Lucor (the
"Lucor Management Agreement"), substantially in the form of Exhibit C attached
hereto;
(h) certificates of existence and good standing for the Seller
and Subsidiaries (other than the Foreign Subsidiaries) issued by the Secretary
of State or other applicable governmental authority of its respective state or
country of incorporation or organization, as applicable, dated as of a date no
more than five days prior to the Closing Date;
(i) copies of the Articles of Incorporation or Articles of
Organization, as applicable, of Seller and each Subsidiary (other than the
Foreign Subsidiaries) certified to be true and accurate by the Secretary of
State or other applicable governmental authority of its respective
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state or country of incorporation or organization, as applicable, dated as of a
date no more than five days prior to the Closing Date;
(j) copies of the Bylaws or Operating Agreement, as applicable,
of Seller and each Subsidiary (other than the Foreign Subsidiaries) certified
to be true and accurate by the current Secretary of Seller or such Subsidiary,
dated as of the Closing Date;
(k) copies of the latest extracts from the Commercial Registers
(Handelsregisterauszuge) for each German Subsidiary indicating that such
Subsidiary has been duly incorporated and still exists on the respective
Register;
(l) copies of the applicable Gesellschaftsvertag for each German
Subsidiary;
(m) Standstill Agreement executed by MJG and SZI, substantially
in the form of Exhibit D attached hereto (collectively the "Standstill
Agreement");
(n) Required Consents of Third Parties;
(o) releases of all Liens on any of the assets, properties or
rights of the Seller or the Subsidiaries (the "Lien Releases");
(p) bank signature cards for all of Seller's and Subsidiaries'
bank accounts;
(q) all other documents, instruments, certificates and opinions
required to be delivered by the Seller pursuant to this Agreement;
(r) a Restrictive Covenant Agreement executed by Seller and MJG,
substantially in the form of Exhibit E attached hereto;
(s) a Restrictive Covenant Agreement executed by SZI,
substantially in the form of Exhibit E attached hereto;
(t) the unaudited Consolidating Balance Sheet as of September 30,
1998;
(u) the unaudited Consolidating Statement of Operations for the
year ended December 31, 1998 and the Consolidating Balance Sheet as of December
31, 1998; and
(v) the calculation of the Estimated Cash Adjustment in
accordance with Section 1.6(c).
2.3 DELIVERIES OF PURCHASER. At the Closing, Purchaser shall
deliver or cause to be delivered to the Seller the following:
(a) the Purchase Price (including, without limitation, the cash
consideration, Convertible Preferred Stock and Redeemable Preferred Stock) to
the extent required by and as provided in Section 1.4 hereof;
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(b) a certificate, dated as of the Closing Date, signed by the
Purchaser stating that (i) all conditions specified in Sections 8.1 and 8.2
have been fulfilled; and (ii) all authorizations, consents, approvals and
waivers or other action required to be obtained or taken by Purchaser in
connection with the execution, delivery and performance of this Agreement and
the consummation of all agreements and transactions contemplated by this
Agreement have been obtained or taken;
(c) the Standstill Agreement executed by Purchaser;
(d) an opinion of Troutman Sanders LLP, counsel for the
Purchaser, dated the Closing Date, in form and substance reasonably
satisfactory to Seller;
(e) a Registration Rights Agreement executed by Purchaser (the
"Registration Rights Agreement") substantially in the form of Exhibit F
attached hereto;
(f) the Lucor Management Agreement, executed by Purchaser;
(g) all other documents, instruments, and certificates required
to be delivered by Purchaser pursuant to this Agreement;
(h) certificates of existence and good standing for the Purchaser
issued by the Secretary of State of Delaware, dated as of a date no more than
five (5) days prior to the Closing Date;
(i) copies of the Certificate of Incorporation of Purchaser,
certified to be true and accurate by the Secretary of State of Delaware, dated
as of a date no more than 5 days prior to the Closing Date;
(j) copies of the Bylaws of Purchaser certified to be true and
accurate by the current Secretary of Purchaser, dated as of the Closing Date;
(k) the Common Stock Warrant, substantially in the form of
Exhibit G attached hereto;
(l) the Assignment and Assumption Agreement, substantially in the
form of Exhibit H attached hereto (the "Assumption Agreement"); and
(m) the Subsidiary Assumption Agreement substantially in the form
of Exhibit I hereto (the "Subsidiary Assumption Agreement").
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ARTICLE 3
ADDITIONAL AGREEMENTS
3.1 CONFIDENTIALITY. Purchaser and the Seller acknowledge that the
Confidentiality Agreement, dated October 28, 1998, shall
survive the execution of this Agreement and remain binding
upon Purchaser and the Seller, except that paragraph 3 thereof
is superseded by Section 3.3 of this Agreement; , provided,
however, that Purchaser hereby consents, pursuant to paragraph
9 of such Confidentiality Agreement, to purchases of Matria
Common Stock by or on behalf of Seller and its members during
the Interim Period so long as (i) Seller informs Purchaser in
writing of the number of shares so purchased and the purchase
price paid therefor, not later than 2 business days after each
such purchase; (ii) such purchases shall not cause to the
"Beneficial Ownership" of Seller and its affiliates (as
defined in the Standstill Agreement), in the aggregate, to
exceed 3% of the outstanding Matria Common Stock without the
prior written consent of Purchaser; and (iii) the shares so
purchased shall otherwise remain subject to all provisions of
such Confidentiality Agreement and shall be subject to the
Standstill Agreement from and after the Closing Date.
3.2 ACCESS TO PREMISES, RECORDS, PROPERTIES, CUSTOMERS AND
EMPLOYEES.
(a) During the period from the date of this Agreement to the
Closing, Seller agrees to permit and to cause the Subsidiaries to permit
Purchaser and its representatives, agents, counsel and accountants to have full
access at all reasonable times to the premises, business, properties, assets,
financial statements, contracts, books, records and working papers of, and
other relevant information pertaining to, the Seller and the Subsidiaries and
to cause their respective officers and employees to furnish to Purchaser and
its representatives, agents, counsel and accountants such financial and
operating data and other information with respect to the business, properties
and assets of the Seller and the Subsidiaries, as Purchaser may reasonably
request; and Seller agrees to cause the respective officers and employees of
the Subsidiaries to cooperate with Purchaser and its representatives, agents,
counsel and accountants in order to enable Purchaser to become fully informed
with respect to the business, earnings, financial condition, prospects,
properties, assets, liabilities and obligations of the Seller and the
Subsidiaries.
(b) During the period from the date of this Agreement to the
Closing, Purchaser agrees to permit the Seller and its representatives, agents,
counsel and accountants to have full access at all reasonable times to the
premises, business, properties, assets, financial statements, contracts, books,
records and working papers of, and other relevant information pertaining to,
Purchaser and its wholly-owned subsidiaries and to cause its officers and
employees to furnish to Seller and its representatives, agents, counsel and
accountants such financial and operating data and other information with
respect to the business, properties and assets of Purchaser, as Seller may
reasonably request; and the Purchaser agrees to cause its officers and
employees to cooperate with Seller and its representatives, agents, counsel and
accountants in order to enable Seller to become fully informed with respect to
the business, earnings, financial condition, prospects, properties, assets,
liabilities and obligations of Purchaser and its wholly-owned subsidiaries.
(c) During the period from the date of this Agreement to the
Closing, Seller agrees to permit, and to cause the Subsidiaries to permit,
Purchaser and its representatives, agents, counsel and accountants to talk to
and meet with, at all reasonable times, the respective customers, suppliers and
employees of the Seller and the Subsidiaries to the extent such activities do
not unreasonably disrupt the Business; provided, however, Purchaser shall
notify Seller prior to such
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conversations with customers and suppliers and allow Seller the opportunity to
be included in said conversations.
3.3 PUBLICITY. During the period from the date of this Agreement
to the Closing, each party hereto agrees to obtain the approval of the other
parties hereto prior to issuing any press release, written public statement or
announcement with respect to the transactions contemplated by this Agreement,
which approval shall not be unreasonably withheld; provided, however, that the
provisions of this Section 3.3 shall not prohibit any party from making any
such release, statement or announcement if, upon advice of counsel, it is
believed that such party is required to do so under any applicable law, rule or
regulation (in which case such party shall use all reasonable efforts to give
the other party prior notice thereof and an opportunity to review and comment
thereon).
3.4 ACQUISITION PROPOSALS.
(a) During the term of this Agreement, Seller shall not, directly
or indirectly, through any officer, director, employee or agent of Seller or
the Subsidiaries, or otherwise, (i) solicit, initiate or encourage (or
authorize any person to solicit, initiate or encourage) any inquiries,
proposals or offers from any person or entity relating to any acquisition or
purchase of all or a material amount of the assets of, or any equity interest
in, or any merger, consolidation or business combination with the Seller or the
Subsidiaries or (ii) participate in any discussions or negotiations regarding,
or furnish to any other person or entity any information with respect to, any
effort or attempt by any other person or entity to do or seek any of the
foregoing. Seller will promptly notify Purchaser if any such proposal or offer,
or any inquiry or contact with any person or entity with respect thereto, is
made.
(b) During the term of this Agreement, Purchaser shall not,
directly or indirectly, through any officer, director, employee or agent of
Purchaser or otherwise, (i) solicit, initiate or encourage (or authorize any
person to solicit, initiate or encourage) any inquiries, proposals or offers
from any person or entity relating to any acquisition or purchase by Purchaser,
directly or indirectly, of all or a material amount of the assets of, or any
equity interest in, or merger, consolidation or business combination with a
competitor of Seller or the Subsidiaries other than DMS or (ii) participate in
any discussions or negotiations regarding, or furnish to any other person or
entity any information with respect to, any effort or attempt by any other
person or entity to do or seek any of the foregoing. Purchaser will promptly
notify Seller if such proposal or offer, or any inquiry or contact with any
person or entity with respect thereto, is made.
3.5 APPROVALS AND CONSENTS; REASONABLE EFFORTS. From the date
hereof until the Closing, each party hereto hereby covenants with the other
parties hereto that it will cooperate to give all notices and obtain as soon as
is reasonably practicable all approvals, consents and waivers of state and
federal departments or agencies or of any other parties required or deemed
necessary or beneficial for consummation of the transactions contemplated by
this Agreement and shall use all reasonable efforts to take or cause to be
taken all actions and to do or cause to be done all things necessary under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement; provided, however, that nothing in
this Agreement or in any document delivered pursuant to this Agreement shall be
construed as an
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attempt to agree to assign any contract, certificate, license or other Asset
which under law, rule or regulation or by agreement is nonassignable without
the consent of a party or parties thereto, or of any governmental authority, as
the case may be, unless such consent shall be given. Seller will use its
reasonable good faith efforts to obtain all such necessary consents of the
parties to any such contracts prior to the Closing. In order, however, that the
full value of the Interests, and every such contract, certificate, license or
other asset included within the Assets and all claims and demands in such
contracts may be realized, Seller covenants with Purchaser that Seller, by
itself or by its agents, will, at the request and expense and under the
direction of Purchaser, in the name of the Seller, or otherwise, as Purchaser
shall specify and as shall be permitted by any law, rule or regulation, take
all such reasonable actions and do or cause to be done all such reasonable
things as shall be necessary in order that the rights of Seller in and under
the Interests, and all such contracts, certificates, licenses and other Assets
shall be preserved. Each of the parties shall use reasonable efforts to close
the transactions contemplated herein on or before January 15, 1999.
3.6 COOPERATION OF THE PARTIES; REGULATORY APPROVALS. Purchaser
shall be responsible, at its sole cost and expense, for obtaining all
regulatory approvals necessary for the consummation of the transactions
contemplated by this Agreement. The parties shall cooperate with each other and
with their respective counsel and accountants in connection with any acts or
actions required to be taken as part of or as a condition to their respective
obligations under this Agreement. Seller shall cooperate with and assist
Purchaser, as Purchaser shall reasonably request, in obtaining the approval of
all regulatory agencies and officials whose approval is required for the
transfer of all licenses and other regulatory approvals required to enable the
Purchaser to acquire the Interests and the Assets and operate the business of
the Subsidiaries.
3.7 EXPENSES. Seller will pay all fees and expenses, including,
without limitation, counsel and accountants' fees, incurred by Seller and the
Subsidiaries in connection with this Agreement and any transaction contemplated
by this Agreement. The Purchaser will pay all fees and expenses, including,
without limitation, counsel and accountants' fees, incurred by it in connection
with this Agreement and any transaction contemplated by this Agreement.
Notwithstanding the foregoing, Purchaser shall pay the filing fee for the
notification required to be filed under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the "HSR Act"). Purchaser shall also pay
the notary fees for the notarial deed regarding the transfer of the German
Subsidiaries. Purchaser shall be responsible for paying any UK transfer taxes
payable upon the transfer of the Interests.
3.8 CORPORATE NAMES. Following Closing, neither Seller nor any
affiliate of Seller will use any corporate name, trade name or advertising
symbol (other than the Seller's logo) associated with, or similar to those of
the Seller or the Subsidiaries in connection with Seller's or the Subsidiaries'
businesses other than the "Gainor" name. MJG and Seller hereby grant to
Purchaser a fully paid-up, perpetual, royalty-free, world-wide license to use
the "Gainor" name, which license shall be exclusive with respect to the health
care industry; provided, however, that such license may be revoked on not less
than 60 days' written notice specifying in detail the reasons therefor, by MJG
or Seller in the event that either of them reasonably believes that the
Purchaser's use of the Gainor name brings disrepute to MJG.
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3.9 HART-SCOTT-RODINO FILINGS. Each of the Purchaser and the
Seller agrees to (i) use its reasonable best efforts to file all documents with
the Federal Trade Commission and the United States Department of Justice as may
be required to comply with the HSR Act, and (ii) promptly furnish all materials
and information thereafter requested by any of the regulatory agencies having
jurisdiction over such filings, and (iii) use all reasonable efforts to obtain
an early termination of the applicable waiting period.
3.10 STANDSTILL AND RESTRICTIVE COVENANT AGREEMENTS. Prior to or
at the Closing, Seller shall cause MJG and SZI to enter into the Standstill
Agreement and the Restrictive Covenant Agreements as required by Sections
2.2(m), 2.2(r) and 2.2(s).
3.11 LUCOR MANAGEMENT AGREEMENT. Prior to or at the Closing,
Seller shall cause Lucor Management, Inc. to enter into the Lucor Management
Agreement.
3.12 TAX MATTERS.
(a) Seller shall pay or cause to be paid in a timely fashion all
income taxes (i) payable by Seller, or (ii) payable by Seller or any Subsidiary
with respect to periods prior to the Effective Date. Purchaser shall be
responsible for all Taxes (as defined in Section 4.3.6) of each Subsidiary with
respect to periods following the Effective Date.
(b) Seller shall file and control any returns required to be
filed by the Seller or any Subsidiary after the Closing Date relating to
periods ending on or before the Effective Date; provided that Purchaser shall
have the right to review and comment on such returns before they are filed,
provided further, that with prior written notice to Purchaser, Seller may make
such extensions to Tax filings and make such estimated interim payments as may
be permitted under applicable Tax law and regulations. In connection with such
returns for the taxable year ending December 31, 1998, Seller shall assure that
all Section 338(h)(10) elections are made in accordance with applicable Tax
rules and regulations and Section 6.7 of the Universal Self Care Agreement (as
defined in Section 9.1(b)).
(c) Seller, on the one hand, and Purchaser, on the other hand,
agree to give prompt notice to each other of any proposed adjustment to Taxes
for periods prior to the Effective Date. Seller and Purchaser shall cooperate
with each other in the conduct of any Tax audit or other proceedings involving
any Subsidiary for such periods. In connection with any such audit or other
proceeding Purchaser, upon Seller's request and at Seller's expense, shall
provide Seller copies of all notices, correspondence, demands, assessments and
other documents generated in connection with any such audit or other
proceeding, all of which information shall remain subject to the
confidentiality provisions of the October 28, 1998 Confidentiality Agreement.
Seller shall also have the right to discuss the status of such audit or other
proceeding with Purchaser's representatives and, with prior written notice to
Purchaser, with the applicable taxing authorities involved. All of such
activities by Seller shall be conducted in a manner so as not to adversely
impact the best interests of Purchaser or the Subsidiaries; provided that
notwithstanding the above, Seller shall at all times be permitted to act as
required by law and to deal honestly and accurately with all applicable taxing
authorities and in their preparation for submissions to such authorities
without being in violation of this subsection (c).
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(d) Seller, on the one hand, and Purchaser, on the other hand,
agree to furnish or cause to be furnished to each other, upon request, such
information and assistance (including access to books and records) relating to
the Seller and the Subsidiaries as is reasonably necessary for the preparation
of any return, claim for refund or audit, and the prosecution or defense of any
claim, suit or proceeding relating to any proposed adjustment.
(e) Seller agrees to indemnify Purchaser from and against any
liability Purchaser may suffer from, arising out of, relating to, in the nature
of, or caused by any liability of any Corporation Subsidiary for income taxes
of any person other than any Corporation Subsidiary (i) under Treasury
Regulation ss. 1.1502-6 (or any similar provision of state, local or foreign
law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.
3.13 BREAK-UP FEE.
(a) In the event that Seller breaches Section 3.4(a) of this
Agreement and the Closing does not occur for any reason not attributable to
Purchaser or its affiliates, and within a year following the date of this
Agreement either (i) a person other than MJG or SZI gains control of more than
15% of the outstanding membership interests of Seller with the help,
assistance, or approval of Seller, any of its management, its Board of
Directors, or any stockholder or member of Seller or any successor to Seller,
or (ii) Seller merges, consolidates, or effects any other business combination
with any person, the result of which is that the current members of Seller own
less than 80% of the resulting entity, or (iii) Seller, the Subsidiaries, or
any of them, sell, lease or otherwise transfer all or 30% or more of their
assets taken as a whole to any person or persons, then Seller shall be liable
to pay to Purchaser the sum of $3,000,000 upon the consummation of any such
transaction.
(b) In the event that Purchaser breaches Section 3.4(b) of this
Agreement and the Closing does not occur for any reason not attributable to
Seller or its affiliates, and within a year following the date of this
Agreement Purchaser acquires, directly or indirectly, through merger,
consolidation, business combination or otherwise, substantially all of the
assets of, or more than 51% of the equity interest in, any entity that was the
subject of Purchaser's breach of Section 3.4(b) then Purchaser shall be liable
to pay to Seller the sum of $3,000,000 upon consummation of any such
transaction.
3.14 SELLER AND SUBSIDIARY PERMITS. Seller shall cooperate with
and use its commercially reasonable efforts to assist Purchaser, both in
advance of the Closing and after the Closing, in maintaining or reapplying for
any Seller and Subsidiary Permits, as defined in Section 4.7.8, for Purchaser's
use after the Closing at Purchaser's sole cost and expense.
3.15 BULK SALES LAW. Purchaser and Seller each hereby waive
compliance with the provisions of any applicable bulk sales or transfer laws.
3.16 DISCHARGE OF LIABILITIES. Seller shall pay, perform and
discharge when due in the ordinary course of business all debts, liabilities
and obligations of Seller or any Subsidiary (i) for any income taxes for any
period ending and prior to the Effective Date and any income, sales,
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use or other taxes arising in connection with the consummation of the
transaction contemplated by this Agreement except to the extent there is a
transfer tax with respect to the transfer of the stock under UK law; (ii)
payable to Seller or any member or affiliate of Seller; (iii) for costs and
expenses (including, without limitation, professional fees) in connection with
this Agreement or the transactions contemplated hereby; and (iv) any Funded
Debt other than Funded Debt of any Subsidiary which Purchaser accepts as a
liability of a Subsidiary by notice to Seller not less than two (2) days prior
to the Closing. The debts, liabilities and obligations referred to in this
Section 3.16 are hereinafter referred to as the "Subsidiary Excluded
Liabilities."
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, and notwithstanding any
independent investigations or verification undertaken by Purchaser or its
representatives in connection herewith, Seller hereby represents and warrants
to Purchaser that the following representations and warranties are true and
correct as of the date hereof and shall, except as may be specifically provided
for in this Agreement or otherwise specifically agreed upon or waived, in each
case in writing by Purchaser, be true and correct as of the Closing:
4.1 VALIDITY. This Agreement constitutes the legal, valid and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether asserted in a proceeding at law or
in equity).
4.2 DEFINITION OF MATERIAL ADVERSE EFFECT. As used in this
Agreement, the term "Material Adverse Effect" shall mean a material adverse
effect in the business or in the financial condition, results of operations,
properties, assets, liabilities or prospects of Seller or the Subsidiaries, or
any of them, or on the ability of Seller to enter into this Agreement and
perform its obligations hereunder.
4.3 CORPORATE AND FINANCIAL.
4.3.1 CORPORATE STATUS.
(a) Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia. Seller does not have any direct or indirect subsidiaries or own any
shares of capital stock of any corporation or any interest in the ownership or
management of any other entity except in those corporations and other entities
listed on Schedule 4.3.1 hereto. Seller has full power and authority, corporate
or otherwise, and possesses all rights, privileges, franchises, licenses,
permits, authorizations and approvals, governmental or otherwise, necessary to
entitle it to use its corporate name and to own or lease its properties and
assets and to carry on its business as and in the places where such properties
or assets are now owned, leased or operated and such business is conducted,
except where the
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absence of such could not reasonably be expected to result in a Material
Adverse Effect. Seller is qualified to transact business as a foreign limited
liability company in the states listed on Schedule 4.3.1, and Seller is
qualified to do business in all jurisdictions in which such qualification is
required, except where the failure to so qualify would not have a Material
Adverse Effect.
(b) Each of the Corporation Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its respective state or country of incorporation. Each of the LLC
Subsidiaries (other than Dia Real) is a limited liability company duly
organized, validly existing and in good standing under the laws of its
respective state or country of organization. None of the Subsidiaries has any
direct or indirect subsidiaries or owns any shares of capital stock of any
corporation or any interest in the ownership or management of any other entity
except in those corporations and other entities listed on Schedule 4.3.1. Each
of the Subsidiaries has full power and authority and possesses all rights,
privileges, franchises, licenses, permits, authorizations and approvals,
governmental or otherwise, necessary to entitle it to use its name and to own
or lease its properties and assets and to carry on its business as and in the
places where such properties or assets are now owned, leased or operated and
such business is conducted, except where the absence of such could not
reasonably be expected to result in a Material Adverse Effect. Each Subsidiary
is qualified to transact business as a foreign corporation or limited liability
company, as applicable, in the states listed on Schedule 4.3.1 and each
Subsidiary is qualified to do business in all jurisdictions in which such
qualification is required, except where failure to qualify would not have a
Material Adverse Effect. David 68 validly exists and is in good standing under
the laws of the Federal Republic of Germany and is registered in the commercial
register of the local court of Frankfurt under HRB 45034. Hans MW and EU
Medical are validly existing and in good standing under the laws of the Federal
Republic of Germany. Dia Real is a limited partnership (kommanditgessellschaft)
duly organized, validly existing and in good standing under the laws of the
Federal Republic of Germany.
(c) The extracts from the Commercial Register and the
articles of incorporation of the German Subsidiaries delivered by the Seller at
Closing contain the most recent, true, accurate and complete version of the
extracts from the Commercial Register and the articles of incorporation,
respectively, of the German Subsidiaries currently valid and in full force and
effect. No changes have been made thereto.
4.3.2 AUTHORITY; NO VIOLATION; CONSENTS.
(a) The Subsidiaries, and each of them, have full power
and authority to consummate the transactions contemplated by this Agreement,
and all corporate or other action necessary on the part of the Subsidiaries, or
any of them, to consummate the transactions contemplated hereby has been taken.
(b) Seller has full power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, and all corporate or other action
necessary on the part of Seller to execute and deliver this
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Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby has been taken.
(c) Neither the execution and delivery of this Agreement
by Seller nor the performance of its obligations hereunder, will:
(i) violate or conflict with any provision of
the Certificate or Articles of Incorporation or Articles of
Organization, as applicable, or Bylaws or operating agreement of
Seller or any Subsidiary;
(ii) except as set forth on Schedule 4.7.1,
breach or otherwise constitute or give rise to a default under any
material contract, commitment or other obligation to or by which
Seller or any Subsidiary is bound;
(iii) violate any material statute, ordinance,
law, rule, regulation, judgment, order or decree of any court or other
governmental or regulatory authority to which Seller or any Subsidiary
is subject; or
(iv) except as set forth on Schedule 4.7.1,
require any consent, approval or authorization of, notice to, or
filing, recording, registration or qualification with any person,
entity, court or governmental or regulatory authority.
4.3.3 OWNERSHIP AND CAPITALIZATION.
(a) Schedule 4.3.3 accurately sets forth the members and
the percentage of membership interest owned by each member of each class of
GMM. Schedule 4.3.3 accurately sets forth GMM's direct and indirect ownership
interest in each of the Subsidiaries, and no other person or entity owns any
ownership interest in the Subsidiaries other than as shown on Schedule 4.3.3.
David 68 owns of record and beneficially 100% of the outstanding ownership
interests of Hans MW, EU Medical and David 71. EU Medical and David 71,
collectively, own of record and beneficially 100% of the outstanding ownership
interests of Dia Real. GMAC owns of record and beneficially 100% of the
outstanding capital stock of HMS and Self Care. Gainor Direct owns of record
and beneficially 100% of the outstanding capital stock of AR Medical.
(b) (i) Schedule 4.3.3 accurately sets forth the
authorized capital stock of each Corporation Subsidiary and the
amounts of such capital stock issued and outstanding. Schedule 4.3.3
accurately sets forth the members and membership interest of each LLC
Subsidiary and the amounts of such membership interests issued and
outstanding.
(ii) All of the outstanding capital stock and
membership or ownership interests, as applicable, of the Subsidiaries
is duly and validly issued, fully paid and non-assessable and was
offered, issued and sold in compliance with all applicable federal or
national and state securities laws. No event has occurred which could
be registered as a repayment of share capital or could otherwise give
rise to an obligation to inject capital contributions into the German
Subsidiaries.
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<PAGE> 29
(iii) None of the capital stock or share capital
or membership or ownership interests, as applicable, of any Subsidiary
has been issued in violation of any preemptive or other material
rights of its shareholders, members or owners.
(c) Other than as listed on Schedule 4.3.3, none of the
Subsidiaries has outstanding any securities or other rights which are either by
their terms or by contract convertible or exchangeable into capital stock or
membership or other equity interest in such Subsidiary, or any preemptive or
similar rights to subscribe for or to purchase, or any options or warrants or
agreements for the purchase or issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, the capital stock or
membership or other equity interest (or securities convertible into capital
stock or membership or other equity interest) in such Subsidiary. None of the
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire or to register any shares of its
capital stock or membership or other equity interests.
(d) Other than as listed on Schedule 4.3.3, there are no
agreements to which Seller or any Subsidiary is a party in any way restricting
the transfer of any shares of capital stock or membership or other equity
interests of any Subsidiary.
(e) Any shares of capital stock or membership or other
equity interest in Seller or the Subsidiaries which have been purchased or
redeemed by the Seller or the Subsidiaries, as the case may be, have been
purchased or redeemed in substantial compliance with all applicable national or
federal and state laws, rules, regulations, and ordinances, including, without
limitation, all federal and state securities laws. The purchase of the
Interests and the consummation of the transactions contemplated hereby will
not, with the giving of notice or lapse of time or both, result in a material
default or acceleration of the maturity of, or otherwise materially modify, any
agreement, note, mortgage, bond, security agreement, loan agreement or other
contract or commitment of Seller or the Subsidiaries, or any of them.
4.3.4 TITLE TO INTEREST AND ASSETS. Seller has good, valid
and marketable title to its Interests and Assets, free and clear of any and all
Liens except for the liens and encumbrances listed on Schedule 4.3.4 to be
removed at or prior to Closing, and will transfer good, valid and marketable
title thereto to Purchaser at Closing.
4.3.5 CORPORATE OR OTHER BOOKS AND RECORDS. The stock and
membership records, minute books and other books and records of the Seller and
the U.S. Subsidiaries fully and accurately reflect all issuances, transfers and
redemptions of the capital stock or membership or other equity interests of the
Seller and the U.S. Subsidiaries, as the case may be, correctly show the total
number of shares of such capital stock or membership or other equity interests,
as the case may be, issued and outstanding on the date hereof, accurately
reflect in all material respects all corporate or other action taken by the
officers, directors, managers, members or shareholders, as applicable, of the
Seller and the U.S. Subsidiaries, as the case may be (including actions taken
by consent without a meeting), and contain true and complete copies or
originals of the Seller's and the U.S. Subsidiaries': (i) Certificate or
Articles of Incorporation or Articles of Organization or other organizational
documents, as the case may be, and all amendments thereto,
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(ii) Bylaws or Operating Agreements or similar agreements, as the case may be,
as amended and currently in force, and (iii) the minutes of all meetings or
consent actions of their respective officers, directors, managers, members or
shareholders, as applicable. Foreign Subsidiaries have complied with all
similar requirements of their governing law. No resolutions, regulations or
bylaws have been passed, enacted, consented to or adopted by such officers,
directors, managers, members or shareholders except those contained in such
minute books and all corporate or other actions of the Seller and the U.S.
Subsidiaries were duly and validly taken in compliance with all applicable
laws, rules, regulations and ordinances.
4.3.6 TAXES.
(a) The Seller and the Subsidiaries have duly filed and
will file, either individually or as part of a consolidated return or
otherwise, when due (i) all required federal, state, local and foreign "Tax"
(as hereinafter defined) returns and reports; and (ii) all returns and reports
of all other governmental units and agencies having jurisdiction with respect
to Taxes imposed upon any of their respective income, properties, revenues,
franchises, operations or other assets or Taxes imposed which might create a
lien or encumbrance on any of their respective assets required to be filed by
any of them prior to the date hereof. All such returns and reports are true,
complete and correct in all material respects, and the Seller and the
Subsidiaries have paid and will pay when due all Taxes as set forth in such
returns or reports, and all such Taxes as set forth constitute all amounts
which are due and owing by the Seller and the Subsidiaries. All federal, state,
local and foreign Taxes and other governmental charges paid or payable by the
Seller or the Subsidiaries have been timely paid, or have been accrued or
reserved on the Seller's or the Subsidiaries' books in accordance with Internal
Revenue Service rules and regulations and GAAP applied on a basis consistent
with prior periods. Adequate reserves for the payment of Taxes have been
established on the books of the Seller and the Subsidiaries, as applicable, for
all periods through the date hereof, whether or not due and payable and whether
or not disputed. Until the Closing, the Seller and the Subsidiaries shall
continue to maintain sufficient reserve accounts for the payment of expected
Tax liabilities in accordance with GAAP applied on a basis consistent with
prior periods. Except as set forth in Schedule 4.3.6, neither Seller nor any
Subsidiary has received any notice of a Tax deficiency or assessment of
additional taxes of any kind, and there is no threatened claim against Seller
or any Subsidiary, or any reasonable basis for any such claim, for payment of
any additional federal, state, local or foreign taxes for any period, and on
the Closing Date there will be no such notice, no such claim and no basis for
any such claim. Neither Seller nor any Subsidiary has executed or otherwise
agreed to or is bound by any currently effective waiver of any statute of
limitations with respect to payment or assessment of Taxes or other agreement
altering or affecting any otherwise applicable statute of limitations with
respect to the payment of Taxes or the filing of Tax returns. There are no
rulings or closing agreements executed with any taxing authority relating to
Seller or the Subsidiaries or any of their respective assets that will be
binding upon Purchaser after the Closing Date. Except for claims for customs
duties, no claim has ever been asserted by an authority in a jurisdiction where
the Seller or the Subsidiaries do not file Tax returns that Seller or any
Subsidiary is or may be subject to taxation by that jurisdiction.
(b) The Seller and the Subsidiaries have withheld proper
and accurate amounts from all of their respective employees, independent
contractors, creditors, shareholders,
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members or other third parties who have performed services in connection with
the businesses of the Seller or any Subsidiary for all periods prior to the
date hereof and will withhold proper and accurate amounts from the date hereof
until Closing, all in compliance with the Tax withholding provisions of
applicable federal, state, local and foreign Tax laws. All federal, state,
local and foreign Tax returns, proper and accurate in all respects, have been
filed by the Seller or the Subsidiaries for all periods for which returns were
due with respect to withholding, social security, Medicare and unemployment
taxes, and the amounts shown thereon to be due and payable have been paid in
full.
(c) Each LLC Subsidiary has only one member and is
treated as a disregarded entity separate from its owner for income Tax purposes
under Treasury Regulation ss. 301.7701-3.
(d) For purposes of this Agreement, "Tax" or "Taxes"
shall mean any taxes, fees, levies, duties, charges or similar assessments
(including interest, penalties and additions) imposed by or payable to any
governmental or other taxing authority, whether foreign, federal, state, local
or otherwise, including, without limitation, partnership, net income, gross
income receipts, franchise, assets, withholding, excise, ad valorem, value
added, capital gains, stamp, real and personal property assessment, sales, use,
employment, social security and unemployment contributions, net worth,
services, customs duties and other taxes or charges of any kind or nature.
(e) All transactions between the German Subsidiaries and
any of their present or former shareholders or persons closely related to such
shareholders have been conducted entirely on an arm's-length basis, and no
event has occurred which could be regarded as the payment of a constructive
dividend. The classification of the German Subsidiaries' equity for Tax
purposes as at December 31, 1997 is true and accurate in all material respects.
4.3.7 FINANCIAL STATEMENTS. Attached hereto as Schedule
4.3.7 are true, correct and complete copies of (a) the audited consolidated
financial statements of Seller and each Subsidiary for the fiscal years ended
December 31, 1996 and December 31, 1997, including fiscal balance sheets,
statements of income and retained earnings, statements of shareholders' or
members' equity, statements of cash flows and related notes (all of the
foregoing described financial statements being herein collectively referred to
as the "Audited Financial Statements"); and (b) unaudited consolidating balance
sheets of Seller and each Subsidiary dated September 30, 1998 (the "Unaudited
Balance Sheets") and unaudited statements of income and cash flows for the
nine-month period ended September 30, 1998 (together with the Unaudited Balance
Sheets, the "Unaudited Financial Statements") (the Audited Financial Statements
and the Unaudited Financial Statements are collectively referred to hereinafter
as the "Financial Statements"). Notwithstanding the foregoing, (i) audited
financial statements for only 1997 for DIA Real have been prepared and are
attached in Schedule 4.3.7 and (ii) no audited financial statements for Hans MW
are available, and only unaudited financial statements for Hans MW are attached
in Schedule 4.3.7. Except as set forth on Schedule 4.3.7 hereto, all of the
Financial Statements were prepared in accordance with GAAP applied on a basis
consistent with prior periods, except that the Unaudited Financial Statements
do not contain normal year end adjustments and omit footnote disclosures
required by GAAP. Except as set forth on Schedule 4.3.7 hereto, the Financial
Statements present fairly the financial condition of Seller and each
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Subsidiary as of the dates indicated therein and the results of operations and
cash flows of Seller and each Subsidiary for the respective periods covered
thereby and are consistent with the books and records of Seller and each
Subsidiary.
4.3.8 ACCOUNTS. Schedule 4.3.8 contains a complete and
accurate list of the names and addresses of each and every bank and other
institution in which Seller or any Subsidiary maintains an account or safety
deposit box, the account numbers of each such account, and the names of all
persons who are presently authorized to draw thereon or have access thereto.
4.3.9 NOTES RECEIVABLE; ACCOUNTS RECEIVABLE; ACCOUNTS
PAYABLE.
(a) All notes receivable, accounts receivable and other
receivables of the Seller or the Subsidiaries or due to the Seller or the
Subsidiaries at September 30, 1998 are shown on the Unaudited Balance Sheets to
the extent required by GAAP or are set forth on Schedule 4.3.9 as of the date
thereof. Except to the extent such receivables were satisfied in full in the
ordinary course of business since the date of the Unaudited Balance Sheets, all
such notes receivable, accounts receivable and other receivables shown on the
Unaudited Balance Sheets or on Schedule 4.3.9 and all such notes receivable,
accounts receivable and other receivables arising since the date thereof
(collectively, the "Receivables") have been and will be (except to the extent
collected in the ordinary course of business consistent with past practice)
genuine, legal and valid obligations of and bona fide claims against the
respective makers thereof or debtors thereon for sales made, services performed
or other charges arising on or before the date hereof, and all of the goods
delivered and services performed that gave rise to such Receivables were
delivered or performed in all material respects in accordance with the
applicable orders, contracts, or client requirements therefor. All accounts
payable shown on the Unaudited Balance Sheets represent, and all Current
Liabilities to be reflected on the unaudited December 31, 1998 Balance Sheet
will represent expenses incurred in the ordinary course of business consistent
with past practices, except for accruals or payments incurred in connection
with this Agreement.
(b) Except as set forth on Schedule 4.3.9, neither
Seller nor any Subsidiary has written off any such Receivables since the date
of the Unaudited Balance Sheets, except nonmaterial write-offs in the ordinary
course of business consistent with past practice. All such Receivables are
evidenced by written agreements, invoices or other instruments, true and
correct copies of which will be made available to Purchaser for examination
prior to the Closing. Except as set forth in Schedule 4.3.9, none of such
Receivables is the subject of a pledge or assignment to secure debt, is subject
to any security interest which will not be released by the Lien Releases, or
has been placed for collection with any attorney or collection agency or
similar individual or firm.
4.3.10 LIABILITIES.
(a) Neither Seller nor any Subsidiary has any debts,
liabilities, or obligations of any kind in excess of $25,000 in the aggregate,
whether accrued, absolute, known or unknown, contingent or otherwise, including
but not limited to any (i) liability or obligation on account of any federal,
state, local or foreign Taxes or penalties, or interest or fines with respect
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to such Taxes, (ii) liability arising from or by virtue of the production,
manufacture, sale, lease, distribution, delivery or other transfer or
disposition of personal property or services of any type, kind or variety, or
(iii) unfunded liability with respect to any pension, profit sharing or
employee stock ownership plan, whether operated by Seller or a Subsidiary or
any other entity covering employees of Seller or a Subsidiary, except (1) those
reflected on the Unaudited Balance Sheets, (2) liabilities incurred in the
ordinary course of business consistent with past practice since the date of the
Unaudited Balance Sheets (none of which individually or in the aggregate has
had, or will have a Material Adverse Effect), and (3) as specifically disclosed
in Schedule 4.3.10. Except as set forth on Schedule 4.3.10, neither Seller nor
any Subsidiary has any liability or obligation (absolute or contingent) to
provide funds on behalf of, or to guarantee or assume any debt, liability or
obligation of any corporation, partnership, association, joint venture,
individual or other person or entity.
4.3.11 ORDINARY COURSE OF BUSINESS AND ABSENCE OF CHANGES.
Except as set forth in Schedule 4.3.11, since September 30, 1998, Seller and
each Subsidiary has operated its respective business in the ordinary course
consistent with past practices. Without limiting the generality of the
foregoing, and except as set forth in Schedule 4.3.11, since September 30,
1998:
(a) there has been no change in the business, assets,
liabilities, results of operation, cash flow or financial condition of Seller
or any Subsidiary, or in any of their respective relationships with suppliers,
customers, employees, independent contractors, lessors, third party payors,
regulators, vendors or others, which individually or in the aggregate could
have a Material Adverse Effect;
(b) the properties and assets of Seller and each
Subsidiary have been maintained in good order, repair and condition, ordinary
wear and tear excepted;
(c) the books, accounts (including, without limitation,
methods, practices and principles of financial and tax accounting), and records
of Seller and each Subsidiary have been maintained in the usual, regular and
ordinary manner on a basis consistent with prior years;
(d) there has been no declaration, setting aside or
payment of any dividend or other distribution on or in respect of the capital
stock of, or other membership or equity interest in, Seller or any Subsidiary
nor has there been any direct or indirect redemption, retirement, purchase or
other acquisition by Seller or any Subsidiary of any of the capital stock of,
or other membership or equity interest in, Seller or such Subsidiary;
(e) there has been (i) no increase in the compensation
or in the rate of compensation or commissions payable or to become payable by
Seller or any Subsidiary to any director, officer, manager, salaried employee,
or agent earning $25,000 or more per annum; (ii) no general increase in the
compensation or in the rate of compensation payable or to become payable to
hourly employees or to salaried employees or fee-for-services contractors of
Seller or any Subsidiary earning less than $25,000 per annum ("general
increase" for the purpose hereof means any increase generally applicable to a
class or group of employees or agents, but not including increases granted to
individual employees for merit, length of service, change in position or
responsibility or other reasons applicable to specific employees or agents and
not
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generally to a class or group thereof); (iii) no director, officer, manager or
employee hired at a salary in excess of $25,000 per annum; and (iv) no increase
in any payment of or commitment to pay any bonus, profit sharing or other
extraordinary compensation to any employee;
(f) there has been no change in the Certificate or
Articles of Incorporation, Articles of Organization, Operating Agreement or
Bylaws or other organizational documents, as applicable, of Seller or any
Subsidiary;
(g) there has been no mortgage, lien or other
encumbrance or security interest (other than liens for current Taxes not yet
due and payable) created on or in (including without limitation, any deposit
for security consisting of) any asset or assets of Seller or any Subsidiary or
assumed by Seller or any Subsidiary with respect to any asset other than in the
ordinary course of business;
(h) no obligation or liability of Seller or any
Subsidiary has been discharged or satisfied, other than current liabilities
reflected on the Unaudited Balance Sheets and current liabilities incurred
since the date thereof in the ordinary course of business consistent with past
practice;
(i) there has been no sale, transfer or other
disposition of any asset of Seller or any Subsidiary, the fair market value of
which individually exceeds $25,000 or in the aggregate exceeds $100,000, except
for sales of inventory in the ordinary course of business consistent with past
practice;
(j) there has been no amendment, termination or waiver
of any right of Seller or any Subsidiary under any contract or agreement or
governmental license, permit or permission which, individually or in the
aggregate, has had or could result in a Material Adverse Effect;
(k) there has been no creation of, amendment to or
contribution, grant, payment or accrual for or to the credit of any employee of
Seller or any Subsidiary with respect to any bonus, incentive compensation,
deferred compensation, profit sharing, retirement, pension, group insurance or
other benefit plan, or any union, employment or consulting agreement or
arrangement;
(l) neither Seller nor any Subsidiary has (i) entered
into any contract, agreement or commitment other than in the ordinary course of
business consistent with past practices (none of which has had or will result
in a Material Adverse Effect); or (ii) failed to perform its obligations under
any of its contracts or agreements;
(m) no Seller or Subsidiary has failed to manage working
capital components (including cash, receivables, other current assets, trade
payables and other current liabilities) in a fashion consistent with past
practice, including failing to sell inventory and other property in an orderly
and prudent manner or failing to make all budgeted and other normal capital
expenditures, repairs, improvements and dispositions; and
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(n) no Subsidiary shall have assumed or otherwise become
obligated to pay any liability of Seller other than liabilities properly
related to the operations of such Subsidiary and not properly an obligation of
Seller.
4.3.12 LITIGATION AND PROCEEDINGS. Except as set forth on
Schedule 4.3.12, there are no actions, decrees, suits, counterclaims, claims,
proceedings or governmental or other investigations pending or, to the
Knowledge of Seller (as defined below) or any Subsidiary, threatened against
Seller or the Subsidiaries, or any of them, in any court or before any
arbitrator or governmental agency, and no judgment, award, order or decree of
any nature has been rendered against Seller or the Subsidiaries, or any of
them, with respect thereto by any agency, arbitrator, court, commission or
other authority which has not been paid or discharged. "Knowledge of Seller"
means the actual knowledge of an executive officer of Seller. There are no
pending or threatened claims against any of the officers, directors, employees,
managers, members or shareholders of any Seller or any Subsidiary in connection
with the business or affairs of Seller or such Subsidiary.
4.3.13 RESERVED.
4.3.14 INVENTORY. The inventory included in the Assets
consists of items of a quality and quantity usable and salable in the ordinary
course of the Business and are free of material defects, and the quantity of
inventory is reasonable and warranted given the present and anticipated
material circumstances of the Business.
4.4 BUSINESS OPERATIONS.
4.4.1 CUSTOMERS AND ACCOUNTS. Schedule 4.4.1 contains a
true, complete and accurate list of all customers and accounts (including,
without limitation, third party payors) of Seller, Gainor North America, Gainor
International, Gainor Europe, Gainor Direct, and AR Medical to whom sales of
more than $25,000 were made during the period from January 1, 1997 through
December 11, 1998; of Self Care to whom sales of more than $25,000 were billed
during the period from January 28, 1998 through November 30, 1998; of HMS,
constituting at least 75% of sales during the period from February 1, 1998
through November 30, 1998; and for the German Subsidiaries, to whom sales of
more than US$25,000 were made since June 29, 1998. To the Knowledge of Seller,
except as set forth on Schedule 4.4.1, relations with each such customer and
account are strong, and Seller does not know of any customer or account who
intends to discontinue the purchase of products or services from Purchaser or
any Subsidiary on a basis consistent with past practice. Schedule 4.4.1 also
lists all provider numbers for Seller and each Subsidiary (identified by name
of provider, provider number and the applicable Seller or Subsidiary) pursuant
to which any revenue included in the Financial Statements was collected from a
third party payor.
4.4.2 SUPPLIERS. Schedule 4.4.2 contains a list of each
supplier of goods or services to Seller or any Subsidiary to whom Seller or any
such Subsidiary paid in the aggregate more than $50,000 during the period
indicated on such Schedule, together with the amounts paid during such period.
To the Knowledge of Seller, except as set forth on Schedule 4.4.2, relations
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with each supplier and account are strong, and Seller does not know of any
supplier who intends to discontinue to supply products or services to Purchaser
or any Subsidiary.
4.4.3 ENVIRONMENTAL.
(a) Except as set forth on Schedule 4.4.3, the Seller
and the Subsidiaries have complied in all material respects at all times and
are currently in compliance with all applicable laws, regulations, rules,
judgments, orders and decrees pertaining to health, safety or environmental
matters, including, without limitation, the Resource Conservation and Recovery
Act (as amended by the Hazardous and Solid Waste Amendments of 1984), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(as amended by the Superfund Amendments and Reauthorization Act of 1986), the
Clean Water Act, the Clean Air Act and the Toxic Substances Control Act
(collectively, "Environmental Laws").
(b) Except as set forth on Schedule 4.4.3, neither
Seller nor any Subsidiary has received any notice from any person or entity of
(and neither Seller nor any Subsidiary is otherwise aware of) any event,
condition, circumstance, activity, practice, incident, action or plan
(including, without limitation, any intentional or unintentional release into
the environment of any hazardous or toxic substances) which may interfere with
the Seller's or any Subsidiary's operation of their respective businesses,
prevent continued compliance by the Seller or any Subsidiary with all
Environmental Laws, or otherwise give rise to any liability or serve as the
basis for any claim, action, suit or proceeding, hearing or investigation under
any Environmental Law.
(c) (i) Except as set forth on Schedule 4.4.3, no
portion of the "Real Property" (as defined in Schedule 4.5.5) has been used by
the Seller or any Subsidiary or to the Knowledge of Seller by any other party
for the generation, handling, processing, use, refinement, recycling,
treatment, storage or disposal of hazardous or toxic substances in any material
amount which may give rise to liability; (ii) to Seller's knowledge, no
underground tank or other underground storage receptacle for any hazardous or
toxic substances, petroleum or petroleum products is or has been located on any
portion of such Real Property; and (iii) there are no asbestos containing
materials or structures located at or on any of the Real Property.
(d) Neither the Seller, any Subsidiary nor any of the
Real Property listed on Schedule 4.5.5 is subject to any applicable
Environmental Law requiring the performance of site assessments, the removal or
remediation of hazardous or toxic substances, the giving of notice to any
governmental agency or the recording or delivery of an environmental disclosure
document or statement by virtue of the transactions contemplated by this
Agreement.
4.4.4 INSURANCE. Schedule 4.4.4 contains a complete list
and description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, the Seller, the Subsidiaries or any of their respective
officers, directors or managers, all of which will be maintained through the
Closing Date in full force and effect. Schedule 4.4.4 also contains a complete
list of (i) all pending claims under any of such policies or bonds; (ii) all
claims made within the last three (3) years under any of such policies or
bonds; and (iii) any denial of
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coverage or reservation of rights to contest any such claim asserted by any
insurer. All material terms, obligations and provisions of each of such
policies and bonds have been complied with; all premiums due thereon have been
paid, and no notice of cancellation with respect thereto has been received.
Neither the Seller nor any Subsidiary will, as of the Closing Date, have any
liability for premiums or for retrospective premium adjustments for any period
prior to the Closing Date. The Seller and the Subsidiaries have heretofore made
available to Purchaser a true, correct and complete copy of each such insurance
policy and bond listed on Schedule 4.4.4, or a summary thereof, and none of
such policies or bonds have since been modified in any respect.
4.4.5 POWERS OF ATTORNEY. Schedule 4.4.5 contains a
complete and accurate list setting forth the names and addresses of all persons
holding a power of attorney on behalf of any Subsidiary.
4.5 CONTRACTS; PROPERTIES AND ASSETS.
4.5.1 CONTRACTS.
(a) Schedule 4.5.1 includes a list of all Seller and
Subsidiary contracts or agreements with a value, expected payments or expected
benefits in excess of $25,000, identified by the Seller and Subsidiary, and all
other Seller and Subsidiary contracts or agreements that are material to the
Seller's or any Subsidiary's businesses (true, correct and complete copies of
which have been delivered to Purchaser), including without limitation the
following:
(i) all agreements and participation agreements
between Seller or any Subsidiary and any provider or pharmacy which
serves Medicare or Medicaid patients;
(ii) all managed care contracts or approvals in
a managed care plan or third-party program;
(iii) all third-party payor contracts;
(iv) all agreements with Medicare, MediCal, and
any state Medicaid agency or any fiscal intermediary for Medicare,
MediCal, or any Medicaid agency;
(v) all agreements with billing agencies and
financial or fiscal intermediaries;
(vi) all contracts or other documents regarding
arrangements with referral sources and marketing agents; and
(vii) all agreements with any supplier to Seller
or any Subsidiary (other than outstanding standard form purchase
orders in amounts less than $25,000).
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(b) True, correct and complete copies of each of the
following documents received by the Seller or any of the Subsidiaries since
January 1, 1998 have been made available to Purchaser and are listed on
Schedule 4.5.1:
(i) all notices or other correspondence with
any third party payor terminating a contract or relationship and the
reason for such termination and all notices or other correspondence
alleging any breach of any such contract;
(ii) all notices or other correspondence with
any managed care plan terminating a contract or relationship and the
reason for such termination and all notices or other correspondence
alleging any breach of any such contract;
(iii) all notices, if any, to terminate a
provider or participation agreement with Seller or any Subsidiary and
all notices or other correspondence alleging a breach of any such
agreement; and
(iv) all discount pricing policies.
(c) Except as set forth on Schedule 4.5.1:
(i) Each contract required to be listed in
Section 4.5.1(a) is in full force and effect and constitutes a binding
obligation of all parties thereto, enforceable against the other party
or parties to such contracts in accordance with its terms; no such
contract has been canceled or otherwise terminated, and to the
Knowledge of Seller there is no threat to do so; no such contract
requires assignment, and no such contract may be terminated, due to
the transfer of the Interests or Assets to Purchaser;
(ii) There are no existing defaults or events of
default, real or claimed, or events which with notice or lapse of time
or both would constitute defaults under any of the Seller's or
Subsidiaries' contracts; and
(iii) No Subsidiary is subject to any contract or
agreement: (1) that contains covenants limiting the freedom of any
Subsidiary to compete in any line of business in any geographic area;
(2) that requires any Subsidiary to share any profits or make any
payments or other distributions based on profits, revenues cash flows
or referrals; or (3) pursuant to which third parties have been
provided with products that can be returned to Seller or any
Subsidiary in the event they are not sold.
4.5.2 LICENSES; INTELLECTUAL PROPERTY.
(a) Schedule 4.5.2 contains a correct and complete list
of all (i) copyrights, registrations and registration applications, (ii)
trademarks, (iii) service marks, (iv) logos, (v) trade names, (vi) patents, and
(vii) computer software (the "Owned Software"), except for commercially
available over-the-counter "shrink-wrap" software (the "Business Software")
(collectively, the "Intellectual Property") used by the Seller or any
Subsidiary in the ordinary course of their respective businesses (including, to
the extent applicable, registrations,
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applications, and renewals for registrations of each of the foregoing) or which
are owned or held for use by the Seller or any Subsidiary in connection with
the operation of their respective businesses. Such items comprise all such
software, patents, copyrights, trademarks, service marks and trade names
required for the Seller and the Subsidiaries to conduct their respective
businesses as presently conducted. Schedule 4.5.2 also identifies all software
and other Intellectual Property licensed from third parties to the Seller or
any Subsidiary which is material to the business of the Seller or any
Subsidiary (the "Licensed Software" and "Licensed Intellectual Property").
Except as set forth on Schedule 4.5.2 and except for the Business Software, the
Seller and the Subsidiaries own all rights to use and protect, or hold a valid
license to use and protect, all such Intellectual Property. Neither Seller nor
any Subsidiary has violated or infringed in any material way any patent,
copyright, trademark, service mark or other intellectual property rights of any
other person or entity, and, to the Knowledge of Seller, there are no claims
pending or threatened against the Seller or any Subsidiary asserting that the
use of any Intellectual Property by the Seller or any Subsidiary infringes the
rights of any other person or entity. Neither the Seller nor any Subsidiary has
made or asserted any claim of violation or infringement of any Intellectual
Property against any other person or entity, and neither the Seller nor any
Subsidiary is aware of any such violation or infringement. Neither the Seller
nor any Subsidiary has granted any outstanding licenses or other rights to any
such Intellectual Property to any other person or entity.
(b) (i) The Business Software that is material to the
operation of the Seller's or the Subsidiaries' respective businesses, (ii) the
Owned Software, and (iii) any Licensed Software that has been incorporated into
any Owned Software is "Year 2000 Compliant" except where the failure to be so
compliant could not have a Material Adverse Effect. All hardware, computer
equipment and firmware used by the Seller and/or any Subsidiary is Year 2000
Compliant except where the failure to be so compliant would not have a Material
Adverse Effect. To the Knowledge of Seller, neither Seller nor any Subsidiary
depends to any extent on embedded computer technology or computer information
systems of its current vendors or suppliers that would, in the event that
embedded computer chips or vendor/supplier computer systems fail to be Year
2000 Compliant, have a Material Adverse Effect. For the purposes of this
Agreement, an item of computer hardware or software will be considered to be
Year 2000 Compliant if it is capable of correctly processing, providing and/or
receiving (including, without limitation, calculating, comparing and
sequencing) date and time data from, into, within and between the years 1999
and 2000 and any other years in the Twentieth and Twenty-First centuries or it
can be made so compliant or replaced without a material expenditure.
4.5.3 TITLE TO ASSETS. Except as otherwise noted on
Schedule 4.5.3 and for nonmaterial defects in title, the Subsidiaries have good
and marketable title to all of their respective assets, as of the date hereof,
free and clear of all Liens or claims of any kind or nature, and such property
and assets (together with the "Leased Assets", "Real Property", as each is
hereinafter defined, and the Intellectual Property and Contracts) constitute
and include substantially all of the property and assets owned or leased by
Seller and its Subsidiaries or used, in the conduct of the Subsidiaries'
respective businesses. As of the date hereof, the Subsidiaries have the right
to use all of the leased assets used by the Subsidiaries (collectively, the
"Leased Assets") in connection with the operation of their respective
businesses pursuant to valid and enforceable lease agreements, true and
complete copies of which have been provided to
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Purchaser. All of the properties and assets owned by the Subsidiaries are in
good operating condition and repair (ordinary wear and tear excepted). The
businesses of the Seller and the Subsidiaries has been operated and performed
through either the Seller or the Subsidiaries, and by acquiring the Interests
and Assets, Purchaser is acquiring the entire business of the Seller and each
of the Subsidiaries.
4.5.4 CONDITIONS OF PROPERTIES. All of the buildings
leased by the Seller or any Subsidiary and equipment owned or leased by the
Seller or any Subsidiary and used in their respective businesses are in good
condition and repair in all material respects, normal wear and tear excepted,
suited for the uses intended, and operated in conformity with all applicable
building, zoning and other applicable ordinances, laws and regulations, and
there are no proposed changes therein that would affect such properties or
their use.
4.5.5 REAL PROPERTY AND LEASES.
(a) Seller does not own any real property. Schedule
4.5.5 lists all real property previously owned at any point in the last three
(3) years by Seller or any Subsidiary (the "Owned Real Property").
(b) Schedule 4.5.5 lists all of the leases (the
"Facility Leases") of real property (together with the Owned Real Property, the
"Real Property") used by Seller or any Subsidiary in the operation of its
respective business, copies of which have been delivered to Purchaser by
Seller. Except as set forth on Schedule 4.5.5, each Facility Lease is valid, in
full force and effect, and enforceable in accordance with its terms and
constitutes a legal and binding obligation of each party thereto. Neither
Seller nor any Subsidiary has given or received any notice of material default,
termination or partial termination under any Facility Lease, and there is no
existing or continuing material default by Seller or any Subsidiary or, to the
Knowledge of Seller or any Subsidiary which default has not been cured, waived,
or otherwise resolved, any other party in the performance or payment of any
obligation under any Facility Lease.
(c) Except as set forth on Schedule 4.5.5, to the
Seller's Knowledge neither Seller nor any Subsidiary has received notice that
any zoning or similar land use restrictions are presently in effect or proposed
by any governmental authority which would materially impair the use or
occupancy of any of the Real Property for the purposes for which such Real
Property is currently being used, and the Seller's and the Subsidiaries' use of
the Real Property is in compliance in all material respects with all applicable
building, zoning and land use laws and regulations and property rights of
others, except to the extent such non-compliance would not have a Material
Adverse Effect. To the Knowledge of Seller, no condemnation by taking or
eminent domain of any Leased Real Property is pending or threatened.
(d) The copies of the Facility Leases heretofore
furnished by the Seller or the Subsidiaries to Purchaser are true, correct and
complete in all material respects, and such Facility Leases have not been
modified in any respect and are in full force and effect in accordance with
their respective terms.
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(e) The interests of the Seller or the Subsidiaries, as
applicable, in and under each of the Facility Leases are unencumbered and
subject to no present claim, contest, action or threatened action at law or in
equity.
(f) Except as set forth in Schedule 4.5.5, no rent has
been paid for more than one month in advance (excluding any amounts paid in
accordance with the Facility Leases as estimates of expenses or Lessee's share
thereof) and no security deposit has been paid by, nor is any brokerage
commission payable by the Seller or the Subsidiaries, or any or them, with
respect to any Facility Lease pursuant to which the Seller or the Subsidiaries,
or any of them, are lessees.
(g) There are no contractual obligations, agreements in
principle or present plans for the Seller or the Subsidiaries to enter into new
leases of real property or to renew or amend existing Facility Leases prior to
the Closing Date.
(h) No covenants, easements, restrictions, servitudes,
rights of way or regulations applicable to the Real Property have had or are
likely to have a Material Adverse Effect.
4.6 EMPLOYEES AND BENEFITS.
4.6.1 DIRECTORS, OFFICERS AND MANAGERS.
(a) Schedule 4.6.1 correctly lists all of the present
officers, directors and managers of the Seller and the Subsidiaries.
(b) Except as disclosed on Schedule 4.6.1, no director,
officer or manager of Seller or any Subsidiary serves as a director, officer or
manager of any other corporation or other entity on behalf of or as a designee
of Seller or any Subsidiary.
4.6.2 EMPLOYEES.
(a) Schedule 4.6.2 sets forth a list of all employees of
the Seller and Subsidiaries and as to each employee of Seller or any Subsidiary
whose current compensation (salary and bonus) exceeds an annual rate of
$25,000: his or her name, the Seller or Subsidiary he or she works for, the
location of employment, the date on which he or she was hired, the basic weekly
or hourly rate of pay (separately listing any bonus), such employee's accrued
sick leave entitlement up to November 30, 1998, such employee's accrued
vacation up to November 30, 1998, and all other benefits actually or
contingently accruing to such employee as of November 30, 1998. Except as set
forth on Schedule 4.6.2, neither Seller nor any Subsidiary has any obligation
to pay severance to any employee under any circumstances, contingent or
otherwise.
(b) Schedule 4.6.2 sets forth as to each officer or
other manager employed by Seller or any Subsidiary, the information described
in subsection (a) above, as well as the current compensation rate (salary,
bonus, commission or other) for each such person.
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(c) Except as set forth on Schedule 4.6.2, neither
Seller nor any Subsidiary has entered into any written employment agreement or
any other material written agreement with any employee, for a fixed term or
otherwise.
(d) Since the date of the Unaudited Balance Sheets, no
raises have been withheld in contemplation of the Closing of the transactions
contemplated hereby.
(e) Except as set forth on Schedule 4.6.2, during the
last three (3) years no significant accident or injury to any employee has
occurred at any of the Seller's or any Subsidiary's premises.
(f) To the Knowledge of Seller, no key employee
(including, without limitation, any licensed pharmacist, pharmacy assistant or
physician) of any Subsidiary will voluntarily leave such Subsidiary or decline
to continue employment, if offered, with Purchaser in connection with the sale
of the Interests and Assets to Purchaser hereunder.
(g) The Seller and Subsidiaries have made available to
Purchaser all employment records for each employee.
(h) To the Knowledge of Seller, no employee of any
Subsidiary is subject to any no-compete, no-hire, non-solicitation or similar
obligation pursuant to any employment or other agreement with any party which
would prevent or limit such employee from performing any duty in furtherance of
the businesses acquired by Purchaser hereunder following consummation of the
transactions contemplated by this Agreement.
(i) Schedule 4.6.2 contains a list of all licensed
pharmacists, pharmacy assistants and physicians employed or engaged by or
contracted with or by Seller or any Subsidiary, the type of license, all states
or other governmental entities which have licensed each such individual, the
license number (if any), any employed physicians' DEA number and a list of all
correspondence known to Seller relating to any adverse actions against any such
persons, true, correct and complete copies of which are contained on Schedule
4.6.2. All such persons are properly licensed by all applicable governmental
and regulatory agencies with respect to their activities on behalf of the
Seller or the Subsidiaries, and to Seller's Knowledge there are no material
problems or adverse actions regarding any such licenses.
4.6.3 COMPENSATION STRUCTURE - INDEPENDENT CONTRACTORS.
Schedule 4.6.3 contains a true and complete list of the names, titles, and
compensation arrangements of each independent contractor of the Seller and
Subsidiaries with annual payments or fees greater than $25,000. No such
independent contractor of Seller or any Subsidiary has informed or advised
Seller or such Subsidiary (nor is Seller otherwise aware) that such independent
contractor does not intend to continue to provide services to the Subsidiaries
after the date hereof. The Seller and Subsidiaries have heretofore provided
Purchaser with copies of all written agreements, correspondence, memoranda and
other written materials currently in effect with any such independent
contractor. A list of such agreements is included in Schedule 4.6.3.
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4.6.4 EMPLOYEE BENEFITS.
(a) Schedule 4.6.4 lists all "pension plans" (as such
term is defined in Section 3 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), "welfare benefit plans" (as such term is defined in
Section 3 of ERISA), bonus, stock option, stock purchase, restricted stock,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements to which
Seller or any Subsidiary is a party or which are maintained, contributed to or
sponsored by Seller or any Subsidiary for the benefit of any current or former
employee, manager, officer or director of Seller or such Subsidiary (all such
plans listed on Schedule 4.6.4 are sometimes referred to herein collectively as
the "Plans" and individually as a "Plan").
(b) True and complete copies of all the Plans and Plan
trusts, Summary Plan Descriptions, Actuarial Reports (if any) and Annual
Reports on Form 5500 for the most recent 3 years with respect to the Plans,
Internal Revenue Service determination letters, audit reports (if any) and any
other related documents have been made available to Purchaser.
(c) Except as set forth on Schedule 4.6.4, with respect
to each Plan: (i) no litigation or administrative or other proceeding is
pending or threatened; (ii) the Plan has been administered in compliance with,
and has been restated or amended so as to comply with, all applicable
requirements of law including all applicable requirements of ERISA, the Code
and regulations promulgated thereunder by the Internal Revenue Service and the
United States Department of Labor; and (iii) no Plan nor any trustee,
administrator or fiduciary for U.S. Subsidiaries thereof has at any time been
involved in any transaction relating to such Plan which would constitute a
breach of fiduciary duty under ERISA or a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code.
(d) Each Plan has been administered in all material
respects in compliance with the terms of the Plan.
(e) Each "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") maintained by or on behalf of
the Seller or any U.S. Subsidiary is listed on Schedule 4.6.4, and copies of
such Pension Plans have been, or prior to the Closing Date will be, made
available to Purchaser. The Pension Plans are qualified plans within the
meaning of Section 401(a) of the Code, and the trusts thereunder are exempt
from federal income tax under Section 501(a) of the Code, and the Seller's or
U.S. Subsidiaries' predecessors, if any, have made or accrued, and as of the
Closing Date will have made or accrued, all payments and contributions required
to be made under the provisions of the Pension Plans or by law with respect to
any period prior to the Closing Date. As of the date hereof, no contribution to
any profit sharing plan maintained by the Seller or any U.S. Subsidiary has
been authorized which has not been fully paid.
(f) Except as disclosed on Schedule 4.6.4 and except for
obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), neither Seller nor any Subsidiary has any obligation to provide, or
liability for, health care, life insurance or other benefits after termination
of employment for former or present employees. As of the Closing
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Date, the Seller and Subsidiaries will have cured any material violations or
deficiencies under applicable statutes, orders and regulations relating to
their employee benefit plans or their administration thereof and will have
provided adequate reserves, or insurance or qualified trust funds, for all
claims incurred through the Closing Date, based on an actuarial valuation
satisfactory to the actuaries of Purchaser representing a projection of claims
expected to be incurred for such retirees during their period of coverage under
such Plans.
(g) No fact or circumstance exists which could
constitute grounds in the future for the Pension Benefit Guaranty Corporation
("PBGC") (or any successor to the PBGC) to take any action whatsoever under
Section 4042 of ERISA in connection with any plan which an "Affiliate" (as
defined below) of Seller or any U.S. Subsidiary maintains within the meaning of
Section 4062 or 4064 of ERISA, and, in either case, the PBGC has not previously
taken any such action which has resulted in, or reasonably might result in, any
liability of an Affiliate or Seller or any U.S. Subsidiary to the PBGC, which
has had or could reasonably be expected to have a Materially Adverse Effect.
The term "Affiliate" for purposes of this Section means any trade or business
(whether incorporated or unincorporated) which is a member of a group described
in Section 414(c) of the Code of which Seller or any U.S. Subsidiary is also a
member.
(h) Only current and former employees of the Seller and
Subsidiaries or their dependents participate in the Plans.
(i) Neither Seller nor any U.S. Subsidiary is an
affiliate with any entity other than entities required to be aggregated with it
pursuant to Sections 414(b), (c), (m) or (o) of the Code. No Plan is
cosponsored or has been adopted by any entity other than the Seller and the
Subsidiaries.
(j) Except as set forth on Schedule 4.6.4, none of the
German Subsidiaries maintains any Plan other than Plans required by law.
4.6.5 LABOR-RELATED MATTERS. Except as set forth on
Schedule 4.6.5, neither Seller nor any Subsidiary is a party to any collective
bargaining agreement or agreement of any kind with any union or labor
organization. No German Subsidiary has employees who have formed a staff
council (Betriebsraft). Neither Seller nor any Subsidiary is in violation of or
default under any such collective bargaining or other agreement. The Seller and
the Subsidiaries have complied in all material respects with all obligations
under the National Labor Relations Act, as amended, Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as
amended, and all other federal, state and local labor laws and regulations
applicable to employees. There are no unfair labor practice charges pending or,
to the Knowledge of Seller, threatened against Seller or any Subsidiary and
there are no charges, complaints, claims, or proceedings pending or, to the
Knowledge of Seller, threatened against Seller or any Subsidiary with respect
to any alleged violation of any legal duty (including but not limited to any
wage and hour claims, employment discrimination claims or claims arising out of
any employment relationship) by Seller or any such Subsidiary as to any of its
respective employees or as to any person seeking employment therefrom, and no
such violations exist.
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4.6.6 TRANSACTIONS WITH MANAGEMENT. Schedule 4.6.6 contains a
description, by name, amount and type, of all contracts with or commitments to
present or former shareholders, directors, officers, members, managers,
employees or agents of Seller or any Subsidiary, including any business
directly or indirectly controlled by any such person, (other than contracts or
commitments relating to services to be performed by an officer, director,
employee, or agent as a currently employed employee or contracted agent of
Seller or any Subsidiary).
4.7 OTHER.
4.7.1 APPROVALS AND CONSENTS. Schedule 4.7.1 lists all
consents or other approvals necessary in order for Seller, the Subsidiaries,
and each of them, to consummate the transactions contemplated by this
Agreement, including but not limited to all governmental and other regulatory
approvals and consents of lenders, lessors, landlords and other third parties.
4.7.2 FRAUD AND ABUSE. Neither Seller nor any Subsidiary
nor any person or entity providing services for their respective businesses
have, engaged in any activities which are prohibited under Section 1320a-7b of
Title 42 of the United States Code or the regulations promulgated thereunder,
or related state or local statutes or regulations, or which are prohibited by
rules of professional conduct, including, but not limited to, the following:
(a) knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (b) any failure by a claimant to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (c) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate) directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing or ordering or
arranging for, or recommending, purchasing, leasing or ordering any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid; (d) engaging in any activity which is a basis for
exclusion from the Medicare, Medicaid and other federally-funded programs; or
(e) any violation of the Medicare or Medicaid requirements, including any fraud
and abuse provisions, except (i) where such circumstances could not reasonably
be expected to have a Material Adverse Effect or (ii) activities which a
reasonably prudent person with knowledge of the underlying facts could
reasonably conclude do not pose an unreasonable risk of violation of such law.
4.7.3 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR
PAYMENT LIABILITIES. Except as described in Schedule 4.7.3, neither Seller nor
any Subsidiary has or as of the Closing Date will have, any material liability
to any third party fiscal intermediary or carrier administering any state
Medicaid program or the federal Medicare program, or to any other third party
payor for the recoupment of any amounts previously paid to Seller or any
Subsidiary (or any predecessor entity) by any such third-party fiscal
intermediary, carrier, Medicaid program, Medicare program, or third party
payor. Except as set forth on Schedule 4.7.3, there are no pending or, to the
Knowledge of Seller, threatened actions by any third party fiscal intermediary
or carrier
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administering any state Medicaid or the federal Medicare program, the
Department of Health and Human Services, any state Medicaid agency, or any
third party payor to suspend payments to Seller or any Subsidiary.
4.7.4 BILLING PRACTICES AND REFERRAL SOURCES.
(a) BILLING PRACTICES GENERALLY. All billing practices
by the Seller and Subsidiaries to all third party payors, including, but not
limited to, the federal Medicare program, state Medicaid programs and private
insurance companies, have been true, fair and correct in all material respects
and in substantial compliance with all applicable laws, regulations and
policies of all such third party payors.
(b) TRANSACTIONS WITH REFERRAL SOURCES. Neither the
Seller, any Subsidiary nor any of their directors, officers or managers, are a
party to any contract, lease, agreement or arrangement, including, but not
limited to, any joint venture or consulting agreement with any physician,
hospital, nursing facility, home health agency or other person who to Seller's
Knowledge is in a position to make or influence referrals to or otherwise
generate business for the Seller or any Subsidiary to provide services, lease
space, lease equipment or engage in any other venture activity except to the
extent the same could not reasonably be expected to have a Material Adverse
Effect.
4.7.5 CONTRIBUTIONS, PAYMENTS OR GIFTS. Neither the
Seller, any Subsidiary nor any of their directors, officers or managers have
directly or indirectly (i) made or agreed to make, or is aware that there has
been made or that there are any agreements to make, any contribution, payment
or gift of funds or property to, or for the private use of, any governmental
official, employee or agent where either the contribution, payment or gift or
the purpose of such contribution, payment or gift is or was illegal under the
laws of the United States or under the laws of any state thereof or any other
jurisdiction (foreign or domestic) under which such payment, contribution or
gift was made; (ii) established or maintained any unrecorded fund or asset for
any purpose or made any false or artificial entries on any of their books or
records for any reason or (iii) made, or agreed to make, or are aware that
there has been made or that there are any agreements to make, any payment to
any person with the intention or understanding that any part of such payment
would be used for any purpose other than that described in the documents
supporting such payment.
4.7.6 PHYSICIAN SELF-REFERRALS. Neither Seller nor any
Subsidiary has submitted any claims in connection with any referrals which
violated any applicable self-referral law, including the Stark Law (42 U.S.C.
ss. 1395nn) or any applicable state self-referral law as those laws are
currently interpreted, except (i) to the extent that any such violation could
not reasonably be expected to have a Material Adverse Effect or (ii) to the
extent claims were submitted under circumstances that a reasonably prudent
person with knowledge of the underlying facts would conclude do not pose an
unreasonable risk of violating such law.
4.7.7 COMPLIANCE WITH LAWS. Seller and each Subsidiary and
each of their respective predecessors in interest have complied and are in
compliance in all material respects with all federal, foreign, state and local
laws, rules, regulations and ordinances applicable to it or
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its business, including, without limitation, those enforced by the Food and
Drug Administration ("FDA") and any similar foreign agencies, and any other
laws, rules, regulations or ordinances regarding the design, manufacture and
sale of medical devices and supplies. No present or past violation of any such
law, rule, regulation or ordinance, whether known or unknown, has occurred
which could or would materially impair the right or ability of Seller or any
Subsidiary or any of their successors, officers, directors, managers, members,
employees or agents to conduct their respective activities. All products
manufactured, sold, licensed, leased or otherwise distributed by Seller or any
Subsidiary or any of its predecessors in interest were free of material defects
at the time of shipment and were manufactured in accordance with good
manufacturing practices and other applicable requirements. All such products
were labeled, packaged, and distributed in substantial compliance with all
applicable domestic or foreign laws, rules, regulations and ordinances, and
except as set forth on Schedule 4.7.7 no such products have been the subject of
any recall or inquiry or investigation of any federal, state or local
government authority or foreign jurisdiction (including, without limitation,
the FDA). Except as set forth on Schedule 4.7.7, no product liability claim or
any other claim premised in whole or in part on product liability is pending or
threatened against Seller or any Subsidiary with respect to any such products
nor are there any unasserted contingent liabilities involving product liability
claims. No oral or written warranties have been made or given by Seller or any
Subsidiary with respect to any such product other than those product warranties
disclosed or contained in contracts on Schedule 4.5.1.
4.7.8 PERMITS. Except as set forth on Schedule 4.7.8:
(a) The Seller and the Subsidiaries and their employees,
as applicable, hold all permits, licenses, franchises and authorizations from
governmental and regulatory authorities necessary to conduct the Seller's and
the Subsidiaries' businesses in the manner in which such businesses have been
and are being conducted (the "Seller and Subsidiary Permits"). True, complete
and correct copies of the Seller and Subsidiary Permits are contained on
Schedule 4.7.8, including but not limited to the following:
(i) a list of all countries, states and other
jurisdictions from, in or to which the Seller or any Subsidiary mails
prescription drugs, a description of any governmental permits or
licenses held by the Seller and any of the Subsidiaries required to do
so or regarding the use of the mails in any of such countries, states
and other jurisdictions, and a statement as to where such mailings are
made;
(ii) all medical, healthcare, and pharmacy
related permits, licenses, franchises and authorizations from
governmental and regulatory authorities, including DEA numbers and/or
approvals, and Medicare, MediCal, and any Medicaid agency supplier or
provider numbers and the Seller and Subsidiaries that use such
number(s);
(iii) all approvals, certifications, or licenses
granted by the FDA (including 510(k)s), with a description of the
device or procedure so approved; and
(iv) all approvals by or participation in
private accrediting agency programs, evidence of which has been
provided to Purchaser.
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(b) True, correct and complete copies of all
correspondence regarding any material adverse information concerning any of the
Seller and Subsidiary Permits, all material notices concerning any of the
Seller and Subsidiary Permits, and other material information concerning the
Seller and Subsidiary Permits are contained or described on Schedule 4.7.8.
(c) Except as set forth on Schedule 4.7.8, all of the
Seller and Subsidiary Permits are fully transferable to Purchaser and none of
the Seller and Subsidiary Permits will be terminated, canceled, revoked or
otherwise materially adversely affected by the transactions contemplated
hereby. With respect to those Seller and Subsidiary Permits set forth on
Schedule 4.7.8 which will be terminated, canceled, revoked or otherwise
materially adversely affected by the transactions contemplated hereby, if any,
all standards and conditions to be met by the Seller and Subsidiaries necessary
for the reissuance of such Seller and Subsidiary Permits to Purchaser have been
satisfied or obtained and will continue until the Closing to be satisfied by
the operation of the Seller and the Subsidiaries. No event has occurred that
allows (nor after notice or lapse of time or both would allow) revocation or
termination of any Seller or material Subsidiary Permit or would result in any
other material impairment of the rights of the holder of any Seller or material
Subsidiary Permit.
(d) Seller and each Subsidiary has all necessary
certificates of medical need and benefit assignments required to receive
reimbursement from Medicare, Medicaid and MediCal and other third party payors
for each of its customers who rely on third party payors for payment.
4.7.9 INVESTMENT REPRESENTATIONS.
(a) The Convertible Preferred Stock, the Redeemable
Preferred Stock, the Warrants and the Earn-Out Note (together with any
underlying securities, collectively, the "Matria Securities") to be received by
Seller pursuant to this Agreement are being acquired for Seller's own account
for investment purposes only and not with a view to any distribution or public
offering in violation of the Securities Act of 1933, as amended (the
"Securities Act").
(b) The Matria Securities to be received by Seller
pursuant to this Agreement have not been registered under the Securities Act;
(c) Seller is an "accredited investor" within the
meaning of Rule 501 of the Securities Act;
(d) The Purchaser has made available to Seller at
reasonable times prior to Seller's execution of this Agreement the opportunity
to ask questions and receive answers concerning the terms and conditions of
this Agreement and the Matria Securities and to obtain any additional
information which Purchaser possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished to Seller;
(e) Seller understands and agrees that Seller may not
sell or otherwise transfer any of the Matria Securities except pursuant to a
registered offering or in one or more private
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transactions which, in the opinion of counsel reasonably satisfactory to
Purchaser are not required to be registered under the Securities Act; and
(f) Seller acknowledges and agrees that each certificate
representing the Matria Securities issued pursuant to this Agreement shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR IN
THE ABSENCE OF RECEIPT BY THE ISSUER OF AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT IT MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
Purchaser covenants to remove the legend on each such certificate once any such
Matria Security may be sold without restrictions in accordance with the
Securities Act and applicable state securities laws.
4.7.10 BROKERS. No broker, finder or other financial
consultant has acted on behalf of Seller or any Subsidiary in connection with
this Agreement or the transactions contemplated by this Agreement.
4.7.11 LIMITATION ON WARRANTIES. Except as expressly set
forth in this Article 4, Seller makes no express or implied warranty of any
kind whatsoever, including, without limitation, any representation as to
physical condition or value of any of the assets of Seller or any of its
Subsidiaries or the future profitability or future earnings performance of the
Subsidiaries. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, and notwithstanding any
independent investigation or verification undertaken by Seller or its
representatives in connection herewith, Purchaser represents and warrants that
the following representations and warranties are true and correct as of the
date hereof and shall, except as may be specifically provided for in this
Agreement or otherwise specifically agreed upon or waived, in each case in
writing by the Seller, be true and correct as of the Closing:
5.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has full
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power and authority, and possesses all rights, privileges, franchises,
licenses, permits, authorizations and approvals, governmental or otherwise,
necessary to entitle it to use its corporate name and to own or lease its
properties and assets and to carry on its business as and in the places where
such properties or assets are now owned, leased or operated and such business
is conducted, where the absence of such could reasonably be expected to result
in, individually or in the aggregate, a Purchaser Material Adverse Effect (as
defined below). Purchaser and its subsidiaries are qualified to do business in
all necessary jurisdictions except where the failure to so qualify would not
have a Purchaser Material Adverse Effect.
5.2 POWER AND AUTHORITY. Purchaser has the full corporate power
and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Purchaser, and no other corporate proceedings on the part of
Purchaser are necessary to authorize the execution, delivery and performance of
this Agreement by Purchaser.
5.3 BINDING EFFECT. This Agreement has been duly executed and
delivered by Purchaser and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
and similar laws affecting creditors' rights generally and general principles
of equity (regardless of whether asserted in a proceeding at law or in equity).
5.4 NO VIOLATION; CONSENTS. Neither the execution and delivery
of this Agreement by Purchaser nor the performance by it of its obligations
hereunder will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Purchaser;
(b) except as set forth on Schedule 5.4, breach or otherwise
constitute or give rise to a default under any contract,
commitment or other obligation to or by which Purchaser is a
party or is bound, except to the extent any such breach or
default would not have a Purchaser Material Adverse Effect;
(c) violate any statute, ordinance, law, rule, regulation,
judgment, order or decree of any court or other governmental
or regulatory authority to which Purchaser is subject; or
(d) except as set forth on Schedule 5.4, require any consent,
approval or authorization of, notice to, or filing,
recording, registration or qualification with any third
party, court or governmental or regulatory authority.
5.5 CAPITALIZATION.
(a) The authorized capital stock of Purchaser consists of
100,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 50,000,000 shares of
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Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which two
series of the Preferred Stock have been designated: the Convertible Preferred
Stock, consisting of 16,500 authorized shares, and the Redeemable Preferred
Stock, consisting of 60,000 authorized shares. As of December 13, 1998, there
were issued and outstanding 36,409,544 shares of Common Stock and no shares of
the Preferred Stock. The shares of Convertible Preferred Stock and Redeemable
Preferred Stock issuable to the Seller pursuant to this Agreement have the
rights, preferences and limitations set forth in Schedules 1.4(b) and 1.4(c),
respectively, and will be, when issued in accordance with the terms hereof,
validly issued, fully paid, nonassessable and free of preemptive rights.
(b) Except as set forth on Schedule 5.5(b) and except for (i)
stock options issued subsequent to September 30, 1998 under Purchaser's 1997
Stock Incentive Plan and 1996 Directors' Non-Qualified Stock Option Plan (the
"Purchaser Option Plans"); (ii) stock options exercisable under Purchaser's
1996 Employee Stock Purchase Plan (together with the options outstanding under
the Purchaser Option Plans (the "Outstanding Purchaser Options"); (iii) the
Rights Agreement, dated as of January 20, 1996, by and between Purchaser and
SunTrust Bank, Atlanta, as Rights Agent, as amended (the "Purchaser's
Shareholder Rights Plan"); and (iv) 1,278,180 at September 30, 1998 in
principal amount of Purchaser's 8% Convertible Subordinated Debentures and Note
due December 31, 2001 convertible into Purchaser's Common Stock at $4.90 per
share, Purchaser is not a party to or bound by any option, call, warrant,
conversion privilege or other agreement obligating Purchaser at present, at any
future time, or upon occurrence of any event to issue or sell any shares of
Purchaser Common Stock or other capital stock of Purchaser. Except as set forth
on Schedule 5.5(b) and the Registration Rights Agreement to be delivered
pursuant to Section 2.3(f) of this Agreement, Purchaser is not a party to any
agreement obligating Purchaser to register any of its securities with the SEC
or any other governmental agency, whether such registration obligation is
presently existing or arises in the future or upon the occurrence of an event.
5.6 EXCHANGE ACT REPORTS AND FINANCIAL STATEMENTS. Purchaser has
filed with the Commission all required reports, schedules, forms, proxy,
registration and other statements and other documents (collectively, the "SEC
Documents"). As of the date of this Agreement, the last SEC Document filed by
Purchaser was Purchaser's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), as
the case may be, and the rules and regulations of the Commission promulgated
thereunder applicable to the SEC Documents. As of their respective filing
dates, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by a later SEC Document filed
and publicly available prior to the Closing Date, the circumstances or bases
for which modifications or supersessions have not and will not individually or
in the aggregate result in any material liability or obligation on behalf of
Purchaser under the Securities Act, the Exchange Act, the rules promulgated
under the Securities Act or the Exchange Act, or any federal, state or local
anti-fraud, blue sky, securities or similar laws. The consolidated financial
statements of Purchaser and its subsidiaries included in the SEC Documents (as
amended or
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supplemented by any later filed SEC Document filed and publicly available prior
to November 1, 1998), comply as to form in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
Commission) applied on a consistent basis during the periods involved (except
as may be indicated in notes thereto) and fairly present the consolidated
financial position, assets and liabilities of Purchaser and its subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the SEC Documents and except for this Agreement and the transactions
contemplated herein since September 30, 1998, Purchaser and its subsidiaries
have conducted their businesses, in all material respects, only in the ordinary
course and in a manner consistent with past practice, and there has not
occurred any event, condition, circumstance, change or development (whether or
not in the ordinary course of business) that, individually or in the aggregate,
has had or could reasonably be expected to have a material adverse effect on
the financial condition or results of operations of Purchaser and its
subsidiaries, taken as a whole, whether or not required by GAAP to be provided
or reserved against on a balance sheet prepared in accordance with GAAP (a
"Purchaser Material Adverse Effect"). Without limiting the generality of the
foregoing, except as set forth on Schedule 5.7 hereto, or as disclosed in any
SEC Documents filed with the Commission and publicly available prior to
November 1, 1998 or as contemplated herein, since September 30, 1998, there has
not been (i) any change by Purchaser in its accounting methods, principles or
practices, (ii) any revaluation by the Purchaser of any of its or any of its
subsidiary's material assets other than in the ordinary course of business
consistent with past practice, (iii) any entry outside the ordinary course of
business by Purchaser or any of its subsidiaries into any commitments or
transactions material, individually or in the aggregate, to Purchaser and its
subsidiaries taken as a whole, (iv) any declaration, setting aside or payment
of any dividends or distributions in respect of the shares of Purchaser's
capital stock or, any redemption, purchase or other acquisition of any of its
securities, or (v) any grant or issuance of any Equity Securities of Purchaser
or any of its subsidiaries. "Equity Securities" means, with respect to the
Purchaser or any of its subsidiaries, as the case may be, (i) any class or
series of common stock, preferred stock or other capital stock, whether voting
or non-voting, (ii) any other equity securities issued by Purchaser or such
subsidiary, as the case may be, whether now or hereafter authorized for
issuance by the Purchaser's or such subsidiary's, as the case may be,
Certificate of Incorporation, (iii) any debt, hybrid or other securities issued
by Purchaser or such subsidiary, as the case may be, which are convertible
into, exercisable for or exchangeable for any other Equity Securities, whether
now or hereafter authorized for issuance by Purchaser's or such subsidiary's,
as the case may be, Certificate of Incorporation, (iv) any equity equivalents
(including, without limitation, stock appreciation rights, phantom stock or
similar rights), interests in the ownership or earnings of Purchaser or such
subsidiary, as the case may be, or other similar rights, (v) any written or
oral rights, options, warrants, subscriptions, calls, preemptive rights,
rescission rights or other rights to subscribe for, purchase or otherwise
acquire any of the foregoing, (vi) any written or oral obligation of the
Purchaser or such subsidiary, as the case may be, to issue, deliver or sell,
any of the foregoing, (vii) any written or oral obligations of Purchaser or
such subsidiary, as the case may be, to repurchase, redeem or
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otherwise acquire any Equity Securities, and (viii) any bonds, debentures,
notes or other indebtedness of Purchaser or such subsidiary, as the case may
be, having the right to vote (or convertible into, or exchangeable for
securities having the right to vote) on any matters on which the stockholders
of Purchaser or such subsidiary, as the case may be, may vote.
5.8 NO SHAREHOLDER VOTE REQUIRED. No vote of the holders of any
Equity Securities or other securities of Purchaser or any of its subsidiaries
is required to approve or effect this Agreement and the transactions
contemplated hereby.
5.9 REPORTING COMPANY; FORM S-3. Purchaser is subject to the
reporting requirements of the Exchange Act and its Common Stock is registered
under Section 12 of the Exchange Act. Purchaser is eligible to register for
resale shares of its Common Stock on a registration statement on Form S-3 under
the Securities Act.
5.10 TRADING ON NASDAQ. Purchaser's Common Stock is authorized for
quotation on the Nasdaq National Market, and the trading in Purchaser's Common
Stock on Nasdaq has not been suspended as of the date hereof and as of the
Closing Date.
5.11 BROKERS. Both parties acknowledge that Bowles Hollowell
Conner & Co. ("BHC") has acted on behalf of Purchaser in connection with the
transactions contemplated by this Agreement and that any and all fees of BHC
shall be paid by the Purchaser. Other than BHC, no other broker, finder or
other financial consultant has acted on behalf of Purchaser in connection with
this Agreement or the transactions contemplated by this Agreement.
5.12 ABSENCE OF LITIGATION; COMPLIANCE. Except as set forth on
Schedule 5.12 hereto or as disclosed in any SEC Documents filed with the SEC
and publicly available prior to November 1, 1998, to the best of Purchaser's
"Knowledge" (as defined below), there are no suits, claims, actions,
proceedings or investigations pending or overtly threatened against Purchaser
or any wholly-owned subsidiary, or any properties or rights of Purchaser or any
wholly-owned subsidiary, before any court, arbitrator or "Governmental Entity"
(as defined below), which (i) if determined adversely to Purchaser or any
wholly-owned subsidiary could, individually or in the aggregate, reasonably be
expected to have a Purchaser Material Adverse Effect; or (ii) seek to delay or
prevent the consummation of the transaction contemplated by this Agreement.
Neither Purchaser nor any of its wholly-owned subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which in the future could
reasonably be expected to have, individually or in the aggregate, a Purchaser
Material Adverse Effect or could prevent or delay the consummation of the
transactions contemplated by this Agreement. To the best of Purchaser's
Knowledge, neither Purchaser nor any of its wholly-owned subsidiaries is in
violation of, nor has Purchaser or any subsidiary violated, any material
provisions of any note, bond, mortgage, indenture, contract, agreement, lease,
or other instrument or obligations to which Purchaser or any of its
wholly-owned subsidiaries is a party or by which Purchaser, any of its
wholly-owned subsidiaries or any of their respective properties are bound or
affected except for any such violations which could not, individually or in the
aggregate, reasonably be expected to have a Purchaser Material Adverse Effect.
"Governmental Entity" means any court, administrative agency or commission or
other governmental authority or instrumentality, whether domestic (federal,
state or local) or foreign.
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"Purchaser's Knowledge" means the actual knowledge of any executive officer of
Purchaser.
5.13 TAKEOVER STATUS. No "fair price", "moratorium", "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws or applicable stock exchange rules or regulations,
including, without limitation, Section 203 of the Delaware General Corporation
Law, applicable to the Parent or any of its subsidiaries is applicable to the
transactions contemplated hereby, taken individually or in the aggregate.
5.14 CORPORATE ACTION. Purchaser has taken all such actions as are
necessary or desirable in order to (i) amend in a manner satisfactory to
Seller's counsel Purchaser's Shareholder Rights Plan so that any acquisition of
securities of Matria (but not dispositions) ("Purchases") contemplated or
permitted by this Agreement and the acquisitions contemplated or permitted by
the Standstill Agreement constitute neither a "triggering event" nor a
"distribution date" as defined by such plan and so that neither Seller, MJG,
nor SZI shall become "Acquiring Persons" within the meaning of Purchaser's
Shareholder Rights Plan as a result of the Purchases contemplated or permitted
by this Agreement or acquisitions contemplated or permitted by the Standstill
Agreement; and (ii) satisfy the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203") with respect to approval of the
Purchases contemplated or permitted by this Agreement and Purchases
contemplated or permitted by the Standstill Agreement and to ensure that
neither Seller nor any of its affiliates shall be an "Interested Shareholder"
within the meaning of Section 203.
5.15 INVESTMENT REPRESENTATIONS.
(a) The Interests in the Subsidiaries (collectively the "Seller's
Securities") to be acquired by Purchaser pursuant to this Agreement are being
acquired for Purchaser's own account for investment purposes only and not with
a view to any distribution or public offering in violation of the Securities
Act;
(b) The Seller's Securities to be received by Purchaser pursuant
to this Agreement have not been registered under the Securities Act;
(c) Purchaser is an "Accredited Investor" within the meaning of
Rule 501 of the Securities Act and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Seller's Securities, and has the ability to bear
the economic risks of its investment;
(d) Seller has made available to Purchaser at a reasonable time
prior to Purchaser's execution of this Agreement the opportunity to ask
questions and receive answers concerning the terms and conditions of this
Agreement and the Seller's Securities and to obtain any additional information
which Seller possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy of the information furnished to
Purchaser;
(e) Purchaser understands and agrees that Purchaser may not sell
or otherwise transfer any of the Seller's Securities except pursuant to a
registered offering or in one or more private
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transactions that, in the opinion of counsel reasonably satisfactory to Seller,
such transaction or transactions are not required to be registered under the
Securities Act; and
(f) Purchaser acknowledges and agrees that each certificate
representing the Seller's Securities acquired pursuant to this Agreement shall
include a legend in substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR IN
THE ABSENCE OF RECEIPT BY THE SELLER OF AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE SELLER
THAT IT MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
5.16 LIMITATION ON WARRANTIES. Except as expressly set forth in
this Article 5, Purchaser makes no express or implied warranty of any kind
whatsoever, including, without limitation, any representation as to physical
condition or value of the assets of Purchaser or any of its Subsidiaries or the
future profitability or future earnings performance of the Purchaser and its
Subsidiaries.
5.17 COMPLIANCE WITH SECURITIES LAWS. Purchaser has not taken, and
will not take, any action which would subject the issuance and sale of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the Warrant and
the Earn-Out Note pursuant to this Agreement to the provisions of Section 5 of
the Securities Act, or violate the registration or qualification provisions of
any securities or blue sky laws of any applicable jurisdiction, and, based in
part on the representations of Seller in Section 4.7.8, the sale of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the Warrant and
the Earn-Out Note pursuant to this Agreement and the issuance of Common Stock
upon exercise of the Warrant from time to time complies with all applicable
requirements of applicable federal and state securities and blue sky laws.
ARTICLE 6
CONDUCT OF BUSINESS OF COMPANY PENDING CLOSING
Except as otherwise expressly provided herein, Seller covenants and
agrees that, without the prior written consent of Purchaser in each instance,
between the date hereof and the Closing Date:
6.1 CONDUCT OF BUSINESS. The Seller and the Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and preserve intact
their present business organizations, keep available the services of their
respective present officers, managers, employees and agents and preserve
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their goodwill and their relationships with customers, suppliers, lenders and
others having business dealings with each of them.
6.2 MAINTENANCE OF PROPERTIES. The Seller and the Subsidiaries
will maintain their respective properties and assets in good operating
condition, ordinary wear and tear excepted.
6.3 INSURANCE. The Seller and the Subsidiaries will maintain and
keep in full force and effect all of the insurance referred to in Section 4.4.4
hereof or other insurance equivalent thereto in all material respects.
6.4 ISSUANCE OF SECURITIES. Neither Seller nor any Subsidiary
will sell, issue, authorize or propose the sale or issuance of, or purchase or
propose the purchase of, any shares of capital stock or other equity interest
or any class of securities convertible into, or rights, warrants or options to
acquire, any such shares, other equity interests or other convertible
securities or enter into any agreement with respect to the foregoing. Neither
Seller nor any Subsidiary shall exercise any option or warrant to purchase the
capital stock or other equity interest of any Seller, Subsidiary or other
entity owned or held by Seller or such Subsidiary.
6.5 DIVIDENDS. Except as expressly agreed to by Purchaser and
Seller in writing, no dividend, distribution or payment will be declared or
made in respect of the capital stock or other equity interests of Seller or any
Subsidiary, except for the regular quarterly distribution to Seller's members
for taxes and neither Seller nor any Subsidiary will, directly or indirectly,
redeem, purchase or otherwise acquire any of its capital stock or other equity
interests or enter into any agreement with respect to the foregoing.
6.6 AMENDMENT OF CHARTER. Except as may be necessitated by this
Agreement, neither the Seller nor any of the Subsidiaries will amend or cause
to be amended its respective Articles of Incorporation, Articles of
Organization, Operating Agreement, Bylaws or other organizational documents.
6.7 NO ACQUISITIONS. Neither the Seller nor any of the
Subsidiaries will acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets or stock of, or by any other manner, any
business or any corporation, partnership, association or other entity or
division thereof or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Seller or any Subsidiary
other than the cartoning machine nor will any of the Seller or Subsidiaries
enter into any agreement with respect to the foregoing.
6.8 DISPOSITION OF ASSETS. Other than in the ordinary course of
business consistent with past practice, the transfers expressly permitted
pursuant to Section 4.3.11 hereof, or the sale of eleven acres of undeveloped
land located in McDonough, Georgia, neither the Seller nor any of the
Subsidiaries will sell, mortgage, lease, buy or otherwise acquire, transfer or
dispose of any real property or interest therein or sell or transfer, mortgage,
pledge or subject to any lien, charge or other encumbrance any other tangible
or intangible asset or enter into any agreement with respect to the foregoing.
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6.9 COMPENSATION. No increase will be made in the compensation
payable or to become payable by any of the Seller or any Subsidiary to any
director, officer, manager, salaried employee or agent; no "general increase"
(as defined in Section 4.3.11(f) hereof) will be made in the compensation
payable or to become payable to any hourly or salaried employees or agents of
any of the Seller or any Subsidiary; no increase will be made in any payment of
or commitment to pay any bonus, profit sharing, severance pay or other
extraordinary compensation to any employee or agent of any of the Seller or any
Subsidiary; and neither the Seller nor any of the Subsidiaries will enter into
any agreement with respect to the foregoing.
6.10 BANKING ARRANGEMENTS. No change will be made in the banking
and safe deposit arrangements referred to in Section 4.3.8 hereof, except in
the ordinary course of business, consistent with past practice, and then only
after first notifying Purchaser of each such change.
6.11 INDEBTEDNESS. Neither the Seller nor any of the Subsidiaries
will incur any indebtedness for borrowed money or purchase money indebtedness
or capital lease obligations or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt securities of others or enter
into any agreement with respect to the foregoing.
6.12 PAYMENT OF DEBT. Except as expressly agreed to by Purchaser
and Seller in writing, neither the Seller nor any of the Subsidiaries will pay
any claim or discharge or satisfy any lien or encumbrance or pay any obligation
or liability or enter into any agreement with respect to the foregoing other
than in the ordinary course of business or as required by the terms of any
instrument evidencing or governing the same.
6.13 BENEFIT PLANS. Other than in the ordinary course of business
consistent with past practice, neither the Seller nor any of the Subsidiaries
will enter into or amend, or make or authorize the making of any contributions
to, any bonus, incentive compensation, deferred compensation, severance, profit
sharing (including, without limitation, the adoption of any resolution or
taking of any other action for or with respect to the contribution of any sum
pursuant to the terms of any existing profit sharing or similar plan),
retirement, pension, group insurance or other benefit plan, or any union,
employment or consulting agreement or arrangement, including, without
limitation, any employee benefit plan, except as and to the extent required by
law or regulation.
6.14 CONTRACTS. Neither the Seller nor any of the Subsidiaries
will enter into any contract, except in the ordinary course of business
consistent with past practice, provided that the written consent of Purchaser
shall be required before any of the Seller or any Subsidiary enters into any
contract with annual payments thereunder in an amount greater than $25,000.
6.15 BOOKS AND RECORDS. The books and records of the Seller and
the Subsidiaries will be maintained in the usual, regular and ordinary course
of business consistent with past practice.
6.16 OTHER ACTIONS. None of the Subsidiaries or the Seller, or any
of them, will take any action that would or could reasonably be expected to
result in any of the representations and
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warranties concerning the Subsidiaries or the Seller set forth in this
Agreement becoming untrue in any respect at any time on or prior to the date
this Agreement terminates.
6.17 SELLER TO ADVISE PURCHASER OF CHANGES. Seller shall promptly
advise Purchaser in writing of any change or event having, or which can
reasonably be foreseen to have, a Material Adverse Effect.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
All of the obligations of Purchaser under this Agreement are subject
to the fulfillment prior to or at the Closing of each of the following
conditions, any one or more of which may be waived, in whole or in part, in
writing by Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained herein or in any certificate, Schedule or other
document delivered pursuant to the provisions hereof, or in connection
herewith, shall be true in all material respects as of the date when made and
shall be deemed to be made again as of the Closing Date and shall be true in
all material respects at and as of such time, except as a result of changes or
events expressly permitted or contemplated herein.
7.2 PERFORMANCE OF AGREEMENTS. Seller shall have performed and
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by such party prior to or at the
Closing.
7.3 DELIVERIES. Seller shall have delivered or caused to be
delivered to Purchaser each and every item required to be delivered by Seller
pursuant to Section 2.2 hereof, including the Lien Releases, Standstill
Agreement, the Lucor Management Agreement, the Bill of Sale, and the
Restrictive Covenant Agreement.
7.4 APPROVALS. Purchaser and Seller shall have received from any
and all governmental authorities, bodies or agencies having jurisdiction over
the transactions contemplated by this Agreement such consents, authorizations
and approvals as are necessary for the consummation thereof and all applicable
waiting or similar periods required by law shall have expired, including,
without limitation, the waiting period under the HSR Act, and such regulatory
consents, authorizations and approvals shall not contain conditions or
restrictions unduly burdensome on the operations or business of the
Subsidiaries to be conducted following the Closing Date.
7.5 FINANCING OBTAINED BY THE PURCHASER. The Purchaser shall have
completed the financing of the purchase of the Interests and Assets on terms
satisfactory to Purchaser in its sole discretion.
7.6 NO INJUNCTIONS. No preliminary or permanent injunction or
other order by any federal or state court which prevents the consummation of
the transactions contemplated by this
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Agreement shall have been issued and remain in effect, and no action to obtain
any such injunction or order shall have been filed and remain pending.
7.7 CONSENTS AND APPROVALS OF THIRD PARTIES. All consents,
authorizations and approvals to the transactions contemplated by this Agreement
necessary to the consummation of such transactions or that are required
pursuant to the terms of any material agreement or arrangement to which any of
the Seller or the Subsidiaries is a party or by which any of the Seller or the
Subsidiaries is bound or in order to preserve any right, license, Medicare
Authorization or franchise held or owned by the Seller or the Subsidiaries
shall have been duly obtained except where the failure to obtain such consent,
authorization or approval will not have a Material Adverse Effect, and such
consents, authorizations or approvals shall be in form and substance reasonably
satisfactory to Purchaser and without condition, cost or expense to Purchaser.
The foregoing shall include, without limitation, the consent of Nissho
Corporation ("Nissho") to the assignment by Seller to a Subsidiary designated
by Purchaser, of the exclusive distributorship agreement between Nissho and
Seller dated as of November 14, 1997.
7.8 RESIGNATIONS. Purchaser shall have received copies of written
resignations from all persons serving as directors, officers and managers of
the Subsidiaries except for such officers, directors and managers as Purchaser
shall designate in writing to the Seller; such resignations shall be effective
on or prior to the Closing Date.
7.9 OPINIONS OF SELLER'S AND SZI'S COUNSEL. Purchaser shall have
received the opinions of Nelson, Mullins, Riley & Scarborough, L.L.P. and
Rosenberg & Liebentritt, P.C. referenced in Sections 2.2(d) and 2.2(e) in form
reasonably satisfactory to Purchaser.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SELLER
All of the obligations of Seller under this Agreement are subject to
the fulfillment prior to or at the Closing Date of each of the following
conditions, any one or more of which may be waived, in whole or in part, in
writing by Seller:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained herein or in any certificate, schedule or
other document delivered pursuant to the provisions hereof, or in connection
herewith, shall be true in all material respects as of the date when made and
shall be deemed to be made again at and as of the Closing Date and shall be
true in all material respects at and as of such time, except as a result of
changes or events expressly permitted herein.
8.2 PERFORMANCE OF AGREEMENTS. Purchaser shall have performed and
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
8.3 DELIVERIES. Purchaser shall have delivered to the Seller each
and every item required to be delivered by Purchaser pursuant to Section 2.3
hereof including the Registration
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Rights Agreement, the Standstill Agreement, the Lucor Management Agreement, the
Warrant Agreement and the Assumption Agreement.
8.4 APPROVALS. The Seller and the Subsidiaries shall have
received from any and all governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement such
consents, authorizations and approvals as are necessary for the consummation
thereof and all applicable waiting or similar periods required by law shall
have expired, including, without limitation, the waiting period under the HSR
Act and such regulatory consents, authorizations and approvals shall not
contain conditions or restrictions unduly burdensome on the operations or
business of the Subsidiaries to be conducted following the Closing Date.
8.5 NO INJUNCTIONS. No preliminary or permanent injunction or
other order by any federal or state court which prevents the consummation of
the transactions contemplated by this Agreement shall have been issued and
remain in effect, and no action to obtain any such injunction or order shall
have been filed and remain pending.
8.6 ACTIONS OF PURCHASER. Purchaser has taken all such actions as
are necessary or desirable in order to (i) amend in a manner satisfactory to
Seller's counsel Purchaser's Shareholder Rights Plan so that any acquisition of
securities of Matria (but not dispositions) ("Purchases") contemplated or
permitted by this Agreement and the acquisitions contemplated or permitted by
the Standstill Agreement constitute neither a "triggering event" nor a
"distribution date" as defined by such plan and so that neither Seller, MJG,
nor SZI shall become "Acquiring Persons" within the meaning of Purchaser's
Shareholder Rights Plan as a result of the Purchases contemplated or permitted
by this Agreement or acquisitions contemplated or permitted by by the
Standstill Agreement; and (ii) satisfy the provisions of Section 203 of the
Delaware General Corporation Law ("Section 203") with respect to approval of
the Purchases contemplated or permitted by this Agreement and Purchases
contemplated or permitted by the Standstill Agreement and to ensure that
neither Seller nor any of its affiliates shall be an "Interested Shareholder"
within the meaning of Section 203; and (iii) MJG's and SZI's representative
shall have been elected to, and shall continue to be incumbent members of,
Purchaser's Board of Directors pursuant to and upon the terms and conditions
set forth in the Standstill Agreement.
8.7 CERTIFICATES OF DESIGNATION. At or before the Closing Date,
Purchaser shall have taken all necessary corporate action to designate the
relative powers, designations, preferences and relative, participating,
optional or other rights of the Convertible Preferred Stock and the Redeemable
Preferred Stock, whether by amending Purchaser's Certificate of Incorporation
or by filing a Certificate or Certificates of Designation. Such action shall be
consistent with the description of such rights and preferences of the
Convertible Preferred Stock set forth on Schedule 1.4(b) and of the Redeemable
Preferred Stock set forth on Schedule 1.4(c) hereof, and in any event shall be
in form and substance satisfactory to Seller's counsel.
8.8 OPINION OF PURCHASER'S COUNSEL. Seller shall have received
the opinion of Troutman Sanders LLP referenced in Section 2.3(e) in form
reasonably satisfactory to Seller.
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ARTICLE 9
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS.
(a) Except as otherwise provided in this Section 9.1, the
representations and warranties made by Seller in or pursuant to this Agreement
shall survive the Closing for a period of 18 months. The representations and
warranties made by Seller in Section 4.3.6 shall survive the Closing until 60
days following the expiration of all applicable statutes of limitation with
respect to the subject matter of such Section, and any extensions thereof; the
representations and warranties made by Seller in Sections 4.7.2, 4.7.5 and
4.7.6 with respect to Seller and the Subsidiaries other than Gainor North
America, Gainor Direct, Gainor Europe and Gainor International shall survive
the Closing for a period of 2 years; the representations and warranties made by
Seller in Sections 4.7.3 and 4.7.4 with respect to Seller and the Subsidiaries
other than Gainor North America, Gainor Direct, Gainor Europe and Gainor
International shall survive Closing for a period of 5 years; and the
representations and warranties made by Seller in Section 4.3.3, other than
subsection (e), shall survive the Closing indefinitely.
(b) Notwithstanding the foregoing, if the Purchaser or any
Subsidiary suffers a Loss and with respect to the event giving rise to such
Loss Seller or any Corporation Subsidiary is entitled to indemnification under
Section 6.9 of the Asset Purchase Agreement dated November 14, 1997 between
Seller, Universal Self Care, Inc. ("Universal") and certain other parties (the
"Universal Self Care Agreement") and such right to claim indemnity under the
Universal Self Care Agreement has not expired, Purchaser and Seller (or its
successors and assigns) shall jointly pursue a claim for indemnification
against Universal under the Universal Self Care Agreement (a "Universal
Claim"). Purchaser and Seller shall each bear one-half of the expenses of
asserting a Universal Claim but Purchaser shall be entitled to receive any
recovery on such Universal Claim. Without limiting the generality of the
foregoing, with respect to any Loss incurred by Purchaser or any Subsidiary
which is the subject of a Universal Claim, (1) Seller agrees to assert its
right of setoff under its Convertible Subordinated Promissory Note dated
January 28, 1998 (the "Universal Self Care Note") for the amount of any such
Loss and Purchaser shall have the right to cancel the Offset Shares (as defined
in Section 9.2(e)(ii)) in the manner provided in Section 9.2(e) to the extent
of any such set-off and (2) Seller shall assign to Purchaser its rights in any
escrow established pursuant to Section 5 of the Universal Self Care Note to the
extent of any such Loss. In furtherance of the foregoing, Seller agrees that it
will not waive, release or relinquish any of its rights to receive
indemnification from Universal (or its successors or assigns) under the
Universal Self Care Note (whether for breach of representations, warranties,
covenants or otherwise) whether in connection with the discount of the
Universal Self Care Agreement or for any other reason without the prior written
consent of Purchaser.
(c) Except for the representations and warranties made by
Purchaser in Section 5.5, which shall survive the Closing indefinitely, the
representations and warranties made by the Purchaser in or pursuant to this
Agreement shall not survive the Closing.
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(d) Notwithstanding the foregoing provisions of this Section 9.1,
subject to any applicable statute of limitations, any party may make a claim at
any time based on fraud or violation of the Commission's Rule 10b-5 in
connection with any representation or warranty.
9.2 INDEMNIFICATION.
(a) BY SELLER. From and after the Closing, Seller shall
indemnify, reimburse, defend and hold harmless Purchaser, its affiliates
(including, without limitation, the Subsidiaries), and their respective
officers, directors, managers, members, shareholders, employees,
representatives, successors and assigns from and against any and all direct or
indirect claims, losses, liabilities, Taxes, damages (including, without
limitation, special and consequential damages), costs (including court costs)
and expenses (including, without limitation, all reasonable attorneys' and
accountants' fees and expenses) (collectively "Losses"), arising out of or in
connection with (i) any breach, inaccuracy or untruth of any representation or
warranty made by Seller contained in this Agreement or the Schedules hereto,
whether such breach, inaccuracy or untruth exists or is made on the date of
this Agreement or as of the Closing; (ii) any breach of or noncompliance by
Seller with any covenant or agreement of Seller contained in this Agreement;
(iii) the claims set forth on Schedule 4.3.12; (iv) the indemnification
obligations of GMAC under the Universal Self Care Agreement; (v) any Excluded
Liability or Subsidiary Excluded Liability; and (vi) any contract or
relationship between Seller, any Subsidiary or any member of Seller and BT
Bankers Trust or any of its affiliates; provided, however, if Purchaser is not
entitled to indemnification under Section 9.2(a)(v) because the Excluded
Liability has been assumed by Gainor North America under the Subsidiary
Assumption Agreement, this shall in no way limit the right of Purchaser to
indemnification under Section 9.2(a)(i) if the facts that would constitute the
Subsidiary Assumed Liability give rise to such a right thereunder.
(b) BY PURCHASER. From and after the Closing, Purchaser shall
indemnify, reimburse, defend and hold harmless the Seller, its affiliates, and
their respective officers, directors, managers, members, shareholders,
employees, representatives, successors or assigns from and against any and all
Losses arising out of or in connection with (i) any breach, inaccuracy or
untruth solely of any representation or warranty of Purchaser contained in
Section 5.5 only, whether such breach, inaccuracy or untruth exists or is made
on the date of this Agreement or as of the Closing; (ii) any breach of or
noncompliance by Purchaser with any covenant or agreement of Purchaser
contained in this Agreement; or (iii) Purchaser's operation of the Business
following the Closing. Without limiting the generality of the foregoing,
Purchaser shall have no liability whatsoever, whether pursuant to this Section
9.2(b) or otherwise, for any breach of any other representation or warranty of
Purchaser set forth in this Agreement, other than with respect to Section 5.5.
(c) DEFINITIONS. A person entitled to make a claim for
indemnification hereunder shall be referred to as an "Indemnified Party." A
person obligated for indemnification hereunder shall be referred to as an
"Indemnifying Party." A person entitled to make a claim for indemnification
pursuant to Section 9.2(a) shall be referred to as a "Purchaser Indemnified
Party," and a person entitled to make a claim for indemnification pursuant to
Section 9.2(b) shall be referred to as a "Seller Indemnified Party."
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(d) CLAIM THRESHOLD. Notwithstanding the foregoing, no claim for
indemnification under Section 9.2(a) or Section 9.2(b) may be made by an
Indemnified Party against an Indemnifying Party unless and until the cumulative
total of all Losses suffered by such Indemnified Party exceeds or is reasonably
expected to exceed $500,000 (the "Threshold"); provided, however, that any Loss
incurred by Purchaser or its affiliates resulting from or arising out of (i)
the claims set forth on Schedule 4.3.12, (ii) the indemnification obligations
of GMAC under the Universal Self Care Agreement, (iii) any Excluded Liability;
or (iv) any Subsidiary Excluded Liability shall not be subject to such
Threshold; and provided further, that any Loss incurred by Seller or its
affiliates resulting from or arising out of any Subsidiary Assumed Liability,
as defined in the Subsidiary Assumption Agreement, shall not be subject to such
Threshold. In addition, the Threshold and the other provisions of this Section
9.2(d) shall not be applicable to any Universal Claim which shall be handled in
the manner set forth in Section 9.1(b). Once Losses exceed the Threshold, the
Indemnified Party suffering such Losses may recover all Losses in excess of
$250,000. The foregoing limitations shall not apply to any Loss either
intentionally caused by the Indemnifying Party or of which the Indemnifying
Party had Knowledge prior to the Closing.
(e) SECURITY AND PRIORITY OF RECOURSE. The obligations of Seller
under this Section 9.2 shall be secured as follows:
(i) Purchaser shall have the right to offset any Loss
against any Cash Adjustment payable pursuant to Section 1.6;
(ii) During the 18-month period following the Closing,
the Purchaser shall have the right to recover any Loss required to be
indemnified pursuant to Section 9.2(a) by cancellation of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the
Warrants and the Earn-Out Note (collectively, but excluding any
underlying Common Stock, the "Offset Shares"), to the extent of the
Loss, on a pro rata basis as among each separate class, series or type
of instrument comprising the Offset Shares, with the Offset Shares to
be valued for such purpose as follows: the Convertible Preferred
Stock, at the higher of its liquidation preference or the aggregate
Current Market Price Per Share of the underlying Common Stock, the
Redeemable Preferred Stock, at its liquidation preference, the
Earn-Out Note, at its principal amount, and the Warrants, at the
excess of the Current Market Price Per Share (as defined in the
Warrants) over the exercise price of the Warrants; provided, however,
that if the exercise price of the Warrants is equal to or less than
the Current Market Price Per Share at the time such right of
cancellation is exercised, the Warrants shall be valued at zero and
the amount of Warrants to be cancelled shall be the same percentage of
the total outstanding Warrants as the percentage of the total
outstanding Redeemable Preferred Stock that is cancelled to offset
such Loss. Seller shall have the right to pay in cash any Loss that
would otherwise be paid by cancellation pursuant to this Section
9.2(e)(ii). In the event Seller has distributed or otherwise sold,
assigned, transferred or disposed of any Offset Shares within 18
months after the Closing Date, if Purchaser elects to exercise its
right of cancellation under this Section 9.2(e)(ii), Purchaser will
exercise such rights as follows:
(A) Purchaser shall allocate to each Member
Group (as hereinafter
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defined) such Member Group's Pro Rata Share (as hereinafter
defined) of the Loss;
(B) Purchaser shall cancel Offset Shares held
by a Member Group in an amount equal to the Member Group's
Pro Rata Share of the Loss on a pro rata basis as among each
separate class, series or type of instrument comprising the
Offset Shares held by the Member Group;
(C) If (1) Purchaser has not recovered the
entire amount of the Loss after exercising its rights under
subparagraphs (A) and (B) above because one or more Member
Groups held an insufficient amount of Offset Shares to
satisfy such Member Group's Pro Rata Share of the Loss, and
(2) any other Member Group continues to hold any Offset
Shares, Purchaser shall be entitled to recover the deficiency
against any Offset Shares held by any such other Member Group
(irrespective of whether any such other Member Group has
already satisfied its Pro Rata Share of the Loss in
accordance with subparagraphs (A) and (B) above) by
cancelling Offset Shares held by each such other Member Group
(on a pro rata basis if there is more than one such other
Member Group, based on each such other Member Group's Pro
Rata Share of the Loss referred to in subparagraph (A) above)
on the same basis as specified in subparagraph (B) above;
(D) Each Member Group (and each member thereof)
may elect in its sole discretion to satisfy any portion of
the Loss which would otherwise be satisfied by cancellation
of some or all of its Offset Shares hereunder by paying
Purchaser an amount in cash equal to such portion of the
Loss, in which event Purchaser would not be entitled to
exercise the rights of cancellation hereunder with respect to
the portion of the Loss so satisfied in cash (it being
specifically understood that the relevant Member Group (or
member thereof) may select to pay cash in lieu of
cancellation of any portion of any class, series or type of
instrument or any combination thereof comprising Offset
Shares which are held by it);
(E) For purposes of this Section 9.2(e)(ii),
"Member Group" shall mean, with respect to any member of
Seller, such member together with each transferee or
subsequent holder of such member's Offset Shares or any
subsequent transferee or holder (other than any member of any
other Member Group). "Pro Rata Share" shall mean, with
respect to, (1) any Member Group in which Mark J. Gainor is a
member, 81.25%, (2) any Member Group in which EGI-Gainor
Investors, L.L.C. or SZ Investments, L.L.C. is a member,
16.01%, and (3) any Member Group in which Nissho is a member,
2.74%.
(iii) For periods following the 18-month period after the
Closing, the Purchaser shall have the right to recover any Loss
required to be indemnified pursuant to Section 9.2(a) by cancellation,
to the extent of the Loss, of any outstanding principal and the
related accrued interest under the Earn-Out Note up to, but not
exceeding $15,000,000 in principal amount, and, to the extent the
original principal amount of the Earn-Out Note is
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less than $15,000,000, Purchaser shall have the right to recover any
Loss required to be indemnified pursuant to Section 9.2(a) by
cancellation, to the extent of the Loss, of the Redeemable Preferred
Stock at the rate of $1.10 of face amount of such Redeemable Preferred
Stock for each $1.00 of Loss. Any right of cancellation of any
outstanding principal and the related accrued interest under the
Earn-Out Note pursuant to this Section 9.2(e)(iii) shall expire as to
the lesser of one-third of the original principal amount of the
Earn-Out Note or $5,000,000 on each of the fourth, fifth and sixth
anniversaries of the Closing as to claims made by Purchaser after each
such anniversary for indemnification of Losses hereunder. Any right of
cancellation of the Redeemable Preferred Stock under this Section
9.2(e)(iii) shall expire as to one-third of the amount originally
subject to such cancellation on each of the eighth, ninth and tenth
anniversaries of the Closing as to claims made by Purchaser after each
such anniversary for indemnification of Losses hereunder.
(iv) In the event Purchaser asserts a claim for
indemnification against Seller and seeks to exercise its right of
offset against the Offset Shares pursuant to this Section 9.2(e), and
Seller disputes such claim (by delivery of written notice to Purchaser
within 30 days following receipt of notice of such claim pursuant to
Section 9.2(g)), Purchaser agrees not to cancel any instruments
representing the Offset Shares until such dispute is finally resolved;
provided that Purchaser may suspend any payments and distributions
owing under such Offset Shares until such dispute is finally resolved.
(f) PROCEDURES.
(i) The Indemnifying Party shall be entitled to defend
any claim, action, suit or proceeding made by any third party against
an Indemnified Party; provided, however, the Indemnified Party shall
be entitled to participate in such defense with counsel of its choice
and at its own expense, and if the Indemnifying Party does not provide
a competent and vigorous defense then the Indemnified Party's
participation shall be at the expense of the Indemnifying Party. The
Indemnified Party shall provide such reasonable cooperation and access
to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to such matter; and the parties shall
cooperate with each other in order to ensure the proper and adequate
defense thereof.
(ii) An Indemnifying Party shall not settle any claim
subject to indemnification hereunder without the prior written consent
of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed (provided that an Indemnified Party shall not be
deemed to be unreasonably withholding its consent if such settlement
does not include a full release of the Indemnified Party).
(iii) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be
paid by the Indemnifying Party (or amounts may be set off by the
Indemnified Party) upon the earliest to occur of: (A) the entry of a
judgment against the Indemnified Party and the expiration of any
applicable appeal period, (B) the entry of an unappealable judgment or
final appellate decision against the Indemnified party, (C) the
settlement of the claim, (D) with respect to indemnities for
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Taxes, upon the issuance of any final resolution by a taxation
authority, or (E) with respect to claims before any administrative or
regulatory authority when the Loss is finally determined and not
subject to further review or appeal; provided, however, the
Indemnifying Party shall pay on the Indemnified Party's demand any
cost or expenses reasonably incurred by the Indemnified Party in
defending or otherwise dealing with such claim.
(g) NOTICE OF CLAIM. To seek indemnification hereunder, an
Indemnified Party shall notify the Indemnifying Party of any claim for
indemnification, specifying in reasonable detail the nature of the Loss and the
amount or an estimate of the amount thereof. No Indemnified Party may make a
claim for breach of a representation or warranty against an Indemnifying Party
unless the Indemnified Party delivers written notice of such breach (specifying
in reasonable detail the nature of such breach) to the Indemnifying Party prior
to the end of the survival period of such representation or warranty under
Section 9.1(a) or (c). Provided that the Indemnified Party delivers written
notice of such breach to the Indemnifying Party in accordance with the
preceding sentence, the expiration of any representation or warranty in
accordance with the provisions of Section 9.1(a) or (c) shall not affect the
Indemnified Party's right to pursue any claim for a breach of such
representation or warranty.
(h) NO PREJUDICE. Nothing herein shall prevent an Indemnified
Party from making a claim for a Loss hereunder notwithstanding its Knowledge of
the Loss or possibility of the Loss on, prior to, or after the Closing Date;
provided that each party agrees to notify the other party of any material loss
of which it has Knowledge prior to the Closing, but any Indemnified Party's
failure to provide such notice shall not relieve the Indemnifying Party of any
of its obligations hereunder or create in the Indemnifying Party any right to
indemnification.
(i) OTHER RIGHTS; INDEMNIFICATION; EXCLUSIVE REMEDY OF
INDEMNIFIED PARTIES. Indemnification pursuant to the provisions of this Article
9 shall be the exclusive remedy of the Indemnified Parties for any
misrepresentation or breach of any warranty or covenant contained in this
Agreement; provided, however, that nothing herein shall be deemed to limit an
Indemnified Party's right to assert claims based on fraud or from pursuing
equitable relief (including, without limitation, injunctive relief). Except for
actions based on fraud, the only legal action which may be asserted by an
Indemnified Party with respect to any matter which is the subject of this
Article 9 shall be a contract action to enforce, or to recover damages for the
breach of, this Article 9.
(j) LIMITATION ON INDEMNIFICATION OBLIGATIONS. The obligations of
any Indemnifying Party under Sections 9.2(a) or (b) are subject to the
limitations that any insurance proceeds (net of applicable deductibles)
actually received by the Indemnified Party in connection with the event giving
rise to the claim for indemnification shall be netted against the Indemnified
Party's Losses arising out of such event.
(k) TAX BENEFIT. The amount of any recovery by Indemnified
Parties pursuant to Section 9.2(a) or (b), as the case may be, shall be net of
any foreign, Federal, state and/or local income tax benefits inuring to the
Indemnified Parties as a result of the state of facts which entitled the
Indemnified Parties to recover from the Indemnifying Parties pursuant to
Section 9.2(a) or (b).
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ARTICLE 10
TERMINATION
This Agreement may be terminated by Purchaser or Seller for the
reasons set forth in this Article 10 at any time prior to or on the Closing
Date upon written notice to the other parties as follows. These events of
termination are intended to operate independently from any other agreements,
representations, warranties and/or conditions contained in this Agreement.
10.1 MATERIAL ADVERSE CHANGE - SUBSIDIARIES. By Purchaser if,
after the date hereof, any event or events occur which have, individually or in
the aggregate, a Material Adverse Effect or if the Seller or any of the
Subsidiaries shall have suffered a material loss of or damage to any of its
properties or assets, which change, loss or damage materially affects or
impairs the ability of the Seller and the Subsidiaries, taken as a whole, to
conduct their businesses.
10.2 MATERIAL ADVERSE CHANGE - PURCHASER. By Seller if, after the
date hereof, any event or events occur which have, individually or in the
aggregate, a Purchaser Material Adverse Effect or Purchaser shall have suffered
a material loss of or damage to any of its properties or assets, which change,
loss or damage materially affects or impairs the ability of the Purchaser and
its subsidiaries, taken as a whole, to conduct their businesses.
10.3 NONCOMPLIANCE OF SELLER. By Purchaser, if the terms,
covenants or conditions of this Agreement to be complied with or performed by
Seller before the Closing shall not have been complied with or performed in all
material respects at or before the Closing Date and such non-compliance or
non-performance shall not have been waived by Purchaser.
10.4 NONCOMPLIANCE OF PURCHASER. By Seller, if the terms,
covenants or conditions of this Agreement to be complied with or performed by
Purchaser before the Closing shall not have been complied with or performed in
all material respects at or before the Closing Date and such non-compliance or
non-performance shall not have been waived by Seller.
10.5 FAILURE TO DISCLOSE - SELLER. By Purchaser, if it learns of
any material fact or condition not disclosed in this Agreement or the Schedules
which was required to be disclosed by the Seller pursuant to any provision of
this Agreement at or prior to the date of execution hereof with respect to the
business, properties, assets or earnings of the Seller or the Subsidiaries
which has a Material Adverse Effect.
10.6 FAILURE TO DISCLOSE - PURCHASER. By the Seller, if it learns
of any material fact or condition not disclosed in this Agreement which was
required to be disclosed by Purchaser.
10.7 ADVERSE PROCEEDINGS. By the Seller or Purchaser, if any
action, suit or proceeding shall have been instituted against any party to this
Agreement to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated herein,
which, in the good faith opinion of Seller or Purchaser, makes consummation of
the transactions herein contemplated inadvisable.
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10.8 TERMINATION DATE. By the Seller or Purchaser, if the Closing
has not been consummated on or prior to February 28, 1999.
10.9 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1 or 10.6, or pursuant to Section 10.4 or 10.5 for a
breach that is not willful or intentional, or pursuant to Section 10.7 in the
absence of any material breach hereunder by Purchaser or Seller, all rights and
obligations of the parties hereto under this Agreement shall terminate, and no
party hereto shall have any further liability or obligation hereunder to any
other party hereto, except that the provisions of Section 3.1 hereof shall
survive the termination of this Agreement for any reason. If this Agreement is
terminated pursuant to Section 10.2, or 10.3, or, in the case of 10.4 or 10.5
for a breach that is willful or intentional, the complying party or parties
shall be entitled to exercise and pursue all rights and remedies available to
it or them hereunder, at law, in equity or otherwise, and shall be entitled to
recover from the other party or parties all of its or their out-of-pocket
expenses incurred in connection with or relating to the negotiation,
preparation, execution and delivery of this Agreement.
ARTICLE 11
[RESERVED]
[RESERVED]
ARTICLE 12
MISCELLANEOUS
12.1 NOTICES. All notices required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by facsimile, by
nationally recognized private courier, or by United States mail. Notices
delivered by mail shall be deemed given 3 business days after being deposited
in the United States mail, postage prepaid, registered or certified mail.
Notices delivered by hand, by facsimile, or by nationally recognized private
carrier shall be deemed given on receipt if received on a business day or on
the first business day following receipt if not received on a business day;
provided, however, that a notice delivered by facsimile shall only be effective
if such notice is also delivered by hand, or by nationally recognized private
courier, or deposited in the Untied States mail, postage prepaid, registered or
certified mail, on or before 2 business days after its delivery by facsimile.
All notices shall be addressed as follows:
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(a) To Purchaser:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attn: General Counsel
Phone Number: (770) 767-8332
Facsimile Number: (770) 767-7769
With copies to:
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2216
Attn: James L. Smith, III, Esquire
Phone Number: (404) 885-3111
Facsimile Number: (404) 962-6687
(b) To Seller:
Gainor Medical Management, L.L.C.
2205 Highway 42 North
P. O. Box 353
McDonough, Georgia 30253-0353
Attn: Mark J. Gainor
Phone Number: (770) 474-0474
Facsimile Number: (770) 474-1600
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: Philip H. Moise
Phone Number: (404) 817-6141
Facsimile Number: (404) 817-6050
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With a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1600
Chicago, Illinois 60606
Attn: Joseph Paolucci, Esquire
Phone Number: (312) 466-3885
Facsimile Number: (312) 454-0335
12.2 ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties hereto with respect to the
matters contained herein and the agreements referred to herein contain the sole
and entire agreement among the parties hereto with respect to the subject
matter hereof and the transactions contemplated herein.
12.3 WAIVER; AMENDMENT. Prior to or on the Closing Date, each
party hereto shall have the right to waive any default in the performance of
any term of this Agreement by any other party hereto, to waive or extend the
time for the fulfillment by such other party of any or all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
such party's obligations under this Agreement, except any condition which, if
not satisfied, would result in the violation of any law or applicable
governmental regulation. No waiver, termination or discharge of this Agreement,
or any of the terms or provisions hereof, shall be binding upon the other
parties hereto unless confirmed in writing. No waiver by any party of any term
or provision of this Agreement or of any default hereunder shall affect such
party's rights thereafter to enforce such term or provision or to exercise any
right or remedy in the event of any other default, whether or not similar. This
Agreement may not be modified or amended except by a writing executed by all of
the parties hereto.
12.4 COUNTERPARTS, FAXED SIGNATURES, HEADINGS, ETC. This Agreement
may be executed simultaneously in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. Any signature page of any such counterpart, or any electronic
facsimile thereof, may be attached or appended to any other counterpart to
complete a fully executed counterpart of this Agreement, and any telecopy or
other facsimile transmission of any signature shall be deemed an original and
shall bind such party. The headings herein are for convenience of reference
only and shall not be deemed a part of this Agreement. A pronoun in one gender
includes and applies to the other gender as well.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of Purchaser, Seller and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by either party without the prior written consent of the other party,
except that Purchaser may assign this Agreement to any wholly owned subsidiary;
provided that such assignment shall not relieve Purchaser of its obligations
hereunder.
12.6 GOVERNING LAW. The validity and effect of this Agreement and
the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia.
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12.7 REMEDIES, DAMAGES, INJUNCTIONS AND SPECIFIC PERFORMANCE. It
is expressly understood and agreed that many of the covenants, agreements and
services to be rendered and performed by the parties pursuant to this Agreement
shall survive the Closing Date and are special, unique, and of an extraordinary
character, and in the event of any default, breach or threatened breach by
either party of any term, provision or Section of this Agreement to be
performed by such persons, or any of them, hereunder, either party shall be
entitled, if it so elects, to institute and prosecute proceedings in any court
of competent jurisdiction, either at law or in equity, and shall be entitled to
such relief as may be available to it pursuant hereto, at law or in equity,
including, without limiting the generality of the foregoing, any proceedings
to: (i) obtain damages for any breach of this Agreement; (ii) order the
specific performance thereof; or (iii) enjoin the other party from breaching
such provisions.
12.8 SEVERABILITY, INTERPRETATION. If any provision of this
Agreement shall be held void, voidable, invalid or inoperative, no other
provision of this Agreement shall be affected as a result thereof, and,
accordingly, the remaining provisions of this Agreement shall remain in full
force and effect as though such void, voidable, invalid or inoperative
provision had not been contained herein and all terms, provisions, Sections,
sub-sections or paragraphs shall be interpreted and construed in such a manner
as to carry out fully the intention of the parties hereto. This Agreement shall
not be construed more strictly against either party hereto regardless of which
party is responsible for its preparation, it being agreed that this Agreement
was fully negotiated by both parties.
12.9 FURTHER ASSURANCES. Upon the reasonable request of any other
party, each party hereto agrees to take any and all actions, including, without
limitation, the execution of certificates, documents or instruments, necessary
or appropriate to give effect to the terms and conditions set forth in this
Agreement.
12.10 LAW AND GAAP APPLICABLE TO FOREIGN SUBSIDIARIES. For purposes
of this Agreement, including but not limited to for purposes of the
representations contained in Article 4, unless otherwise stipulated, the laws,
regulations, rules, judgments, orders, decrees, book keeping and accounting
rules applicable to the Foreign Subsidiaries are those applicable in their own
jurisdiction or in the jurisdiction where they are exercising substantial
business activities. In no case shall this contract require the Foreign
Subsidiaries to comply with any laws, regulations, rules, judgments, orders,
decrees or bookkeeping and accounting rules unless they are applicable to the
affected Foreign Subsidiary under general principles of law.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above written.
"SELLER"
GAINOR MEDICAL MANAGEMENT, LLC
By: /s/ Mark J. Gainor
------------------------------------------
Name: Mark J. Gainor
--------------------------------------
Title: President and CEO
--------------------------------------
"PURCHASER"
MATRIA HEALTHCARE, INC.
By: /s/ Donald R. Millard
------------------------------------------
Name: Donald R. Millard
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
[CORPORATE SEAL]
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM, OR IN THE ABSENCE OF RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE MAKER THAT THEY MAY BE SOLD OR TRANSFERRED
WITHOUT SUCH REGISTRATION.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH
(13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
THIS NOTE IS SUBJECT TO CERTAIN RIGHTS OF CANCELLATION AS PROVIDED IN A
PURCHASE AND SALE AGREEMENT DATED AS OF DECEMBER 21, 1998, A COPY OF WHICH MAY
BE OBTAINED FROM MAKER.
NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE
Atlanta, Georgia
$____________ __________ ___, 2000
FOR VALUE RECEIVED, the undersigned, MATRIA HEALTHCARE, INC., a
Delaware corporation (the "Maker"), promises to pay to GAINOR MEDICAL
MANAGEMENT, L.L.C., a Georgia limited liability company (together with any
subsequent holders or transferees hereof, individually and collectively, the
"Holder"), at _____________ ______________________________, or at such other
address as Holder may designate to Maker from time to time in writing, the
principal sum of _____________________ and No/100 Dollars ($_____________), in
immediately available funds and in such coin or currency of the United States
which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment together with (i) interest on the principal
amount from time to time outstanding under this Non-Negotiable Subordinated
Promissory Note (this "Note") until said principal amount is paid in full,
payable as provided herein and (ii) any and all other amounts that may be due
by the Maker to the Holder pursuant to this Note.
Interest shall accrue on the unpaid principal balance of this Note
from time to time outstanding and shall be payable as follows:
(A) interest shall accrue at the fixed rate of eight
percent (8%) per annum on the principal amount outstanding
from time to time under this Note and shall be due and
payable to Holder in arrears on January 1, April 1, July 1
and October 1 of each year this Note remains outstanding; and
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(B) interest shall accrue at the fixed rate of four
percent (4%) per annum on the principal amount outstanding
from time to time under this Note ("Specified Interest") and
shall be due and payable to Holder on each of the "Third
Anniversary", the "Fourth Anniversary" and the "Maturity
Date" (each as defined below).
Interest shall accrue on the basis of the actual number of days elapsed based
on a 360 day year made up of twelve thirty day months.
Provided that the following payment will not result in a default under
the Maker's Senior Debt (as defined herein) and unless sooner accelerated by
Holder pursuant to the terms hereof, the Maker shall prepay to Holder on the
third anniversary of the date of this Note (the "Third Anniversary") (i)
[$____________], such amount being one-third of the initial principal amount of
this Note, and (ii) all Specified Interest then outstanding. Provided that the
following payment will not result in a default under the Maker's Senior Debt
and unless sooner accelerated by Holder pursuant to the terms hereof, the Maker
shall prepay to Holder on the fourth anniversary of the date of this Note (the
"Fourth Anniversary") (i) [$____________], such amount being one-third of the
initial principal amount of this Note, and (ii) all Specified Interest then
outstanding. Subject to the subordination provisions set forth in this Note and
unless sooner accelerated by Holder pursuant to the terms hereof, the Maker
shall pay to Holder on the fifth anniversary of the date of this Note (the
"Maturity Date") (i) the remaining principal balance of this Note, (ii) all
accrued but unpaid interest thereon, and (iii) all other amounts owing
hereunder, if any.
If any date for the payment of principal or interest, as set forth
above, falls on Saturday, Sunday or a holiday for which banks are authorized to
be closed in Atlanta, Georgia, then such payment shall be made on the next
business day for which banks are not so authorized and interest shall continue
to accrue thereon. Payments received by Holder after 2:00 p.m., Atlanta,
Georgia time on any business day shall not be credited as received until the
following business day.
Upon the occurrence of an "Acceleration Event" (as defined below) and
during the continuance thereof, the outstanding principal balance of this Note
shall bear interest at a rate per annum ("Default Interest") equal to the
lesser of (i) fifteen percent (15%) per annum or (ii) the maximum rate
permitted by applicable law. Maker shall pay Default Interest upon demand by
Holder, provided that the payment of such Default Interest shall not be
required to be made for so long as such payment is not permitted under the
Maker's Senior Debt Documents (as hereinafter defined).
Maker covenants and agrees that the indebtedness evidenced by this
Note shall be senior in right of payment to all promissory notes issued by the
Maker to sellers or their affiliates or shareholders in connection with
acquisitions consummated after the date hereof ("Junior Seller Notes"), and
each of the Junior Seller Notes shall contain a legend clearly stating that
such note is subordinate in right of payment to the Holder hereof and shall
contain subordination provisions, acknowledged by the holder thereof,
substantially similar to those contained in numbered paragraphs 1 through 13
(except 5(b)) hereof.
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This Note is issued pursuant to that certain Purchase and Sale
Agreement dated as of December 21, 1998 (the "Purchase Agreement"), by and
between the Maker and Gainor Medical Management, LLC and represents an
"Additional Purchase Price Payment" due under the Purchase Agreement.
Capitalized terms used in this Note but not otherwise defined herein shall have
the respective meanings assigned to such terms in the Purchase Agreement. This
Note is subject to certain rights of cancellation pursuant to Article 9 of the
Purchase Agreement. If the Maker is entitled to cancel all or a portion of this
Note pursuant thereto, notice of cancellation shall be mailed, first class,
postage prepaid, not less than 30 days nor more than 60 days prior to the
cancellation date, to the Holder. In addition to any information required by
law, such notice shall set forth the cancellation date and the amount of
principal and accrued interest outstanding hereunder to be cancelled. In case
less than the total amount of principal and accrued interest outstanding
hereunder is to be cancelled, a new note in substantially the same form as this
Note representing the total principal and accrued interest that was not
cancelled will be issued to the Holder upon surrender of this Note without cost
to Holder. Except as set forth in this paragraph, Maker waives and agrees not
to assert any right of setoff or offset against Holder in connection with any
amounts due under this Note.
Maker shall be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal and accrued interest
owing thereon due hereunder by delivering 30 days' prior written notice to
Holder; provided that no such prepayment shall be made to the extent such
prepayment is then prohibited by the terms of any of Maker's Senior Debt.
Any of the following shall constitute an "Acceleration Event" under
this Note:
(a) Maker fails to pay any installment of principal or interest
within 10 days after such installment is due;
(b) Maker fails to pay any other amount due and owing under this
Note within 30 days following receipt by Maker of written
notice from Holder that such amount is due and owing to
Holder;
(c) Maker (i) files a voluntary petition or assignment in
bankruptcy or a voluntary petition, assignment or answer
seeking liquidation, reorganization, arrangement, or
readjustment of its debts under the Bankruptcy Reform Act of
1978, as amended (the "Bankruptcy Code"), or under any
similar federal, state or foreign law pertaining to
insolvency or debtor relief, (ii) enters into an agreement
indicating its consent to or approval of any such petition or
proceeding, (iii) applies for or consents to the appointment
of a receiver, custodian or trustee of Maker, or of all or
substantially all of its property, (iv) makes an assignment
for the benefit of its creditors, (v) becomes insolvent or is
unable or fails to pay its debts generally as they become due
or (vi) takes corporate or other official action in
furtherance of the foregoing;
(d) there is filed against Maker an involuntary petition in
bankruptcy seeking the liquidation, reorganization,
arrangement or readjustment of Maker's debts or any
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similar relief under the Bankruptcy Code or any similar state,
federal or foreign law, which remains undismissed or unstayed
for a period of 90 days;
(e) the occurrence of a Change in Control of Maker, which for
purposes of this subparagraph (e), shall mean any of the
following events: (i) any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than an
"Existing Stockholder" (as hereinafter defined) is or becomes
the direct or indirect beneficial owner of shares of the
Maker's capital stock representing greater than 50% of the
power to vote in the election of directors under ordinary
circumstances or (ii) the Maker sells, transfers or otherwise
disposes of all or substantially all of the assets of the
Maker other than in a transaction between the Maker and a
wholly-owned subsidiary of the Maker in which the
wholly-owned subsidiary assumes this Note pursuant to an
assignment and assumption agreement in form and substance
acceptable to the Holder and such wholly-owned subsidiary
causes a law firm acceptable to the Holder to issue a legal
opinion as to the corporate authority and capacity of the
subsidiary, the enforceability of this Note (as assumed) and
such other matters as the Holder may reasonably require, all
in form and substance satisfactory to each Holder in its
reasonable discretion, or (iii) the Maker is a party to a
merger or a consolidation in which the holders of the Maker's
voting securities prior to such merger or consolidation own,
directly or indirectly, securities representing less than 50%
of the voting power in the surviving entity. "Existing
Stockholder" shall mean Mark J. Gainor, SZ Investments, LLC.,
any holder of Convertible Preferred Stock, Redeemable
Preferred Stock or Warrants or any affiliate of any of them;
(f) the failure of the Maker to comply with or perform any other
provision of this Note (and not constituting an Acceleration
Event under any of the other provisions of this paragraph)
and continuance of such failure for 30 days following receipt
of written notice thereof by Maker from Holder; or
(g) the acceleration of any of Maker's Senior Debt or the taking
of any collection action by any of the "Senior Debt Holders"
against the Maker or any of its subsidiaries or their
respective properties.
Subject at all times to the subordination provisions set forth below
in this Note, including without limitation the standstill provisions of
paragraph 5 below, (i) if an Acceleration Event described in subparagraphs (c)
or (d) above shall occur, this Note and all interest and other amounts due
hereunder shall become immediately due and payable, all without notice of any
kind, and (ii) upon the occurrence and during the continuation of an
Acceleration Event (including, without limitation, an Acceleration Event under
subparagraphs (c) or (d) above), the Holder (x) may, at its option, declare
this Note and all interest and other amounts due hereunder immediately due and
payable, and (y) shall have all of the rights and remedies provided to it at
law or in equity.
Until this Note has been fully satisfied in cash, Maker shall mail to
Holder within 105 days after the close of each fiscal year of Maker and within
50 days after the close of each of the
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first three quarters of each fiscal year of Maker financial statements,
including any notes thereto (and, in the case of fiscal year end, an auditors'
report by a firm of established national reputation) and the Management's
Discussion and Analysis of Financial Condition and Results of Operations, for
Maker comparable to those required to be included in annual and quarterly
reports furnished pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Until this Note has been fully satisfied in cash, Maker will not enter
into any material transaction with any Affiliate (as hereinafter defined) of
Maker (other than the Holder of this Note or any wholly-owned subsidiary of
Maker) unless such transaction is on terms and conditions at least as favorable
to Maker as could be obtained through arm's length negotiations with an
independent third party. For purposes of this Note, an "Affiliate", as applied
to any person or entity, shall mean any other person or entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with that person or entity. For the purposes of this definition,
"control" when used with respect to any person or entity means the power to
direct the management and policies of such person or entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Maker agrees to pay all costs of collection of this Note in the event
of nonpayment as required hereunder, including reasonable attorneys' fees and
court costs actually incurred.
Except as expressly provided herein, Maker hereby waives presentment,
demand, protest, notice of dishonor or protest, notice of nonpayment, notice of
maturity, notice of acceleration of maturity, diligence of collection and all
other notices of any kind.
No failure or delay on the part of the Holder in the exercise of any
right, power or privilege under this Note shall impair such right, power or
privilege or be construed to be a waiver of any default or Acceleration Event
or acquiescence therein nor shall any single or partial exercise of any such
right, power or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies under this Note are
cumulative to and not exclusive of any rights or remedies otherwise available.
Any consent, notice or other communication herein required or
permitted shall be given in writing and in the manner set forth in Section 12.1
of the Purchase Agreement and shall be given to the addresses of the Holder and
the Maker set forth therein or, as to each party, at such other address as may
be designated by such party in a written notice to all of the other parties.
The obligations, duties and rights of Maker under this Note are
personal to Maker and may not be assigned or assumed without the prior written
consent of Holder; provided, however, subject to compliance with applicable
securities laws and provided that any transferee agrees in writing to be bound
by the terms and conditions hereof, Holder may assign all or a portion of its
interest in this Note, to any member of Holder as of the Closing Date or any
"Permitted Transferee" (as such term is defined in that certain Standstill
Agreement dated _____________, 1999 between Maker, Mark J. Gainor and SZ
Investments, L.L.C.) (each, an "Assignee"), or may sell or convey
participations interests in this Note to any member of Holder as of the Closing
Date or any Permitted Transferee. Upon an assignment by a Holder of an interest
in the Note,
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and at the request of Holder, Maker will issue a note to each such Assignee in
the principal amount assigned and shall also reissue this Note so that each
Holder shall hold a note in the face principal amount of the indebtedness owing
to such Holder, and the aggregate principal balance of the notes shall equal
the then outstanding principal balance owed by Maker to Holder hereunder. The
percentage of principal held by any Holder of the then outstanding principal
balance of the indebtedness of Maker to Holder hereunder shall be the
"Percentage Interest" of such party in the indebtedness evidenced hereby.
Subject to the terms of the Subordination provisions of this Note and
any applicable Senior Debt (to the extent any such provisions, agreements or
instruments require the consent of any other parties), and except as set forth
in the next succeeding sentence, this Note may be altered, amended or modified
by a writing signed by Maker and the Holders which, in the aggregate, hold a
Percentage Interest equal to, in the aggregate, at least sixty-six percent
(66%), but excluding for purposes of this calculation any Percentage Interest
held by the Maker or an Affiliate of Maker. The following waivers, alterations,
amendments or modifications of this Note require the written consent of Holders
which, in the aggregate, hold a Percentage Interest equal to at least ninety
percent (90%), but excluding for purposes of this calculation any Percentage
Interest held by the Maker or an Affiliate of Maker: any change in the
principal amount or the Maturity Date of this Note or the manner, place or time
of any payment of principal; any change in the interest rate or the manner,
place or time of any payment of interest; any change in the entitlement of each
Holder to receive principal, interest and other amounts due under this Note in
proportion to their respective Percentage Interest; any change in the
Acceleration Events or any waiver of any default or Acceleration Event; any
assumption or assignment of the obligations, duties or rights of Maker under
this Note; and any change to this paragraph.
The provisions of this Note shall be construed and interpreted, and
all rights and obligations of the parties under this Note determined, in
accordance with the laws of the State of Georgia without regard to principles
of conflicts of law.
It is the intention of the parties to conform strictly to the usury
laws, whether state or federal, that are applicable to this Note. All
agreements between Maker and Holder, whether now existing or hereafter arising
and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever, shall the amount paid or agreed to be paid to
the Holder hereof, or collected by the Holder, for the use, forbearance or
detention of the money loaned or to be loaned hereunder or otherwise, or for
the payment or performance of any covenant or obligation contained herein, or
in any other document evidencing, securing or pertaining to the indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable
federal or state usury laws. If under any circumstances whatsoever fulfillment
of any provision hereof or any other documents, at the time performance of such
provision shall be due, shall involve exceeding the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if under any circumstances the Holder hereof shall
ever receive an amount deemed interest by applicable law, which would exceed
the highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal and such other indebtedness,
the excess shall be deemed to have been a payment made by mistake and shall be
refunded to Maker or to any other person making such
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payment on Maker's behalf. All sums paid or agreed to be paid to the Holder
hereof for the use, forbearance or detention of the indebtedness of Maker
evidenced hereby outstanding from time to time shall, to the extent permitted
by applicable law, and to the extent necessary to preclude exceeding the limit
of validity prescribed by law, be amortized, prorated, allocated and spread
from the date of disbursement of the proceeds of this Note until payment in
full of the loan evidenced hereby so that the actual rate of interest on
account of such indebtedness is uniform throughout the term hereof. The terms
and provisions of this paragraph shall control and supersede every other
provision of all agreements between Maker and the Holder.
Maker warrants and represents to the Holder that the indebtedness
evidenced by this Note is with respect to an exempt transaction under the
Truth-In-Lending Act, 15 U.S.C. 1601, et seq. and that this Note is made for
business or commercial purposes (and not for personal or agricultural
purposes).
Time is of the essence with respect to the performance of the
obligations of Maker under this Note.
MAKER AND HOLDER HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
GEORGIA AND THAT OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE AND
HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. MAKER AND THE HOLDER
IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS NOTE.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Note and this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein or therein.
SUBORDINATION TERMS
This Note and the entire indebtedness evidenced hereby from time to
time, whether for principal, interest or any other amounts payable hereunder or
in respect hereof, shall be subject, subordinate and junior in all respects to
the following: (i) all "Obligations" of Maker under and as such term is defined
in the Credit Agreement dated as of __________, 1999 (as amended, modified,
extended or restated, the "Credit Agreement"), among the Maker, the Lenders
party thereto from time to time, and First Union National Bank, as
Administrative Agent (in such capacity, together with any successor or
replacement agent under such agreement or any refinancing or replacement
agreement, the "Agent") (as such may be amended, modified, supplemented or
restated from time to time, the "Senior Credit Facility"); (ii) all obligations
of Maker to any lender or group of lenders for borrowed money, whether to
refinance, in whole or in part, the indebtedness owing under the Credit
Agreement pursuant to an infusion of new
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money that pays in full the Obligations under the Senior Credit Facility or
consisting of a new credit facility which is established after the Senior
Credit Facility has been terminated (as such new facility may be amended,
modified, supplemented or restated from time to time, the "New Senior Credit
Facility"); and (iii) all obligations of Maker to holders of any non-investment
grade securities (as such may be amended, modified, supplemented or restated
from time to time, the "High Yield Debt").
All indebtedness, obligations and liabilities of Maker under the
Senior Credit Facility, the New Senior Credit Facility, or the High Yield Debt,
whether such indebtedness, obligations and liabilities are now existing or
hereafter arising, whether or not evidenced by notes or other instruments, and
whether direct or indirect, fixed or contingent, liquidated or unliquidated,
due or to become due, secured or unsecured, and whether for principal, interest
(including interest accruing after the filing of a petition initiating any
bankruptcy, insolvency or a similar proceeding as described in Section 9.1(f)
or Section 9.1(g) of the Credit Agreement, whether or not such interest is an
allowed claim enforceable against the Maker in any such proceeding), and all
other obligations or liabilities (including all fees, taxes, additional
compensation, expense reimbursements and indemnification) now or hereafter
payable under or with respect to any of the foregoing are collectively referred
to as the "Senior Debt". All documents evidencing the Senior Credit Facility,
the New Senior Credit Facility, or the High Yield Debt, including without
limitation, all credit agreements, security agreements, pledge agreements,
notes, bonds or other instruments, financing statements, mortgages, deeds of
trust, deeds to secure debt, investment property, securities, financing
statements, certificates, powers of attorney, stock powers or similar
documents, agreements or certificates, are hereinafter referred to as the
"Senior Debt Documents".
By its acceptance of this Note, Holder covenants and agrees that the
subordination terms set forth below shall inure to the benefit of the "Lenders"
under and as such term is defined in the Senior Credit Facility from time to
time party thereto (hereinafter the "Senior Lenders"), the lenders from time to
time party to any New Senior Credit Facility (hereinafter the "New Senior
Lenders"), and the holders from time to time of any High Yield Debt (the "High
Yield Debt Holders"; the Senior Lenders, the New Senior Lenders and the High
Yield Debt Holders are hereinafter collectively sometimes referred to as the
"Senior Debt Holders"), and the successors and assigns of any of the Senior
Debt Holders.
Holder hereby covenants and agrees that it will, upon the Maker's
request, from time to time enter into such subordination agreements as
requested by Maker or a Senior Debt Holder to evidence the subordination of the
indebtedness evidenced hereby to the Senior Debt to the fullest extent provided
hereunder with respect to debt subordination, the restrictions placed on
Holder's acceleration of the debt evidenced hereby and the enforcement of
remedies against Maker.
In the event Maker fails to pay the principal balance of this Note on
the Maturity Date, Holder shall be entitled in connection with (i) a
modification of the Senior Credit Facility other than a modification resulting
from a default or event of default thereunder, (ii) a refinancing of the senior
indebtedness of Maker pursuant to a proposed New Senior Credit Facility, or any
negotiations resulting from the occurrence of an event of default thereunder;
or (iii) the issuance of new High Yield Debt, or any negotiations resulting
from the occurrence of an event of default thereunder, to participate in such
negotiations to express its position concerning its rights under
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this Note. However, the consent of Holder to the terms of such modification,
new financing or placement of new High Yield Debt or modification thereof shall
not be required to be obtained as a condition to such transactions, and Holder
shall not have standing to object to Maker's consummation of the transaction
contemplated by any of (i), (ii) or (iii) of this paragraph on terms Maker and
deems appropriate in its sole and absolute discretion.
1. SUBORDINATION. Anything in this Note to the contrary
notwithstanding, all principal, interest and other amounts due or to become due
on this Note shall be subordinate and junior in right of payment to the extent
set forth herein to the prior payment in full in cash of all Senior Debt.
2. PRIORITY AND PAYMENT OVER UPON INSOLVENCY AND DISSOLUTION. In
the event of (i) any insolvency or bankruptcy case or proceeding or any
receivership, liquidation, reorganization or similar case or proceeding in
connection therewith relative to the Maker or to its assets, (ii) any
liquidation, dissolution or other winding up of the Maker, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Maker, then and in any such event the Senior Debt Holders
shall be entitled to receive payment in full in cash of all amounts due or to
become due on or in respect of all Senior Debt before the Holder of this Note
shall be entitled to receive and retain any payment on account of the
principal, interest or other amounts due or to become due on this Note and to
that end the Senior Debt Holders shall be entitled to receive, for application
to the payment of the Senior Debt, any payment or distribution of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Maker which is subordinated to the payment of
this Note, which may be payable or deliverable in respect of this Note in any
such case, proceeding, dissolution, liquidation or other winding up or event.
Accordingly, any payment or distribution of assets of the Maker of any kind or
character, whether in cash, property or securities, which would otherwise have
been made to the Holder of this Note but for the provisions of this Section 2
shall instead be made by the Maker or by the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of assets of the Maker directly to the Senior Debt Holders (or
the agent or trustee for the Senior Debt Holders on their behalf) for
application to the payment of all Senior Debt remaining unpaid to the extent
necessary to pay all Senior Debt in full in cash after giving effect to any
concurrent payment or distribution to or for the benefit of the Senior Debt
Holders.
If, notwithstanding the foregoing provisions of this Section 2, the
Holder of this Note shall have received any payment of distribution of assets
of the Maker of any kind or character, whether in cash, property or securities,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of the Maker which is
subordinated to the payment of this Note, before all amounts due or to become
due on or in respect of all Senior Debt have been paid in full in cash, then
and in such event such payment or distribution shall be received in trust for
the Senior Debt Holders and shall be forthwith paid over or delivered by the
Holder of this Note receiving the same directly to the Senior Debt Holders (or
to the agent or trustee for the Senior Debt Holders on their behalf) or, to the
extent legally required, to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other person making such payment or
distribution of assets of the Maker, for application to the
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payment of all Senior Debt remaining unpaid to the extent necessary to pay all
Senior Debt in full in cash after giving effect to any concurrent payment or
distribution to or for the benefit of the Senior Debt Holders. Notwithstanding
anything set forth in this Section 2 or elsewhere in this Note, the Maker may
make and the Holder may retain any payment received on account of this Note
prior to the occurrence of an event described in clauses (i) through (iii) of
this Section 2 or clauses (i) through (ii) of Section 3.
3. PAYMENT ON NOTE SUSPENDED WHEN SENIOR DEBT IS IN DEFAULT. In
the event and during the continuation of (i) any default in the payment of
principal of or interest on any Designated Senior Debt (as hereinafter
defined), whether at maturity, at a date fixed for prepayment or by declaration
of acceleration or otherwise, or any default in the payment of any other
obligations or liabilities constituting Designated Senior Debt, or (ii) any
other event of default (after expiration of any applicable grace or cure
periods) with respect to any Designated Senior Debt which would permit the
holders of such Designated Senior Debt (or a person or persons, including the
agent or trustee for such holders, acting on their behalf) to declare such
Designated Senior Debt to become due and payable prior to the date on which it
would otherwise have become due and payable, then in the case of either (i) or
(ii) above, unless and until such default or event of default shall have been
cured or waived or shall have ceased to exist or such acceleration shall have
been rescinded or annulled, or in the event any judicial proceeding shall be
pending with respect to any such event of default, then no payment (including
any payment which may be payable by reason of the payment of any other
indebtedness of the Maker which is subordinated to the payment of this Note)
shall be made by the Maker on account of the principal of or interest on this
Note or on account of the purchase or other acquisition by it of this Note. The
"Designated Senior Debt" shall mean, all Senior Debt under the Senior Credit
Facility or the New Senior Credit Facility, and, provided there is no Senior
Credit Facility or New Senior Credit Facility, then Designated Senior Debt
shall mean the High Yield Debt.
If, notwithstanding the foregoing provisions of this Section 3 or the
provisions of Section 5, the Maker shall make any payment or distribution on or
with respect to this Note prohibited by the foregoing provisions of this
Section 3 or the provisions of Section 5, or the Holder of this Note shall have
received any payment or distribution of assets of the Maker of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Maker which is subordinated to the payment of
this Note, at a time when such payment or distribution is prohibited by the
foregoing provisions of this Section 3 or the provisions of Section 5, then and
in such event such payment or distribution shall be received in trust for the
Senior Debt Holders and shall be forthwith paid over or delivered by the Holder
of this Note receiving the same directly to the Senior Debt Holders (or to the
agent or trustee for the Senior Debt Holders on their behalf) or, to the extent
legally required, to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making such payment or distribution
of assets of the Maker, for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay all Senior Debt in full in cash
after giving effect to any concurrent payment or distribution to or for the
benefit of the Senior Debt Holders. Nothing set forth in this Section 3 or
elsewhere in this Note, shall prohibit or restrict the Holder from accepting
and retaining for its own account at any time common stock in the Maker or its
Affiliate (but nothing herein shall require the Holder to accept or require the
Maker to offer such common stock) in full or partial payment of amounts due
under this Note.
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<PAGE> 83
4. OBLIGATION TO PAY NOTE NOT IMPAIRED; PROVISIONS SOLELY TO
DEFINE RELATIVE RIGHTS. The subordination provisions of this Note are intended
solely for the purpose of defining the relative rights of the Holder of this
Note on the one hand and the Senior Debt Holders on the other hand. It is and
shall be the intent of the parties that these provisions shall constitute a
present assignment by the Holder of this Note of its rights to receive payments
or distributions of cash, property and securities of the Maker otherwise
payable to the Holder of this Note in the circumstances described in Sections 2
and 3 hereof. Nothing contained herein shall (i) impair or affect, as among the
Maker, its creditors (other than the Senior Debt Holders) and the Holder of
this Note, the obligation of the Maker, which is absolute and unconditional, to
pay the Holder of this Note the principal of and interest on this Note as of
when the same shall become due and payable in accordance with their terms, or
(ii) affect the relative rights against the Maker of the Holder of this Note
and the creditors of the Maker (other than the Senior Debt Holders), or (iii)
prevent the Holder of this Note from exercising all remedies otherwise
permitted by applicable law upon default under the instrument or instruments
governing this Note, subject to the rights, if any, under this Note of the
Senior Debt Holders to receive cash, property and securities otherwise payable
or deliverable to the Holder and subject to the other subordination provisions
of this Note.
5. ACTIONS AGAINST THE MAKER. (a) No Holder of this Note will
(i) declare this Note or any portion hereof due and payable before the stated
maturity hereof (other than any Acceleration Event described in paragraphs (c)
or (d) of the definition thereof, which results in an automatic acceleration of
this Note) or commence any action or proceeding against the Maker to recover
all or any part of this Note, (ii) ask, demand, sue for, or take other
collection action against the Maker, directly or indirectly, in cash, property
or securities or other property or by set-off or in any manner (including
without limitation from or by way of collateral) receive payment of all or any
part of this Note, or (iii) join with any creditor in bringing any proceeding
against the Maker under Title 11 of the United States Code or any other state
or federal insolvency statute, unless and until, in each case under (i), (ii)
and (iii) above, either (a) the requisite percentage of the Senior Debt Holders
necessary to take such action under the instrument or instruments governing the
Senior Debt shall have commenced or joined action or (b) all Senior Debt has
been paid in full in cash, all commitments to extend credit under the Senior
Debt Documents have been terminated, and all letters of credit issued pursuant
to the Senior Debt Documents have been canceled or otherwise terminated, all as
more fully set forth in Section 3 hereof.
(b) Notwithstanding the foregoing paragraph 5(a) or anything else
set forth in this Note, in the event (i) Maker fails to pay the principal
balance of and any other amounts due under this Note on the Maturity Date, (ii)
the Senior Credit Facility Maturity Date has occurred and (iii) solely as to
the Senior Credit Facility (and not the New Senior Credit Facility or the High
Yield Debt), no event described in clauses (i) through (iii) of Section 2 or
clauses (i) through (ii) of Section 3 exists, Holder shall be allowed to
accelerate the obligations due under this Note and to exercise such remedies as
are available to Holder under this Note or applicable law provided that Holder
forbear from exercising any remedies for a period of not less than one hundred
eighty days (180) after the Maturity Date (hereinafter the "Standstill
Period"). Any cash or property acquired by Holder in connection with its
exercise of its remedies under the Note or any judgment obtained by Holder in
connection with the Note shall be held in trust for the benefit of
11
<PAGE> 84
the Senior Debt Holders until all Senior Debt has been paid in full, in cash,
all commitments to extend credit to Maker pursuant to the Senior Debt Documents
have been canceled or otherwise terminated, and all letters of credit issued
pursuant to the Senior Debt Documents have been canceled or otherwise
terminated, all as more fully set forth in Section 3 hereof. The "Senior Credit
Facility Maturity Date" shall mean the earlier of (x) March __, 2004, subject
to extension of such date to the then-current maturity date of that certain
Credit Agreement dated as of _____________, 1999 among the Maker, the Lenders
and the Agent, as amended, modified or extended, but (as to extensions) only to
the extent that the March ___ 2004 maturity date is being extended because of a
default or event of default under the Senior Credit Facility or in connection
with a workout of the Maker's obligations under the Senior Credit Facility
required in order to avoid a future default or event of default thereunder or
(y) the date the Obligations under and as such term is defined in the Credit
Agreement executed in connection with the Senior Credit Facility are paid in
full and the Credit Agreement has been terminated by the Agent.
6. SUBROGATION. Subject to the payment in full in cash of all
Senior Debt, the termination of all commitments to extend credit under the
Senior Debt Documents, and the cancellation or termination of all letters of
credit issued pursuant to the Senior Debt Documents, the Holder of this Note
shall be subrogated to the extent of the payments or distributions made to the
Senior Debt Holders pursuant to these provisions to the rights of the holders
of such Senior Debt to receive payments and distributions of cash, property and
securities applicable to the Senior Debt until the principal of and interest on
this Note shall be paid in full. For purposes of such subrogation, no payments
or distributions to the Senior Debt Holders of any cash, property or securities
to which the Holder of this Note would be entitled but for these provisions,
and no payments over pursuant to the provisions of Section 2 or 3 to the Senior
Debt Holders by the Holder of this Note shall, as among the Maker, its
creditors (other than the Senior Debt Holders) and the Holder of this Note, be
deemed to be a payment or distribution by the Maker to or on account of the
Senior Debt.
7. PROOFS OF CLAIM. The Holder of this Note or any trustee or
other person acting on its behalf may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Holder of this Note in respect of this Note allowed in any
bankruptcy, insolvency or other judicial proceedings relative to the Maker (or
any other obligor on this Note, including any guarantor), its creditors or its
property. Any term or provision of this Section 7 to the contrary
notwithstanding, however, if any bankruptcy, insolvency or judicial proceeding
referred to above is commenced by or against the Maker, and so long as all
Senior Debt has not been paid in full: (i) each of the Senior Debt Holders (and
the agent or trustee of such Senior Debt Holders on their behalf) is hereby
irrevocably authorized and empowered (in its own name or in the name of the
Holder of this Note or otherwise), but shall have no obligation, to demand, sue
for, collect and receive every payment or distribution received in respect of
any such proceeding and give acquittances therefor, to file claims and proofs
of claims, to vote the claims of the Holder of this Note in any proceeding (and
for that purpose, the Holder of this Note hereby irrevocably assigns to the
Senior Debt Holders the right to file a proof of claim in the Holder's name and
to vote its claims in any such proceeding), and to take such other action as it
may deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of such Senior Debt Holders or Holder of this Note with
respect hereto, and (ii) the Holder of this Note shall duly and promptly take,
for the account of the Senior
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<PAGE> 85
Debt Holders, such action as the Senior Debt Holders (or the agent or trustee
for the Senior Debt Holders on their behalf) may request (a) to collect all
amounts payable by the Maker in respect of this Note and to file the
appropriate claims or proofs of claim in respect of this Note, (b) to execute
and deliver to the Senior Debt Holders such assignments or other instruments as
the Senior Debt Holders (or the agent or trustee for the Senior Debt Holders on
their behalf) may request in order to enable the Senior Debt Holders (or the
agent or trustee for the Senior Debt Holders on their behalf) to enforce any
and all claims with respect to any and all security interests and other liens
securing payment of all amounts payable in respect of this Note and (c) to
insure that all payments and distributions made in respect of any such
proceedings are made to the Senior Debt Holders as it or their interests may
appear.
8. RELIANCE ON SUBORDINATION. The Holder of this Note by its
acceptance hereof consents and agrees that all Senior Debt shall be deemed to
have been made or incurred at the request of the Holder of this Note and in
reliance upon the subordination of this Note pursuant to the subordination
provisions hereof.
9. RESTRICTIONS ON CERTAIN ACTIONS. The Holder of this Note by
its acceptance hereof agrees not to sell, assign or transfer all or any part of
this Note while any Senior Debt remains unpaid unless such sale, assignment or
transfer is made expressly subject to these provisions. The Holder of this Note
represents that no other subordination of this Note is in existence on the date
hereof, and such Holder agrees that this Note will not be subordinated to any
indebtedness owed to any person other than the Senior Debt Holders. Until the
Senior Debt has been paid in full, no Holder of this Note will file or create,
or cause to be filed or created, any lien or encumbrance of any kind upon the
assets of the Maker or any of its subsidiaries, without the prior consent of
the Senior Debt Holders.
10. CHANGES. The Senior Debt Holders may at any time, and from
time to time, without the consent of or notice to the Holder of this Note,
without incurring responsibility to such Holder, and without impairing or
releasing any of the rights of the Senior Debt Holders, or any of the
obligations of the Holder of this Note hereunder:
(i) change the time, amount, manner, place or terms of
payment of, or change or extend the time of payment of, or renew or otherwise
alter, any of the Senior Debt Documents, or any other instrument or agreement
evidencing any Senior Debt or securing payment thereof or relating to the
Senior Debt in any manner;
(ii) sell, exchange, release or otherwise deal with any
collateral for all or any of the Senior Debt (whether or not in a commercially
reasonable manner);
(iii) release anyone liable in any manner for the payment
or collection of any Senior Debt;
(iv) exercise or refrain from exercising any rights
against the Maker or others (including the Holder of this Note);
(v) apply any sums received by the Senior Debt Holders,
by whomsoever paid and however realized, to the payment of the Senior Debt in
such manner as the Senior Debt
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<PAGE> 86
Holders, in their sole discretion, shall deem appropriate; and
(vi) take any other action which might otherwise
constitute a defense available to, or a discharge of, this Note in respect of
these provisions.
11. CONTINUED EFFECTIVENESS. These provisions shall continue to
be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Debt is rescinded or must otherwise be returned by any
Senior Debt Holders upon the insolvency, bankruptcy or reorganization of the
Maker or otherwise, all as though such payment had been due but not made at
such time.
12. AMENDMENTS. The subordination provisions of this Note are for
the benefit of the Senior Debt Holders and, so long as any Senior Debt remains
unpaid, may not be amended, modified, rescinded or canceled in whole or in part
in any manner that would be adverse to any holder of Senior Debt without the
prior written consent of such holder.
13. BINDING AFFECT; ASSIGNMENT. This Note shall be binding upon
and inure to the benefit of Maker and Holder and their respective successors
and permitted assigns, and representatives. Holder may not assign its rights or
obligations under this Note (by operation of law or otherwise) other than to
any Permitted Transferee or Assignee as expressly provided in this Note without
the prior written consent of Maker, and any attempted assignment without
consent where required shall be void. The subordination provisions of this Note
shall inure to the benefit of the successors and assigns of each of the Senior
Debt Holders.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the day and year first above written.
MAKER:
MATRIA HEALTHCARE, INC.
By:
--------------------------------------------
Title:
-----------------------------------------
Accepted and agreed
this _____ day of ___________, 2000.
HOLDER:
GAINOR MEDICAL MANAGEMENT, L.L.C.
By:
-----------------------------------
Title:
--------------------------------
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<PAGE> 87
EXHIBIT B
FORM OF
BILL OF SALE AND ASSIGNMENT
FOR VALUE RECEIVED, and in further consideration of the mutual
covenants and conditions set forth in, and pursuant to the terms of, that
certain Purchase and Sale Agreement (the "Purchase Agreement") (unless
otherwise defined herein, all capitalized terms shall have the respective
meanings assigned to such terms in the Purchase Agreement), dated as of
December 21, 1998, by and among MATRIA HEALTHCARE, INC., a Delaware corporation
("Purchaser"), and GAINOR MEDICAL MANAGEMENT, L.L.C., a Georgia limited
liability company ("Seller"), Seller hereby grants, conveys, sells, transfers,
assigns and sets over unto Purchaser all of Seller's right, title and interest,
and good and marketable title, in and to all of the interests and assets set
forth on Exhibit A attached hereto and made a part hereof (collectively, the
"Interests and Assets").
TO HAVE AND TO HOLD FOREVER the above described property unto
Purchaser, for the use and benefit of Purchaser and its successors and assigns.
This Bill of Sale and Assignment is made pursuant to the terms of the
Purchase Agreement and is entitled to all benefits thereof. The
representations, warranties, covenants and indemnities provided in the Purchase
Agreement shall continue in full force and effect as provided therein and shall
not be deemed modified, waived or amended in any respect whatsoever by reason
of this Bill of Sale and Assignment.
This Bill of Sale and Assignment shall be binding upon, inure to the
benefit of and be enforceable by Seller and Purchaser and their respective
successors and assigns.
<PAGE> 88
IN WITNESS WHEREOF, Seller has caused its duly authorized
representative to execute and deliver this Bill of Sale and Assignment as of
this ___ day of _________, 1999.
GAINOR MEDICAL MANAGEMENT, L.L.C.
By:
-------------------------------------
Name: Mark J. Gainor, President
[CORPORATE SEAL]
Accepted and agreed to this
____ day of ______________, 1999:
MATRIA HEALTHCARE, INC.
By:
--------------------------------
Name: , President
---------------------
[CORPORATE SEAL]
-2-
<PAGE> 89
EXHIBIT A
INTERESTS AND ASSETS
<PAGE> 90
EXHIBIT C
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is entered into as of this
______ day of January, 1999, by and between Matria Healthcare, Inc., a Delaware
corporation, (the "Company"), Lucor Holdings, LLC, a Georgia limited liability
company ("Lucor"), Mark J. Gainor, a Georgia resident ("MJG"), and J. Michael
Highland, a Georgia resident ("JMH").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and certain subsidiaries of the Company have acquired
substantially all of the assets of Gainor Medical Management, L.L.C., a Georgia
limited liability company ("GMM"), including all of the equity interests of
GMM's subsidiaries (the "Subsidiaries") pursuant to the terms of that certain
Purchase and Sale Agreement (the "Purchase Agreement") dated as of December 21,
1998, by and among Company and GMM; and
WHEREAS, MJG and JMH are stockholders, officers and directors of Lucor
and expect to provide services to the Company hereunder through Lucor and are
executing this Agreement solely for the purpose of agreeing to be bound by
Sections 9 and 10 hereof; and
WHEREAS, the execution and delivery of this Agreement is a material
condition for the Company to enter into the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereinafter set forth, Lucor and the Company hereto agree as follows:
1. RETENTION OF MANAGER. Subject to each of the terms,
conditions and provisions of this Agreement, the Company hereby retains Lucor
and Lucor hereby agrees to be retained by the Company and the Subsidiaries to
perform those managerial functions set forth in Section 4 of this Agreement.
2. TERM.
2.1 Subject to the provisions for termination set forth herein,
the term of this Agreement shall be from the date hereof through December 31,
2008.
<PAGE> 91
2.2 The Company, by written notice to Lucor, authorized by a
majority of the directors other than those who are partners, principals or
employees of Lucor (or an affiliate of Lucor), may terminate this Agreement for
justifiable cause, which shall mean any of the following events: material
breach by Lucor of any of its obligations hereunder (including, without
limitation, failure to make available the services of MJG as provided in
paragraph 4 below); misappropriation by Lucor of funds or property of the
Company or the Subsidiaries, or other willful breach in the course of its
duties hereunder; any attempt by Lucor, MJG or JMH to secure personal profit
related to the business of the Company and not fairly disclosed to and approved
by the Board of Directors of the Company or gross neglect by Lucor in the
fulfillment of its obligations hereunder.
2.3 Either party, by sixty (60) days' prior written notice to the
other party, may terminate this Agreement effective as of the end of each
calendar year during the Term hereof.
3. COMPENSATION.
3.1 As compensation to Lucor for its management services to the
Company and the Subsidiaries under this Agreement in 1999, the Company, on
behalf of itself and the Subsidiaries, agrees to pay Lucor a fee at the annual
rate of Eight Hundred Thousand Dollars ($800,000). Such fee shall be payable
monthly in arrears, on or before the last day of each month, commencing on
January 31, 1999. Payment shall be prorated for any partial month during the
term hereof.
3.2 For years subsequent to 1999, Lucor's compensation under this
Agreement will be established by agreement between Lucor and the Board of
Directors based on the level of compensation paid Lucor in 1999, the number of
employees of Lucor providing management services to the Company, Lucor's
performance in the previous year, inflation and other relevant factors.
3.3 Compensation payable hereunder is intended to cover all
expenses incurred by Lucor in connection with providing management services to
the Company hereunder. Unless approved in advance by the Chief Executive
Officer of the Company, the Company will not reimburse Lucor, MJG or JMH, for
out-of-pocket or other costs and expenses (including travel expenses) incurred
by it or any of its employees or affiliates in connection with (i) providing
the services under this Agreement; or (ii) serving as an officer of the
Company. Unbudgeted approved expenses as set forth in the preceding sentence
shall be reimbursed, if reasonable, upon receipt by the Company of invoices
from Lucor providing information reasonably required by the Company. Provided
further, MJG acknowledges and agrees that as long as this Agreement is in
effect, MJG shall not
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<PAGE> 92
receive any Board of Directors' fees or participate in the Company's Director
Stock Option Plan.
4. DUTIES AS MANAGER. Lucor's duties under this Agreement shall
include providing management services to the diabetes disease management and
microsampling businesses operated by the Company, the Subsidiaries and Diabetes
Management Services, Inc., with overall responsibility for the management of
such businesses, subject to the direction and oversight of the Chief Executive
Officer of the Company (the "Services"). Services shall include, without
limitation, identifying and implementing other acquisition opportunities or
joint ventures and business development projects agreed upon by Lucor and the
Company's Chief Executive Officer. Lucor agrees that substantially the
full-time services of its officer, MJG, will be included in the Services
provided hereunder.
5. AUTHORITY OF MANAGER. Except as may be authorized by the
Chief Executive Officer of the Company, Lucor shall have no authority to enter
into any agreement or to make any representation, commitment or warranty
binding upon the Company or any Subsidiary or to obtain or incur any right,
obligation or liability on behalf of the Company.
6. INDEPENDENT CONTRACTOR. Lucor shall act as an independent
contractor and shall have complete charge of its personnel engaged in the
performance of the Services. Neither the Company nor any Subsidiary shall have
any obligation to provide health insurance, life insurance, worker's
compensation, or other benefits, or to pay or withhold employment taxes with
respect to Lucor personnel. To the extent permitted by applicable law and the
Company's insurance carriers, at the request of Lucor, the Company will include
Lucor employees in Company's group health and worker's compensation programs,
provided that Lucor shall pay the Company the Company's cost of providing such
coverage upon the Company's invoice therefor.
7. DISPUTES OVER REQUIRED EXPENDITURES WITH RESPECT TO CALENDAR
YEAR 1999. Notwithstanding the limitations on Lucor's authority and the
requirement that Lucor act under the direction of the Chief Executive Officer
of the Company, as set forth above, any dispute over required expenditures with
respect to calendar year 1999 shall be resolved in accordance with Section 1.5
of the Purchase Agreement.
8. BOOKS AND RECORDS.
(a) Lucor's books and records with respect to the
Services and any reimbursable costs ("Books and Records") shall be
kept at Lucor's office located at 2317 Forest Drive, Jonesboro,
Georgia 30236. The Books
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<PAGE> 93
and Records shall be kept in accordance with recognized accounting
principles and practices, consistently applied, and shall be made
available for the Company or the Company's representatives' inspection
and copying at all times during regular office hours. Lucor shall not
be required to maintain the Books and Records for more than three (3)
years after termination of this Agreement.
(b) Lucor shall have access at all reasonable times to
the premises, business properties, assets, financial statements and
other books and records of the Subsidiaries, to the extent necessary
for Lucor to perform its duties hereunder, and the Company agrees to
cause its officers and employees, and the officers and employees of
the Subsidiaries and DMS, to cooperate with Lucor in carrying out its
duties hereunder.
9. CONFIDENTIAL INFORMATION.
9.1 The parties acknowledge that during the course of provision
of the Services, the Company may disclose confidential information to Lucor,
MJG and JMH or its affiliated companies. Lucor, MJG and JMH shall treat such
information as the Company's confidential property and safeguard and keep
secret all such information about the Company, including reports and records,
customer lists, trade lists, trade practices, and prices pertaining to the
Company's business coming to the attention or knowledge of Lucor, MJG or JMH
because of any activities conducted by Lucor, MJG or JMH under or pursuant to
this Agreement.
9.2 Lucor, MJG and JMH shall exercise their best efforts and
shall cause any of their affiliated companies to exercise their best efforts to
prevent any confidential information from being disclosed to third parties,
except as necessarily required in the performance of the Services and except
under terms of confidentiality satisfactory to the Company. This obligation
shall remain in effect until the Company shall release Lucor or its affiliated
companies from their obligations under this paragraph 9, but in no event later
than three (3) years after the completion of the Services. Lucor shall not use
any of the Company's confidential information in any way that is detrimental to
the interests of the Company, directly or indirectly, either during the term of
this Agreement or at any time thereafter.
10. DEFINITIONS.
10.1 For purposes of this Section 10, the following terms shall
have the following respective meanings:
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<PAGE> 94
(a) "Competing Business" shall mean a business that,
wholly or partly, directly or indirectly, is engaged in (i) providing,
selling or marketing lancet or lancing devices, microsampling, sale of
diabetes supplies or diabetic disease management; or (ii) designing,
developing, manufacturing, testing, selling, marketing or distributing
products or equipment relating thereto.
(b) "Competitive Position" shall mean: (i) Lucor's,
MJG's or JMH's direct or indirect equity ownership (excluding
ownership of less than one percent (1%) of the outstanding common
stock of any publicly held corporation) or control of any portion of
any Competing Business; or (ii) Lucor, MJG or JMH serving as a
director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business.
(c) "Covenant Period" shall mean the period of time
commencing with the date of this Agreement and continuing for a period
of three (3) years after the termination of this Agreement.
(d) "Restricted Territory" shall mean the United States,
the United Kingdom and Germany.
10.2 During the Covenant Period, Lucor, MJG and JMH, and each of
them, agrees that he/it will not, without the prior written consent of the
Company, either directly or indirectly, alone or in conjunction with any other
person or entity, accept, enter into or attempt to enter into a Competitive
Position in the Restricted Territory.
10.3 During the Covenant Period, Seller, MJG and JMH, and each of
them, agrees that it/he will not, without the prior written consent of the
Company, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit any customer of the Subsidiaries (or any actively
sought or prospective customer of the Subsidiaries) for or on behalf of any
Competing Business to purchase any products offered by the Company.
10.4 During the Covenant Period, Lucor, MJG and JMH, and each of
them, agrees that it/he will not, without the prior written consent of the
Company, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit or attempt to solicit any "key or material" employee,
consultant, contractor or other personnel of the Company or the Subsidiaries to
terminate, alter or lessen that party's affiliation with the Company or the
Subsidiaries or to violate the terms of any agreement or understanding between
such employee, consultant, contractor or other person and the Company or the
Subsidiaries. For purposes of this Section
5
<PAGE> 95
10.4, "key or material" employees, consultants, contractors or other personnel
shall mean those such persons or entities who have direct access to or have had
substantial exposure to confidential information or trade secrets of the
Company or the Subsidiaries.
10.5 During the Covenant Period, Lucor, MJG and JMH, and each of
them, shall not make any statement or other communication that impugns or
attacks the reputation or character of the Company or the Subsidiaries, or
materially damages the goodwill of the Company or the Subsidiaries, take any
action that would interfere with any contractual, customer or referral source
relationships of the Company or the Subsidiaries in a way, including, without
limitation, any action that would result in a diminution of business, or
otherwise take any action that is detrimental to the best interests of the
Company or the Subsidiaries.
11. INDEMNIFICATION. The Company agrees to indemnify and hold
Lucor and its partners, officers, directors and agents harmless from damages,
losses or expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred or paid directly or indirectly, by Lucor as a result or
arising out of any actions taken by Lucor in connection with the performance of
the Services under this Agreement except to the extent that such actions
resulted solely from the gross negligence or willful misconduct of Lucor. The
Company hereby further agrees to reimburse Lucor for all reasonable fees and
expenses (including attorneys' fees) incurred in connection with defending any
such claim to which Lucor is a party, as such fees and expenses are incurred by
Lucor.
12. NOTICES AND COMMUNICATIONS.
12.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Company and Lucor, who will be designated by the parties
promptly upon commencement of the Services.
12.2 All other notices, demands and communications required or
permitted hereunder shall be in writing and shall be delivered personnally to
the respective representatives of the Company and Lucor set forth below or
shall be mailed by registered mail, postage prepaid, return receipt requested.
Notices, demands and communications hereunder shall be effective: (i) if
delivered personally, on delivery; or (ii) if mailed, 48 hours after deposit
thereof in the United States mail addressed to the party to whom such notice,
demand, or communication is given. Until changed by written notice, all such
notices, demands and communications shall be addressed as follows:
6
<PAGE> 96
If to the Company:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
Telephone: (770) 767-8332
Telecopy: (770) 767-7769
With a copy to:
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2216
Attention: James L. Smith, III, Esq.
Telephone: (404) 885-3111
Telecopy: (404) 962-6687
If to Lucor:
Lucor Management Company, Inc.
2205 Highway 42 North
McDonough, Georgia 30253-0353
Attention: Mark J. Gainor
Telephone: (404) 474-0474
Telecopy: (404) 474-1600
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, GA 30307
Attention: Philip H. Moise, Esq.
Telephone: (404) 817-6141
Telecopy: (404) 817-6050
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If to MJG:
Mark J. Gainor
2205 Highway 42 North
McDonough, Georgia 30253-0353
Attention: Mark J. Gainor
Telephone: (404) 474-0474
Telecopy: (404) 474-1600
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, GA 30307
Attention: Philip H. Moise, Esq.
Telephone: (404) 817-6141
Telecopy: (404) 817-6050
If to JMH:
J. Michael Highland
2205 Highway 42 North
McDonough, Georgia 30253-0353
Telephone: (404) 474-0474
Telecopy: (404) 474-1600
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, GA 30307
Attention: Philip H. Moise, Esq.
Telephone: (404) 817-6141
Telecopy: (404) 817-6050
13. ASSIGNMENTS. Lucor shall not assign this Agreement in whole
or in part without the prior written consent of the Company, and the Company
shall not assign this Agreement in whole or in part without the prior written
consent of Lucor; provided, however, that such consent shall not be
unreasonably withheld with respect to assignments to affiliates or wholly-owned
subsidiaries; and
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<PAGE> 98
provided further, that any such assignment shall not relieve the assignor of
any of its obligations under this Agreement.
Subject to the foregoing, all the terms and conditions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
14. APPLICABLE LAW AND SEVERABILITY. This document shall, in all
respects, be governed by the laws of the State of Georgia applicable to
agreements executed and to be wholly performed within the State of Georgia.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provisions contained herein and any contrary present or future statute, law,
ordinance or regulation, the latter shall prevail, but the provision of this
document which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law.
15. FURTHER ASSURANCES. Each of the parties hereto shall execute
and deliver any and all additional papers, documents and other assurances, and
shall do any and all acts and things reasonably necessary in connection with
the performance of their obligations hereunder and to carry out the intent of
the parties hereto.
16. ATTORNEYS' FEES. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
17. CAPTIONS. The captions appearing at the commencement of the
paragraphs herein are descriptive only and for convenience and reference.
Should there be any conflicts between any such caption and the paragraph at the
head of which it appears, the paragraph and not such caption shall control and
govern in the construction of this document.
18. MODIFICATIONS OR AMENDMENTS. No amendment, change or
modification of this document shall be valid unless it is in writing and signed
by all the parties hereto and expressly states that an amendment, change or
modification of this Agreement is intended.
19. SEPARATE COUNTERPARTS. This document may be executed in one
or more separate counterparts, each of which, when so executed, shall be deemed
to be an original. Such counterparts shall, together, constitute and be one and
the same instrument.
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<PAGE> 99
20. ENTIRE AGREEMENT. This Agreement shall constitute the entire
understanding and agreement between the parties hereto and shall supersede any
and all letters of intent, whether written or oral, pertaining to the subject
matter of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MATRIA HEALTHCARE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
LUCOR HOLDINGS, LLC
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
------------------------------------------
MARK J. GAINOR
------------------------------------------
J. MICHAEL HIGHLAND
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<PAGE> 100
EXHIBIT D
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (the "Agreement") dated as of this _____ day
of January, 1999, is between MATRIA HEALTHCARE, INC., a Delaware corporation
("Matria"), MARK J. GAINOR, a Georgia resident ("MJG"), and SZ INVESTMENTS,
L.L.C., a Delaware limited liability company ("SZI").
Statement of Purpose
MJG Affiliates (as defined below) and SZI Affiliates (as defined
below) are members of Gainor Medical Management, L.L.C., a Georgia limited
liability company ("GMM"). GMM and Matria have entered into a Purchase and Sale
Agreement dated as of December 21, 1998 (the "Purchase Agreement"), pursuant to
which Matria will acquire substantially all of the assets of GMM, including its
interests in its subsidiaries, for consideration consisting, in part, of
Redeemable Preferred Stock, Warrants, Convertible Preferred Stock and an
Earn-Out Note (each as defined below) of Matria. Upon consummation of the
transactions contemplated by the Purchase Agreement, MJG and SZI will own
indirectly through their respective Affiliates approximately 10.74% and 1.66%,
respectively, of the Fully Diluted Common Stock (as defined below) of Matria.
In addition, the MJG Affiliates and/or SZI Affiliates may acquire Common Stock
of Matria in the open market after the closing of the Purchase Agreement. As a
condition to consummation of the Purchase Agreement, MJG, SZI and Matria have
agreed to enter into this Agreement with respect to the ownership, voting and
disposition of the Voting Securities (as defined below) of Matria owned by the
MJG Affiliates and/or the SZI Affiliates.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the respective meanings specified below, and terms
used herein and not defined herein shall have the meaning given in the Purchase
Agreement:
"Affiliate" shall have the meaning ascribed to such term pursuant to
Rule 12b-2 under the Exchange Act, as in effect on the date hereof; provided,
that in no event shall MJG and SZI be deemed to be Affiliates of each other.
"Beneficial Ownership" means beneficial ownership as defined in Rule
13d-3 of the Exchange Act.
"Board" means the Board of Directors of Matria.
<PAGE> 101
"Change in Control" means any of the following events: (i) any Person,
other than an "Existing Shareholder" (as hereinafter defined) is or becomes the
direct or indirect beneficial owner of shares of the Matria's capital stock
representing greater than 50% of the power to vote in the election of directors
under ordinary circumstances, or (ii) Matria sells, transfers or otherwise
disposes of all or substantially all of the assets of Matria other than in any
transaction between Matria and a wholly-owned subsidiary of Matria, or (iii)
Matria is a party to a merger or a consolidation in which the holders of
Matria's voting securities prior to such merger or consolidation own, directly
or indirectly, securities representing less than 50% of the voting power in the
surviving entity.
"Common Stock" means (a) the Common Stock of Matria, par value $.01
per share, as described in the Certificate of Incorporation of Matria or any
shares of capital stock issued in exchange, redemption or conversion thereof,
and (b) any other class of capital stock of Matria whether currently
outstanding or as may be hereafter issued or authorized for issuance having the
right to share in distributions either of earnings or assets without limit as
to amount or percentage.
"Convertible Preferred Stock" means the Series A Convertible Preferred
Stock of Matria, par value $.01 per share, issued pursuant to the Purchase
Agreement and described in the Certificate of Incorporation of Matria.
"Disinterested Majority" means a majority of the members of the Board
other than the representatives of the MJG Affiliates and/or the SZI Affiliates
nominated and elected to the Board pursuant to Section 4.1 or 4.2 below.
"Earn-Out Note" shall have the meaning ascribed to such term in the
Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Shareholder" shall mean Mark J. Gainor, SZ Investments,
L.L.C., any holder of any of the Convertible Preferred Stock, the Redeemable
Preferred Stock or the Warrants, or any affiliate of any of them.
"Fully Diluted" means, with respect to the Common Stock, all of the
outstanding Common Stock of Matria determined as if any security or obligation
directly or indirectly exercisable for or convertible into Common Stock had
been so exercised or converted.
"Institutional Investor" shall mean any bank, thrift, investment
company registered under the Investment Company Act of 1940, pension fund or
insurance company, or any "qualified institutional buyer" as defined in Rule
144A of the Securities Act.
"Investor" means any of the MJG Affiliates and the SZI Affiliates
individually, and "Investors" means all of the MJG Affiliates and SZI
Affiliates collectively.
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<PAGE> 102
"Market Price" means, per share of Common Stock, as of the date of
notice of repurchase pursuant to Section 3.5 or as of the date of any notice of
acceptance of a director's resignation pursuant to Section 4.1, (a) if such
Common Stock is listed on a national securities exchange or traded on The
Nasdaq National Market System ("NMS"), the average mean between the highest
price and the lowest price of which the Common Stock shall have been sold
regular way on the national securities exchange (or if traded on more than one
such exchange, the principal exchange on which such shares are traded) or the
NMS each day in the 20 consecutive trading days ending on said date, or (b) if
the Common Stock shall not be listed on a national securities exchange or
traded on the NMS but shall be traded in the over-the-counter market and
quotations therefor are reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), the average during the 20
consecutive trading days ending on such date of the last price (if such last
price is then reported on a real-time basis) or each such day, or, if the last
price is not then so reported, the mean between the bid and asked prices last
reported on each such day, by NASDAQ for the over-the-counter market on said
date, or (c) if at any time quotations for the Common Stock shall not be
reported by NASDAQ for the over-the-counter market and the Common Stock shall
not be listed on any national securities exchange or traded on the NMS, the
fair market value per share of Common Stock as determined by the Board on the
basis of available prices for such Common Stock or in such other manner as the
Board may deem reasonable.
"MJG Affiliates" means MJG and any Affiliate of MJG (in each case
exclusive of any SZI Affiliate).
"MJG Minimum Ownership" means the direct or indirect beneficial
ownership by any MJG Affiliates and their Permitted Transferees (other than any
SZI Affiliate) of Convertible Preferred Stock, Redeemable Preferred Stock,
Warrants, Common Stock and/or the Earn-Out Note having an aggregate value of at
least $25,000,000. For purposes of this definition, "value" shall be determined
as follows: for Convertible Preferred Stock and Redeemable Preferred Stock, the
aggregate liquidation preference of such stock plus all accrued and unpaid
dividends thereon; for Common Stock, the aggregate Market Price of such stock;
for Warrants, the excess (if any) of the aggregate Market Price of the Common
Stock issuable upon exercise of such Warrants over the aggregate exercise price
of such Warrants; and for the Earn-Out Note, the outstanding balance plus all
accrued and unpaid interest owed thereon, not to exceed $10,000,000 in the
aggregate.
"Permitted Transferee" means (i) any member of GMM as of the date of
the Purchase Agreement, (ii) any Affiliate of any such member, (iii) any
employee or consultant of any Investor or Rosenberg & Liebentritt, P.C., (iv)
the spouse, siblings, ancestors, and lineal descendants of any of the
foregoing, and (v) any trust, family limited partnership or similar entity
established for the benefit of any of the foregoing; provided that, in each
case, such Person agrees in a writing, delivered to Matria, to be bound by the
provisions of this Agreement (if not already so bound).
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
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"Redeemable Preferred Stock" means the Series B Redeemable Preferred
Stock of Matria, par value $.01 per share, issued pursuant to the Purchase
Agreement and described in the Certificate of Incorporation of Matria.
"Securities Act" means the Securities Act of 1933, as amended.
"SZI Affiliate" means SZI and any of its Affiliates under control of
or common control with SZI (in each case exclusive of any MJG Affiliates);
provided, however, that, notwithstanding the foregoing, no Person shall be
deemed to be an SZI Affiliate unless (i) Sam Zell or any other executive
officer of SZI has actual knowledge of the relevant action to be attributed to
the SZI Affiliate hereunder or (ii) in the case of publicly held entities that
might otherwise fall within this definition, unless Sam Zell or any other
executive officer of SZI took any action, directly or indirectly, to cause,
suggest, encourage or assist such publicly held entity to take the relevant
action to be attributed to the SZI Affiliate hereunder.
"Voting Securities" means, collectively, Common Stock, any preferred
stock of Matria that is entitled to vote generally for the election of
directors, any other class or series of Matria securities that is entitled to
vote generally for the election of directors and any other securities,
warrants, options or rights of any nature that are directly or indirectly
convertible into, exchangeable for, or exercisable for the purchase of, or
otherwise give the holder thereof any rights in respect of, Common Stock,
Matria preferred stock that is entitled to vote generally for the election of
directors, or any other class or series of Matria securities that is entitled
to vote generally for the election of directors.
"Warrants" means the warrants to purchase Common Stock of Matria
issued pursuant to the Purchase Agreement.
2.1 Representations and Warranties of Investors:
(a) MJG represents and warrants to Matria as follows:
(i) MJG has full legal right, power and authority to
enter into and perform this Agreement. This Agreement is a valid and binding
obligation of MJG enforceable against MJG in accordance with its terms, except
that such enforcement may be subject to (A) bankruptcy, insolvency, moratorium
and other similar laws affecting creditors' rights generally and (B) general
principles of equity (regardless of whether asserted at law or in equity).
(ii) Neither the execution and delivery of this Agreement
by MJG nor the consummation by MJG of the transactions contemplated hereby
conflicts with or constitutes a violation of or default under any statute, law,
regulation, order or decree applicable to MJG, or any contract, commitment,
agreement, arrangement or restriction of any kind to which MJG is a party or by
which MJG is bound.
(b) SZI represents and warrants to Matria as follows:
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(i) SZI has full legal right, power and authority to
enter into and perform this Agreement. The execution and delivery of this
Agreement by SZI and the consummation by SZI of the transactions contemplated
hereby have been duly authorized by all necessary limited liability company or
other action on behalf of SZI. This Agreement is a valid and binding obligation
of SZI enforceable against SZI in accordance with its terms, except that such
enforcement may be subject to (A) bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally and (B) general principles
of equity (regardless of whether asserted at law or in equity).
(ii) Neither the execution and delivery of this Agreement
by SZI nor the consummation by SZI of the transactions contemplated hereby
conflicts with or constitutes a violation of or default under the certificate
of formation or other organizational or governing documents of SZI, any
statute, law, regulation, order or decree applicable to SZI, or any contract,
commitment, agreement, arrangement or restriction of any kind to which SZI is a
party or by which SZI is bound.
2.2 Representations and Warranties of Matria. Matria hereby
represents and warrants to each Investor as follows:
(a) Matria has full legal right, power and authority to
enter into and perform this Agreement. The execution and delivery of this
Agreement by Matria and the consummation by Matria of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
other action on behalf of Matria. This Agreement is a valid and binding
obligation of Matria enforceable against Matria in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and
(ii) general principles of equity (regardless of whether asserted at law or in
equity).
(b) Neither the execution and delivery of this Agreement
by Matria nor the consummation by Matria of the transactions contemplated
hereby conflicts with or constitutes a violation of or default under the
charter or by-laws of Matria, any statute, law, regulation, order or decree
applicable to Matria, or any contract, commitment, agreement, arrangement or
restriction of any kind to which Matria is a party or by which Matria is bound.
3.1 Restrictions on Certain Actions by Investors. Subject to
Section 3.2 hereof, until the fifth anniversary of this Agreement, unless
otherwise approved by a Disinterested Majority, neither MJG, whether directly
or indirectly through any MJG Affiliate, nor SZI, whether directly or
indirectly through any SZI Affiliate, shall:
(a) acquire, announce an intention to acquire, offer or
propose to acquire, solicit an offer to sell or agree to acquire by purchase,
by gift, by joining a partnership, limited partnership, syndicate or other
"group" (as such term is used in Section 13(d)(3) of the Exchange Act, such
term to have such meaning throughout this Agreement) or otherwise, any (i)
assets, businesses or properties of Matria other than in the ordinary course of
business or (ii) any Voting Securities:
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(b) participate in the formation or encourage the
formation of any group (other than any group consisting exclusively of the
Investors and/or their Permitted Transferees), or join or in any way
participate with any Person (other than the Investors and/or their Permitted
Transferees), which owns or seeks to acquire beneficial ownership of Voting
Securities;
(c) solicit, or participate in any "solicitation" of
"proxies" (other than with respect to Voting Securities held by the Investors
and/or their Permitted Transferees and/or in compliance with this Agreement) or
become a "participant" in any "election contest" (as such terms are defined or
used in Regulation 14A under the Exchange Act, these terms to have such meaning
throughout this Agreement) with respect to Matria, in each case in opposition
to the recommendation of a Disinterested Majority;
(d) initiate, propose or otherwise solicit stockholders
for the approval of one or more stockholder proposals with respect to Matria or
induce any Person (other than the Investors and/or their Permitted Transferees)
to initiate any stockholder proposal, in each case in opposition to the
recommendation of a Disinterested Majority;
(e) except as contemplated by the terms of the
Convertible Preferred Stock, the Redeemable Preferred Stock or this Agreement,
seek to place more than one representative of each of the MJG Affiliates and
the SZI Affiliates on the Board of Directors of Matria, seek the removal of any
member of the Board of Directors of Matria or seek to have called any meeting
of the stockholders of Matria, in each case in opposition to the recommendation
of a Disinterested Majority;
(f) deposit any Voting Securities in a voting trust or,
except as specifically contemplated by this Agreement, subject them to a voting
agreement or other agreement or arrangement with respect to the voting of such
Voting Securities, other than any such trust, agreement or other arrangement
involving no Person other than the Investors and their Permitted Transferees;
(g) otherwise act, alone or in concert with any other
Person (other than the Investors and/or their Permitted Transferees), to seek
to control the management, Board, policies or affairs of Matria or solicit,
propose, seek to effect or negotiate with any other Person (including, without
limitation, Matria, but excluding any Investor and its Permitted Transferees)
with respect to any form of business combination or other extraordinary
transaction with Matria or any of its subsidiaries or any restructuring,
recapitalization, similar transaction or other transaction not in the ordinary
course of business with respect to Matria or any of its subsidiaries, solicit,
make or propose or negotiate with any other Person (other than the Investors
and/or their Permitted Transferees) with respect to, or announce an intent to
make, any tender offer or exchange offer for any securities of Matria or any of
its subsidiaries, in each case in opposition to the recommendation of a
Disinterested Majority, or publicly disclose an intent, purpose, plan or
proposal with respect to Matria, any of its subsidiaries or any securities or
assets of Matria or any of its subsidiaries, that would violate the provisions
of this Section 3.1, or assist, participate in, facilitate or solicit any
effort or attempt by any Person to do or seek to do any of the foregoing; or
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<PAGE> 106
(h) request Matria (or its directors, officers,
employees or agents) to amend or waive any provision of this Agreement
(including, without limitation, this Section 3.1(h)) or otherwise seek any
modification to or waiver of any of the agreements or obligations of the
Investors under this Agreement in each case in opposition to the recommendation
of a Disinterested Majority.
3.2 Certain Permitted Actions. Notwithstanding the limitations
and restrictions set forth elsewhere in this Agreement:
(a) The Investors and their Permitted Transferees shall
have the right to acquire the Convertible Preferred Stock and the Redeemable
Preferred Stock and to convert the Convertible Preferred Stock and acquire
Common Stock issuable upon conversion of the Convertible Preferred Stock (or
upon conversion, exercise or exchange of any securities received from Matria in
exchange for the Convertible Preferred Stock) and shall have the right to
acquire any Matria securities distributed as a dividend, because of an
adjustment resulting from the operation of anti-dilution provisions, or
otherwise in respect of Convertible Preferred Stock or any securities received
from Matria in exchange for the Convertible Preferred Stock.
(b) The Investors and their Permitted Transferees shall
have the right to acquire the Warrants and to exercise the Warrants and acquire
Common Stock issuable upon exercise of the Warrants (or upon conversion,
exercise or exchange of any securities received from Matria in exchange for the
Warrants) and shall have the right to acquire any Matria securities distributed
as a dividend, because of an adjustment resulting from the operation of
anti-dilution provisions, or otherwise in respect of the Warrants or any
securities received from Matria in exchange for the Warrants.
(c) In addition to any Matria securities acquired
pursuant to paragraphs (a) or (b) of this Section 3.2, the Investors and their
Permitted Transferees shall have the right to acquire Voting Securities so long
as immediately after such acquisition the Investors and their Permitted
Transferees collectively would have Beneficial Ownership of no more than an
aggregate of 35% of the Fully Diluted Common Stock;
(d) Notwithstanding anything to the contrary in this
Agreement, the Investors shall have the right to discuss any business matters
(including but not limited to subjects that may be within the matters listed in
Section 3.1 of this Agreement) privately with the chief executive officer and
other senior executive officers of Matria (and Matria agrees that its chief
executive officer and other senior executive officers will make themselves
reasonably available for such discussions). Notwithstanding anything to the
contrary in this Agreement, the Investors also may discuss their investment in
Matria with each other, their Permitted Transferees, their own stockholders,
and members and with the investment community, provided that such discussions
are not for the purpose of circumventing Section 3.1 hereof.
(e) As a holder of Common Stock, Convertible Preferred
Stock and Warrants, the Investors and their Permitted Transferees may exercise
Rights under Matria's Stockholder Rights Plan and may acquire the securities
issuable upon exercise of those Rights.
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(f) Any purchase of Common Stock by the Investors or
their Permitted Transferees which was contemplated and permitted under the
Confidentiality Agreement referred to in Section 3.1 of the Purchase Agreement
shall be deemed a permitted action hereunder.
3.3 Voting. In connection with either (a) the election or removal
of directors of Matria or (b) any stockholder proposals with respect to Matria
in opposition to the recommendation of a Disinterested Majority, MJG shall, and
shall direct the MJG Affiliates to, and SZI shall, and shall direct the SZI
Affiliates to, vote all Voting Securities owned by them (a) in accordance with
the recommendation of Matria's Board of Directors with respect to such matter,
or (b) in the absence of a recommendation, in the same proportion as the votes
cast by all other holders of Voting Securities with respect to such matter;
provided that each Investor and its Permitted Transferees shall retain the
right to vote, in their sole and absolute discretion, all Voting Securities
owned by such Investor and its Permitted Transferees with respect to the
following matters:
(a) the election of individuals proposed by the
Investors to serve as members of the Board in accordance with Section 4.1 or
4.2 of this Agreement;
(b) the election of individuals proposed by the holders
of the Convertible Preferred Stock or the Redeemable Preferred Stock in
accordance with the terms of such securities; and
(c) matters respecting which a class or series vote of
the Convertible Preferred Stock or the Redeemable Preferred Stock is provided
pursuant to law or pursuant to Matria's charter or by-laws.
By voting as directed by Matria, the Investors and their Permitted Transferees
shall not be deemed to have waived any rights (i) that they may have to enforce
their rights under Matria's Certificate of Incorporation, Matria's Bylaws, the
Purchase Agreement or the Delaware General Corporation Law to challenge the
actions taken or (ii) which they would otherwise be entitled to exercise under
Section 262 of the Delaware General Corporation Law.
3.4 Restrictions on Transfer.
(a) Until the second anniversary of this Agreement, neither the
MJG Affiliates nor the SZI Affiliates will sell, assign, transfer, grant an
option with respect to or otherwise dispose of any interest in (or enter into
an agreement, arrangement or understanding with respect to the foregoing)
(individually and collectively, "Sell") any Voting Securities, except for the
dispositions described in Section 3.4(c) below, which, to the extent provided
in Section 5.1 hereof, are subject to the right of first offer specified in
Section 5.1 hereof.
(b) From and after the second anniversary of this Agreement and
until the fifth anniversary of this Agreement, neither the MJG Affiliates nor
the SZI Affiliates will Sell any Voting Securities except for (i) the
dispositions described in Section 3.4(c) below and (ii) the sale or other
disposition of any Voting Securities to any Person or group if, after due
inquiry, the Investor reasonably believes such Person or group would not have
Beneficial Ownership of 15%
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or more of the then outstanding Common Stock, after taking such sale or other
disposition into account, in each case, which, to the extent provided in
Section 5.1 hereof, are subject to the right of first offer specified in
Section 5.1 hereof.
(c) The Investors and their Permitted Transferees may Sell Voting
Securities (i) pursuant to a transaction approved in writing by a Disinterested
Majority; (ii) pursuant to (A) a "qualifying offer" (as hereinafter defined) or
(B) a "qualifying tender offer" (as hereinafter defined); (iii) in a transfer
made by any Investor or its Permitted Transferees to any other Investor or any
Permitted Transferee or any other Investor's Permitted Transferees provided the
transferee agrees in a writing, delivered to Matria, to be bound by the
provisions of this Agreement (if not already bound) (provided that the
transferor of such Voting Securities shall also continue to remain bound by the
terms of this Agreement, unless Matria shall otherwise, consent in writing,
such consent not to be unreasonably withheld); (iv) pursuant to a bona fide
pledge of Voting Securities by the Investor and its Affiliates as security for
bona fide indebtedness to a brokerage firm or financial institution not
affiliated with the Investor or any of its Affiliates for money borrowed or
pursuant to such pledge by such pledgee; (v) in "brokers' transactions" (as
such term is defined in Rule 144(g) of the Securities Act, which definition
shall apply for all purposes of this Agreement) on the NMS, or if any
particular series of Voting Securities is not listed on the NMS, on the
principal national securities exchange on which such Voting Securities are
listed or admitted to trading, and if not so listed or admitted, in the
over-the-counter market, subject in all cases to the volume limitations
presently set forth in Rule 144(c)(1) of the Securities Act; (vi) in a
registered public offering pursuant to the Registration Rights Agreement; (vii)
constituting 5% or less of the then outstanding Common Stock on a Fully Diluted
basis (or, with the prior written consent of Matria, more than 5%) to any
Institutional Investor whom Investor reasonably believes is Purchasing for
investment and not with a view toward effecting or assisting in a change of
control; (viii) to any Person or group if, after due inquiry, the Investor
reasonably believes such Person or group would not own 5% or more of the then
outstanding Common Stock; or (ix) as a result of a merger, consolidation, share
exchange or liquidation of the Investor in which the Investor is not the
survivor, provided that the surviving or successor entity and each entity that
"controls" (as that term is defined in Rule 405 of the Securities Act) the
surviving or successor entity agrees in writing with Matria to be bound by the
provisions of this Agreement.
For purposes of this Agreement, a "qualifying offer" shall mean (i)
any tender offer or exchange offer commenced by Matria for any Voting
Securities; and (ii) any acquisition transaction involving any Voting
Securities proposed by a Person or entity other than Matria (A) which is
approved by, or not opposed by, a Disinterested Majority of the Board of
Directors of Matria, or (B) where such third party offeror already owns at
least 50% of the outstanding Voting Securities. For purposes of this Agreement,
a "qualifying tender offer" shall mean any acquisition transaction involving
any Voting Securities which is a bona fide tender offer or exchange offer that
is commenced by a third party offeror who does not already own at least 50% of
the outstanding Voting Securities at a price per share greater than the closing
price per share on the principal securities exchange on which the Matria Common
Stock is then traded on the last trading day prior to the first public
announcement of such offer, if upon consummation thereof, such third party
offeror would be the beneficial owner of 50% or more of the shares of Matria
Common Stock then outstanding.
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<PAGE> 109
3.5 Repurchase of Common Stock. In the event that MJG and SZI,
whether directly or indirectly through any Affiliate, shall at any time without
the express approval of a Disinterested Majority have in the aggregate
Beneficial Ownership of Common Stock in excess of 35% of the Fully Diluted
Common Stock of Matria (whether due to redemption, open market repurchases, an
issuer tender offer or otherwise), Matria shall have the right and option, in
addition to any other remedy for breach of this Agreement, to repurchase shares
of Common Stock held by MJG Affiliates or the SZI Affiliates (other than shares
of Common Stock acquired upon conversion of the Convertible Preferred Stock or
upon exercise of the Warrants) in order to reduce such beneficial ownership of
Common Stock to such percentage. Such right and option may be exercised by
Matria by delivering written notice to MJG or SZI, as the case may be, on any
business day at the address set forth in Section 7(h) and the closing of the
repurchase shall occur at the principal office of Matria within 10 business
days of the date of such notice. At such closing, Matria shall tender the
Market Price per share of the Common Stock subject to repurchase in immediately
available funds and the selling party shall deliver certificates for the shares
to be purchased duly endorsed for transfer to Matria together with a
certificate to the effect that such selling party owns the shares to be
transferred free and clear of any and all liens, claims and other adverse
interests other than restrictions imposed by applicable securities laws.
3.6 Dispositions in Certain Events. If an Investor acquires any
Voting Securities in violation of this Agreement, it will immediately dispose
of such Voting Securities to Persons which are not Investors in a manner
permitted by Section 3.4. If Matria shall enter into a definitive agreement
providing for a transaction that will result in a Change in Control, the
restrictions in Section 3.5 hereof shall terminate immediately.
3.7 Legend on Certificates. Any certificate representing shares
of Voting Securities held by Investors or their Affiliates shall bear a
conspicuous legend referring to the restrictions on transfer and voting
agreements set forth in this Agreement.
4.1 Nominations to the Board. Upon closing of the transactions
contemplated by the Purchase Agreement, Matria shall exercise its good faith
efforts (including effecting any increase in the size of the Board, if
necessary) and take all necessary or appropriate action to insure that (a) MJG
or such other individual as MJG shall designate shall be nominated to a class
of directors of the Board at each annual meeting at which the term of office of
such Person as a director would otherwise expire commencing as of the Closing
Date and continuing until the earlier of the fifth anniversary of this
Agreement or until the MJG Minimum Ownership is no longer satisfied; and (b)
Rod F. Dammeyer or such other individual as SZI shall designate shall be
nominated to a class of directors of the Board to serve thereon commencing as
of the Closing Date and continuing for a single three year term. In the event
that the MJG Minimum Ownership is not satisfied, MJG's nominee shall
immediately withdraw as a nominee or resign as a director, as the case may be,
and MJG shall no longer have any rights under this Section 4.1 whether or not
such party may thereafter acquire the MGJ Minimum Ownership. Provided that MJG
or his designee is otherwise qualified to serve as a director and MJG or his
designee fails to be nominated to serve as director, MJG shall be released from
his obligation under this Agreement.
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4.2 Death, Permanent Disability or Resignation of Board
Representatives. In the event that any representative nominated and elected to
the Board pursuant to Section 4.1 ceases to be a member of the Board by reason
of his death, permanent disability or resignation (other than a resignation
required pursuant to Section 4.1), Matria shall exercise its good faith
efforts, consistent with the fiduciary obligations of the Board under
applicable law, to replace any such representative with another designee of the
applicable party or his personal representative.
4.3 Reporting Obligations. As long as any Investors and/or their
Permitted Transferees holds any Convertible Preferred Stock, Redeemable
Preferred Stock, Warrants or Common Stock and/or any amount of principal or
interest is owed under the Earn-Out Note, Matria shall deliver to MJG or SZI
(who in turn shall be entitled to distribute copies of the same to any MJG
Affiliate, SZI Affiliate and/or their Permitted Transferees who hold any of the
foregoing securities or instruments) at the addresses set forth in Section 6.1
hereof:
(a) within 105 days after the close of each fiscal year and
within 50 days after the close of each of the first three quarters of each
fiscal year financial statements, including any notes thereto (and, in the case
of fiscal year end, an auditors' report by a firm of established national
reputation) and the Management's Discussion and Analysis of Financial Condition
and Results of Operations, for Matria and its subsidiaries in the form required
to be included in an annual or quarterly reports furnished pursuant to the
Exchange Act and the rules and regulations promulgated thereunder; and
(b) within 30 days after the end of each calendar month, a
consolidated and consolidating balance sheet, income statement and cash flow
statements, and consolidated shareholders' equity statement for Matria and its
subsidiaries for the immediately preceding calendar month.
4.4 Reports Under the Exchange Act. With a view to making
available to the Investors and their Permitted Transferees the benefits of Rule
144 and any other rule or regulation of the Securities and Exchange Commission
that may at any time permit an Investor to sell securities of Matria to the
public without registration or pursuant to a registration on Form S-3, Matria
agrees to:
(a) use its reasonable efforts to make and keep public
information available, as those terms are understood and defined in Rule 144;
(b) use its reasonable efforts to file with the Securities and
Exchange Commission in a timely manner all reports and other documents required
under the Securities Act and the Exchange Act; and
(c) furnish to any Investor and its Permitted Transferees
forthwith upon request (i) a written statement by Matria as to its compliance
with the reporting requirements of Rule 144, or as to whether it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of
the most recent annual or quarterly report of Matria and such other reports and
documents so filed by Matria, and (iii) such other information (and Matria
shall take such action) as may be reasonably requested in availing the Investor
or its Permitted Transferees of any rule
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or regulation of the Securities and Exchange Commission which permits the
selling of any such securities without registration or pursuant to such form.
5.1 Right of First Offer. In the event that an Investor desires
to sell all or part of its holding of Voting Securities (the "Shares") pursuant
to the terms of Section 3.4(b)(ii), Section 3.4(c)(ii)(B), Section 3.4(c)(vii),
and Section 3.4(c)(viii) hereof, such Investor shall first give written notice
of such intent to Matria. Matria shall have a period of 30 days from the
receipt of such written notice to deliver to such Investor an irrevocable
written offer (a "Purchase Offer") to purchase such Shares for cash at the
price and upon such other terms and conditions as are set forth in the Purchase
Offer. In the event Matria delivers such Purchase Offer within the 30 day
period, such Investor may accept or reject in its sole and absolute discretion
such Purchase Offer by delivering written notice of acceptance or rejection
within 30 days of the receipt of such Purchase Offer. In the event of
acceptance of such Purchase Offer, the closing of the sale of the Shares shall
occur in the manner provided in the Purchase Offer. In the event Matria fails
to deliver a Purchase Offer or such Investor rejects such Purchase Offer, such
Investor shall have a period of 120 days following the earlier of the
expiration of the 30 day period referred to above or the express rejection of
the Purchase Offer to sell the Shares in accordance with Section 3.4(b)(ii), or
Section 3.4(c)(ii)(B), or Section 3.4(c)(vii) or Section 3.4(c)(viii) hereof
free and clear of the terms of this Agreement; provided, that (i) the terms of
such sale shall be more favorable than the terms contained in the Purchase
Offer, if any, and (ii) upon the expiration of the 120 day period, such Shares,
if not then sold pursuant to Section 3.4(b)(ii), Section 3.4(c)(ii)(B), Section
3.4(c)(vii) or Section 3.4(c)(viii) shall once again be subject to the right of
first offer contained herein.
6.1 Miscellaneous.
(a) Liability of Investors. Any liability or obligation
of any kind whatsoever under this Agreement shall be several and not joint as
between any MJG Affiliate(s) and their Permitted Transferees, on the one hand,
and any SZI Affiliate(s) and their Permitted Transferees, on the other hand.
Notwithstanding anything to the contrary in this Agreement, in no event shall
any MJG Affiliate be responsible in any manner for any liability or obligation
of, or the breach of any provision of this Agreement by, any person or group
who is not an MJG Affiliate. Notwithstanding anything to the contrary in this
Agreement, in no event shall any SZI Affiliate be responsible in any manner for
any liability or obligation of, or the breach of any provision of this
Agreement by, any person or group who is not an SZI Affiliate.
(b) Interpretation. For all purposes of this Agreement,
the term Matria Common Stock shall include any securities of any issuer
entitled to vote generally for the election of directors of such issuer which
securities the holders of Matria Common Stock shall have received or as a
matter of right be entitled to receive as a result of (i) any capital
reorganization or reclassification of the capital stock of Matria, (ii) any
consolidation, merger or share exchange of Matria with or into another
corporation or (iii) any sale of all or substantially all the assets of Matria.
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<PAGE> 112
(c) Enforcement.
(i) The Investors, on the one hand, and Matria,
on the other, acknowledge and agree that irreparable damage
would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties will be entitled
to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically its provisions in any
court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they may
be entitled at law or in equity.
(ii) No failure or delay on the part of either
party in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(iii) MJG and SZI each shall take all action as
may be necessary to cause its respective controlled
Affiliates to comply with the terms of this Agreement and any
violation of this Agreement by any MJG Affiliate or SZI
Affiliate shall be deemed a violation by MJG or SZI, as the
case may be.
(d) Entire Agreement. This Agreement, the Purchase
Agreement and the documents referred to as Exhibits to the Purchase Agreement
constitute the entire understanding of the parties with respect to the
transactions contemplated by them. This Agreement may be amended only by an
agreement in writing executed by all the parties.
(e) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining provisions
without including any that may be declared unenforceable.
(f) Heading. Descriptive headings are for convenience
only and will not control or affect the meaning or construction of any
provision of this Agreement.
(g) Counterparts. This Agreement may be executed in two
or more counterparts, and each such executed counterpart will be an original
instrument.
(h) Notices. All notices, consents, requests,
instructions, approvals and other communications provided for in this Agreement
and all legal process in regard to this Agreement will be validly given, made
or served, if in writing and delivered personally, by telecopy (except for
legal process) or sent by registered mail postage paid.
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<PAGE> 113
If to Matria:
Matria Healthcare, Inc.
1850 Parkway Place
12th Floor
Marietta, Georgia 30067
Attention: General Counsel
Telecopy Number: (770) 767-7769
with a copy to:
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: James L. Smith, III, Esq.
Telecopy Number: (404) 962-6687
If to MJG:
Mr. Mark J. Gainor
Gainor Medical Management, LLC
2205 Highway 42 North
P.O. Box 353
McDonough, Georgia 30253-0353
Telecopy Number: (770) 474-1600
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Philip H. Moise, Esq.
Telecopy Number: (404) 817-6050
If to SZI:
SZ Investments, L.L.C.
Two North Riverside Plaza, Suite 600
Chicago, Illinois 60606
Attention: Rod F. Dammeyer
Telecopy Number: (312) 454-0610
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<PAGE> 114
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, Illinois 60606
Attention: President
Telecopy Number: 312-454-0335
or to such other address or telecopy number as any party may, from time to
time, designate in a written notice given in a like manner. Notice by telecopy
shall be deemed delivered on the day telephone confirmation of receipt is
given.
(i) Successors and Assigns. This Agreement shall bind
the successors and assigns of the parties, and inure to the benefit of any
successor or assign of any of the parties; provided, however, that no party may
assign this Agreement without the other party's prior written consent.
(j) Change in Control. Notwithstanding anything to the
contrary in this Agreement, all of the provisions of this Agreement shall
terminate in the event of a Change in Control of Matria.
(k) Governing Law. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the State of
Georgia, without giving effect to the conflict of laws principles thereof.
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<PAGE> 115
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first referred to above.
MATRIA HEALTHCARE, INC.
By:
--------------------------------------
Title:
--------------------------------
--------------------------------------
MARK J. GAINOR
SZ INVESTMENTS, L.L.C.
By:
--------------------------------------
Title:
--------------------------------
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<PAGE> 116
EXHIBIT E
RESTRICTIVE COVENANT AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT (the "Agreement") is made and
entered into this _____ day of January, 1999 (the "Closing Date"), by and among
GAINOR MEDICAL MANAGEMENT, L.L.C., a Georgia limited liability company
("Seller"), MARK J. GAINOR, a Georgia resident ("MJG"), SZ INVESTMENTS, L.L.C.,
a Delaware limited liability company ("SZI"), and MATRIA HEALTHCARE, INC., a
Delaware corporation ("Matria").
BACKGROUND:
A. Contemporaneously with the execution of this Agreement,
Matria is effectively acquiring all of the Interests and Assets pursuant to the
terms of, and as defined in, that certain Purchase and Sale Agreement (the
"Purchase Agreement"), dated as of December 21, 1998, among Matria and Seller.
B. MJG and SZI are members of Seller and will benefit from
Matria's acquisition of the Interests and Assets pursuant to the Purchase
Agreement.
C. As a material inducement for Matria to enter into the
Purchase Agreement, Seller, MJG and SZI have agreed to enter into this
Agreement.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following respective meanings and other terms used herein
shall have the meanings given in the Purchase Agreement:
(a) "Competing Business" shall mean a business that,
wholly or partly, directly or indirectly, is engaged in (i) providing,
selling or marketing lancet or lancing devices, microsampling or
diabetic disease management; or (ii) designing, developing,
manufacturing, testing, selling, marketing or distributing products or
equipment relating thereto; provided, however, MJG's involvement
pursuant to that certain Management Agreement, by and among Matria and
MJG, among others, dated January 19, 1999, shall not constitute a
competing business for purposes of this Agreement.
<PAGE> 117
(b) "Competitive Position" shall mean: (i) Seller, MJG
or SZI's direct or indirect equity ownership (excluding ownership of
less than two percent (2%) of the outstanding common stock or equity
interests of any publicly held company) or control of any portion of
any Competing Business; or (ii) Seller, MJG or SZI serving as a
director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business.
(c) "Confidential Information" shall mean all valuable,
proprietary and confidential business information belonging to or
pertaining to Seller or the Subsidiaries that does not constitute a
Trade Secret and that is not generally known by or available to the
competitors of Seller or the Subsidiaries but is generally known only
to Seller and Subsidiaries and those of its employees, independent
contractors, customers or agents to whom such information must be
confided for internal business purposes.
(d) "Covenant Period" shall mean the period of time
commencing with the Closing Date and continuing for a period of five
(5) years hereafter.
(e) "Restricted Territory" shall mean North America,
Europe and Japan.
(f) "Trade Secrets" shall mean all information of Seller
and the Subsidiaries defined as such under applicable law.
2. CONFIDENTIALITY. Seller, and MJG and SZI (as members of
Seller), were exposed to and had access to Trade Secrets and Confidential
Information. Seller, MJG and SZI hereby acknowledge and agree that the Trade
Secrets and Confidential Information represent a substantial investment of
Matria, and that any unauthorized disclosure or use of any of the Trade Secrets
or Confidential Information or any other violation of the confidentiality
provisions of this Section 2, would be wrongful and could cause immediate and
irreparable injury to Matria. Accordingly, each of Seller, MJG and SZI hereby
agrees severally and not jointly that he/it will not, without the express prior
written consent of Matria, distribute, sell, market, publish, disclose,
transfer, assign, disseminate or otherwise communicate to any other person or
entity, or use, copy or appropriate for or on behalf of himself/itself or any
other person or entity: (a) any Confidential Information during the Covenant
Period; or (b) any Trade Secret at any time during which such information
constitutes a trade secret under applicable law. Each of Seller, MJG and SZI
agrees severally and not jointly that he/it will adhere to all reasonable
confidentiality requirements that Matria may establish from time to time, with
respect to the Confidential Information and Trade Secrets, and will immediately
notify Matria of any unauthorized disclosure or use of any Trade Secret or
Confidential Information by him/it. Each of Seller, MJG and SZI also agrees
severally and not jointly to assist Matria, at Matria's sole expense and to the
extent reasonably necessary, in the procurement of any protection of Matria's
rights in or to any Trade Secrets or Confidential Information.
3. NONCOMPETITION. During the Covenant Period, each of Seller,
MJG and SZI agrees severally and not jointly that he/it will not, without the
prior written consent of Matria, either directly or indirectly, alone or in
conjunction with any other person or entity, accept, enter into or attempt to
enter into a Competitive Position in the Restricted Territory.
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<PAGE> 118
4. NONSOLICITATION OF CUSTOMERS. During the Covenant Period,
each of Seller, MJG and SZI agrees severally and not jointly that he/it will
not, without the prior written consent of Matria, either directly or
indirectly, alone or in conjunction with any other person or entity, solicit
any customer of the Subsidiaries (or any actively sought or prospective
customer of the Subsidiaries) for or on behalf of any Competing Business to
purchase products or services offered by Matria or any Subsidiary.
5. NONSOLICITATION OF PERSONNEL. During the Covenant Period,
each of Seller, MJG and SZI agrees severally and not jointly that he/it will
not, without the prior written consent of Matria, either directly or
indirectly, alone or in conjunction with any other person or entity, solicit or
attempt to solicit any "key or material" employee, consultant, contractor or
other personnel of Matria or the Subsidiaries to terminate, alter or lessen
that party's affiliation with the Subsidiaries or to violate the terms of any
agreement or understanding between such employee, consultant, contractor or
other person and the Subsidiaries. For purposes of this Section 5, "key or
material" employees, consultants, contractors or other personnel shall mean
those such persons or entities who have direct access to or have had
substantial exposure to Confidential Information or Trade Secrets.
6. GOODWILL. During the Covenant Period, each of Seller, MJG and
SZI agree severally and not jointly to not make any statement or other
communication that impugns or attacks the reputation or character of the
Subsidiaries, or materially damages the goodwill of the Subsidiaries, take any
action that would interfere with any contractual, customer or referral source
relationships of the Subsidiaries in a way that would result in a diminution of
business, or otherwise take any action that is detrimental to the best
interests of the Subsidiaries.
7. CORPORATE NAMES. Each of Seller, MJG and SZI hereby agrees
severally and not jointly that he/it will no longer use, and is hereby
prohibited from using, any corporate name, trade name or advertising symbol
associated with, or similar to those of "Gainor Medical"; provided, however,
MJG may use his name in a business not in the healthcare industry.
8. ACKNOWLEDGMENTS. Each of Seller, MJG and SZI acknowledges and
agrees severally and not jointly that the business of the Subsidiaries is
conducted and is known throughout the Restricted Territory and that the
Subsidiaries' reputation and goodwill are an integral part of its business
success throughout the Restricted Territory. If Seller, MJG or SZI deprives
Matria of any of the Subsidiaries' goodwill or in any manner utilizes the
Subsidiaries' reputation or goodwill in competition with the Subsidiaries,
Matria will be deprived of the benefits it has bargained for pursuant to the
Purchase Agreement. Accordingly, each of Seller, MJG and SZI hereby
acknowledges and agrees severally and not jointly that the covenants contained
in Sections 2, 3, 4, 5, 6, 7 and 8 hereof (the "Protective Covenants") are made
by him/it (and shall be treated) as "ancillary to the sale of the business"
under the Purchase Agreement. Each of Seller, MJG and SZI further acknowledges
and agrees severally and not jointly that the Protective Covenants are
reasonable as to time, scope and territory given Matria's need to protect the
Trade Secrets and Confidential Information of the Subsidiaries. In the event
any covenant or agreement in this Agreement shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over
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<PAGE> 119
too great a geographical area or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the maximum period
of time for which it may be enforceable and/or over the maximum geographical
area as to which it may be enforceable and/or to the maximum extent in all
other respects as to which it may be enforceable, all as determined by such
court in such action.
9. SPECIFIC PERFORMANCE. Each of Seller, MJG and SZI hereby
acknowledges and agrees severally and not jointly that any breach of a
Protective Covenant by him/it will cause irreparable damage to the Subsidiaries
and Matria, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such breach will be inadequate. Accordingly, each
of Seller, MJG and SZI agrees severally and not jointly that, in addition to
any other remedy that may be available at law, in equity, or hereunder, Matria
shall be entitled to specific performance and injunctive relief, without
posting bond or other security to enforce or prevent any violation of any of
the Protective Covenants by him/it.
10. MISCELLANEOUS.
(a) This Agreement contains the entire agreement and
understanding concerning the subject matter hereof between the parties
hereto. No waiver, termination or discharge of this Agreement, or any
of the terms or provisions hereof, shall be binding upon any party
hereto unless confirmed in writing. This Agreement may not be modified
or amended, except by a writing executed by all parties hereto. No
waiver by any party hereto of any term or provision of this Agreement
or of any default hereunder shall affect such party's rights
thereafter to enforce such term or provision or to exercise any right
or remedy in the event of any other default, whether or not similar.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
(c) This Agreement may not be assigned, in whole or in
part, by Seller, MJG or SZI, without the prior written consent of
Matria, or by Matria except to one of its Affiliates, and any
attempted assignment not in accordance herewith shall be null and void
and of no force or effect.
(d) This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
(e) If any provision of this Agreement shall be held
void, voidable, invalid or inoperative, no other provision of this
Agreement shall be affected as a result thereof, and, accordingly, the
remaining provisions of this Agreement shall remain in full force and
effect as though such void, voidable, invalid or inoperative provision
had not been contained herein.
(f) This Agreement shall not be construed more strongly
against any party hereto regardless of which party is responsible for
its preparation. The headings herein
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<PAGE> 120
are for convenience of reference only and shall not be deemed to be a
part of this Agreement. A pronoun in one gender includes and applies
to the other gender as well.
(g) Upon the reasonable request of any party, each party
hereto agrees to take any and all actions, including, without
limitation, the execution of certificates, documents or instruments,
necessary or appropriate to give effect to the terms and conditions
set forth in this Agreement.
(h) All rights and remedies of each party hereto are
cumulative of each other and of every other right or remedy such party
may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent
or subsequent exercise of other rights or remedies.
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute the same Agreement. Any signature
page of any such counterpart, or any electronic facsimile thereof, may
be attached or appended to any other counterpart to complete a fully
executed counterpart of this Agreement, and any telecopy or other
facsimile transmission of any signature shall be deemed an original
and shall bind such party.
(j) Liability of Seller, MJG and SZI. Any liability or
obligation of any kind whatsoever under this Agreement shall be
several and not joint as between or among any of Seller, MJG and/or
SZI. Notwithstanding anything to the contrary in this Agreement: (i)
in no event shall Seller be responsible in any manner for any
liability or obligation of, or the breach of any provision of this
Agreement by, MJG or SZI; in no event shall MJG be responsible in any
manner for any liability or obligation of, or the breach of any
provision of this Agreement by, Seller or SZI; and (ii) in no event
shall SZI be responsible in any manner for any liability or obligation
of, or the breach of any provision of this Agreement by, Seller or
MJG.
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<PAGE> 121
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representative to execute, this Agreement as of the day and
year first above written.
"MATRIA"
MATRIA HEALTHCARE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[CORPORATE SEAL]
"SELLER"
GAINOR MEDICAL MANAGEMENT, L.L.C.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"MJG"
------------------------------------------
Mark J. Gainor
"SZI"
SZ INVESTMENTS, L.L.C.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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<PAGE> 122
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of this ______ day of
January, 1999, by and among MATRIA HEALTHCARE, INC., a Delaware corporation
("Matria") and Gainor Medical Management, L.L.C., a Georgia limited liability
company ("GMM" or individually, an "Investor" and together with those persons
deemed to become "Investors" under Section 3.8, the "Investors").
WHEREAS, Matria and GMM entered into a Purchase and Sale Agreement
dated as of December 21, 1998 (the "Purchase Agreement"), pursuant to which
Matria acquired certain assets of GMM in exchange for cash, Convertible
Preferred Stock, Redeemable Preferred Stock, Warrants and the Earn-Out Note (as
those terms are defined in the Purchase Agreement) of Matria.
WHEREAS, the Investor will beneficially own the Convertible Preferred
Stock and Warrants to be issued pursuant to the Purchase Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and other good and valuable
consideration, the parties hereto covenant and agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the same meaning as provided in the Purchase
Agreement. "Matria Shares" means Common Stock of Matria acquired by Investors
upon conversion of the Convertible Preferred Stock or exercise of the Warrants
and any additional Common Stock acquired by the Investors, including, but not
limited to, Common Stock purchased in accordance with the Standstill Agreement,
issued as a dividend, stock split, distribution by way of merger,
consolidation, reorganization or exchange for, or in respect of, such Common
Stock.
2.1 Demand Registration.
(a) Upon the written demand of either Mark J. Gainor
("MJG") or SZ Investments, L.L.C., a Delaware limited liability company ("SZ")
(or its successors) or any Investor who holds at least 10% of the outstanding
Matria Shares (any of such persons, an "Initiating Investor"), to Matria (a
"Demand") at any time and from time to time during the Demand Period (as
defined below), but not more than once in any 365-day period and thereafter
during the term of the Standstill Agreement so long as the person requesting
registration remains an Affiliate (as that term is defined in the Securities
Act) (the "Demand Period") requesting that Matria effect the registration under
the Securities Act, Matria will promptly give written notice (a "Demand
Notice") of such Demand to all Investors. The Demand Period shall mean the
period beginning the date hereof and ending the later of (i) the date five (5)
years after the date of this
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Agreement, (ii) as to demands made by MJG, SZ or any of their Permitted
Transferees, the date on which MJG, SZ and their Permitted Transferees own in
the aggregate less than 15% of the then outstanding Common Stock, (iii) as to
demands made by MJG or his Permitted Transferees the date on which MJG and his
Permitted Transferees own in the aggregate less than 10% of the then
outstanding Common Stock or (iv) as to demands made by SZ or its Permitted
Transferees the date on which SZ or its Permitted Transferees own in the
aggregate less than 10% of the outstanding Common Stock.
(b) Each other Investor may request that Matria effect
the registration under the Securities Act of additional Matria Shares of such
Investor by delivering written notice to Matria specifying such number of
Matria Shares within 20 days of receipt of the Demand Notice. In the event that
Matria receives requests for the registration under the Securities Act of
Matria Shares representing at least an aggregate of thirty-three percent (33%)
of the Matria Shares initially issuable upon conversion of the Convertible
Preferred Stock and exercise of the Warrants (or if a lesser number of Matria
Shares are outstanding or subject to issuance upon conversion or exercise of
outstanding Convertible Preferred Stock or Warrants, representing at least an
aggregate of the lesser of 1% of the then outstanding Common Stock or 50% of
the remainder of the Matria Shares then outstanding and subject to such
issuance but not less than 500,000) within such 20-day period Matria shall give
written notice (a "Registration Notice") to all Investors that Matria will be
filing a registration statement (including registrations filed under Section
2.3 hereof, a "Registration Statement") pursuant to this Section 2.1 and will
thereupon use its reasonable best efforts promptly to effect the registration
under the Securities Act of (i) the Matria Shares that Investors have requested
to be registered within 20 days of the receipt of the Demand Notice, (ii) any
additional Matria Shares that Investors have requested to be registered within
10 days of receipt of the Registration Notice. To the extent permitted by
paragraph (c) below, such Registration Statement may include shares to be sold
by Matria and other persons with contractual registration rights. If the
registration of which Matria gives a Demand Notice is for an underwritten
public offering, Matria Shares and shares held by other Matria shareholders
with contractual registration rights that are to be included in the
underwriting may be included in such registration, and Matria shall, with the
consent of Investors holding a majority of the Matria Shares to be registered,
which shall not be unreasonably withheld, have the right to designate the
managing underwriter(s) in any such underwritten public offering. Investors who
include Matria Shares in a registration pursuant to this Section 2.1 shall bear
the cost of any underwriters' discounts and commissions relating to their
Matria Shares that are sold and the fees and disbursements of any counsel
representing the selling Investors.
(c) If Matria shall furnish to the Investors a
certificate signed by Matria's chief executive officer stating that, because of
unannounced material pending acquisitions or other undisclosed material facts,
in the good faith judgment of the Board of Directors of Matria, it would not be
in the best interests of Matria and its shareholders generally to sell shares
pursuant to such Registration Statement for a period not to exceed 90 days from
the date of such officer's certificate, the Investors shall agree that they
shall not sell securities pursuant to such Registration Statement during such
period; provided, however, that Matria shall be entitled to
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give such notice only once in any 365-day period. Matria has not previously and
will not on or after the date of this Agreement, enter into any agreement
granting to any other person the right to participate in an underwritten
offering of Common Stock under a Registration Statement filed pursuant to this
Section 2.1 unless, (i) MJG and SZ consent in writing to such grant; or (ii)
under the terms of such agreement, such person may include securities in such
registration statement only to the extent that such inclusion will not reduce
the amount of the Investors' Matria Shares included in the Registration
Statement.
(d) Unless otherwise requested by the Investors of a
majority of shares being registered, the Registration Statement filed pursuant
to this Section 2.1 shall be a shelf registration statement on an appropriate
form pursuant to Rule 415 (or similar rule that may be adopted by the
Commission, as hereinafter defined). Matria shall use its reasonable best
efforts to keep such Registration Statement continuously effective for a period
expiring, subject to Section 2.6, on the earlier of (i) the date on which all
of the Matria Shares covered by the Registration Statement have been sold
pursuant thereto or (ii) 270 days.
2.2 Expenses. Matria is obligated to use its reasonable best
efforts to effect any and all demand registrations under Section 2.1 and, with
respect to each such registration, Matria shall bear all expenses other than
underwriting discounts and commissions, if any, in connection with
registrations, filings or qualifications pursuant to Section 2.1 or 2.3,
including without limitation all registration, filing and qualification fees,
printers' and accounting fees and the fees and disbursements of counsel for
Matria.
2.3 Piggyback Registration. If, at any time during the Demand
Period, Matria proposes to register any of its securities under the Securities
Act (except pursuant to a Registration Statement filed on Form S-8 or Form S-4,
or such other form as shall be prescribed under the Act for the same purposes),
Matria will at each such time give prompt written notice to Investors (but in
no event less than 30 days before the anticipated filing of the Registration
Statement) of its intention to do so and the proposed minimum offering price
per Matria Share, and upon the written request of any Investor given within 20
days after Matria's giving of such notice, Matria will use its reasonable best
efforts to effect the registration of the Matria Shares which it shall have
been so requested to register by including the same in such Registration
Statement all to the extent required to permit the sale or other disposition
thereof in accordance with the intended method of sale or other disposition
given in each such request. If the registration of which Matria gives notice
pursuant to this Section 2.3 is for an underwritten public offering, Matria
shall have the right to designate the managing underwriter(s) in any such
underwritten public offering; provided that (i) Matria shall use its
commercially reasonable best efforts to cause the managing underwriter(s) to
include the Matria Shares requested to be included in the registration in the
underwriting; and (ii) if the managing underwriter(s) advises the Investors in
writing that it cannot sell the total amount of securities which they, Matria
and all other selling stockholders intend to include in such offering at prices
acceptable to Matria and the holders of a majority of the Common Stock being
sold (the "Majority Holders"), the amount of securities to be offered for the
accounts of all Investors shall be reduced pro rata (based upon the amount of
securities each such selling stockholder sought to include in the offering) to
the
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extent necessary to reduce the total amount of securities to be included in the
offering to the amount that may, in the opinion of such managing
underwriter(s), be sold at prices that are acceptable to Matria and the
Majority Holders (which amount may be zero, if so recommended by such managing
underwriter(s)). Any Registration Statement filed pursuant to this Section 2.3
may be withdrawn at any time at the discretion of Matria.
2.4 Registration In Connection with Underwritten Public Offering.
If a registration under Section 2.1 or 2.3 shall be in connection with an
underwritten public offering, each holder of Matria Shares shall be deemed to
have agreed by acquisition of such Matria Shares not to effect any sale or
distribution, including any sale pursuant to Rule 144 or Rule 144A, of any
Matria Shares, and to use such holder's reasonable best efforts not to effect
any such sale or distribution of any other equity security of Matria or of any
security convertible into or exchangeable or exercisable for any equity
security of Matria (other than as part of such underwritten public offering)
within such period (not to exceed 120 days) after the effective date of such
Registration Statement as shall be requested by the managing underwriter for
such offering and agreed to by all executive officers and directors of Matria.
2.5 Obligations with Respect to Registration.
(a) In connection with the registration of the Matria
Shares, Matria shall:
(i) promptly prepare and file with the
Securities and Exchange Commission (the "Commission") a
Registration Statement (which shall be available for the sale
of the Matria Shares in accordance with the intended method
or methods of distribution by the selling Investors thereof
and shall include pledgees of any selling Investor in the
"plan of distribution") (x) as soon as possible after the
lapse of the ten-day period following the Registration Notice
or (y) within the time period set forth in Section 2.3, and
file any amendments (including post-effective amendments) and
supplements to the Registration Statement and to any
prospectus included therein (the "Prospectus") as may be
necessary to keep such Registration Statement continuously
effective and respond promptly to any comments received from
the Commission with respect to the Registration Statement or
any amendment thereto and (z) comply with the provisions of
the Securities Act and the rules and regulations promulgated
thereunder with respect to the disposition of all Matria
Shares covered by such Registration Statement for the periods
specified in Section 2.1(c) or, in the case of piggyback
registration, the period necessary to complete the
distribution of the Matria Shares covered thereby, in each
case with any extension of such period under Section 2.6.
(ii) notify the Investors and confirm such
advice in writing, (v) when such Registration Statement
becomes effective, (w) when the filing of any post-effective
amendment to such Registration Statement or supplement to the
Prospectus is required, when the same is filed and, in the
case of a post-effective
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amendment, when the same becomes effective, (x) of any
request by the Commission for any amendment of or supplement
to such Registration Statement or the Prospectus or for
additional information and (y) of the entry of any stop order
suspending the effectiveness of such Registration Statement
or the initiation of any proceedings for that purpose, and,
if such stop order shall be entered, Matria shall use its
reasonable best efforts promptly to obtain the lifting
thereof (z) of the happening of any event during the period
such Registration Statement is effective as a result of which
such Registration Statement or the applicable Prospectus
contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(iii) furnish at Matria's expense to the
Investors without charge (x) at a reasonable time prior to
the filing thereof with the Commission a copy of the
Registration Statement in the form in which Matria proposes
to file the same; not later than one day prior to the filing
thereof, a copy of any amendment (including any
post-effective amendment) to such Registration Statement; and
promptly following the effectiveness thereof, a conformed
copy of the Registration Statement as declared effective by
the Commission and of each post-effective amendment thereto,
including financial statements and all exhibits and reports
incorporated therein by reference, and (y) such number of
copies of the preliminary, any amended preliminary, and final
Prospectus and of each post-effective amendment or supplement
thereto, as may reasonably be required in order to facilitate
the disposition of the Matria Shares covered by such
Registration Statement in conformity with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder, but only while Matria is required under the
provisions hereof to cause the Registration Statement to
remain effective;
(iv) use its reasonable efforts to register or
qualify the Matria Shares by the time the Registration
Statement is declared effective by the SEC under all
applicable state securities or blue sky laws of such
jurisdictions in the United States and its territories and
possessions as any Investor whose Matria Shares covered by
the Registration Statement shall reasonably request in
writing, keep each such registration or qualification
effective during the period such Registration Statement is
required to be kept effective or during the period offers or
sales are being made by a selling Investor, whichever is
shorter; provided, however, that in connection therewith,
Matria shall not be required to (x) qualify as a foreign
corporation to do business or to register as a broker or
dealer in any such jurisdiction where it would not otherwise
be required to qualify or register but for this Section
2.5(a)(iv), (y) subject itself to taxation in any such
jurisdiction or (z) file a general consent to service of
process in any such jurisdiction;
(v) cooperate with each seller of Matria Shares
and each underwriter
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participating in the disposition of such Matria Shares and
their respective counsel in connection with any filings
required to be made with the National Association of
Securities Dealers, Inc. (the "NASD");
(vi) if reasonably requested by the managing
underwriter(s) or a selling Investor in connection with an
underwritten offering, promptly incorporate in a prospectus
supplement or post-effective amendment such information as
the managing underwriter(s) and the holders of a majority in
number of the Matria Shares being sold agree should be
included therein solely relating to (x) the number of Matria
Shares being sold to such underwriter(s), (y) the purchase
price being paid therefor by such underwriter(s) and (z) with
respect to any other terms of the offering of the Matria
Shares to be sold in such offering which may affect the
underwriter(s) or the selling Investors;
(vii) cooperate with the selling Investors of
Matria Shares to facilitate the timely preparation and
delivery of certificates representing Matria Shares to be
sold and not bearing any Securities Act legend; and enable
certificates for such Matria Shares to be issued at least two
business days prior to any sale of Matria Shares;
(viii) subject to obtaining confidentiality
agreements reasonably satisfactory to Matria, make available
for inspection by the selling Investors of Matria Shares and
underwriter(s), and any counsel, accountants or other
representatives retained by such selling Investors and
underwriter(s) all financial and other records, pertinent
corporate documents and properties of Matria and cause the
officers, directors and employees of Matria to supply all
such records, documents or information reasonably requested
by such selling Investors, underwriter(s), counsel,
accountants or representatives in connection with the
Registration Statement;
(ix) use its reasonable efforts to cause all
Matria Shares to be listed on any securities exchange or
quotation system on which similar securities issued by Matria
are then listed;
(x) if requested by a selling Investor and any
underwriters engaged by such selling Investor for purposes of
distributing the Matria Shares, enter into such agreements
(including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take
all such other reasonable actions in connection therewith
(including those reasonably requested by the underwriter(s)
or such selling Investor) in order to expedite or facilitate
the disposition of such Matria Shares, and in such
connection, (v) make such representations and warranties to
the underwriter(s) with respect to the business of Matria and
the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in
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underwritten offerings, and confirm the same if and when
requested; (w) obtain opinions of counsel to Matria and
updates thereof (which shall be in form and substance
reasonably satisfactory to the underwriter(s), if any, and
their respective counsel), addressed to such selling Investor
and each of the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such
counsel and underwriters; (x) obtain "cold comfort" letters
and updates thereof from the independent certified public
accountants of Matria, addressed to each of the underwriters,
such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in
connection with underwritten offerings (in each case, to the
extent permitted by applicable accounting rules and
guidelines); (y) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and
procedures no less favorable to the underwriters than those
set forth in Section 2.8 hereof and cross indemnification by
the underwriters similar to that set forth in Section 2.8
hereof in favor of Matria or the selling Investors, as the
case may be; and (z) deliver such documents and certificates
as may be reasonably requested by the managing underwriters
and their counsel to evidence compliance with any customary
conditions contained in the underwriting agreement entered
into by Matria.
(b) Each of the Investors receiving Matria Shares shall
furnish to Matria such information regarding such Investor and the distribution
of the Matria Shares as Matria may from time to time reasonably request in
writing and as shall be required by law or by the Commission in connection
therewith.
2.6 Disclosure Notice. Notwithstanding anything set forth herein
to the contrary, in the event that Matria notifies the Investors in writing
(the "Disclosure Notice") that Matria desires to amend the Registration
Statement or to supplement the prospectus in order to disclose material
information required to be disclosed in the prospectus included in such
Registration Statement, as then in effect, in order to correct an untrue
statement of a material fact or to disclose an omitted material fact that is
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, the Investors shall
refrain from selling Matria Shares thereunder until Matria notifies the
Investors in writing that the required amendment or supplement has been filed
with the Commission or until 90 days following the Disclosure Notice, whichever
is earlier (the "Disclosure Restricted Period"). If a Registration Statement
filed pursuant to Section 2.1 is effective at any time during the Disclosure
Restricted Period, Matria's obligation under Section 2.5(a) to keep such
Registration Statement current and effective shall be extended for a number of
days equal to the number of days such Registration Statement was in effect
during the Disclosure Restricted Period.
2.7 Offering Notice. Notwithstanding any provision of this
Agreement to the contrary, in the event Matria notifies the Investors under
Section 2.3 that Matria intends to file a Registration Statement in connection
with an underwritten offering (the "Offering") by Matria of
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any of its capital stock, and a registration has become effective under Section
2.1, the Investors shall refrain from selling or otherwise distributing any
Matria Shares within the period requested in writing by the managing
underwriter for such Offering, which period shall begin no earlier than two
days (subject to prior written notice thereof) prior to the effective date of
such Registration Statement and shall end no later than 120 days after such
effective date (the "Offering Restricted Period"); provided, however, that the
Investors shall not be required to refrain from selling in connection with any
Offering unless (i) Matria and all of the directors and executive officers of
Matria are also required to refrain from selling for a comparable period with
respect to any shares not registered for sale by them in such Offering pursuant
to contractual registration rights in effect on the date of this Agreement; and
(ii) each of the Investors whose Matria Shares are covered by the Registration
Statement shall be given the opportunity to include such Matria Shares in the
Registration Statement filed in connection with such Offering to the extent
required by Section 2.3. If a Registration Statement filed pursuant to Section
2.1 is in effect at any time during the Offering Restricted Period and the
Investors are not permitted to include in the Registration Statement filed for
the Offering all shares requested by the Investors to be included in the
Offering, Matria's obligation under the Section 2.1(d) to keep such
Registration Statement current and effective shall be extended for a number of
days equal to the number of days such Registration Statement was in effect
during the Offering Restricted Period or, if earlier, until the date on which
all of the Matria Shares initially covered thereby has been disposed of.
2.8 Commission Filings. Matria covenants that, so long as it is
subject to the reporting requirements of the Exchange Act, it will file the
reports required to be filed by it under the Exchange Act so as to enable any
Investor to sell Matria Shares pursuant to Rule 144 under the Securities Act.
In connection with any sale, transfer or other disposition by any Investor of
any Matria Shares pursuant to Rule 144 under the Securities Act, Matria shall
cooperate with such Investor to facilitate the timely preparation and delivery
of certificates representing Matria Shares to be sold and not bearing any
Securities Act legend, and enable certificates for such Matria Shares to be
issued at least 2 business days prior to any sale of Matria Shares for such
number of shares and registered in such names as the selling Investors may
reasonably request upon 10 business days' prior notice. Matria's obligation set
forth in the previous sentence shall be subject to the delivery, if reasonably
requested by Matria or its transfer agent, by counsel to such Investor, in form
and substance reasonably satisfactory to Matria and its transfer agent, of an
opinion that such Securities Act legend need not appear on such certificate.
2.9 Indemnification and Contribution.
(a) By Matria. In connection with the registration under
the Securities Act of the Matria Shares pursuant to this Section 2.8, Matria
shall indemnify and hold harmless the Investors and each other person, if any,
who controls any of the Investors within the meaning of Section 15 of the
Securities Act and each of their respective partners, trustees, officers,
directors, employees, agents and affiliates ("controlling persons"), against
any losses, claims, damages or liabilities, joint or several (or actions in
respect thereof) ("Losses"), to which each such indemnified party may become
subject, under the Securities Act or otherwise, but only to the
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extent such Losses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained, on the effective date
thereof, in any Registration Statement under which such Matria Shares were
registered under the Securities Act, in any preliminary Prospectus (if used
prior to the effective date of such Registration Statement) or in any final
Prospectus or in any post-effective amendment or supplement thereto (if used
during the period during which Matria is required to keep the Registration
Statement effective) (the "Disclosure Documents"), or (ii) any omission or
alleged omission to state in any of the Disclosure Documents a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, or (iii) any violation of any federal or state laws or rules or
regulations thereunder committed by Matria in connection with the performance
of its obligations under this Section 2.8; and Matria will reimburse each such
indemnified party for all legal and other expenses reasonably incurred by such
party in investigating or defending against any such claims, whether or not
resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality with respect to any
offering of securities pursuant to this Section 2.8, but excluding any amounts
paid in settlement of any action, suit, arbitration, proceeding, litigation or
investigation (collectively "Litigation"), commenced or threatened, if such
settlement is effected without the prior written consent of Matria; provided,
however, that Matria shall not be liable to an indemnified party or any other
Investor or controlling person of any other Investor in any such case to the
extent that any such Losses arise out of or are based upon (i) an untrue
statement or omission or alleged omission (x) made in any such Disclosure
Documents in reliance upon and in conformity with written information furnished
to Matria by such indemnified party for use therein, or (y) made in any
preliminary Prospectus if a copy of the final Prospectus was not delivered to
the person alleging any loss, claim, damage or liability for which Losses arise
at or prior to the written confirmation of the sale of such Matria Shares to
such person and the untrue statement or omission concerned had been corrected
in such final Prospectus and copies thereof had timely been delivered by Matria
to such indemnified party; or (ii) the use of any Prospectus after such time as
Matria has advised such indemnified party in writing that the filing of a
post-effective amendment or supplement thereto is required, except the
Prospectus as so amended or supplemented, or the use of any Prospectus after
such time as the obligation of Matria to keep the same current and effective
has expired.
(b) By the Investors. In connection with the
registration under the Securities Act of the Matria Shares of the Investors
pursuant to this Section 2.8, each Investor receiving such Matria Shares shall,
severally and not jointly, indemnify and hold harmless Matria, each of its
directors, each of its officers who have signed such Registration Statement and
each other person, if any, who controls Matria within the meaning of Section 15
of the Securities Act, and each other Investor and each controlling person of
such Investors and each of their respective partners, trustees, officers,
directors, employees, agent and affiliates against any Losses to which such
indemnified party may become subject under the Securities Act or otherwise, but
only to the extent such Losses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any of
the Disclosure Documents or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
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and in conformity with written information furnished to Matria by such
indemnifying party for use therein; (ii) the use by such indemnifying party of
any Prospectus after such time as Matria has advised such indemnifying party in
writing that the filing of a post-effective amendment or supplement thereto is
required, except the Prospectus as so amended or supplemented, or after such
time as the obligation of Matria to keep the Registration Statement effective
and current has expired, or (iii) any information given or representation made
by such indemnifying party in connection with the sale of Matria Shares which
is not contained in and not in conformity with the Prospectus (as amended or
supplemented at the time of the giving of such information or making of such
representation); and such indemnifying party shall reimburse each such
indemnified party for all legal and other expenses reasonably incurred by such
party in investigating or defending against any such claims, whether or not
resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality relating to any such
claims with respect to any offering of securities pursuant to this Section 2.8,
but excluding any amounts paid in settlement of any Litigation, commenced or
threatened, if such settlement is effected without the prior written consent of
such indemnifying party. The indemnification obligations under this
subparagraph (b), and the contribution obligations under subparagraph (d), of
an indemnifying Investor shall be limited to the amount of proceeds received by
such Investor upon the sale of Matria Shares under a Registration Statement
filed to which Section 2.1 or 2.3 hereof applies.
(c) Actions Commenced. If a third party commences any
action or proceeding against an indemnified party related to any of the matters
subject to indemnification under Section 2.8(a) or (b) hereof, such indemnified
party shall promptly give notice to the indemnifying party in writing of the
commencement thereof, but failure so to give notice shall not relieve the
indemnifying party from any liability which it may have hereunder unless and to
the extent the indemnifying party is prejudiced thereby.
The indemnifying party shall be entitled to control
the defense or prosecution of such claim or demand in the name of the
indemnified party, with counsel satisfactory to the indemnified party, if it
notifies the indemnified party in writing of its intention to do so within 20
days of its receipt of the notice from the indemnified party without prejudice,
however, to the right of the indemnified party to participate therein through
counsel of its own choosing, which participation shall be at the indemnified
party's expense unless (i) the indemnified party shall have been advised by its
counsel that use of the same counsel to represent both the indemnifying party
and the indemnified party would represent a conflict of interest (which shall
be deemed to include any case where there may be a legal defense or claim
available to the indemnified party which is different from or additional to
those available to the indemnifying party), in which case the indemnifying
party shall not have the right to direct the defense of such action on behalf
of the indemnified party, or (ii) the indemnifying party shall fail vigorously
to defend or prosecute such claim or demand within a reasonable time. Whether
or not the indemnifying party chooses to defend or prosecute such claim, the
parties hereto shall cooperate in the prosecution or defense of such claim and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
requested in connection therewith. No indemnified party will be required to
consent to
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entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Contribution. If the indemnification provided for in
subsections (a) or (b) of this Section 2.8 is unavailable to or insufficient to
hold the indemnified party harmless under subsections (a) or (b) above in
respect of any Losses referred to therein for any reason other than as
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of and benefits
received by the indemnifying party on the one hand and such indemnified party
on the other in connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable considerations. The
relative benefits to the indemnifying party and indemnified parties shall be
determined by reference to among things, the total proceeds received by the
indemnified party and indemnifying parties in connection with the offering to
which such losses, claims, damages, liabilities or expenses relate. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
(or omitted to be supplied by) Matria or the Investors and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by an
indemnified party as a result of the Losses referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3.1 Notices. All notices and other communications required to be
given hereunder shall be in writing and shall be deemed to have been duly given
upon delivery, if delivered by hand; if given by mail, 3 days after the date of
mailing, postage prepaid, certified or registered mail to a party hereto at the
address set forth below; if given by facsimile, upon transmission to the number
set forth below provided written confirmation is sent to the address below; if
given by overnight delivery service addressed to the address set forth below,
the business day following the day on which such notice is sent:
If to Matria:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
Facsimile: (770) 767-7769
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With a copy to:
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: James L. Smith, III, Esq.
Facsimile: (404) 962-6687
If to the Investor:
Gainor Medical Management, LLC
2205 Highway 42 North
P.O. Box 353
McDonough, Georgia 30253-0353
Attention: J. Michael Highland
Facsimile: (770) 474-1600
With copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Philip H. Moise, Esq.
Facsimile: (404) 817-6050
With copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, Illinois 60606
Attention: President
Facsimile: 312-454-0335
Any party hereto may change its address for purposes of receiving notice
pursuant to this Agreement by giving notice of such new address to each other
party hereto.
3.2 Interpretation. The Sections and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Terms used in the plural include
the singular, and vice versa, unless the context otherwise requires.
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3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Telecopy transmission of
signatures shall be deemed originals.
3.4 Miscellaneous. This Agreement (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof; (ii) is not intended to and shall not confer upon any other person any
rights or remedies hereunder or otherwise with respect to the subject matter
hereof; (iii) subject to Section 3.10, shall not be assigned by operation of
law or otherwise; and (iv) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Georgia.
3.5 Binding Effect. The terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by or
against the parties and their respective legal representatives, heirs,
successors and permitted assigns.
3.6 Severability. If any part of this Agreement or other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given full force and effect to the greatest extent permitted by law.
3.7 Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is responsible for
its preparation.
3.8 Assignment of Registration Rights. The rights to cause Matria
to register the Matria Shares pursuant to this Agreement may only be assigned
by an Investor (i) to any person to whom an Investor is permitted to transfer
shares pursuant to Section 3.4(c)(i), (iii), (iv), (vii) or (viii) of the
Standstill Agreement who is restricted as to the resale of such Matria Shares
under the Securities Act, (ii) as a result of a pledge by an Investor of the
Matria Shares as security for any indebtedness or guaranty of any Investor,
upon the exercise of the pledgee's rights under such pledge; provided that in
each case such assignee agrees in a writing, delivered to Matria, to be bound
by the provisions of this Agreement. Upon each such assignment and delivery,
such assignee shall be deemed to be "Investor" for purposes on this Agreement.
3.9 Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first above written.
MATRIA
MATRIA HEALTHCARE, INC.
(CORPORATE SEAL)
By:
---------------------------------------
Name:
Title:
INVESTOR
GAINOR MEDICAL MANAGEMENT, L.L.C.
By:
---------------------------------------
Name:
Title:
Address:
2205 Highway 42 North
P. O. Box 353
McDonough, Georgia 30253-0353
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EXHIBIT G
Common Stock Warrant No. ______
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF RECEIPT BY THE INVESTOR OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE INVESTOR THAT THE SECURITIES MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
THESE SECURITIES AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF
THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND VOTING AS SET FORTH IN
THAT CERTAIN STANDSTILL AGREEMENT, DATED AS OF JANUARY 19, 1999, A COPY OF
WHICH MAY BE OBTAINED FROM THE COMPANY.
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT ARE SUBJECT TO CANCELLATION AS SET FORTH IN SECTION 13 HEREOF.
MATRIA HEALTHCARE, INC.
Common Stock Warrant
MATRIA HEALTHCARE, INC., a Delaware corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Gainor Medical Management,
L.L.C., a Georgia limited liability company ("Investor") or its permitted
assigns under the terms of this warrant (Investor or such permitted assigns at
the time being the registered holder or holders hereof being hereinafter
referred to as "Holder") is entitled, subject to the terms set forth below, to
purchase from the Company, at a purchase price per share of $3.00 (as such
amount may be adjusted from time to time pursuant to Section 3 hereof, the
"Purchase Price"), at any time or from time to time prior to 5:00 p.m., Eastern
Standard Time, on the Expiration Date, 4,000,000 fully paid and non-assessable
shares of Common Stock, $.01 par value per share, of the Company (the "Common
Stock") (such shares of Common Stock, in each case as the number and
characterization of such shares may be adjusted or otherwise modified from time
to time pursuant to Sections 3 or 4, are herein referred to as the "Warrant
Shares").
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Certain capitalized terms not otherwise defined herein shall have the
meanings set forth in Section 6 hereof.
Section 1 EXERCISE OF WARRANT.
1.1 Exercise. This Warrant may be exercised by Holder, in whole
or in part (but not for less than 1,000 of the Warrant Shares issuable under
this Warrant, or the remaining Warrant Shares, if less than such amount), at
any time and from time to time on or after the date hereof and prior to 5:00
p.m., Eastern Standard Time, on the Expiration Date by surrender of this
Warrant, together with a subscription substantially in the form of Exhibit A
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
Holder, to the Company at its principal office and accompanied by payment in
full, in cash or by check payable to the order of the Company (or in the manner
provided in Section 1.2 hereof), in the amount of the aggregate Purchase Price
for the Warrant Shares covered by such exercise.
1.2 Cashless Exercise. In lieu of exercising this Warrant
pursuant to Section 1.1 above, the Holder shall have the right at any time and
from time to time to exercise this Warrant, in whole or in part , by requiring
the Company to convert all or any part of this Warrant (the "Conversion
Right"), into Warrant Shares by surrendering this Warrant to the Company
accompanied by the form conversion notice (substantially in the form attached
hereto as Exhibit B, or a reasonable facsimile thereof) which has been duly
completed and signed. Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any cash in respect of
the Purchase Price) that number of Warrant Shares which is equal to the amount
obtained by dividing (x) an amount equal to the difference between (A) the
aggregate Current Market Price Per Share for the Warrant Shares as to which the
Conversion Right is then being exercised (the "Conversion Shares"), determined
as of immediately prior to the effective time of the exercise of the Conversion
Right, minus (B) the aggregate Purchase Price then applicable to the Conversion
Shares (such difference, the "Conversion Amount"), by (y) the Current Market
Price Per Share of one share of Common Stock determined as of immediately prior
to the effective time of the exercise of the Conversion Right. Upon exercise of
the Conversion Right, the Conversion Amount shall be deemed to have been paid
to the Company in respect of the Warrant Shares so acquired. Any references in
this Warrant to the "exercise" of this Warrant, and the use of the term
"exercise" herein, shall be deemed to include, without limitation, any exercise
of the Conversion Right. In the event this Warrant is not exercised in full,
the Warrant Shares shall be reduced by the number of Warrant Shares subject to
such partial exercise, and the Company, at its expense, shall forthwith issue
and deliver to Holder a new Warrant of like tenor in the name of Holder,
reflecting such adjusted Warrant Shares.
1.3 When Exercise Effective. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1 or 1.2 hereof, and at such time the Person
or Persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.4 shall be deemed to have become the holder or holders of
record thereof. The
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warrant or warrants surrendered upon exercise thereof shall thereafter be
canceled and of no further force or effect.
1.4 Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, the Company at its
expense (including the payment by it of any and all applicable issue taxes but
excluding any applicable transfer taxes) will issue and deliver to Holder: (a)
a certificate or certificates, in such name or names as such Holder may
designate, for the number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock to which Holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash in an amount equal to the same fraction of the
Current Market Price Per Share determined as of the Business Day preceding the
date of such exercise, and (b) in case such exercise is for less than all the
Warrant Shares issuable hereunder, a new Warrant representing such Warrant or
Warrants remaining hereunder in substantially the form of this Warrant.
Section 2 CERTAIN OBLIGATIONS OF THE COMPANY.
2.1 Reservation of Stock. The Company covenants that it will at
all times reserve and keep available, free from preemptive rights, solely for
issuance and delivery upon exercise of this Warrant, the number of shares of
Common Stock (or Other Securities) from time to time issuable upon exercise of
this Warrant. In furtherance of and not in limitation of the foregoing, the
Company will from time to time, in accordance with the laws of its state of
incorporation, take all necessary action to increase and maintain the
authorized amount of its Common Stock (or Other Securities) if at any time the
number of shares of Common Stock authorized but remaining unissued and
unreserved for other purposes shall be insufficient to permit the full exercise
of this Warrant.
2.2 Status of Warrant Shares; Corporate Actions. The Company
covenants that all Warrant Shares, upon issuance in accordance with the terms
of this Warrant Agreement and the Company's Certificate of Incorporation, as
amended from time to time (the "Certificate of Incorporation"), shall be fully
paid and nonassessable and free from all taxes with respect to the issuance
thereof (other than income taxes, if any, related to ordinary income
attributable to the Holder) and from all liens, charges and security interests.
The Company will not, by amendment of its Certificate of Incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issuance or sale of securities or any other voluntary action or
omission, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant. Without limiting the generality of the foregoing, the
Company (a) will not permit the par value or the determined or stated value of
any shares of the Common Stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise and (b) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of the Common
Stock (or Other Securities) upon the exercise of this Warrant, including,
without limitation, amending the Certificate of Incorporation.
2.3 Maintenance of Office. The Company will maintain an office
where presentations and demands to or upon the Company in respect of this
Warrant may be made. The initial
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location of such office shall be at 1850 Parkway Place, 12th Floor, Marietta,
Georgia 30067. The Company will give notice in writing to Holder in accordance
with Section 11 hereof of each change in the location of such office.
Section 3 ADJUSTMENT OF PURCHASE PRICE.
3.1 General; Purchase Price. The number of shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 3)
be issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1 hereof, by the fraction of which (a) the numerator is $3.00, and (b)
the denominator is the Purchase Price in effect on the date of such exercise.
The "Purchase Price" shall initially be $3.00 per share, shall be adjusted and
readjusted from time to time as provided in this Section 3 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this Section 3.
3.2. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 hereof) without
consideration or for a consideration per share less than the greater of the
Current Market Price Per Share and the Purchase Price in effect immediately
prior to such issue or sale (the greater of such two numbers being referred to
herein as the "Floor Price"), then, and in each such case, such Purchase Price
shall be reduced, concurrently with such issue or sale, to a price (calculated
to the nearest .001 of a cent) determined by multiplying such Purchase Price by
a fraction,
(i) the numerator of which shall be (A) the
number of shares of Common Stock outstanding immediately
prior to such issue or sale plus (B) the number of shares of
Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the Floor
Price; and
(ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately
after such issue or sale, provided that, for the purposes of
this Section 3.2, (A) immediately after any Additional Shares
of Common Stock are deemed to have been issued pursuant to
Section 3.3 or 3.4 hereof, such Additional Shares of Common
Stock shall be deemed to be outstanding, and (B) treasury
shares shall not be deemed to be outstanding.
3.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and options therefor,
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issuable upon the conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading); provided that such Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 3.5 hereof) of such shares would be less than
the Floor Price in effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), as the case may be;
and, provided, further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(a) no further adjustment of the Purchase Price shall be
made upon the subsequent issue or sale of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities by reason of (i) a
change of control of the Company or (ii) the acquisition by any Person or group
of Persons of any specified number or percentage of the Voting Securities of
the Company;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of Additional
Shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof (by change of rate or otherwise), the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of
the record date, or date prior to the commencement of ex-dividend trading, as
the case may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
options, or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have been
exercised or the expiration of any rights of conversion or exchange under any
such Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised, the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the commencement of
ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common Stock
issued or sold were the Additional Shares of
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Common Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Company for the issue, sale,
grant or assumption of all such Options, whether or not exercised,
plus the consideration actually received by the Company upon such
exercise, or for the issue or sale of all such Convertible Securities
which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such
conversion or exchange; and
(ii) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued or sold upon
the exercise of such Options were issued at the time of the issue,
sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to Section 3.5
hereof) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c)
above shall have the effect of increasing the Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in respect of
the issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by
their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Purchase Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall be
made in the manner provided in subdivision (c) above; and
(f) notwithstanding the foregoing, there shall be no
adjustment pursuant to this subsection 3.3 if the Holder is then an "Acquiring
Person" under the Rights Agreement, dated as of January 20, 1996 between the
Company and SunTrust Bank, Atlanta, as Rights Agent, as such agreement may be
amended pursuant to Section 8.6 of the Purchase and Sale Agreement or otherwise
amended, restated or modified from time to time.
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, with respect to any
adjustment of the Purchase Price pursuant to Section 3.2, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action
becomes effective.
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3.5 Computation of Consideration. For the purposes of this
Section 3:
(a) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company, (without
deducting any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale);
(ii) insofar as it consists of property
(including securities) other than cash, be computed at the
fair value thereof at the time of such issue or sale, as
determined in good faith by the Board of Directors of the
Company; and
(iii) in case Additional Shares of Common Stock
are issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company.
(b) Additional Shares of Common Stock deemed to have
been issued pursuant to Section 3.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the issue,
sale, grant or assumption of the Options or Convertible
Securities in question plus the aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the
exercise in full of such Options or the conversion or
exchange of such Convertible Securities or, in the case of
Options for Convertible Securities, the exercise of such
options for Convertible Securities and the conversion or
exchange of such Convertible Securities, in each case
computing such consideration as provided in the foregoing
subdivision (a), by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
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(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.4 hereof, relating to stock dividends, stock splits,
etc., shall be deemed to have been issued for no consideration, unless and only
to the extent that consideration is actually paid therefor.
3.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Purchase
Price in effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become issuable upon exercise of
Options or upon conversion of Convertible Securities, as the case may be, for a
consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of this Section 3, the purchase rights
granted by this Warrant, then, and in each such case, the computations,
adjustments and readjustments provided for in this Section 3 with respect to
the Purchase Price shall be made as nearly as possible in the manner so
provided and applied to determine the amount of Other Securities from time to
time receivable upon the exercise of this Warrant, so as to protect the Holder
of this Warrant against the effect of such dilution. All computations,
adjustments and readjustments made pursuant to this Section 3.7 shall be
determined by the Board of Directors, which determination shall be made in good
faith.
Section 4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In the case of
(A) any capital reorganization, reclassification or other change of outstanding
Common Stock (or Other Securities) (other than those referred to in Section 3.4
hereof and other than a change in par value), or (B) any consolidation of the
Company with any other corporation or any merger of the Company into another
corporation or of another corporation into the Company (other than a
consolidation or merger in which the Company is the continuing or surviving
corporation and which does not result in any reclassification of, or change
(other than a change in par value, or as a result of a subdivision or
combination to which Section 3.4 hereof is applicable) in, the outstanding
Common Stock (or Other Securities)), or (C) any sale or transfer to another
Person (other than by mortgage or pledge) of all or substantially all of the
properties and assets of the Company, each Warrant shall from and after such
event or transaction be exercisable upon the terms and conditions specified in
this Warrant, for the number of shares of stock or other securities or assets
to which the Holder (at the time of transaction or event) upon exercise of this
Warrant would have been entitled upon such transaction or event as if such
Holder exercised this Warrant in full immediately prior to such transaction or
event and in any such case, if necessary, the provisions set forth in this
Section 4 with respect to the rights thereafter of the Holder shall be
appropriately adjusted so as to be applicable, as nearly as may be possible, to
any shares of stock or other securities or assets thereafter deliverable on the
exercise of the Warrant; provided, that any such resulting or surviving
corporation or purchaser, as the case may be, in any such transaction, shall
expressly assume, by delivery of written instrument delivered to the Company
and the Holder prior to consummation of the transaction in question, the
obligation to deliver, upon the exercise of the Warrant, such shares,
securities or property as the Holder of the Warrant or other securities
received by the Holder in place thereof, shall be entitled to receive pursuant
to
8
<PAGE> 144
the provisions hereof, and to make provisions for the protection of the
exercise rights as above provided.
Section 5 NOTICE OF CERTAIN EVENTS.
If at any time:
(a) the Company shall declare any dividend or distribution
payable to the holders of its Common Stock (whether payable in cash, Common
Stock or other consideration);
(b) the Company shall offer for subscription or issuance pro rata
to the holders of its Common Stock any additional shares of stock of any class;
(c) there shall be any capital reorganization of the Company, any
recapitalization or reclassification of the capital stock of the Company, or
consolidation or merger involving the Company, or any sale or transfer of all
or substantially all of the Company's assets to any other Person;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company as a whole or substantially as a whole
in a single transaction or a series of related transactions; or
(e) there shall be any other event which would or may require
adjustment of at least 1% of the Purchase Price or the Warrant Shares pursuant
to Section 3 or 4 hereof,
then, in any one or more of such cases, the Company shall give Holder written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights or for determining stockholders entitled to
vote upon such reorganization, recapitalization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
and of the date, if determined, when any such transaction shall take place, as
the case may be. If and to the extent applicable, such notice shall also
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such recapitalization, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Such notice shall
be given at least 30 days before the earliest date required to be specified
therein in accordance with this subparagraph, shall describe the proposed
transaction in reasonable detail and shall specify the consideration to be
received by the holders of Common Stock in respect thereto and/or any
adjustment which would be made to the number of Warrant Shares obtainable upon
the exercise of this Warrant as a result of such transaction; provided,
however, that the Company shall be obligated to give only ten 10 days prior
notice with respect to the following events: (i) any event the occurrence of
which would give rise to an adjustment pursuant to the provisions of Section 3
or (ii) any regularly-scheduled dividend or distribution which, individually or
as a policy, has been previously publicly announced. The Company shall also
furnish to each Holder all notices and materials furnished to its stockholders
in connection with such transaction as and when such notices and materials are
furnished to its stockholders.
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<PAGE> 145
Section 6 DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
6.1 The term "Acquisition" shall mean any transaction, or any
series of related transactions, consummated after the date hereof, by which (a)
the Company acquires the business or all or substantially all of the assets of
any Person, or any division of any Person, whether through acquisition of
voting securities, purchase of assets, merger or otherwise or (b) any Person
that was not theretofore a subsidiary of the Company becomes a subsidiary of
the Corporation.
6.2 The term "Additional Shares of Common Stock" shall mean all
shares (including treasury shares) of Common Stock issued or sold (or, pursuant
to Section 3.3 or 3.4 hereof, deemed to be issued) by the Company after the
date hereof, whether or not subsequently reacquired or retired by the Company,
other than: (a) shares issued upon the exercise of this Warrant; (b) options
and shares issued upon the exercise of options outstanding on the date hereof
or to be granted under any Company stock option plan or stock purchase plan as
in effect on the date hereof or under any other employee or director stock
option or purchase plan or plans adopted or assumed after such date and which
have been duly approved and adopted by a vote of the stockholders of the
Company; (c) dividends paid or warrants issued pursuant to the terms of the
Series A Preferred Stock or the terms of the Series B Preferred Stock and
shares of capital stock issued upon exercise of such warrants; (d) in
connection with an Acquisition, options, and shares issued upon exercise of
such options, assumed by the Company or options, and shares issued upon
exercise of such options, issued by the Company in replacement of outstanding
options of the Person being acquired, to the extent that such options issued by
the Company have the same or greater relative exercise price per option and are
exercisable for the same or less relative number of shares of capital stock of
the Company, in each case, as the options being replaced; (e) the Company's 8%
Convertible Subordinated Debentures and Note due December 31, 2001 and shares
of Common Stock issued upon conversion thereof; (f) shares of Series A
Preferred Stock issued pursuant to the Purchase and Sale Agreement and shares
of Common Stock or other securities issued upon conversion thereof; (g) such
additional number of shares as may become issuable upon the exercise of any of
the securities referred to in the foregoing clauses (a), (b), (c) (d), (e) or
(f) by reason of adjustments required pursuant to anti-dilution provisions
applicable to such securities as in effect on the date hereof, but only if and
to the extent that such adjustments are required as the result of the original
issuance of the Warrants; (h) such additional number of shares as may become
issuable upon the exercise of any of the securities referred to in the
foregoing clauses (a), (b), (c), (d), (e) or (f) by reason of adjustments
required pursuant to anti-dilution provisions applicable to such securities as
in effect on the date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or otherwise, or any dividend
on Common Stock payable in Common Stock.
6.3 The term "Business Day" means any day other than a Saturday
or a Sunday or a day on which commercial banking institutions in New York City
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
10
<PAGE> 146
6.4 The term "Common Stock" shall have the meaning ascribed to it
in the introductory paragraph to this Warrant, provided that such term shall
also include any other securities or rights into which or for which the Common
Stock is converted or exchanged, whether pursuant to a plan of
reclassification, reorganization, consolidation, merger, sale of assets,
dissolution, liquidation, or otherwise.
6.5 The term "Convertible Securities" shall mean any evidence of
indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares
of Common Stock.
6.6 The term "Current Market Price Per Share" shall mean, with
respect to any of the Common Stock, as of any particular date of determination,
the average of the daily closing prices of the Common Stock as reported in The
Wall Street Journal or other reputable financial news source, for the 30
consecutive trading days immediately preceding such date.
6.7 The term "Expiration Date" shall mean 5:00 p.m., Eastern
Standard Time, on January 19, 2009.
6.8 The term "Options" shall mean any and all rights, options or
warrants to subscribe for, purchase or otherwise acquire either Additional
Shares of Common Stock or Convertible Securities.
6.9 The term "Other Securities" shall mean any stock (other than
Common Stock) and other securities of the Company or any other Person
(corporate or otherwise) which the holders of this Warrant at any time shall be
entitled to receive, or shall have received, upon the exercise of this Warrant,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 4 hereof or otherwise.
6.10 The term "Permitted Transferee" shall have the meaning given
such term in the Standstill Agreement, dated as of January 19, 1999, between
the Company, Mark J. Gainor, and SZ Investments, L.L.C.
6.11 The term "Person" shall mean an individual, corporation,
partnership, limited liability company, association, trust, joint venture,
unincorporated organization or any government, governmental department or
agency or political subdivision thereof.
6.12 The term "Purchase and Sale Agreement" shall mean that
certain Purchase and Sale Agreement dated as of December 21, 1998 between the
Company and Gainor Medical Management, L.L.C.
6.13 The term "Series A Preferred Stock" shall mean the 4% Series
A Convertible Preferred Stock, $.01 par value per share, of the Company.
6.14 The term "Voting Securities" shall mean stock of any class or
classes (or equivalent interests), if the holders of the stock of such class or
classes (or equivalent interests)
11
<PAGE> 147
are ordinarily, in the absence of contingencies, entitled to vote for the
election of the directors (or persons performing similar functions) of such
business entity, even though the right so to vote has been suspended by the
happening of such a contingency.
6.15 The term "Warrant Shares" shall have the meaning ascribed to
it in the introductory paragraph to this Warrant, provided that such term shall
include all Other Securities issuable from time to time upon exercise of this
Warrant in whole or in part.
Section 7 REPLACEMENT OF WARRANTS.
Upon surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant, then, the Company, at its expense, shall execute and deliver, in lieu
of and in replacement of this Warrant, a Warrant identical in form to this
Warrant.
Section 8 REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms
hereof or otherwise. The Company hereby irrevocably waives, to the extent that
it may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Company for specific performance
of this Warrant by the Holder. Such remedies and all other remedies provided
for in this Warrant shall, however, be cumulative and not exclusive and shall
be in addition to any other remedies which may be available under this Warrant.
Section 9 TRANSFER.
Subject to the restrictions set forth in the Standstill Agreement and
Section 11 of this Warrant, Holder may transfer or assign this Warrant. Upon a
transfer in accordance with this Section 9, the Company at its expense
(excluding any applicable transfer taxes) shall execute and deliver, in lieu of
and in replacement of this Warrant, Warrants identical in form to this Warrant
and in such denominations as the transferring Holder shall request; provided
that, any such transferee, by acceptance hereof, agrees to assume all of the
obligations of Holder and be bound by all of the terms and provisions of this
Warrant.
Section 10 NOTICES.
Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail or a
nationally recognized express courier, postage and other applicable charges
prepaid, (iii) sent by facsimile transmission, and shall be deemed given when
so delivered personally, sent by facsimile transmission (confirmed in writing)
or mailed. Notices shall be addressed, as follows:
12
<PAGE> 148
if to Holder:
Gainor Medical Management, L.L.C.
2205 Highway 42 North
P.O. Box 353
McDonough, Georgia 30253-0353
if to the Company:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
provided, that the exercise of this Warrant shall be effective in the manner
provided in Section 1 hereof.
Section 11 SALE OF WARRANT OR SHARES.
Neither this Warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act of 1933, as
amended (the "Federal Act"), or under the securities laws of any state. Neither
this Warrant nor such shares, when issued, may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement for this
Warrant, or the shares, as the case may be, under the Federal Act, such
registration or qualification as may be necessary under the securities laws of
any state, an exemption from such registration or qualification requirements.
The certificate or certificates evidencing all or any of the shares issued upon
exercise of this Warrant shall bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any state
securities act and may not be sold or transferred in the absence of
such registration or an exemption therefrom, or in the absence of
receipt by the Investor of an opinion of counsel reasonably
satisfactory to the Investor that the securities may be sold or
transferred without such registration.
These securities have been issued or sold in reliance on paragraph
(13) of Code Section 10-5-9 of the Georgia Securities Act of 1973, and
may not be sold or transferred except in a transaction which is exempt
under such Act or pursuant to an effective registration under such
Act."
This Warrant shall be registered on the books of the Company, which
shall be kept by it at its principal office for that purpose and shall be
transferable only on said books by the registered Holder's duly authorized
attorney upon surrender of this Warrant properly endorsed, and only in
compliance with the provisions of the preceding paragraph.
13
<PAGE> 149
Section 12 NO DIVIDENDS OR VOTING RIGHTS.
Other than as provided herein, unless and until exercised, no
provision of this Warrant shall be construed as conferring upon the Holder the
right to receive dividends or to vote as a shareholder of the Company, or as
imposing any obligation on the Holder to purchase any securities or as imposing
any liabilities on such Holder as a stockholder of the Company, whether such
obligation or liabilities are asserted by the Company or by creditors of the
Company.
Section 13 RIGHT OF CANCELLATION
If the Company is entitled under Article 9 of the Purchase and Sale
Agreement to cancel any portion of the outstanding Warrants, the Company shall
provide a notice of cancellation (the "Notice of Cancellation"), which shall be
mailed, first class, postage prepaid, to the Holder at its address set forth in
Section 10 or at such other address supplied by such holder in writing to the
Company for the purpose of such notice. The Company shall mail the Notice of
Cancellation not less than 30 nor more than 60 days prior to the effective date
of such proposed cancellation. In addition to any information required by law,
such notice shall set forth the proposed cancellation date, the number of
Warrant Shares proposed to be canceled, and the reason for the proposed
cancellation. The Purchase and Sale Agreement provides certain procedures for
resolving a dispute as to whether the Company is entitled to such cancellation.
Each Holder receiving a Notice of Cancellation shall be prohibited from
exercising any Warrant held by such Holder from the date on which the Company
mails the Notice of Cancellation through and including the actual cancellation
date. In case fewer than the total number of Warrants hereunder are canceled, a
new Warrant for the number of Warrants that were not cancelled will be issued
to the Holder upon surrender of the old Warrant without cost to such Holder.
Warrants not surrendered for cancellation shall be deemed to represent the
reduced number of Warrants from and after the actual cancellation date.
Section 14 MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if
any, that it may legally be enforced and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by a statement in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia without regard to its
principles of conflicts of laws. The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which constitute one and the same
instrument.
14
<PAGE> 150
Section 15 JUDICIAL PROCEEDINGS; WAIVER OF JURY TRIAL. Any judicial
proceeding brought against the Company with respect to this Warrant may be
brought in any court of competent jurisdiction in the State of Georgia or of
the United States of America for the Northern District of Georgia and, by
execution and delivery of this Agreement, the Company (a) accepts, generally
and unconditionally, the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Warrant, subject to any rights of
appeal, and (b) irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such a court or that such court is an inconvenient forum. THE COMPANY HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTION WITH THIS WARRANT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
IN WITNESS WHEREOF, the Company and the Holder have caused this
Warrant to be executed as an instrument under seal by a duly authorized officer
and, in the case of the Company, attested by its Secretary or Assistant
Secretary.
Dated as of January 19, 1999
(Corporate Seal)
MATRIA HEALTHCARE, INC.
Attest:
By:
- -------------------------------- ------------------------------
Secretary/Assistant Secretary Name: Donald R. Millard
Title: President
INVESTOR:
By:
----------------------------
Name:
-----------------------
15
<PAGE> 151
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: MATRIA HEALTHCARE, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to receive thereunder, shares of
Common Stock of MATRIA HEALTHCARE, INC. (the "Company"), and herewith makes
payment of $_________ therefor, and requests that the certificates for such
shares be issued in the name of _________________________, and delivered to
_________________________ whose address is ____________________________________
________________________________________.
Dated:
------------------------------
-------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant)
-------------------------------------
(Address)
- --------------------------
*Insert here the number of shares of Common Stock as to which the Warrant is
being exercised (including partial exercise), and in any event without making
any adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder of the
surrendering Warrant.
<PAGE> 152
EXHIBIT B
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant delivered herewith, in accordance with Section 1.2
of the Warrant, to convert the Warrant represented thereby into ___ shares of
Common Stock in accordance with the terms hereof. The undersigned requests that
a certificate for such shares of Common Stock be registered in the name of
___________________________ whose address is _____________________________ and
that such certificate be delivered to _______________________ whose address is
___________________. If said number of shares of Common Stock is less than all
of the Warrant Shares obtainable hereunder, the undersigned requests that a new
Warrant representing the remaining balance of the Warrant Shares be registered
in the name of ___________________________ whose address is ___________________
and that such Warrant be delivered to __________________________ whose address
is ____________________________.
Signature:
- ---------------------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant.)
Date:
-------------------
<PAGE> 153
EXHIBIT H
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is made
and entered into this ____ day of ____________, 1999, to be effective as of
January 1, 1999, by and among MATRIA HEALTHCARE, INC., a Delaware corporation
("Purchaser"), and GAINOR MEDICAL MANAGEMENT, L.L.C., a Georgia limited
liability company ("Seller").
W I T N E S S E T H :
WHEREAS, Purchaser and Seller are parties to that certain Purchase and
Sale Agreement dated as of December 21, 1998 (the "Purchase Agreement");
WHEREAS, pursuant to the Purchase Agreement, Purchaser agreed to
assume and discharge certain specified liabilities and obligations of Seller,
all as more fully set forth in the Purchase Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements set forth herein, Ten Dollars ($10.00) in
hand paid, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Capitalized Terms. Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Purchase Agreement.
2. Assumption. Purchaser hereby assumes all of the liabilities
listed on Exhibit A hereto (the "Assumed Liabilities") and hereby agrees to
pay, perform and discharge all of the Assumed Liabilities in accordance with
their respective terms.
3. Further Assurances. Each party hereto agrees from time to
time, subsequent to the date hereof, to execute and deliver or cause to be
executed and delivered such instruments or further assurances as may, in the
reasonable opinion of the other party, be necessary or desirable to give effect
to the provisions of this Assignment.
4. Binding Effect. This Assignment shall be binding upon and
shall enure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
<PAGE> 154
5. Governing Law. The validity and effect of this Assignment and
the rights and obligations of the parties hereunder shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia
without regard to principles of conflicts of law.
6. Amendments. No amendment to the terms and conditions of this
Assignment shall be valid and binding on the parties hereto unless made in
writing and signed by an authorized representative of each of the parties.
2
<PAGE> 155
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed as of the day and year first written above.
"PURCHASER"
MATRIA HEALTHCARE, INC.
By:
--------------------------------------
Name: Donald R. Millard, President
"SELLER"
GAINOR MEDICAL MANAGEMENT, L.L.C.
By:
--------------------------------------
Name: Mark J. Gainor, President
3
<PAGE> 156
EXHIBIT A
ASSUMED LIABILITIES
4
<PAGE> 157
EXHIBIT I
SUBSIDIARY ASSUMPTION AGREEMENT
THIS SUBSIDIARY ASSUMPTION AGREEMENT ("ASSUMPTION AGREEMENT") is made
as of the _____ day of January, 1999, to be effective as of January 1, 1999,
between Gainor Medical North America, LLC, a Georgia limited liability company
("NORTH AMERICA") and Gainor Medical Management, LLC, a Georgia limited
liability company ("MANAGEMENT").
WHEREAS, North America was a wholly-owned subsidiary of Management; and
WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as
of December 21, 1998 by and between Management and Matria Healthcare, Inc., a
Delaware corporation (the "PURCHASER"), Management has sold to Purchaser the
Business as defined below of Management by selling substantially all of its
assets, including its entire equity interest in its direct subsidiaries
(including North America) (the "PURCHASE AND SALE AGREEMENT"); and
WHEREAS, in order to effect the transfer of the liabilities of the
Business to North America and to limit Management's responsibility for any
liabilities related to the Business to the liabilities under the
indemnification provisions set forth in Section 9.2(a) of the Purchase and Sale
Agreement, and in consideration of Management's sale of the Business to
Purchaser as provided in the Purchase and Sale Agreement, the parties hereto
agree as follows:
1. Assumption. North America hereby assumes and agrees to timely
pay, perform, satisfy, be responsible for and discharge all liabilities of
Management incurred in North America's operation of the Business, other than
Assumed Liabilities, to the extent the same exist on the date hereof (the
"SUBSIDIARY ASSUMED LIABILITIES").
2. Covenants of North America. For a period of 18 months from
the date hereof (i) North America covenants and agrees not to transfer directly
or indirectly a significant portion of its assets other than in the ordinary
course of its business, unless the transferee of such assets expressly agrees
in a writing, in form and substance reasonably satisfactory to Management, to
assume all of North America's obligations under this Assumption Agreement and
to timely pay, perform, satisfy, be responsible for and discharge the
Subsidiary Assumed Liabilities, and (ii) North America covenants and agrees not
to merge or consolidate or engage in any similar transaction in which North
America will not be the surviving entity unless prior to doing so the successor
to North America in such merger, consolidation or other transaction expressly
agrees in a writing, in form and substance reasonably satisfactory to
Management, to assume all of North America's obligations under this Assumption
Agreement and to timely pay, perform, satisfy, be responsible for and discharge
the Subsidiary Assumed Liabilities.
3. Acknowledgment of Management. Management hereby acknowledges
its obligations under the Purchase and Sale Agreement to indemnify Purchaser,
subject to the limitations contained therein, for Subsidiary Assumed
Liabilities that constitute breaches of Management's representations and
warranties therein or otherwise give rise to a Loss thereunder,
<PAGE> 158
as defined therein. To the extent that a Loss (as defined in the Purchase and
Sale Agreement) incurred by North America is based on the same facts that would
otherwise give rise to a Subsidiary Assumed Liability hereunder, such liability
shall not be deemed a Subsidiary Assumed Liability and Management shall not be
entitled to assert any claim against North America with respect thereto.
4. Limitation on Remedies. Subject to the foregoing limitations,
North America shall indemnify, reimburse, defend and hold harmless the Seller,
its affiliates, and their respective officers, directors, managers, members,
shareholders, employees, representatives, successors or assigns from and
against any and all Subsidiary Assumed Liabilities. No claim may be asserted by
Management against North America hereunder more than 18 months after the
Closing, and the provisions of Section 9.2(c), (f), (g), (h), (i), (j) and (k)
of the Purchase and Sale Agreement shall apply to the greatest extent
practicable to any claim asserted by Management against North America hereunder
as if it were a claim by Seller against Purchaser thereunder.
5. Definitions. As used herein, the term "Business" shall mean
the business of North America as conducted on the date hereof. Capitalized
terms used herein and not otherwise defined shall have the meaning given them
in the Purchase and Sale Agreement. Except for the definition of any terms
defined herein, if any conflict exists between the terms of this Assumption
Agreement and the Purchase and Sale Agreement, then the terms of this
Assumption Agreement shall govern and control.
6. Governing Law. This Assumption Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia, without
giving effect to the conflict of law provisions therein.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Agreement to be executed in their names as of the date first above written.
GAINOR MEDICAL MANAGEMENT, LLC
By:
-----------------------------------------
Mark J. Gainor, President
GAINOR MEDICAL NORTH AMERICA, LLC
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
<PAGE> 1
EXHIBIT 4.1
MATRIA HEALTHCARE, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF 4% SERIES A CONVERTIBLE PREFERRED STOCK
--------------------------------------
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
--------------------------------------
Matria Healthcare, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, in a duly convened meeting thereof on December 21, 1998, adopted
the following resolution, which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Restated Certificate of Incorporation of the
Corporation, to fix by resolution or resolutions the designation of each series
of Preferred Stock of the Corporation and the powers, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereof, including, without limiting the generality
of the foregoing, such provisions as may be desired concerning voting,
redemption, dividends, dissolution or distribution of assets, conversion or
exchange, and such other subjects as may be fixed by resolutions of the Board of
Directors under the General Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of Preferred Stock on the terms and with the provisions herein set forth:
A. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph A shall have, for all purposes of this resolution, the meanings herein
specified:
"Acquisition" shall mean any transaction, or any series of related
transactions, consummated after the Issue Date, by which (a) the Corporation
acquires the business or all or substantially all of the assets of any Person,
or any division of any Person, whether through
<PAGE> 2
acquisition of voting securities, purchase of assets, merger or otherwise or (b)
any Person that was not theretofore a subsidiary of the Corporation becomes a
subsidiary of the Corporation.
"Additional Shares of Common Stock" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to paragraph 5(e)
or 5(f) hereof, deemed to be issued) by the Corporation after the Issue Date,
whether or not subsequently reacquired or retired by the Corporation, other
than: (a) the Warrants issued pursuant to the Purchase and Sale Agreement and
shares of Common Stock or other securities issued upon exercise thereof; (b)
options and shares issued upon the exercise of options outstanding on the Issue
Date or to be granted under any Corporation stock option plan or stock purchase
plan as in effect on the Issue Date or under any other employee or director
stock option or purchase plan or plans adopted or assumed after the Issue Date
and which have been duly approved and adopted by a vote of the stockholders of
the Corporation; (c) dividends paid or warrants issued pursuant to the terms of
the Series A Preferred Stock or the terms of the Series B Preferred Stock and
shares of capital stock issued upon exercise of such warrants; (d) in connection
with an Acquisition, options, and shares issued upon exercise thereof, assumed
by the Corporation and options, and shares issued upon exercise thereof, issued
by the Corporation in replacement of outstanding options of the Person being
acquired, to the extent that such options issued by the Corporation have the
same or greater relative exercise price per option and are exercisable for the
same or less relative number of shares of capital stock, in each case, as the
options being so replaced; (e) the Corporation's 8% Convertible Subordinated
Debentures and Note due December 31, 2001 and shares of Common Stock issued upon
conversion thereof; (f) such additional number of shares as may become issuable
upon the exercise of any of the securities referred to in the foregoing clauses
(a), (b), (c), (d) or (e) by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities as in effect on the Issue
Date; and (g) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clauses (a), (b),
(c), (d) or (e) by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the Issue Date, in
order to reflect any subdivision or combination of Common Stock, by
reclassification or otherwise, or any dividend on Common Stock payable in Common
Stock.
"Affiliate" shall have the meaning ascribed to such term pursuant to
Rule 12b-2 under the Securities Exchange Act of 1934, as amended, as in effect
on the date hereof; provided, that in no event shall MJG and SZI be deemed to be
Affiliates of each other.
"Base Price" shall initially be $3.00 and shall be adjusted whenever
the Conversion Price is adjusted pursuant to paragraph 5 hereof by multiplying
(i) the Base Price in effect immediately prior to such adjustment of the
Conversion Price by (ii) a fraction, the numerator of which is the Conversion
Price in effect immediately following such adjustment and the denominator of
which is the Conversion Price in effect immediately prior to such adjustment.
"Board of Directors" shall mean the Board of Directors of the
Corporation and, to the extent permitted by law, any committee of the Board of
Directors authorized to exercise the powers of the Board of Directors.
"Change in Control" shall have the meaning set forth in paragraph 6(b)
hereof.
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"Closing Price" with respect to a share of the Common Stock, for any
day, shall mean the last reported sale price, regular way, of the Common Stock,
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices, regular way, for such day, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if it is not listed or admitted to trading on any
national securities exchange but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, in case no sale is publicly reported,
the average of the closing bid and asked quotations for the Common Stock, in
either case as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any comparable system or, if the
Common Stock is not quoted on NASDAQ or any comparable system, the closing sale
price of the Common Stock as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose.
"Common Stock" shall mean the one hundred million (100,000,000)
authorized shares of the Common Stock, par value $.01 per share, of the
Corporation, and all shares hereafter authorized of any class of common stock of
the Corporation.
"Common Stock Warrant" shall mean the Common Stock Warrant as defined
in the Purchase and Sale Agreement.
"Conversion Price" shall have the meaning set forth in paragraph 5(c)
hereof.
"Convertible Securities" shall mean any evidence of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"Current Market Price" per share shall mean, with respect to any of the
Common Stock, as of any particular date of determination, the average of the
daily closing prices of the Common Stock as reported in The Wall Street Journal
or other reputable financial news source, for the 30 consecutive trading days
immediately preceding such date.
"Dividend Payment Dates" shall have the meaning set forth in paragraph
2(a) hereof.
"Dividend Period" shall mean the period from and including the Issue
Date to the first Dividend Payment Date and each quarterly period from and after
the Dividend Payment Date for the preceding Dividend Period to the Dividend
Payment Date for such Dividend Period.
"Event of Noncompliance" shall mean the occurrence of any of the
following events:
(i) the Corporation shall fail to pay dividends on the
Series A Preferred Stock for two consecutive Dividend
Periods, not including any suspension of dividend
payments pursuant to Section 9.2(e)(iv) of the
Purchase and Sale Agreement; or
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<PAGE> 4
(ii) (a) the Corporation shall (i) apply for or consent to
the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii)
be generally unable or admit in writing its inability
to pay its debts as such debts become due, (iii) make
a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the
Federal Bankruptcy Code (as now or hereafter in
effect), (v) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the
enforcement of creditors' rights generally, (vi)
acquiesce in writing to, or fail to controvert in a
timely or appropriate manner, any petition filed
against it in an involuntary action case under such
Bankruptcy Code, or (vii) take any action under the
laws of any jurisdiction analogous to any of the
foregoing; or
(b) a proceeding or case shall be commenced, without
the application or consent of the Corporation, in any
court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution,
winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or
any substantial part of its assets, or (iii) similar
relief in respect of it under any law providing for
the relief of debtors, and such proceeding or case
described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period
of 90 days.
"Failure to Redeem" shall mean any failure by the Corporation to redeem
shares of the Series A Preferred Stock in accordance with the provisions of
paragraph 6(b) or paragraph 6(c), other than a failure to redeem pursuant to
Section 9.2(e)(iv) of the Purchase and Sale Agreement.
"Fully Diluted" means, with respect to the Common Stock, all of the
outstanding Common Stock determined as if any security or obligation directly or
indirectly exercisable for or convertible into Common Stock had been so
exercised or converted, as the case may be.
"Issue Date" shall mean the date on which any shares of the Series A
Preferred Stock are first issued.
"Joint Director" shall mean a director elected collectively by the
holders of the Series A Preferred Stock and the holders of the Series B
Preferred Stock, as a Voting Group.
"Junior Stock" shall mean Common Stock and any other class or series of
capital stock of the Corporation authorized after the Issue Date not entitled to
receive any dividends unless all dividends required to have been paid or
declared and set apart for payment on the Series A Preferred Stock and any
Parity Stock shall have been so paid or declared and set apart for payment and
shall also mean any class or series of capital stock of the Corporation not
entitled to receive any assets upon liquidation, dissolution or winding up of
the affairs of the Corporation until the Series A Preferred Stock and any Parity
Stock shall have received the entire amount to which such stock is entitled upon
such liquidation, dissolution or winding up.
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<PAGE> 5
"Liquidation Preference" with respect to the Series A Preferred Stock
shall mean $1,000 per share.
"MJG" shall mean Mark J. Gainor, a Georgia resident.
"MJG Affiliate" shall mean MJG and any Affiliate of MJG (in each case
exclusive of any SZI Affiliate).
"MJG Director" shall mean any director on the Board of Directors who is
an MJG Affiliate or a designee of an MJG Affiliate, other than a director
elected by the holders of the Series A Preferred Stock and/or Series B Preferred
Stock upon an Event of Noncompliance or a Failure to Redeem as set forth herein.
"Options" shall mean any and all rights, options or warrants to
subscribe for, purchase or otherwise acquire either Additional Shares of Common
Stock or Convertible Securities.
"Other Securities" shall mean any stock (other than Common Stock) and
other securities of the Corporation or any other Person (corporate or otherwise)
which the holders of the Series A Preferred Stock at any time shall be entitled
to receive, or shall have received, upon the conversion thereof, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to paragraph 5(i) hereof or otherwise.
"Parity Stock" shall mean the Series B Preferred Stock and any class or
series of capital stock of the Corporation authorized after the Issue Date
entitled to receive payment of dividends on a parity with the Series A Preferred
Stock and shall also mean any class or series of capital stock of the
Corporation entitled to receive assets upon liquidation, dissolution or winding
up of the affairs of the Corporation on a parity with the Series A Preferred
Stock.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or other agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
"Preferred Stock" shall mean the authorized fifty million (50,000,000)
shares of the Corporation's serial Preferred Stock, par value $.01 per share.
"Purchase and Sale Agreement" shall mean that certain Purchase and Sale
Agreement dated as of December 21, 1998 between the Corporation and Gainor
Medical Management, L.L.C.
"Senior Stock" shall mean any class or series of capital stock of the
Corporation authorized after the Issue Date ranking senior to the Series A
Preferred Stock and any Parity Stock in
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respect of a right to receive dividends and shall also mean any class or series
of capital stock of the Corporation ranking senior to the Series A Preferred
Stock and any Parity Stock in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the affairs of the
Corporation.
"Series A Director" shall mean a director elected by the holders of the
Series A Preferred Stock in accordance with the terms of the Series A Preferred
Stock, other than a Joint Director.
"Series A Preferred Stock" shall have the meaning set forth in
paragraph 1 hereof.
"Series B Director" shall mean a director elected by the holders of the
Series B Preferred Stock in accordance with the terms of the Series B Preferred
Stock, other than a Joint Director.
"Series B Preferred Stock" shall mean the 60,000 shares of that series
of the Preferred Stock of the Corporation designated as "8% Series B Redeemable
Preferred Stock."
"SZI" shall mean SZ Investments, L.L.C., a Delaware limited liability
company.
"SZI Affiliate" shall mean SZI and any of its Affiliates under control
of or common control with SZI (in each case exclusive of any MJG Affiliates);
provided, however, that, notwithstanding the foregoing, no Person shall be
deemed to be an SZI Affiliate unless (i) Sam Zell or any other executive officer
of SZI has actual knowledge of the relevant action to be attributed to the SZI
Affiliate hereunder or (ii) in the case of publicly held entities that might
otherwise fall within this definition, unless Sam Zell or any other executive
officer of SZI took any action, directly or indirectly, to cause, suggest,
encourage or assist such publicly held entity to take the relevant action to be
attributed to the SZI Affiliate hereunder.
"SZI Director" shall mean any director on the Board of Directors who is
an SZI Affiliate or a designee of an SZI Affiliate, other than a director
elected by the holders of the Series A Preferred Stock and/or Series B Preferred
Stock upon the occurrence of an Event of Noncompliance or a Failure to Redeem.
"Voting Group" shall mean the holders of the outstanding Series A
Preferred Stock and Series B Preferred Stock voting together as a single class.
"Voting Securities" shall mean stock of any class or classes (or
equivalent interests), if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies, entitled
to vote for the election of the directors (or persons performing similar
functions) of such business entity, even though the right so to vote has been
suspended by the happening of such a contingency.
1. Designation and Amount; Rank. There shall be a series of Preferred
Stock designated as the "4% Series A Convertible Preferred Stock" (the "Series A
Preferred Stock"), and the number of shares constituting such series shall be
16,500, of which 10,000 shares shall be issued initially on the Issue Date, and
the remainder shall be reserved for issuance as dividends pursuant to paragraph
2(b) hereof. The Series A Preferred Stock shall, with respect to payment of
dividends and rights upon liquidation, dissolution or winding up of the affairs
of the
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<PAGE> 7
Corporation rank senior to the Common Stock and to all Junior Stock, rank on a
parity with all Parity Stock and rank junior to all Senior Stock.
2. Dividends and other Distributions.
(a) Subject to the prior preferences and other rights of any Senior
Stock, the holders of the Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of any funds legally
available therefor, cumulative dividends at the annual rate (the "Base Rate") of
4% of the Liquidation Preference of such share (or $40.00 per share per year)
from and including the Issue Date (or, in the case of each share issued after
the Issue Date, from the Dividend Payment Date which is the date of issue of
such share, or if such date is not a Dividend Payment Date, from the immediately
preceding Dividend Payment Date, or if none, the Issue Date) to and including
the date on which the Liquidation Preference of such share is made available
(whether upon liquidation, dissolution or winding up of the Corporation or, in
the case of paragraph 6 hereof, redemption or, in the case of paragraph 5
hereof, conversion), whether or not there are any funds of the Corporation
legally available for the payment of dividends. Dividends shall be fully
cumulative, shall accrue without interest, whether or not such dividends have
been declared, and shall be payable quarterly in arrears in equal amounts on
January 1, April 1, July 1 and October 1 of each year ("Dividend Payment
Dates"), commencing with the first Dividend Payment Date following the Issue
Date, to the holders of record of the Series A Preferred Stock as of the close
of business on such date, not more than 30 days nor less than 10 days preceding
the Dividend Payment Date, as may be fixed by the Board of Directors (the
"Record Date"). For purposes of determining the amount of dividends "accrued" as
of any date which is not a Dividend Payment Date, such amount shall be
calculated on the basis of the foregoing rate per annum for actual days elapsed
from and including the Issue Date (in the case of any date up to the first
Dividend Payment Date) or the last preceding Dividend Payment Date (in the case
of any other date) to the date as of which such determination is to be made,
based on a 360-day year.
(b) Dividends shall be payable on any Dividend Payment Date in cash or,
at the option of the Corporation, in shares of Series A Preferred Stock or any
combination thereof. To the extent that the Corporation elects to pay such
dividends, in whole or in part, in shares of Series A Preferred Stock, the
Corporation shall deliver to a holder of Series A Preferred Stock on the
Dividend Payment Date the number of shares of Series A Preferred Stock equal to
the product of (i) the number of shares of Series A Preferred Stock held by such
holder as of the Record Date, multiplied by (ii) a fraction, the numerator of
which is the difference between (y) the full quarterly dividend to which a
holder of a share of Series A Preferred Stock is entitled and (z) the per share
amount of any cash dividend to be paid to a holder on such Dividend Payment
Date, and the denominator of which is $1,000. Notice of each Record Date shall
specify whether the dividend being declared will be paid in cash, in shares of
Series A Preferred Stock, or any combination thereof, and shall be mailed, first
class, postage prepaid, not less than 10 days nor more than 30 days prior
thereto to the holders of record of Series A Preferred Stock at their respective
addresses as the same appear on the books of the Corporation or supplied by them
in writing to the Corporation for the purpose of such notice. In the event that
the Board of Directors does not declare and/or the Corporation does not pay a
dividend on any regular Dividend Payment Date, notice of such nondeclaration
and/or nonpayment shall be given to
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<PAGE> 8
holders of the Series A Preferred Stock in the manner provided in the preceding
sentence not more than five days subsequent to such Dividend Payment Date.
(c) To the extent not paid on each Dividend Payment Date in the manner
provided in paragraph 2(b), all dividends that have accrued on each share of
Series A Preferred Stock during the Dividend Period ending on such Dividend
Payment Date (i) shall be declared and paid at any time upon the request of the
holders of not less than a majority of the outstanding shares of Series A
Preferred Stock, such dividends to be paid solely in shares of the Series A
Preferred Stock; and (ii) may be declared and paid at any time, in cash (subject
to the concurrent satisfaction of any cash dividend arrearages then existing
with respect to any Parity Stock) or, at the option of the Corporation, in
shares of Series A Preferred Stock. Such dividends may be paid, without
reference to any regular Dividend Payment Date, to holders of record as of the
close of business on such date, not more than 30 days nor less than 10 days
preceding the payment date thereof, as may be fixed by the Board of Directors
(the "Special Record Date"). Notice of each Special Record Date shall be mailed,
first class, postage prepaid, not less than 10 days nor more than 30 days prior
thereto, to the holders of record of Series A Preferred Stock at their
respective addresses as the same appear on the books of the Corporation or
supplied by them in writing to the Corporation for the purpose of such notice.
To the extent that such accrued unpaid dividends are paid in shares of Series A
Preferred Stock, the number of such shares shall be determined in accordance
with paragraph 2(b).
(d) So long as any shares of the Series A Preferred Stock shall be
outstanding, the Corporation shall not declare or pay on any Junior Stock any
dividend whatsoever, whether in cash, property or otherwise, nor shall the
Corporation make any distribution on any Junior Stock, or set aside any assets
for any such purposes, nor shall any Junior Stock be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries, nor shall any
monies be paid, set aside for payment or made available for a sinking fund for
the purchase or redemption of any Junior Stock, unless and until all dividends
to which the holders of the Series A Preferred Stock and all Parity Stock shall
have been entitled for all current and all previous Dividend Periods shall have
been paid or declared and the consideration sufficient for the payment thereof
set apart so as to be available for the payment thereof and for no other
purpose; provided, however, that nothing contained in this paragraph 2(d) shall
prevent the payment of dividends solely in Junior Stock or the repurchase,
redemption or other acquisition of Junior Stock solely through the issuance of
Junior Stock.
(e) The Corporation shall not be required to issue any fractional
shares of Series A Preferred Stock that a holder may become entitled to pursuant
to paragraph 2(b) or paragraph 2(c). The Board of Directors may elect to settle
any final fraction of a share of Series A Preferred Stock which a holder of one
or more shares of Series A Preferred Stock would otherwise be entitled to
receive pursuant to paragraph 2(b) or paragraph 2(c) by having the Corporation
pay to such holder, in lieu of issuing a fractional share thereto, a cash
adjustment in respect of such final fraction in an amount equal to the product
determined by multiplying such fraction times $1,000. Such election, if made,
shall be made as to all holders of Series A Preferred Stock who would otherwise
be entitled to receive a fractional share of Series A Preferred Stock. If the
Board of Directors does not make the foregoing election, then in determining the
number of whole shares of Series A Preferred Stock which a holder of Series A
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<PAGE> 9
Preferred Stock would be entitled to receive pursuant to paragraph 2(b) or
paragraph 2(c), any final fraction of a share shall be rounded upward to the
next higher integer.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) Subject to the prior payment in full of the preferential amounts to
which any Senior Stock is entitled, in the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of shares of the Series A Preferred Stock shall be entitled to receive from the
assets of the Corporation available for distribution to the shareholders an
amount in cash or property at its fair market value, as determined by the Board
of Directors in good faith, or a combination thereof, equal to $1,000 per share
(the "Liquidation Preference"), plus an amount equal to unpaid accrued dividends
thereon to the payment date before any payment or distribution shall be made to
the holders of any Junior Stock of the Corporation, which payment shall be made
pari passu to any such payment made to the holders, if any, of any Parity Stock.
The holders of Series A Preferred Stock shall be entitled to no other or further
distribution of or participation in any remaining assets of the Corporation
after receiving the Liquidation Preference per share and such unpaid accrued
dividends.
(b) If, upon distribution of the Corporation's assets in liquidation,
dissolution or winding up, the assets of the Corporation to be distributed among
the holders of the Series A Preferred Stock and to all holders of any Parity
Stock shall be insufficient to permit payment in full to such holders of the
preferential amounts to which they are entitled, then the entire assets of the
Corporation to be distributed to holders of the Series A Preferred Stock and
such Parity Stock shall be distributed pro rata to such holders based upon the
aggregate of the full preferential amounts to which the shares of Series A
Preferred Stock and such Parity Stock would otherwise respectively be entitled.
(c) Neither the consolidation or merger of the Corporation with or into
any other corporation or corporations nor the sale, transfer, or lease of all or
substantially all the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be mailed, first class, postage prepaid, not less than 20 days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective, to the holders of the Series A
Preferred Stock at their respective addresses as the same appear on the books of
the Corporation or supplied by them in writing to the Corporation for the
purpose of such notice.
4. Voting.
(a) The holders of Series A Preferred Stock shall have no right to vote
for any purpose, except as specifically required by the General Corporation Law
of the State of Delaware and except as described in this paragraph 4 or
paragraph 6(h).
(b) Unless the consent or approval of a greater number of shares shall
be required by law, without the consent of the holders of at least 66-2/3% of
the number of shares of the Series A Preferred Stock at the time outstanding,
either in writing or by vote at a meeting called
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for that purpose at which the holders of the Series A Preferred Stock shall vote
as a class, the Corporation shall not (i) amend, alter or repeal any provision
of the Certificate of Incorporation of the Corporation nor any resolution of the
Board of Directors establishing and designating a series of preferred stock and
determining the relative rights and preferences thereof, so as to effect any
adverse change in the rights, privileges or preferences of the holders of the
Series A Preferred Stock, (ii) create or designate any class or series of Parity
Stock, Senior Stock or any other stock which has conversion features, redemption
features, voting rights or other material terms which are, in any such case,
more favorable than the comparable terms of the Series A Preferred Stock, or
(iii) issue additional shares of Series A Preferred Stock except pursuant to the
terms hereof.
(c) The Corporation shall promptly notify the holders of the Series A
Preferred Stock of the occurrence of an Event of Noncompliance or a Failure to
Redeem. Upon the occurrence and during the continuation of an Event of
Noncompliance or a Failure to Redeem, the holders of shares of Series A
Preferred Stock, shall have the certain voting rights set forth below with
respect to the election of directors to the Board of Directors. Notwithstanding
anything to the contrary contained herein, the holders of the Series A Preferred
Stock shall only be entitled to elect a maximum of one Series A Director with
respect to any and all Events of Noncompliance and a maximum of one Series A
Director with respect to any and all Failures to Redeem.
(i) if either an Event of Noncompliance or a Failure to
Redeem occurs (but not concurrently), then the holders of Series A
Preferred Stock, voting separately as a class, shall have the right to
elect one Series A Director;
(ii) if an Event of Noncompliance exists concurrently with a
Failure to Redeem, then the holders of Series A Preferred Stock, voting
separately as a class, shall have the right to elect two Series A
Directors, except:
(A) if the Board of Directors includes both an MJG
Director and an SZI Director and the holders of Series B
Preferred Stock have elected or have the right to elect one or
more Series B Directors, then the holders of Series A
Preferred Stock, voting separately as a class, shall have the
right to elect one Series A Director; or
(B) if the Board of Directors includes either an MJG
Director or an SZI Director, but not both, and the holders of
Series B Preferred Stock have elected or have the right to
elect two Series B Directors, then, notwithstanding anything
to the contrary herein or in the terms of the Series B
Preferred Stock, the rights of the holders of Series A
Preferred Stock with respect to the election of directors
shall be as follows:
(1) the holders of Series A Preferred Stock, voting
separately as a class, shall have the right to elect one
Series A Director; and
(2) the holders of Series B Preferred Stock, voting
separately as a class, shall have the right to elect one
Series B Director; and
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(3) the holders of the Series A Preferred Stock and
the holders of the Series B Preferred Stock, voting as a
Voting Group, shall have the right to elect one Joint
Director.
Notwithstanding anything to the contrary contained herein, the
aggregate number of all of the Series A Directors, Series B Directors,
Joint Directors, MJG Directors and SZI Directors shall never exceed
four (4) directors at any one time.
(d) Each director elected in accordance with paragraph 4(c) shall
thereupon become an additional director of the Corporation and the authorized
directors of the Corporation shall thereupon be automatically increased by such
number. The Corporation will not take any action which would impair its ability,
in conformity with the Certificate of Incorporation and the By-Laws of the
Corporation, to increase automatically the number of its directors as provided
herein. During such times that the holders of the Series A Preferred Stock or
the Voting Group, as the case may be, shall be entitled to elect such additional
directors, the remaining directors shall be elected by the holders of the other
shares of capital stock of the Corporation entitled to vote for the election of
directors, without right in the holders of Series A Preferred Stock or the
Voting Group to participate in the election of such remaining directors.
Such right of the holders of shares of the Series A Preferred Stock,
acting separately or as part of a Voting Group, to elect a particular director
shall continue only until the event or events forming the basis for the election
of such director have been cured in full, or as otherwise contemplated in
paragraph 4(c), at which time the term of office of such director shall
forthwith terminate and the number of directors constituting the entire Board of
Directors of the Corporation shall be reduced correspondingly (subject always to
the same provisions for the vesting of such voting rights on the occurrence of
any other or future Event of Noncompliance or Failure to Redeem). The fact that
an Event of Noncompliance or Failure to Redeem has been cured and that no other
Event of Noncompliance or Failure to Redeem has occurred and is continuing shall
be evidenced by a certificate executed by the chief executive officer and chief
financial officer of the Corporation and delivered to the Board of Directors.
At any time after such voting rights shall so have vested in the
holders of shares of the Series A Preferred Stock, as a separate group or as
part of a Voting Group, the Secretary of the Corporation may, and upon the
written request of the holders of record of not less than 25% of the Series A
Preferred Stock, addressed to him at the principal office of the Corporation,
shall within 10 days after delivery of such request, call a special meeting of
the holders of shares of the Series A Preferred Stock or of such Voting Group
for the purpose of electing the director to be elected by them, such meeting to
be held within 15 days after such call at the place and upon the notice provided
by the By-Laws of the Corporation for the holding of meetings of shareholders;
provided, however, that if the Secretary of the Corporation shall fail to call
any such meeting within 10 days after delivery of any such request, such meeting
may be called by any holder or holders of record of 25% or more of the Series A
Preferred Stock. Notwithstanding the foregoing, the Secretary of the Corporation
shall not be required, and the holders of Series A Preferred Stock shall not be
entitled, to call such a special meeting if the request for such call is
received less than 45 days prior to the date fixed for the next annual meeting
of shareholders, and
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if in such case such special meeting is not called, the holders of Series A
Preferred Stock shall be entitled to vote (as a class or as part of a Voting
Group, as the case may be) at such annual meeting to elect such director. Any
vacancy in the office of the director elected by the holders of the Series A
Preferred Stock or such Voting Group shall be filled by a vote of such holders
or such Voting Group, as the case may be, as a separate class. Except as
hereinbefore provided, the director elected by the holders of the Series A
Preferred Stock or such Voting Group shall serve until the next annual meeting
of the shareholders and until his successor shall have been elected and
qualified and may be otherwise removed only by the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock, or then
outstanding shares of such Voting Group, as the case may be, at the time of such
removal.
At any meeting having as a purpose the election of a director by
holders of the Series A Preferred Stock or any such Voting Group, the presence,
in person or by proxy, of the holders of a majority of the outstanding shares of
Series A Preferred Stock or a majority of such Voting Group, as the case may be,
shall be required and be sufficient to constitute a quorum of such class for the
election of a director by such holders. At any such meeting or adjournment
thereof, (i) the absence of a quorum of such holders of the Series A Preferred
Stock or such Voting Group, as the case may be, shall not prevent the election
of the directors to be elected by the holders of shares other than the Series A
Preferred Stock or such Voting Group, and the absence of a quorum of holders of
shares other than the Series A Preferred Stock or such Voting Group shall not
prevent the election of the director to be elected by the holders of the Series
A Preferred Stock or such Voting Group, and (ii) in the absence of such quorum
of any class or classes of stock, a majority of the holders, present in person
or by proxy, of the class or classes of stock which lack a quorum shall have
power to adjourn the meeting for the election of directors which they are
entitled to elect, from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
5. Conversion and Adjustments.
(a) Conversion Right. Unless previously redeemed as provided in
paragraph 6 hereof, shares of the Series A Preferred Stock may be converted
prior to redemption thereof at such time, in such manner and upon such terms and
conditions as hereinafter provided in this paragraph 5 into fully paid and
non-assessable full shares of Common Stock. In the event the Corporation shall
call for redemption the shares of Series A Preferred Stock pursuant to paragraph
6 hereof, the conversion right provided by this paragraph 5 shall terminate at
the close of business on the business day immediately preceding the redemption
date. In case cash, securities or property other than Common Stock shall be
payable, deliverable or issuable upon conversion as provided herein, then all
references to Common Stock in this paragraph 5 shall be deemed to apply, so far
as appropriate and as nearly as may be, to such cash, property or other
securities.
(b) Conversion Date. Unless previously redeemed as provided in
paragraph 6 hereof, the Series A Preferred Stock shall be convertible at any
time and from time to time at the option of the holder(s) thereof.
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<PAGE> 13
(c) Conversion Price. Subject to the provisions for adjustment
hereinafter set forth in this paragraph 5, holders of shares of Series A
Preferred Stock may convert shares of Series A Preferred Stock, unless
previously redeemed, into a number of shares of Common Stock calculated by
dividing, for each share of Series A Preferred Stock to be converted, (1) the
Liquidation Preference by (2) $4.50 (this price as from time to time adjusted
cumulatively pursuant to the provisions of this paragraph 5 is hereinafter
referred to as the "Conversion Price.")
(d) Issuance of Additional Shares of Common Stock. In case the
Corporation at any time or from time to time after the Issue Date shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to subparagraphs 5(e) and (f) hereof) without
consideration or for a consideration per share less than the greater of the
Current Market Price Per Share and the Base Price in effect immediately prior to
such issue or sale (the greater of such two numbers being referred to herein as
the "Floor Price"), then, and in each such case, the Conversion Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Conversion Price by a
fraction,
(i) the numerator of which shall be (A) the number of
shares of Common Stock outstanding immediately prior to such issue
or sale plus (B) the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total
number of such Additional Shares of Common Stock so issued or sold
would purchase at the Floor Price; and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such issue or
sale, provided that, for the purposes of this paragraph 5(d), (A)
immediately after any Additional Shares of Common Stock are deemed
to have been issued pursuant to subparagraphs 5(e) and (f) hereof,
such Additional Shares of Common Stock shall be deemed to be
outstanding, and (B) treasury shares shall not be deemed to be
outstanding.
(e) Treatment of Options and Convertible Securities. In case the
Corporation at any time or from time to time after the Issue Date shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and options therefor, issuable upon the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading); provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to paragraph 5(g) hereof) of such shares would be less than the Floor
Price in effect on the date
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<PAGE> 14
of and immediately prior to such issue, sale, grant or assumption or immediately
prior to the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be; and, provided, further, that in any
such case in which Additional Shares of Common Stock are deemed to be issued:
(i) no further adjustment of the Conversion Price
shall be made upon the subsequent issue or sale of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an
adjustment, subsequent to the date of the issue or sale
thereof, of the number of Additional Shares of Common Stock
issuable upon the exercise of such Options or the conversion
or exchange of such Convertible Securities by reason of (x) a
change of control of the Corporation, or (y) the acquisition
by any Person or group of Persons of any specified number or
percentage of the Voting Securities of the Corporation;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase in the consideration payable to the
Corporation, or decrease in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or
exchange thereof (by change of rate or otherwise), the
Conversion Price computed upon the original issue, sale, grant
or assumption thereof (or upon the occurrence of the record
date, or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such
options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(iii) upon the expiration (or purchase by the
Corporation and cancellation or retirement) of any such
Options which shall not have been exercised or the expiration
of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Corporation
and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which)
shall not have been exercised, the Conversion Price computed
upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(A) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional
Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the
conversion or exchange of
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<PAGE> 15
such Convertible Securities and the consideration
received therefor was the consideration actually
received by the Corporation for the issue, sale,
grant or assumption of all such Options, whether or
not exercised, plus the consideration actually
received by the Corporation upon such exercise, or
for the issue or sale of all such Convertible
Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such
conversion or exchange; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received
by the Corporation for the issue, sale, grant or
assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Corporation (pursuant to paragraph
5(g) hereof) upon the issue or sale of such
Convertible Securities with respect to which such
Options were actually exercised.
(iv) no readjustment pursuant to subparagraph (ii) or
(iii) above shall have the effect of increasing the Conversion
Price by an amount in excess of the amount of the adjustment
thereof originally made in respect of the issue, sale, grant
or assumption of such Options or Convertible Securities; and
(v) in the case of any such Options which expire by
their terms not more than thirty (30) days after the date of
issue, sale, grant or assumption thereof, no adjustment of the
Conversion Price shall be made until the expiration or
exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subparagraph (iii) above;
and
(vi) Notwithstanding the foregoing, there shall be no
adjustment pursuant to this paragraph 5(e) if the holder of
the Series A Preferred Stock is then an "Acquiring Person"
under the Rights Agreement, dated as of January 30, 1996
between the Corporation and SunTrust Bank, Atlanta, as Rights
Agent, as such agreement may be amended pursuant to Section
8.6 of the Purchase and Sale Agreement or otherwise amended,
restated or modified from time to time.
(f) Treatment of Stock Dividends, Stock Splits, etc. In case the
Corporation at any time or from time to time after the Issue Date hereof shall
declare or pay any dividend on the Common Stock payable in Common Stock, or
shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), then, and in each such case, with
respect to any adjustment of the Conversion Price pursuant to paragraph 5(d),
Additional Shares of Common Stock shall be deemed to have been issued (i) in the
case of any such dividend, immediately after the close of business on the record
date for the determination of holders of any class of securities entitled to
receive such dividend, or (ii) in the case of any such subdivision, at
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<PAGE> 16
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective. Additional Shares of Common Stock deemed to
have been issued pursuant to this subparagraph (f), relating to stock dividends,
stock splits, etc., shall be deemed to have been issued for no consideration,
unless and only to the extent that consideration is actually paid therefor.
(g) Computation of Consideration. For the purposes of this
paragraph 5:
(i) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the
accounting treatment of such consideration,
(A) insofar as it consists of cash, be computed at
the net amount of cash received by the Corporation,
(without deducting any expenses paid or incurred by
the Corporation or any commissions or compensations
paid or concessions or discounts allowed to
underwriters, dealers or others performing similar
services in connection with such issue or sale);
(B) insofar as it consists of property (including
securities) other than cash, be computed at the fair
value thereof at the time of such issue or sale, as
determined in good faith by the Board of Directors of
the Corporation; and
(C) in case Additional Shares of Common Stock are
issued or sold together with other stock or
securities or other assets of the Corporation for a
consideration which covers both, be the portion of
such consideration so received, computed as provided
in clauses (A) and (B) above, allocable to such
Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the
Corporation.
(ii) Additional Shares of Common Stock deemed to have
been issued pursuant to paragraph 5(e) relating to Options and
Convertible Securities, shall be deemed to have been issued
for a consideration per share determined by dividing
(A) the total amount, if any, received and receivable
by the Corporation as consideration for the issue,
sale, grant or assumption of the Options or
Convertible Securities in question plus the aggregate
amount of additional consideration (as set forth in
the instruments relating thereto, without regard to
any provision contained therein for a subsequent
adjustment of such consideration to protect against
dilution) payable to the Corporation upon the
exercise in full of such Options or the conversion or
exchange of such Convertible Securities or, in the
case of Options for Convertible Securities, the
exercise of such options for Convertible Securities
and the conversion or exchange of such Convertible
Securities, in each case computing such consideration
as provided in the foregoing subparagraph (g)(i), by
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<PAGE> 17
(B) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto,
without regard to any provision contained therein for
a subsequent adjustment of such number to protect
against dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities.
(h) Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Conversion Price
in effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
(i) Reclassification, Consolidation or Merger. In the case of (A)
any capital reorganization, reclassification or other change of outstanding
Common Stock (or Other Securities) (other than those referred to in paragraph
5(f) of this Section and other than a change in par value), or (B) any
consolidation of the Corporation with any other corporation or any merger of the
Corporation into another corporation or of another corporation into the
Corporation (other than a consolidation or merger in which the Corporation is
the continuing or surviving corporation and which does not result in any
reclassification of, or change (other than a change in par value, or as a result
of a subdivision or combination to which paragraph 5(f) hereof is applicable)
in, the outstanding Common Stock (or Other Securities)) or (C) any sale or
transfer to another corporation or entity (other than by mortgage or pledge) of
all or substantially all of the properties and assets of the Corporation, the
Corporation (or its successor in such consolidation or merger) or the purchaser
of such properties and assets shall make appropriate provision so that the
holder of each share of Series A Preferred Stock then outstanding shall have the
right thereafter to convert such share into the kind and amount of shares of
stock or other securities and property receivable upon such reclassification,
change, consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which such Series A Preferred Stock might have been
converted immediately prior to such reclassification, change, consolidation,
merger, sale or transfer, and the holders of the Series A Preferred Stock shall
have no other conversion rights under these provisions; provided, that effective
provision shall be made, in the Articles or Certificate of Incorporation of the
resulting or surviving corporation or otherwise or in any contracts of sale or
transfer, so that the provisions set forth herein for the protection of the
conversion rights of Series A Preferred Stock shall thereafter be made
applicable, as nearly as reasonably may be, to any such other shares of stock or
other securities and property deliverable upon conversion of the Series A
Preferred Stock remaining outstanding or other convertible preferred stock or
other securities received by the holders of Series A Preferred Stock in place
thereof; and, provided further, that any such resulting or surviving corporation
or purchaser shall expressly assume the obligation to deliver, upon the exercise
of the conversion privilege, such shares, securities or property as the holders
of the Series A Preferred Stock remaining outstanding, or other convertible
preferred stock or other securities received by the holders in place thereof,
shall be entitled to receive pursuant to the provisions hereof, and to make
provisions for the protection of the conversion rights as above provided.
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<PAGE> 18
(j) Dilution in Case of Other Securities. In case any Other Securities
shall be issued or sold or shall become issuable upon exercise of Options or
upon conversion of Convertible Securities, as the case may be, for a
consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of this paragraph 5, the conversion rights
granted hereunder, then, and in each such case, the computations, adjustments
and readjustments provided for in this paragraph 5 with respect to the
Conversion Price shall be made as nearly as possible in the manner so provided
and applied to determine the amount of Other Securities from time to time
receivable upon the conversion of the Series A Preferred Stock, so as to protect
the holders thereof against the effect of such dilution. All computations,
adjustments and readjustments made pursuant to this paragraph 5(j) shall be
determined by the Board of Directors, which determination shall be made in good
faith.
(k) Notice of Adjustment. Whenever the Conversion Price shall be
adjusted as provided in this paragraph 5, the Corporation shall promptly file
with the transfer agent for the Series A Preferred Stock a statement signed by
the President or one of the Vice Presidents of the Corporation and by its
Treasurer or Assistant Treasurer, disclosing the nature of such event, the
Conversion Price in effect immediately thereafter and the kind and amount of
stock or other securities or property into which Series A Preferred Stock shall
be convertible after such event.
(l) Advance Notice of Certain Events. In case at any time:
(i) the Corporation shall declare any dividend or
distribution payable to the holders of its Common Stock
(whether payable in cash, Common Stock or other
consideration);
(ii) the Corporation shall offer for subscription or
issuance pro rata to the holders of the Common Stock any
additional shares of stock of any class;
(iii) there shall be any capital reorganization of
the Corporation, any recapitalization or reclassification of
the capital stock of the Corporation, or consolidation or
merger involving the Corporation, or any sale or transfer of
all or substantially all of the Corporation's assets to any
other Person other than a sale or transfer to a wholly-owned
subsidiary of the Corporation;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation as a
whole or substantially as a whole in a single transaction or a
series of related transactions;
(v) the Corporation shall take any action which
would require an increase or decrease of 1% or greater in the
Conversion Rate pursuant to paragraph 5; or
(vi) the Corporation shall propose or have knowledge
of any other event which constitutes or, if consummated would
constitute, a "Change in Control" as defined in subparagraph
6(b)(ii) below;
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<PAGE> 19
then, in each such case, the Corporation shall give each holder of Series A
Preferred Stock written notice of the date on which a record shall be taken for
such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such reorganization, recapitalization,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, as the case may be, and of the date, if determined,
when any such transaction shall take place. If and to the extent applicable,
such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be. Such notice
shall be given at least 30 days before the earliest date required to be
specified therein in accordance with this subparagraph, shall describe the
proposed transaction in reasonable detail, and shall specify the consideration
to be received by the holders of Common Stock in respect thereto and/or any
adjustment which would be made to the Conversion Price as a result of such
transaction; provided, however, that the Corporation shall be obligated to only
give 10 days prior notice with respect to the following events: (A) any event
the occurrence of which would give rise to an adjustment pursuant to paragraph
5, or (B) any regularly-scheduled dividend or distribution which, individually
or as a policy, has been previously publicly announced. The Corporation shall
also furnish to each holder of Series A Preferred Stock all notices and
materials furnished to its stockholders in connection with such transaction as
and when such notices and materials are furnished to its stockholders.
(m) Method of Conversion. For any holder of Series A Preferred
Stock to convert the same into Common Stock, it shall surrender the certificate
or certificates for such Series A Preferred Stock at the office of the
Corporation or at the office of the transfer agent for the Series A Preferred
Stock, which certificate or certificates, if the Corporation shall so request,
shall be duly endorsed to the Corporation or in blank or accompanied by proper
instruments of transfer to the Corporation or in blank (such endorsements or
instruments of transfer to be in form reasonably satisfactory to the
Corporation), and shall give written notice to the Corporation at said office
that it elects to convert all or a part of the shares of Series A Preferred
Stock represented by said certificate or certificates in accordance with the
terms of this paragraph 5, and shall state in writing therein the name or names
in which it wishes the certificate or certificates for Common Stock to be
issued. The Corporation will as soon as practicable after such deposit of a
certificate or certificates for Series A Preferred Stock, accompanied by the
written notice and the statement above prescribed, issue and deliver at the
office of the Corporation or of said transfer agent to the person for whose
account such Series A Preferred Stock was so surrendered, or to its nominee(s)
or, subject to compliance with applicable law, transferee(s), a certificate or
certificates for the number of full shares of Common Stock to which it shall be
entitled, together with cash in lieu of any fraction of a share as hereinafter
provided. If surrendered certificates for Series A Preferred Stock are converted
only in part, the Corporation will issue and deliver to the holder, or to its
nominee(s), without charge therefor, a new certificate or certificates
representing the aggregate of the unconverted shares of Series A Preferred
Stock. Such conversion shall be deemed to have been made as of the date that (i)
certificates for shares to be converted are so surrendered and (ii) the holder
thereof has paid or otherwise provided for all taxes, if any, payable in respect
of any transfer involved in the issuance or delivery of any certificate for
Common Stock in a name other than that of such holder; and the person or persons
entitled to receive the Common Stock issuable upon
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<PAGE> 20
conversion of such Series A Preferred Stock shall be treated for all purposes as
the record holder or holders of such Common Stock on such date.
The issuance of certificates for shares of Common Stock upon conversion
of shares of Series A Preferred Stock shall be made without charge for any
issue, stamp or other similar tax in respect of such issuance; provided,
however, if any such certificate is to be issued in a name other than that of
the holder of the share or shares of Series A Preferred Stock converted, the
person or persons requesting the issuance thereof shall pay to the Corporation
the amount of any tax which may be payable in respect of any transfer involved
in such issuance or shall establish to the reasonable satisfaction of the
Corporation that such tax has been paid.
The Corporation shall not be required to convert Series A Preferred
Stock, and no surrender of Series A Preferred Stock shall be effective for that
purpose, while the stock transfer books of the Corporation are closed for any
purpose; but the surrender of Series A Preferred Stock for conversion during any
period while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been made
on the date such Series A Preferred Stock was surrendered.
(n) Shares Reserved for Conversion; Corporate Actions. The Corporation
shall at all times reserve and keep available, solely for the purpose of
issuance upon conversion of the outstanding shares of Series A Preferred Stock,
such number of shares of Common Stock as shall be issuable upon the conversion
of all such outstanding shares; provided, that nothing contained herein shall be
construed to preclude the Corporation from satisfying the obligations in respect
of the conversion of the outstanding shares of Series A Preferred Stock by
delivery of shares of Common Stock which are held in the treasury of the
Corporation. The Corporation shall take all such corporate and other actions as
from time to time may be necessary to insure that all shares of Common Stock
issuable upon conversion of shares of Series A Preferred Stock at the Conversion
Rate in effect from time to time will, upon issue, be duly and validly
authorized and issued, fully paid and nonassessable and free of any preemptive
or similar rights. In order that the Corporation may issue shares of Common
Stock upon conversion of the Series A Preferred Stock, the Corporation will use
reasonable efforts to comply with all applicable Federal and state securities
laws and will use reasonable efforts to list such shares to be issued upon
conversion on such securities exchange on which the Common Stock is listed. The
Corporation will not, by amendment of its Certificate of Incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issuance or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of its obligations
hereunder.
(o) Status of Shares Converted. All shares of Series A Preferred Stock
received by the Corporation upon conversion thereof into Common Stock shall be
retired and be restored to the status of authorized and unissued shares of
Preferred Stock, and may be reissued as part of another series of the Preferred
Stock of the Corporation, but such shares shall not be reissued as Series A
Preferred Stock.
(p) Fractions upon Conversion. The Corporation shall not be required to
issue fractional shares of Common Stock or script upon conversion of the Series
A Preferred Stock. As to any final fraction of a share of Common Stock which a
holder of one or more shares of
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<PAGE> 21
Series A Preferred Stock would otherwise be entitled to receive upon conversion
of such shares in the same transaction, the Corporation shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the market value of a full share of the Common Stock. For purposes
of this paragraph 5(p), the market value of a share of the Common Stock shall be
the Closing Price per share on the business day immediately preceding the date
of conversion.
6. Redemption.
(a) Redemption at Option of the Corporation. Subject to the rights
of Senior Stock, if any, from and after the date which is the second anniversary
of the Issue Date, the Corporation, at its option, may redeem, following any
Redemption Pricing Date (as defined below), shares of Series A Preferred Stock,
in whole or in part, in the sole discretion of the Board of Directors, at the
redemption price of $1,222.22 per share plus an amount equal to the accrued
dividends thereon to the redemption date. A "Redemption Pricing Date" shall be
any date as of which the Current Market Price of the Common Stock equals or
exceeds $5.40 per share. If less than all outstanding shares of Series A
Preferred Stock are to be redeemed, the shares of Series A Preferred Stock to be
redeemed shall be chosen by lot or pro rata in such manner as the Board of
Directors may determine.
(b) Redemption at Option of Holders.
(i) Subject to the rights of Senior Stock, if any,
and the further provisions of subparagraph (b)(ii) below, the
Series A Preferred Stock shall be redeemed in whole by the
Corporation out of funds legally available therefor, at the
written request of the holder or holders of a majority of the
outstanding shares thereof after a "Change in Control" of the
Corporation, as defined in subparagraph (b)(ii) below, at a
redemption price of $1,222.22 per share plus an amount equal
to the accrued dividends thereon to the redemption date.
(ii) The redemption rights provided by subparagraph
(b)(i) shall be available only in the event of a "Change in
Control" of the Corporation. For purposes of this subparagraph
(b), a "Change in Control" of the Corporation shall mean any
of the following events: (i) any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than an
"Existing Stockholder" (as hereinafter defined) is or becomes
the direct or indirect beneficial owner of shares of the
Corporation's capital stock representing greater than 50% of
the power to vote in the election of directors under ordinary
circumstances or (ii) the Corporation sells, transfers or
otherwise disposes of all or substantially all of the assets
of the Corporation other than in any transaction between the
Corporation and a wholly-owned subsidiary of the Corporation,
or (iii) the Corporation is a party to a merger or a
consolidation in which the holders of the Corporation's voting
securities prior to such merger or consolidation own, directly
or indirectly, securities representing less than 50% of the
voting power in the surviving entity. "Existing Stockholder"
shall mean Mark J. Gainor, SZ Investments, L.L.C., any holder
of any of this
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<PAGE> 22
Series A Preferred Stock, the Series B Preferred Stock or the
Common Stock Warrant, or any affiliate of any of them.
(iii) If the funds of the Corporation legally
available for redemption of shares of the Series A Preferred
Stock are insufficient to redeem the total number of such
shares required to be redeemed pursuant to subparagraph
(b)(i), those funds which are legally available will be used
to redeem the maximum possible number of shares of Series A
Preferred Stock ratably among the holders thereof. At any time
thereafter when additional funds of the Corporation are
legally available for such purpose, such funds will
immediately be used to redeem the balance of the shares of
Series A Preferred Stock outstanding.
(c) Scheduled Redemption. Subject to the rights of Senior Stock,
if any, the Corporation shall redeem, out of funds legally available therefor,
shares of the Series A Preferred Stock as follows:
<TABLE>
<CAPTION>
SCHEDULED NUMBER OF SHARES
REDEMPTION DATE TO BE REDEEMED
--------------- ----------------
<S> <C>
Eighth anniversary of Issue Date One-third of shares then outstanding
Ninth anniversary of Issue Date One-half of shares then outstanding
Tenth anniversary of Issue Date All remaining outstanding shares
</TABLE>
All shares shall be redeemed at a redemption price of $1,000 per share plus an
amount equal to the accrued and unpaid dividends thereon to the scheduled
redemption date. The shares of Series A Preferred Stock to be redeemed shall be
redeemed pro rata. If the funds of the Corporation legally available for
redemption of shares of the Series A Preferred Stock are insufficient to redeem
the total number of such shares required to be redeemed on a scheduled
redemption date, those funds which are legally available will be used to redeem
the maximum possible number of shares of Series A Preferred Stock ratably among
the holders thereof. At any time thereafter when additional funds of the
Corporation are legally available for such purpose, such funds will immediately
be used to redeem the balance of the shares of Series A Preferred Stock
scheduled to have been redeemed on the previous scheduled redemption date.
(d) Method of Redemption. Notice of redemption shall be mailed, first
class, postage prepaid, not less than 30 days nor more than 60 days prior to the
redemption date, to the holders of record of the Series A Preferred Stock to be
redeemed, at their respective addresses as the same appear upon the books of the
Corporation or supplied by them in writing to the Corporation for the purpose of
such notice. In addition to any information required by law, such notice shall
set forth the redemption price, the redemption date, the number of shares to be
redeemed and the place at which the shares called for redemption will, upon
presentation and surrender of the stock certificates evidencing such shares, be
redeemed. In case fewer than the total number of shares of Series A Preferred
Stock represented by any certificate are redeemed, a new certificate
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<PAGE> 23
representing the number of unredeemed shares will be issued to the holder
thereof without cost to such holder.
(e) Deposit of Redemption Price. If notice of any redemption by the
Corporation pursuant to this paragraph 6 shall have been mailed as provided in
paragraph 6(d) of this Section, and if on or before the redemption date
specified in such notice the consideration necessary for such redemption shall
have been set apart so as to be available therefor and only therefor, then on
and after the close of business on the redemption date, the shares of Series A
Preferred Stock called for redemption, notwithstanding that any certificate
therefor shall not have been surrendered for cancellation, shall no longer be
deemed outstanding, and all rights with respect to such shares shall forthwith
cease and terminate, except the right of the holder thereof to receive upon
surrender of its certificates the consideration payable upon redemption thereof.
If on or prior to the redemption date (but no earlier than 60 days prior to such
redemption date) the Corporation shall deposit, in a trust fund, with any bank
or trust company organized under the laws of the United States of America or any
state thereof having capital, undivided profits and surplus aggregating at least
$100,000,000 (the "Redemption Agent"), the consideration sufficient to redeem on
such redemption date the shares of Series A Preferred Stock to be redeemed, with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Corporation, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the redemption date or prior thereto, the redemption price of the
shares of Series A Preferred Stock to be redeemed to their respective holders
upon the surrender of their share certificates, then, from and after the date of
such deposit (although prior to the redemption date) the shares of Series A
Preferred Stock to be redeemed shall be deemed to be redeemed and dividends on
those shares shall cease to accrue after such redemption date. The deposit shall
be deemed to constitute full payment for shares of Series A Preferred Stock to
be redeemed to their holders and from and after the date of such deposit the
shares shall be deemed to be no longer outstanding and the holders thereof shall
cease to be shareholders with respect to such shares and shall have no rights
with respect thereto, except the right to receive payment of the consideration
sufficient to pay the redemption price of the shares, including all accrued but
unpaid dividends through the redemption date, without interest, upon surrender
of their certificates therefor, and except the right to exercise on or before
the close of business on the second full business day prior to the redemption
date the conversion rights appertaining to such shares of the Series A Preferred
Stock.
(f) Any monies so deposited or set aside by the Corporation pursuant to
the preceding paragraph which shall not be required for such redemption because
of the exercise of any right of conversion subsequent to the date of such
deposit shall be returned to the Corporation forthwith. Any interest accrued on
any funds so deposited shall belong to the Corporation and be paid to it from
time to time. Any funds so deposited by the Corporation and unclaimed at the end
of six months from the date fixed for redemption, shall be paid to the
Corporation, after which repayment the holders of shares of Series A Preferred
Stock so called for redemption shall look only to the Corporation for the
payment thereof, without interest.
(g) Status of Redeemed Stock. All shares of Series A Preferred Stock
redeemed, retired, purchased or otherwise acquired by the Corporation shall be
retired and shall be restored
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<PAGE> 24
to the status of authorized but unissued shares of the Preferred Stock, and may
be reissued as part of another series of the Preferred Stock of the Corporation,
but such shares shall not be reissued as Series A Preferred Stock. The
Corporation will not redeem any shares of Series A Preferred Stock, except as
expressly authorized herein.
(h) Additional Remedies Upon Failure to Redeem.
(i) Issuance of Warrants. Upon the occurrence of a Failure
to Redeem, the Corporation shall issue to the holders of shares of
Series A Preferred Stock warrants to purchase that number of shares of
Common Stock equal to (A) 5.0% of the Fully Diluted Common Stock
multiplied by (B) a fraction, the numerator of which is the aggregate
value of all shares of Series A Preferred Stock then outstanding
(valued at the Liquidation Preference plus accrued but unpaid
dividends) and the denominator of which is (x) the aggregate value of
all shares of Series A Preferred Stock then outstanding (valued at the
Liquidation Preference plus accrued but unpaid dividends) plus (y) the
aggregate value of all shares of Series B Preferred Stock then
outstanding (valued at the liquidation preference of such shares plus
accrued but unpaid dividends). If, on or prior to the occurrence of a
Failure to Redeem, the Corporation redeems or has redeemed shares of
Series A Preferred Stock and Series B Preferred Stock having an
aggregate liquidation preference of at least $15,000,000 but less than
$30,000,000, then the percentage of Fully Diluted Common Stock set
forth in (A) above shall be reduced to 4.0%. If on or prior to the
occurrence of a Failure to Redeem, the Corporation redeems or has
redeemed shares of Series A Preferred Stock and Series B Preferred
Stock having an aggregate liquidation preference of $30,000,000 or
more, then the percentage of Fully Diluted Common Stock set forth in
(A) above shall be reduced to 3.0%. Warrants issued pursuant to this
paragraph 6(h)(i) shall be issued at a purchase price per share equal
to 50% of the Current Market Price per share of the Common Stock on the
date of the Failure to Redeem. Such warrants shall be issued to holders
of the outstanding Series A Preferred Stock on a pro rata basis.
(ii) Increase in the Base Rate. In the event of a Failure to
Redeem, the Base Rate shall be increased to 20% until such time as all
then existing Failures to Redeem have been cured in full.
(iii) Election of Additional Director. Upon the occurrence and
during the continuation of a Failure to Redeem, the holders of shares
of Series A Preferred Stock, shall have the right to elect a director
to the Board of Directors in accordance with the procedures set forth
in paragraphs 4(c) and 4(d).
7. Right of Cancellation. If the Corporation is entitled under
Article 9 of the Purchase and Sale Agreement to cancel any portion of the
outstanding Series A Preferred Stock, the Corporation shall provide a notice of
cancellation (the "Notice of Cancellation"), which shall be mailed, first class,
postage prepaid, to the holders of record of the Series A Preferred Stock to be
so canceled, at their respective addresses as the same appear upon the books of
the Corporation or supplied by them in writing to the Corporation for the
purpose of such notice. The Corporation shall mail the Notice of Cancellation
not less than 30 days nor more than 60
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<PAGE> 25
days prior to the effective date of such proposed cancellation. In addition to
any information required by law, the Notice of Cancellation shall set forth the
proposed cancellation date, the number of shares proposed to be canceled, the
reason for the proposed cancellation. The Purchase and Sale Agreement provides
certain procedures for resolving a dispute as to whether the Corporation is
entitled to such cancellation. Each holder of Series A Preferred Stock receiving
a Notice of Cancellation shall be prohibited from exercising its conversion
right with respect to any shares of Series A Preferred Stock then held by such
holder from the date of the Notice of Cancellation through and including the
actual cancellation date. In case fewer than the total number of shares of
Series A Preferred Stock represented by any certificate are cancelled, a new
certificate representing the number of shares that were not cancelled will be
issued to the holder thereof upon surrender of the old certificate without cost
to such holder. Certificates not surrendered for cancellation shall be deemed to
represent the reduced number of shares from and after the cancellation date.
This right of cancellation shall be conspicuously noted in a legend on any
certificate evidencing the Series A Preferred Stock.
8. Certain Prohibited Transactions. At any time during which not less
than 10% of the number of shares of Series A Preferred Stock issued on the Issue
Date remain outstanding, the Corporation shall not enter into any material
transaction with any Affiliate (as hereinafter defined) of the Corporation
(other than a holder of this Series A Preferred Stock and any wholly-owned
subsidiary of the Corporation) unless such transaction is on terms and
conditions at least as favorable to the Corporation as could be obtained through
arm's length negotiations with an independent third party. For purposes of this
paragraph 8, an "Affiliate" of any specified Person shall mean 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.
9. Preemptive Rights. The holders of the Series A Preferred Stock will
not have any preemptive right to subscribe for or purchase any shares of stock
or any other securities which may be issued by the Corporation.
10. Reports to Stockholders. The Corporation shall mail to holders of
Series A Preferred Stock within 105 days after the first day of each fiscal year
and within 50 days after the close of each of the first three quarters of each
fiscal year, at such holder's address as appearing on the stock register with
respect to such Series A Preferred Stock, financial statements, including any
notes thereto (and, in the case of fiscal year end, an auditors' report by a
firm of established national reputation) and the Management's Discussion and
Analysis of Financial Condition and Results of Operations, for the Corporation
comparable to those required to be included in annual and quarterly reports
furnished pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
11. Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies which may otherwise be available
to holders of Series A Preferred Stock, the shares of Series A Preferred Stock
shall not have any designations,
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<PAGE> 26
preferences, limitations or relative rights, other than those specifically set
forth in this Certificate of Designations.
12. Headings of Subdivisions. The headings of the various subdivisions
of this Section are for convenience of reference only and shall not affect the
interpretation of any of the provisions of this Section.
IN WITNESS WHEREOF, this Certificate of Designation has been made under
seal of the Corporation and the hands of the undersigned, said Donald R.
Millard, President and Roberta L. McCaw, Secretary, respectively, of the
Corporation, this 15th day of January, 1999.
[CORPORATE SEAL] MATRIA HEALTHCARE, INC.
By: /s/ Donald R. Millard
-------------------------------
Donald R. Millard, President
ATTEST:
/s/ Roberta L. McCaw
- ---------------------------
Roberta L. McCaw, Secretary
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<PAGE> 1
EXHIBIT 4.2
MATRIA HEALTHCARE, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF 8% SERIES B REDEEMABLE PREFERRED STOCK
-------------------------------------------
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
-------------------------------------------
Matria Healthcare, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, in a duly convened meeting thereof on December 21, 1998, adopted
the following resolution, which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Restated Certificate of Incorporation of the
Corporation, to fix by resolution or resolutions the designation of each series
of Preferred Stock of the Corporation and the powers, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereof, including, without limiting the generality
of the foregoing, such provisions as may be desired concerning voting,
redemption, dividends, dissolution or distribution of assets, conversion or
exchange, and such other subjects as may be fixed by resolutions of the Board of
Directors under the General Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of Preferred Stock on the terms and with the provisions herein set forth:
A. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph A shall have, for all purposes of this resolution, the meanings herein
specified:
<PAGE> 2
"Affiliate" shall have the meaning ascribed to such term pursuant to
Rule 12b-2 under the Securities Exchange Act of 1934, as amended, as in effect
on the Issue Date; provided, that in no event shall MJG and SZI be deemed to be
Affiliates of each other.
"Board of Directors" shall mean the Board of Directors of the
Corporation and, to the extent permitted by law, any committee of the Board of
Directors authorized to exercise the powers of the Board of Directors.
"Change in Control" shall have the meaning set forth in paragraph 5(b)
hereof.
"Closing Price" with respect to a share of the Common Stock, for any
day, shall mean the last reported sale price, regular way, of the Common Stock,
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices, regular way, for such day, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if it is not listed or admitted to trading on any
national securities exchange but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, in case no sale is publicly reported,
the average of the closing bid and asked quotations for the Common Stock, in
either case as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any comparable system or, if the
Common Stock is not quoted on NASDAQ or any comparable system, the closing sale
price of the Common Stock as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose.
"Common Stock" shall mean the one hundred million (100,000,000)
authorized shares of the Common Stock, par value $.01 per share, of the
Corporation, and all shares hereafter authorized of any class of common stock of
the Corporation.
"Common Stock Warrant" shall mean the Common Stock Warrant as defined
in the Purchase and Sale Agreement.
"Current Market Price" per share shall mean, with respect to any of the
Common Stock, as of any particular date of determination, the average of the
daily closing prices of the Common Stock as reported in The Wall Street Journal
or other reputable financial news source, for the 30 consecutive trading days
immediately preceding such date.
"Dividend Payment Dates" shall have the meaning set forth in paragraph
2(a) hereof.
"Dividend Period" shall mean the period from and including the Issue
Date to the first Dividend Payment Date and each quarterly period from and after
the Dividend Payment Date for the preceding Dividend Period to the Dividend
Payment Date for such Dividend Period.
"Event of Noncompliance" shall mean the occurrence of any of the
following events:
(i) the Corporation shall fail to pay dividends on the
Series B Preferred Stock for two consecutive Dividend
Periods, not including any suspension of
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<PAGE> 3
dividend payments pursuant to Section 9.2(e)(iv) of
the Purchase and Sale Agreement; or
(ii) (a) the Corporation shall (i) apply for or consent to
the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii)
be generally unable or admit in writing its inability
to pay its debts as such debts become due, (iii) make
a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the
Federal Bankruptcy Code (as now or hereafter in
effect), (v) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the
enforcement of creditors' rights generally, (vi)
acquiesce in writing to, or fail to controvert in a
timely or appropriate manner, any petition filed
against it in an involuntary action case under such
Bankruptcy Code, or (vii) take any action under the
laws of any jurisdiction analogous to any of the
foregoing; or
(b) a proceeding or case shall be commenced, without
the application or consent of the Corporation, in any
court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution,
winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or
any substantial part of its assets, or (iii) similar
relief in respect of it under any law providing for
the relief of debtors, and such proceeding or case
described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period
of 90 days.
"Failure to Redeem" shall mean any failure by the Corporation to redeem
shares of the Series B Preferred Stock in accordance with the provisions of
paragraph 5(b) or paragraph 5(c), other than a failure to redeem pursuant to
Section 9.2(e)(iv) of the Purchase and Sale Agreement.
"Fully Diluted" means, with respect to the Common Stock, all of the
outstanding Common Stock determined as if any security or obligation directly or
indirectly exercisable for or convertible into Common Stock had been so
exercised or converted, as the case may be.
"Issue Date" shall mean the date on which any shares of the Series B
Preferred Stock are first issued.
"Joint Director" shall mean a director elected collectively by the
holders of the Series A Preferred Stock and the holders of the Series B
Preferred Stock, as a Voting Group.
"Junior Stock" shall mean Common Stock and any other class or series of
capital stock of the Corporation authorized after the Issue Date not entitled to
receive any dividends unless all dividends required to have been paid or
declared and set apart for payment on the Series B Preferred Stock and any
Parity Stock shall have been so paid or declared and set apart for payment and
shall also mean any class or series of capital stock of the Corporation not
entitled to
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<PAGE> 4
receive any assets upon liquidation, dissolution or winding up of the affairs of
the Corporation until the Series B Preferred Stock and any Parity Stock shall
have received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
"Liquidation Preference" with respect to the Series B Preferred Stock
shall mean $1,000 per share.
"MJG" shall mean Mark J. Gainor, a Georgia resident.
"MJG Affiliate" shall mean MJG and any Affiliate of MJG (in each case
exclusive of any SZI Affiliate).
"MJG Director" shall mean any director on the Board of Directors who is
an MJG Affiliate or a designee of an MJG Affiliate, other than a director
elected by the holders of the Series A Preferred Stock and/or Series B Preferred
Stock upon an Event of Noncompliance or a Failure to Redeem as set forth herein.
"Parity Stock" shall mean any class or series of capital stock of the
Corporation authorized after the Issue Date entitled to receive payment of
dividends on a parity with the Series B Preferred Stock and shall also mean any
class or series of capital stock of the Corporation entitled to receive assets
upon liquidation, dissolution or winding up of the affairs of the Corporation on
a parity with the Series B Preferred Stock.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or other agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
"Preferred Stock" shall mean the authorized fifty million (50,000,000)
shares of the Corporation's serial Preferred Stock, par value $.01 per share.
"Purchase and Sale Agreement" shall mean that certain Purchase and Sale
Agreement dated as of December 21, 1998 between the Corporation and Gainor
Medical Management, L.L.C.
"Senior Stock" shall mean any class or series of capital stock of the
Corporation authorized after the Issue Date ranking senior to the Series B
Preferred Stock and any Parity Stock in respect of a right to receive dividends
and shall also mean any class or series of capital stock of the Corporation
ranking senior to the Series B Preferred Stock and any Parity Stock in respect
of the right to participate in any distribution upon liquidation, dissolution or
winding up of the affairs of the Corporation.
"Series A Preferred Stock" shall mean the 16,500 shares of that series
of the Preferred Stock of the Corporation designated as "4% Series A Convertible
Preferred Stock."
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<PAGE> 5
"Series A Director" shall mean a director elected by the holders of the
Series A Preferred Stock in accordance with the terms of the Series A Preferred
Stock, other than a Joint Director.
"Series B Preferred Stock" shall have the meaning set forth in
paragraph 1 hereof.
"Series B Director" shall mean a director elected by the holders of the
Series B Preferred Stock in accordance with the terms of the Series B Preferred
Stock, other than a Joint Director.
"SZI" shall mean SZ Investments, L.L.C., a Delaware limited liability
company.
"SZI Affiliate" shall mean SZI and any of its Affiliates under control
of or common control with SZI (in each case exclusive of any MJG Affiliates);
provided, however, that, notwithstanding the foregoing, no Person shall be
deemed to be an SZI Affiliate unless (i) Sam Zell or any other executive officer
of SZI has actual knowledge of the relevant action to be attributed to the SZI
Affiliate hereunder or (ii) in the case of publicly held entities that might
otherwise fall within this definition, unless Sam Zell or any other executive
officer of SZI took any action, directly or indirectly, to cause, suggest,
encourage or assist such publicly held entity to take the relevant action to be
attributed to the SZI Affiliate hereunder.
"SZI Director" shall mean any director on the Board of Directors who is
an SZI Affiliate or a designee of an SZI Affiliate, other than a director
elected by the holders of the Series A Preferred Stock and/or Series B Preferred
Stock upon the occurrence of an Event of Noncompliance or a Failure to Redeem.
"Voting Group" shall mean the holders of the outstanding Series A
Preferred Stock and Series B Preferred Stock voting together as a single class.
1. Designation and Amount; Rank. There shall be a series of Preferred
Stock designated as the "8% Series B Redeemable Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting such series shall be
60,000. The Series B Preferred Stock shall, with respect to payment of dividends
and rights upon liquidation, dissolution or winding up of the affairs of the
Corporation ran senior to the Common Stock and to all Junior Stock, rank on a
parity with all Parity Stock and rank junior to all Senior Stock.
2. Dividends and other Distributions.
(a) Subject to the prior preferences and other rights of any Senior
Stock, the holders of the Series B Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of any funds legally
available therefor, cumulative dividends at the annual rate (the "Base Rate") of
8% of the Liquidation Preference of such share (or $80.00 per share per year)
from and including the Issue Date (or, in the case of each share issued after
the Issue Date, from the Dividend Payment Date which is the date of issue of
such share, or if such date is not a Dividend Payment Date, from the immediately
preceding Dividend Payment Date, or if none, the Issue Date) to and including
the date on which the Liquidation Preference of such share is made available
(whether upon liquidation, dissolution or winding up of the Corporation or, in
the case of paragraph 5 hereof, redemption), whether or not there are any funds
of the Corporation legally
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<PAGE> 6
available for the payment of dividends. Dividends shall be fully cumulative,
shall accrue without interest, whether or not such dividends have been declared,
and shall be payable in cash quarterly in arrears in equal amounts on January 1,
April 1, July 1 and October 1 of each year ("Dividend Payment Dates"),
commencing with the first Dividend Payment Date following the Issue Date, to the
holders of record of the Series B Preferred Stock as of the close of business on
such date, not more than 30 days nor less than 10 days preceding the Dividend
Payment Date, as may be fixed by the Board of Directors (the "Record Date").
Notice of each Record Date shall be mailed, first class, postage prepaid, not
less than 10 days nor more than 30 days prior thereto to the holders of record
of Series B Preferred Stock at their respective addresses as the same appear on
the books of the Corporation or supplied by them in writing to the Corporation
for the purpose of such notice. In the event that the Board of Directors does
not declare and/or the Corporation does not pay a full dividend on any regular
Dividend Payment Date, notice of such nondeclaration and/or nonpayment (a
"Nonpayment Notice") shall be given to holders of the Series B Preferred Stock
in the manner provided in the preceding sentence not more than five days
subsequent to such Dividend Payment Date. For purposes of determining the amount
of dividends "accrued" as of any date which is not a Dividend Payment Date, such
amount shall be calculated on the basis of the foregoing rate per annum for
actual days elapsed from and including the Issue Date (in the case of any date
up to the first Dividend Payment Date) or the last preceding Dividend Payment
Date (in the case of any other date) to the date as of which such determination
is to be made, based on a 360-day year.
(b) Dividends shall be payable in cash; provided, however, that if, on
any Dividend Payment Date, the Corporation, pursuant to applicable law or the
terms of any debt instrument, shall be prohibited or restricted from paying in
cash the full dividends to which holders of the Series B Preferred Stock and any
Parity Stock shall be entitled, the amount of cash available (if any) pursuant
to applicable law and which is not restricted by the terms of any debt
instrument shall be distributed among the holders of the Series B Preferred
Stock and such Parity Stock ratably in proportion to the full amounts to which
they would otherwise be entitled. The per share amounts to be distributed
pursuant to the preceding sentence shall, in each case, be adjusted by rounding
down to the nearest whole cent and such adjusted amount is hereinafter referred
to as the "Cash Dividend Payment."
(c) If the Cash Dividend Payment is insufficient to satisfy the full
quarterly dividend to which the holder of a share of the Series B Preferred
Stock is entitled or to which the Holder would have been entitled if such
dividend had been declared by the Board of Directors, the difference between
such full quarterly dividend per share and the Cash Dividend Payment (or, if
none, zero) (such difference being hereinafter referred to as the "Stock
Dividend Payment") shall, at the written request of the holders of not less than
50% of the outstanding shares of Series B Preferred Stock, be paid by delivering
as to each share of Series B Preferred Stock outstanding a number of shares of
Series B Preferred Stock determined by dividing the Stock Dividend Payment by
$1,000. Such notice must be given by the holders to the Corporation not more
than 10 days after delivery by the Corporation of the applicable Nonpayment
Notice as provided in paragraph (a) above.
(d) To the extent not paid on each Dividend Payment Date in the manner
provided in paragraph 2(a), all dividends that have accrued on each share of
Series B Preferred Stock during
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<PAGE> 7
the Dividend Period ending on such Dividend Payment Date may be declared and
paid at any time in cash (subject to the concurrent satisfaction of any cash
dividend arrearages then existing with respect to any Parity Stock) without
reference to any regular Dividend Payment Date, to holders of record as of the
close of business on such date, not more than 30 days nor less than 10 days
preceding the payment date thereof, as may be fixed by the Board of Directors
(the "Special Record Date"). Notice of each Special Record Date shall be mailed,
first class, postage prepaid, not less than 10 days nor more than 30 days prior
thereto, to the holders of record of Series B Preferred Stock at their
respective addresses as the same appear on the books of the Corporation or
supplied by them in writing to the Corporation for the purpose of such notice.
(e) So long as any shares of the Series B Preferred Stock shall be
outstanding, the Corporation shall not declare or pay on any Junior Stock any
dividend whatsoever, whether in cash, property or otherwise, nor shall the
Corporation make any distribution on any Junior Stock, or set aside any assets
for any such purposes, nor shall any Junior Stock be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries, nor shall any
monies be paid, set aside for payment or made available for a sinking fund for
the purchase or redemption of any Junior Stock, unless and until all dividends
to which the holders of the Series B Preferred Stock and all Parity Stock shall
have been entitled for all current and all previous Dividend Periods shall have
been paid or declared and the consideration sufficient for the payment thereof
set apart so as to be available for the payment thereof and for no other
purpose; provided, however, that nothing contained in this paragraph 2(e) shall
prevent the payment of dividends solely in Junior Stock or the repurchase,
redemption or other acquisition of Junior Stock solely through the issuance of
Junior Stock.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) Subject to the prior payment in full of the preferential amounts to
which any Senior Stock is entitled, in the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of shares of the Series B Preferred Stock shall be entitled to receive from the
assets of the Corporation available for distribution to the shareholders an
amount in cash or property at its fair market value, as determined by the Board
of Directors in good faith, or a combination thereof, equal to $1,000 per share
(the "Liquidation Preference"), plus an amount equal to unpaid accrued dividends
thereon to the payment date before any payment or distribution shall be made to
the holders of any Junior Stock of the Corporation, which payment shall be made
pari passu to any such payment made to the holders, if any, of any Parity Stock.
The holders of Series B Preferred Stock shall be entitled to no other or further
distribution of or participation in any remaining assets of the Corporation
after receiving the Liquidation Preference per share and such unpaid accrued
dividends.
(b) If, upon distribution of the Corporation's assets in liquidation,
dissolution or winding up, the assets of the Corporation to be distributed among
the holders of the Series B Preferred Stock and to all holders of any Parity
Stock shall be insufficient to permit payment in full to such holders of the
preferential amounts to which they are entitled, then the entire assets of the
Corporation to be distributed to holders of the Series B Preferred Stock and
such Parity Stock shall be distributed pro rata to such holders based upon the
aggregate of the full preferential
-7-
<PAGE> 8
amounts to which the shares of Series B Preferred Stock and such Parity Stock
would otherwise respectively be entitled.
(c) Neither the consolidation or merger of the Corporation with or into
any other corporation or corporations nor the sale, transfer, or lease of all or
substantially all the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be mailed, first class, postage prepaid, not less than 20 days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective, to the holders of the Series B
Preferred Stock at their respective addresses as the same appear on the books of
the Corporation or supplied by them in writing to the Corporation for the
purpose of such notice.
4. Voting.
(a) The holders of Series B Preferred Stock shall have no right to vote
for any purpose, except as specifically required by the General Corporation Law
of the State of Delaware and except as described in this paragraph 4 or
paragraph 5(h).
(b) Unless the consent or approval of a greater number of shares shall
be required by law, without the consent of the holders of at least 66-2/3% of
the number of shares of the Series B Preferred Stock at the time outstanding,
either in writing or by vote at a meeting called for that purpose at which the
holders of the Series B Preferred Stock shall vote as a class, the Corporation
shall not (i) amend, alter or repeal any provision of the Certificate of
Incorporation of the Corporation nor any resolution of the Board of Directors
establishing and designating a series of preferred stock and determining the
relative rights and preferences thereof, so as to effect any adverse change in
the rights, privileges or preferences of the holders of the Series B Preferred
Stock, (ii) create or designate any class or series of Parity Stock, Senior
Stock or any other stock which has redemption features, voting rights or other
material terms which are, in any such case, more favorable than the comparable
provisions of the Series B Preferred Stock or (iii) issue additional shares of
Series B Preferred Stock except pursuant to the terms hereof.
(c) The Corporation shall promptly notify the holders of the Series B
Preferred Stock of the occurrence of an Event of Noncompliance or a Failure to
Redeem. Upon the occurrence and during the continuation of an Event of
Noncompliance or a Failure to Redeem, the holders of shares of Series B
Preferred Stock, shall have the certain voting rights set forth below with
respect to the election of directors to the Board of Directors. Notwithstanding
anything to the contrary contained herein, the holders of the Series B Preferred
Stock shall only be entitled to elect a maximum of one Series B Director with
respect to any and all Events of Noncompliance and a maximum of one Series B
Director with respect to any and all Failures to Redeem.
(i) if either an Event of Noncompliance or a Failure to Redeem
occurs (but not concurrently), then the holders of Series B Preferred
Stock, voting separately as a class, shall have the right to elect one
Series B Director;
-8-
<PAGE> 9
(ii) if an Event of Noncompliance exists concurrently with a
Failure to Redeem, then the holders of Series B Preferred Stock, voting
separately as a class, shall have the right to elect two Series B
Directors, except:
(A) if the Board of Directors includes both an MJG Director
and an SZI Director and the holders of Series A Preferred Stock
have elected or have the right to elect one or more Series A
Directors, then the holders of Series B Preferred Stock, voting
separately as a class, shall have the right to elect one Series B
Director; or
(B) if the Board of Directors includes either an MJG Director
or an SZI Director, but not both, and the holders of Series A
Preferred Stock have elected or have the right to elect two Series
A Directors, then, notwithstanding anything to the contrary herein
or in the terms of the Series A Preferred Stock, the rights of the
holders of Series B Preferred Stock with respect to the election of
directors shall be as follows:
(1) the holders of Series B Preferred Stock, voting
separately as a class, shall have the right to elect one
Series B Director; and
(2) the holders of Series A Preferred Stock, voting
separately as a class, shall have the right to elect one
Series A Director; and
(3) the holders of the Series A Preferred Stock and
the holders of the Series B Preferred Stock, voting as a
Voting Group, shall have the right to elect one Joint
Director.
Notwithstanding anything to the contrary contained herein, the
aggregate number of all of the Series A Directors, Series B Directors,
Joint Directors, MJG Directors and SZI Directors shall never exceed
four (4) directors at any one time.
(d) Each director elected in accordance with paragraph 4(c) shall
thereupon become an additional director of the Corporation and the authorized
directors of the Corporation shall thereupon be automatically increased by such
number. The Corporation will not take any action which would impair its ability,
in conformity with the Certificate of Incorporation and the By-Laws of the
Corporation, to increase automatically the number of its directors as provided
herein. During such times that the holders of the Series B Preferred Stock or
the Voting Group, as the case may be, shall be entitled to elect such additional
directors, the remaining directors shall be elected by the holders of the other
shares of capital stock of the Corporation entitled to vote for the election of
directors, without right in the holders of Series B Preferred Stock or the
Voting Group to participate in the election of such remaining directors.
Such right of the holders of shares of the Series B Preferred Stock,
acting separately or as part of a Voting Group, to elect a particular director
shall continue only until the event or events forming the basis for the election
of such director have been cured in full, or as otherwise contemplated in
paragraph 4(c), at which time the term of office of such director shall
forthwith
-9-
<PAGE> 10
terminate and the number of directors constituting the entire Board of
Directors of the Corporation shall be reduced correspondingly (subject always to
the same provisions for the vesting of such voting rights on the occurrence of
any other or future Event of Noncompliance or Failure to Redeem). The fact that
an Event of Noncompliance or Failure to Redeem has been cured and that no other
Event of Noncompliance or Failure to Redeem has occurred and is continuing shall
be evidenced by a certificate executed by the chief executive officer and chief
financial officer of the Corporation and delivered to the Board of Directors.
At any time after such voting rights shall so have vested in the
holders of shares of the Series B Preferred Stock, as a separate group or as
part of a Voting Group, the Secretary of the Corporation may, and upon the
written request of the holders of record of not less than 25% of the Series B
Preferred Stock, addressed to him at the principal office of the Corporation,
shall within 10 days after delivery of such request, call a special meeting of
the holders of shares of the Series B Preferred Stock or of such Voting Group
for the purpose of electing the director to be elected by them, such meeting to
be held within 15 days after such call at the place and upon the notice provided
by the By-Laws of the Corporation for the holding of meetings of shareholders;
provided, however, that if the Secretary of the Corporation shall fail to call
any such meeting within 10 days after delivery of any such request, such meeting
may be called by any holder or holders of record of 25% or more of the Series B
Preferred Stock. Notwithstanding the foregoing, the Secretary of the Corporation
shall not be required, and the holders of Series B Preferred Stock shall not be
entitled, to call such a special meeting if the request for such call is
received less than 45 days prior to the date fixed for the next annual meeting
of shareholders, and if in such case such special meeting is not called, the
holders of Series B Preferred Stock shall be entitled to vote (as a class or as
part of a Voting Group, as the case may be) at such annual meeting to elect such
director. Any vacancy in the office of the director elected by the holders of
the Series B Preferred Stock or such Voting Group shall be filled by a vote of
such holders or such Voting Group, as the case may be, as a separate class.
Except as hereinbefore provided, the director elected by the holders of the
Series B Preferred Stock or such Voting Group shall serve until the next annual
meeting of the shareholders and until his successor shall have been elected and
qualified and may be otherwise removed only by the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock, or then
outstanding shares of such Voting Group, as the case may be, at the time of such
removal.
At any meeting having as a purpose the election of a director by
holders of the Series B Preferred Stock or any such Voting Group, the presence,
in person or by proxy, of the holders of a majority of the outstanding shares of
Series B Preferred Stock or a majority of such Voting Group, as the case may be,
shall be required and be sufficient to constitute a quorum of such class for the
election of a director by such holders. At any such meeting or adjournment
thereof, (i) the absence of a quorum of such holders of the Series B Preferred
Stock or such Voting Group, as the case may be, shall not prevent the election
of the directors to be elected by the holders of shares other than the Series B
Preferred Stock or such Voting Group, and the absence of a quorum of holders of
shares other than the Series B Preferred Stock or such Voting Group shall not
prevent the election of the director to be elected by the holders of the Series
B Preferred Stock or such Voting Group, and (ii) in the absence of such quorum
of any class or classes of stock, a majority of the holders, present in person
or by proxy, of the class or classes of stock which lack a quorum shall have
power to adjourn the meeting for the election of directors which
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<PAGE> 11
they are entitled to elect, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
5. Redemption.
(a) Redemption at Option of the Corporation. Subject to the rights
of Senior Stock, if any, the Corporation, at its option, may redeem at any time
and from time to time shares of Series B Preferred Stock, in whole or in part,
in the sole discretion of the Board of Directors, at the redemption price of
$1,000 per share plus an amount equal to the accrued dividends thereon to the
redemption date. If less than all outstanding shares of Series B Preferred Stock
are to be redeemed, the shares of Series B Preferred Stock to be redeemed shall
be chosen by lot or pro rata in such manner as the Board of Directors may
determine.
(b) Redemption at Option of Holders.
(i) Subject to the rights of Senior Stock, if any, and the
further provisions of subparagraph (b)(ii) below, the Series B
Preferred Stock shall be redeemed in whole by the Corporation
out of funds legally available therefor, at the written
request of the holder or holders of a majority of the
outstanding shares thereof, after a "Change in Control" of the
Corporation as defined in subparagraph (b)(ii) below, at a
redemption price of $1,000 per share plus an amount equal to
the accrued dividends thereon to the redemption date.
(ii) The redemption rights provided by subparagraph (b)(i)
shall be available only in the event of a "Change in Control"
of the Corporation. For purposes of this subparagraph (b), a
"Change in Control" of the Corporation shall mean any of the
following events: (i) any person (as the term "person" is used
in Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended), other than an "Existing
Stockholder" (as hereinafter defined) is or becomes the direct
or indirect beneficial owner of shares of the Corporation's
capital stock representing greater than 50% of the power to
vote in the election of directors or (ii) the Corporation
sells, transfers or otherwise disposes of all or substantially
all of the assets of the Corporation other than in any
transaction between the Corporation and a wholly-owned
subsidiary of the Corporation or (iii) the Corporation is a
party to a merger or consolidation in which the holders of the
Corporation's voting securities prior to such merger or
consolidation own, directly or indirectly, securities
representing less than 50% of the voting power in the
surviving entity. "Existing Stockholder" shall mean Mark J.
Gainor, SZ Investments, L.L.C., any holders of any of this
Series B Preferred Stock, the Series A Preferred Stock or the
Common Stock Warrant, or any affiliate of any of them.
(iii) If the funds of the Corporation legally available for
redemption of shares of the Series B Preferred Stock are
insufficient to redeem the total number of such shares
required to be redeemed pursuant to subparagraph (b)(i), those
funds which are legally available will be used to redeem the
maximum possible number of
-11-
<PAGE> 12
shares of Series B Preferred Stock ratably among the holders
thereof. At any time thereafter when additional funds of the
Corporation are legally available for such purpose, such funds will
immediately be used to redeem the balance of the shares of Series B
Preferred Stock outstanding.
(c) Scheduled Redemption. Subject to the rights of Senior Stock, if
any, the Corporation shall redeem, out of funds legally available therefor,
shares of the Series B Preferred Stock as follows:
<TABLE>
<CAPTION>
SCHEDULED NUMBER OF SHARES
REDEMPTION DATE TO BE REDEEMED
--------------- --------------
<S> <C>
Eighth anniversary of Issue Date One-third of shares then outstanding
Ninth anniversary of Issue Date One-half of shares then outstanding
Tenth anniversary of Issue Date All remaining outstanding shares
</TABLE>
All shares shall be redeemed at a redemption price of $1,000 per share plus an
amount equal to the accrued and unpaid dividends thereon to the scheduled
redemption date. The shares of Series B Preferred Stock to be redeemed shall be
redeemed pro rata. If the funds of the Corporation legally available for
redemption of shares of the Series B Preferred Stock are insufficient to redeem
the total number of such shares required to be redeemed on a scheduled
redemption date, those funds which are legally available will be used to redeem
the maximum possible number of shares of Series B Preferred Stock ratably among
the holders thereof. At any time thereafter when additional funds of the
Corporation are legally available for such purpose, such funds will immediately
be used to redeem the balance of the shares of Series B Preferred Stock
scheduled to have been redeemed on the previous scheduled redemption date.
(d) Method of Redemption. Notice of redemption shall be mailed, first
class, postage prepaid, not less than 30 days nor more than 60 days prior to the
redemption date, to the holders of record of the Series B Preferred Stock to be
redeemed, at their respective addresses as the same appear upon the books of the
Corporation or supplied by them in writing to the Corporation for the purpose of
such notice. In addition to any information required by law, such notice shall
set forth the redemption price, the redemption date, the number of shares to be
redeemed and the place at which the shares called for redemption will, upon
presentation and surrender of the stock certificates evidencing such shares, be
redeemed. In case fewer than the total number of shares of Series B Preferred
Stock represented by any certificate are redeemed, a new certificate
representing the number of unredeemed shares will be issued to the holder
thereof without cost to such holder.
(e) Deposit of Redemption Price. If notice of any redemption by the
Corporation pursuant to this paragraph 5 shall have been mailed as provided in
paragraph 5(d) of this Section, and if on or before the redemption date
specified in such notice the consideration necessary for such redemption shall
have been set apart so as to be available therefor and only therefor, then on
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<PAGE> 13
and after the close of business on the redemption date, the shares of Series B
Preferred Stock called for redemption, notwithstanding that any certificate
therefor shall not have been surrendered for cancellation, shall no longer be
deemed outstanding, and all rights with respect to such shares shall forthwith
cease and terminate, except the right of the holder thereof to receive upon
surrender of its certificates the consideration payable upon redemption thereof.
If on or prior to the redemption date (but no earlier than 60 days prior to such
redemption date) the Corporation shall deposit, in a trust fund, with any bank
or trust company organized under the laws of the United States of America or any
state thereof having capital, undivided profits and surplus aggregating at least
$100,000,000 (the "Redemption Agent"), the consideration sufficient to redeem on
such redemption date the shares of Series B Preferred Stock to be redeemed, with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Corporation, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the redemption date or prior thereto, the redemption price of the
shares of Series B Preferred Stock to be redeemed to their respective holders
upon the surrender of their share certificates, then, from and after the date of
such deposit (although prior to the redemption date) the shares of Series B
Preferred Stock to be redeemed shall be deemed to be redeemed and dividends on
those shares shall cease to accrue after such redemption date. The deposit shall
be deemed to constitute full payment for shares of Series B Preferred Stock to
be redeemed to their holders and from and after the date of such deposit the
shares shall be deemed to be no longer outstanding and the holders thereof shall
cease to be shareholders with respect to such shares and shall have no rights
with respect thereto, except the right to receive payment of the consideration
sufficient to pay the redemption price of the shares, including all accrued but
unpaid dividends through the redemption date, without interest, upon surrender
of their certificates therefor, and except the right to exercise on or before
the close of business on the second full business day prior to the redemption
date the conversion rights appertaining to such shares of the Series B Preferred
Stock.
(f) Any monies so deposited or set aside by the Corporation pursuant to
the preceding paragraph which shall not be required for such redemption because
of the exercise of any right of conversion subsequent to the date of such
deposit shall be returned to the Corporation forthwith. Any interest accrued on
any funds so deposited shall belong to the Corporation and be paid to it from
time to time. Any funds so deposited by the Corporation and unclaimed at the end
of six months from the date fixed for redemption, shall be paid to the
Corporation, after which repayment the holders of shares of Series B Preferred
Stock so called for redemption shall look only to the Corporation for the
payment thereof, without interest.
(g) Status of Redeemed Stock. All shares of Series B Preferred Stock
redeemed, retired, purchased or otherwise acquired by the Corporation shall be
retired and shall be restored to the status of authorized but unissued shares of
the Preferred Stock, and may be reissued as part of another series of the
Preferred Stock of the Corporation, but such shares shall not be reissued as
Series B Preferred Stock. The Corporation will not redeem any shares of Series B
Preferred Stock, except as expressly authorized herein.
-13-
<PAGE> 14
(h) Additional Remedies Upon Failure to Redeem.
(i) Issuance of Warrants. Upon the occurrence of a Failure
to Redeem, the Corporation shall issue to the holders of shares of
Series B Preferred Stock warrants to purchase that number of shares of
Common Stock equal to (A) 5.0% of the Fully Diluted Common Stock
multiplied by (B) a fraction, the numerator of which is the aggregate
value of all shares of Series B Preferred Stock then outstanding
(valued at the Liquidation Preference plus accrued but unpaid
dividends) and the denominator of which is (x) the aggregate value of
all shares of Series B Preferred Stock then outstanding (valued at the
Liquidation Preference plus accrued but unpaid dividends) plus (y) the
aggregate value of all shares of Series A Preferred Stock then
outstanding (valued at the liquidation preference of such shares plus
accrued but unpaid dividends). If, on or prior to the occurrence of a
Failure to Redeem, the Corporation redeems or has redeemed shares of
Series A Preferred Stock and Series B Preferred Stock having an
aggregate liquidation preference of at least $15,000,000 but less than
$30,000,000, then the percentage of Fully Diluted Common Stock set
forth in (A) above shall be reduced to 4.0%. If on or prior to the
occurrence of a Failure to Redeem, the Corporation redeems or has
redeemed shares of Series A Preferred Stock and Series B Preferred
Stock having an aggregate liquidation preference of $30,000,000 or
more, then the percentage of Fully Diluted Common Stock set forth in
(A) above shall be reduced to 3.0%. Warrants issued pursuant to this
paragraph 6(h)(i) shall be issued at a purchase price per share equal
to 50% of the Current Market Price per share of the Common Stock on the
date of the Failure to Redeem. Such warrants shall be issued to holders
of the outstanding Series B Preferred Stock on a pro rata basis.
(ii) Increase in the Base Rate. In the event of a Failure to
Redeem, the Base Rate shall be increased to 20% until such time as all
then existing Failures to Redeem have been cured in full.
(iii) Election of Additional Director. Upon the occurrence and
during the continuation of a Failure to Redeem, the holders of shares
of Series B Preferred Stock, shall have the right to elect a director
to the Board of Directors in accordance with the procedures set forth
in paragraphs 4(c) and 4(d).
6. Right of Cancellation. If the Corporation is entitled under Article
9 of the Purchase and Sale Agreement to cancel any portion of the outstanding
Series B Preferred Stock, the Corporation shall provide a notice of cancellation
(the "Notice of Cancellation"), which shall be mailed, first class, postage
prepaid, to the holders of record of the Series B Preferred Stock to be so
canceled, at their respective addresses as the same appear upon the books of the
Corporation or supplied by them in writing to the Corporation for the purpose of
such notice. The Corporation shall mail the Notice of Cancellation not less than
30 days nor more than 60 days prior to the effective date of such proposed
cancellation. In addition to any information required by law, the Notice of
Cancellation shall set forth the proposed cancellation date, the number of
shares proposed to be canceled, the reason for the proposed cancellation. The
Purchase and Sale Agreement provides certain procedures for resolving a dispute
as to whether the Corporation is entitled to such cancellation. Each holder of
Series B Preferred Stock
-14-
<PAGE> 15
receiving a Notice of Cancellation shall be prohibited from exercising its
conversion right with respect to any shares of Series B Preferred Stock then
held by such holder from the date of the Notice of Cancellation through and
including the actual cancellation date. In case fewer than the total number of
shares of Series B Preferred Stock represented by any certificate are canceled,
a new certificate representing the number of shares that were not canceled will
be issued to the holder thereof upon surrender of the old certificate without
cost to such holder. Certificates not surrendered for cancellation shall be
deemed to represent the reduced number of shares from and after the cancellation
date. This right of cancellation shall be conspicuously noted in a legend on any
certificate evidencing the Series B Preferred Stock.
7. Certain Prohibited Transactions. At any time during which not less
than 10% of the number of shares of Series B Preferred Stock issued on the
Issues Date remain outstanding, the Corporation shall not enter into any
material transaction with any Affiliate (as hereinafter defined) of the
Corporation unless such transaction is on terms and conditions at least as
favorable to the Corporation as could be obtained through arm's length
negotiations with an independent third party. For purposes of this paragraph 7,
an "Affiliate" of any specified Person shall mean 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.
8. Preemptive Rights. The holders of the Series B Preferred Stock will
not have any preemptive right to subscribe for or purchase any shares of stock
or any other securities which may be issued by the Corporation.
9. Reports to Stockholders. The Corporation shall mail to holders of
Series B Preferred Stock within 105 days after the first day of each fiscal year
and within 50 days after the close of each of the first three quarters of each
fiscal year, at such holder's address as appearing on the stock register with
respect to such Series B Preferred Stock, financial statements, including any
notes thereto (and, in the case of fiscal year end, an auditors' report by a
firm of established national reputation) and the Management's Discussion and
Analysis of Financial Condition and Results of Operations, for the Corporation
comparable to those required to be included in annual and quarterly reports
furnished pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
10. Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies which may otherwise be available
to holders of Series B Preferred Stock, the shares of Series B Preferred Stock
shall not have any designations, preferences, limitations or relative rights,
other than those specifically set forth in this Certificate of Designations.
11. Headings of Subdivisions. The headings of the various subdivisions
of this Section are for convenience of reference only and shall not affect the
interpretation of any of the provisions of this Section.
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<PAGE> 16
IN WITNESS WHEREOF, this Certificate of Designation has been made under
seal of the Corporation and the hands of the undersigned, said Donald R.
Millard, President and Roberta L. McCaw, Secretary, respectively, of the
Corporation, this 15th day of January, 1999.
[CORPORATE SEAL] MATRIA HEALTHCARE, INC.
By: /s/ Donald R. Millard
-------------------------------
Donald R. Millard, President
ATTEST:
/s/ Roberta L. McCaw
- ------------------------------
Roberta L. McCaw, Secretary
-16-
<PAGE> 1
EXHIBIT 4.3
================================================================================
CREDIT AGREEMENT
among
MATRIA HEALTHCARE, INC.
and certain subsidiaries,
as Borrowers,
THE LENDERS NAMED HEREIN,
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
$125,000,000 Senior Credit Facilities
Arranged by
FIRST UNION CAPITAL MARKETS
A division of Wheat First Securities, Inc.
Dated as of January 19, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS..........................................................................................................1
ARTICLE I
DEFINITIONS
1.1 Defined Terms............................................................................................2
1.2 Accounting Terms........................................................................................28
1.3 Other Terms; Construction...............................................................................29
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments.............................................................................................29
2.2 Borrowings..............................................................................................31
2.3 Disbursements; Funding Reliance; Domicile of Loans......................................................34
2.4 Notes...................................................................................................35
2.5 Termination and Reduction of Commitments and Swingline Commitment.......................................37
2.6 Mandatory Payments and Prepayments......................................................................37
2.7 Voluntary Prepayments...................................................................................41
2.8 Interest................................................................................................41
2.9 Fees....................................................................................................43
2.10 Interest Periods........................................................................................44
2.11 Conversions and Continuations...........................................................................45
2.12 Method of Payments; Computations........................................................................46
2.13 Recovery of Payments....................................................................................47
2.14 Use of Proceeds.........................................................................................48
2.15 Pro Rata Treatment......................................................................................48
2.16 Increased Costs; Change in Circumstances; Illegality; etc...............................................49
2.17 Taxes...................................................................................................52
2.18 Compensation............................................................................................54
ARTICLE III
LETTERS OF CREDIT
3.1 Issuance................................................................................................55
3.2 Notices.................................................................................................56
3.3 Participations..........................................................................................56
3.4 Reimbursement...........................................................................................56
3.5 Payment by Revolving Loans..............................................................................57
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.6 Payment to Revolving Credit Lenders.....................................................................58
3.7 Obligations Absolute....................................................................................58
3.8 Cash Collateral Account.................................................................................59
3.9 Effectiveness...........................................................................................60
ARTICLE IV
CONDITIONS OF BORROWING
4.1 Conditions of Initial Borrowing.........................................................................60
4.2 Conditions of All Borrowings............................................................................65
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Organization and Power..................................................................................66
5.2 Authorization; Enforceability...........................................................................66
5.3 No Violation............................................................................................67
5.4 Governmental and Third-Party Authorization; Permits.....................................................67
5.5 Litigation..............................................................................................68
5.6 Taxes...................................................................................................68
5.7 Subsidiaries............................................................................................68
5.8 Full Disclosure.........................................................................................68
5.9 Margin Regulations......................................................................................69
5.10 No Material Adverse Change..............................................................................69
5.11 Financial Matters.......................................................................................69
5.12 Ownership of Properties.................................................................................70
5.13 ERISA...................................................................................................71
5.14 Environmental Matters...................................................................................71
5.15 Compliance With Laws....................................................................................72
5.16 Regulated Industries....................................................................................72
5.17 Insurance...............................................................................................72
5.18 Material Contracts......................................................................................73
5.19 Security Documents......................................................................................73
5.20 Labor Relations.........................................................................................74
5.21 Year 2000 Compatibility.................................................................................74
5.22. Reimbursement...........................................................................................74
5.23. Fraud and Abuse.........................................................................................75
5.24. Certain Transaction Documents...........................................................................75
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Financial Statements....................................................................................76
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
6.2 Other Business and Financial Information................................................................77
6.3 Corporate Existence; Franchises; Maintenance of Properties..............................................79
6.4 Compliance with Laws....................................................................................79
6.5 Payment of Obligations..................................................................................79
6.6 Insurance...............................................................................................79
6.7 Maintenance of Books and Records; Inspection............................................................80
6.8 Interest Rate Protection................................................................................80
6.9 Permitted Acquisitions..................................................................................80
6.10 Creation or Acquisition of Subsidiaries.................................................................82
6.11 Year 2000 Compatibility.................................................................................83
6.12 Additional Security; Further Assurances.................................................................83
ARTICLE VII
FINANCIAL COVENANTS
7.1 Leverage Ratio..........................................................................................84
7.2 Senior Leverage Ratio...................................................................................85
7.3 Fixed Charge Coverage Ratio.............................................................................85
7.4 Consolidated Net Worth..................................................................................85
7.5 Capital Expenditures....................................................................................86
ARTICLE VIII
NEGATIVE COVENANTS
8.1 Merger; Consolidation...................................................................................86
8.2 Indebtedness............................................................................................88
8.3 Liens...................................................................................................90
8.4 Disposition of Assets...................................................................................91
8.5 Investments.............................................................................................91
8.6 Restricted Payments.....................................................................................93
8.7 Transactions with Affiliates............................................................................94
8.8 Lines of Business.......................................................................................95
8.9 Certain Amendments......................................................................................95
8.10 Limitation on Certain Restrictions......................................................................95
8.11 No Other Negative Pledges...............................................................................95
8.12 Fiscal Year.............................................................................................96
8.13 Accounting Changes......................................................................................96
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default.......................................................................................96
9.2 Remedies: Termination of Commitments, Acceleration, etc.................................................99
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
9.3 Remedies: Set-Off.......................................................................................99
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 Appointment............................................................................................100
10.2 Nature of Duties.......................................................................................100
10.3 Exculpatory Provisions.................................................................................100
10.4 Reliance by Administrative Agent.......................................................................101
10.5 Non-Reliance on Administrative Agent and Other Lenders.................................................101
10.6 Notice of Default......................................................................................102
10.7 Indemnification........................................................................................102
10.8 The Administrative Agent in its Individual Capacity....................................................103
10.9 Successor Administrative Agent.........................................................................103
10.10 Collateral Matters.....................................................................................104
10.11 Issuing Lender and Swingline Lender....................................................................104
10.12 Co-Agents..............................................................................................104
ARTICLE XI
GUARANTY
11.1 Guaranty...............................................................................................104
11.2 Right of Set-Off.......................................................................................105
11.3 No Subrogation.........................................................................................105
11.4 Amendments, etc. with respect to the Obligations; Waiver of Rights.....................................106
11.5 Guaranty Absolute and Unconditional....................................................................106
11.6 Reinstatement..........................................................................................107
11.7 Payments...............................................................................................107
ARTICLE XII
MISCELLANEOUS
12.1 Fees and Expenses......................................................................................108
12.2 Indemnification........................................................................................108
12.3 Governing Law; Consent to Jurisdiction.................................................................109
12.4 Arbitration; Preservation and Limitation of Remedies...................................................110
12.5 Notices................................................................................................111
12.6 Amendments, Waivers, etc...............................................................................112
12.7 Assignments, Participations............................................................................113
12.8 No Waiver..............................................................................................116
12.9 Successors and Assigns.................................................................................116
12.10 Surviva1...............................................................................................116
12.11 Severability...........................................................................................117
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
12.12 Construction...........................................................................................117
12.13 Confidentiality........................................................................................117
12.14 Counterparts; Effectiveness............................................................................117
12.15 Disclosure of Information..............................................................................117
12.16 Judgment Currency......................................................................................118
12.17 European Monetary Union................................................................................118
12.18 Addition of Borrowers..................................................................................121
12.19 Entire Agreement.......................................................................................122
</TABLE>
v
<PAGE> 7
EXHIBITS
<TABLE>
<S> <C>
Exhibit A-1 Form of Term Note
Exhibit A-2 Form of Dollar Revolving Credit Note
Exhibit A-3 Form of Foreign Currency Revolving Credit Note
Exhibit A-4 Form of Swingline Note
Exhibit B-1 Form of Notice of Borrowing
Exhibit B-2 Form of Notice of Swingline Borrowing
Exhibit B-3 Form of Notice of Conversion/Continuation
Exhibit B-4 Form of Letter of Credit Notice
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Security Agreement
Exhibit F Form of Matria Pledge Agreement
Exhibit G Form of Subsidiary Guaranty
Exhibit H Form of Joinder Agreement
Exhibit I Form of Intercompany Note
Exhibit J Form of Financial Condition Certificate
SCHEDULES
Schedule 5.4 Consents and Approvals
Schedule 5.7 Subsidiaries
Schedule 5.12 Real Property
Schedule 5.17 Insurance
Schedule 5.18 Material Contracts
Schedule 8.2 Indebtedness
Schedule 8.3 Liens
Schedule 8.6 Restricted Payments
</TABLE>
<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 19th day of January, 1999 (this
"Agreement"), is made among MATRIA HEALTHCARE, INC., a Delaware corporation with
its principal offices in Marietta, Georgia ("Matria"), certain Foreign
Subsidiaries (as hereinafter defined) of Matria that become parties hereto after
the date hereof pursuant to SECTION 12.18 (collectively, together with Matria,
the "Borrowers"), the banks and financial institutions listed on the signature
pages hereto or that become parties hereto after the date hereof (collectively,
the "Lenders"), and FIRST UNION NATIONAL BANK ("First Union"), as administrative
agent for the Lenders (in such capacity, the "Administrative Agent").
RECITALS
A. Pursuant to a Purchase and Sale Agreement, dated as of
December 21, 1998 (as amended, modified or supplemented from time to time in
accordance with the provisions of this Agreement, the "Gainor Purchase and Sale
Agreement"), between the Borrower and Gainor Medical Management, LLC, a Georgia
limited liability company ("Gainor"), the Borrower proposes to acquire from
Gainor the assets relating to Gainor's domestic and international diabetes
disease management and microsampling businesses (the "Gainor Acquisition"), all
as more particularly set forth in the Gainor Purchase and Sale Agreement.
B. In order to finance a portion of the purchase price of the
Gainor Acquisition, to refinance certain existing indebtedness, to pay or
reimburse certain fees and expenses in connection with the Gainor Acquisition,
the transactions contemplated by this Agreement, and the other Transactions (as
hereinafter defined), and to provide for working capital and general corporate
purposes, including certain acquisitions, Matria has requested that the Lenders
make available to Matria and the other Borrowers a term loan facility in the
aggregate principal amount of $80,000,000 and a revolving credit facility in the
aggregate principal amount of $45,000,000, all as more fully described herein.
C. The Lenders are willing to make available to the Borrowers the
credit facilities described herein subject to and on the terms and conditions
set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants
and agreements herein contained, the parties hereto hereby agree as follows:
<PAGE> 9
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to
the terms defined elsewhere herein, the following terms shall have the meanings
set forth below (such meanings to be equally applicable to the singular and
plural forms thereof):
"Account Designation Letter" shall mean a letter from one or more
Borrowers to the Administrative Agent, duly completed and signed by an
Authorized Officer of each such Borrower and in form and substance satisfactory
to the Administrative Agent, listing any one or more accounts to which any such
Borrower may from time to time request the Administrative Agent to forward the
proceeds of any Loans made hereunder.
"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by which Matria directly,
or indirectly through one or more Subsidiaries, (i) acquires any going business,
or all or substantially all of the assets, of any Person, whether through
purchase of assets, merger or otherwise, or (ii) acquires securities or other
ownership interests of any Person having at least a majority of combined voting
power of the then outstanding securities or other ownership interests of such
Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, the
sum (without duplication) of (i) the amount of cash paid by Matria and its
Subsidiaries in connection with such Acquisition, (ii) the Fair Market Value of
all Capital Stock of Matria issued or given in connection with such Acquisition,
(iii) the amount (determined by using the face amount or the amount payable at
maturity, whichever is greater) of all Indebtedness incurred, assumed or
acquired by Matria and its Subsidiaries in connection with such Acquisition,
(iv) all additional purchase price amounts in connection with such Acquisition
in the form of earnouts and other contingent obligations that should be recorded
as a liability on the balance sheet of Matria and its Subsidiaries or expensed,
in either event in accordance with GAAP, Regulation S-X under the Securities Act
of 1933, as amended, or any other rule or regulation of the Securities and
Exchange Commission, (v) all amounts paid in respect of covenants not to compete
and consulting agreements in connection with such Acquisition, (vi) the amount
of all transaction fees and expenses (including, without limitation, legal,
accounting and finders' fees and expenses) incurred by Matria and its
Subsidiaries in connection with such Acquisition and (vii) the aggregate fair
market value of all other consideration given by Matria and its Subsidiaries in
connection with such Acquisition. For purposes of this Agreement, all amounts
included in calculating the Acquisition Amount with respect to any Acquisition
for which the Acquisition Amount is payable or determinable in a currency other
than Dollars shall be valued at the Dollar Equivalent thereof as of the relevant
date of determination.
"Adjusted Base Rate" shall mean, at any time with respect to any Base
Rate Loan, a rate per annum equal to the Base Rate as in effect at such time
plus the Applicable Margin Percentage for Base Rate Loans as in effect at such
time.
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<PAGE> 10
"Adjusted IBOR Rate" shall mean, at any time with respect to any
Foreign Currency Revolving Loan, a rate per annum equal to the IBOR Rate as in
effect at such time plus the Applicable Margin Percentage for Foreign Currency
Revolving Loans as in effect at such time.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan, a rate per annum equal to the LIBOR Rate as in effect at such time plus
the Applicable Margin Percentage for LIBOR Loans as in effect at such time.
"Administrative Agent" shall mean First Union, in its capacity as
Administrative Agent appointed under ARTICLE X, and its successors and permitted
assigns in such capacity.
"Affiliate" shall mean, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person. For purposes of this definition, with respect to any
Person "control" shall mean (i) the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise, or
(ii) the beneficial ownership of securities or other ownership interests of such
Person having 10% or more of the combined voting power of the then outstanding
securities or other ownership interests of such Person ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors or other governing body of such Person.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"Applicable Currency" shall mean (i) in the case of Dollar Revolving
Loans, Dollars, and (ii) in the case of any Foreign Currency Revolving Loans,
the Foreign Currency in which such Loans are to be made or maintained, as
selected pursuant to the relevant Notice of Borrowing or Notice of
Conversion/Continuation.
"Applicable Margin Percentage" shall mean, at any time from and after
the Closing Date, the applicable percentage (a) to be added to the Base Rate
pursuant to SECTION 2.8 for purposes of determining the Adjusted Base Rate, (b)
to be added to the IBOR Rate pursuant to SECTION 2.8 for purposes of determining
the Adjusted IBOR Rate, and (c) to be added to the LIBOR Rate pursuant to
SECTION 2.8 for purposes of determining the Adjusted LIBOR Rate, in each case as
determined under the following matrix with reference to the Leverage Ratio:
3
<PAGE> 11
<TABLE>
<CAPTION>
Applicable Margin
Percentage for
Applicable Margin Foreign Currency
Percentage for Revolving Loans and
Leverage Ratio Base Rate Loans LIBOR Loans
-------------- --------------- -----------
<S> <C> <C>
Greater than or equal to 3.0 to 1.0 1.250% 2.500%
Greater than or equal to 2.5 to 1.0 but
less than 3.0 to 1.0 1.000% 2.250%
Greater than or equal to 2.0 to 1.0 but
less than 2.5 to 1.0 0.750% 2.000%
Greater than or equal to 1.5 to 1.0 but
less than 2.0 to 1.0 0.500% 1.750%
Less than 1.5 to 1.0 0.250% 1.500%
</TABLE>
On each Adjustment Date (as hereinafter defined), the Applicable Margin
Percentage for all Loans shall be adjusted effective as of such date (based upon
the calculation of the Leverage Ratio as of the last day of the fiscal period to
which such Adjustment Date relates) in accordance with the above matrix;
provided, however, that, notwithstanding the foregoing or anything else herein
to the contrary, if at any time Matria shall have failed to deliver the
financial statements and a Compliance Certificate as required by SECTION 6.1(A)
or SECTION 6.1(B), as the case may be, and SECTION 6.2(A), then at the election
of the Required Lenders, at all times from and including the date on which such
statements and Compliance Certificate are required to have been delivered to the
date on which the same shall have been delivered, each Applicable Margin
Percentage shall be determined in accordance with the above matrix as if the
Leverage Ratio were greater than or equal to 3.0 : 1.0 (notwithstanding the
actual Leverage Ratio). For purposes of this definition, "Adjustment Date" shall
mean, with respect to any fiscal period of Matria beginning with the fiscal
quarter ending March 31, 1999, the tenth (10th) day (or, if such day is not a
Business Day, on the next succeeding Business Day) after delivery by Matria in
accordance with SECTION 6.1(A) or SECTION 6.1(B), as the case may be, of (i)
financial statements as of the end of and for such fiscal period and (ii) a duly
completed Compliance Certificate with respect to such fiscal period. Until the
first Adjustment Date, each Applicable Margin Percentage shall be determined in
accordance with the above matrix based upon the Leverage Ratio as set forth in
the pro forma Covenant Compliance Worksheet required to be delivered pursuant to
SECTION 4.1(N).
"Applicable Number of Business Days" shall mean (i) with respect to all
notices and determinations in connection with Foreign Currency Revolving Loans,
four (4) Business Days, (ii) with respect to all notices and determinations in
connection with LIBOR Loans, three (3) Business Days, and (iii) with respect to
all notices and determinations in connection with Base Rate Loans other than
Swingline Loans, one (1) Business Day.
4
<PAGE> 12
"Arranger" shall mean First Union Capital Markets, a division of Wheat
First Securities, Inc.
"Asset Disposition" shall mean any sale, assignment, transfer or other
disposition by Matria or any of its Subsidiaries to any other Person (other than
to Matria or to a Wholly Owned Subsidiary), whether in one transaction or in a
series of related transactions, of any of its assets, business units or other
properties (including any interests in property, whether tangible or intangible,
and including Capital Stock of Subsidiaries), excluding (i) sales of inventory
in the ordinary course of business, (ii) the sale or exchange of used or
obsolete equipment to the extent (y) the proceeds of such sale are applied
towards, or such equipment is exchanged for, similar replacement equipment or
(z) such equipment is no longer necessary for the operations of Matria or its
applicable Subsidiary in the ordinary course of business, and (iii) sales or
other dispositions of assets to the extent the aggregate amount of consideration
received by Matria and its Subsidiaries in connection therewith does not exceed
$250,000 for all such sales and dispositions during any fiscal year.
"Assignee" shall have the meaning given to such term in SECTION
12.7(A).
"Assignment and Acceptance" shall mean an Assignment and Acceptance
entered into between a Lender and an Assignee and accepted by the Administrative
Agent and Matria, in substantially the form of EXHIBIT D.
"Authorized Officer" shall mean, with respect to any action of any
Borrower specified herein, any officer of such Borrower duly authorized by
resolution of its board of directors to take such action on its behalf, and
whose signature and incumbency shall have been certified to the Administrative
Agent by the secretary or an assistant secretary of such Borrower.
"Bankruptcy Code" shall mean 11 U.S.C. ss.ss. 101 et seq., as amended
from time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum interest rate
publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of business on the
date of any such change in such prime rate, and (ii) the Federal Funds Rate plus
0.5% per annum, as adjusted to conform to changes as of the opening of business
on the date of any such change in the Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Loan that bears interest
at such time at the Adjusted Base Rate.
"Borrowing" shall mean the incurrence by any Borrower (including as a
result of conversions and continuations of outstanding Loans pursuant to SECTION
2.11) on a single date of a group of Loans of a single Class and Type (or a
Swingline Loan made by the Swingline Lender) and, in the case of Fixed Rate
Loans, as to which a single Interest Period is in effect.
5
<PAGE> 13
"Borrowing Date" shall mean, with respect to any Borrowing, the date
upon which such Borrowing is made.
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) or (iii) below, any day other than a Saturday or Sunday, a legal
holiday or a day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to be closed, (ii) with respect to all notices and
determinations in connection with, and payments in respect of, LIBOR Loans, any
day described in clause (i) above that is also a day on which tradings are
conducted in the London interbank Eurodollar market, and (iii) with respect to
all notices and determinations in connection with, and payments in respect of,
any Foreign Currency Revolving Loans, any day described in clauses (i) and (ii)
that is also (y) not a legal holiday or a day on which banking institutions are
authorized or required by law to close in the city of the country of issuance of
the Applicable Currency where the relevant disbursement or payment office of the
Administrative Agent or its applicable Correspondent is located and (z) a day on
which tradings are conducted in the interbank market for the Applicable
Currency.
"Capital Expenditures" shall mean, for any period, the aggregate amount
(whether paid in cash or accrued as a liability) that would, in accordance with
GAAP, be included on a Consolidated statement of cash flows for such period as
additions to equipment, fixed assets, real property or improvements or other
capital assets (including, without limitation, capital lease obligations);
provided, however, that Capital Expenditures shall not include any such
expenditures (i) for replacements and substitutions for capital assets, to the
extent made with the proceeds of insurance, or (ii) made in connection with
Permitted Acquisitions.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Collateral Account" shall have the meaning given to such term in
SECTION 3.8.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within 90 days from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 90 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by
6
<PAGE> 14
Moody's Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing within 90 days from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof that has combined capital and surplus of at least $500,000,000 and that
has (or is a subsidiary of a bank holding company that has) a long-term
unsecured debt rating of at least A or the equivalent thereof by Standard &
Poor's Ratings Services or at least A2 or the equivalent thereof by Moody's
Investors Service, Inc., (iv) repurchase obligations with a term not exceeding
seven (7) days with respect to underlying securities of the types described in
clause (i) above entered into with any bank or trust company meeting the
qualifications specified in clause (iii) above, and (v) money market funds at
least 95% of the assets of which are continuously invested in securities of the
type described in clause (i) above.
"Casualty Event" shall mean, with respect to any property (including
any interest in property) of Matria or any of its Subsidiaries, any loss of,
damage to, or condemnation or other taking of, such property for which Matria or
such Subsidiary receives insurance proceeds, proceeds of a condemnation award or
other compensation.
"Certificate of Designations" shall mean, with respect to the Series A
Preferred Stock or the Series B Preferred Stock, the Certificate of
Designations, Preferences and Relative, Participating, Optional and other
Special Rights therefor authorized and adopted by Matria's board of directors in
the forms attached as Schedule 1.4(b) and Schedule 1.4(c), respectively, to the
Gainor Purchase and Sale Agreement, as filed with the office of the Delaware
Secretary of State and as in effect on the Closing Date, in each case as
amended, modified or restated from time to time in accordance with the terms of
this Agreement.
"Class," with respect to any Loan, shall mean and refer to whether such
Loan is a Term Loan, a Revolving Loan or a Swingline Loan, each of which
constitutes a Class.
"Closing Date" shall mean the date upon which the initial extensions of
credit are made pursuant to this Agreement.
"Collateral" shall mean all the assets, property and interests in
property that shall from time to time be pledged or be purported to be pledged
as direct or indirect security for the Obligations pursuant to any one or more
of the Security Documents.
"Commitment" shall mean, with respect to any Lender, such lender's Term
Loan Commitment and Revolving Credit Commitment.
"Commitment Fee Percentage" shall mean, at any time from and after the
date of this Agreement, the applicable percentage to be used in calculating the
commitment fee payable pursuant to SECTION 2.9(B), as determined under the
following matrix with reference to the Leverage Ratio:
7
<PAGE> 15
<TABLE>
<CAPTION>
Commitment Fee
Leverage Ratio Percentage
-------------- ----------
<S> <C>
Greater than or equal to 3.0 to 1.0 0.500%
Greater than or equal to 2.5 to 1.0 but
less than 3.0 to 1.0 0.500%
Greater than or equal to 2.0 to 1.0 but
less than 2.5 to 1.0 0.500%
Greater than or equal to 1.5 to 1.0 but
less than 2.0 to 1.0 0.375%
Less than 1.5 to 1.0 0.375%
</TABLE>
On each Adjustment Date (as hereinafter defined), the Commitment Fee
Percentage shall be adjusted effective as of such date (based upon the
calculation of the Leverage Ratio as of the last day of the fiscal period to
which such Adjustment Date relates) in accordance with the above matrix;
provided, however, that, notwithstanding the foregoing or anything else herein
to the contrary, if at any time Matria shall have failed to deliver the
financial statements and a Compliance Certificate as required by SECTION 6.1(A)
or SECTION 6.1(B), as the case may be, and SECTION 6.2(A), then at the election
of the Required Lenders, at all times from and including the date on which such
statements and Compliance Certificate are required to have been delivered to the
date on which the same shall have been delivered, the Commitment Fee Percentage
shall be determined in accordance with the above matrix as if the Leverage Ratio
were greater than or equal to 3.0 : 1.0 (notwithstanding the actual Leverage
Ratio). For purposes of this definition, "Adjustment Date" shall mean, with
respect to any fiscal period of Matria beginning with the fiscal quarter ending
March 31, 1999, the tenth (10th) day (or, if such day is not a Business Day, on
the next succeeding Business Day) after delivery by Matria in accordance with
SECTION 6.1(A) or SECTION 6.1(B), as the case may be, of (i) financial
statements as of the end of and for such fiscal period and (ii) a duly completed
Compliance Certificate with respect to such fiscal period. Until the first
Adjustment Date, the Commitment Fee Percentage shall be determined in accordance
with the above matrix based upon the Leverage Ratio as set forth in the pro
forma Covenant Compliance Worksheet required to be delivered pursuant to SECTION
4.1(N).
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of EXHIBIT C, together with a Covenant Compliance
Worksheet.
"Consolidated" shall mean, with respect to any financial statements or
financial statement items, such statements or items of Matria and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP;
provided, however, that for purposes of calculation of any of the financial
covenants set forth in ARTICLE VII for any purposes of this Agreement, which
calculation takes into account periods prior to the Closing Date, "Consolidated"
shall mean, with respect to any financial statements or financial statement
items covering such periods, the
8
<PAGE> 16
combination of (i) such statements or items of Matria and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, and (ii) such
statements or items of Gainor and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP, but in each case under (i) and (ii) subject to
the adjustments described in SECTION 1.2.
"Consolidated EBITDA" shall mean, for any period, the aggregate of (i)
Consolidated Net Income for such period, plus (ii) the sum of Consolidated
Interest Expense, federal, state, local and other income taxes, depreciation,
amortization of intangible assets, and extraordinary or nonrecurring losses
(including in connection with the sale or write-down of assets) and other
noncash expenses or charges reducing income for such period, all to the extent
taken into account in the calculation of Consolidated Net Income for such
period, minus (iii) the sum of extraordinary or nonrecurring gains (including in
connection with the sale or write-up of assets) and other noncash credits
increasing income for such period, all to the extent taken into account in the
calculation of Consolidated Net Income for such period.
"Consolidated Fixed Charges" shall mean, for any period, the aggregate
(without duplication) of the following, all determined on a Consolidated basis
for such period: (a) Consolidated Interest Expense for such period, (b)
aggregate expense for federal, state, local and other income taxes for such
period, (c) Capital Expenditures for such period, (d) the aggregate (without
duplication) of all scheduled payments of principal on Funded Debt required to
have been made during such period (whether or not such payments are actually
made), including, without limitation, the aggregate principal amount of the Term
Loans due during such period under SECTION 2.6(A) (as such amounts may have been
previously adjusted in accordance with the terms of this Agreement as a result
of prior prepayments on the Term Loans, including adjustments made pursuant to
SECTION 2.6(H) or SECTION 2.7(B)), (e) the aggregate of all amounts paid during
such period in respect of Contingent Purchase Price Obligations, and (f) the
aggregate of all amounts paid during such period as dividends or distributions
in respect of Capital Stock or to purchase, redeem, retire or otherwise acquire
Capital Stock.
"Consolidated Indebtedness" shall mean, as of the last day of any
fiscal quarter, the aggregate (without duplication) of all Indebtedness of
Matria and its Subsidiaries as of such date (provided that (a) any Guaranty
Obligation shall be included only in the event that the corresponding "primary
obligation" (as such term is defined in the definition of Guaranty Obligation
herein) constitutes Indebtedness, (b) any Contingent Purchase Price Obligation
shall be included only to the extent such obligation should be recorded as a
liability on the balance sheet of Matria and its Subsidiaries in accordance with
GAAP, and (c) no Indebtedness of Matria or any Subsidiary under or relating to
Hedge Agreements shall be included), determined on a Consolidated basis. For
purposes of calculating Consolidated Indebtedness at any date, (i) each Guaranty
Obligation of Matria or any of its Subsidiaries required to be included in such
determination as set forth hereinabove shall be valued at the aggregate stated
or determinable principal amount (whether or not then drawn or outstanding) of
the Indebtedness that is the corresponding "primary obligation" as of such date
or, if such amount is not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as of such date (assuming the primary
obligor is required to perform thereunder), and (ii) each Contingent Purchase
Price Obligation of Matria or any of its Subsidiaries required to be included in
such
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determination as set forth hereinabove shall be valued at the aggregate stated
principal amount thereof.
"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of (i) total interest expense for such period in respect
of Funded Debt (including, without limitation, all such interest expense accrued
or capitalized during such period, whether or not actually paid during such
period), (ii) all net amounts payable under or in respect of Hedge Agreements,
to the extent paid or accrued during such period, and (iii) all commitment fees
and other ongoing fees in respect of Funded Debt (including the commitment fee
provided for under SECTION 2.9(B) and the fees provided for under the Fee
Letter) paid, accrued or capitalized during such period, all determined on a
Consolidated basis for such period.
"Consolidated Net Income" shall mean, for any period, net income (or
loss) of Matria and its Subsidiaries for such period, determined on a
Consolidated basis.
"Consolidated Net Revenues" shall mean, for any period, net revenues of
Matria and its Subsidiaries for such period, determined on a Consolidated basis.
"Consolidated Net Worth" shall mean, as of any date of determination,
the net worth of Matria and its Subsidiaries as of such date, determined on a
Consolidated basis, and including the Series A Preferred Stock and Series B
Preferred Stock but excluding any Disqualified Capital Stock.
"Consolidated Senior Indebtedness" shall mean, as of the last day of
any fiscal quarter, the excess of (i) Consolidated Indebtedness as of such date
over (ii) the aggregate (without duplication) of all Subordinated Indebtedness
of Matria and its Subsidiaries as of such date, determined on a Consolidated
basis.
"Contingent Purchase Price Obligations" shall mean any "earnout"
obligations or similar deferred or contingent purchase price obligations of
Matria or any of its Subsidiaries incurred or created in connection with a
Permitted Acquisition.
"Convertible Subordinated Debentures" shall mean the 8% Convertible
Subordinated Debentures of Matria due December 31, 2001.
"Correspondent" shall mean First Union National Bank, London branch, or
any other financial institution designated by the Administrative Agent to act as
its correspondent hereunder in respect of the disbursement and payment of
Foreign Currency Revolving Loans.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet
in the form of Attachment A to EXHIBIT C.
"Credit Documents" shall mean this Agreement, the Notes, the Letters of
Credit, the Fee Letter, the Security Agreement, the Pledge Agreements, the
Subsidiary Guaranty, the Mortgages, any other Security Documents, the
Intercompany Notes, and all other agreements, instruments,
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<PAGE> 18
documents and certificates now or hereafter executed and delivered to the
Administrative Agent or any Lender by or on behalf of Matria or any of its
Subsidiaries with respect to this Agreement and the transactions contemplated
hereby, in each case as amended, modified, supplemented or restated from time to
time.
"DMS" shall mean Diabetes Management Services, Inc., a South Carolina
corporation.
"Debt Issuance" shall mean the issuance or sale by Matria or any of its
Subsidiaries of any debt securities, whether in a public offering of such
securities or otherwise.
"Default" shall mean any event or condition that, with the passage of
time or giving of notice, or both, would constitute an Event of Default.
"Disqualified Capital Stock" shall mean, with respect to any Person,
any Capital Stock of such Person that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event or otherwise, (i) matures or is mandatorily
redeemable or subject to any mandatory repurchase requirement, pursuant to a
sinking fund obligation or otherwise, (ii) is redeemable or subject to any
mandatory repurchase requirement at the sole option of the holder thereof, or
(iii) is convertible into or exchangeable for (whether at the option of the
issuer or the holder thereof) (a) debt securities or (b) any Capital Stock
referred to in (i) or (ii) above, in each case under (i), (ii) or (iii) above at
any time on or prior to the first anniversary of the Term Loan Maturity Date;
provided, however, that (y) only the portion of Capital Stock that so matures or
is mandatorily redeemable, is so redeemable at the option of the holder thereof,
or is so convertible or exchangeable on or prior to such date shall be deemed to
be Disqualified Capital Stock, and (z) the Series A Preferred Stock and Series B
Preferred Stock shall not (so long as such stock has, in each case, the terms,
preferences and rights given to it in the applicable Certificate of Designations
as in effect on the Closing Date) be deemed Disqualified Capital Stock
hereunder.
"Dollar Amount" shall mean (i) with respect to Dollars or an amount
denominated in Dollars, such amount, and (ii) with respect to an amount
denominated in a Foreign Currency, the Dollar Equivalent of such amount on the
date contemplated by the applicable section of this Agreement.
"Dollar Equivalent" shall mean (i) with respect to each Loan made or
continued in a Foreign Currency, except as specifically provided otherwise
herein, the amount of Dollars into which the Administrative Agent could, in
accordance with its customary commercial practice from time to time in the
applicable interbank foreign exchange market, convert such amount of Foreign
Currency at the most favorable spot rate of exchange determined by the
Administrative Agent to be available to it (inclusive of all reasonable and
related costs of conversion, if any are actually incurred) at or about 11:00
a.m., Charlotte time, two (2) Business Days prior to the date such Loan is made
or continued (or is to be made or continued), for purchase on such date, and
(ii) with respect to any other amount denominated in a Foreign Currency (and,
for purposes of SECTIONS 2.6(C) and 2.6(D), with respect to each Loan made or
continued in a Foreign Currency), the amount of Dollars into which the
Administrative Agent could convert such amount of
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Foreign Currency at the most favorable spot rate of exchange determined by the
Administrative Agent to be available to it (inclusive of all reasonable and
related costs of conversion, if any are actually incurred) as of the date of
determination.
"Dollar Revolving Credit Notes" shall mean the promissory notes of
Matria in substantially the form of EXHIBIT A-2, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Dollar Revolving Loans" shall have the meaning given to such term in
SECTION 2.1(B).
"Dollars" or "$" shall mean dollars of the United States of America.
"Domestic Subsidiary" shall mean any Subsidiary of Matria that is
organized under the laws of the United States of America or any state thereof or
the District of Columbia.
"EMU" shall have the meaning given to such term in SECTION 12.17.
"EMU legislation" shall have the meaning given to such term in SECTION
12.17.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, Matria or any of
its Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by Matria or any
ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by Matria or any ERISA Affiliate
of notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA, (iii) the distribution by Matria or any
ERISA Affiliate under Section 4041 or 4041A of ERISA of a notice of intent to
terminate any Plan or the taking of any action to terminate any Plan, (iv) the
commencement of proceedings by the PBGC under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by Matria or any ERISA Affiliate of a notice from any Multiemployer Plan
that such action has been taken by the PBGC with respect to such Multiemployer
Plan, (v) the institution of a proceeding by any fiduciary of any Multiemployer
Plan against Matria or any ERISA Affiliate to enforce Section 515 of ERISA,
which is not dismissed within thirty (30) days, (vi) the imposition upon Matria
or any ERISA Affiliate of any liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, or the
imposition or threatened imposition of any Lien upon any assets of Matria or any
ERISA
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Affiliate as a result of any alleged failure to comply with the Internal Revenue
Code or ERISA in respect of any Plan, (vii) the engaging in or otherwise
becoming liable for a nonexempt Prohibited Transaction by Matria or any ERISA
Affiliate, (viii) a violation of the applicable requirements of Section 404 or
405 of ERISA or the exclusive benefit rule under Section 401(a) of the Internal
Revenue Code by any fiduciary of any Plan for which Matria or any of its ERISA
Affiliates may be directly or indirectly liable or (ix) the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Internal
Revenue Code or Section 307 of ERISA, would result in the loss of tax-exempt
status of the trust of which such Plan is a part if Matria or an ERISA Affiliate
fails to timely provide security to such Plan in accordance with the provisions
of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof and having total assets in
excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance
company, insurance company or other financial institution or fund that is
engaged in making, purchasing or otherwise investing in loans in the ordinary
course of its business and having total assets in excess of $500,000,000, (v)
any Affiliate of an existing Lender or (vi) any other Person approved by the
Required Lenders, which approval shall not be unreasonably withheld.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
accusations, allegations, notices of noncompliance or violation, investigations
(other than internal reports prepared by any Person in the ordinary course of
its business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of
or liability under any Environmental Law by Matria or any of its Subsidiaries or
relating to any permit issued, or any approval given, under any such
Environmental Law to Matria or any of its Subsidiaries (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all applicable federal, state
and local laws, statutes, ordinances, rules, regulations, permits, licenses,
approvals, rules of common law and orders of courts or Governmental Authorities,
relating to the protection of human health or the environment, now or hereafter
in effect and in each case as amended from time to time, including, without
limitation, requirements pertaining to the manufacture, processing,
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<PAGE> 21
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Equity Issuance" shall mean the issuance, sale or other disposition by
Matria or any of its Subsidiaries of its Capital Stock, any rights, warrants or
options to purchase or acquire any shares of its Capital Stock or any other
security or instrument representing, convertible into or exchangeable for an
equity interest in Matria or any of its Subsidiaries; provided, however, that
the term Equity Issuance shall not include (i) the issuance or sale of Capital
Stock by any of the Subsidiaries of Matria to Matria or any other Subsidiary,
provided that such Capital Stock is pledged to the Administrative Agent pursuant
to a Pledge Agreement, (ii) any Capital Stock of Matria issued or sold in
connection with any Permitted Acquisition and constituting all or a portion of
the applicable purchase price, (iii) any rights, options or other Capital Stock
issued pursuant to bona fide stock option or purchase plans or arrangements
approved by Matria's board of directors (or the board of directors of any
predecessor company) or upon the exercise of rights or options issued under any
such plan or arrangement, (iv) any Capital Stock of Matria issued upon the
exercise of the Common Stock Warrant (as such term is defined in the Gainor
Purchase and Sale Agreement), or (v) any Capital Stock of Matria issued upon the
conversion of the Convertible Subordinated Debentures or the Series A Preferred
Stock.
"Euro" shall have the meaning given to such term in SECTION 12.17.
"Euro unit" shall have the meaning given to such term in SECTION 12.17.
"Event of Default" shall have the meaning given to such term in SECTION
9.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Fair Market Value" shall mean, with respect to any Capital Stock of
Matria given in connection with an Acquisition, the value given to such Capital
Stock for purposes of such Acquisition by the parties thereto, as determined in
good faith pursuant to the relevant acquisition agreement or otherwise in
connection with such Acquisition.
"Federal Funds Rate" shall mean, for any period, a fluctuating per
annum interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
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"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fee Letter" shall mean the letter from First Union to Matria, dated
December 21, 1998, relating to certain fees payable by Matria in respect of the
transactions contemplated by this Agreement, as amended, modified or
supplemented from time to time.
"Financial Condition Certificate" shall mean a fully completed and duly
executed certificate, substantially in the form of EXHIBIT J, together with the
attachments thereto.
"Financial Officer" shall mean, with respect to Matria, the chief
financial officer, vice president finance, principal accounting officer or
treasurer of Matria.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (i) Consolidated EBITDA for the period of four
consecutive fiscal quarters then ending to (ii) Consolidated Fixed Charges for
such period (subject to the adjustments set forth in SECTION 1.2).
"Fixed Rate" shall mean the IBOR Rate or the LIBOR Rate, or both, as
the context may require.
"Fixed Rate Loans" shall mean any or all of the Foreign Currency
Revolving Loans and the LIBOR Loans, as the context may require.
"Foreign Currency" shall mean each of (i) British pounds sterling,
Canadian dollars, French francs, German deutsche marks, Euros (if and when
introduced pursuant to the Treaty on European Union), and Japanese yen and (ii)
at the option of the Lenders, any other currency that is readily available and
freely tradeable and convertible into Dollars; provided that no such other
currency under this clause (ii) shall be included as a Foreign Currency
hereunder or referenced as an Applicable Currency in a Notice of Borrowing
unless the applicable Borrower has first submitted a request to the
Administrative Agent and the Lenders that such currency be so included and the
Administrative Agent and the Lenders have agreed to such request in their sole
discretion.
"Foreign Currency Revolving Credit Notes" shall mean the promissory
notes of the applicable Borrowers in substantially the form of EXHIBIT A-3,
together with any amendments, modifications and supplements thereto,
substitutions therefor and restatements thereof.
"Foreign Currency Revolving Loan" shall have the meaning given to such
term in SECTION 2.1(C).
"Foreign Currency Sublimit" shall mean $12,500,000 or, if less, the
aggregate Revolving Credit Commitments at the time of determination, as such
amount may be reduced at or prior to such time pursuant to the terms hereof.
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"Foreign Subsidiary" shall mean any Subsidiary of Matria that is
organized under the laws of any nation, state or jurisdiction other than the
United States of America or any state thereof or the District of Columbia.
"Funded Debt" shall mean, with respect to any Person, all Indebtedness
for borrowed money of such Person that by its terms or by the terms of any
instrument or agreement relating thereto matures more than one year from, or is
renewable or extendable at the option of the debtor to a date more than one year
from, the date of creation thereof (including an option of the debtor under a
revolving credit or similar arrangement obligating the lender or lenders to
extend credit over a period of one year or more), including any current
maturities of such Indebtedness.
"GAAP" shall mean generally accepted accounting principles, as set
forth in the statements, opinions and pronouncements of the Accounting
Principles Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, consistently applied and maintained, as in
effect from time to time (subject to the provisions of SECTION 1.2).
"Gainor" shall have the meaning given to such term in the recitals
hereto.
"Gainor Acquisition" shall have the meaning given to such term in the
recitals hereto.
"Gainor Purchase and Sale Agreement" shall have the meaning given to
such term in the recitals hereto.
"Gainor Seller Subordinated Note" shall mean the Non-Negotiable
Subordinated Promissory Note to be issued by Matria in favor of Gainor pursuant
to Section 1.5 of the Gainor Purchase and Sale Agreement and in substantially
the form of Exhibit A thereto, as amended, modified or supplemented from time to
time in accordance with the terms of this Agreement.
"Governmental Authority" shall mean any domestic or foreign nation or
government, any state or other political subdivision thereof and any central
bank thereof, any municipal, local, city or county government, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Guaranty Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness
(the "primary obligation") of another Person (the "primary obligor"), whether or
not contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligation or any property constituting direct or indirect security therefor,
(b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor in respect thereof to make payment of such primary
obligation or (d) otherwise to assure
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or hold harmless the owner of any such primary obligation against loss or
failure or inability to perform in respect thereof; provided, however, that,
with respect to Matria and its Subsidiaries, the term Guaranty Obligation shall
not include endorsements for collection or deposit in the ordinary course of
business.
"Hazardous Substances" shall mean any substances or materials (i) that
are or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require investigation or response under any Environmental Law, (iv) that
constitute a nuisance, trespass or health hazard to Persons or neighboring
properties, (v) that consist of underground or aboveground storage tanks,
whether empty, filled or partially filled with any substance, or (vi) that
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate
swap, cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"IBOR Rate" shall mean, with respect to each Foreign Currency Revolving
Loan comprising part of the same Borrowing for any Interest Period, an interest
rate per annum obtained by dividing (i) (y) the rate of interest (rounded
upward, if necessary, to the nearest 1/16 of one percentage point) appearing on
Telerate Page 3750 (or any successor page) or (z) if no such rate is available,
the rate of interest determined by the Administrative Agent to be the rate or
the arithmetic mean of rates (rounded upward, if necessary, to the nearest 1/16
of one percentage point) at which deposits in the applicable Foreign Currency in
immediately available funds are offered by First Union to first-tier banks in
the interbank market for such Foreign Currency, in each case under (y) and (z)
above at approximately 11:00 a.m., London time, two (2) Business Days prior to
the first day of such Interest Period for a period substantially equal to such
Interest Period and in an amount substantially equal to the amount of First
Union's Foreign Currency Revolving Loan comprising part of such Borrowing, by
(ii) the amount equal to 1.00 minus the applicable Reserve Requirement
(expressed as a decimal) for such Interest Period.
"Inactive Subsidiary" shall mean any Subsidiary of Matria (i) the
Capital Stock of which has been previously acquired by Matria or another
Subsidiary, (ii) that owns no assets or properties (other than Medicare and
Medicaid provider numbers and immaterial accounts receivable) and (iii) that
does not conduct any active trade or business. Notwithstanding the foregoing,
the general partnerships listed in SCHEDULE 5.7 and Matria Healthcare Puerto
Rico, Inc. shall be deemed Inactive Subsidiaries for all purposes of this
Agreement and the other Credit Documents.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or
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similar instruments, (iii) all reimbursement obligations of such Person with
respect to surety bonds, letters of credit and bankers' acceptances (in each
case, whether or not drawn or matured and in the stated amount thereof), (iv)
all obligations of such Person to pay the deferred purchase price of property or
services, including Contingent Purchase Price Obligations, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person, (vi) all obligations of such
Person as lessee under leases that are or are required to be, in accordance with
GAAP, recorded as capital leases, to the extent such obligations are required to
be so recorded, (vii) all Disqualified Capital Stock issued by such Person, with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any (for
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the board of directors or other governing body of the issuer of such
Disqualified Capital Stock), (viii) the net termination obligations of such
Person under any Hedge Agreements, calculated as of any date as if such
agreement or arrangement were terminated as of such date, (ix) all Guaranty
Obligations of such Person and (x) all indebtedness referred to in clauses (i)
through (ix) above secured by any Lien on any property or asset owned or held by
such Person regardless of whether the indebtedness secured thereby shall have
been assumed by such Person or is nonrecourse to the credit of such Person.
"Intercompany Notes" shall mean, collectively, the intercompany notes
made by the Subsidiaries, in substantially the form of EXHIBIT I, as amended,
modified or supplemented from time to time.
"Interest Period" shall have the meaning given to such term in SECTION
2.10.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Issuing Lender" shall mean First Union in its capacity as issuer of
the Letters of Credit, and its successors in such capacity.
"Joinder Agreement" shall mean a joinder agreement made by a Foreign
Subsidiary and Matria in favor of the Administrative Agent and the Lenders, in
substantially the form of EXHIBIT H, as amended, modified or supplemented from
time to time.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at
such time at the Adjusted LIBOR Rate.
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"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising
part of the same Borrowing for any Interest Period, an interest rate per annum
obtained by dividing (i) (y) the rate of interest (rounded upward, if necessary,
to the nearest 1/16 of one percentage point) appearing on Telerate Page 3750 (or
any successor page) or (z) if no such rate is available, the rate of interest
determined by the Administrative Agent to be the rate or the arithmetic mean of
rates (rounded upward, if necessary, to the nearest 1/16 of one percentage
point) at which Dollar deposits in immediately available funds are offered by
First Union to first-tier banks in the London interbank Eurodollar market, in
each case under (y) and (z) above at approximately 11:00 a.m., London time, two
(2) Business Days prior to the first day of such Interest Period for a period
substantially equal to such Interest Period and in an amount substantially equal
to the amount of First Union's LIBOR Loan comprising part of such Borrowing, by
(ii) the amount equal to 1.00 minus the applicable Reserve Requirement
(expressed as a decimal) for such Interest Period.
"Lender" shall mean each financial institution signatory hereto and
each other financial institution that becomes a "Lender" hereunder pursuant to
SECTION 12.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of
such Lender designated as its "Lending Office" on its signature page hereto or
in an Assignment and Acceptance, or such other office as may be otherwise
designated in writing from time to time by such Lender to Matria and the
Administrative Agent. A Lender may designate separate Lending Offices as
provided in the foregoing sentence for the purposes of making or maintaining
different Types of Loans, and, with respect to Fixed Rate Loans, such office may
be a domestic or foreign branch or Affiliate of such Lender.
"Letter of Credit Exposure" shall mean, with respect to any Lender at
any time, such Lender's ratable share (based on the proportion that its
Revolving Credit Commitment bears to the aggregate Revolving Credit Commitments
at such time) of the sum of (i) the aggregate Stated Amount of all Letters of
Credit outstanding at such time and (ii) the aggregate amount of all
Reimbursement Obligations outstanding at such time.
"Letter of Credit Notice" shall have the meaning given to such term in
SECTION 3.2.
"Letters of Credit" shall have the meaning given to such term in
SECTION 3.1.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter,
the ratio of (i) Consolidated Indebtedness as of such date to (ii) Consolidated
EBITDA for the period of four consecutive fiscal quarters then ending (subject
to the adjustments set forth in SECTION 1.2).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without limitation, the interest of any vendor or lessor under any conditional
sale agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
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"Licenses" shall mean any and all licenses (including provisional
licenses), certificates of need, accreditations, permits, franchises, rights to
conduct business, approvals (by a Governmental Authority or otherwise),
consents, qualifications, operating authority and any other authorizations.
"Limitation" shall mean a revocation, suspension, termination,
impairment, probation, limitation, non-renewal, forfeiture, declaration of
ineligibility, loss of status as a participating provider in a Third Party Payor
Arrangement, and the loss of any other rights.
"Loans" shall mean any or all of the Term Loans, the Revolving Loans
and the Swingline Loans, as the context may require.
"Local Time" shall mean the local time in effect at the office of the
applicable Correspondent in connection with any disbursements or payments of
Loans by or through such Correspondent.
"Margin Stock" shall have the meaning given to such term in Regulation
U.
"Material Adverse Change" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse change in the condition
(financial or otherwise), operations, prospects, business, properties or assets
of (A) Matria and its Subsidiaries, taken as a whole, or (B) Gainor and its
Subsidiaries, taken as a whole, and (ii) with reference to any time or period
from and after the Closing Date, a material adverse change in the condition
(financial or otherwise), operations, prospects, business, properties or assets
of Matria and its Subsidiaries, taken as a whole.
"Material Adverse Effect" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse effect upon the condition
(financial or otherwise), operations, prospects, business, properties or assets
of (A) Matria and its Subsidiaries, taken as a whole, or (B) Gainor and its
Subsidiaries, taken as a whole, and (ii) with reference to any time or period
from and after the Closing Date, a material adverse effect upon (A) the
condition (financial or otherwise), operations, prospects, business, properties
or assets of Matria and its Subsidiaries, taken as a whole, (B) the ability of
any Borrower or any of its Subsidiaries to perform its obligations under this
Agreement or any of the other Credit Documents to which it is a party or (C) the
legality, validity or enforceability of this Agreement or any of the other
Credit Documents or the rights and remedies of the Administrative Agent and the
Lenders hereunder and thereunder.
"Material Contract" shall have the meaning given to such term in
SECTION 5.18.
"Matria Pledge Agreement" shall mean a pledge agreement made by Matria
and the Subsidiaries party thereto in favor of the Administrative Agent, in
substantially the form of EXHIBIT F, as amended, modified or supplemented from
time to time.
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"Mortgage" shall mean any mortgage, deed of trust, deed to secure debt
or similar agreement or instrument pursuant to which Matria or any of its
Subsidiaries grants in favor of the Administrative Agent, for its benefit and
the benefit of the Lenders, a security interest in and Lien upon any fee or
leasehold interest in real property owned by it, as amended, modified or
supplemented from time to time.
"Mortgaged Premises" shall mean, with respect to any Mortgage, the
"Mortgaged Premises" (as such term is defined therein) covered by such Mortgage.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which Matria or any ERISA Affiliate
makes, is making or is obligated to make contributions or has made or been
obligated to make contributions.
"national currency unit" shall have the meaning given to such term in
SECTION 12.17.
"Net Cash Proceeds" shall mean (i) in the case of any Equity Issuance
or Debt Issuance, the aggregate cash payments received by Matria and its
Subsidiaries less reasonable and customary fees and expenses (including
underwriting discounts and commissions) incurred by Matria and its Subsidiaries
in connection therewith, (ii) in the case of any Casualty Event, the aggregate
cash proceeds of insurance, condemnation awards and other compensation received
by Matria and its Subsidiaries in respect of such Casualty Event less (y)
reasonable fees and expenses incurred by Matria and its Subsidiaries in
connection therewith and (z) contractually required repayments of Indebtedness
to the extent secured by Liens on the property subject to such Casualty Event
and any income or transfer taxes paid or reasonably estimated by Matria to be
payable by Matria and its Subsidiaries as a result of such Casualty Event, and
(iii) in the case of any Asset Disposition, the aggregate amount of all cash
payments received by Matria and its Subsidiaries in connection with such Asset
Disposition less (x) reasonable fees and expenses incurred by Matria and its
Subsidiaries in connection therewith, (y) Indebtedness to the extent the amount
thereof is secured by a Lien on the property that is the subject of such Asset
Disposition and the transferee of (or holder of the Lien on) such Property
requires that such Indebtedness be repaid as a condition to such Asset
Disposition, and (z) any income or transfer taxes paid or reasonably estimated
by Matria to be payable by Matria and its Subsidiaries as a result of such Asset
Disposition.
"Notes" shall mean any or all of the Term Notes, the Revolving Credit
Notes and the Swingline Note, as the context may require.
"Notice of Borrowing" shall have the meaning given to such term in
SECTION 2.2(B).
"Notice of Conversion/Continuation" shall have the meaning given to
such term in SECTION 2.11(B).
"Notice of Swingline Borrowing" shall have the meaning given to such
term in SECTION 2.2(D).
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"Obligations" shall mean all principal of and interest (including, to
the greatest extent permitted by law, post-petition interest) on the Loans, all
Reimbursement Obligations and all fees, expenses, indemnities and other
obligations owing, due or payable at any time by any Borrower to the
Administrative Agent, any Lender, the Issuing Lender or any other Person
entitled thereto, under this Agreement or any of the other Credit Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Participant" shall have the meaning given to such term in SECTION
12.7(D).
"participating member state" shall have the meaning given to such term
in SECTION 12.17.
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
shall be within the permitted lines of business described in SECTION 8.8, (ii)
any Capital Stock given as consideration in connection therewith shall be
Capital Stock of Matria, (iii) in the case of an Acquisition involving the
acquisition of control of Capital Stock of any Person, immediately after giving
effect to such Acquisition such Person (or the surviving Person, if the
Acquisition is effected through a merger or consolidation) shall be Matria or a
Wholly Owned Subsidiary, (iv) the board of directors or equivalent governing
body of the Person whose Capital Stock or business is acquired shall have
approved such Acquisition, if required by applicable law (but provided in any
event that such acquisition shall not be "hostile"), and (v) all of the
conditions and requirements of SECTIONS 6.9 and 6.10 applicable to such
Acquisition are satisfied; or (b) any other Acquisition to which the Required
Lenders (or the Administrative Agent on their behalf) shall have given their
prior written consent (which consent may be in their sole but reasonable
discretion and may be given subject to such additional terms and conditions as
the Required Lenders shall establish) and with respect to which all of the
conditions and requirements set forth in this definition and in SECTION 6.9, and
in or pursuant to any such consent, have been satisfied or waived in writing by
the Required Lenders (or the Administrative Agent on their behalf).
"Permitted Liens" shall have the meaning given to such term in SECTION
8.3.
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which Matria or any ERISA
Affiliate may have any liability.
"Pledge Agreement" shall mean (i) the Matria Pledge Agreement and (ii)
each other pledge agreement made by Matria or any Subsidiary with respect to the
pledge of Capital Stock of any other Subsidiary, in substantially the form of
EXHIBIT F (with such modifications as may be necessary or appropriate for each
applicable foreign jurisdiction), as amended, modified or supplemented from time
to time.
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"Pro Forma Balance Sheet" shall have the meaning given to such term in
SECTION 5.11(C).
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Projections" shall have the meaning given to such term in SECTION
5.11(D).
"Refunded Swingline Loans" shall have the meaning given to such term in
SECTION 2.2(E).
"Register" shall have the meaning given to such term in SECTION
12.7(B).
"Regulations D, T, U and X" shall mean Regulations D, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reimbursement Approvals" shall mean, with respect to all Third Party
Payor Arrangements, any and all certifications, provider numbers, provider
agreements, participation agreements, accreditations and any other similar
agreements with or approvals by Governmental Authorities or other Persons.
"Reimbursement Obligation" shall have the meaning given to such term in
SECTION 3.4.
"Relevant Type" shall have the meaning given to such term in SECTION
2.16(C).
"Reportable Event" shall mean (i) any "reportable event" within the
meaning of Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC (including any failure to meet
the minimum funding standard of, or timely make any required installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA, regardless of
the issuance of any waivers in accordance with Section 412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section 4043(b)(3) of ERISA, (iii) any application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code, and (iv) a cessation of operations described in Section
4062(e) of ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans,
Letter of Credit Exposure, participations in outstanding Swingline Loans and
Unutilized Revolving Credit Commitments (or, after the termination of the
Revolving Credit Commitments, outstanding Loans, Letter of Credit Exposure and
participations in outstanding Swingline Loans) representing greater than
sixty-six and two-thirds percent (66-2/3%) of the aggregate at such time of all
outstanding Loans, Letter of Credit Exposure, participations in outstanding
Swingline Loans and Unutilized Revolving Credit Commitments (or, after the
termination of the Revolving
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Credit Commitments, the aggregate at such time of all outstanding Loans, Letter
of Credit Exposure and participations in outstanding Swingline Loans). For
purposes of any determination of the "Required Lenders," the aggregate
outstanding Swingline Loans held by the Swingline Lender shall be calculated net
of participations therein purchased by the other Lenders pursuant to the terms
hereof.
"Required Revolving Credit Lenders" shall mean the Revolving Credit
Lenders holding outstanding Revolving Loans, Letter of Credit Exposure,
participations in outstanding Swingline Loans and Unutilized Revolving Credit
Commitments (or, after the termination of the Revolving Credit Commitments,
outstanding Revolving Loans, Letter of Credit Exposure and participations in
outstanding Swingline Loans) representing greater than sixty-six and two-thirds
percent (66-2/3%) of the aggregate at such time of all outstanding Revolving
Loans, Letter of Credit Exposure, participations in outstanding Swingline Loans
and Unutilized Revolving Credit Commitments (or, after the termination of the
Revolving Credit Commitments, the aggregate at such time of all outstanding
Revolving Loans, Letter of Credit Exposure and participations in outstanding
Swingline Loans). For purposes of any determination of the "Required Revolving
Credit Lenders," the aggregate outstanding Swingline Loans held by the Swingline
Lender shall be calculated net of participations therein purchased by the other
Lenders pursuant to the terms hereof.
"Requirement of Law" shall mean, with respect to any Person, the
charter, articles or certificate of organization or incorporation and bylaws or
other organizational or governing documents of such Person, and any statute,
law, treaty, rule, regulation, order, decree, writ, injunction or determination
of any arbitrator or court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject or otherwise pertaining to any or
all of the transactions contemplated by this Agreement and the other Credit
Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period,
(i) in respect of any LIBOR Loan, the reserve percentage (expressed as a
decimal) in effect from time to time during such Interest Period, as provided by
the Federal Reserve Board, applied for determining the maximum reserve
requirements (including, without limitation, basic, supplemental, marginal and
emergency reserves) applicable to First Union under Regulation D with respect to
"Eurocurrency liabilities" within the meaning of Regulation D, or under any
similar or successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding, and (ii) in respect of any Foreign Currency Revolving
Loan, the reserve percentage (expressed as a decimal) in effect from time to
time during such Interest Period applied for determining the maximum reserve
requirements (including, without limitation, basic, supplemental, marginal and
emergency reserves), applicable to First Union under any applicable Requirement
of Law established by any Governmental Authority having jurisdiction in respect
of such Foreign Currency Revolving Loan or any category of liabilities that
includes deposits by reference to which the interest rate on such Foreign
Currency Revolving Loan is determined.
"Responsible Officer" shall mean, with respect to any Borrower or any
of its Subsidiaries, the president, the chief executive officer, the chief
financial officer, any executive
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officer, or any other Financial Officer of such Borrower or Subsidiary, and any
other officer or similar official thereof responsible for the administration of
the obligations of the Borrower or such Subsidiary in respect of this Agreement
and the other Credit Documents.
"Revolving Credit Commitment" shall mean, with respect to any Lender at
any time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Revolving Credit Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, the amount set forth for
such Lender at such time in the Register maintained by the Administrative Agent
pursuant to SECTION 12.7(B) as such Lender's "Revolving Credit Commitment," as
such amount may be reduced at or prior to such time pursuant to the terms
hereof.
"Revolving Credit Lender" shall mean any Lender having a Revolving
Credit Commitment and/or holding outstanding Revolving Loans.
"Revolving Credit Maturity Date" shall mean March 31, 2004.
"Revolving Credit Notes" shall mean any or all of the Dollar Revolving
Credit Notes and the Foreign Currency Revolving Credit Notes, as the context may
require.
"Revolving Loans" shall mean any or all of the Dollar Revolving Loans
and the Foreign Currency Revolving Loans, as the context may require.
"Security Agreement" shall mean a security agreement made by Matria and
the Subsidiaries party thereto in favor of the Administrative Agent, in
substantially the form of EXHIBIT E, as amended, modified or supplemented from
time to time.
"Security Documents" shall mean the Security Agreement, the Pledge
Agreements, the Mortgages and all other pledge or security agreements,
mortgages, deeds of trust, assignments or other similar agreements or
instruments executed and delivered by Matria or any of its Subsidiaries pursuant
to SECTION 6.10 or SECTION 6.11 or otherwise in connection with the transactions
contemplated hereby, in each case as amended, modified or supplemented from time
to time.
"Seller Subordinated Indebtedness" shall have the meaning given to such
term in SECTION 8.2.
"Senior Leverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Consolidated Senior Indebtedness as of such date to
(ii) Consolidated EBITDA for the period of four consecutive fiscal quarters then
ending (subject to the adjustments set forth in SECTION 1.2).
"Series A Preferred Stock" shall mean the Borrower's 4% Series A
Convertible Preferred Stock designated as such, and having the terms, rights and
preferences set forth, in the Certificate of Designations therefor and issued
pursuant to the Gainor Purchase and Sale Agreement.
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"Series B Preferred Stock" shall mean the Borrower's 8% Series B
Redeemable Preferred Stock designated as such, and having the terms, rights and
preferences set forth, in the Certificate of Designations therefor and issued
pursuant to the Gainor Purchase and Sale Agreement.
"Stated Amount" shall mean, with respect to any Letter of Credit at any
time, the aggregate amount available to be drawn thereunder at such time
(regardless of whether any conditions for drawing could then be met).
"Subordinated Indebtedness" shall mean, collectively, (i) the Gainor
Seller Subordinated Note, (ii) any subordinated Indebtedness issued pursuant to
clause (v) of SECTION 8.2, (iii) any Seller Subordinated Indebtedness issued
pursuant to clause (vi) of SECTION 8.2, (iv) the Convertible Subordinated
Debentures, and (v) any other Indebtedness of Matria or any Subsidiary that is
subordinated in right of payment to the Obligations.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof (irrespective of whether, at
the time, securities of any other class or classes of any such corporation or
other Person shall or might have voting power by reason of the happening of any
contingency). When used without reference to a parent entity, the term
"Subsidiary" shall be deemed to refer to a Subsidiary of Matria.
"Subsidiary Guarantor" shall mean any Domestic Subsidiary of Matria
that is a guarantor under the Subsidiary Guaranty and has granted to the
Administrative Agent a first priority Lien upon and security interest in its
personal property assets pursuant to the Security Agreement, subject only to
Permitted Liens.
"Subsidiary Guaranty" shall mean a guaranty agreement made by the
Subsidiary Guarantors in favor of the Administrative Agent and the Lenders, in
substantially the form of EXHIBIT G, as amended, modified or supplemented from
time to time.
"Swingline Commitment" shall mean $5,000,000 or, if less, the aggregate
Revolving Credit Commitments at the time of determination, as such amount may be
reduced at or prior to such time pursuant to the terms hereof.
"Swingline Lender" shall mean First Union in its capacity as maker of
Swingline Loans, and its successors in such capacity.
"Swingline Loans" shall have the meaning given to such term in SECTION
2.1(D).
"Swingline Maturity Date" shall mean the date that is five (5) Business
Days prior to the Revolving Credit Maturity Date.
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"Swingline Note" shall mean the promissory note of Matria in
substantially the form of EXHIBIT A-4, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Syndication Completion Date" shall have the meaning given to such term
in SECTION 2.2(A).
"Term Loan Commitment" shall mean, with respect to any Lender at any
time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Term Loan Commitment" or, if such Lender has entered
into one or more Assignment and Acceptances, the amount set forth for such
Lender at such time in the Register maintained by the Administrative Agent
pursuant to SECTION 12.7(B) as such Lender's "Term Loan Commitment," as such
amount may be reduced at or prior to such time pursuant to the terms hereof.
"Term Loan Maturity Date" shall mean March 31, 2004.
"Term Loans" shall have the meaning given to such term in SECTION
2.1(A).
"Term Notes" shall mean the promissory notes of Matria in substantially
the form of EXHIBIT A-1, together with any amendments, modifications and
supplements thereto, substitutions therefor and restatements thereof.
"Terminating Indebtedness" shall have the meaning given to such term in
SECTION 4.1(P).
"Termination Date" shall mean the Revolving Credit Maturity Date or
such earlier date of termination of the Commitments pursuant to SECTION 2.5 or
SECTION 9.2.
"Third Party Payor Arrangements" shall mean any and all arrangements
with Medicare, Medicaid, CHAMPUS and any other Governmental Authority or
quasi-public agency, Blue Cross, Blue Shield, any managed care plans and
organizations including, without limitation, health maintenance organizations
and preferred provider organizations, private commercial insurance companies and
any similar third party arrangements, plans or programs for payment or
reimbursement in connection with health care services, products or supplies.
"Transaction Documents" shall mean, collectively, this Agreement and
the other Credit Documents, the Gainor Purchase and Sale Agreement, the Gainor
Seller Subordinated Note, and all other agreements, instruments, certificates
and documents executed and delivered by Matria or any Subsidiary in connection
with the Transactions, in each case as amended, modified or supplemented from
time to time in accordance with the terms of this Agreement.
"Transactions" shall mean, collectively, the transactions contemplated
by the Transaction Documents, including (i) the initial extensions of credit
hereunder on the Closing Date, (ii) the Gainor Acquisition, (iii) the purchase
and sale of the Series A Preferred Stock and the Series B Preferred Stock, (iv)
the execution and delivery of the Gainor Seller Subordinated Note, (v) the
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acquisition by Matria of the remaining outstanding Capital Stock of DMS, (vi)
the satisfaction of the Terminating Indebtedness, and (vii) the payment of
permitted fees and expenses incident to the foregoing.
"Treaty on European Union" shall have the meaning given to such term in
SECTION 12.17.
"Type" shall mean the type of Loan determined with regard to both the
currency and interest rate option applicable thereto. Foreign Currency Revolving
Loans denominated in different currencies shall be different Types of Loans.
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Universal" shall mean Universal Self Care, Inc., a Delaware
corporation.
"Unutilized Revolving Credit Commitment" shall mean, with respect to
any Revolving Credit Lender at any time, such Lender's Revolving Credit
Commitment at such time less the sum of (i) the aggregate principal Dollar
Amount of all Revolving Loans made by such Lender that are outstanding at such
time and (ii) such Lender's Letter of Credit Exposure at such time.
"Unutilized Swingline Commitment" shall mean, with respect to the
Swingline Lender at any time, the Swingline Commitment at such time less the
aggregate principal amount of all Swingline Loans that are outstanding at such
time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any
Person, that 100% of the outstanding Capital Stock of such Subsidiary is owned,
directly or indirectly, by such Person.
1.2 Accounting Terms. (a) Except as specifically provided
otherwise in this Agreement, all accounting terms used herein that are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. Notwithstanding anything to the contrary in this
Agreement, for purposes of calculation of the financial covenants set forth in
ARTICLE VII, all accounting determinations and computations hereunder shall be
made in accordance with GAAP as in effect as of the date of this Agreement
applied on a basis consistent with the application used in preparing the most
recent financial statements of Matria referred to in SECTION 5.11(A). In the
event that any changes in GAAP after such date are required to be applied to
Matria and would affect the computation of the financial covenants contained in
ARTICLE VII, such changes shall be followed only from and after the date this
Agreement shall have been amended to take into account any such changes.
(b) Notwithstanding the other provisions of this Section, for all
purposes of this Agreement calculations of the financial covenants set forth in
ARTICLE VII shall be made by giving effect to the following adjustments, as
applicable: (i) calculations of income statement financial items of Matria's
Quality Diagnostic Services business segment for the period ending
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March 31, 1999 shall be determined by multiplying (A) such items, determined for
the period of three consecutive fiscal quarters then ending, by (B) 4/3; (ii)
income statement financial items of Matria's FFN business segment shall not be
included in any calculations; (iii) for purposes of calculating Consolidated
EBITDA for the periods ending March 31, 1999, June 30, 1999 and September 30,
1999, the EBITDA for Diabetes Management Services, Inc. (for purposes of this
subsection, "EBITDA" and its components for any single entity shall be
calculated on a stand-alone basis for such entity but otherwise in accordance
with the definition of Consolidated EBITDA) shall be $150,000 for each fiscal
quarter of 1998 included in each such calculation; and (iv) to the extent
permitted or required to be included in the calculation of financial covenants
pursuant to subsection (c) below, the EBITDA of Hans M.W. Spreth GmbH and Dia
Real Diabetesservice Kommanditgesellschaft for the periods ending March 31, 1999
and June 30, 1999 shall be determined by including, as the EBITDA of each such
entity for each of the fiscal quarters ended June 30, 1998 (to the extent
included in any such calculation) and September 30, 1998, the product of (A)
such entity's actual EBITDA for the period August 1, 1998 through December 31,
1998 times (B) 3/5; and
(c) Notwithstanding the other provisions of this Section or any
other provision of this Agreement, the assets, liabilities, revenues, income,
losses and other financial statement items of any Foreign Subsidiary of Matria
(including entities that were Foreign Subsidiaries of Gainor prior to the
consummation of the Gainor Acquisition) that is not either (i) a Subsidiary
Guarantor or (b) a Foreign Subsidiary that has joined this Agreement as a
Borrower hereunder in accordance with, and has satisfied the requirements of,
SECTION 12.18 shall not be taken into account in the calculation of the
financial covenants set forth in ARTICLE VII; provided, however, that
notwithstanding the foregoing, calculations of financial covenants as of and for
the periods ending March 31, 1999 and June 30, 1999 shall include all financial
items and results of operations of Matria's Foreign Subsidiaries.
1.3 Other Terms; Construction. Unless otherwise specified or
unless the context otherwise requires, all references herein to sections,
annexes, schedules and exhibits are references to sections, annexes, schedules
and exhibits in and to this Agreement, and all terms defined in this Agreement
shall have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto. All references
herein to the Lenders or any of them shall be deemed to include the Issuing
Lender unless specifically provided otherwise or unless the context otherwise
requires.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments. (a) Each Lender severally agrees, subject to and
on the terms and conditions of this Agreement, to make a loan (each, a "Term
Loan," and collectively, the "Term Loans") to Matria on the Closing Date in a
principal amount not to exceed its Term Loan Commitment. No Term Loans shall be
made at any time after the Closing Date. To the extent repaid, Term Loans may
not be reborrowed.
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(b) Each Revolving Credit Lender severally agrees, subject to and
on the terms and conditions of this Agreement, to make revolving credit loans in
Dollars (each, a "Dollar Revolving Loan," and collectively, the "Dollar
Revolving Loans") to Matria, from time to time on any Business Day during the
period from and including the Closing Date to but not including the Termination
Date, provided that no Borrowing of Dollar Revolving Loans shall be made if,
immediately after giving effect thereto:
(i) the sum of (y) the aggregate principal Dollar Amount
of Revolving Loans of such Lender outstanding at such time and (z) such
Lender's Letter of Credit Exposure at such time would exceed its
Revolving Credit Commitment at such time; or
(ii) the sum of (x) the aggregate principal Dollar Amount
of Revolving Loans outstanding at such time, (y) the aggregate
principal amount of Swingline Loans outstanding at such time (excluding
the aggregate amount of any Swingline Loans to be repaid with proceeds
of Dollar Revolving Loans made pursuant to such Borrowing) and (z) the
aggregate Letter of Credit Exposure of all Revolving Credit Lenders at
such time would exceed the aggregate Revolving Credit Commitments at
such time.
Subject to and on the terms and conditions of this Agreement, Matria
may borrow, repay and reborrow Dollar Revolving Loans.
(c) Each Revolving Credit Lender severally agrees, subject to and
on the terms and conditions of this Agreement, to make revolving credit loans in
any Foreign Currency (each, a "Foreign Currency Revolving Loan," and
collectively, the "Foreign Currency Revolving Loans") to any Borrower, from time
to time on any Business Day during the period from and including the Closing
Date to but not including the Termination Date, provided that no Borrowing of
Foreign Currency Revolving Loans shall be made if, immediately after giving
effect thereto:
(i) the sum of (y) the aggregate principal Dollar Amount
of Revolving Loans of such Lender outstanding at such time and (z) such
Lender's Letter of Credit Exposure at such time would exceed its
Revolving Credit Commitment at such time;
(ii) the sum of (x) the aggregate principal Dollar Amount
of Revolving Loans outstanding at such time, (y) the aggregate
principal amount of Swingline Loans outstanding at such time and (z)
the aggregate Letter of Credit Exposure of all Revolving Credit Lenders
at such time would exceed the aggregate Revolving Credit Commitments at
such time; or
(iii) the aggregate principal Dollar Amount of Foreign
Currency Revolving Loans outstanding at such time would exceed the
Foreign Currency Sublimit.
Subject to and on the terms and conditions of this Agreement, each
Borrower may borrow, repay and reborrow Foreign Currency Revolving Loans.
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(d) The Swingline Lender agrees, subject to and on the terms and
conditions of this Agreement, to make loans (each, a "Swingline Loan," and
collectively, the "Swingline Loans") to Matria, from time to time on any
Business Day during the period from the Closing Date to but not including the
Swingline Maturity Date (or, if earlier, the Termination Date), in an aggregate
principal amount at any time outstanding not exceeding the Swingline Commitment,
notwithstanding that the aggregate principal amount of Swingline Loans
outstanding at any time, when added to the aggregate principal Dollar Amount of
the Revolving Loans made by the Swingline Lender in its capacity as a Revolving
Credit Lender outstanding at such time and its Letter of Credit Exposure at such
time, may exceed its Revolving Credit Commitment at such time, but provided that
no Borrowing of Swingline Loans shall be made if, immediately after giving
effect thereto, the sum of (x) the aggregate principal Dollar Amount of
Revolving Loans outstanding at such time, (y) the aggregate Letter of Credit
Exposure of all Revolving Credit Lenders at such time and (z) the aggregate
principal amount of Swingline Loans outstanding at such time would exceed the
aggregate Revolving Credit Commitments at such time. Subject to and on the terms
and conditions of this Agreement, Matria may borrow, repay (including by means
of a Borrowing of Dollar Revolving Loans pursuant to SECTION 2.2(E)) and
reborrow Swingline Loans.
2.2 Borrowings. (a) Subject to the terms and conditions of this
Agreement, (i) the Term Loans shall, at the option of Matria, be either Base
Rate or LIBOR Loans, and (ii) the Dollar Revolving Loans shall at the option of
Matria, be either Base Rate Loans or LIBOR Loans, provided that (i) all Loans
comprising the same Borrowing shall, unless otherwise specifically provided
herein, be of the same Type (with regard to both currency and interest rate
option, in the case of Foreign Currency Revolving Loans), (ii) the Loans made on
the Closing Date shall be made initially as Base Rate Loans, (iii) no Borrowing
of LIBOR Loans may be made at any time prior to the third (3rd) Business Day
after the Closing Date, and no Borrowing of Foreign Currency Revolving Loans may
be made at any time prior to the fourth (4th) Business Day after the Closing
Date, and (iv) no LIBOR Loans or Foreign Currency Revolving Loans having (in
each case) an interest period greater than one month may be borrowed at any time
prior to the earlier of the 90th day after the Closing Date and the date upon
which the Administrative Agent determines in its sole discretion, and notifies
Matria, that the primary syndication of the credit facilities provided for
hereunder has been completed (the earlier of such dates, the "Syndication
Completion Date"). The Swingline Loans shall be made and maintained as Base Rate
Loans at all times, and the Foreign Currency Revolving Loans shall at all times
bear interest at the Adjusted IBOR Rate.
(b) In order to make a Borrowing (other than (x) Borrowings of
Swingline Loans, which shall be made pursuant to SECTION 2.2(D), (y) Borrowings
for the purpose of repaying Refunded Swingline Loans, which shall be made
pursuant to SECTION 2.2(E), and (z) Borrowings involving continuations or
conversions of outstanding Loans, which shall be made pursuant to SECTION 2.11),
the applicable Borrower will give the Administrative Agent written notice not
later than 11:00 a.m., Charlotte time, the Applicable Number of Business Days
prior to each Borrowing; provided, however, that requests for the Borrowing of
the Term Loans and any Revolving Loans to be made on the Closing Date may, at
the discretion of the Administrative Agent, be given later than the times
specified hereinabove. Each such notice (each, a "Notice of
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<PAGE> 39
Borrowing") shall be irrevocable, shall be given in the form of EXHIBIT B-1 and
shall specify (1) the aggregate principal amount, Class and initial Type of the
Loans to be made pursuant to such Borrowing, (2) in the case of a Borrowing of
Fixed Rate Loans, the initial Interest Period to be applicable thereto, (3) in
the case of a Borrowing of Foreign Currency Revolving Loans, the applicable
Foreign Currency, and (4) the requested date of such Borrowing (the "Borrowing
Date"), which shall be a Business Day. Upon its receipt of a Notice of
Borrowing, the Administrative Agent will promptly notify each Revolving Credit
Lender of the proposed Borrowing. Notwithstanding anything to the contrary
contained herein:
(i) the aggregate principal amount of the Borrowing of
the Term Loans shall be in the amount of the aggregate Term Loan
Commitments;
(ii) the aggregate principal amount of each Borrowing
comprised of Base Rate Loans shall not be less than $1,000,000 or, if
greater, an integral multiple of $500,000 in excess thereof (or, in the
case of a Borrowing of Revolving Loans, if less, in the amount of the
aggregate Unutilized Revolving Credit Commitments), and the aggregate
principal amount of each Borrowing comprised of Fixed Rate Loans shall
not be less than a Dollar Amount of $3,000,000 or, if greater, an
integral multiple of a Dollar Amount of $1,000,000 in excess thereof;
and
(iii) if the applicable Borrower shall have failed to
select the duration of the Interest Period to be applicable to any
Borrowing of Fixed Rate Loans, then such Borrower shall be deemed to
have selected an Interest Period with a duration of one month.
(c) In the case of each Borrowing of Dollar Revolving Loans (and
the Borrowing of the Term Loans), not later than 1:00 p.m., Charlotte time, on
the requested Borrowing Date (which shall be the Closing Date, in the case of
the Term Loans), each Lender will make available to the Administrative Agent at
its office referred to in SECTION 12.5 (or at such other location as the
Administrative Agent may designate) an amount, in Dollars and in immediately
available funds, equal to the amount of the Dollar Revolving Loan (or the Term
Loan, as the case may be) to be made by such Lender. To the extent the
applicable Lenders have made such amounts available to the Administrative Agent
as provided hereinabove, the Administrative Agent will make the aggregate of
such amounts available to Matria in accordance with SECTION 2.3(A) and in like
funds as received by the Administrative Agent. In the case of each Borrowing of
Foreign Currency Revolving Loans, not later than 10:00 a.m., Local Time, on the
requested Borrowing Date, each Revolving Credit Lender will make available to
the Administrative Agent at the office of its applicable Correspondent (or at
such other location as the Administrative Agent may designate) an amount, in the
applicable Foreign Currency and in immediately available funds, equal to the
amount of the Foreign Currency Revolving Loan to be made by such Lender. To the
extent the applicable Lenders have made such amounts available to the
Administrative Agent as provided hereinabove, the Administrative Agent will make
the aggregate of such amounts available to the applicable Borrower in accordance
with SECTION 2.3(A) and in like funds as received by the Administrative Agent.
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<PAGE> 40
(d) In order to make a Borrowing of a Swingline Loan, Matria will
give the Administrative Agent and the Swingline Lender written notice not later
than 11:00 a.m., Charlotte time, on the date of such Borrowing. Each such notice
(each, a "Notice of Swingline Borrowing") shall be irrevocable, shall be given
in the form of EXHIBIT B-2 and shall specify (i) the principal amount of the
Swingline Loan to be made pursuant to such Borrowing (which shall not be less
than $50,000 and, if greater, shall be in an integral multiple of $50,000 in
excess thereof (or, if less, in the amount of the Unutilized Swingline
Commitment)) and (ii) the requested Borrowing Date, which shall be a Business
Day. Not later than 1:00 p.m., Charlotte time, on the requested Borrowing Date,
the Swingline Lender will make available to the Administrative Agent at its
office referred to in SECTION 12.5 (or at such other location as the
Administrative Agent may designate) an amount, in Dollars and in immediately
available funds, equal to the amount of the requested Swingline Loan. To the
extent the Swingline Lender has made such amount available to the Administrative
Agent as provided hereinabove, the Administrative Agent will make such amount
available to Matria in accordance with SECTION 2.3(A) and in like funds as
received by the Administrative Agent.
(e) With respect to any outstanding Swingline Loans, the Swingline
Lender may at any time (whether or not an Event of Default has occurred and is
continuing) in its sole and absolute discretion, and is hereby authorized and
empowered by Matria to, cause a Borrowing of Revolving Loans to be made for the
purpose of repaying such Swingline Loans by delivering to the Administrative
Agent (if the Administrative Agent is different from the Swingline Lender) and
each other Revolving Credit Lender (on behalf of, and with a copy to, Matria),
not later than 11:00 a.m., Charlotte time, one (1) Business Day prior to the
proposed Borrowing Date therefor, a notice (which shall be deemed to be a Notice
of Borrowing given by Matria) requesting the Revolving Credit Lenders to make
Dollar Revolving Loans (which shall be made initially as Base Rate Loans) on
such Borrowing Date in an aggregate amount equal to the amount of such Swingline
Loans (the "Refunded Swingline Loans") outstanding on the date such notice is
given that the Swingline Lender requests to be repaid. Not later than 1:00 p.m.,
Charlotte time, on the requested Borrowing Date, each Revolving Credit Lender
(other than the Swingline Lender) will make available to the Administrative
Agent at its office referred to in SECTION 12.5 (or at such other location as
the Administrative Agent may designate) an amount, in Dollars and in immediately
available funds, equal to the amount of the Dollar Revolving Loan to be made by
such Lender. To the extent the Revolving Credit Lenders have made such amounts
available to the Administrative Agent as provided hereinabove, the
Administrative Agent will make the aggregate of such amounts available to the
Swingline Lender in like funds as received by the Administrative Agent, which
shall apply such amounts in repayment of the Refunded Swingline Loans.
Notwithstanding any provision of this Agreement to the contrary, on the relevant
Borrowing Date, the Refunded Swingline Loans (including the Swingline Lender's
ratable share thereof, in its capacity as a Revolving Credit Lender) shall be
deemed to be repaid with the proceeds of the Dollar Revolving Loans made as
provided above (including a Dollar Revolving Loan deemed to have been made by
the Swingline Lender), and such Refunded Swingline Loans deemed to be so repaid
shall no longer be outstanding as Swingline Loans but shall be outstanding as
Dollar Revolving Loans. If any portion of any such amount repaid (or deemed to
be repaid) to the Swingline Lender shall be recovered by or on behalf of Matria
from the Swingline Lender in any bankruptcy, insolvency or similar proceeding or
otherwise, the loss of
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<PAGE> 41
the amount so recovered shall be shared ratably among all the Revolving Credit
Lenders in the manner contemplated by SECTION 2.15(B).
(f) If, as a result of any bankruptcy, insolvency or similar
proceeding with respect to Matria, Dollar Revolving Loans are not made pursuant
to subsection (e) above in an amount sufficient to repay any amounts owed to the
Swingline Lender in respect of any outstanding Swingline Loans, or if the
Swingline Lender is otherwise precluded for any reason from giving a notice on
behalf of Matria as provided for hereinabove, the Swingline Lender shall be
deemed to have sold without recourse, representation or warranty, and each
Revolving Credit Lender shall be deemed to have purchased and hereby agrees to
purchase, a participation in such outstanding Swingline Loans in an amount equal
to its ratable share (based on the proportion that its Revolving Credit
Commitment bears to the aggregate Revolving Credit Commitments at such time) of
the unpaid amount thereof together with accrued interest thereon. Upon one (1)
Business Day's prior notice from the Swingline Lender, each Revolving Credit
Lender (other than the Swingline Lender) will make available to the
Administrative Agent at its office referred to in SECTION 12.5 (or at such other
location as the Administrative Agent may designate) an amount, in Dollars and in
immediately available funds, equal to its respective participation. To the
extent the Revolving Credit Lenders have made such amounts available to the
Administrative Agent as provided hereinabove, the Administrative Agent will make
the aggregate of such amounts available to the Swingline Lender in like funds as
received by the Administrative Agent. In the event any such Revolving Credit
Lender fails to make available to the Administrative Agent the amount of such
Lender's participation as provided in this subsection (f), the Swingline Lender
shall be entitled to recover such amount on demand from such Lender, together
with interest thereon for each day from the date such amount is required to be
made available for the account of the Swingline Lender until the date such
amount is made available to the Swingline Lender at the Federal Funds Rate for
the first three (3) Business Days and thereafter at the Adjusted Base Rate.
Promptly following its receipt of any payment by or on behalf of Matria in
respect of a Swingline Loan, the Swingline Lender will pay to each Revolving
Credit Lender that has acquired a participation therein such Lender's ratable
share of such payment.
(g) Notwithstanding any provision of this Agreement to the
contrary, the obligation of each Revolving Credit Lender (other than the
Swingline Lender) to make Dollar Revolving Loans for the purpose of repaying any
Refunded Swingline Loans pursuant to subsection (e) above and each such Lender's
obligation to purchase a participation in any unpaid Swingline Loans pursuant to
subsection (f) above shall be absolute and unconditional and shall not be
affected by any circumstance or event whatsoever, including, without limitation,
(i) any set-off, counterclaim, recoupment, defense or other right that such
Lender may have against the Swingline Lender, the Administrative Agent, Matria
or any other Person for any reason whatsoever, (ii) the occurrence or
continuance of any Default or Event of Default, (iii) any adverse change in the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Matria or any of its Subsidiaries, or (iv) any breach of this
Agreement by any party hereto.
2.3 Disbursements; Funding Reliance; Domicile of Loans. (a) Each
Borrower hereby authorizes the Administrative Agent and each Correspondent to
disburse the proceeds of each
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Borrowing in accordance with the terms of any written instructions from any of
its Authorized Officers, provided that neither the Administrative Agent nor any
Correspondent shall be obligated under any circumstances to forward amounts to
any account not listed in an Account Designation Letter. Each Borrower may at
any time deliver to the Administrative Agent an Account Designation Letter
listing any additional accounts or deleting any accounts listed in a previous
Account Designation Letter.
(b) Unless the Administrative Agent has received, prior to the
applicable funding deadline as set forth in SECTION 2.2(C) or SECTION 2.2(E), on
the relevant Borrowing Date, written notice from a Lender that such Lender will
not make available to the Administrative Agent such Lender's ratable portion (if
any) of the relevant Borrowing, the Administrative Agent may assume that such
Lender has made such portion available to the Administrative Agent in
immediately available funds on such Borrowing Date in accordance with the
applicable provisions of SECTION 2.2(C) or SECTION 2.2(E), as the case may be,
and the Administrative Agent may, in reliance upon such assumption, but shall
not be obligated to, make a corresponding amount available to the applicable
Borrower on such Borrowing Date. If and to the extent that such Lender shall not
have made such portion available to the Administrative Agent, and the
Administrative Agent shall have made such corresponding amount available to the
applicable Borrower, such Lender, on the one hand, and the applicable Borrower,
on the other, severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount, together with interest thereon for each day
from the date such amount is made available to the applicable Borrower until the
date such amount is repaid to the Administrative Agent, (i) in the case of such
Lender, (y) with respect to any Borrowing of Term Loans or Dollar Revolving
Loans, at the Federal Funds Rate, and (z) with respect to any Borrowing of
Foreign Currency Revolving Loans, at the Administrative Agent's average daily
cost of carrying such amount, and (ii) in the case of such Borrower, at the rate
of interest applicable at such time to the Type of Loans comprising such
Borrowing, as determined under the provisions of SECTION 2.8. If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement. The failure of any Lender to make any Loan required to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan as part of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the Loan
to be made by such other Lender as part of any Borrowing.
(c) Each Lender may, at its option, make and maintain any Loan at,
to or for the account of any of its Lending Offices, provided that any exercise
of such option shall not affect the obligation of the applicable Borrower to
repay such Loan to or for the account of such Lender in accordance with the
terms of this Agreement.
2.4 Notes. (a) The Loans made by each Lender shall be evidenced
(i) in the case of Term Loans, by a Term Note appropriately completed in
substantially the form of EXHIBIT A-1, (ii) in the case of Dollar Revolving
Loans, by a Dollar Revolving Credit Note appropriately completed in
substantially the form of EXHIBIT A-2, (ii) in the case of Foreign Currency
Revolving Loans, by a Foreign Currency Revolving Credit Note appropriately
completed in
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substantially the form of EXHIBIT A-3, and (iv) in the case of Swingline Loans,
by a Swingline Note appropriately completed in substantially the form of EXHIBIT
A-4.
(b) Each Term Note issued to a Lender shall (i) be executed by
Matria, (ii) be payable to the order of such Lender, (iii) be dated as of the
Closing Date (or, in the case of a Term Note issued after the Closing Date,
dated the effective date of the applicable Assignment and Acceptance), (iv) be
in a stated principal amount equal to such Lender's Term Loan Commitment (or, in
the case of a Term Note issued after the Closing Date, in an amount equal to the
unpaid principal amount of such Lender's Term Loan), (v) bear interest in
accordance with the provisions of SECTION 2.8, as the same may be applicable
from time to time to the Term Loan made by such Lender, and (vi) be entitled to
all of the benefits of this Agreement and the other Credit Documents and subject
to the provisions hereof and thereof.
(c) Each Dollar Revolving Credit Note issued to a Lender shall (i)
be executed by Matria, (ii) be payable to the order of such Lender, (iii) be
dated as of the Closing Date (or, in the case of a Dollar Revolving Credit Note
issued after the Closing Date, dated the effective date of the applicable
Assignment and Acceptance), (iv) be in a stated principal amount equal to such
Lender's Revolving Credit Commitment, (v) bear interest in accordance with the
provisions of SECTION 2.8, as the same may be applicable from time to time to
the Dollar Revolving Loans made by such Lender, and (vi) be entitled to all of
the benefits of this Agreement and the other Credit Documents and subject to the
provisions hereof and thereof.
(d) Each Foreign Currency Revolving Credit Note issued to a Lender
shall (i) be executed by the applicable Borrower, (ii) be payable to the order
of such Lender, (iii) be dated as of the Closing Date (or, in the case of a
Foreign Currency Revolving Credit Note issued after the Closing Date, dated the
effective date of the applicable Assignment and Acceptance), (iv) be in a stated
principal amount equal to such Lender's ratable share of the Foreign Currency
Sublimit, (v) bear interest in accordance with the provisions of SECTION 2.8, as
the same may be applicable from time to time to the Foreign Currency Revolving
Loans made by such Lender to such Borrower, and (vi) be entitled to all of the
benefits of this Agreement and the other Credit Documents and subject to the
provisions hereof and thereof.
(e) The Swingline Note shall (i) be executed by Matria, (ii) be
payable to the order of the Swingline Lender, (iii) be dated as of the Closing
Date, (iv) be in a stated principal amount equal to the Swingline Commitment,
(v) bear interest in accordance with the provisions of SECTION 2.8, as the same
may be applicable from time to time to the Swingline Loans, and (vi) be entitled
to all of the benefits of this Agreement and the other Credit Documents and
subject to the provisions hereof and thereof.
(f) Each Lender will record on its internal records the amount and
Type of each Loan made by it and each payment received by it in respect thereof
and will, in the event of any transfer of any of its Notes, either endorse on
the reverse side thereof or on a schedule attached thereto (or any continuation
thereof) the outstanding principal amount and Type of the Loans evidenced
thereby as of the date of transfer or provide such information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
the failure of any
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<PAGE> 44
Lender to make any such recordation or provide any such information, or any
error therein, shall not affect any Borrower's obligations under this Agreement
or the Notes.
2.5 Termination and Reduction of Commitments and Swingline
Commitment. (a) The Term Loan Commitments shall be automatically and permanently
terminated on the Closing Date (or, if earlier, on February 1, 1999), unless the
Term Loans have been made in full on or prior to such date. The Revolving Credit
Commitments shall be automatically and permanently terminated on the Termination
Date (or on February 1, 1999, but only if the Closing Date shall not have
occurred on or prior to such date). The Swingline Commitment shall be
automatically and permanently terminated on the Swingline Maturity Date, unless
sooner terminated pursuant to any other provision of this Section or SECTION
9.2.
(b) The Revolving Credit Commitments shall, on each date upon
which a prepayment of the Loans is required under any of subsections (e) through
(g) of SECTION 2.6 (and exceeds in amount the aggregate principal amount of Term
Loans then outstanding) or would be required if Term Loans were then
outstanding, be automatically and permanently reduced by the amount, if any, by
which the amount of such required prepayment (determined as if an unlimited
amount of Term Loans were then outstanding) exceeds the aggregate principal
amount of Term Loans then actually outstanding, as more particularly set forth
in SECTION 2.6(H).
(c) At any time and from time to time after the date hereof, upon
not less than five (5) Business Days' prior written notice to the Administrative
Agent (and, in the case of a termination or reduction of the Unutilized
Swingline Commitment, the Swingline Lender), Matria may terminate in whole or
reduce in part the aggregate Unutilized Revolving Credit Commitments, the
Unutilized Swingline Commitment and/or the Foreign Currency Sublimit, provided
that any such partial reduction shall be in an aggregate principal Dollar Amount
of not less than $1,000,000 or, if greater, an integral multiple thereof. The
amount of any termination or reduction made under this subsection (c) may not
thereafter be reinstated.
(d) Each reduction of the Revolving Credit Commitments or the
Foreign Currency Sublimit pursuant to this Section shall be applied ratably
among the Revolving Credit Lenders according to their respective Revolving
Credit Commitments or ratable share (based on their respective Revolving Credit
Commitments) of the Foreign Currency Sublimit, as the case may be.
Notwithstanding any provision of this Agreement to the contrary, to the extent
that the aggregate Revolving Credit Commitments are reduced pursuant to this
Section to an amount lower than the Swingline Commitment or the Foreign Currency
Sublimit, there shall be a corresponding permanent reduction of the Swingline
Commitment or the Foreign Currency Sublimit, as the case may be, to the amount
of the aggregate Revolving Credit Commitments as so reduced.
2.6 Mandatory Payments and Prepayments. (a) Except to the extent
due or paid sooner pursuant to the provisions of this Agreement, the Borrower
will repay the aggregate outstanding principal of the Term Loans in the amounts
and on the dates set forth below:
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<PAGE> 45
<TABLE>
<CAPTION>
Date Payment Amount
---- --------------
<S> <C>
July 1, 1999 $3,000,000
October 1, 1999 3,000,000
January 1, 2000 3,000,000
April 1, 2000 3,000,000
July 1, 2000 3,000,000
October 1, 2000 3,000,000
January 1, 2001 3,000,000
April 1, 2001 3,000,000
July 1, 2001 4,000,000
October 1, 2001 4,000,000
January 1, 2002 4,000,000
April 1, 2002 4,000,000
July 1, 2002 4,000,000
October 1, 2002 4,000,000
January 1, 2003 4,000,000
April 1, 2003 4,000,000
July 1, 2003 6,000,000
October 1, 2003 6,000,000
January 1, 2004 6,000,000
March 31, 2004 6,000,000
</TABLE>
(b) Except to the extent due or paid sooner pursuant to the
provisions of this Agreement, (i) the aggregate outstanding principal of the
Term Loans shall be due and payable in full on the Term Loan Maturity Date, (ii)
the aggregate outstanding principal of the Swingline Loans shall be due and
payable in full on the Swingline Maturity Date, (iii) the aggregate outstanding
principal amount of each Borrowing of Foreign Currency Revolving Loans shall be
due and payable in full on the last day of the Interest Period applicable
thereto; provided, however, that the applicable Borrower may, subject to the
provisions of SECTION 2.11, continue all or a portion of such outstanding
principal amount of such Foreign Currency Revolving Loans for an additional
Interest Period in the same Foreign Currency, and to the extent that any such
Foreign Currency Revolving Loans are not continued for an additional Interest
Period as provided in such Section, such Borrower will repay the principal
amount thereof not so continued (together with interest thereon) on the last day
of the Interest Period applicable thereto, and (iv) the aggregate outstanding
principal amount of all the Revolving Loans shall be due and payable in full on
the Revolving Credit Maturity Date. Each payment of a Foreign Currency Revolving
Loan made pursuant to the provisions of this subsection (b) shall be made in the
Foreign Currency in which such Foreign Currency Revolving Loan was made, as set
forth more particularly in SECTION 2.12(A), and shall be made in an amount
(denominated in the applicable Foreign Currency) equal to the outstanding amount
(denominated in such Foreign Currency) of such Foreign Currency Revolving Loan,
i.e. without adjustment to the Dollar Equivalent of such outstanding amount.
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(c) In the event that, at any time, the sum of (x) the aggregate
principal Dollar Amount of Revolving Loans outstanding at such time, (y) the
aggregate Letter of Credit Exposure of all Revolving Credit Lenders at such time
and (z) the aggregate principal amount of Swingline Loans outstanding at such
time (excluding the aggregate amount of any Swingline Loans to be repaid with
proceeds of Dollar Revolving Loans made on the date of determination) shall
exceed the aggregate Revolving Credit Commitments at such time (after giving
effect to any concurrent termination or reduction thereof), the Borrowers will
immediately prepay the outstanding principal amount of the Swingline Loans and,
to the extent of any excess remaining after prepayment in full of outstanding
Swingline Loans, the Borrower will immediately prepay the outstanding principal
amount of the Revolving Loans in the Dollar Amount of such excess; provided
that, to the extent such excess amount is greater than the aggregate principal
amount of Swingline Loans and Revolving Loans outstanding immediately prior to
the application of such prepayment, the amount so prepaid shall be retained by
the Administrative Agent and held in the Cash Collateral Account as cover for
Letter of Credit Exposure, as more particularly described in Section 3.8, and
thereupon such cash shall be deemed to reduce the aggregate Letter of Credit
Exposure by an equivalent amount.
(d) In the event that, at any time, the aggregate principal Dollar
Amount of Foreign Currency Revolving Loans outstanding at such time shall exceed
the Foreign Currency Sublimit at such time (after giving effect to any
concurrent termination or reduction thereof), the Borrowers will immediately
prepay the outstanding principal amount of the Foreign Currency Revolving Loans
in the Dollar Amount of such excess.
(e) Promptly upon (and in any event not later than two (2)
Business Days after) receipt thereof by Matria or any Subsidiary, the Borrowers
will prepay the outstanding principal amount of the Loans in an amount equal to
75% of the Net Cash Proceeds from any Equity Issuance or 100% of the Net Cash
Proceeds from any Debt Issuance, and in connection therewith Matria will deliver
to the Administrative Agent, concurrently with such prepayment, a certificate
signed by a Financial Officer of Matria in form and substance satisfactory to
the Administrative Agent and setting forth the calculation of such Net Cash
Proceeds.
(f) Not later than sixty (60) days after receipt by Matria or any
Subsidiary of any proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event (and in any event upon its
determination not to repair or replace any property subject to such Casualty
Event), the Borrowers will prepay the outstanding principal amount of the Loans
in an amount equal to 100% of the Net Cash Proceeds from such Casualty Event
(less any amounts theretofore applied to the repair or replacement of property
subject to such Casualty Event) and in connection therewith Matria will deliver
to the Administrative Agent, concurrently with such prepayment, a certificate
signed by a Financial Officer of Matria in form and substance satisfactory to
the Administrative Agent and setting forth the calculation of such Net Cash
Proceeds; provided, however, that, notwithstanding the foregoing, (i) nothing in
this subsection shall be deemed to limit or otherwise affect any right of the
Administrative Agent herein or in any of the other Credit Documents to receive
and hold such proceeds as loss payee and to disburse the same to Matria upon the
terms hereof or thereof, or any obligation of Matria and each of its
Subsidiaries herein or in any of the other Credit Documents to remit any such
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proceeds to the Administrative Agent upon its receipt thereof, and (ii) any and
all such proceeds received or held by the Administrative Agent or Matria or any
of its Subsidiaries during the continuance of an Event of Default (regardless of
any proposed or actual use thereof for repair or replacement) shall be applied
to prepay the outstanding principal amount of the Loans.
(g) Promptly upon (and in any event not later than two (2)
Business Days after) receipt thereof by Matria or any Subsidiary, the Borrowers
will prepay the outstanding principal amount of the Loans in an amount equal to
100% of the Net Cash Proceeds from any Asset Disposition, and in connection
therewith Matria will deliver to the Administrative Agent, concurrently with
such prepayment, a certificate signed by a Financial Officer of Matria in form
and substance satisfactory to the Administrative Agent and setting forth the
calculation of such Net Cash Proceeds. Notwithstanding the foregoing, nothing in
this subsection shall be deemed to permit any Asset Disposition not expressly
permitted under SECTION 8.4.
(h) Each prepayment of the Loans made pursuant to subsections (e)
through (g) above shall be applied (i) first, to reduce the outstanding
principal amount of the Term Loans, with such reduction to be applied to the
scheduled principal payments on the Term Loans (as set forth in subsection (a)
above) on a pro rata basis according to the amount of each such scheduled
payment, (ii) second, to the extent of any excess remaining after application as
provided in clause (i) above, to reduce the outstanding principal amount of the
Swingline Loans, with a corresponding reduction to the Revolving Credit
Commitments as provided in Section 2.5(b), (iii) third, to the extent of any
excess remaining after application as provided in clauses (i) and (ii) above, to
reduce the outstanding principal amount of the Revolving Loans, with a
corresponding reduction to the Revolving Credit Commitments as provided in
SECTION 2.5(B), and (iv) fourth, to the extent of any excess remaining after
application as provided in clauses (i), (ii) and (iii) above, to pay any
outstanding Reimbursement Obligations, and thereafter to cash collateralize
Letter of Credit Exposure pursuant to Section 3.8. Each payment or prepayment
pursuant to the provisions of this Section shall be applied ratably among the
Lenders holding the Loans being prepaid, in proportion to the principal amount
held by each, and in the case of prepayments pursuant to subsection (c), (e),
(f) or (g) above shall be applied, as among the Term Loans (or the Revolving
Loans, as the case may be) being prepaid, (x) first, to prepay all Base Rate
Loans, (y) second, to the extent of any excess remaining after application as
provided in clause (x) above, to prepay all LIBOR Loans (and as among LIBOR
Loans, first to prepay those LIBOR Loans, if any, having Interest Periods ending
on the date of such prepayment), and (z) third, in the case of Revolving Loans
only, to the extent of any excess remaining after application as provided in
clauses (x) and (y) above, to prepay all Foreign Currency Revolving Loans in an
amount equal to the Dollar Amount of such excess (and as among Foreign Currency
Revolving Loans, first to prepay those Foreign Currency Revolving Loans, if any,
having Interest Periods ending on the date of such prepayment).
(i) Each payment or prepayment of a Fixed Rate Loan made pursuant
to the provisions of this Section on a day other than the last day of the
Interest Period applicable thereto shall be made together with all amounts
required under SECTION 2.18 to be paid as a consequence thereof.
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(j) For purposes of subsections (c) and (d) above, and
notwithstanding any other provision of this Agreement, the Administrative Agent
shall calculate the Dollar Equivalent of each Foreign Currency Revolving Loan
(i) in connection with the making or continuation of such Foreign Currency
Revolving Loan, as of the date such Foreign Currency Revolving Loan is so made
or continued, and (ii) on the Termination Date. Notwithstanding the foregoing,
the Administrative Agent may in its sole discretion, but unless requested in
writing to do so by the Required Revolving Credit Lenders shall not be required
to, calculate the Dollar Equivalent of any Foreign Currency Revolving Loan or
other amount at any other time for purposes of determining compliance with the
provisions of subsections (c) and (d) above.
2.7 Voluntary Prepayments. (a) At any time and from time to time,
each Borrower shall have the right to prepay the Loans, in whole or in part,
without premium or penalty (except as provided in clause (iii) below), upon
written notice given to the Administrative Agent not later than 11:00 a.m.,
Charlotte time, the Applicable Number of Business Days prior to each intended
prepayment, provided that (i) each partial prepayment of Base Rate Loans shall
be in an aggregate principal amount of not less than $1,000,000 or, if greater,
an integral multiple of $500,000 in excess thereof ($50,000 and $50,000,
respectively, in the case of Swingline Loans), and each partial prepayment of
Fixed Rate Loans shall be in an aggregate principal Dollar Amount of not less
than $3,000,000 or, if greater, an integral multiple of a Dollar Amount of
$1,000,000 in excess thereof, (ii) no partial prepayment of Fixed Rate Loans
made pursuant to any single Borrowing shall reduce the aggregate outstanding
principal amount of the remaining Fixed Rate Loans under such Borrowing to less
than a Dollar Amount of $3,000,000 or to any greater amount not an integral
multiple Dollar Amount of $1,000,000 in excess thereof, and (iii) unless made
together with all amounts required under SECTION 2.18 to be paid as a
consequence of such prepayment, a prepayment of a Fixed Rate Loan may be made
only on the last day of the Interest Period applicable thereto. Each such notice
shall specify the proposed date of such prepayment and the aggregate principal
amount, Class and Type of the Loans to be prepaid (and, in the case of Fixed
Rate Loans, the Borrowing pursuant to which made and the Interest Period
applicable thereto), and shall be irrevocable and shall bind such Borrower to
make such prepayment on the terms specified therein. Revolving Loans and
Swingline Loans (but not Term Loans) prepaid pursuant to this subsection (a) may
be reborrowed, subject to the terms and conditions of this Agreement.
(b) Each prepayment of the Term Loans made pursuant to subsection
(a) above shall be applied to reduce the outstanding principal amount of the
Term Loans, with such reduction to be applied to the scheduled principal
payments on the Term Loans (as set forth in SECTION 2.6(A)) on a pro rata basis
according to the amount of each such scheduled payment. Each prepayment of the
Loans made pursuant to subsection (a) above shall be applied ratably among the
Lenders holding the Loans being prepaid, in proportion to the principal amount
held by each.
2.8 Interest. (a) Each Borrower will pay interest in respect of
the unpaid principal amount of each Loan made to it, from the date of Borrowing
thereof until such principal amount shall be paid in full, (i) at the Adjusted
Base Rate, as in effect from time to time during such periods as such Loan is a
Base Rate Loan, (ii) at the Adjusted LIBOR Rate, as in effect from time to time
during such periods as such Loan is a LIBOR Loan, and (iii) at the Adjusted IBOR
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Rate, as in effect from time to time during such periods as such Loan is a
Foreign Currency Revolving Loan.
(b) Upon the occurrence and during the continuance of any default
by any Borrower in the payment of any principal of or interest on any Loan, any
fees or other amount hereunder when due (whether at maturity, pursuant to
acceleration or otherwise), and (at the election of the Required Lenders) upon
the occurrence and during the continuance of any Event of Default, in order to
compensate the Lenders for increased credit risk and not as a penalty, all
outstanding principal amounts of the Loans and, to the greatest extent permitted
by law, all interest accrued on the Loans and all other accrued and outstanding
fees and other amounts hereunder, shall bear interest at a rate per annum equal
to the interest rate applicable from time to time thereafter to such Loans
(whether the Adjusted Base Rate, the Adjusted LIBOR Rate or the Adjusted IBOR
Rate) plus 2% (or, in the case of fees and other amounts, at the Adjusted Base
Rate plus 2%), and, in each case, such default interest shall be payable on
demand. To the greatest extent permitted by law, interest shall continue to
accrue after the filing by or against any applicable Borrower of any petition
seeking any relief in bankruptcy or under any law pertaining to insolvency or
debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as
follows:
(i) in respect of each Base Rate Loan (including any Base
Rate Loan or portion thereof paid or prepaid pursuant to the provisions
of SECTION 2.6, except as provided hereinbelow), in arrears on the last
Business Day of each calendar quarter, beginning with the first such
day to occur after the Closing Date; provided, that in the event the
Loans are repaid or prepaid in full and the Commitments have been
terminated, then accrued interest in respect of all Base Rate Loans
shall be payable together with such repayment or prepayment on the date
thereof;
(ii) in respect of each Fixed Rate Loan (including any
Fixed Rate Loan or portion thereof paid or prepaid pursuant to the
provisions of SECTION 2.6, except as provided hereinbelow), in arrears
(y) on the last Business Day of the Interest Period applicable thereto
(subject to the provisions of clause (iv) in SECTION 2.10) and (z) in
addition, in the case of a Fixed Rate Loan with an Interest Period
having a duration of six months, on the date three months after the
first day of such Interest Period; provided, that in the event all
Fixed Rate Loans made pursuant to a single Borrowing are repaid or
prepaid in full, then accrued interest in respect of such Fixed Rate
Loans shall be payable together with such repayment or prepayment on
the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant
to acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit
Document shall be deemed to establish or require the payment of interest to any
Lender at a rate in excess of the maximum rate permitted by
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applicable law. If the amount of interest payable for the account of any Lender
on any interest payment date would exceed the maximum amount permitted by
applicable law to be charged by such Lender, the amount of interest payable for
its account on such interest payment date shall be automatically reduced to such
maximum permissible amount. In the event of any such reduction affecting any
Lender, if from time to time thereafter the amount of interest payable for the
account of such Lender on any interest payment date would be less than the
maximum amount permitted by applicable law to be charged by such Lender, then
the amount of interest payable for its account on such subsequent interest
payment date shall be automatically increased to such maximum permissible
amount, provided that at no time shall the aggregate amount by which interest
paid for the account of any Lender has been increased pursuant to this sentence
exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to the previous sentence.
(e) The Administrative Agent shall promptly notify Matria and the
Lenders upon determining the interest rate for each Borrowing of Fixed Rate
Loans after its receipt of the relevant Notice of Borrowing or Notice of
Conversion/Continuation, and upon each change in the Base Rate; provided,
however, that the failure of the Administrative Agent to provide the applicable
Borrower or the Lenders with any such notice shall neither affect any
obligations of such Borrower or the Lenders hereunder nor result in any
liability on the part of the Administrative Agent to such Borrower or any
Lender. Each such determination (including each determination of the applicable
Reserve Requirement) shall, absent manifest error, be conclusive and binding on
all parties hereto.
2.9 Fees. Matria agrees to pay:
(a) To the Arranger, for its own account, on the Closing Date, the
fee described in paragraph (1) of the Fee Letter, in the amount set forth
therein as due and payable on the Closing Date and to the extent not theretofore
paid to the Arranger;
(b) To the Administrative Agent, for the account of each Revolving
Credit Lender, a commitment fee for each calendar quarter (or portion thereof)
for the period from the date of this Agreement to the Termination Date, at a per
annum rate equal to the Commitment Fee Percentage in effect from time to time
during such quarter, on such Lender's ratable share (based on the proportion
that its Revolving Credit Commitment bears to the aggregate Revolving Credit
Commitments) of the average daily aggregate Unutilized Revolving Credit
Commitments, payable in arrears (i) on the last Business Day of each calendar
quarter, beginning with the first such day to occur after the Closing Date, and
(ii) on the Termination Date;
(c) To the Administrative Agent, for the account of each Revolving
Credit Lender, a letter of credit fee for each calendar quarter (or portion
thereof) in respect of all Letters of Credit outstanding during such quarter, at
a per annum rate equal to the Applicable Margin Percentage in effect from time
to time during such quarter for Loans that are maintained as LIBOR Loans, on
such Lender's ratable share (based on the proportion that its Revolving Credit
Commitment bears to the aggregate Revolving Credit Commitments) of the daily
average aggregate Stated Amount of such Letters of Credit, payable in arrears
(i) on the last Business Day of each calendar quarter, beginning with the first
such day to occur after the Closing Date, and (ii) on the later of the
Termination Date and the date of termination of the last outstanding Letter of
Credit;
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(d) To the Issuing Lender, for its own account, a facing fee for
each calendar quarter (or portion thereof) in respect of all Letters of Credit
outstanding during such quarter, at a per annum rate of 0.125% on the daily
average aggregate Stated Amount of such Letters of Credit, payable in arrears
(i) on the last Business Day of each calendar quarter, beginning with the first
such day to occur after the Closing Date, and (ii) on the later of the
Termination Date and the date of termination of the last outstanding Letter of
Credit; and
(e) To the Administrative Agent, for its own account, the annual
administrative fee described in paragraph (2) of the Fee Letter, on the terms,
in the amount and at the times set forth therein.
2.10 Interest Periods. Concurrently with the giving of a Notice of
Borrowing or Notice of Conversion/Continuation in respect of (a) any Borrowing
of Term Loans or Dollar Revolving Loans comprised of Base Rate Loans to be
converted into, or LIBOR Loans to be continued as, LIBOR Loans, or (b) any
Borrowing of Foreign Currency Revolving Loans in any Foreign Currency to be
continued as Foreign Currency Revolving Loans in the same Foreign Currency, the
applicable Borrower shall have the right to elect, pursuant to such notice, the
interest period (each, an "Interest Period") to be applicable to such LIBOR
Loans or Foreign Currency Revolving Loans, as the case may be, which Interest
Period shall, at the option of such Borrower, be a one, two, three or six-month
period; provided, however, that:
(i) all Fixed Rate Loans comprising a single Borrowing
shall at all times have the same Interest Period;
(ii) the initial Interest Period for any Fixed Rate Loan
shall commence on the date of the Borrowing of such Fixed Rate Loan
(including the date of any continuation of, or conversion into, such
Fixed Rate Loan), and each successive Interest Period applicable to
such Fixed Rate Loan shall commence on the day on which the next
preceding Interest Period applicable thereto expires;
(iii) Fixed Rate Loans may not be outstanding under more
than five (5) separate Interest Periods at any one time (for which
purpose Interest Periods shall be deemed to be separate even if they
are coterminous);
(iv) if any Interest Period otherwise would expire on a
day that is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day unless such next succeeding Business
Day falls in another calendar month, in which case such Interest Period
shall expire on the next preceding Business Day;
(v) no Interest Period may be selected with respect to
the Term Loans that would end after a scheduled date for repayment of
principal of the Term Loans occurring on or after the first day of such
Interest Period unless, immediately after giving effect to such
selection, the aggregate principal amount of Term Loans that are Base
Rate Loans or
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that have Interest Periods expiring on or before such principal
repayment date equals or exceeds the principal amount required to be
paid on such principal repayment date;
(vi) the Borrower may not select any Interest Period that
(y) begins prior to the third (3rd) Business Day after the Closing Date
(with respect to LIBOR Loans) or the fourth (4th) Business Day after
the Closing Date (with respect to Foreign Currency Loans) or (z) that
expires after (1) the Term Loan Maturity Date (with respect to LIBOR
Loans that are Term Loans) or (2) the Revolving Credit Maturity Date
(with respect to Fixed Rate Loans that are Revolving Loans);
(vii) the Borrowers may not select any Interest Period
having a duration of more than one month at any time prior to the
Syndication Completion Date; and
(viii) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month during
which such Interest Period would otherwise expire, such Interest Period
shall expire on the last Business Day of such calendar month.
2.11 Conversions and Continuations. (a) The Borrowers shall have
the right, on any Business Day occurring on or after the Closing Date, to elect
(i) to convert all or a portion of the outstanding principal amount of any Base
Rate Loans of any Class into LIBOR Loans of the same Class, or to convert any
LIBOR Loans of any Class the Interest Periods for which end on the same day into
Base Rate Loans of the same Class, or (ii) upon the expiration of any Interest
Period, (A) to continue all or a portion of the outstanding principal amount of
any LIBOR Loans of any Class, the Interest Periods for which end on the same
day, for an additional Interest Period, or (B) to continue all or a portion of
the outstanding principal amount of any Foreign Currency Revolving Loans in any
Foreign Currency, the Interest Periods for which end on the same day, for an
additional Interest Period as Foreign Currency Revolving Loans in the same
Foreign Currency, provided that (w) any such conversion of LIBOR Loans into Base
Rate Loans shall involve an aggregate principal amount of not less than
$1,000,000 or, if greater, an integral multiple of $500,000 in excess thereof;
any such conversion of Base Rate Loans into, or continuation of, LIBOR Loans, or
continuation of Foreign Currency Revolving Loans, shall involve an aggregate
principal Dollar Amount of not less than $3,000,000 or, if greater, an integral
multiple of a Dollar Amount of $1,000,000 in excess thereof; and no partial
conversion of LIBOR Loans made pursuant to a single Borrowing shall reduce the
outstanding principal amount of such LIBOR Loans to less than $3,000,000 or to
any greater amount not an integral multiple of $1,000,000 in excess thereof, (x)
except as otherwise provided in SECTION 2.16(D), LIBOR Loans may be converted
into Base Rate Loans only on the last day of the Interest Period applicable
thereto (and, in any event, if a LIBOR Loan is converted into a Base Rate Loan
on any day other than the last day of the Interest Period applicable thereto,
the applicable Borrower will pay, upon such conversion, all amounts required
under SECTION 2.18 to be paid as a consequence thereof), (y) no such conversion
or continuation shall be permitted with regard to any Base Rate Loans that are
Swingline Loans, and (z) no conversion of Base Rate Loans into LIBOR Loans or
continuation of Fixed Rate Loans shall be permitted during the continuance of a
Default or Event of Default.
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(b) The applicable Borrower shall make each such election by
giving the Administrative Agent written notice not later than 11:00 a.m.,
Charlotte time, the Applicable Number of Business Days prior to the intended
effective date of any such conversion or continuation. Each such notice (each, a
"Notice of Conversion/Continuation") shall be irrevocable, shall be given in the
form of EXHIBIT B-3 and shall specify (w) the date of such conversion or
continuation (which shall be a Business Day), (x) in the case of a conversion
into, or a continuation of, Fixed Rate Loans, the Interest Period to be
applicable thereto, (y) in the case of a continuation of Foreign Currency
Revolving Loans, the applicable Foreign Currency, and (z) the aggregate amount,
Class and Type of the Loans being converted or continued. Upon the receipt of a
Notice of Conversion/Continuation, the Administrative Agent will promptly notify
each Lender having a Commitment for Loans (or outstanding Loans) of the relevant
Class of the proposed conversion or continuation. In the event that the
applicable Borrower shall fail to deliver a Notice of Conversion/Continuation as
provided herein with respect to any outstanding Fixed Rate Loans, such Fixed
Rate Loans shall automatically be converted to Base Rate Loans upon the
expiration of the then current Interest Period applicable thereto (unless repaid
pursuant to the terms hereof), and if such Fixed Rate Loans were Foreign
Currency Revolving Loans, any such Base Rate Loans shall be in an aggregate
principal amount equal to the aggregate principal Dollar Amount of such Fixed
Rate Loans. In the event the applicable Borrower shall have failed to select in
a Notice of Conversion/Continuation the duration of the Interest Period to be
applicable to any conversion into, or continuation of, Fixed Rate Loans, then
such Borrower shall be deemed to have selected an Interest Period with a
duration of one month.
2.12 Method of Payments; Computations. (a) All payments by the
Borrowers hereunder shall be made without setoff, counterclaim or other defense
and in immediately available funds to the Administrative Agent, for the account
of the Lenders entitled to such payment or the Swingline Lender, as the case may
be (except as otherwise expressly provided herein as to payments required to be
made directly to the Issuing Lender and the Lenders), (i) in the case of
payments of principal and interest with respect to any Dollar Revolving Loan and
all payments of fees, expenses and any other amounts due hereunder or under any
other Credit Document (except as set forth in clause (ii) below with respect to
Foreign Currency Revolving Loans), in Dollars, to the Administrative Agent at
its office referred to in SECTION 12.5, prior to 12:00 noon, Charlotte time, on
the date payment is due, and (ii) in the case of payments of principal and
interest with respect to any Foreign Currency Revolving Loan, in the Foreign
Currency in which such Foreign Currency Revolving Loan was made, to the
Administrative Agent at the office of the applicable Correspondent, prior to
12:00 noon, Local Time, on the date payment is due. Any payment made as required
hereinabove, but after 12:00 noon, Charlotte time (or Local Time, as the case
may be) shall be deemed to have been made on the next succeeding Business Day.
If any payment falls due on a day that is not a Business Day, then such due date
shall be extended to the next succeeding Business Day (except that in the case
of Fixed Rate Loans to which the provisions of clause (iv) in SECTION 2.10 are
applicable, such due date shall be the next preceding Business Day), and such
extension of time shall then be included in the computation of payment of
interest, fees or other applicable amounts.
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(b) The Administrative Agent will distribute to the Lenders like
amounts relating to payments made to the Administrative Agent for the account of
the Lenders as follows: (i) if the payment is received by 12:00 noon, Charlotte
time (in the case of payments denominated in Dollars) or Local Time (in the case
of payments denominated in a Foreign Currency), in immediately available funds,
the Administrative Agent will make available to each relevant Lender on the same
date, by wire transfer of immediately available funds, such Lender's ratable
share of such payment (based on the percentage that the amount of the relevant
payment owing to such Lender bears to the total amount of such payment owing to
all of the relevant Lenders), and (ii) if such payment is received after 12:00
noon, Charlotte time (in the case of payments denominated in Dollars) or Local
Time (in the case of payments denominated in a Foreign Currency), or in other
than immediately available funds, the Administrative Agent will make available
to each such Lender its ratable share of such payment by wire transfer of
immediately available funds on the next succeeding Business Day (or in the case
of uncollected funds, as soon as practicable after collected). The
Administrative Agent will distribute to the Issuing Lender like amounts relating
to payments made to the Administrative Agent for the account of the Issuing
Lender in the same manner, and subject to the same terms and conditions, as set
forth hereinabove with respect to distributions of amounts to the Lenders.
(c) Unless the Administrative Agent shall have received written
notice from the applicable Borrower prior to the date on which any payment is
due to any Lender hereunder that such payment will not be made in full, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date, and the Administrative Agent may, in
reliance on such assumption, but shall not be obligated to, cause to be
distributed to such Lender on such due date an amount equal to the amount then
due to such Lender. If and to the extent such Borrower shall not have so made
such payment in full to the Administrative Agent, and without limiting the
obligation of such Borrower to make such payment in accordance with the terms
hereof, such Lender shall repay to the Administrative Agent forthwith on demand
such amount so distributed to such Lender, together with interest thereon for
each day from the date such amount is so distributed to such Lender until the
date repaid to the Administrative Agent, (y) with respect to any amount
denominated in Dollars, at the Federal Funds Rate, and (z) with respect to any
amount denominated in a Foreign Currency, at the Administrative Agent's average
daily cost of carrying such amount.
(d) All computations of interest and fees hereunder (including
computations of the applicable Reserve Requirement) shall be made on the basis
of a year consisting of (i) in the case of interest on Base Rate Loans and
Foreign Currency Revolving Loans denominated in British pounds sterling, 365 or
366 days, as the case may be, and (ii) in all other instances, 360 days, and in
each case, the actual number of days (including the first day, but excluding the
last day) elapsed.
2.13 Recovery of Payments. (a) Each Borrower agrees that to the
extent such Borrower makes a payment or payments to or for the account of the
Administrative Agent, any Lender or the Issuing Lender, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or similar state or
federal
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law, common law or equitable cause, then, to the extent of such payment or
repayment, the Obligation intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been received.
(b) If any amounts distributed by the Administrative Agent to any
Lender are subsequently returned or repaid by the Administrative Agent to any
Borrower or its representative or successor in interest, whether by court order
or by settlement approved by the Lender in question, such Lender will, promptly
upon receipt of notice thereof from the Administrative Agent, pay the
Administrative Agent such amount. If any such amounts are recovered by the
Administrative Agent from any Borrower or its representative or successor in
interest, the Administrative Agent will redistribute such amounts to the Lenders
on the same basis as such amounts were originally distributed.
2.14 Use of Proceeds. (a) The proceeds of the Term Loans shall be
used solely to finance a portion of the purchase price of the Gainor
Acquisition.
(b) The proceeds of the Revolving Loans shall be used as follows:
(i) up to $26,000,000 in proceeds of the Revolving Loans shall be used on the
Closing Date, together with cash from other sources, solely (A) to finance a
portion of the purchase price of the Gainor Acquisition, (B) to repay the
Terminating Indebtedness in full, (C) to acquire the remaining outstanding
Capital Stock of DMS (for an amount not exceeding $6,500,000), and (D) to pay or
reimburse reasonable transaction fees and expenses in connection with the
closing of the transactions contemplated hereby and the consummation of the
other Transactions, and (v) thereafter, the proceeds of the Revolving Loans
shall be used for working capital and general corporate purposes of the
Borrowers and their Subsidiaries and in such other manner as is expressly
provided under, and in accordance with, the terms and provisions of this
Agreement (including to finance Permitted Acquisitions in accordance with the
terms and provisions of this Agreement, including, without limitation, the
provisions set forth in SECTION 6.9, and to pay earnout obligations in
connection with the prior acquisition of Quality Diagnostic Services, Inc.).
2.15 Pro Rata Treatment. (a) Except in the case of Swingline Loans,
all fundings, continuations and conversions of Loans of any Class shall be made
by the Lenders pro rata on the basis of their respective Commitments to provide
Loans of such Class (in the case of the initial funding of Loans of such Class
pursuant to SECTION 2.2) or on the basis of their respective outstanding Loans
of such Class (in the case of continuations and conversions of Loans of such
Class pursuant to SECTION 2.11, and additionally in all cases in the event the
Commitments have expired or have been terminated), as the case may be from time
to time. All payments on account of principal of or interest on any Loans, fees
or any other Obligations owing to or for the account of any one or more Lenders
shall be apportioned ratably among such Lenders in proportion to the amounts of
such principal, interest, fees or other Obligations owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount
hereunder (whether by voluntary payment, realization upon security, exercise of
the right of setoff or banker's lien, counterclaim or cross action, or
otherwise, other than pursuant to SECTION 12.7) applicable to the
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payment of any of the Obligations that exceeds its ratable share (according to
the proportion of (i) the amount of such Obligations due and payable to such
Lender at such time to (ii) the aggregate amount of such Obligations due and
payable to all Lenders at such time) of payments on account of such Obligations
then or therewith obtained by all the Lenders to which such payments are
required to have been made, such Lender shall forthwith purchase from the other
Lenders such participations in such Obligations as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each such other Lender shall be rescinded and each such other Lender shall repay
to the purchasing Lender the purchase price to the extent of such recovery,
together with an amount equal to such other Lender's ratable share (according to
the proportion of (i) the amount of such other Lender's required repayment to
(ii) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. Each Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to the provisions of this subsection
may, to the fullest extent permitted by law, exercise any and all rights of
payment (including, without limitation, setoff, banker's lien or counterclaim)
with respect to such participation as fully as if such participant were a direct
creditor of such Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or similar law, any Lender receives a secured
claim in lieu of a setoff to which this subsection applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders entitled under this
subsection to share in the benefits of any recovery on such secured claim.
2.16 Increased Costs; Change in Circumstances; Illegality; etc. (a)
If, at any time after the date hereof and from time to time, the introduction of
or any change in any applicable law, rule or regulation or in the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge, or
change the basis of taxation of payments to such Lender, in respect of any of
its Fixed Rate Loans or any other amounts payable hereunder or its obligation to
make, fund or maintain any Fixed Rate Loans (other than any change in the rate
or basis of tax on the overall net income of such Lender or its applicable
Lending Office), (ii) impose, modify or deem applicable any reserve, special
deposit or similar requirement (other than any reserves to the extent actually
included within the applicable Reserve Requirement in the calculation of any
Fixed Rate) against assets of, deposits with or for the account of, or credit
extended by, such Lender or its applicable Lending Office, or (iii) impose on
such Lender or its applicable Lending Office any other condition, and the result
of any of the foregoing shall be to increase in any material respect the cost to
such Lender of making or maintaining any Fixed Rate Loans or issuing or
participating in Letters of Credit or to reduce in any material respect the
amount of any sum received or receivable by such Lender hereunder (including in
respect of Letters of Credit), each applicable Borrower will, promptly upon
demand therefor by such Lender, pay to such Lender such additional amounts as
shall compensate such Lender for such increase in costs or reduction in return.
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(b) If, at any time after the date hereof and from time to time,
any Lender shall have reasonably determined that the introduction of or any
change in any applicable law, rule or regulation regarding capital adequacy or
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by such
Lender with any guideline or request from any such Governmental Authority
(whether or not having the force of law), has or would have the effect, as a
consequence of such Lender's Commitment, Loans or issuance of or participations
in Letters of Credit hereunder, of reducing the rate of return on the capital of
such Lender or any Person controlling such Lender to a level below that which
such Lender or controlling Person could have achieved but for such introduction,
change or compliance (taking into account such Lender's or controlling Person's
policies with respect to capital adequacy), each applicable Borrower will,
promptly upon demand therefor by such Lender therefor, pay to such Lender such
additional amounts as will compensate such Lender or controlling Person for such
reduction in return.
(c) If, on or prior to the first day of any Interest Period, (x)
the Administrative Agent or the Required Lenders shall have determined that by
reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Eurodollars or any Foreign Currency in the applicable
amounts are not being quoted or offered to the Administrative Agent or the
Lenders for such Interest Period, or that a fundamental change has occurred in
the foreign exchange or interbank markets with respect to any Foreign Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls), (y) the Administrative Agent shall have determined that adequate and
reasonable means do not exist for ascertaining the applicable Fixed Rate for
such Interest Period, or (z) the Administrative Agent shall have received
written notice from the Required Lenders of their determination that the rate of
interest referred to in the definition of "LIBOR Rate" or "IBOR Rate" upon the
basis of which the applicable Fixed Rate for such Interest Period is to be
determined will not adequately and fairly reflect the cost to such Lenders of
making or maintaining the relevant Type of Fixed Rate Loans during such Interest
Period, the Administrative Agent will forthwith so notify the Borrowers and the
Lenders. Upon such notice, (i) all then outstanding Fixed Rate Loans of each
affected currency and/or Interest Period type specified in such notice (each, a
"Relevant Type") shall automatically, on the expiration date of the respective
Interest Periods applicable thereto, be converted into Base Rate Loans or
prepaid in full (provided that if any such Fixed Rate Loan is a Foreign Currency
Revolving Loan, such Loan shall be prepaid in full on the expiration date of the
applicable Interest Period), and (ii) the obligation of the Lenders to make, to
convert Loans into, or to continue, Fixed Rate Loans of each Relevant Type shall
be suspended (including pursuant to the Borrowing to which such Interest Period
applies), in each case until the Administrative Agent or the Required Lenders,
as the case may be, shall have determined that the circumstances giving rise to
such suspension no longer exist, and upon such determination the Required
Lenders (if making such determination) shall so notify the Administrative Agent,
and the Administrative Agent shall so notify the Borrowers and the Lenders.
(d) Notwithstanding any other provision in this Agreement, if, at
any time after the date hereof and from time to time, any Lender shall have
determined in good faith that the introduction of or any change in any
applicable law, rule or regulation or in the interpretation or
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administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance with any guideline or
request from any such Governmental Authority (whether or not having the force of
law), has or would have the effect of making it unlawful for such Lender to make
or to continue to make or maintain Fixed Rate Loans of any currency or Interest
Period type, such Lender will forthwith so notify the Administrative Agent and
the Borrowers. Upon such notice, (i) each of such Lender's then outstanding
Fixed Rate Loans of each Relevant Type shall automatically, on the expiration
date of the respective Interest Period applicable thereto (or, to the extent any
such Fixed Rate Loan may not lawfully be maintained as a Fixed Rate Loan of such
Type until such expiration date, upon such notice), be converted into a Base
Rate Loan (provided that if any such Fixed Rate Loan is a Foreign Currency
Revolving Loan, such Loan shall be prepaid in full on the expiration date of the
applicable Interest Period), and (ii) the obligation of such Lender to make, to
convert Loans into, or to continue, Fixed Rate Loans of each Relevant Type shall
be suspended (including pursuant to any Borrowing for which the Administrative
Agent has received a Notice of Borrowing but for which the Borrowing Date has
not arrived), in each case until such Lender shall have reasonably determined
that the circumstances giving rise to such suspension no longer exist, and upon
such determination such Lender shall so notify the Administrative Agent, and the
Administrative Agent shall so notify the Borrowers.
(e) In the event, as a result of increases in the value of any
Foreign Currency against the Dollar, the obligation of any Lender to make,
maintain or continue Revolving Loans or issue or participate in Letters of
Credit (taking into account the Dollar Amount of the Obligations and all other
indebtedness required to be aggregated under 12 U.S.C.A. ss.84, as amended, the
regulations promulgated thereunder and any other applicable Requirement of Law)
is determined by such Lender to exceed its then applicable legal lending limit
under 12 U.S.C.A. ss.84, as amended, the regulations promulgated thereunder, or
any other applicable Requirement of Law, the amount of additional extensions of
credit (including participations in Letters of Credit) such Lender shall be
obligated to make or issue or participate in hereunder shall, immediately
thereupon, be reduced to the maximum amount that such Lender may legally advance
or maintain (as reasonably determined by such Lender), and, to the extent
necessary under such applicable Requirements of Law (as determined by each
Lender with respect to itself), the Borrowers shall reduce, or cause to be
reduced, complying to the extent practicable with the remaining provisions
hereof, the Obligations outstanding hereunder by an amount sufficient to comply
with such maximum amount.
(f) Determinations by the Administrative Agent or any Lender for
purposes of this Section of any increased costs, reduction in return, market
contingencies, illegality or any other matter shall, absent manifest error, be
conclusive, provided that such determinations are made in good faith. No failure
by the Administrative Agent or any Lender at any time to demand payment of any
amounts payable under this Section shall constitute a waiver of its right to
demand payment of any additional amounts arising at any subsequent time;
provided, however, that no Borrower shall be required to compensate a Lender
pursuant to this Section for any increased costs or reduction in return incurred
or suffered more than 180 days prior to the date that such Lender notifies the
applicable Borrower of the event or circumstance giving rise to such increased
costs or reduction and of such Lender's intent to claim compensation therefor;
and
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provided further that if the event or circumstance giving rise to such increased
costs or reduction is retroactive, then the 180-day period referred to above
shall be extended to include the period of retroactive effect thereof. Nothing
in this Section shall require or be construed to require any Borrower to pay any
interest, fees, costs or other amounts in excess of that permitted by applicable
law.
(g) Any Lender claiming any additional amounts payable pursuant to
this Section or exercising its rights under subsection (d) or (f) above shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
file any certificate or document reasonably requested by the applicable Borrower
or to change the jurisdiction of its applicable Lending Office if the making of
such filing or change would avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue or avoid the circumstances giving
rise to such exercise and would not, in the reasonable determination of such
Lender, result in any additional costs, expenses or risks or be otherwise
disadvantageous to it. Each Lender agrees to use reasonable efforts to notify
the applicable Borrower as promptly as practicable upon its becoming aware that
circumstances exist that would cause such Borrower to become obligated to pay
additional amounts to such Lender pursuant to this Section or that would entitle
such Lender to exercise its rights under subsection (d) or (f) above.
2.17 Taxes. (a) Any and all payments by the Borrowers hereunder or
under any Note shall be made, in accordance with the terms hereof and thereof,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than net income and franchise taxes imposed on the
Administrative Agent or any Lender by the United States or by the jurisdiction
under the laws of which the Administrative Agent or such Lender, as the case may
be, is organized or in which its principal office or (in the case of a Lender)
its applicable Lending Office is located, or any political subdivision or taxing
authority thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If any Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to the Administrative Agent or
any Lender, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section), the Administrative Agent or such
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Borrower will make such
deductions, (iii) such Borrower will pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) such Borrower will deliver to the Administrative Agent or such Lender,
as the case may be, evidence of such payment.
(b) The Borrowers will indemnify the Administrative Agent and each
Lender for the full amount of Taxes (including, without limitation, any Taxes
imposed by any jurisdiction on amounts payable under this Section) paid by the
Administrative Agent or such Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted. This
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indemnification shall be made within 30 days from the date the Administrative
Agent or such Lender, as the case may be, makes written demand therefor.
(c) Each of the Administrative Agent and the Lenders agrees that
if it subsequently recovers, or receives a permanent net tax benefit with
respect to, any amount of Taxes (i) previously paid by it and as to which it has
been indemnified by or on behalf of the Borrowers or (ii) previously deducted by
the Borrowers (including, without limitation, any Taxes deducted from any
additional sums payable under clause (i) of subsection (a) above), the
Administrative Agent or such Lender, as the case may be, shall reimburse the
Borrowers to the extent of the amount of any such recovery or permanent net tax
benefit (but only to the extent of indemnity payments made, or additional
amounts paid, by or on behalf of the Borrowers under this Section with respect
to the Taxes giving rise to such recovery or tax benefit); provided, however,
that the Borrowers, upon the request of the Administrative Agent or such Lender,
agree to repay to the Administrative Agent or such Lender, as the case may be,
the amount paid over to the Borrowers (together with any penalties, interest or
other charges), in the event the Administrative Agent or such Lender is required
to repay such amount to the relevant taxing authority or other Governmental
Authority. The determination by the Administrative Agent or any Lender of the
amount of any such recovery or permanent net tax benefit shall, in the absence
of manifest error, be conclusive and binding, provided that such determination
is made in good faith.
(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Administrative Agent and Matria, on or prior to the Closing Date (or, in
the case of a Non-U.S. Lender that becomes a party to this Agreement as a result
of an assignment after the Closing Date, on the effective date of such
assignment), (i) in the case of a Non-U.S. Lender that is a "bank" for purposes
of Section 881(c)(3)(A) of the Internal Revenue Code, a properly completed
Internal Revenue Service Form 4224 or 1001, as applicable (or successor forms),
certifying that such Non-U.S. Lender is entitled to an exemption from or a
reduction of withholding or deduction for or on account of United States federal
income taxes in connection with payments under this Agreement or any of the
Notes, together with a properly completed Internal Revenue Service Form W-8 or
W-9, as applicable (or successor forms), and (ii) in the case of a Non-U.S.
Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, a certificate in form and substance reasonably satisfactory to the
Administrative Agent and Matria and to the effect that (x) such Non-U.S. Lender
is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal Revenue
Code, is not subject to regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any governmental authority,
any application made to a rating agency or qualification for any exemption from
any tax, securities law or other legal requirements, (y) is not a 10-percent
shareholder for purposes of Section 881(c)(3)(B) of the Internal Revenue Code
and (z) is not a controlled foreign corporation receiving interest from a
related person for purposes of Section 881(c)(3)(C) of the Internal Revenue
Code, together with a properly completed Internal Revenue Service Form W-8 or
W-9, as applicable (or successor forms). Each such Non-U.S. Lender further
agrees to deliver to each of the Administrative Agent and Matria an additional
copy of
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each such relevant form on or before the date that such form expires or becomes
obsolete or after the occurrence of any event (including a change in its
applicable Lending Office) requiring a change in the most recent forms so
delivered by it, in each case certifying that such Non-U.S. Lender is entitled
to an exemption from or a reduction of withholding or deduction for or on
account of United States federal income taxes in connection with payments under
this Agreement or any of the Notes, unless an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required, which event renders
all such forms inapplicable or the exemption to which such forms relate
unavailable and such Non-U.S. Lender notifies the Administrative Agent and
Matria that it is not entitled to receive payments without deduction or
withholding of United States federal income taxes. Each such Non-U.S. Lender
will promptly notify the Administrative Agent and Matria of any changes in
circumstances that would modify or render invalid any claimed exemption or
reduction.
(e) If any Lender is entitled to a reduction in (and not a
complete exemption from) the applicable withholding tax, the Borrowers and the
Administrative Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If any of the forms or other documentation required under
subsection (d) above are not delivered to the Administrative Agent as therein
required, then the Borrowers and the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
2.18 Compensation. Each Borrower will compensate each Lender upon
demand for all losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by such Lender to fund or
maintain Fixed Rate Loans or by reason of the liquidation or closing out of any
foreign currency contract undertaken by such Lender to fund or maintain Fixed
Rate Loans) that such Lender may incur or sustain (i) if for any reason (other
than a default by such Lender) a Borrowing or continuation of, or conversion
into, a Fixed Rate Loan by or to such Borrower does not occur on a date
specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation, (ii) if any repayment, prepayment or conversion of any
Fixed Rate Loan by such Borrower occurs on a date other than the last day of an
Interest Period applicable thereto (including as a consequence of acceleration
of the maturity of the Loans pursuant to SECTION 9.2), (iii) if any prepayment
of any Fixed Rate Loan by such Borrower is not made on any date specified in a
notice of prepayment given by such Borrower, (iv) as a consequence of any other
failure by such Borrower to make any payments with respect to any Fixed Rate
Loan when due hereunder, or (v) as a consequence of any failure by such Borrower
to pay a Foreign Currency Revolving Loan in the applicable Foreign Currency.
Calculation of all amounts payable to a Lender under this Section shall be made
as though such Lender had actually funded its relevant Fixed Rate Loan through
the purchase in the applicable interbank market of a Eurodollar (or other
applicable Foreign Currency) deposit bearing interest at the relevant Fixed Rate
in an amount equal to the amount of such Fixed Rate Loan, having a maturity
comparable to the relevant Interest Period; provided, however, that each Lender
may fund its Fixed Rate Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the
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calculation of amounts payable under this Section. Determinations by any Lender
for purposes of this Section of any such losses, expenses or liabilities shall,
absent manifest error, be conclusive, provided that such determinations are made
in good faith.
ARTICLE III
LETTERS OF CREDIT
3.1 Issuance. Subject to and upon the terms and conditions herein
set forth, so long as no Default or Event of Default has occurred and is
continuing, the Issuing Lender will, at any time and from time to time on and
after the Closing Date and prior to the earlier of (i) the seventh day prior to
the Revolving Credit Maturity Date and (ii) the Termination Date, and upon
request by Matria in accordance with the provisions of SECTION 3.2, issue for
the account of Matria one or more irrevocable standby letters of credit
denominated in Dollars and in a form customarily used or otherwise approved by
the Issuing Lender (together with all amendments, modifications and supplements
thereto, substitutions therefor and renewals and restatements thereof,
collectively, the "Letters of Credit"). The Stated Amount of each Letter of
Credit shall not be less than such amount as may be acceptable to the Issuing
Lender. Notwithstanding the foregoing:
(a) No Letter of Credit shall be issued the Stated Amount upon
issuance of which (i) would be less than $500,000, (ii) when added to the
aggregate Letter of Credit Exposure of the Revolving Credit Lenders at such
time, would exceed $5,000,000, or (iii) when added to the sum of (x) the
aggregate Letter of Credit Exposure of all Revolving Credit Lenders at such
time, (y) the aggregate principal Dollar Amount of all Revolving Loans then
outstanding and (z) the aggregate principal amount of all Swingline Loans then
outstanding, would exceed the aggregate Revolving Credit Commitments at such
time;
(b) No Letter of Credit shall be issued that by its terms expires
later than the seventh day prior to the Revolving Credit Maturity Date or, in
any event, more than one (1) year after its date of issuance; provided, however,
that a Letter of Credit may, if requested by Matria, provide by its terms, and
on terms acceptable to the Issuing Lender, for renewal for successive periods of
one year or less (but not beyond the seventh day prior to the Revolving Credit
Maturity Date), unless and until the Issuing Lender shall have delivered a
notice of nonrenewal to the beneficiary of such Letter of Credit; and
(c) The Issuing Lender shall be under no obligation to issue any
Letter of Credit if, at the time of such proposed issuance, (i) any order,
judgment or decree of any Governmental Authority or arbitrator shall purport by
its terms to enjoin or restrain the Issuing Lender from issuing such Letter of
Credit, or any Requirement of Law applicable to the Issuing Lender or any
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Lender shall prohibit,
or request that the Issuing Lender refrain from, the issuance of letters of
credit generally or such Letter of Credit in particular or shall impose upon the
Issuing Lender with respect to such Letter of Credit any restriction or reserve
or
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capital requirement (for which the Issuing Lender is not otherwise compensated)
not in effect on the Closing Date, or any unreimbursed loss, cost or expense
that was not applicable, in effect or known to the Issuing Lender as of the
Closing Date and that the Issuing Lender in good faith deems material to it, or
(ii) the Issuing Lender shall have actual knowledge, or shall have received
notice from any Lender, prior to the issuance of such Letter of Credit that one
or more of the conditions specified in SECTIONS 4.1 (if applicable) or 4.2 are
not then satisfied (or have not been waived in writing as required herein) or
that the issuance of such Letter of Credit would violate the provisions of
subsection (a) above.
3.2 Notices. Whenever Matria desires the issuance of a Letter of
Credit, Matria will give the Issuing Lender written notice with a copy to the
Administrative Agent not later than 11:00 a.m., Charlotte time, three (3)
Business Days (or such shorter period as is acceptable to the Issuing Lender in
any given case) prior to the requested date of issuance thereof. Each such
notice (each, a "Letter of Credit Notice") shall be irrevocable, shall be given
in the form of EXHIBIT B-4 and shall specify (i) the requested date of issuance,
which shall be a Business Day, (ii) the requested Stated Amount and expiry date
of the Letter of Credit, and (iii) the name and address of the requested
beneficiary or beneficiaries of the Letter of Credit. Matria will also complete
any application procedures and documents required by the Issuing Lender in
connection with the issuance of any Letter of Credit. Upon its issuance of any
Letter of Credit, the Issuing Lender will promptly notify the Administrative
Agent of such issuance, and the Administrative Agent will give prompt notice
thereof to each Revolving Credit Lender.
3.3 Participations. Immediately upon the issuance of any Letter of
Credit, the Issuing Lender shall be deemed to have sold and transferred to each
Revolving Credit Lender, and each Revolving Credit Lender shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Lender, without recourse or warranty, an undivided interest and participation,
pro rata (based on the percentage of the aggregate Revolving Credit Commitments
represented by such Lender's Revolving Credit Commitment), in such Letter of
Credit, each drawing made thereunder and the obligations of Matria under this
Agreement with respect thereto and any Collateral or other security therefor or
guaranty pertaining thereto; provided, however, that the fee relating to Letters
of Credit described in SECTION 2.9(D) shall be payable directly to the Issuing
Lender as provided therein, and the Lenders shall have no right to receive any
portion thereof. Upon any change in the Revolving Credit Commitments of any of
the Lenders pursuant to SECTION 12.7(A), with respect to all outstanding Letters
of Credit and Reimbursement Obligations there shall be an automatic adjustment
to the participations pursuant to this Section to reflect the new pro rata
shares of the assigning Lender and the Assignee.
3.4 Reimbursement. Matria hereby agrees to reimburse the Issuing
Lender by making payment to the Administrative Agent, for the account of the
Issuing Lender, in immediately available funds, for any payment made by the
Issuing Lender under any Letter of Credit (each such amount so paid until
reimbursed, together with interest thereon payable as provided hereinbelow, a
"Reimbursement Obligation") immediately after, and in any event within one (1)
Business Day after its receipt of notice of, such payment (provided that any
such Reimbursement Obligation shall be deemed timely satisfied (but nevertheless
subject to the payment of interest thereon as provided hereinbelow) if satisfied
pursuant to a Borrowing of Revolving Loans
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(which shall be Dollar Revolving Loans) made on or prior to the next Business
Day following the date of Matria's receipt of notice of such payment), together
with interest on the amount so paid by the Issuing Lender, to the extent not
reimbursed prior to 12:00 noon, Charlotte time, on the date of such payment or
disbursement, for the period from the date of the respective payment to the date
the Reimbursement Obligation created thereby is satisfied, at the Adjusted Base
Rate as in effect from time to time during such period, such interest also to be
payable on demand. The Issuing Lender will provide the Administrative Agent and
Matria with prompt notice of any payment or disbursement made under any Letter
of Credit, although the failure to give, or any delay in giving, any such notice
shall not release, diminish or otherwise affect Matria's obligations under this
Section or any other provision of this Agreement. The Administrative Agent will
promptly pay to the Issuing Lender any such amounts received by it under this
Section.
3.5 Payment by Revolving Loans. In the event that the Issuing
Lender makes any payment under any Letter of Credit and Matria shall not have
timely satisfied in full its Reimbursement Obligation to the Issuing Lender
pursuant to SECTION 3.4, and to the extent that any amounts then held in the
Cash Collateral Account established pursuant to SECTION 3.8 shall be
insufficient to satisfy such Reimbursement Obligation in full, the Issuing
Lender will promptly notify the Administrative Agent, and the Administrative
Agent will promptly notify each Revolving Credit Lender, of such failure. If the
Administrative Agent gives such notice prior to 11:00 a.m., Charlotte time, on
any Business Day, each Revolving Credit Lender will make available to the
Administrative Agent, for the account of the Issuing Lender, its pro rata share
(based on the percentage of the aggregate Revolving Credit Commitments
represented by such Lender's Revolving Credit Commitment) of the amount of such
payment on such Business Day in immediately available funds. If the
Administrative Agent gives such notice after 11:00 a.m., Charlotte time, on any
Business Day, each such Lender shall make its pro rata share of such amount
available to the Administrative Agent on the next succeeding Business Day. If
and to the extent any Revolving Credit Lender shall not have so made its pro
rata share of the amount of such payment available to the Administrative Agent,
such Lender agrees to pay to the Administrative Agent, for the account of the
Issuing Lender, forthwith on demand such amount, together with interest thereon
at the Federal Funds Rate for each day from such date until the date such amount
is paid to the Administrative Agent. The failure of any Revolving Credit Lender
to make available to the Administrative Agent its pro rata share of any payment
under any Letter of Credit shall not relieve any other Revolving Credit Lender
of its obligation hereunder to make available to the Administrative Agent its
pro rata share of any payment under any Letter of Credit on the date required,
as specified above, but no Revolving Credit Lender shall be responsible for the
failure of any other Revolving Credit Lender to make available to the
Administrative Agent such other Lender's pro rata share of any such payment.
Each such payment by a Revolving Credit Lender under this Section of its pro
rata share of an amount paid by the Issuing Lender shall constitute a Revolving
Loan by such Revolving Credit Lender (Matria being deemed to have given a timely
Notice of Borrowing therefor) and shall be treated as such for all purposes of
this Agreement; provided that for purposes of determining the aggregate
Unutilized Revolving Credit Commitments immediately prior to giving effect to
the application of the proceeds of such Revolving Loans, the Reimbursement
Obligation being satisfied thereby shall be deemed not to be outstanding at such
time. Each Revolving Loan made
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pursuant to this Section shall be a Dollar Revolving Loan and shall be made
initially as a Base Rate Loan.
3.6 Payment to Revolving Credit Lenders. Whenever the Issuing
Lender receives a payment in respect of a Reimbursement Obligation as to which
the Administrative Agent has received, for the account of the Issuing Lender,
any payments from the Revolving Credit Lenders pursuant to SECTION 3.5, the
Issuing Lender will promptly pay to the Administrative Agent, and the
Administrative Agent will promptly pay to each Revolving Credit Lender that has
paid its pro rata share thereof, in immediately available funds, an amount equal
to such Revolving Credit Lender's ratable share (based on the proportionate
amount funded by such Lender to the aggregate amount funded by all Revolving
Credit Lenders) of such Reimbursement Obligation.
3.7 Obligations Absolute. The Reimbursement Obligations of Matria,
and the obligations of the Revolving Credit Lenders under SECTION 3.5 to make
payments to the Administrative Agent, for the account of the Issuing Lender,
with respect to Letters of Credit, shall be irrevocable, shall remain in effect
until the Issuing Lender shall have no further obligations to make any payments
or disbursements under any circumstances with respect to any Letter of Credit,
and, except to the extent resulting from any gross negligence or willful
misconduct on the part of the Issuing Lender, shall be absolute and
unconditional, shall not be subject to counterclaim, setoff or other defense or
any other qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including, without limitation, any of the following circumstances:
(a) Any lack of validity or enforceability of this Agreement, any
of the other Credit Documents or any documents or instruments relating to any
Letter of Credit;
(b) Any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations in respect of any Letter of
Credit, in each case whether or not Matria has notice or knowledge thereof;
(c) The existence of any claim, setoff, defense or other right
that Matria may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Administrative Agent, the Issuing Lender, any
Lender or other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated hereby or any unrelated transactions
(including any underlying transaction between Matria and the beneficiary named
in any such Letter of Credit);
(d) Any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect (provided that such draft, certificate or other document appears on its
face to comply with the terms of such Letter of Credit), any errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
telecopier or otherwise, or any errors in translation or in interpretation of
technical terms;
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(e) Any defense based upon the failure of any drawing under a
Letter of Credit to conform to the terms of the Letter of Credit (provided that
any draft, certificate or other document presented pursuant to such Letter of
Credit appears on its face to comply with the terms thereof), any nonapplication
or misapplication by the beneficiary or any transferee of the proceeds of such
drawing or any other act or omission of such beneficiary or transferee in
connection with such Letter of Credit;
(f) The exchange, release, surrender or impairment of any
Collateral or other security for the Obligations;
(g) The occurrence of any Default or Event of Default; or
(h) Any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Matria or a guarantor.
Any action taken or omitted to be taken by the Issuing Lender under or in
connection with any Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall be binding upon Matria and each
Lender and shall not create or result in any liability of the Issuing Lender to
Matria or any Lender. It is expressly understood and agreed that, for purposes
of determining whether a wrongful payment under a Letter of Credit resulted from
the Issuing Lender's gross negligence or willful misconduct, (i) the Issuing
Lender's good faith acceptance of documents that appear on their face to comply
with the terms of such Letter of Credit, without responsibility for further
investigation, regardless of any notice or information to the contrary, (ii) the
Issuing Lender's exclusive reliance on the documents presented to it under such
Letter of Credit as to any and all matters set forth therein, including the
amount of any draft presented under such Letter of Credit, whether or not the
amount due to the beneficiary thereunder equals the amount of such draft and
whether or not any document presented pursuant to such Letter of Credit proves
to be insufficient in any respect (so long as such document appears on its face
to comply with the terms of such Letter of Credit), and whether or not any other
statement or any other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein proves to be inaccurate
or untrue in any respect whatsoever, and (iii) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, be deemed not to constitute gross
negligence or willful misconduct of the Issuing Lender.
3.8 Cash Collateral Account. At any time and from time to time (i)
after the occurrence and during the continuance of an Event of Default, the
Administrative Agent, at the direction or with the consent of the Required
Lenders, may require Matria to deliver to the Administrative Agent such
additional amount of cash as is equal to the aggregate Stated Amount of all
Letters of Credit at any time outstanding (whether or not any beneficiary under
any Letter of Credit shall have drawn or be entitled at such time to draw
thereunder) and (ii) in the event of a prepayment under SECTION 2.6(C), or to
the extent any amount of a required prepayment under any of SECTIONS 2.6(E)
through 2.6(G) remains after prepayment of all outstanding Loans and
Reimbursement Obligations and termination of the Commitments, as contemplated by
SECTION 2.6(H), the Administrative Agent will retain such amount as may then be
required to be
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retained, such amounts in each case under clauses (i) and (ii) above to be held
by the Administrative Agent in a cash collateral account (the "Cash Collateral
Account"). Matria hereby grants to the Administrative Agent, for the benefit of
the Issuing Lender and the Revolving Credit Lenders, a Lien upon and security
interest in the Cash Collateral Account and all amounts held therein from time
to time as security for Letter of Credit Exposure, and for application to
Matria's Reimbursement Obligations as and when the same shall arise. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest on the
investment of such amounts in Cash Equivalents, which investments shall be made
at the direction of Matria (unless a Default or Event of Default shall have
occurred and be continuing, in which case the determination as to investments
shall be made at the option and in the discretion of the Administrative Agent),
amounts in the Cash Collateral Account shall not bear interest. Interest and
profits, if any, on such investments shall accumulate in such account. In the
event of a drawing, and subsequent payment by the Issuing Lender, under any
Letter of Credit at any time during which any amounts are held in the Cash
Collateral Account, the Administrative Agent will deliver to the Issuing Lender
an amount equal to the Reimbursement Obligation created as a result of such
payment (or, if the amounts so held are less than such Reimbursement Obligation,
all of such amounts) to reimburse the Issuing Lender therefor. Any amounts
remaining in the Cash Collateral Account after the expiration of all Letters of
Credit and reimbursement in full of the Issuing Lender for all of its
obligations thereunder shall be held by the Administrative Agent, for the
benefit of Matria, to be applied against the Obligations in such order and
manner as the Administrative Agent may direct. If Matria is required to provide
cash collateral pursuant to SECTION 2.6(C), such amount (to the extent not
applied as aforesaid) shall be returned to Matria on demand, provided that after
giving effect to such return (i) the sum of (x) the aggregate principal Dollar
Amount of all Revolving Loans outstanding at such time, (y) the aggregate
principal amount of all Swingline Loans outstanding at such time and (z) the
aggregate Letter of Credit Exposure of all Revolving Credit Lenders at such time
would not exceed the aggregate Revolving Credit Commitments at such time and
(ii) no Default or Event of Default shall have occurred and be continuing at
such time. If Matria is required to provide cash collateral as a result of an
Event of Default, such amount (to the extent not applied as aforesaid) shall be
returned to Matria within three (3) Business Days after all Events of Default
have been cured or waived.
3.9 Effectiveness. Notwithstanding any termination of the
Revolving Credit Commitments or repayment of the Loans, or both, the obligations
of Matria under this Article shall remain in full force and effect until the
Issuing Lender and the Lenders shall have no further obligations to make any
payments or disbursements under any circumstances with respect to any Letter of
Credit.
ARTICLE IV
CONDITIONS OF BORROWING
4.1 Conditions of Initial Borrowing. The obligation of each Lender
to make Loans in connection with the initial Borrowing hereunder, and the
obligation of the Issuing Lender to
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issue Letters of Credit hereunder on the Closing Date, is subject to the
satisfaction of the following conditions precedent:
(a) The Administrative Agent shall have received the following,
each dated as of the Closing Date (unless otherwise specified) and, except for
the Notes and any certificates or instruments required to be delivered under the
Matria Pledge Agreement, in sufficient copies for each Lender:
(i) A Term Note for each Lender that is a party hereto as
of the Closing Date, in the amount of such Lender's Term Loan
Commitment; a Dollar Revolving Credit Note for each Lender that is a
party hereto as of the Closing Date, in the amount of such Lender's
Revolving Credit Commitment; a Foreign Currency Revolving Credit Note
for each Lender that is a party hereto as of the Closing Date, in the
amount of such Lender's ratable share of the Foreign Currency Sublimit;
and a Swingline Note for the Swingline Lender, in the amount of the
Swingline Commitment, in each case duly completed in accordance with
the relevant provisions of SECTION 2.4 and executed by Matria;
(ii) the Subsidiary Guaranty, duly completed and executed
by each Subsidiary of Matria (other than Foreign Subsidiaries and
Inactive Subsidiaries), and an Intercompany Note, duly completed and
executed by each Subsidiary of Matria (other than Foreign Subsidiaries
and Inactive Subsidiaries);
(iii) the Security Agreement, duly completed and executed
by Matria and each Subsidiary of Matria (other than Foreign
Subsidiaries and Inactive Subsidiaries), and the Matria Pledge
Agreement, duly completed and executed by Matria and each Subsidiary of
Matria (other than Foreign Subsidiaries and Inactive Subsidiaries) that
owns Capital Stock of another Subsidiary other than an Inactive
Subsidiary (provided that the Capital Stock of Inactive Subsidiaries
shall not be required to be pledged), together with any certificates
evidencing the Capital Stock being pledged thereunder as of the Closing
Date and undated assignments separate from certificate for any such
certificate, duly executed in blank, and any promissory notes being
pledged thereunder, duly endorsed in blank; and
(iv) the favorable opinions of (A) Troutman Sanders LLP,
special counsel to Matria, and (B) Roberta L. McCaw, general counsel of
Matria, in each case addressed to the Administrative Agent and the
Lenders, addressing such matters as the Administrative Agent or any
Lender may reasonably request and in form and substance satisfactory to
the Administrative Agent and each Lender.
(b) The Administrative Agent shall have received a certificate,
signed by the president, the chief executive officer or the chief financial
officer of Matria, in form and substance satisfactory to the Administrative
Agent, certifying that (i) all representations and warranties of Matria
contained in this Agreement and the other Credit Documents are true and correct
as of the Closing Date, both immediately before and after giving effect to the
consummation of the Transactions, the making of the initial Loans hereunder and
the application of the proceeds thereof, (ii) no Default or Event of Default has
occurred and is continuing, both
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immediately before and after giving effect to the consummation of the
Transactions, the making of the initial Loans hereunder and the application of
the proceeds thereof, (iii) both immediately before and after giving effect to
the consummation of the Transactions, the making of the initial Loans hereunder
and the application of the proceeds thereof, no Material Adverse Change has
occurred since December 31, 1997, and there exists no event, condition or state
of facts that could reasonably be expected to result in a Material Adverse
Change, and (iv) all conditions to the initial extensions of credit hereunder
set forth in this Section and in SECTION 4.2 have been satisfied or waived as
required hereunder.
(c) The Administrative Agent shall have received a certificate of
the secretary or an assistant secretary of each of Matria and its Subsidiaries
(other than Foreign Subsidiaries and Inactive Subsidiaries), in form and
substance satisfactory to the Administrative Agent, certifying (i) that attached
thereto is a true and complete copy of the articles or certificate of
incorporation or organization and all amendments thereto of Matria or such
Subsidiary, as the case may be, certified as of a recent date by the Secretary
of State (or comparable Governmental Authority) of its jurisdiction of
organization, and that the same has not been amended since the date of such
certification, (ii) that attached thereto is a true and complete copy of the
bylaws or operating agreement of Matria or such Subsidiary, as the case may be,
as then in effect and as in effect at all times from the date on which the
resolutions referred to in clause (iii) below were adopted to and including the
date of such certificate, and (iii) that attached thereto is a true and complete
copy of resolutions adopted by the board of directors of Matria or such
Subsidiary (or the board of directors of its managing member), as the case may
be, authorizing the execution, delivery and performance of this Agreement and
the other Credit Documents to which it is a party, and as to the incumbency and
genuineness of the signature of each officer of Matria or such Subsidiary (or
its managing member), as the case may be, executing this Agreement or any of
such other Credit Documents, and attaching all such copies of the documents
described above.
(d) The Administrative Agent shall have received (i) a certificate
as of a recent date of the good standing of each of Matria and its Subsidiaries
(other than Foreign Subsidiaries and Inactive Subsidiaries) under the laws of
its jurisdiction of organization, from the Secretary of State (or comparable
Governmental Authority) of such jurisdiction, (ii) a certificate as of a recent
date of the qualification of each of Matria and its Subsidiaries (other than
Foreign Subsidiaries and Inactive Subsidiaries) to conduct business as a foreign
corporation or limited liability company in each jurisdiction where it is so
qualified as of the Closing Date, from the Secretary of State (or comparable
Governmental Authority) of such jurisdiction, and (iii) to the extent generally
provided, a tax clearance, tax good standing or similar certificate or letter as
to each of Matria and its Subsidiaries (other than Foreign Subsidiaries and
Inactive Subsidiaries), from the Department of Revenue (or comparable
Governmental Authority) in each applicable jurisdiction under (i) and (ii)
above.
(e) All aspects of the structure and documentation of the
Transactions (including the Gainor Purchase and Sale Agreement, the form of
Gainor Seller Subordinated Note, and the other Transaction Documents), all legal
matters and documentation relating to the credit facilities provided for hereby,
and all corporate or other proceedings incident to the Transactions, shall be
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received copies of the executed Transaction
Documents in such number as it shall have reasonably requested.
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(f) All approvals, permits and consents of any Governmental
Authorities or other Persons required in connection with the execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the Transactions shall have been obtained, without the
imposition of conditions that are not acceptable to the Administrative Agent,
and all related filings, if any, shall have been made, and all such approvals,
permits, consents and filings shall be in full force and effect and the
Administrative Agent shall have received such copies thereof as it shall have
requested; all applicable waiting periods shall have expired without any adverse
action being taken by any Governmental Authority having jurisdiction; and no
action, proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed before, and no order, injunction or decree
shall have been entered by, any court or other Governmental Authority, in each
case to enjoin, restrain or prohibit, to obtain substantial damages in respect
of, or that is otherwise related to or arises out of, this Agreement, any of the
other Transaction Documents or the consummation of the Transactions, or that, in
the opinion of the Administrative Agent, could reasonably be expected to have a
Material Adverse Effect.
(g) Since the date thereof, the Gainor Purchase and Sale Agreement
shall not have been amended, modified or supplemented, nor any condition or
provision thereof waived, other than as approved by the Administrative Agent and
shall be in full force and effect; Matria shall have duly complied with and
performed all of its agreements and conditions set forth in the Gainor Purchase
and Sale Agreement required to be complied with or performed by it on or prior
to the closing date thereunder; the Administrative Agent shall have received
evidence satisfactory to it that, concurrently with the making of the initial
Loans hereunder, the Gainor Acquisition shall be consummated in accordance with
the terms of the Gainor Purchase and Sale Agreement and in compliance with all
applicable Requirements of Law; and the Administrative Agent shall have received
a letter from Nelson Mullins Riley & Scarborough L.L.P., counsel to Gainor,
addressed to the Administrative Agent and the Lenders and in sufficient copies
for each Lender, to the effect that the Administrative Agent and the Lenders are
entitled to rely on their opinion delivered to Matria in connection with the
Gainor Purchase and Sale Agreement as if such opinion were addressed to them and
attaching a copy thereof.
(h) All transaction fees and expenses payable by or on behalf of
Matria in connection with the Transactions shall be in an aggregate amount
acceptable to the Administrative Agent, and the Administrative Agent shall have
received such evidence thereof in form and substance satisfactory to it as it
shall have reasonably requested.
(i) The Administrative Agent shall have received certified reports
from an independent search service satisfactory to it listing any judgment or
tax lien filing or Uniform Commercial Code financing statement that (i) names
Matria as debtor in any of the jurisdictions listed beneath its name on Annex A
to the Security Agreement or (ii) names any Subsidiary Guarantor as debtor in
any of the jurisdictions listed beneath its name on Annex A to the Security
Agreement, and the results thereof shall be satisfactory to the Administrative
Agent.
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(j) The Administrative Agent shall have received evidence in form
and substance satisfactory to it that all filings, recordings, registrations and
other actions (including, without limitation, the filing of duly completed and
executed UCC-1 financing statements in each jurisdiction listed on Annex A to
the Security Agreement) necessary or, in the reasonable opinion of the
Administrative Agent, desirable to perfect the Liens created by the Security
Documents shall have been completed, or arrangements satisfactory to the
Administrative Agent for the completion thereof shall have been made.
(k) Since December 31, 1997, both immediately before and after
giving effect to the consummation of the transactions contemplated by this
Agreement, there shall not have occurred any Material Adverse Change or any
event, condition or state of facts that could reasonably be expected to result
in a Material Adverse Change.
(l) Matria shall have paid (i) to the Arranger, the unpaid balance
of the fee described in paragraph (1) of the Fee Letter, (ii) to the
Administrative Agent, the initial payment of the annual administrative fee
described in paragraph (2) of the Fee Letter, and (iii) all other fees and
expenses of the Administrative Agent and the Lenders required hereunder or under
any other Credit Document to be paid on or prior to the Closing Date (including
fees and expenses of counsel) in connection with this Agreement and the
transactions contemplated hereby.
(m) The Administrative Agent shall have received a Financial
Condition Certificate, together with the Pro Forma Balance Sheet and the
Projections as described in SECTIONS 5.11(C) and 5.11(D), all of which shall be
in form and substance satisfactory to the Administrative Agent.
(n) The Administrative Agent shall have received a Covenant
Compliance Worksheet, duly completed and certified by the chief financial
officer of Matria and in form and substance satisfactory to the Administrative
Agent, demonstrating Matria's compliance with the financial covenants set forth
in SECTIONS 7.1 through 7.5, determined on a pro forma basis as of December 31,
1998 after giving effect to the making of the initial Loans hereunder and the
consummation of the Transactions.
(o) The Administrative Agent shall have received evidence in form
and substance reasonably satisfactory to it that all of the requirements of
SECTION 6.6 and those provisions of the Security Agreement relating to the
maintenance of insurance have been satisfied, including receipt of certificates
of insurance evidencing the insurance coverages described on SCHEDULE 5.17 and
all other or additional coverages required under the Security Agreement and
naming the Administrative Agent as loss payee or additional insured, as its
interests may appear.
(p) The Administrative Agent shall have received evidence
satisfactory to it that (i) concurrently with the making of the initial Loans
hereunder, (x) all principal, interest and other amounts outstanding with
respect to any Indebtedness of Matria or any Subsidiary (including under
Matria's Loan and Security Agreement with BankAmerica Business Credit, Inc.
dated as of September 15, 1997, as amended, and under Gainor's Loan and Security
Agreement with LaSalle National Bank and certain other banks, dated as of
January 28, 1998, as amended) not expressly permitted under SECTION 8.2 to
remain outstanding on and after the Closing Date or
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otherwise to be terminated (the "Terminating Indebtedness") shall be repaid and
satisfied in full, (y) all commitments to extend credit under the agreements and
instruments relating thereto shall be terminated, and (z) any Liens securing any
Terminating Indebtedness shall be released and any related filings terminated of
record (or arrangements satisfactory to the Administrative Agent made therefor),
and (ii) any letters of credit outstanding with respect to the Terminating
Indebtedness shall have been terminated or canceled.
(q) Matria shall have executed and delivered to the Administrative
Agent a letter agreement covering certain matters relating to the primary
syndication of the facilities provided for hereby, in form and substance
satisfactory to the Administrative Agent.
(r) There shall not have occurred any material disruption or
material adverse change in, or other condition with respect to, the United
States financial and capital markets that could reasonably be expected to have a
material adverse effect on the syndication of the credit facilities provided for
hereunder, and there shall be no competing issues of debt securities or
commercial bank or other credit facilities of Matria or any Subsidiary being
offered, placed or arranged.
(s) The Administrative Agent shall have received from Matria its
consolidated operating budget for the fiscal year ending December 31, 1999, and
the same shall be in form and substance satisfactory to the Administrative
Agent.
(t) The Administrative Agent shall have received an Account
Designation Letter, together with written instructions from an Authorized
Officer, including wire transfer information, directing the payment of the
proceeds of the initial Loans to be made hereunder.
(u) The Administrative Agent and each Lender shall have received
such other documents, certificates, opinions and instruments in connection with
the Transactions as it shall have reasonably requested.
4.2 Conditions of All Borrowings. The obligation of each Lender to
make any Loans hereunder, including the initial Loans (but excluding Revolving
Loans made for the purpose of repaying Refunded Swingline Loans pursuant to
SECTION 2.2(E)), and the obligation of the Issuing Lender to issue any Letters
of Credit hereunder, is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date or date of issuance:
(a) The Administrative Agent shall have received a Notice of
Borrowing in accordance with SECTION 2.2(B), or (together with the Swingline
Lender) a Notice of Swingline Borrowing in accordance with SECTION 2.2(D), or
(together with the Issuing Lender) a Letter of Credit Notice in accordance with
SECTION 3.2, as applicable;
(b) Each of the representations and warranties contained in
ARTICLE V and in the other Credit Documents shall be true and correct on and as
of such Borrowing Date (including the Closing Date, in the case of the initial
Loans made hereunder) or date of issuance with the same effect as if made on and
as of such date, both immediately before and after giving effect to the Loans to
be made or Letter of Credit to be issued on such date (except to the extent any
such
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representation or warranty is expressly stated to have been made as of a
specific date, in which case such representation or warranty shall be true and
correct in all material respects as of such date); and
(c) No Default or Event of Default shall have occurred and be
continuing on such date, both immediately before and after giving effect to the
Loans to be made or Letter of Credit to be issued on such date.
Each giving of a Notice of Borrowing, a Notice of Swingline Borrowing
or a Letter of Credit Notice, and the consummation of each Borrowing or issuance
of a Letter of Credit, shall be deemed to constitute a representation by Matria
(and each other applicable Borrower) that the statements contained in
subsections (b) and (c) above are true, both as of the date of such notice or
request and as of the relevant Borrowing Date or date of issuance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to induce the Lenders to extend the credit contemplated hereby,
each of the Borrowers represents and warrants to the Administrative Agent and
the Lenders, both before and after giving effect to the Transactions, as
follows:
5.1 Organization and Power. Each of Matria and its Subsidiaries
(i) is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has the full corporate or limited liability company power and
authority to execute, deliver and perform the Transaction Documents to which it
is or will be a party, to own and hold its property and to engage in its
business as presently conducted, and (iii) is duly qualified to do business as a
foreign corporation or limited liability company and is in good standing in each
jurisdiction where the nature of its business or the ownership of its properties
requires it to be so qualified, except where the failure to be so qualified
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.
5.2 Authorization; Enforceability. Each of Matria and its
Subsidiaries has taken, or on the Closing Date will have taken, all necessary
corporate or limited liability company action to execute, deliver and perform
each of the Transaction Documents to which it is or will be a party, and has, or
on the Closing Date (or any later date of execution and delivery) will have,
validly executed and delivered each of the Transaction Documents to which it is
or will be a party. This Agreement constitutes, and each of the other
Transaction Documents upon execution and delivery will constitute, the legal,
valid and binding obligation of each of Matria and its Subsidiaries that is a
party hereto or thereto, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, by general equitable principles or by principles of good faith and
fair dealing.
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5.3 No Violation. The execution, delivery and performance by each
of Matria and its Subsidiaries of this Agreement and each of the other
Transaction Documents to which it is or will be a party, and compliance by it
with the terms hereof and thereof, do not and will not (i) violate any provision
of its articles or certificate of incorporation or organization, bylaws or
operating agreement or contravene any other Requirement of Law applicable to it,
(ii) conflict with, result in a breach of or constitute (with notice, lapse of
time or both) a default under any indenture, agreement or other instrument to
which it is a party, by which it or any of its properties is bound or to which
it is subject, (iii) result in a Limitation on any Licenses applicable to the
business, operations or properties of Matria or any of its Subsidiaries or
adversely affect the ability of Matria or any of its Subsidiaries to participate
in any Third Party Payor Arrangement, or (iv) except for the Liens granted in
favor of the Administrative Agent pursuant to the Security Documents, result in
or require the creation or imposition of any Lien upon any of its properties or
assets. No Subsidiary is a party to any agreement or instrument or otherwise
subject to any restriction or encumbrance that restricts or limits its ability
to make dividend payments or other distributions in respect of its Capital
Stock, to repay Indebtedness owed to Matria or any other Subsidiary, to make
loans or advances to Matria or any other Subsidiary, or to transfer any of its
assets or properties to Matria or any other Subsidiary, in each case other than
such restrictions or encumbrances existing under or by reason of the Credit
Documents or applicable Requirements of Law.
5.4 Governmental and Third-Party Authorization; Permits. (a) No
consent, approval, authorization or other action by, notice to, or registration
or filing with, any Governmental Authority or other Person is or will be
required as a condition to or otherwise in connection with the due execution,
delivery and performance by each of Matria and its Subsidiaries of this
Agreement or any of the other Transaction Documents to which it is or will be a
party or the legality, validity or enforceability hereof or thereof, other than
(i) filings of Uniform Commercial Code financing statements and other
instruments and actions necessary to perfect the Liens created by the Security
Documents, (ii) consents, authorizations and filings that have been (or on or
prior to the Closing Date will have been) made or obtained and that are (or on
the Closing Date will be) in full force and effect, which consents,
authorizations and filings are listed on SCHEDULE 5.4, and (iii) consents and
filings the failure to obtain or make which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Each of Matria and its Subsidiaries (i) has, and is in good
standing with respect to, all governmental approvals, permits and other Licenses
and (to the extent applicable) all Reimbursement Approvals necessary to conduct
its business as presently conducted and to own or lease and operate its
properties, (ii) has obtained and maintains accreditation from all generally
recognized accrediting agencies to the extent prudent and customary in the
industry in which it is engaged or to the extent required under applicable
Requirements of Law, and (iii) if and to the extent required, has obtained and
maintains Medicaid and Medicare certifications and has entered into and
maintains in good standing its Medicare and Medicaid provider agreements, except
in each instance under clauses (i) through (iii), for those the failure to
obtain which would not be reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect. There is no pending or, to the knowledge of
Matria, threatened Limitation of any such approval, permit or
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other License or Reimbursement Approval of Matria or any Subsidiary, except for
such Limitations as would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
5.5 Litigation. There are no actions, investigations, suits or
proceedings pending or, to the knowledge of Matria, threatened, at law, in
equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting Matria, any of its Subsidiaries or any of
their respective properties that would, if adversely determined, be reasonably
likely to have a Material Adverse Effect, or (ii) with respect to this
Agreement, any of the other Transaction Documents or any of the Transactions.
5.6 Taxes. Each of Matria and its Subsidiaries has timely filed
all federal, state and local tax returns and reports required to be filed by it
and has paid all taxes, assessments, fees and other charges levied upon it or
upon its properties that are shown thereon as due and payable, other than those
that are being contested in good faith and by proper proceedings and for which
adequate reserves have been established in accordance with GAAP. Such returns
accurately reflect in all material respects all liability for taxes of Matria
and its Subsidiaries for the periods covered thereby. There is no ongoing audit
or examination or, to the knowledge of Matria, other investigation by any
Governmental Authority of the tax liability of Matria or any of its
Subsidiaries, and there is no unresolved claim by any Governmental Authority
concerning the tax liability of Matria or any of its Subsidiaries for any period
for which tax returns have been or were required to have been filed, other than
claims for which adequate reserves have been established in accordance with
GAAP. Neither Matria nor any of its Subsidiaries has waived or extended or has
been requested to waive or extend the statute of limitations relating to the
payment of any taxes.
5.7 Subsidiaries. SCHEDULE 5.7 sets forth a list, as of the
Closing Date and after giving effect to the Transactions, of all of the
Subsidiaries of Matria and, as to each such Subsidiary, the percentage ownership
(direct and indirect) of Matria in each class of its capital stock and each
direct owner thereof, and separately identifies each such Subsidiary that is an
Inactive Subsidiary. Except for the shares of capital stock expressly indicated
on SCHEDULE 5.7, there are no shares of capital stock, warrants, rights, options
or other equity securities, or other Capital Stock of any Subsidiary of Matria
outstanding or reserved for any purpose. All outstanding shares of capital stock
of each Subsidiary of Matria are duly and validly issued, fully paid and
nonassessable. Except as set forth on SCHEDULE 5.7, as of the Closing Date and
after giving effect to the Transactions, neither Matria nor any Subsidiary is
engaged in any joint venture, partnership or similar arrangement with any other
Person. As of the Closing Date and after giving effect to the Transactions, the
aggregate face amount of all accounts receivable owned by Inactive Subsidiaries
does not exceed $500,000.
5.8 Full Disclosure. All factual information heretofore or
contemporaneously furnished to the Administrative Agent or any Lender in writing
by or on behalf of Matria or any of its Subsidiaries for purposes of or in
connection with this Agreement and the transactions contemplated hereby and the
other Transactions is, and all other such factual information hereafter
furnished to the Administrative Agent or any Lender in writing by or on behalf
of
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Matria or any of its Subsidiaries will be, true and accurate in all material
respects on the date as of which such information is dated or certified (or, if
such information has been amended or supplemented, on the date as of which any
such amendment or supplement is dated or certified) and not made incomplete by
omitting to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which such information was
provided, not misleading.
5.9 Margin Regulations. Neither Matria nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock. No
proceeds of the Loans will be used, directly or indirectly, to purchase or carry
any Margin Stock, to extend credit for such purpose or for any other purpose
that would violate or be inconsistent with Regulations T, U or X or any
provision of the Exchange Act.
5.10 No Material Adverse Change. There has been no Material Adverse
Change since December 31, 1997, and there exists no event, condition or state of
facts that could reasonably be expected to result in a Material Adverse Change.
5.11 Financial Matters. (a) Matria has heretofore furnished to the
Administrative Agent copies of (i) the audited consolidated balance sheets of
Matria and its Subsidiaries as of December 31, 1997 and 1996, and the related
statements of income, cash flows and stockholders' equity for the fiscal years
then ended and for the fiscal year ended December 31, 1995, together with the
opinion of KPMG Peat Marwick LLP thereon, and (ii) the unaudited consolidated
balance sheet of Matria and its Subsidiaries as of November 30, 1998, and the
related statements of income, cash flows and stockholders' equity for the
eleven-month period then ended. Such financial statements have been prepared in
accordance with GAAP (subject, with respect to the unaudited financial
statements, to the absence of notes required by GAAP and to normal year-end
adjustments) and present fairly the financial condition of Matria and its
Subsidiaries on a consolidated basis as of the respective dates thereof and the
consolidated results of operations of Matria and its Subsidiaries for the
respective periods then ended. Except as fully reflected in the most recent
financial statements referred to above and the notes thereto, there are no
material liabilities or obligations with respect to Matria or any of its
Subsidiaries of any nature whatsoever (whether absolute, contingent or otherwise
and whether or not due).
(b) Matria has heretofore furnished to the Administrative Agent
copies of (i) the audited consolidated balance sheet of Gainor and its
Subsidiaries as of December 31, 1997, and the related statements of income and
cash flows for the fiscal year then ended, together with the opinion of Arthur
Andersen LLP thereon, (ii) the audited consolidated balance sheet of Universal
and its Subsidiaries as of June 30, 1997, and the related statements of income
and cash flows for the fiscal year then ended, together with the opinion of
Feldman Radin & Co. thereon, and (iii) the unaudited consolidated balance sheet
of Gainor and its Subsidiaries as of November 30, 1998, and the related
statements of income and cash flows for the eleven-month period then ended. To
the knowledge of Matria, such financial statements have been prepared in
accordance with GAAP (subject, with respect to the unaudited financial
statements, to the absence of notes required by GAAP and to normal year-end
adjustments) and present fairly the financial condition
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of Gainor (or Universal, as the case may be) and its Subsidiaries on a
consolidated basis as of the respective dates thereof and the consolidated
results of operations of Gainor (or Universal, as the case may be) and its
Subsidiaries for the respective periods then ended. To the knowledge of Matria,
except as fully reflected in the most recent financial statements referred to
above and the notes thereto, there are no material liabilities or obligations
with respect to Gainor or any of its Subsidiaries of any nature whatsoever
(whether absolute, contingent or otherwise and whether or not due).
(c) The unaudited pro forma balance sheet of Matria as of January
1, 1999, a copy of which has heretofore been delivered to the Administrative
Agent, gives pro forma effect to the consummation of the Gainor Acquisition, the
issuance of the Series A Preferred Stock and the Series B Preferred Stock, the
consummation of the transactions contemplated by this Agreement and the initial
extensions of credit hereunder, the payment of transaction fees and expenses
related to the foregoing, and the consummation of the other Transactions, all as
if such events had occurred on such date (the "Pro Forma Balance Sheet"). The
Pro Forma Balance Sheet has been prepared in accordance with GAAP (subject to
the absence of footnotes required by GAAP and subject to normal year-end
adjustments) and, subject to stated assumptions made in good faith and having a
reasonable basis set forth therein, presents fairly the financial condition of
Matria on an unaudited pro forma basis as of the date set forth therein after
giving effect to the consummation of the transactions described above.
(d) Matria has prepared, and has heretofore furnished to the
Administrative Agent a copy of, annual projected balance sheets and statements
of income and cash flows of Matria for the period ending December 31, 2003,
giving effect to the consummation of the Gainor Acquisition, the issuance of the
Series A Preferred Stock and the Series B Preferred Stock, the consummation of
the transactions contemplated by this Agreement and the initial extensions of
credit hereunder, the payment of transaction fees and expenses related to the
foregoing, and the consummation of the other Transactions (the "Projections").
In the opinion of management of Matria, the assumptions used in the preparation
of the Projections were fair, complete and reasonable when made and continue to
be fair, complete and reasonable as of the date hereof. The Projections have
been prepared in good faith by the executive and financial personnel of Matria,
are complete and represent a reasonable estimate of the future performance and
financial condition of Matria, subject to the uncertainties and approximations
inherent in any projections.
(e) Each of Matria and its Subsidiaries, after giving effect to
the consummation of the Transactions, (i) has capital sufficient to carry on its
businesses as conducted and as proposed to be conducted, (ii) has assets with a
fair saleable value, determined on a going concern basis, (y) not less than the
amount required to pay the probable liability on its existing debts as they
become absolute and matured and (z) greater than the total amount of its
liabilities (including identified contingent liabilities, valued at the amount
that can reasonably be expected to become absolute and matured), and (iii) does
not intend to, and does not believe that it will, incur debts or liabilities
beyond its ability to pay such debts and liabilities as they mature.
5.12 Ownership of Properties. Each of Matria and its Subsidiaries
(i) has good and marketable title to all real property owned by it, if any, (ii)
holds interests as lessee under valid
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leases in full force and effect with respect to all material leased real and
personal property used in connection with its business, (iii) possesses or has
rights to use licenses, patents, copyrights, trademarks, service marks, trade
names and other assets sufficient to enable it to continue to conduct its
business substantially as heretofore conducted and without any material conflict
with the rights of others, and (iv) after giving effect to the Transactions, has
good title to all of its other properties and assets reflected in the most
recent financial statements referred to in SECTIONS 5.11(A) and 5.11(B) (except
as sold or otherwise disposed of since the date thereof in the ordinary course
of business), in each case under (i), (ii), (iii) and (iv) above free and clear
of all Liens other than Permitted Liens. SCHEDULE 5.12 lists, as of the Closing
Date and after giving effect to the Transactions, all real property interests of
Matria and its Subsidiaries, indicating in each case the identity of the owner,
the address of the property, the nature of use of the premises, and whether such
interest is a leasehold or fee ownership interest (and, if a leasehold interest,
whether Matria or such Subsidiary, as the case may be, is a lessee, sublessee or
assignee thereunder).
5.13 ERISA. (a) Each of Matria and its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of ERISA, and
each Plan is and has been administered in compliance in all material respects
with all applicable Requirements of Law, including, without limitation, the
applicable provisions of ERISA and the Internal Revenue Code. No ERISA Event (i)
has occurred within the five-year period prior to the Closing Date, (ii) has
occurred and is continuing, or (iii) to the knowledge of Matria, is reasonably
expected to occur with respect to any Plan. No Plan has any Unfunded Pension
Liability as of the most recent annual valuation date applicable thereto, and
neither Matria nor any ERISA Affiliate has engaged in a transaction that could
be subject to Section 4069 or 4212(c) of ERISA.
(b) Neither Matria nor any ERISA Affiliate has had a complete or
partial withdrawal from any Multiemployer Plan, and neither Matria nor any ERISA
Affiliate would become subject to any liability under ERISA if Matria or any
ERISA Affiliate were to withdraw completely from all Multiemployer Plans as of
the most recent valuation date. No Multiemployer Plan is in "reorganization" or
is "insolvent" within the meaning of such terms under ERISA.
5.14 Environmental Matters. (a) No Hazardous Substances are or have
been generated, used, located, released, treated, disposed of or stored by
Matria or any of its Subsidiaries or, to the knowledge of Matria, by any other
Person (including any predecessor in interest) or otherwise, in, on or under any
portion of any real property, leased or owned, of Matria or any of its
Subsidiaries, except for immaterial amounts used in the ordinary course of
business and except in material compliance with all applicable Environmental
Laws; to the knowledge of Matria, no portion of any such real property or any
other real property at any time leased, owned or operated by Matria or any of
its Subsidiaries has been contaminated by any Hazardous Substance; and to the
knowledge of Matria, no portion of any real property, leased or owned, of Matria
or any of its Subsidiaries has been or is presently the subject of any remedial
action under any Environmental Law.
(b) To the knowledge of Matria, (i) No portion of any real
property, leased or owned, of Matria or any of its Subsidiaries has been used by
Matria or any of its Subsidiaries or by any
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other Person as or for a mine, a landfill, a dump or other unpermitted disposal
facility, a gasoline service station, or (other than for petroleum substances
stored in the ordinary course of business) a petroleum products storage
facility; no portion of such real property or any other real property at any
time leased, owned or operated by Matria or any of its Subsidiaries has,
pursuant to any Environmental Law, been placed on the "National Priorities List"
or "CERCLIS List" (or any similar federal, state or local list) of sites subject
to possible response action; and there are not and have never been any
underground storage tanks situated on any real property, leased or owned, of
Matria or any of its Subsidiaries.
(c) All activities and operations of Matria and its Subsidiaries
are in compliance with the requirements of all applicable Environmental Laws,
except to the extent the failure so to comply, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect. Each of Matria
and its Subsidiaries has obtained all licenses and permits under Environmental
Laws necessary to its respective operations; all such licenses and permits are
being maintained in good standing; and each of Matria and its Subsidiaries is in
compliance with all terms and conditions of such licenses and permits, except
for such licenses and permits the failure to obtain, maintain or comply with
which would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect. Neither Matria nor any of its Subsidiaries is
involved in any suit, action or proceeding, or has received any notice,
complaint or other request for information from any Governmental Authority or
other Person, with respect to any actual or alleged Environmental Claims that,
if adversely determined, would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect; and, to the knowledge of Matria,
there are no threatened actions, suits, proceedings or investigations with
respect to any such Environmental Claims, nor any reasonable basis therefor.
5.15 Compliance With Laws. Each of Matria and its Subsidiaries has
timely filed all material reports, documents and other materials required to be
filed by it under all applicable Requirements of Law with any Governmental
Authority, has retained all material records and documents required to be
retained by it under all applicable Requirements of Law, and is otherwise in
compliance with all applicable Requirements of Law in respect of the conduct of
its business and the ownership and operation of its properties (including,
without limitation, all applicable Medicare and Medicaid statutes, rules and
regulations and all related administrative, reimbursement and other guidelines
having the force of law), except for such Requirements of Law the failure to
comply with which, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect.
5.16 Regulated Industries. Neither Matria nor any of its
Subsidiaries is (i) an "investment company," a company "controlled" by an
"investment company," or an "investment advisor," within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company," a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
5.17 Insurance. SCHEDULE 5.17 sets forth a true and complete
summary of all insurance policies or arrangements carried or maintained by
Matria and its Subsidiaries as of the Closing
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Date and after giving effect to the Transactions, indicating in each case the
insurer, policy number, expiration, amount and type of coverage and deductibles.
The assets, properties and business of Matria and its Subsidiaries are insured
against such hazards and liabilities, under such coverages and in such amounts,
as are customarily maintained by prudent companies similarly situated and under
policies issued by insurers of recognized responsibility.
5.18 Material Contracts. SCHEDULE 5.18 lists, as of the Closing
Date and after giving effect to the Transactions, each "material contract"
(within the meaning of Item 601(b)(10) of Regulation S-K under the Exchange Act)
to which Matria or any of its Subsidiaries is a party, by which any of them or
their respective properties is bound or to which any of them is subject
(collectively, "Material Contracts"), and also indicates the parties and dates
thereof. As of the Closing Date, (i) each Material Contract is in full force and
effect and is enforceable by Matria or the Subsidiary that is a party thereto in
accordance with its terms, and (ii) neither Matria nor any of its Subsidiaries
(nor, to the knowledge of Matria, any other party thereto) is in breach of or
default under any Material Contract in any material respect or has given notice
of termination or cancellation of any Material Contract. SCHEDULE 5.18 also
indicates, as of the Closing Date and after giving effect to the Transactions,
each Material Contract under which the consent of any party thereto is required
in order for all of the rights and interests of Matria or any Subsidiary
thereunder to be included among the Collateral pledged to the Administrative
Agent, for its benefit and the benefit of the Lenders, pursuant to the Security
Agreement without violation of the terms of such Material Contract.
5.19 Security Documents. (a) The provisions of each of the Security
Documents other than the Mortgages (whether executed and delivered prior to or
on the Closing Date or thereafter) are and will be effective to create in favor
of the Administrative Agent, for its benefit and the benefit of the Lenders, a
valid and enforceable security interest in and Lien upon all right, title and
interest of each of Matria and its Subsidiaries that is a party thereto in and
to the Collateral purported to be pledged by it thereunder and described
therein, and upon (i) the initial extension of credit hereunder, (ii) the filing
of appropriately completed Uniform Commercial Code financing statements and
continuations thereof in the jurisdictions specified therein, (iii) the filing
of appropriately completed short-form assignments in the U.S. Patent and
Trademark Office and the U.S. Copyright Office, and (iv) the possession by the
Administrative Agent of any certificates evidencing the securities pledged
thereby, such security interest and Lien shall constitute a fully perfected and
first priority security interest in and Lien upon such right, title and interest
of Matria or such Subsidiary, as applicable, in and to such Collateral, to the
extent that such security interest and Lien can be perfected by such filings,
actions and possession, subject only to Permitted Liens.
(b) The provisions of each Mortgage (whether executed and
delivered prior to or on the Closing Date or thereafter) are and will be
effective to create in favor of the Administrative Agent, for its benefit and
the benefit of the Lenders, a valid and enforceable security interest in and
Lien upon all right, title and interest of each of Matria and its Subsidiaries
that is a party thereto in and to the Mortgaged Premises described therein, and
upon (i) the initial extension of credit hereunder and (ii) the filing of such
Mortgage in the applicable real property recording office, such security
interest and Lien shall constitute a fully perfected and first priority security
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interest in and Lien upon such right, title and interest of Matria or such
Subsidiary, as applicable, in and to such Mortgaged Premises, in each case prior
and superior to the rights of any other Person and subject only to Permitted
Liens.
5.20 Labor Relations. Neither Matria nor any of its Subsidiaries is
engaged in any unfair labor practice within the meaning of the National Labor
Relations Act of 1947, as amended. There is (i) no unfair labor practice
complaint before the National Labor Relations Board, or grievance or arbitration
proceeding arising out of or under any collective bargaining agreement, pending
or, to the knowledge of Matria, threatened, against Matria or any of its
Subsidiaries, (ii) no strike, lock-out, slowdown, stoppage, walkout or other
labor dispute pending or, to the knowledge of Matria, threatened, against Matria
or any of its Subsidiaries, and (iii) to the knowledge of Matria, no petition
for certification or union election or union organizing activities taking place
with respect to Matria or any of its Subsidiaries.
5.21 Year 2000 Compatibility. Any reprogramming required to permit
the proper functioning, before, on and after January 1, 2000, of (i) Matria's
and its Subsidiaries' computer-based systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which Matria's or any of its Subsidiaries' systems interface), and the testing
of all such systems and equipment, as so reprogrammed, will be completed by June
30, 1999. The cost to Matria and its Subsidiaries of such reprogramming and
testing and of the reasonably foreseeable consequences of the year 2000 to
Matria and its Subsidiaries (including, without limitation, reprogramming errors
and the failure of others' systems or equipment) will not result in a Default or
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of Matria and its Subsidiaries are and, with ordinary course upgrading
and maintenance will continue for the term of this Agreement to be, sufficient
to permit Matria and its Subsidiaries to conduct their respective businesses
without a Material Adverse Effect.
5.22 Reimbursement. The accounts receivable of Matria and each
Subsidiary have been properly adjusted in all material respects to reflect the
reimbursement policies under all applicable Requirements of Law (including,
without limitation, all applicable Medicare and Medicaid statutes, rules and
regulations and all related administrative, reimbursement and other guidelines)
and other Third Party Payor Arrangements to which Matria or such Subsidiary is
subject, and do not exceed in any material respect amounts Matria or such
Subsidiary is entitled to receive under any capitation arrangement, fee
schedule, discount formula, cost-based reimbursement or other adjustment or
limitation to usual charges. All billings by Matria and each Subsidiary pursuant
to Third Party Payor Arrangements have been made in compliance with all
applicable Requirements of Law, except where the failure to comply would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; and there has been no intentional or material overbilling or
overcollection pursuant to any Third Party Payor Arrangements, other than as
created by routine adjustments and disallowances made in the ordinary course of
business by the payors with respect to such billings.
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5.23 Fraud and Abuse. Neither Matria nor any Subsidiary, nor any
physician shareholder or employee thereof or of any physician practice managed
by Matria or any of its Subsidiaries, has engaged in any activities that are
prohibited under 42 U.S.C. ss.ss. 1320a-7b, or the regulations promulgated
thereunder, or related Requirements of Law, or that are prohibited by rules of
professional conduct, including, without limitation, the following: (i)
knowingly and willfully making or causing to be made a false statement or
misrepresentation of a material fact in any application for any benefit or
payment; (ii) knowingly and willfully making or causing to be made any false
statement or misrepresentation of a material fact for use in determining rights
to any benefit or payment; (iii) failure to disclose knowledge by a claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with intent to
secure such benefit or payment fraudulently; and (iv) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (y) in return for referring an
individual to a Person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare,
Medicaid or any other government or private third party payor, or (z) in return
for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare, Medicaid or any other
government or private third party payor.
5.24 Certain Transaction Documents. Matria has heretofore furnished
to the Administrative Agent true and complete copies of the Gainor Purchase and
Sale Agreement together with all schedules and exhibits referred to therein or
delivered pursuant thereto and all amendments, modifications and waivers
relating thereto. On the Closing Date and immediately prior to giving effect to
the consummation of the Transactions, (i) none of such Transaction Documents
shall have been amended, modified or supplemented, nor any condition or
provision thereof waived, other than as approved by the Administrative Agent,
and each such Transaction Document is in full force and effect and neither
Matria nor any of its Subsidiaries (nor, to the knowledge of Matria, any other
party thereto) is in default thereunder or in breach thereof, (ii) all
conditions to the obligations of Matria and its Subsidiaries under each of such
Transaction Documents to consummate the transactions contemplated thereby shall
have been satisfied, and (iii) the Transactions will be consummated in
accordance with the terms of such Transaction Documents and in compliance with
all applicable Requirements of Law. All representations and warranties of Matria
and its Subsidiaries and, to the knowledge of Matria, all representations and
warranties of Gainor, contained in each of such Transaction Documents were true
and correct in all material respects on and as of the date made and will be true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of the Closing Date, except as contemplated by the
terms of such Transaction Documents.
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ARTICLE VI
AFFIRMATIVE COVENANTS
Matria covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
6.1 Financial Statements. Matria will deliver to each Lender:
(a) As soon as available and in any event within fifty (50) days
after the end of each of the first three fiscal quarters of each fiscal year,
beginning with the fiscal quarter ending March 31, 1999, unaudited consolidated
and consolidating balance sheets of Matria and its Subsidiaries as of the end of
such fiscal quarter and unaudited consolidated and consolidating statements of
income and cash flows (reported by business segment) and stockholders' equity
for Matria and its Subsidiaries for the fiscal quarter then ended and for that
portion of the fiscal year then ended, in each case setting forth comparative
consolidated (or consolidating) figures as of the end of and for the
corresponding period in the preceding fiscal year, all in reasonable detail and
prepared in accordance with GAAP (subject to the absence of notes required by
GAAP and subject to normal year-end adjustments) applied on a basis consistent
with that of the preceding quarter or containing disclosure of the effect on the
financial condition or results of operations of any change in the application of
accounting principles and practices during such quarter; and
(b) As soon as available and in any event within 105 days after
the end of each fiscal year, beginning with the fiscal year ending December 31,
1998, (i) an audited consolidated balance sheet of Matria and its Subsidiaries
as of the end of such fiscal year and audited consolidated statements of income,
cash flows and stockholders' equity for Matria and its Subsidiaries for the
fiscal year then ended, including the notes thereto, in each case setting forth
comparative figures as of the end of and for the preceding fiscal year, all in
reasonable detail and certified by the independent certified public accounting
firm regularly retained by Matria or another independent certified public
accounting firm of recognized national standing reasonably acceptable to the
Required Lenders, together with (y) a report thereon by such accountants that is
not qualified as to going concern or scope of audit and to the effect that such
financial statements present fairly the consolidated financial condition and
results of operations of Matria and its Subsidiaries as of the dates and for the
periods indicated in accordance with GAAP applied on a basis consistent with
that of the preceding year or containing disclosure of the effect on the
financial condition or results of operations of any change in the application of
accounting principles and practices during such year, and (z) a report by such
accountants to the effect that, based on and in connection with their
examination of the financial statements of Matria and its Subsidiaries, they
obtained no knowledge of the occurrence or existence of any Default or Event of
Default relating to accounting or financial reporting matters, or a statement
specifying the nature and period of existence of any such Default or Event of
Default disclosed by their audit; provided, however, that such accountants shall
not be liable by reason of the failure to obtain knowledge of any Default or
Event of Default that would not be disclosed or revealed in the
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course of their audit examination, and (ii) an unaudited consolidating balance
sheet of Matria and its Subsidiaries as of the end of such fiscal year and
unaudited consolidating statements of income and cash flows (reported by
business segment) and stockholders' equity for Matria and its Subsidiaries for
the fiscal year then ended, all in reasonable detail.
6.2 Other Business and Financial Information. Matria will deliver
to each Lender:
(a) Concurrently with each delivery of the financial statements
described in SECTION 6.1, a Compliance Certificate with respect to the period
covered by the financial statements then being delivered, executed by a
Financial Officer of Matria, together with a Covenant Compliance Worksheet
reflecting the computation of the financial covenants set forth in SECTIONS 7.1
through 7.5 as of the last day of the period covered by such financial
statements;
(b) As soon as available and in any event prior to January 31 of
each fiscal year, beginning January 31, 2000, a consolidated operating budget
for Matria and its Subsidiaries for such fiscal year (prepared on a quarterly
basis), consisting of a consolidated balance sheet, consolidated statements of
income and cash flows, and consolidating statements of income and cash flows
reported by business segment, and containing analysis of projected compliance
with the financial covenants set forth in ARTICLE VII, together with a
certificate of a Financial Officer of Matria to the effect that such budgets
have been prepared in good faith and are reasonable estimates of the financial
position and results of operations of Matria and its Subsidiaries for the period
covered thereby; and as soon as available from time to time thereafter, any
modifications or revisions to or restatements of such budget;
(c) Promptly upon receipt thereof, copies of any "management
letter" submitted to Matria or any of its Subsidiaries by its certified public
accountants in connection with each annual, interim or special audit, and
promptly upon completion thereof, any response reports from Matria or any such
Subsidiary in respect thereof;
(d) Promptly upon the sending, filing or receipt thereof, copies
of (i) all financial statements, reports, notices and proxy statements that
Matria or any of its Subsidiaries shall send or make available generally to its
shareholders, (ii) all regular, periodic and special reports, registration
statements and prospectuses (other than on Form S-8) that Matria or any of its
Subsidiaries shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities exchange, and (iii) all press releases and other statements made
available generally by Matria or any of its Subsidiaries to the public
concerning material developments in the business of Matria or any of its
Subsidiaries;
(e) Promptly upon (and in any event within five (5) Business Days
after) any Responsible Officer of Matria or any of its Subsidiaries obtaining
knowledge thereof, written notice of any of the following:
(i) the occurrence of any Default or Event of Default,
together with a written statement of a Responsible Officer of Matria or
such Subsidiary specifying the nature of
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such Default or Event of Default, the period of existence thereof and
the action that Matria has taken and proposes to take with respect
thereto;
(ii) the institution or threatened institution of any
action, suit, investigation or proceeding against or affecting Matria
or any of its Subsidiaries, including any such investigation or
proceeding by any Governmental Authority (other than routine periodic
inquiries, investigations or reviews), that would, if adversely
determined, be reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect, and any material development in any
litigation or other proceeding previously reported pursuant to SECTION
5.5 or this subsection;
(iii) the receipt by Matria or any of its Subsidiaries from
any Governmental Authority or other Person of (y) any notice asserting
any failure by Matria or any of its Subsidiaries to be in compliance
with applicable Requirements of Law or that threatens the taking of any
action against such Person or sets forth circumstances that, if taken
or adversely determined, would be reasonably likely to have a Material
Adverse Effect, or (z) any notice of any actual or threatened
Limitation with respect to any License or Reimbursement Approval of
Matria or any of its Subsidiaries, where such action would be
reasonably likely to have a Material Adverse Effect;
(iv) the occurrence of any ERISA Event, together with (x)
a written statement of a Responsible Officer of Matria or such
Subsidiary specifying the details of such ERISA Event and the action
that Matria or such Subsidiary has taken and proposes to take with
respect thereto, (y) a copy of any notice with respect to such ERISA
Event that may be required to be filed with the PBGC and (z) a copy of
any notice delivered by the PBGC to Matria or such ERISA Affiliate with
respect to such ERISA Event;
(v) the occurrence of any material default under, or any
proposed or threatened termination or cancellation of, any Material
Contract or other material contract or agreement to which Matria or any
of its Subsidiaries is a party, the termination or cancellation of
which would be reasonably likely to have a Material Adverse Effect;
(vi) the occurrence of any of the following: (x) the
assertion of any Environmental Claim against or affecting Matria, any
of its Subsidiaries or any of their respective real property, leased or
owned; (y) the receipt by Matria or any of its Subsidiaries of notice
of any alleged violation of or noncompliance with any Environmental
Laws; or (z) the taking of any remedial action by Matria, any of its
Subsidiaries or any other Person in response to the actual or alleged
generation, storage, release, disposal or discharge of any Hazardous
Substances on, to, upon or from any real property leased or owned by
Matria or any of its Subsidiaries; but in each case under clauses (x),
(y) and (z) above, only to the extent the same would be reasonably
likely to have a Material Adverse Effect; and
(vii) any other matter or event that has, or would be
reasonably likely to have, a Material Adverse Effect, together with a
written statement of a Responsible Officer of
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Matria or such Subsidiary setting forth the nature and period of
existence thereof and the action that Matria or such Subsidiary has
taken and proposes to take with respect thereto;
(f) Promptly upon the acquisition thereof, written notice of the
acquisition by the Borrower or such Subsidiary, as the case may be, of any fee
or leasehold interest in any real property; and
(g) As promptly as reasonably possible, such other information
about the business, condition (financial or otherwise), operations or properties
of Matria or any of its Subsidiaries (including any Plan and any information
required to be filed under ERISA) as the Administrative Agent or any Lender may
from time to time reasonably request.
6.3 Corporate Existence; Franchises; Maintenance of Properties.
Matria will, and will cause each of its Subsidiaries to, (i) maintain and
preserve in full force and effect its corporate existence, except as expressly
permitted otherwise by SECTION 8.1, (ii) obtain, maintain and preserve in full
force and effect all other rights, franchises, licenses, permits,
certifications, approvals, authorizations and other Licenses, and all
Reimbursement Approvals, required by Governmental Authorities and necessary to
the ownership, occupation or use of its properties or the conduct of its
business, except to the extent the failure to do so would not be reasonably
likely to have a Material Adverse Effect, and (iii) keep all material properties
in good working order and condition (normal wear and tear excepted) and from
time to time make all necessary repairs to and renewals and replacements of such
properties, except to the extent that any of such properties are obsolete or are
being replaced.
6.4 Compliance with Laws. Matria will, and will cause each of its
Subsidiaries to, comply in all respects with all Requirements of Law applicable
in respect of the conduct of its business and the ownership and operation of its
properties (including, without limitation, all applicable Medicare and Medicaid
statutes, rules and regulations and all related administrative, reimbursement
and other guidelines having the force of law), except to the extent the failure
so to comply would not be reasonably likely to have a Material Adverse Effect.
6.5 Payment of Obligations. Matria will, and will cause each of
its Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so would not be reasonably likely to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
Matria or any of its Subsidiaries; provided, however, that neither Matria nor
any of its Subsidiaries shall be required to pay any such tax, assessment,
charge, levy or claim that is being contested in good faith and by proper
proceedings and as to which Matria or such Subsidiary is maintaining adequate
reserves with respect thereto in accordance with GAAP.
6.6 Insurance. Matria will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance with respect to its assets,
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properties and business, against such hazards and liabilities, of such types and
in such amounts, as is customarily maintained by companies in the same or
similar businesses similarly situated, and maintain such other or additional
insurance on such terms and subject to such conditions as may be required under
any Security Document.
6.7 Maintenance of Books and Records; Inspection. Matria will, and
will cause each of its Subsidiaries to, (i) maintain adequate books, accounts
and records, in which full, true and correct entries shall be made of all
financial transactions in relation to its business and properties, and prepare
all financial statements required under this Agreement, in each case in
accordance with GAAP and in compliance with the requirements of any Governmental
Authority having jurisdiction over it, and (ii) permit employees or agents of
the Administrative Agent or any Lender to inspect its properties and examine or
audit its books, records, working papers and accounts and make copies and
memoranda of them, and to discuss its affairs, finances and accounts with its
officers and employees and, upon notice to Matria, the independent public
accountants of Matria and its Subsidiaries (and by this provision Matria
authorizes such accountants to discuss the finances and affairs of Matria and
its Subsidiaries), all at such times and from time to time, upon reasonable
notice and during business hours, as may be reasonably requested.
6.8 Interest Rate Protection. At April 30, 1999, Matria shall have
entered into or obtained, and Matria will thereafter maintain in full force and
effect, Hedge Agreements in form and substance reasonably satisfactory to the
Administrative Agent the effect of which shall be to fix or limit interest rates
payable by Matria and its Subsidiaries as to such portion of the Term Loans, for
such period, and on such other terms, as shall be mutually agreeable to Matria
and the Administrative Agent. Matria will deliver to the Administrative Agent,
promptly upon receipt thereof, copies of such Hedge Agreements (and any
supplements or amendments thereto), and promptly upon request therefor, any
other information reasonably requested by the Administrative Agent to evidence
its compliance with the provisions of this Section.
6.9 Permitted Acquisitions. (a) Subject to the provisions of
subsection (b) below and the requirements contained in the definition of
Permitted Acquisition, and subject to the other terms and conditions of this
Agreement, Matria may from time to time on or after the Closing Date effect
Permitted Acquisitions, provided that, with respect to each Permitted
Acquisition:
(i) no Default or Event of Default shall have occurred
and be continuing at the time of the consummation of such Permitted
Acquisition or would exist immediately after giving effect thereto; and
(ii) to the extent paid or payable in cash, the
Acquisition Amount with respect thereto (y) shall be less than
$10,000,000, and (z) together with the aggregate of the Acquisition
Amounts (to the extent paid or payable in cash) for all other Permitted
Acquisitions consummated during the same fiscal year, shall not exceed
$20,000,000; and
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(iii) regardless of the form of consideration, the
Acquisition Amount with respect thereto (y) shall be less than
$15,000,000, and (z) together with the aggregate of the Acquisition
Amounts (regardless of the form of consideration) for all other
Permitted Acquisitions consummated during the same fiscal year, shall
not exceed $30,000,000.
(b) Within forty-five (45) days after the end of each fiscal
quarter, Matria will deliver to the Administrative Agent and each Lender, with
respect to each Permitted Acquisition during such fiscal quarter the Acquisition
Amount in respect of which is less than $2,000,000, the items described in
clauses (i) and (ii) of subsection (c) below.
(c) Not less than ten (10) Business Days prior to the consummation
of any proposed Acquisition with respect to which the Acquisition Amount equals
or exceeds $2,000,000, Matria shall have delivered to the Administrative Agent
and each Lender a request that such Acquisition be approved as a Permitted
Acquisition and, in support of such request (at a minimum, and without
limitation of any other materials or information that may be reasonably
requested by the Administrative Agent or any Lender), the following:
(i) a reasonably detailed description of the material
terms of such Acquisition (including, without limitation, the purchase
price and method and structure of payment) and of each Person or
business that is the subject of such Acquisition (each, a "Target"),
including any materials presented to Matria's board of directors or any
committee thereof;
(ii) historical financial statements of the Target (or, if
there are two or more Targets that are the subject of such Acquisition
and that are part of the same consolidated group, consolidated
historical financial statements for all such Targets) for the two (2)
most recent fiscal years available and, if available, for any interim
periods since the most recent fiscal year-end;
(iii) consolidated projected income statements of Matria
and its Subsidiaries (giving effect to such Acquisition and the
consolidation with Matria of each relevant Target) for the five-year
period following the consummation of such Acquisition, in reasonable
detail, together with any appropriate statement of assumptions and pro
forma adjustments; and
(iv) a certificate, in form and substance reasonably
satisfactory to the Administrative Agent, executed by a Financial
Officer of Matria setting forth the Acquisition Amount and further to
the effect that, to the best of such individual's knowledge, (x) the
consummation of such Acquisition will not result in a violation of any
provision of this Section, and after giving effect to such Acquisition
and any Borrowings made in connection therewith, Matria will be in
compliance with the financial covenants contained in SECTIONS 7.1
through 7.5, such compliance determined with regard to calculations
made on a pro forma basis in accordance with GAAP as if each Target had
been consolidated with Matria for those periods applicable to such
covenants (such calculations to be attached to the certificate), (y)
Matria believes in good faith that it will
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continue to comply with such financial covenants for a period of one
year following the date of the consummation of such Acquisition, and
(z) after giving effect to such Acquisition and any Borrowings in
connection therewith, Matria believes in good faith that it will have
sufficient availability under the Commitments to meet its ongoing
working capital requirements.
(d) As soon as reasonably practicable after the consummation of
any Permitted Acquisition, Matria will deliver to the Administrative Agent and
each Lender a copy of the fully executed acquisition agreement (including
schedules and exhibits thereto) and other material documents and closing papers
delivered in connection therewith.
(e) The consummation of each Permitted Acquisition shall be deemed
to be a representation and warranty by Matria that (except as shall have been
approved in writing by the Required Lenders) all conditions thereto set forth in
this Section and in the description furnished under clause (i) of subsection (c)
above (if applicable) have been satisfied, that the same is permitted in
accordance with the terms of this Agreement, and that the matters certified to
by the Financial Officer of Matria in the certificate referred to in clause (iv)
of subsection (c) above (if applicable) are, to the best of such individual's
knowledge, true and correct in all material respects as of the date such
certificate is given, which representation and warranty shall be deemed to be a
representation and warranty as of the date thereof for all purposes hereunder,
including, without limitation, for purposes of SECTIONS 4.2 and 9.1.
6.10 Creation or Acquisition of Subsidiaries. Subject to the
provisions of SECTION 8.5, Matria may from time to time create or acquire new
Wholly Owned Subsidiaries in connection with Permitted Acquisitions or otherwise
as permitted under SECTION 8.5, and the Wholly Owned Subsidiaries of Matria may
create or acquire new Wholly Owned Subsidiaries, provided that:
(a) Concurrently with (and in any event within ten (10) Business
Days thereafter) the creation or direct or indirect acquisition by Matria of any
new Domestic Subsidiary, (i) Matria will cause such Domestic Subsidiary to
execute and deliver to the Administrative Agent (y) a joinder to the Subsidiary
Guaranty, pursuant to which such new Domestic Subsidiary shall become a party
thereto and shall guarantee the payment in full of the Obligations of Matria
under this Agreement and the other Credit Documents, and (z) a joinder to the
Security Agreement, pursuant to which such new Domestic Subsidiary shall become
a party thereto and shall grant to the Administrative Agent a first priority
Lien upon and security interest in its accounts receivable, inventory,
equipment, general intangibles and other personal property as Collateral for its
obligations under the Subsidiary Guaranty, subject only to Permitted Liens, and
(iii) Matria and/or any applicable Subsidiary will execute and deliver to the
Administrative Agent a Pledge Agreement or an amendment or supplement to the
Matria Pledge Agreement pursuant to which all of the Capital Stock of such new
Domestic Subsidiary shall be pledged to the Administrative Agent, together with
the certificates evidencing such Capital Stock and undated stock powers duly
executed in blank;
(b) Concurrently with (and in any event within ten (10) Business
Days thereafter) the creation or direct or indirect acquisition by Matria of any
new Foreign Subsidiary, (i) Matria will
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cause such Foreign Subsidiary to execute and deliver to the Administrative Agent
a joinder to the Subsidiary Guaranty or a separate guaranty agreement in form
and substance satisfactory to the Administrative Agent, pursuant to which such
new Foreign Subsidiary shall guarantee the payment in full of the Obligations of
Matria under this Agreement and the other Credit Documents, (ii) Matria will
cause such Foreign Subsidiary to execute and deliver to the Administrative Agent
a joinder to the Security Agreement or a separate security agreement in form and
substance satisfactory to the Administrative Agent, pursuant to which such new
Foreign Subsidiary shall grant to the Administrative Agent a first priority Lien
upon and security interest in its accounts receivable, inventory, equipment,
general intangibles and other personal property as Collateral for its
obligations under the Subsidiary Guaranty or such other guaranty agreement,
subject only to Permitted Liens, and (iii) Matria and/or any applicable
Subsidiary will execute and deliver to the Administrative Agent a Pledge
Agreement or an amendment or supplement to the Matria Pledge Agreement pursuant
to which all of the Capital Stock of such new Foreign Subsidiary shall be
pledged to the Administrative Agent, together with the certificates evidencing
such Capital Stock and undated stock powers duly executed in blank (or such
other documents, instruments and other evidence as the Administrative Agent
shall require in order to perfect its security interest (or the equivalent
thereof under applicable law of the relevant foreign jurisdiction) in such
Capital Stock); provided that such Foreign Subsidiary shall not be required to
guarantee the Obligations or grant a Lien upon and security interest in its
assets, and no more than 65% of the Capital Stock of such Foreign Subsidiary
shall be required to be pledged to the Administrative Agent, if such guarantee
or Lien, or the pledge of more than 65% of such Capital Stock, would, in the
good faith judgment of Matria, result in materially adverse tax consequences to
Matria or would be unlawful for such Foreign Subsidiary; and
(c) As promptly as reasonably possible, Matria and its
Subsidiaries will deliver any such other documents, certificates and opinions
(including opinions of local counsel in the jurisdiction of organization of each
such new Subsidiary, including any new Foreign Subsidiary), in form and
substance reasonably satisfactory to the Administrative Agent, as the
Administrative Agent may reasonably request in connection therewith and will
take such other action as the Administrative Agent may reasonably request to
create in favor of the Administrative Agent a perfected security interest in the
Collateral being pledged pursuant to the documents described above. Nothing
contained in this Section, however, shall be deemed to permit the creation or
acquisition by Matria, directly or indirectly, of any Subsidiary not expressly
permitted under SECTION 8.5.
6.11 Year 2000 Compatibility. Matria will, and will cause each of
its Subsidiaries to, take all action necessary to ensure that its computer-based
systems are able to operate and effectively process data including dates on and
after January 1, 2000. At the request of the Administrative Agent or the
Required Lenders, Matria will provide reasonable assurance of its Year 2000
compatibility.
6.12 Additional Security; Further Assurances. (a) Matria will, and
will cause each of its Subsidiaries to, grant to the Administrative Agent from
time to time security interests and Liens in and upon such of its interests in
real property as may be requested from time to time by the Administrative Agent
or the Required Lenders, pursuant to Mortgages in form and substance
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satisfactory to the Administrative Agent and in a manner so that such security
interests and Liens shall constitute valid and perfected security interests and
Liens, subject to no Liens other than Permitted Liens. Without limitation of the
foregoing, in connection with the grant of any Mortgage with respect to any fee
or leasehold interest in real property, Matria will, and will cause each
applicable Subsidiary to, at Matria's expense, prepare, obtain and deliver to
the Administrative Agent any environmental assessments, appraisals, surveys,
certifications, title insurance and other matters or documents as the
Administrative Agent may request or as may be required under applicable banking
laws and regulations, all in form and substance satisfactory to the
Administrative Agent.
(b) Matria will, and will cause each of its Subsidiaries to, make,
execute, endorse, acknowledge and deliver any amendments, modifications or
supplements hereto and restatements hereof and any other agreements, instruments
or documents, and take any and all such other actions, as may from time to time
be reasonably requested by the Administrative Agent or the Required Lenders to
perfect and maintain the validity and priority of the Liens granted pursuant to
the Security Documents and to effect, confirm or further assure or protect and
preserve the interests, rights and remedies of the Administrative Agent and the
Lenders under this Agreement and the other Credit Documents.
ARTICLE VII
FINANCIAL COVENANTS
Matria covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
7.1 Leverage Ratio. The Borrower will not permit the Leverage
Ratio as of the last day of any fiscal quarter during the periods set forth
below, beginning with the fiscal quarter ending March 31, 1999, to be greater
than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Maximum
Date Leverage Ratio
---- --------------
<S> <C>
Closing Date through
March 31, 2000 3.5 : 1.0
April 1, 2000 through
December 31, 2000 3.25 : 1.0
Thereafter 3.0 : 1.0
</TABLE>
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7.2 Senior Leverage Ratio. The Borrower will not permit the Senior
Leverage Ratio as of the last day of any fiscal quarter during the periods set
forth below, beginning with the fiscal quarter ending March 31, 1999, to be
greater than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Maximum Senior
Date Leverage Ratio
---- --------------
<S> <C>
Closing Date through
March 31, 2000 3.5 : 1.0
April 1, 2000 through
December 31, 2000 2.75 : 1.0
Thereafter 2.5 : 1.0
</TABLE>
7.3 Fixed Charge Coverage Ratio. The Borrower will not permit the
Fixed Charge Coverage Ratio as of the last day of any fiscal quarter during the
periods set forth below, beginning with the fiscal quarter ending March 31,
1999, to be less than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Minimum Fixed Charge
Date Coverage Ratio
---- --------------
<S> <C>
Closing Date through
December 31, 1999 1.25 : 1.0
January 1, 2000 through
December 31, 2000 1.35 : 1.0
January 1, 2001 through
December 31, 2001 1.4 : 1.0
January 1, 2002 through
December 31, 2002 1.45 : 1.0
Thereafter 1.5 : 1.0
</TABLE>
7.4 Consolidated Net Worth. Matria will not permit Consolidated
Net Worth as of the last day of any fiscal quarter, beginning with the fiscal
quarter ending March 31, 1999, to be less than the sum of (i) $85,000,000, plus
(ii) 75% of the aggregate of Consolidated Net Income for each fiscal quarter
ending after March 31, 1999 (provided that Consolidated Net Income for any such
fiscal quarter shall be taken into account for purposes of this calculation only
if positive), plus (iii) 100% of the aggregate amount of all increases in the
stated capital and additional paid-in capital accounts of Matria and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
resulting from the issuance of equity securities
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(including pursuant to the exercise of options, rights or warrants or pursuant
to the conversion of convertible securities) or other Capital Stock after March
31, 1999, minus (iv) the aggregate of all cash dividends paid on the Series A
Preferred Stock and the Series B Preferred Stock from and after the Closing
Date, minus (v) the aggregate of all other dividends, purchases, redemptions,
repurchases, acquisitions and other distributions of or with respect to the
Capital Stock of Matria and its Subsidiaries made after March 31, 1999.
7.5 Capital Expenditures. Matria will not permit Capital Expenditures
during any period of four consecutive fiscal quarters (a "Reference Period")
ending on the last day of any fiscal quarter during the periods set forth below,
beginning with the period ending March 31, 1999, to be greater than the sum of
(i) the amount set forth below opposite such period plus (ii) fifty percent
(50%) of the excess, if any, of the amount set forth below applicable to the
immediately preceding Reference Period (without giving effect to any carryover
from any prior Reference Period) over the actual amount of Capital Expenditures
for such immediately preceding Reference Period:
<TABLE>
<CAPTION>
Maximum Amount of Capital
Period Expenditures
------ ------------
<S> <C>
Closing Date through
December 31, 1999 $10,500,000
January 1, 2000 through
December 31, 2000 $11,500,000
January 1, 2001 through
December 31, 2001 $12,500,000
Thereafter 3% of Consolidated Net
Revenues for such
Reference Period
</TABLE>
ARTICLE VIII
NEGATIVE COVENANTS
Matria covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
8.1 Merger; Consolidation. Matria will not, and will not permit or
cause any of its Subsidiaries to, liquidate, wind up or dissolve, or enter into
any consolidation, merger or other combination, or agree to do any of the
foregoing; provided, however, that:
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(i) Matria may merge or consolidate with another Person,
provided that (x) Matria is the surviving entity, (y) unless such other
Person is a Wholly Owned Subsidiary immediately prior to giving effect
thereto, such merger or consolidation shall constitute a Permitted
Acquisition and the applicable conditions and requirements of SECTIONS
6.9 and 6.10 shall be satisfied, and (z) no Default or Event of Default
shall have occurred and be continuing or would result therefrom;
(ii) any Wholly Owned Subsidiary may merge or consolidate
with Matria (provided that Matria is the surviving entity) or with any
Subsidiary Guarantor (provided that a Subsidiary Guarantor is the
surviving entity), and in each case provided further that no Default or
Event of Default shall have occurred and be continuing or would result
therefrom;
(iii) any Wholly Owned Subsidiary that is a Domestic
Subsidiary may merge or consolidate with another Person not a
Subsidiary immediately prior to giving effect thereto, provided that
(x) the surviving entity shall be a Wholly Owned Subsidiary that is a
Domestic Subsidiary and a Subsidiary Guarantor, (y) such merger or
consolidation shall constitute a Permitted Acquisition and the
applicable conditions and requirements of SECTIONS 6.9 and 6.10 shall
be satisfied, and (z) no Default or Event of Default shall have
occurred and be continuing or would result therefrom;
(iv) any Wholly Owned Subsidiary that is a Foreign
Subsidiary may merge or consolidate with any other Wholly Owned
Subsidiary that is a Foreign Subsidiary, provided that if either
constituent corporation is a Borrower or a Subsidiary Guarantor, the
surviving entity shall be a Borrower or a Subsidiary Guarantor, as the
case may be, and provided further that no Default or Event of Default
shall have occurred and be continuing or would result therefrom;
(v) Matria may merge with a direct Wholly Owned
Subsidiary of a newly created holding company, which holding company
("Holdings") is a direct Wholly Owned Subsidiary of Matria, in a
transaction permitted by Section 251(g) of the Delaware General
Corporation Law, provided that (u) Matria shall have given the
Administrative Agent not less than sixty (60) days' prior written
notice of such merger, (v) Matria shall be the surviving entity, (w)
such transaction shall comply in all respects with the requirements of
Section 251(g) of the Delaware General Corporation Law, (x) no Default
or Event of Default shall have occurred and be continuing or would
result therefrom, (y) Holdings shall have executed and delivered to the
Administrative Agent (1) a guaranty agreement, pursuant to which
Holdings shall guarantee the payment in full of the Obligations of
Matria and the other Borrowers under this Agreement and the other
Credit Documents, (2) a security agreement (or a joinder to the
Security Agreement), pursuant to which Holdings shall grant to the
Administrative Agent a first priority Lien upon and security interest
in its personal property as Collateral for its obligations under such
guaranty, subject only to Permitted Liens, and (3) a pledge agreement,
pursuant to which Holdings shall pledge to the Administrative Agent all
of the Capital Stock of
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Matria owned by it, together with the certificates evidencing such
Capital Stock and undated stock powers duly executed in blank, and
Holdings and Matria shall have delivered any such other documents,
certificates and opinions (including opinions of counsel) as the
Administrative Agent shall have reasonably requested in connection
therewith, all of which shall be in form and substance reasonably
satisfactory to the Administrative Agent, and (z) this Agreement shall
have been amended or amended and restated to the extent deemed
necessary or appropriate, in the reasonable opinion of the
Administrative Agent and the Required Lenders, to reflect the creation
of Holdings and to add Holdings as a party hereto (which amendments
shall include, without limitation, the inclusion of Holdings under the
representations, covenants, events of default and other provisions of
ARTICLES V through IX); and
(vi) any Inactive Subsidiary may merge or consolidate with
any other Inactive Subsidiary or dissolve and thereafter liquidate and
wind up its affairs, in each case so long as no Default or Event of
Default would result therefrom and, in the case of dissolution, so long
as its assets, if any, are distributed only to Matria or a Subsidiary
Guarantor.
8.2 Indebtedness. Matria will not, and will not permit or cause
any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness incurred under this Agreement, the Notes
and the Subsidiary Guaranty;
(ii) Indebtedness existing on the Closing Date and
described in SCHEDULE 8.2, provided that the principal amount thereof
as shown on such schedule shall not be increased;
(iii) accrued expenses (including salaries, accrued
vacation and other compensation), current trade or other accounts
payable and other current liabilities arising in the ordinary course of
business and not incurred through the borrowing of money, provided that
the same shall be paid when due except to the extent being contested in
good faith and by appropriate proceedings;
(iv) loans and advances by any Borrower or Subsidiary
Guarantor to any other Borrower or Subsidiary Guarantor, provided that
(y) any such loan or advance is subordinated in right and time of
payment to the Obligations and is evidenced by an Intercompany Note, or
other promissory note in form and substance satisfactory to the
Administrative Agent, pledged to the Administrative Agent pursuant to a
Pledge Agreement, and (z) no such loan or advance shall be made to any
Borrower or Subsidiary that is the subject of a proceeding of the type
described in SECTION 9.1(F) or 9.1(G);
(v) unsecured Indebtedness of Matria issued pursuant to
an effective registration statement under the Securities Act of 1933,
as amended, or Rule 144A thereunder or in a private placement exempt
from registration thereunder, which
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Indebtedness is expressly subordinated and made junior in right and
time of payment to the Obligations and is evidenced by one or more
written indentures, agreements or instruments having terms, conditions
and provisions (including, without limitation, terms and provisions
relating to principal amount, maturity, covenants, defaults, interest,
and subordination) satisfactory in form and substance to the Required
Lenders in their sole but reasonable discretion and which shall
provide, at a minimum and without limitation, that such Indebtedness
(a) shall mature by its terms no earlier than the second anniversary of
the Term Loan Maturity Date, (b) shall not require any scheduled
payment of principal prior to the first anniversary of the Term Loan
Maturity Date, and (c) shall have covenants and undertakings that,
taken as a whole, are materially less restrictive than those contained
herein; provided that, as further conditions to the issuance of any
such Indebtedness, (1) no Default or Event of Default shall have
occurred and be continuing or would result from the issuance of such
Indebtedness, (2) all indentures, agreements and instruments evidencing
or governing such Indebtedness shall have been approved in writing by
the Required Lenders (or the Administrative Agent on their behalf), and
(3) prior to or concurrently with the issuance of such Indebtedness,
Matria shall have delivered to each Lender a certificate, signed by a
Financial Officer of Matria, satisfactory in form and substance to the
Required Lenders and to the effect that, after giving effect to the
incurrence of such Indebtedness, Matria is in compliance with the
financial covenants set forth in SECTIONS 7.1 through 7.5, such
compliance being determined with regard to calculations made on a pro
forma basis in accordance with GAAP as of the last day of the fiscal
quarter then most recently ended and as if such Indebtedness had been
incurred on the first day of the period applicable to such covenants
(such calculations to be attached to such certificate); and provided
further that the Net Cash Proceeds from the issuance of such
Indebtedness shall be applied to prepay the Loans in accordance with,
and to the extent required under, the provisions of SECTION 2.6(E);
(vi) unsecured Indebtedness issued after the Closing Date
by Matria or any of its Subsidiaries to sellers in connection with
Permitted Acquisitions, including Indebtedness consisting of Contingent
Purchase Price Obligations, in an aggregate principal amount not
exceeding $10,000,000 outstanding at any time, provided that such
Indebtedness (A) shall not mature or require any scheduled payment of
principal at any time prior to the first anniversary of the Term Loan
Maturity Date, (B) is fully subordinated in right and time of payment
to the Obligations on terms and conditions acceptable to the
Administrative Agent, and (C) is otherwise on terms and conditions
acceptable to, and in a form approved in writing by, the Administrative
Agent (the Indebtedness described in this clause (vi), "Seller
Subordinated Indebtedness");
(vii) Indebtedness of Matria (y) under the Gainor Seller
Subordinated Note and (z) in respect of earnout obligations in favor of
Quality Diagnostic Systems, Inc. in an amount not exceeding $6,250,000;
(viii) Indebtedness of Matria under Hedge Agreements
required pursuant to, and entered into in accordance with, SECTION 6.8;
and
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(ix) purchase money Indebtedness of Matria and its
Subsidiaries incurred solely to finance the payment of all or part of
the purchase price of any equipment, real property or other fixed
assets acquired in the ordinary course of business, including
Indebtedness in respect of capital lease obligations, and any renewals,
refinancings or replacements thereof (subject to the limitations on the
principal amount thereof set forth in this clause (ix)), and other
Indebtedness of Matria and its Subsidiaries that is unsecured,
including Guaranty Obligations (other than Indebtedness specified in
clauses (i) through (viii) above), which purchase money indebtedness
and other unsecured indebtedness shall not exceed $5,000,000 in
aggregate principal amount outstanding at any time.
8.3 Liens. Matria will not, and will not permit or cause any of
its Subsidiaries to, directly or indirectly, make, create, incur, assume or
suffer to exist, any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice statute, or agree to do any of the foregoing, other than the following
(collectively, "Permitted Liens"):
(i) Liens created under the Security Documents;
(ii) Liens in existence on the Closing Date and set forth
on SCHEDULE 8.3;
(iii) Liens imposed by law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar
Liens incurred in the ordinary course of business for sums not
constituting borrowed money that are not overdue for a period of more
than sixty (60) days or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(iv) Liens (other than any Lien imposed by ERISA, the
creation or incurrence of which would result in an Event of Default
under SECTION 9.1(J)) incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure the
performance of letters of credit, bids, tenders, statutory obligations,
surety and appeal bonds, leases, government contracts and other similar
obligations (other than obligations for borrowed money) entered into in
the ordinary course of business;
(v) Liens for taxes, assessments or other governmental
charges or statutory obligations that are not delinquent or remain
payable without any penalty or that are being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
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(vi) Liens securing the purchase money Indebtedness
permitted under clause (ix) of SECTION 8.2, provided that any such Lien
(a) shall attach to such property concurrently with or within ten (10)
days after the acquisition thereof by Matria or such Subsidiary, (b)
shall not exceed the lesser of (y) the fair market value of such
property or (z) the cost thereof to Matria or such Subsidiary and (c)
shall not encumber any other property of Matria or any of its
Subsidiaries;
(vii) any attachment or judgment Lien not constituting an
Event of Default under SECTION 9.1(H) that is being contested in good
faith by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP (if so required);
(viii) Liens arising from the filing, for notice purposes
only, of financing statements in respect of true leases; and
(ix) with respect to any real property occupied by Matria
or any of its Subsidiaries, all easements, rights of way, licenses and
similar encumbrances on title that do not materially impair the use of
such property for its intended purposes.
8.4 Disposition of Assets. Matria will not, and will not permit or
cause any of its Subsidiaries to, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or properties (including, without limitation,
any Capital Stock of any Subsidiary), or enter into any arrangement with any
Person providing for the lease by Matria or any Subsidiary as lessee of any
asset that has been sold or transferred by Matria or such Subsidiary to such
Person, or agree to do any of the foregoing, except for:
(i) sales of inventory in the ordinary course of
business;
(ii) the sale or exchange of used or obsolete equipment to
the extent (y) the proceeds of such sale are applied towards, or such
equipment is exchanged for, replacement equipment or (z) such equipment
is no longer necessary for the operations of Matria or its applicable
Subsidiary in the ordinary course of business;
(iii) the sale, lease or other disposition of assets by any
Subsidiary to Matria or to a Subsidiary Guarantor so long as no Default
or Event of Default shall have occurred and be continuing or would
result therefrom; and
(iv) sales or other dispositions of assets to the extent
the aggregate amount of consideration received by Matria and its
Subsidiaries in connection therewith does not exceed $250,000 for all
such sales and dispositions during any fiscal year.
8.5 Investments. Matria will not, and will not permit or cause any
of its Subsidiaries to, directly or indirectly, purchase, own, invest in or
otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other
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Person, or make or permit to exist any loans, advances or extensions of credit
to, or any investment in cash or by delivery of property in, any other Person,
or purchase or otherwise acquire (whether in one or a series of related
transactions) any portion of the assets, business or properties of another
Person (including pursuant to an Acquisition), or create or acquire any
Subsidiary, or become a partner or joint venturer in any partnership or joint
venture (collectively, "Investments"), or make a commitment or otherwise agree
to do any of the foregoing, other than:
(i) Investments in Cash Equivalents;
(ii) Investments consisting of purchases and acquisitions
of inventory, supplies, materials and equipment in the ordinary course
of business,
(iii) Investments consisting of loans and advances to
employees for reasonable travel, relocation and business expenses in
the ordinary course of business, extensions of trade credit in the
ordinary course of business, and prepaid expenses incurred in the
ordinary course of business;
(iv) without duplication, Investments consisting of
intercompany Indebtedness permitted under clause (iv) of SECTION 8.2;
(v) Investments in (x) Domestic Subsidiaries existing as
of the date hereof, which Domestic Subsidiaries are Subsidiary
Guarantors, (y) Foreign Subsidiaries existing as of the date hereof,
and (z) partnerships and joint ventures existing as of the date hereof
and described in SCHEDULE 5.7, provided that nothing in clauses (y) or
(z) above shall permit any Investments after the date hereof in such
Foreign Subsidiaries, partnerships or joint ventures;
(vi) Investments consisting of the making of capital
contributions or the purchase of Capital Stock (a) by Matria or any
Subsidiary in any other Wholly Owned Subsidiary that is (or immediately
after giving effect to such Investment will be) a Domestic Subsidiary
and a Subsidiary Guarantor, provided that Matria complies with the
provisions of SECTION 6.10, and (b) by any Subsidiary in Matria;
(vii) Investments of Matria under Hedge Agreements required
pursuant to, and entered into in accordance with, SECTION 6.8;
(viii) the Gainor Acquisition;
(ix) Permitted Acquisitions; provided that the Acquisition
Amounts with respect to Permitted Acquisitions of businesses having
assets or operations located outside of the United States of America
shall not exceed (a) $3,000,000 for any individual foreign Acquisition
or $6,000,000 for all foreign Acquisitions from and after the Closing
Date or (b) together with all Investments in Foreign Subsidiaries made
pursuant to clause (x) below (but without duplication thereof),
$5,000,000 in the aggregate for all such foreign Acquisitions and
Investments made during any single fiscal year and
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$10,000,000 in the aggregate for all such foreign Acquisitions and
Investments made from and after the Closing Date;
(x) Investments in Foreign Subsidiaries made after the
date hereof in an aggregate amount, together with the aggregate amount
of foreign Permitted Acquisitions made pursuant to clause (ix) above,
not exceeding the amounts set forth in part (b) of clause (ix) above
for all such Investments and Acquisitions from and after the Closing
Date;
(xi) the acquisition of the remaining outstanding Capital
Stock of DMS on the Closing Date for an amount not exceeding
$6,500,000; and
(xii) other Investments in an aggregate amount not
exceeding $3,000,000 at any time outstanding.
8.6 Restricted Payments. (a) Matria will not, and will not permit
or cause any of its Subsidiaries to, directly or indirectly, declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect of any of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock, or purchase, redeem, retire or otherwise acquire for
value any shares of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock, or set aside funds for any of the foregoing, except
that:
(i) Matria may declare and make dividend payments or
other distributions payable solely in its common stock;
(ii) each Wholly Owned Subsidiary of Matria may declare
and make dividend payments or other distributions to Matria or to
another Wholly Owned Subsidiary that is a Subsidiary Guarantor, or (if
such declaring Subsidiary is a Foreign Subsidiary) to another Foreign
Subsidiary, in each case to the extent not prohibited under applicable
Requirements of Law;
(iii) Matria may declare and make cash or in-kind dividend
payments on the shares of Series A Preferred Stock and the Series B
Preferred Stock issued pursuant to the Gainor Purchase and Sale
Agreement, in each case as provided in the applicable Certificate of
Designations, so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom;
(iv) Matria may redeem (y) shares of the Series A
Preferred Stock pursuant to the provisions of paragraph 6(b) of
paragraph A of the Certificate of Designations for the Series A
Preferred Stock or (z) shares of the Series B Preferred Stock pursuant
to the provisions of paragraph 6(b) of paragraph A of the Certificate
of Designations for the Series B Preferred Stock, but in either case
only so long as (1) not less than thirty (30) days prior to the
proposed redemption date, the Administrative Agent shall have received
written notice from the Borrower stating that an event has occurred
that requires such redemption and describing such event, and (2) the
Required Lenders (or the
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Administrative Agent on their behalf) shall have delivered to Matria a
written instrument consenting in their sole discretion to the event
giving rise to such redemption requirement and waiving any rights under
this Agreement arising therefrom;
(v) Matria may purchase, redeem, retire or otherwise
acquire for value shares of its common stock in an aggregate amount not
exceeding $10,000,000 for all such purchases, redemptions, retirements
and acquisitions from and after the Closing Date, provided that no
Default or Event of Default shall have occurred and be continuing or
would result therefrom; and
(vi) Matria may make the repurchase of its common stock
described in SCHEDULE 8.6.
(b) Matria will not, and will not permit or cause any of its
Subsidiaries to, make (or give any notice in respect of) any payment or
prepayment (whether scheduled, at maturity, voluntary or otherwise) of principal
on any Subordinated Indebtedness, or directly or indirectly make any redemption
(including pursuant to any change of control provision), retirement, defeasance
or other acquisition for value of any Subordinated Indebtedness, or make any
deposit or otherwise set aside funds for any of the foregoing purposes;
provided, however, that (i) Matria may defease or otherwise discharge all or any
portion of the Indebtedness under the Gainor Seller Subordinated Note by the
issuance to the holder thereof of Matria common stock, (ii) Matria may make
required principal payments on the Convertible Subordinated Debentures at
maturity thereof and in accordance with the terms thereof (including the
subordination provisions thereof), (iii) Matria may make required principal
payments on the Gainor Seller Subordinated Note on the third, fourth and fifth
anniversaries thereof in accordance with the terms thereof so long as (y) after
giving effect to any such payment, Matria is in compliance with the financial
covenants set forth in SECTIONS 7.1 through 7.5, such compliance being
determined with regard to calculations made on a pro forma basis in accordance
with GAAP as of the last day of the fiscal quarter then most recently ended and
as if such payment had been made on the last day of the period applicable to
such covenants (and in any event, the Leverage Ratio as of such date shall not
be greater than 2.5 to 1.0 on a pro forma basis, notwithstanding that the
maximum permitted Leverage Ratio for purposes of SECTION 7.1 may be higher), and
prior to the making of such payment Matria shall have delivered to each Lender a
certificate, signed by a Financial Officer of Matria, satisfactory in form and
substance to the Required Lenders and to the foregoing effect (and attaching
such calculations), and (z) no Default or Event of Default shall have occurred
and be continuing or would result from such payment, and (iv) Matria and its
Subsidiaries may make required principal payments on any Seller Subordinated
Indebtedness (other than the Gainor Seller Subordinated Note) incurred or issued
pursuant to (and in accordance with the terms of) SECTION 8.2(VI), in accordance
with the terms of such Seller Subordinated Indebtedness (including the
subordination provisions thereof).
8.7 Transactions with Affiliates. Matria will not, and will not
permit or cause any of its Subsidiaries to, enter into any transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of Matria or any Subsidiary, except in the
ordinary course of its
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business and upon fair and reasonable terms that are no less favorable to it
than would obtain in a comparable arm's length transaction with a Person other
than an Affiliate of Matria or such Subsidiary; provided, however, that nothing
contained in this Section shall prohibit:
(i) transactions between or among Matria and its Wholly
Owned Subsidiaries; and
(ii) the payment by Matria of reasonable and customary
fees to members of its board of directors.
8.8 Lines of Business. Matria will not, and will not permit or
cause any of its Subsidiaries to, engage in any business other than the
businesses engaged in by it on the date hereof and businesses and activities
reasonably related thereto.
8.9 Certain Amendments. Matria will not, and will not permit or
cause any of its Subsidiaries to, (i) amend, modify or waive, or permit the
amendment, modification or waiver of, any provision of any agreement or
instrument evidencing or governing any Subordinated Indebtedness, the effect of
which would be to (a) increase the principal amount due thereunder, (b) shorten
or accelerate the time of payment of any amount due thereunder, (c) increase the
applicable interest rate or amount of any fees or costs due thereunder, (d)
amend any of the subordination provisions thereunder (including any of the
definitions relating thereto), (e) make any covenant therein more restrictive or
add any new covenant, or (f) otherwise materially and adversely affect the
Lenders, or breach or otherwise violate any of the subordination provisions
applicable thereto, including, without limitation, restrictions against payment
of principal and interest thereon, or (ii) amend, modify, restate or change any
provision of its articles or certificate of incorporation or bylaws, or the
terms of any class or series of its Capital Stock, other than in a manner that
could not reasonably be expected to adversely affect the Lenders.
8.10 Limitation on Certain Restrictions. Matria will not, and will
not permit or cause any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the ability of Matria and its Subsidiaries to perform and
comply with their respective obligations under the Credit Documents or (ii) the
ability of any Subsidiary of any Borrower to make any dividend payments or other
distributions in respect of its Capital Stock, to repay Indebtedness owed to
such Borrower or any other Subsidiary, to make loans or advances to such
Borrower or any other Subsidiary, or to transfer any of its assets or properties
to such Borrower or any other Subsidiary, in each case other than such
restrictions or encumbrances existing under or by reason of the Credit Documents
or applicable Requirements of Law.
8.11 No Other Negative Pledges. Matria will not, and will not
permit or cause any of its Subsidiaries to, directly or indirectly, enter into
or suffer to exist any agreement or restriction that prohibits or conditions the
creation, incurrence or assumption of any Lien upon or with respect to any part
of its property or assets, whether now owned or hereafter acquired, or agree to
do any of the foregoing, other than as set forth in (i) this Agreement and the
Security Documents, (ii) any agreement or instrument creating a Permitted Lien
(but only to the extent such agreement
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or restriction applies to the assets subject to such Permitted Lien), and (iii)
operating leases of real or personal property entered into by Matria or any of
its Subsidiaries as lessee in the ordinary course of business.
8.12 Fiscal Year. Matria will not, and will not permit or cause any
of its Subsidiaries to, change the ending date of its fiscal year to a date
other than December 31.
8.13 Accounting Changes. Matria will not, and will not permit or
cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by GAAP.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) Any Borrower shall fail to pay (i) any principal of any Loan
when due, or (ii) any interest on any Loan, any Reimbursement Obligation, any
fee or any other Obligation when due, and in the case of clause (ii) only, such
failure shall continue unremedied for a period of three (3) Business Days;
(b) Any Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of SECTIONS 2.14, 6.1, 6.2,
6.3(I), 6.8, 6.9, 6.10 or in ARTICLE VII or ARTICLE VIII;
(c) Any Borrower or any of its Subsidiaries shall fail to observe,
perform or comply with any condition, covenant or agreement contained in this
Agreement or any of the other Credit Documents other than those enumerated in
subsections (a) and (b) above, and such failure shall continue unremedied for
any grace period specifically applicable thereto or, if no such grace period is
applicable, for a period of thirty (30) days after the earlier of (i) the date
on which a Responsible Officer of the Borrower or such Subsidiary acquires
knowledge thereof and (ii) the date on which written notice thereof is delivered
by the Administrative Agent or any Lender to the Borrower;
(d) Any representation or warranty made or deemed made by or on
behalf of any Borrower or any of its Subsidiaries in this Agreement, any of the
other Credit Documents or in any certificate, instrument, report or other
document furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished;
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(e) Matria or any of its Subsidiaries shall (i) fail to pay when
due (whether by scheduled maturity, acceleration or otherwise and after giving
effect to any applicable grace period) (y) any principal of or interest on any
Indebtedness (other than the Indebtedness incurred pursuant to this Agreement)
having an aggregate principal Dollar Amount of at least $250,000 or (z) any
termination or other payment under any Hedge Agreement covering a notional
amount of Indebtedness of at least $250,000 or (ii) fail to observe, perform or
comply with any condition, covenant or agreement contained in any agreement or
instrument evidencing or relating to any such Indebtedness, or any other event
shall occur or condition exist in respect thereof, and the effect of such
failure, event or condition is to cause, or permit the holder or holders of such
Indebtedness (or a trustee or agent on its or their behalf) to cause (with the
giving of notice, lapse of time, or both), such Indebtedness to become due, or
to be prepaid, redeemed, purchased or defeased, prior to its stated maturity;
(f) Matria or any of its Subsidiaries shall (i) file a voluntary
petition or commence a voluntary case seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts or any other
relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to controvert in a timely and appropriate manner, any
petition or case of the type described in subsection (g) below, (iii) apply for
or consent to the appointment of or taking possession by a custodian, trustee,
receiver or similar official for or of itself or all or a substantial part of
its properties or assets, (iv) fail generally, or admit in writing its
inability, to pay its debts generally as they become due, (v) make a general
assignment for the benefit of creditors or (vi) take any corporate action to
authorize or approve any of the foregoing;
(g) Any involuntary petition or case shall be filed or commenced
against Matria or any of its Subsidiaries seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts, the appointment
of a custodian, trustee, receiver or similar official for it or all or a
substantial part of its properties or any other relief under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, and such petition or case shall continue undismissed and
unstayed for a period of sixty (60) days; or an order, judgment or decree
approving or ordering any of the foregoing shall be entered in any such
proceeding;
(h) Any one or more money judgments, writs or warrants of
attachment, executions or similar processes involving an aggregate amount
(exclusive of amounts fully bonded or covered by insurance as to which the
surety or insurer, as the case may be, has acknowledged its liability in
writing) in excess of $250,000 shall be entered or filed against Matria or any
of its Subsidiaries or any of their respective properties and the same shall not
be dismissed, stayed or discharged for a period of thirty (30) days or in any
event later than five days prior to the date of any proposed sale thereunder;
(i) Any Security Document to which Matria or any of its
Subsidiaries is now or hereafter a party shall for any reason cease to be in
full force and effect or cease to be effective to give the Administrative Agent
a valid and perfected security interest in and Lien upon the Collateral
purported to be covered thereby, subject to no Liens other than Permitted Liens,
in
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each case unless any such cessation occurs in accordance with the terms thereof
or is due to any act or failure to act on the part of the Administrative Agent
or any Lender; or Matria or any such Subsidiary shall assert any of the
foregoing; or Matria or any Person acting on its behalf shall deny or disaffirm
its obligations under the guaranty contained in ARTICLE XI; or any Subsidiary of
Matria or any Person acting on behalf of any such Subsidiary shall terminate,
deny or disaffirm such Subsidiary's obligations under the Subsidiary Guaranty or
any other guaranty of the Obligations;
(j) Any ERISA Event or any other event or condition shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result thereof,
together with all other ERISA Events and other events or conditions then
existing, Matria and its ERISA Affiliates have incurred or would be reasonably
likely to incur liability to any one or more Plans or Multiemployer Plans or to
the PBGC (or to any combination thereof) in excess of $250,000;
(k) There shall occur a Limitation with respect to any one or more
Licenses or Reimbursement Approvals of Matria or any of its Subsidiaries, or any
other action shall be taken by any Governmental Authority or other Person in
response to any alleged failure by Matria or any such Subsidiary to be in
compliance with applicable Requirements of Law, and such Limitation or other
action, individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect; or there shall occur any introduction of or
change in any Requirement of Law (or in the interpretation or administration
thereof by any Governmental Authority) governing or affecting Matria or any of
its Subsidiaries, and such introduction or change, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse Effect;
(l) Any one or more agreements or contracts to which Matria or any
of its Subsidiaries is a party shall be terminated or shall, for any other
reason, fail to be in full force and effect and enforceable in accordance with
its terms, and such event or condition, together with all other such events or
conditions, if any, has or would be reasonably likely to have a Material Adverse
Effect; or
(m) Any of the following shall occur: (i) any Person or group of
Persons acting in concert as a partnership or other group shall, as a result of
a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become, after the date hereof, the "beneficial
owner" (within the meaning of such term under Rule 13d-3 under the Exchange Act)
of securities of Matria representing 20% or more of the combined voting power of
the then outstanding securities of Matria ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors; (ii) the Board of Directors of Matria shall cease to consist of a
majority of the individuals who constituted the Board of Directors as of the
date hereof or who shall have become a member thereof subsequent to the date
hereof after having been nominated, or otherwise approved in writing, by at
least a majority of individuals who constituted the Board of Directors of Matria
as of the date hereof (or their replacements approved as herein required); or
(iii) a "change of control" or similar event within the meaning of any agreement
or instrument governing or evidencing Subordinated Indebtedness shall occur
thereunder.
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9.2 Remedies: Termination of Commitments, Acceleration, etc. Upon
and at any time after the occurrence and during the continuance of any Event of
Default, the Administrative Agent shall at the direction, or may with the
consent, of the Required Lenders, take any or all of the following actions at
the same or different times:
(a) Declare the Commitments, the Swingline Commitment and the
Issuing Lender's obligation to issue Letters of Credit, to be terminated,
whereupon the same shall terminate (provided that, upon the occurrence of an
Event of Default pursuant to SECTION 9.1(F) or SECTION 9.1(G), the Commitments,
the Swingline Commitment and the Issuing Lender's obligation to issue Letters of
Credit shall automatically be terminated);
(b) Declare all or any part of the outstanding principal amount of
the Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrowers (provided that, upon the occurrence of an Event of
Default pursuant to SECTION 9.1(F) or SECTION 9.1(G), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrowers);
(c) Direct Matria to deposit (and Matria hereby agrees, forthwith
upon receipt of notice of such direction from the Administrative Agent, to
deposit) with the Administrative Agent from time to time such additional amount
of cash as is equal to the aggregate Stated Amount of all Letters of Credit then
outstanding (whether or not any beneficiary under any Letter of Credit shall
have drawn or be entitled at such time to draw thereunder), such amount to be
held by the Administrative Agent in the Cash Collateral Account as security for
the Letter of Credit Exposure as described in SECTION 3.8; and
(d) Exercise all rights and remedies available to it under this
Agreement, the other Credit Documents and applicable law.
9.3 Remedies: Set-Off. In addition to all other rights and
remedies available under the Credit Documents or applicable law or otherwise,
upon and at any time after the occurrence and during the continuance of any
Event of Default, each Lender may, and each is hereby authorized by each
Borrower, at any such time and from time to time, to the fullest extent
permitted by applicable law, without presentment, demand, protest or other
notice of any kind, all of which are hereby knowingly and expressly waived by
each Borrower, to set off and to apply any and all deposits (general or special,
time or demand, provisional or final) and any other property at any time held
(including at any branches or agencies, wherever located), and any other
indebtedness at any time owing, by such Lender to or for the credit or the
account of such Borrower against any or all of the Obligations to such Lender
now or hereafter existing, whether
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or not such Obligations may be contingent or unmatured, each Borrower hereby
granting to each Lender a continuing security interest in and Lien upon all such
deposits and other property as security for such Obligations. Each Lender agrees
promptly to notify the applicable Borrower and the Administrative Agent after
any such set-off and application; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 Appointment. Each Lender hereby irrevocably appoints and
authorizes First Union to act as Administrative Agent hereunder and under the
other Credit Documents and to take such actions as agent on its behalf hereunder
and under the other Credit Documents, and to exercise such powers and to perform
such duties, as are specifically delegated to the Administrative Agent by the
terms hereof or thereof, together with such other powers and duties as are
reasonably incidental thereto.
10.2 Nature of Duties. The Administrative Agent shall have no
duties or responsibilities other than those expressly set forth in this
Agreement and the other Credit Documents. The Administrative Agent shall not
have, by reason of this Agreement or any other Credit Document, a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or any
other Credit Document, express or implied, is intended to or shall be so
construed as to impose upon the Administrative Agent any obligations or
liabilities in respect of this Agreement or any other Credit Document except as
expressly set forth herein or therein. The Administrative Agent may execute any
of its duties under this Agreement or any other Credit Document by or through
agents or attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact that it selects with reasonable
care. The Administrative Agent shall be entitled to consult with legal counsel,
independent public accountants and other experts selected by it with respect to
all matters pertaining to this Agreement and the other Credit Documents and its
duties hereunder and thereunder and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. The Lenders hereby acknowledge that the
Administrative Agent shall not be under any duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Credit Document unless it shall be requested in writing to do so by
the Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders).
10.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action taken or omitted to be taken by it
or such Person under or in connection with the Credit Documents, except for its
or such Person's own gross negligence or willful misconduct, (ii) responsible in
any manner to any Lender for any recitals, statements, information,
representations or warranties herein or in any other Credit Document or in any
document, instrument, certificate, report or other writing delivered in
connection herewith or therewith, for the execution, effectiveness,
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genuineness, validity, enforceability or sufficiency of this Agreement or any
other Credit Document, or for the financial condition of any Borrower, its
Subsidiaries or any other Person, or (iii) required to ascertain or make any
inquiry concerning the performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Credit Document or the existence or
possible existence of any Default or Event of Default, or to inspect the
properties, books or records of any Borrower or any of its Subsidiaries.
10.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
notice, statement, consent or other communication (including, without
limitation, any thereof by telephone, telecopy, telex, telegram or cable)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons. The Administrative Agent may deem
and treat each Lender as the owner of its interest hereunder for all purposes
hereof unless and until a written notice of the assignment, negotiation or
transfer thereof shall have been given to the Administrative Agent in accordance
with the provisions of this Agreement. The Administrative Agent shall be
entitled to refrain from taking or omitting to take any action in connection
with this Agreement or any other Credit Document (i) if such action or omission
would, in the reasonable opinion of the Administrative Agent, violate any
applicable law or any provision of this Agreement or any other Credit Document
or (ii) unless and until it shall have received such advice or concurrence of
the Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders) as it deems appropriate or it shall first have
been indemnified to its satisfaction by the Lenders against any and all
liability and expense (other than liability and expense arising from its own
gross negligence or willful misconduct) that may be incurred by it by reason of
taking, continuing to take or omitting to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent's acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Lenders (or, where a higher
percentage of the Lenders is expressly required hereunder, such Lenders), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding upon all of the Lenders (including all subsequent Lenders).
10.5 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representation or warranty to it and that no act by the Administrative
Agent or any such Person hereinafter taken, including any review of the affairs
of Matria and its Subsidiaries, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that (i) it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, properties, financial
and other condition and creditworthiness of Matria and its Subsidiaries and made
its own decision to enter into this Agreement and extend credit to the Borrowers
hereunder, and (ii) it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in
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taking or not taking action hereunder and under the other Credit Documents and
to make such investigation as it deems necessary to inform itself as to the
business, prospects, operations, properties, financial and other condition and
creditworthiness of Matria and its Subsidiaries. Except as expressly provided in
this Agreement and the other Credit Documents, the Administrative Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information concerning the business,
prospects, operations, properties, financial or other condition or
creditworthiness of any Borrower, its Subsidiaries or any other Person that may
at any time come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.6 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Administrative Agent shall have received written notice from
a Borrower or a Lender referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that the Administrative Agent receives such a notice, the Administrative
Agent will give notice thereof to the Lenders as soon as reasonably practicable;
provided, however, that if any such notice has also been furnished to the
Lenders, the Administrative Agent shall have no obligation to notify the Lenders
with respect thereto. The Administrative Agent shall (subject to SECTIONS 10.4
and 12.6) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders; provided that, unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders except
to the extent that this Agreement expressly requires that such action be taken,
or not be taken, only with the consent or upon the authorization of the Required
Lenders or all of the Lenders.
10.7 Indemnification. To the extent the Administrative Agent is not
reimbursed by or on behalf of the Borrowers, and without limiting the obligation
of the Borrowers to do so, the Lenders agree (i) to indemnify the Administrative
Agent and its officers, directors, employees, agents, attorneys-in-fact and
Affiliates, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses) or disbursements of any kind or nature whatsoever
that may at any time (including, without limitation, at any time following the
repayment in full of the Loans and the termination of the Commitments) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Credit Document or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Administrative Agent
under or in connection with any of the foregoing, and (ii) to reimburse the
Administrative Agent upon demand, ratably in proportion to their respective
percentages as used in determining the Required Lenders as of the date of
determination, for any expenses incurred by the Administrative Agent in
connection with the preparation, negotiation, execution, delivery,
administration, amendment, modification, waiver or enforcement (whether
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through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any of the other
Credit Documents (including, without limitation, reasonable attorneys' fees and
expenses and compensation of agents and employees paid for services rendered on
behalf of the Lenders); provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the gross negligence or willful misconduct of the party to be
indemnified.
10.8 The Administrative Agent in its Individual Capacity. With
respect to its Commitment, the Loans made by it, the Letters of Credit issued or
participated in by it and the Note or Notes issued to it, the Administrative
Agent in its individual capacity and not as Administrative Agent shall have the
same rights and powers under the Credit Documents as any other Lender and may
exercise the same as though it were not performing the agency duties specified
herein; and the terms "Lenders," "Required Lenders," "holders of Notes" and any
similar terms shall, unless the context clearly otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent and
its Affiliates may accept deposits from, lend money to, make investments in, and
generally engage in any kind of banking, trust, financial advisory or other
business with any Borrower, any of its Subsidiaries or any of their respective
Affiliates as if the Administrative Agent were not performing the agency duties
specified herein, and may accept fees and other consideration from any of them
for services in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
10.9 Successor Administrative Agent. The Administrative Agent may
resign at any time by giving ten (10) days' prior written notice to Matria and
the Lenders. Upon any such notice of resignation, the Required Lenders will,
with the prior written consent of Matria (which consent shall not be
unreasonably withheld), appoint from among the Lenders a successor to the
Administrative Agent (provided that Matria's consent shall not be required in
the event a Default or Event of Default shall have occurred and be continuing).
If no successor to the Administrative Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within such ten-day
period, then the retiring Administrative Agent may, on behalf of the Lenders and
after consulting with the Lenders and Matria, appoint a successor Administrative
Agent from among the Lenders. Upon the acceptance of any appointment as
Administrative Agent by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Credit Documents. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent. If no successor to the
Administrative Agent has accepted appointment as Administrative Agent by the
thirtieth (30th) day following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective, and the Lenders shall thereafter perform all of the
duties of the Administrative Agent hereunder and under the other Credit
Documents until such time, if any, as the Required Lenders appoint a successor
Administrative Agent as provided for hereinabove.
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10.10 Collateral Matters. (a) The Administrative Agent is hereby
authorized on behalf of the Lenders, without the necessity of any notice to or
further consent from the Lenders, from time to time (but without any obligation)
to take any action with respect to the Collateral and the Security Documents
that may be necessary to perfect and maintain perfected the Liens upon the
Collateral granted pursuant to the Security Documents.
(b) The Lenders hereby authorize the Administrative Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the
Commitments, termination or expiration of all outstanding Letters of Credit and
payment in full of all of the Obligations, (ii) constituting property sold or to
be sold or disposed of as part of or in connection with any disposition
expressly permitted hereunder or under any other Credit Document or to which the
Required Lenders have consented or (iii) otherwise pursuant to and in accordance
with the provisions of any applicable Credit Document. Upon request by the
Administrative Agent at any time, the Lenders will confirm in writing the
Administrative Agent's authority to release Collateral pursuant to this
subsection (b).
10.11 Issuing Lender and Swingline Lender. The provisions of this
Article (other than SECTION 10.9) shall apply to the Issuing Lender and the
Swingline Lender mutatis mutandis to the same extent as such provisions apply to
the Administrative Agent.
10.12 Co-Agents. Notwithstanding any other provision of this
Agreement or any of the other Credit Documents, any Lenders designated on the
cover page of this Agreement or elsewhere herein as "Co-Agent" or any similar
designation are named as such for recognition purposes only, and in their
capacities as such shall have no powers, rights, duties, responsibilities or
liabilities with respect to this Agreement and the other Credit Documents and
the transactions contemplated hereby and thereby.
ARTICLE XI
GUARANTY
11.1 Guaranty. (a) Matria hereby unconditionally and irrevocably
guarantees to the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment and performance by the
Borrowers when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
(b) Matria further agrees to pay any and all expenses (including,
without limitation, all reasonable fees and expenses of counsel actually
incurred) that may be paid or incurred by the Administrative Agent or any Lender
in enforcing, or obtaining advice of counsel in respect of, any rights with
respect to, or collecting, any or all of the Obligations and/or enforcing any
rights with respect to, or collecting against, Matria under this Section. This
Section shall remain in full force and effect until the Obligations are paid in
full, all Letters of Credit have expired or
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terminated and the Commitments have been terminated, notwithstanding that from
time to time prior thereto the Borrowers may be free from any Obligations.
(c) No payment or payments made by any Borrower or any other
Person or received or collected by the Administrative Agent or any Lender from
any Borrower or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of Matria hereunder, and Matria shall,
notwithstanding any such payment or payments, remain liable hereunder for the
Obligations until the Obligations are paid in full, all Letters of Credit have
expired or terminated and the Commitments have been terminated.
(d) Matria agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability under this Section, it will notify the Administrative
Agent and such Lender in writing that such payment is made under this Section
for such purpose.
11.2 Right of Set-Off. The Administrative Agent and each Lender is
hereby irrevocably authorized at any time and from time to time without notice
to Matria, any such notice being expressly waived by Matria, to set off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the
Administrative Agent or such Lender to or for the credit or the account of
Matria, or any part thereof in such amounts as the Administrative Agent or such
Lender may elect, against or on account of the obligations and liabilities of
Matria to the Administrative Agent or such Lender hereunder which are then due
and payable and claims of every nature and description of the Administrative
Agent or such Lender against Matria, in any currency, whether arising hereunder,
under any other Credit Document or otherwise in connection therewith, as the
Administrative Agent or such Lender may elect, whether or not the Administrative
Agent or such Lender has made any demand for payment. The Administrative Agent
and each Lender shall notify Matria promptly of any such set-off and the
application made by the Administrative Agent or such Lender, as the case may be,
of the proceeds thereof; provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the
Administrative Agent and each Lender under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that the Administrative Agent or such Lender may have.
11.3 No Subrogation. Notwithstanding any payment or payments made
by Matria hereunder, or any set-off or application of funds of Matria by the
Administrative Agent or any Lender, Matria shall not be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrowers or against any Collateral or other security or guarantee
or right of offset held by the Administrative Agent or any Lender for the
payment of the Obligations, nor shall Matria seek or be entitled to seek any
contribution or reimbursement from any of the Borrowers in respect of payments
made by Matria hereunder, until all amounts owing to the Administrative Agent
and the Lenders by the Borrowers on account of the
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Obligations are paid in full, all Letters of Credit have expired or terminated
and the Commitments have been terminated. If any amount shall be paid to Matria
on account of such subrogation rights at any time when all of the Obligations
shall not have been paid in full, such amount shall be held by Matria in trust
for the Administrative Agent and the Lenders, segregated from other funds of
Matria, and shall, forthwith upon receipt by Matria, be turned over to the
Administrative Agent in the exact form received by Matria (duly endorsed by
Matria to the Administrative Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as Administrative Agent
may determine. The provisions of this Section shall survive the termination of
this Agreement and the payment in full of the Obligations, the termination or
expiration of all Letters of Credit and the termination of the Commitments.
11.4 Amendments, etc. with respect to the Obligations; Waiver of
Rights. Matria shall remain obligated hereunder notwithstanding that, without
any reservation of rights against Matria, and without notice to or further
assent by Matria, any demand for payment of any of the Obligations made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender, and any of the Obligations continued, and the Obligations, or
the liability of any other party upon or for any part thereof, or any Collateral
or other security or guarantee therefor or right of offset with respect thereto,
may, from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the
Administrative Agent or any Lender, and any Credit Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, in accordance with
the provisions thereof as the Administrative Agent (or the requisite Lenders, as
the case may be) may deem advisable from time to time, and any Collateral or
other security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. None of the Administrative
Agent or any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this Agreement or any property subject thereto. When making any demand hereunder
against Matria, the Administrative Agent or any Lender may, but shall be under
no obligation to, make a similar demand on any Borrower or any other guarantor,
and any failure by the Administrative Agent or any Lender to make any such
demand or to collect any payments from any Borrower or any such other guarantor
or any release of any Borrower or such other guarantor shall not relieve Matria
of its obligations or liabilities hereunder, and shall not impair or affect the
rights and remedies, express or implied, or as a matter of law, of the
Administrative Agent or any Lender against Matria. For the purposes hereof
"demand" shall include the commencement and continuance of any legal
proceedings.
11.5 Guaranty Absolute and Unconditional. Matria waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent or any Lender
upon this Agreement or acceptance of this Agreement; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon this Agreement; and
all dealings between Matria and the other Borrowers, on the one hand, and the
Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Agreement. Matria waives diligence,
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presentment, protest, demand for payment and notice of default or nonpayment to
or upon Matria and the other Borrowers with respect to the Obligations, and
without limitation of the foregoing, specifically waives the benefits of
O.C.G.A. Section 10-7-24. This ARTICLE XI shall be construed as a continuing,
absolute and unconditional guaranty of payment without regard to (a) the
validity, regularity or enforceability of this Agreement, any other Credit
Document, any of the Obligations or any other Collateral or other security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by any of the
Borrowers against the Administrative Agent or any Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of Matria or any
other Borrower) that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrowers for the Obligations, or of Matria
under this ARTICLE XI, in bankruptcy or in any other instance. When pursuing its
rights and remedies hereunder against Matria, the Administrative Agent and any
Lender may, but shall be under no obligation to, pursue such rights and remedies
as it may have against the Borrowers or any other Person or against any
Collateral or other security or guarantee for the Obligations or any right of
offset with respect thereto, and any failure by the Administrative Agent or any
Lender to pursue such other rights or remedies or to collect any payments from
the Borrowers or any such other Person or to realize upon any such Collateral or
other security or guarantee or to exercise any such right of offset, or any
release of any of the Borrowers or any such other Person or of any such
Collateral or other security, guarantee or right of offset, shall not relieve
Matria of any liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against Matria. This ARTICLE XI shall remain
in full force and effect and be binding in accordance with and to the extent of
its terms upon Matria and its successors and assigns, and shall inure to the
benefit of the Administrative Agent and the Lenders, and their respective
successors, indorsees, transferees and assigns, until all the Obligations and
the obligations of Matria under this Agreement shall have been satisfied by
payment in full, all Letters of Credit shall have expired or terminated, and the
Commitments shall have been terminated, notwithstanding that from time to time
during the term of this Agreement the Borrowers may be free from any
Obligations.
11.6 Reinstatement. This ARTICLE XI shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must otherwise be restored or
returned by the Administrative Agent or any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Borrower or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, any Borrower or any substantial part of its
property, or otherwise, all as though such payments had not been made.
11.7 Payments. Matria hereby agrees that all payments required to
be made by it hereunder will be made to the Administrative Agent without set-off
or counterclaim in accordance with the terms of the Obligations, including,
without limitation, in the currency in which payment is due.
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ARTICLE XII
MISCELLANEOUS
12.1 Fees and Expenses. The Borrowers agree (i) whether or not the
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Administrative
Agent (including, without limitation, the reasonable fees and expenses of
counsel to the Administrative Agent actually incurred) in connection with (y)
the Administrative Agent's due diligence investigation in connection with, and
the preparation, negotiation, execution, delivery and syndication of, this
Agreement and the other Credit Documents, and any amendment, modification or
waiver hereof or thereof or consent with respect hereto or thereto, and (z) the
creation, perfection and maintenance of the perfection of the Administrative
Agent's Liens upon the Collateral, including, without limitation, Lien search,
filing and recording fees, (ii) to pay upon demand all reasonable out-of-pocket
costs and expenses of the Administrative Agent and each Lender (including,
without limitation, reasonable attorneys' fees and expenses actually incurred)
in connection with (y) any refinancing or restructuring of the credit
arrangement provided under this Agreement, whether in the nature of a
"work-out," in any insolvency or bankruptcy proceeding or otherwise and whether
or not consummated, and (z) the enforcement, attempted enforcement or
preservation of any rights or remedies under this Agreement or any of the other
Credit Documents, whether in any action, suit or proceeding (including any
bankruptcy or insolvency proceeding) or otherwise, and (iii) to pay and hold the
Administrative Agent and each Lender harmless from and against all liability for
any intangibles, documentary, stamp or other similar taxes, fees and excises, if
any, including any interest and penalties, and any finder's or brokerage fees,
commissions and expenses (other than any fees, commissions or expenses of
finders or brokers engaged by the Administrative Agent or any Lender), that may
be payable in connection with the transactions contemplated by this Agreement
and the other Credit Documents.
12.2 Indemnification. The Borrowers agree, whether or not the
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold the Administrative Agent and each Lender and each of their respective
directors, officers, employees, agents and Affiliates (each, an "Indemnified
Person") harmless from and against any and all claims, losses, damages,
obligations, liabilities, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses actually incurred) of any
kind or nature whatsoever, whether direct, indirect or consequential
(collectively, "Indemnified Costs"), that may at any time be imposed on,
incurred by or asserted against any such Indemnified Person as a result of,
arising from or in any way relating to the preparation, execution, performance
or enforcement of this Agreement or any of the other Transaction Documents, any
of the Transactions contemplated herein or therein or any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of any Loans or Letters of Credit (including, without limitation, in connection
with the actual or alleged generation, presence, discharge or release of any
Hazardous Substances on, into or from, or the transportation of Hazardous
Substances to or from, any real property at any time owned or leased by any
Borrower or any of its Subsidiaries, any other Environmental Claims or any
violation of or liability under any Environmental Law), or any action, suit or
proceeding (including any inquiry or
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investigation) by any Person, whether threatened or initiated, related to any of
the foregoing, and in any case whether or not such Indemnified Person is a party
to any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. All of the foregoing Indemnified Costs of any Indemnified Person shall
be paid or reimbursed by the Borrowers, as and when incurred and upon demand.
12.3 Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE
OTHER CREDIT DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO THE
CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED THAT EACH LETTER OF CREDIT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OR RULES
DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO SUCH LAWS OR RULES ARE DESIGNATED,
THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER
OF COMMERCE, AS IN EFFECT FROM TIME TO TIME (THE "UNIFORM CUSTOMS"), AND, AS TO
MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF GEORGIA
(WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF). EACH BORROWER
HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN COBB
COUNTY, GEORGIA OR FULTON COUNTY, GEORGIA OR ANY FEDERAL COURT LOCATED WITHIN
THE NORTHERN DISTRICT OF THE STATE OF GEORGIA FOR ANY PROCEEDING INSTITUTED
HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY
PROCEEDING TO WHICH THE AGENT OR ANY LENDER OR SUCH BORROWER IS A PARTY,
INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE AGENT OR ANY LENDER OR SUCH BORROWER. EACH BORROWER IRREVOCABLY
AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT
RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY
HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY SUCH PROCEEDING. EACH BORROWER CONSENTS THAT ALL SERVICE OF
PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO MATRIA AT ITS
ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY
ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION.
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12.4 Arbitration; Preservation and Limitation of Remedies. (a) UPON
DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER INSTITUTION OF ANY
JUDICIAL PROCEEDING, ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF, CONNECTED
WITH OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT ("DISPUTES")
BETWEEN OR AMONG THE BORROWERS, ITS SUBSIDIARIES, THE ADMINISTRATIVE AGENT AND
THE LENDERS, OR ANY OF THEM, SHALL BE RESOLVED BY BINDING ARBITRATION AS
PROVIDED HEREIN. INSTITUTION OF A JUDICIAL PROCEEDING BY A PARTY DOES NOT WAIVE
THE RIGHT OF THAT PARTY TO DEMAND ARBITRATION HEREUNDER. DISPUTES MAY INCLUDE,
WITHOUT LIMITATION, TORT CLAIMS, COUNTERCLAIMS, CLAIMS BROUGHT AS CLASS ACTIONS,
CLAIMS ARISING FROM DOCUMENTS EXECUTED IN THE FUTURE, DISPUTES AS TO WHETHER A
MATTER IS SUBJECT TO ARBITRATION, OR CLAIMS ARISING OUT OF OR CONNECTED WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
ARBITRATION SHALL BE CONDUCTED UNDER AND GOVERNED BY THE COMMERCIAL FINANCIAL
DISPUTES ARBITRATION RULES (THE "ARBITRATION RULES") OF THE AMERICAN ARBITRATION
ASSOCIATION (THE "AAA"), AS IN EFFECT FROM TIME TO TIME, AND THE FEDERAL
ARBITRATION ACT, TITLE 9 OF THE U.S. CODE, AS AMENDED. ALL ARBITRATION HEARINGS
SHALL BE CONDUCTED IN THE CITY IN WHICH THE PRINCIPAL OFFICE OF THE
ADMINISTRATIVE AGENT IS LOCATED. A HEARING SHALL BEGIN WITHIN NINETY (90) DAYS
OF DEMAND FOR ARBITRATION AND ALL HEARINGS SHALL BE CONCLUDED WITHIN 120 DAYS OF
DEMAND FOR ARBITRATION. THESE TIME LIMITATIONS MAY NOT BE EXTENDED UNLESS A
PARTY SHOWS CAUSE FOR EXTENSION AND THEN FOR NO MORE THAN A TOTAL OF SIXTY (60)
DAYS. THE EXPEDITED PROCEDURES SET FORTH IN RULE 51 ET SEQ. OF THE ARBITRATION
RULES SHALL BE APPLICABLE TO CLAIMS OF LESS THAN $1,000,000. ALL APPLICABLE
STATUTES OF LIMITATION SHALL APPLY TO ANY DISPUTE. A JUDGMENT UPON THE AWARD MAY
BE ENTERED IN ANY COURT HAVING JURISDICTION. THE PANEL FROM WHICH ALL
ARBITRATORS ARE SELECTED SHALL BE COMPRISED OF LICENSED ATTORNEYS SELECTED FROM
THE COMMERCIAL FINANCIAL DISPUTE ARBITRATION PANEL OF THE AAA. THE SINGLE
ARBITRATOR SELECTED FOR EXPEDITED PROCEDURE SHALL BE A RETIRED JUDGE FROM THE
HIGHEST COURT OF GENERAL JURISDICTION, STATE OR FEDERAL, OF THE STATE WHERE THE
HEARING WILL BE CONDUCTED. NOTWITHSTANDING THE FOREGOING, THIS ARBITRATION
PROVISION DOES NOT APPLY TO DISPUTES UNDER OR RELATED TO ANY HEDGE AGREEMENT
THAT IS A CREDIT DOCUMENT. THE PARTIES DO NOT WAIVE APPLICABLE FEDERAL OR STATE
SUBSTANTIVE LAW EXCEPT AS PROVIDED HEREIN.
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(b) NOTWITHSTANDING THE PRECEDING BINDING ARBITRATION PROVISIONS,
THE PARTIES HERETO AGREE TO PRESERVE, WITHOUT DIMINUTION, CERTAIN REMEDIES THAT
ANY PARTY HERETO MAY EMPLOY OR EXERCISE FREELY, EITHER ALONE, IN CONJUNCTION
WITH OR DURING A DISPUTE. ANY PARTY HERETO SHALL HAVE THE RIGHT TO PROCEED IN
ANY COURT OF PROPER JURISDICTION OR BY SELF-HELP TO EXERCISE OR PROSECUTE THE
FOLLOWING REMEDIES, AS APPLICABLE: (I) ALL RIGHTS TO FORECLOSE AGAINST ANY
COLLATERAL BY EXERCISING A POWER OF SALE GRANTED PURSUANT TO ANY OF THE CREDIT
DOCUMENTS OR UNDER APPLICABLE LAW OR BY JUDICIAL FORECLOSURE AND SALE, INCLUDING
A PROCEEDING TO CONFIRM THE SALE; (II) ALL RIGHTS OF SELF-HELP, INCLUDING
PEACEFUL OCCUPATION OF REAL PROPERTY AND COLLECTION OF RENTS, SET-OFF, AND
PEACEFUL POSSESSION OF PERSONAL PROPERTY; (III) OBTAINING PROVISIONAL OR
ANCILLARY REMEDIES, INCLUDING INJUNCTIVE RELIEF, SEQUESTRATION, GARNISHMENT,
ATTACHMENT, APPOINTMENT OF A RECEIVER AND FILING AN INVOLUNTARY BANKRUPTCY
PROCEEDING; AND (IV) WHEN APPLICABLE, A JUDGMENT BY CONFESSION OF JUDGMENT. ANY
CLAIM OR CONTROVERSY WITH REGARD TO ANY PARTY'S ENTITLEMENT TO SUCH REMEDIES IS
A DISPUTE. PRESERVATION OF THESE REMEDIES DOES NOT LIMIT THE POWER OF AN
ARBITRATOR TO GRANT SIMILAR REMEDIES THAT MAY BE REQUESTED BY A PARTY IN A
DISPUTE. THE PARTIES HERETO AGREE THAT NO PARTY SHALL HAVE A REMEDY OF PUNITIVE
OR EXEMPLARY DAMAGES AGAINST ANY OTHER PARTY IN ANY DISPUTE, AND EACH PARTY
HEREBY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THAT IT HAS
NOW OR THAT MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY DISPUTE, WHETHER SUCH
DISPUTE IS RESOLVED BY ARBITRATION OR JUDICIALLY. THE PARTIES ACKNOWLEDGE THAT
BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY
MAY HAVE TO A JURY TRIAL WITH REGARD TO A DISPUTE.
12.5 Notices. (a) All notices and other communications provided for
hereunder shall be in writing (including facsimile transmission) and mailed (by
registered or certified mail), telecopied, or delivered (by hand or overnight
delivery service) to the party to be notified at the following addresses:
(a) if to Matria or any other Borrower, to Matria
Healthcare, Inc., 1850 Parkway Place, 12th Floor, Marietta, Georgia
30067, Attention: President, Telecopy No. (770) 767-7769, with copies
(except in the case of routine administrative notices) to Matria
Healthcare, Inc., 1850 Parkway Place, 12th Floor, Marietta, Georgia
30067, Attention: General Counsel, Telecopy No. (770) 767-7769, and to
Troutman Sanders LLP, 600 Peachtree Street, N.E., Suite 5200, Atlanta,
Georgia 30308-2216, Attention: James L. Smith, III, Telecopy No. (404)
962-6687;
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(b) if to the Administrative Agent, to First Union
National Bank, One First Union Center, DC-4, 301 South College Street,
Charlotte, North Carolina 28288-0680, Attention: Syndication Agency
Services, Telecopy No. (704) 383-0288; and
(c) if to any Lender, to it at the address set forth on
its signature page hereto (or if to any Lender not a party hereto as of
the date hereof, at the address set forth in its Assignment and
Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given on the date of receipt.
(b) Each Borrower (other than Matria) hereby irrevocably
designates and appoints Matria as its designee, appointee and agent to receive
on its behalf all service of process in any action or proceeding and any other
notice or communication hereunder, consents that all service of process upon it
may be made by registered or certified mail directed to Matria at its address
set forth hereinabove (and service so made shall be deemed to be completed upon
the earlier of actual receipt thereof or three (3) Business Days after deposit
in the United States mails, proper postage prepaid and properly addressed), and
agrees that service so made shall be effective and binding upon such Borrower in
every respect and that any other notice or communication given to Matria at the
address and in the manner specified herein shall be effective notice to such
Borrower. Further, each Borrower does hereby irrevocably make, constitute and
appoint Matria as its true and lawful attorney-in-fact, with full authority in
its place and stead and in its name, Matria's name or otherwise, and with full
power of substitution in the premises, from time to time in Matria's discretion
to agree on behalf of, and sign the name of, such Borrower to any Notice of
Borrowing or Notice of Conversion/Continuation, or any amendment, modification
or supplement to, restatement of, or waiver or consent in connection with, this
Agreement, any other Credit Document or any document or instrument pursuant
hereto or thereto, and to take any other action and do all other things on
behalf of such Borrower that Matria may deem necessary or advisable to carry out
and accomplish the purposes of this Agreement and the other Credit Documents.
Matria will not be liable for any act or omission nor for any error of judgment
or mistake of fact unless the same shall occur as a result of its gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable by any Borrower for so long as such Borrower shall be a party
hereto. By its signature hereto, Matria consents to its appointment as provided
for herein and agrees promptly to distribute all process, notices and other
communications to each other Borrower.
12.6 Amendments, Waivers, etc. No amendment, modification, waiver
or discharge or termination of, or consent to any departure by any Borrower
from, any provision of this Agreement or any other Credit Document, shall be
effective unless in a writing signed by the Required Lenders (or by the
Administrative Agent at the direction or with the consent of the Required
Lenders), and then the same shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
amendment, modification, waiver, discharge, termination or consent shall:
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(a) unless agreed to by each Lender directly affected thereby, (i)
reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other Obligations
(other than fees payable to the Administrative Agent for its own account), or
(ii) extend the Term Loan Maturity Date, the Revolving Credit Maturity Date or
any other date fixed for the payment of any principal of or interest on any Loan
(other than additional interest payable under SECTION 2.8(B) at the election of
the Required Lenders, as provided therein), any fees (other than fees payable to
the Administrative Agent for its own account) or any other Obligations;
(b) unless agreed to by all of the Lenders, (i) increase or extend
any Commitment of any Lender (it being understood that a waiver of any Event of
Default, if agreed to by the requisite Lenders hereunder, shall not constitute
such an increase), (ii) change the percentage of the aggregate Commitments or of
the aggregate unpaid principal amount of the Loans, or the number or percentage
of Lenders, that shall be required for the Lenders or any of them to take or
approve, or direct the Administrative Agent to take, any action hereunder
(including as set forth in the definition of "Required Lenders"), (iii) except
as may be otherwise specifically provided in this Agreement or in any other
Credit Document, release all or substantially all of the Collateral, release
Matria from its obligations under its guaranty contained in ARTICLE XI, or
release any Subsidiary Guarantor from its obligations under the Subsidiary
Guaranty, or (iv) change any provision of SECTION 2.15 or this Section;
(c) unless agreed to by (i) all of the Revolving Credit Lenders,
extend the expiry date of any Letter of Credit beyond the seventh day prior to
the Revolving Credit Maturity Date, or (ii) the Required Revolving Credit
Lenders, change any other provision of ARTICLE III; and
(d) unless agreed to by the Issuing Lender, the Swingline Lender
or the Administrative Agent in addition to the Lenders required as provided
hereinabove to take such action, affect the respective rights or obligations of
the Issuing Lender, the Swingline Lender or the Administrative Agent, as
applicable, hereunder or under any of the other Credit Documents;
and provided further that (i) if any amendment, modification, waiver or consent
would adversely affect the holders of Loans of a particular Class (the "affected
Class") relative to holders of Loans of any other Class (including, without
limitation, by way of reducing the relative proportion of any payments,
prepayments or Commitment reductions to be applied for the benefit of holders of
Loans of the affected Class under SECTIONS 2.6(E) through 2.6(G)), then such
amendment, modification, waiver or consent shall require the consent of Lenders
holding more than sixty-six and two-thirds percent (66-2/3%) of the aggregate
outstanding principal amount of all Loans of the affected Class, and (ii) the
Fee Letter may be amended or modified, and any rights thereunder waived, in a
writing signed by the parties thereto.
12.7 Assignments, Participations. (a) Each Lender may assign to one
or more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments, the outstanding Loans made by it, the Note or
Notes held by it and its participations in Letters of Credit); provided,
however, that (i) any such assignment (other than an assignment to a Lender or
an
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Affiliate of a Lender) shall not be made without the prior written consent of
the Administrative Agent and Matria (to be evidenced by its counterexecution of
the relevant Assignment and Acceptance), which consent shall not be unreasonably
withheld (provided that Matria's consent shall not be required in the event a
Default or Event of Default shall have occurred and be continuing), (ii) each
such assignment need not be pro rata as between the Term Loans and the Revolving
Loans, but with respect to each Class of Loans, each such assignment by a Lender
of any of its interests relating to Loans of a particular Class shall be made in
such manner so that the same portion of its Commitment, Loans, Note or Notes and
other interests under and with respect to such Class is assigned to the relevant
Assignee, (iii) except in the case of an assignment to a Lender or an Affiliate
of a Lender, no such assignment shall be in an aggregate principal amount
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) less than (y) in the case of assignments of Term Loans and/or
Revolving Credit Commitments, $5,000,000, determined by combining the amount of
the assigning Lender's outstanding Term Loans and Revolving Credit Commitment
being assigned pursuant to such assignment (or, if less, the entire amount of
outstanding Term Loans and the entire Revolving Credit Commitment of the
assigning Lender), or (z) in the case of assignments of Swingline Loans, the
entire Swingline Commitment and the full amount of the outstanding Swingline
Loans, and (iv) the parties to each such assignment will execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment, and will pay a nonrefundable processing fee of $3,000 to the
Administrative Agent for its own account. Upon such execution, delivery,
acceptance and recording of the Assignment and Acceptance, from and after the
effective date specified therein, which effective date shall be at least five
Business Days after the execution thereof (unless the Administrative Agent shall
otherwise agree), (A) the Assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of the assigning Lender hereunder with respect thereto and (B) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (other than rights under the provisions of this Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the effective
date of such Assignment and Acceptance) and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of such assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto). The terms
and provisions of each Assignment and Acceptance shall, upon the effectiveness
thereof, be incorporated into and made a part of this Agreement, and the
covenants, agreements and obligations of each Lender set forth therein shall be
deemed made to and for the benefit of the Administrative Agent and the other
parties hereto as if set forth at length herein.
(b) The Administrative Agent will maintain at its address for
notices referred to herein a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Lenders and the Commitments of, and principal amount of the Loans owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Administrative Agent and the Lenders may treat each Person whose
name is
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recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers and
each Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an Assignee and, if required,
counterexecuted by Matria, together with the Note or Notes subject to such
assignment and the processing fee referred to in subsection (a) above, the
Administrative Agent will (i) accept such Assignment and Acceptance, (ii) on the
effective date thereof, record the information contained therein in the Register
and (iii) give notice thereof to Matria and the Lenders. Within five (5)
Business Days after its receipt of such notice, each applicable Borrower, at its
own expense, will execute and deliver to the Administrative Agent, in exchange
for the surrendered Note or Notes, a new Note or Notes to the order of the
Assignee (and, if the assigning Lender has retained any portion of its rights
and obligations hereunder, to the order of the assigning Lender), prepared in
accordance with the applicable provisions of SECTION 2.4 as necessary to
reflect, after giving effect to the assignment, the Commitments (or outstanding
Term Loans, as the case may be) of the Assignee and (to the extent of any
retained interests) the assigning Lender, dated the date of the replaced Note or
Notes and otherwise in substantially the form of EXHIBITS A-1, A-2 and A-3, as
applicable. The Administrative Agent will return canceled Notes to the
Borrowers.
(d) Each Lender may, without the consent of any Borrower, the
Administrative Agent or any other Lender, sell to one or more other Persons
(each, a "Participant") participations in any portion comprising less than all
of its rights and obligations under this Agreement (including, without
limitation, a portion of its Commitments, the outstanding Loans made by it, the
Note or Notes held by it and its participations in Letters of Credit); provided,
however, that (i) such Lender's obligations under this Agreement shall remain
unchanged and such Lender shall remain solely responsible for the performance of
such obligations, (ii) no Lender shall sell any participation that, when taken
together with all other participations, if any, sold by such Lender, covers all
of such Lender's rights and obligations under this Agreement, (iii) the
Borrowers, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and no Lender shall permit any Participant to
have any voting rights or any right to control the vote of such Lender with
respect to any amendment, modification, waiver, consent or other action
hereunder or under any other Credit Document (except as to actions that would
(x) reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other
Obligations, (y) extend the Term Loan Maturity Date, the Revolving Credit
Maturity Date or any other date fixed for the payment of any principal of or
interest on any Loan, any fees or any other Obligations, or (z) increase or
extend any Commitment of any Lender), and (iv) no Participant shall have any
rights under this Agreement or any of the other Credit Documents, each
Participant's rights against the granting Lender in respect of any participation
to be those set forth in the participation agreement, and all amounts payable by
the Borrowers hereunder shall be determined as if such Lender had not granted
such participation. Notwithstanding the foregoing, each Participant shall have
the rights of a Lender for purposes of SECTIONS 2.16(A), 2.16(B), 2.17, 2.18 and
9.3, and shall be entitled to the benefits thereto, to the extent that the
Lender granting such participation would be entitled to
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such benefits if the participation had not been made, provided that no
Participant shall be entitled to receive any greater amount pursuant to any of
such Sections than the Lender granting such participation would have been
entitled to receive in respect of the amount of the participation made by such
Lender to such Participant had such participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any
Lender from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release a Lender from any of its obligations hereunder.
(f) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section, disclose to the Assignee or Participant or proposed Assignee or
Participant any information relating to Matria and its Subsidiaries furnished to
it by or on behalf of any other party hereto, provided that such Assignee or
Participant or proposed Assignee or Participant agrees in writing to keep such
information confidential to the same extent required of the Lenders under
SECTION 12.13.
12.8 No Waiver. The rights and remedies of the Administrative Agent
and the Lenders expressly set forth in this Agreement and the other Credit
Documents are cumulative and in addition to, and not exclusive of, all other
rights and remedies available at law, in equity or otherwise. No failure or
delay on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or be construed to be a waiver of any Default or Event of Default. No
course of dealing between any of the Borrowers and the Administrative Agent or
the Lenders or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon any Borrower in any case shall entitle such Borrower or any other Borrower
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Administrative Agent or any Lender to
exercise any right or remedy or take any other or further action in any
circumstances without notice or demand.
12.9 Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, and all references herein to any party shall be
deemed to include its successors and assigns; provided, however, that (i) no
Borrower may sell, assign or transfer any of its rights, interests, duties or
obligations under this Agreement without the prior written consent of all of the
Lenders and (ii) any Assignees and Participants shall have such rights and
obligations with respect to this Agreement and the other Credit Documents as are
provided for under and pursuant to the provisions of SECTION 12.7.
12.10 Survival. All representations, warranties and agreements made
by or on behalf of any Borrower or any of its Subsidiaries in this Agreement and
in the other Credit Documents shall survive the execution and delivery hereof or
thereof, the making and repayment of the
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Loans and the issuance and repayment of the Letters of Credit. In addition,
notwithstanding anything herein or under applicable law to the contrary, the
provisions of this Agreement and the other Credit Documents relating to
indemnification or payment of fees, costs and expenses, including, without
limitation, the provisions of SECTIONS 2.16(A), 2.16(B), 2.17, 2.18, 10.7, 12.1
and 12.2, shall survive the payment in full of all Loans and Letters of Credit,
the termination of the Commitments and all Letters of Credit, and any
termination of this Agreement or any of the other Credit Documents.
12.11 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
12.12 Construction. The headings of the various articles, sections
and subsections of this Agreement have been inserted for convenience only and
shall not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
12.13 Confidentiality. Each Lender agrees to keep confidential,
pursuant to its customary procedures for handling confidential information of a
similar nature and in accordance with safe and sound banking practices, all
nonpublic information provided to it by or on behalf of Matria or any of its
Subsidiaries in connection with this Agreement or any other Credit Document;
provided, however, that any Lender may disclose such information (i) to its
directors, employees and agents and to its auditors, counsel and other
professional advisors, (ii) at the demand or request of any bank regulatory
authority, court or other Governmental Authority having or asserting
jurisdiction over such Lender, as may be required pursuant to subpoena or other
legal process, or otherwise in order to comply with any applicable Requirement
of Law, (iii) in connection with any proceeding to enforce its rights hereunder
or under any other Credit Document or any other litigation or proceeding related
hereto or to which it is a party, (iv) to the Administrative Agent or any other
Lender, (v) to the extent the same has become publicly available other than as a
result of a breach of this Agreement and (vi) pursuant to and in accordance with
the provisions of SECTION 12.7(F).
12.14 Counterparts; Effectiveness. This Agreement may be executed in
any number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto and receipt by the Administrative Agent and Matria of
written or telephonic notification of such execution and authorization of
delivery thereof.
12.15 Disclosure of Information. Matria agrees and consents to the
Administrative Agent's disclosure of information relating to this transaction to
Gold Sheets and other similar
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bank trade publications. Such information will consist of deal terms and other
information customarily found in such publications.
12.16 Judgment Currency. The obligations of the Borrowers and each
Guarantor hereunder and under the other Credit Documents to make payment of
principal of and interest on the Loans, and any other amounts payable hereunder
and thereunder, in the Applicable Currency (the "Obligation Currency") shall not
be discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency,
except to the extent that such tender or recovery shall result in the effective
receipt by the Administrative Agent or any applicable Lender of the full amount
of the Obligation Currency expressed to be payable under this Agreement or any
other Credit Document, as applicable. If, for the purpose of obtaining or
enforcing judgment against any Borrower or any Guarantor in any court or in any
jurisdiction, it becomes necessary to convert into or from any currency other
than the Obligation Currency (such other currency being hereinafter referred to
as the "Judgment Currency") an amount due in the Obligation Currency, the
conversion shall be made at the rate of exchange (as quoted by the
Administrative Agent or if the Administrative Agent does not quote a rate of
exchange on such currency, by a known dealer in such currency designated by the
Administrative Agent) or the Dollar Equivalent thereof, as the case may be,
determined, in each case, as of the Business Day immediately preceding the day
on which the judgment is given (such Business Day being hereinafter referred to
as the "Judgment Currency Conversion Date"). If there shall occur any change in
the rate of exchange prevailing between the Judgment Currency Conversion Date
and the date of actual payment of the amount due, each applicable Borrower
agrees to pay, or cause to be paid, such additional amounts, if any (but in any
event not a lesser amount), as may be necessary to ensure that the amount paid
in the Judgment Currency, when converted at the rate of exchange prevailing on
the date of payment, will produce the amount of the Obligation Currency that
could have been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial award at the rate of exchange prevailing on the Judgment
Currency Conversion Date. In determining the Dollar Equivalent or any other rate
of exchange for purposes of this Section, such amounts shall include any premium
or other costs payable in connection with the purchase of the Obligation
Currency.
12.17 European Monetary Union. (a) For purposes of this Section and
the remaining provisions of this Agreement and the other Credit Documents, the
following terms have the meanings set forth below:
"EMU" means economic and monetary union as contemplated in the Treaty
on European Union.
"EMU legislation" means legislative measures of the European Council
for the introduction of change over to or operation of a single or unified
European currency (whether known as the Euro or otherwise), being in part the
implementation of the third stage of EMU;
"Euro" means the single currency to which participating member states
of the European Union are converting;
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"Euro unit" means the currency unit of the Euro;
"national currency unit" means the unit of currency (other than a Euro
unit) of a participating member state;
"participating member state" means each state so described in any EMU
legislation; and
"Treaty on European Union" means the treaty of Rome of March 25, 1957,
as amended by the Single European Act 1986 and the Maastricht Treaty (signed
February 7, 1992) as amended from time to time.
(b) The provisions of subsections (c) through (l) below
(inclusive) shall be effective at and from the date of this Agreement; provided,
that if and to the extent that any such provision relates to any state (or the
currency of such state) that is not a participating member state on the date
hereof, such provision shall become effective in relation to such state (and the
currency of such state) at and from the date on which such state becomes a
participating member state.
(c) The Administrative Agent, the Lenders and the Borrowers agree
that the occurrence or non-occurrence of EMU, any event or events associated
with the EMU and/or the introduction of the Euro in all or any part of the
European Union will not result in the discharge, cancellation, rescission or
termination in whole or in part of any agreement between or among the
Administrative Agent, the Lenders and any Borrower or give the Administrative
Agent, any Lender or any Borrower the right to cancel, rescind, terminate or
vary any agreement, other than as specifically provided in this Agreement.
(d) Each obligation of any party under this Agreement that has
been denominated in the national currency unit of a participating member state
shall be redenominated into the Euro unit at the exchange rate set in accordance
with EMU legislation; provided, that if and to the extent that any EMU
legislation provides that following the beginning of the third stage of EMU an
amount denominated either in the Euro or in the national currency unit of a
member state and payable within the member state by crediting an account of a
creditor can be paid by a debtor either in the Euro unit or in that national
currency unit, each party to this Agreement shall be entitled to pay or repay
any such amount either in the Euro unit or in such national currency unit;
provided, however, any amount paid in a national currency unit shall be paid at
the fixed exchange rate in order to yield the required amount in Euros.
(e) Any Loan in the currency of a participating member state shall
be made in the Euro unit; provided that any Loan may, if so requested by any
Borrower, be made in the national currency unit (based upon the fixed exchange
rate) of any participating member state so long as such national currency unit
continues to be available as legal tender, is freely convertible and is not
subject to exchange controls.
(f) Those Sections of this Agreement providing for payment or
repayment in a national currency unit shall be construed so that, in relation to
the payment of any amount of Euro units or national currency units, such amount
shall be made available to the Administrative Agent in immediately available,
freely transferable, cleared funds to such account with each bank (in such
principal financial center) as the Administrative Agent may from time to time
nominate for this purpose.
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(g) Any amount payable by the Administrative Agent to the Lenders
under this Agreement in the currency of a participating member state shall be
paid in the currency received by it from the applicable Borrower.
(h) With respect to the payment of any amount denominated in the
Euro or in a national currency unit, the Administrative Agent shall not be
liable to the Borrowers or any of the Lenders in any way whatsoever for any
delay, or the consequences of any delay, in the crediting to any account of any
amount required by this Agreement to be paid by the Administrative Agent if the
Administrative Agent has made reasonable effort to effect all relevant steps to
achieve, on the date required by the Agreement, the payment of such amount in
immediately available, freely transferable, cleared funds (in the Euro unit or,
as the case may be, in a national currency unit) to the account with the bank in
the principal financial center in the participating member state which the
applicable Borrower or, as the case may be, any Lender shall have specified for
such purpose. In this paragraph, "all relevant steps" means all such steps as
may be prescribed from time to time by the regulations or operating procedures
of such clearing or settlement system as the Administrative Agent may from time
to time determine for the purpose of clearing or settling payment of the Euro.
(i) If the basis of accrual of interest or fees expressed in this
Agreement with respect to the currency of any state that becomes a participating
state shall, in the Administrative Agent's judgment, be inconsistent with any
convention or practice in the London interbank market for the basis of accrual
of interest or fees in respect of the Euro, or interest rate quotes for a
national currency unit are no longer provided, such convention or practice shall
replace such expressed basis effective as of and from the date on which such
state becomes a participating member state; provided, that if any Loan in the
currency of such state is outstanding immediately prior to such date, such
replacement shall take effect, with respect to such Loan, at the end of the then
current Interest Period.
(j) Without prejudice and in addition to any method of conversion
or rounding prescribed by any EMU legislation and without prejudice to the
respective liabilities for indebtedness of the Borrower to the Administrative
Agent and to the Lenders and the Administrative Agent and the Lenders to the
Borrower under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum amount
(or an integral multiple thereof) in a national currency unit to be
paid to or by the Administrative Agent shall be replaced by a reference
to such reasonably comparable and convenient amount (or an integral
multiple thereof) in the Euro unit as the Administrative Agent may from
time to time specify; and
(ii) except as expressly provided in this Agreement, each
provision of this Agreement, including, without limitation, the right
to combine currencies to effect a setoff, shall be subject to such
reasonable changes of interpretation as the Administrative Agent may
from time to time specify to be necessary or appropriate to reflect the
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implementation of the EMU to place the parties hereto in substantially
the position they would have occupied had the EMU not been implemented.
(k) Each applicable Borrower shall, upon demand from the
Administrative Agent or any Lender, pay to the Administrative Agent or such
Lender, as the case may be, the amount of any loss or cost or increased cost
incurred by, or of any reduction in any amount payable to or in the effective
return on its capital to, or of interest or other return, including principal,
foregone by the Administrative Agent or such Lender (as the case may be) or its
holding company as a result of the introduction of, change over to or operation
of the Euro in any participating member state, or such Borrower's election to
borrower in a national currency and repay in the Euro or to borrow in the Euro
and repay in a national currency.
(l) Each Borrower agrees, at the request of the Administrative
Agent, at the time of or at any time following the implementation of the EMU, to
enter into an agreement amending this Agreement in such manner as the
Administrative Agent reasonably shall request in order to reflect the
implementation of the EMU to place the parties hereto in the position they would
have been in had the EMU not been implemented.
12.18 Addition of Borrowers. Any Foreign Subsidiary of Matria may
join this Agreement as a Borrower hereunder upon (i) execution and delivery by
Matria, such Foreign Subsidiary and the Administrative Agent of a Joinder
Agreement providing for such Foreign Subsidiary to become a Borrower hereunder,
(ii) execution and delivery by such Foreign Subsidiary to the Administrative
Agent of (x) a Foreign Currency Note, appropriately completed as set forth in
SECTION 2.4, (y) a guaranty of the obligations to the Administrative Agent and
the Lenders of any other Foreign Subsidiaries that are Borrowers and that are
organized under the laws of the same jurisdiction as such Foreign Subsidiary,
and (z) a joinder to the Security Agreement or a separate security agreement in
form and substance satisfactory to the Administrative Agent, pursuant to which
such Foreign Subsidiary shall grant to the Administrative Agent a first priority
Lien upon and security interest in its accounts receivable, inventory,
equipment, general intangibles and other personal property as Collateral for
Loans made to such Foreign Subsidiary under the Credit Agreement, all accrued
interest thereon and such Foreign Subsidiary's ratable share of all fees,
expenses and other amounts due or payable at any time under the Credit Agreement
and the other Credit Documents, subject only to Permitted Liens, (iii) execution
and delivery by Matria and any applicable Subsidiaries to the Administrative
Agent of a Pledge Agreement or an amendment or supplement to the Matria Pledge
Agreement, together with the certificates evidencing the Capital Stock of such
Foreign Subsidiary being pledged thereby and undated stock powers duly executed
in blank, all as required by, and as described more completely in, SECTION 6.10,
and (iii) to the extent not previously delivered pursuant to SECTION 6.10,
delivery to the Administrative Agent of documents and certificates with respect
to such Foreign Subsidiary of the type described in SECTIONS 4.1(C) and 4.1(D)
and such other documents, certificates and opinions (including opinions of local
counsel in the jurisdiction of organization of such Foreign Subsidiary) as the
Administrative Agent may reasonably request, all in form and substance
reasonably satisfactory to the Administrative Agent. Any such Foreign Subsidiary
may be removed and released as a Borrower upon (a) written notice from Matria to
the Administrative Agent to such effect and
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(b) repayment in full of all outstanding Loans of such Borrower, together with
all accrued and unpaid interest thereon and all other fees, expenses and other
Obligations owing by such Borrower in connection therewith.
12.19 Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO MATRIA DATED DECEMBER 21, 1998 (EXCEPT AS
SPECIFICALLY OTHERWISE PROVIDED THEREIN), BUT SPECIFICALLY EXCLUDING THE FEE
LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED OR OTHERWISE
MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
MATRIA HEALTHCARE, INC.
By: /s/ Donald R. Miller
--------------------------------------------
Title: President
------------------------------------------
(signatures continued)
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FIRST UNION NATIONAL BANK, as Administrative
Agent and as a Lender
Term Loan By: /s/ J. Matthew MacIver
Commitment: ----------------------------------------
$80,000,000 Title: Vice President
---------------------------------------
Revolving Credit
Commitment: Instructions for wire transfers to the Administrative
$45,000,000 Agent:
First Union National Bank
ABA Routing No. 053000219
Charlotte, North Carolina
Account Name: Matria Healthcare, Inc.
Attention: Syndication Agency Services
Address for notices as a Lender:
First Union National Bank
150 Fourth Avenue North, Second Floor
Nashville, Tennessee 37219
Attention: Carolyn Hannon
Telephone: (615) 251-9374
Telecopy: (615) 251-9247
Lending Office:
First Union National Bank
150 Fourth Avenue North, Second Floor
Nashville, Tennessee 37219
Attention: Carolyn Hannon
Telephone: (615) 251-9374
Telecopy: (615) 251-9247
S-2
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EXHIBIT 99
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, effective as of December 21, 1998 to the Rights Agreement,
dated as of January 30, 1996 (the "Rights Agreement"), between Matria
Healthcare, Inc., a Delaware corporation (the "Company"), and SunTrust Bank,
Atlanta, a Georgia banking corporation, as Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights
Agreement specifying the terms of the Rights (as defined therein); and
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement in accordance with Section 27 of the Rights Agreement; and
WHEREAS, the Board of Directors of the Company has voted in favor of
this Amendment at a meeting of directors duly called and held; and
WHEREAS, there are Continuing Directors (as defined in the Rights
Agreement) serving on the Board of Directors of the Company and a majority of
the Continuing Directors have voted in favor of this Amendment at a meeting of
directors duly called and held;
NOW THEREFORE, in consideration of the premises and mutual agreements
set forth in the Rights Agreement and this Amendment, the parties hereby agree
as follows:
1. Section 1(a) is amended by adding the following at the end of
said Section:
Provided, further however, that neither any Investor
(as defined in that certain Standstill Agreement dated as of
January _, 1999, between the Company, Mark J. Gainor and SZ
Investments, L.L.C. (the "Standstill Agreement")) nor any such
Investor's Permitted Transferees (as defined in the Standstill
Agreement) shall be deemed to be an Acquiring Person solely by
virtue of (x) the execution of the Purchase and Sale Agreement
dated as of December 21, 1998 (the "Purchase Agreement")
between the Company and Gainor Medical Management, L.L.C., a
Georgia limited liability company ("GMM"), (y) the execution
of the Standstill Agreement, or (z) the consummation of any of
the transactions contemplated and expressly permitted by the
Purchase Agreement or Section 3.2(a), (b), or (c) of the
Standstill Agreement, except that if any Investor (or any
Permitted Transferee) acquires Matria Voting Securities (as
defined in the Standstill Agreement) other than in an
acquisition expressly permitted by Section 3.2(a), (b) or (c)
of the Standstill Agreement, such Matria Voting Securities,
together with all other Matria Voting Securities then
Beneficially Owned by such Investor (or such Investor's
Permitted Transferees), shall be counted in determining
whether such Investor (or any Permitted Transferee) is an
Acquiring Person.
<PAGE> 2
2. Section 1(m) is amended by adding the following at the end of said
Section:
Notwithstanding anything to the contrary contained in
this Agreement, the consummation of the transactions contemplated
and expressly permitted by the Purchase Agreement or Section 3.2
(a), (b) or (c) of the Standstill Agreement shall not constitute a
Triggering Event, except that if any Investor (or any Permitted
Transferee) acquires Matria Voting Securities (as defined in the
Standstill Agreement) other than in an acquisition expressly
permitted by Section 3.2(a), (b) or (c) of the Standstill Agreement,
such Matria Voting Securities, together with all other Matria Voting
Securities then Beneficially Owned by such Investor (or such
Investor's Permitted Transferees), shall be counted in determining
whether a Triggering Event has occurred.
3. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended hereby.
4. The foregoing Amendment shall be effective as of the date first
above written, and, except as set forth herein, the Rights Agreement shall
remain in full force and effect and shall be otherwise unaffected hereby. In the
event that the Purchase Agreement is terminated at any time prior to or on the
Closing Date (as defined therein), this Amendment shall immediately become void
and of no further force and effect.
5. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed this 15th day of January, 1999.
MATRIA HEALTHCARE, INC.
By: /s/ Donald R. Millard
--------------------------------------------
Name: Donald R. Millard
Title: President and Chief Executive Officer
SUNTRUST BANK, ATLANTA
By: /s/ Letitia A. Radford
--------------------------------------------
Name: Letitia A. Radford
Title: Vice President
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