UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934 (No Fee Required)
For the fiscal year ended May 31, 1998
OR
Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from to
Commission file number 1-14194
MORRISON HEALTH CARE, INC.
(Exact name of Registrant as specified in charter)
GEORGIA 63-1155966
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
1955 Lake Park Drive, Suite 400, Smyrna, GA 30080-8855
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 437-3300
Securities Registered Pursuant to Section 12(b) of The Act:
Name of each exchange
Title of each class on which registered
- ------------------------------------------ -----------------------
$0.01 par value Common Stock New York Stock Exchange
Rights to Purchase Series A Participating New York Stock Exchange
Preferred Stock
Securities Registered Pursuant to Section 12(g) of The Act:
None
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES[_X_] NO[__]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on August 14, 1998
as reported on the New York Stock Exchange, was approximately $215,874,329.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
The number of shares of the Registrant's common stock outstanding at August 14,
1998 was 12,084,408.
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended May 31, 1998 are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive proxy statement dated August 31, 1998
are incorporated by reference into Part III.
This form 10-K/A is being filed to amend and restate the Registrant's Form 10-K
for the fiscal year ended May 31, 1998 in its entirety to correct certain
typographical and formatting errors.
<PAGE>
INDEX
PART I
Page
Number
Item 1. Business.............................................. 3-6
Item 2. Properties............................................ 6
Item 3. Legal Proceedings..................................... 6
Item 4. Submission of Matters to a Vote of Security Holders... 7
Executive Officers of the Company..................... 7-8
PART II
Item 5. Market for the Registrant's Common Equity and
Related Shareholder Matters........................... 9
Item 6. Selected Financial Data............................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk........................................... 9
Item 8. Financial Statements and Supplementary Data........... 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 9
PART III
Item 10. Directors and Executive Officers of the Company....... 10
Item 11. Executive Compensation................................ 10
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................ 10
Item 13. Certain Relationships and Related Transactions........ 10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................... 11-14
<PAGE>
PART I
ITEM 1. BUSINESS.
General
Morrison Health Care, Inc., a Georgia corporation (the "Company" or "MHCI"),
became an independent, publicly owned company in March 1996 as a result of the
distribution (the "Distribution") by Morrison Restaurants Inc., a Delaware
corporation ("MRI"), to its shareholders of all the issued and outstanding
shares of common stock of the Company. As a result of the Distribution, MRI's
shareholders received one share of Company common stock for every three shares
of MRI held.
MHCI is the largest independent company focused exclusively on providing food
and nutrition services to health care facilities. Its clients include acute care
hospitals, health systems, nursing homes and retirement facilities. The
Company's mission is to be the leading provider of food and nutrition services
to the health care industry, fully committed to maximizing quality and value in
everything the Company does for its clients, customers, team members and
shareowners. With contracts in 33 states and Washington D.C., MHCI is one of the
leading providers of food and nutrition services to hospitals, senior living
facilities and other health care facilities across North America.
The Company's health care foodservice operations originated in the early 1950s.
The Company has expanded through its own marketing and sales force and by
acquiring other foodservice businesses. In August 1994, the Company sold certain
of its education, business and industry ("B&I") contracts and assets and closed
the remaining B&I accounts. This divestiture left the Company with only health
care contracts and allowed the Company to concentrate its capital and management
team in the health care and senior living industry, which Management believes
have a better opportunity for growth and profitability.
The Company believes the senior living market is the fastest growing segment of
the health care industry, due to changing demographics and lifestyles and the
number of retirement facilities being constructed. The Company has emphasized
its commitment to provide food and nutrition services to the senior living
market by acquiring two companies in the field: Drake Management Services, Inc.
in January 1998 which services the Southwest and Spectra Services, Inc. in March
1998 which services the Mid-west. Believing that this market is
under-penetrated and rapidly expanding, the Company plans for future growth in
the senior living market to result from acquisitions and internal development.
Operations
The Company operates the food and nutrition services departments of hospitals
and other health care facilities. These departments typically include retail
outlets for staff and visitors and patient food and nutrition services. MHCI
health care accounts range in size from 100 bed specialty hospitals to
facilities with over 2,100 beds. Senior living accounts range in size from 100
residents to 750 residents. The Company has operations in 33 states and
Washington, D.C. Approximately 68% of the accounts are in hospitals, while over
24% of the accounts are in senior living facilities.
The Company provides its clients with the flexibility to adjust programs,
staffing and service plans to meet the changing needs of the industry. MHCI has
capitalized on its retail heritage of operating restaurants to bring a
retail-oriented mentality to health care and senior living clients. MHCI offers
its clients programs designed to reduce costs and increase customer (patients
<PAGE>
and staff) satisfaction. To better serve its clients and provide them with
specialized expertise, MHCI's staff is organized into regional teams. Teams may
include a regional vice president, regional director of operations, regional
director of nutrition services, regional director of culinary, human resources
director, support services coordinator and a director of business development,
each of whom is dedicated to sharing the best industry practices and performance
improvement ideas. The regional teams are supported by a corporate staff that
includes nutrition services, marketing, sales, vending, human resources, legal,
finance, layout and design and culinary services.
MHCI offers its services pursuant to two general types of contracts:(i) profit
and loss (or guaranteed cost) contracts, where MHCI assumes the risk of profit
or loss for the foodservice operation and (ii) management fee contracts, where
the client reimburses MHCI for all or nearly all costs incurred in providing the
services contracted plus a negotiated management fee for supervising the
client's food and nutrition services operations. In addition, some management
fee contracts include incentives and penalties, pursuant to which MHCI manages
the client's food and nutrition operations on a management fee basis, with the
amount of the management fee determined in whole or in part by the achievement
of predetermined goals. Approximately 69% of MHCI's accounts are operated
pursuant to management fee contracts. Management fee contracts with incentives
and penalties are becoming more popular. The majority of MHCI's contracts were
awarded through bidding processes.
In addition, MHCI operates "branded concept" restaurants such as Pizza Hut(R)
and Taco Bell(R) on client premises. These branded concept accounts are
operated pursuant to license arrangements with the appropriate restaurant
company. Currently, MHCI has 13 license arrangements with nationally and
regionally recognized restaurant companies.
The Company has created a new program to develop advanced food preparation and
delivery systems. These systems are designed to increase customer satisfaction
by enhancing production consistencies while generating significant cost
reductions and providing quality services for health care facilities nationwide.
MHCI markets its services nationwide through its business development directors.
Each business development director focuses on potential clients in a specific
territory pursuant to a marketing plan. The business development directors,
along with a vice president of sales and marketing, also market MHCI's services
to large national health care accounts. In addition, MHCI personnel market to
existing clients to expand its foodservice responsibilities and increase sales
of existing services to complement the facility's foodservices department. The
Company is planning to continue its expansion into the senior living market
through internal growth and development as well as through key acquisitions.
Research and Development
The Company does not engage in any material research and development activities.
Numerous studies are made, however, on a continuing basis, to improve menus,
equipment and methods of operations.
Raw Materials
Raw materials essential to the operation of the Company's business are obtained
principally through national food distributors. The Company uses short-term
purchase commitment contracts to stabilize the potentially volatile pricing
<PAGE>
associated with certain commodities. Because of the relatively short storage
life of inventories, limited storage facilities at customer locations, MHCI's
requirements for freshness and the numerous sources of goods, a minimum amount
of inventory is maintained at customer locations. If necessary, all essential
food, beverage and operational products are available and can be obtained from
alternative suppliers in all cities where the Company operates. The Company has
entered into a purchasing arrangement with Ruby Tuesday, Inc. ("RTI"), successor
to MRI's casual dining business and Morrison Fresh Cooking, Inc. ("MFCI"), which
held the family dining assets of MRI and was spun off along with the Company
in the Distribution, to maintain the volume purchasing bargaining position
enjoyed by the Company prior to the Distribution.
Trademarks of the Company
The Company has registered certain trademarks and service marks with the United
States Patent and Trademark Office including the Pro-Health Dining(R) trademark.
The Company believes that this and other related marks are important to its
business. Registrations of the Company's trademarks expire from 2000 to 2009,
unless renewed.
Seasonality
The Company's revenues are not seasonal to any significant degree.
Working Capital Practices
Cash provided by operations, along with borrowings under the Company's revolving
lines of credit, are used to pay dividends, invest in new units and renovate
existing units.
Additional information concerning the working capital of the Company is
incorporated herein by reference to information presented within the "Liquidity
and Capital Resources" section of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the Company's 1998 Annual
Report to Shareholders.
Customer Dependence
No material part of the business of the Company is dependent upon a single
customer, or a very few customers, the loss of any one of which would have a
material adverse effect on the Company.
Government Contracts
There is no material portion of the Company's business that is subject to
renegotiation of profits or termination of contracts or sub-contracts at the
election of the Government.
Competition
The health care food and nutrition services business is highly competitive. The
Company competes with national and regional food contract companies that offer
the same type of services as the Company. Management believes that competition
in health care food and nutrition services is based on pricing, quality of
<PAGE>
services and reputation. Management believes that it compares favorably with its
competition in these areas.
Government Compliance
The Company is subject to various regulations at both the state and local levels
for items such as sanitation, health and fire safety, all of which could affect
the operation of existing accounts. The Company's business is also subject to
various other regulations at the federal level such as fair labor standards and
occupational safety and health regulations. Compliance with these regulations
has not had, and is not expected to have, a material adverse effect on the
Company's operations.
Environmental Compliance
Compliance with federal, state and local laws and regulations which have been
enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, is not expected to
have a material effect upon the capital expenditures, earnings or competitive
position of the Company.
Personnel
The Company employs approximately 4,300 full-time and part-time employees. The
Company believes that working conditions are favorable and employee compensation
is comparable with its competition.
ITEM 2. PROPERTIES.
MHCI professionally manages foodservice departments on client-owned properties
and, therefore, does not own any significant amounts of property. Vending
services on client-owned facilities complement the foodservice program. Under
the terms of certain contracts, MHCI is required to make rent payments to its
clients.
The corporate headquarters are located in approximately 15,000 square feet of a
leased building in a suburb of Atlanta, Georgia. The headquarters' lease term
ends in 2001 with remaining average annual lease payments of approximately
$278,000. The Company also has administrative offices in a leased building in
Mobile, Alabama. This office has a lease term ending in 2001 with remaining
average annual lease payments of approximately $108,000. In addition, there are
nine regional offices across the United States, each of which is generally less
than 1,500 square feet, with total average annual lease payments of less than
$145,000.
During the fiscal year, MHCI constructed of two advanced food preparation
facilities. The first facility, located in Tampa, Florida, provides for about
5,000 square feet of light industrial space with a lease term ending in 2002 and
average annual lease payments of about $29,000. The second facility, located in
Baltimore, Maryland, includes approximately 15,000 square feet of light
industrial and regional office space and has average annual lease payments of
about $98,000
Facilities and equipment are repaired and maintained to assure their adequacy,
productive capacity and utilization.
ITEM 3. LEGAL PROCEEDINGS.
The Company is presently, and from time to time, subject to pending claims and
suits arising in the ordinary course of its business. In the opinion of
Management, the ultimate resolution of these pending legal proceedings will not
have a material adverse effect on the Company's operations or consolidated
financial position.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Executive Officers of the Company
Executive officers of the Company are appointed by and serve at the discretion
of the Company's Board of Directors. Information regarding the Company's
executive officers as of August 14, 1998 is provided below.
Name Age Position with the Company
G. A. Davenport 44 President, Chief Executive Officer and Director
K. W. Engwall 50 Senior Vice President, Finance and Assistant
Secretary
J. E. Fountain 47 Vice President, General Counsel and Secretary
J. D. Underhill 53 Senior Vice President, Operations
G. L. Gaddy 45 Senior Vice President, Sales and Marketing
F. G. Michels 60 Senior Vice President, Support Services
R. C. Roberson 54 Divisional Vice President
<PAGE>
Glenn A. Davenport has been President and Chief Executive Officer of the Company
since the Distribution in March 1996. He was President of the Health Care
Division of MRI's Morrison Group from November 1993 until the Distribution in
March 1996. Prior thereto, he served as Senior Vice President, Hospitality Group
of MRI from February 1990 through November 1993 and in various other capacities
since joining MRI in November 1973.
K. Wyatt Engwall has been Senior Vice President, Finance and Assistant Secretary
of the Company since the Distribution in March 1996. Prior thereto, he was Vice
President, Controller of MRI's Ruby Tuesday Group from January 1994 until March
1996. He served as Vice President of Financial Planning of MRI from January 1993
through January 1994, Vice President and Controller of MRI's Contract Dining
Division from October 1991 through January 1993 and as Controller of MRI's
former Morrison's Management Services (Contract Dining) Division from October
1986 through October 1991. Mr. Engwall joined MRI in 1983 as a Financial Systems
Analyst.
John E. Fountain has been Vice President, General Counsel and Secretary of the
Company since the Distribution in March 1996. He was Vice President, Legal of
MRI's Morrison Group from August 1994 until March 1996. He served as Senior
Attorney of MRI from December 1991 through August 1994. Prior thereto, he served
as Staff Attorney of MRI from October 1978 through December 1991.
Jerry D. Underhill has been Senior Vice President, Operations of the Company
since the Distribution in March 1996. He was Senior Vice President, Retail
Development of the Health Care Division of MRI's Morrison Group from September
1995 until March 1996. Prior thereto, he was Senior Vice President,
<PAGE>
Development of the Family Dining Division of MRI's Morrison Group from March
1993 to September 1995. Mr. Underhill was President of Mid-Continent Restaurants
(currently known as Bravo Restaurants) from July 1988 to March 1993.
Gary L. Gaddy has been Senior Vice President, Sales and Marketing of the Company
since March 1998. Prior thereto, he was Vice President, Health Systems for the
Company since July 1997. Mr. Gaddy was Vice President of Sales and Marketing for
EmCare, Inc., an emergency medicine contract management company from January
1995 to July 1997. He was Vice President/General Manager of Business Development
for HMSS Management, Inc., a home infusion company, from August 1990 to December
1994. Mr. Gaddy has over 20 years of sales and marketing experience in the
healthcare industry.
Frances G. Michels has been Senior Vice President, Support Services of the
Company since the Distribution in March 1996. She was Senior Vice President,
Support Services of the Health Care Division of MRI's Morrison Group from
January 1996 until March 1996. Prior thereto, she served MRI's Health Care
Division in various capacities, including as Vice President of Nutrition
Services from December 1984 through January 1996, Area Manager for Operations
and Nutrition Services from January 1982 through December 1984, Consulting
Dietitian for the Health Care Division from June 1974 through January 1982,
Foodservice Director from July 1973 through June 1974, and Chief Therapeutic
Dietitian from June 1970 through July 1973.
Richard C. Roberson has been a Division Vice President of the Company since
October 1997. He was a Regional Vice President of the Company since the
Distribution in March 1996. Prior thereto, he served MRI's Health Care Division
in various capacities, including as a Regional Vice President, District Manager
and Foodservice Director.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
Certain information required by this item is incorporated herein by reference to
information contained under the caption "Common Stock Market Prices and
Dividends" of the Registrant's Annual Report to Shareholders for the fiscal year
ended May 31, 1998. The Company intends to continue to pay dividends in the
future.
ITEM 6. SELECTED FINANCIAL DATA.
The information contained under the caption "Selected Financial Data" of the
Registrant's Annual Report to Shareholders for the fiscal year ended May 31,
1998 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of the Registrant's
Annual Report to Shareholders for the fiscal year ended May 31, 1998 is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and the related report of the
Company's independent auditors contained in the Registrant's Annual Report to
Shareholders for the fiscal year ended May 31, 1998, are incorporated herein by
reference:
Consolidated Statements of Income - Fiscal years ended May 31, 1998, May
31, 1997 and June 1, 1996.
Consolidated Balance Sheets - As of May 31, 1998 and May 31, 1997.
Consolidated Statements of Stockholders' Equity - Fiscal years ended May
31, 1998, May 31, 1997 and June 1, 1996.
Consolidated Statements of Cash Flows - Fiscal years ended May 31, 1998,
May 31, 1997 and June 1, 1996.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
(a) The information regarding directors of the Company is incorporated herein by
reference to the information set forth in the table captioned "Director and
Director Nominee Information" under "Election of Directors" in the definitive
proxy statement of the Registrant dated August 31, 1998, relating to the
Registrant's annual meeting of shareholders to be held on September 29, 1998.
(b) Pursuant to Form 10-K General Instruction G(3), the information regarding
executive officers of the Company has been included in Part I of this Report
under the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is incorporated herein by reference to
the information set forth under the captions "Executive Compensation" and
"Election of Directors - Directors' Fees and Attendance" in the definitive proxy
statement of the Registrant dated August 31, 1998 relating to the Registrant's
annual meeting of shareholders to be held on September 29, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is incorporated herein by reference to
the information set forth in the table captioned "Beneficial Ownership of Common
Stock" under "Election of Directors" in the definitive proxy statement of the
Registrant dated August 31, 1998, relating to the Registrant's annual meeting of
shareholders to be held on September 29, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are incorporated by reference into or are filed as
part of this report:
1. Financial Statements:
The following consolidated financial statements and the independent
auditors' report thereon, included in the Registrant's Annual Report
to Shareholders for the fiscal year ended May 31, 1998, a copy of
which is contained in the exhibits to this report, are incorporated
herein by reference:
Page Reference
in paper version
of Annual Report
to Shareholders
Consolidated Statements of Income for
the fiscal years ended May 31, 1998,
May 31, 1997 and June 1, 1996...................... 18
Consolidated Balance Sheets as of
May 31, 1998 and May 31, 1997...................... 19
Consolidated Statements of Stockholders' Equity
for the fiscal years ended May 31, 1998,
May 31, 1997 and June 1, 1996...................... 21
Consolidated Statements of Cash Flows
for the fiscal years ended May 31, 1998,
May 31, 1997 and June 1, 1996...................... 20
Notes to Consolidated Financial Statements......... 22 - 31
Report of Independent Auditors..................... 32
Page Reference
in Form 10-K
2. Financial statement schedules:
Schedule II - Valuation and Qualifying
Accounts for the fiscal years ended
May 31, 1998, May 31, 1997 and
June 1, 1996...................................... 17
Financial statement schedules other than those shown above are
omitted because they are either not required or the required
information is shown in the financial statements or notes
thereto.
3. Exhibits
The following exhibits are filed as part of this report:
<PAGE>
MORRISON HEALTH CARE, INC.
LIST OF EXHIBITS
Exhibit
- --------------------------------------------------------------------------------
Number Description
3.1 Amended and Restated Articles of Incorporation of Morrison Health
Care, Inc.*
3.2 Bylaws, as amended, of Morrison Health Care, Inc.**
4.1 Specimen Common Stock Certificate.+
4.2 Amended and Restated Articles of Incorporation of Morrison Health
Care, Inc. (see Exhibit 3.1 hereto).
4.3 Bylaws, as amended, of Morrison Health Care, Inc. (see Exhibit
3.2 hereto).
4.4 Form of Rights Agreement between Morrison Health Care, Inc. and
AmSouth Bank of Alabama, as Rights Agent.+
4.5 Form of Rights Certificate (attached as Exhibit B to the Rights
Agreement filed as Exhibit 4.4 hereto).
4.6 Form of First Amendment to Rights Agreement.
10.1 Form of Distribution Agreement among Morrison Restaurants Inc.,
Morrison Fresh Cooking, Inc. and Morrison Health Care, Inc.*
10.2 Form of Amended and Restated Tax Allocation and Indemnification
Agreement among Morrison Restaurants Inc., Custom Management
Corporation of Pennsylvania, Custom Management Corporation, John C.
Metz & Associates, Inc., Morrison International, Inc., Morrison Custom
Management Corporation of Pennsylvania, Morrison Fresh Cooking, Inc.,
Ruby Tuesday, Inc., a Delaware corporation, Ruby Tuesday (Georgia),
Inc., a Georgia corporation, Galaxy Management, Inc., Manask Food
Service, Inc., Morrison of New Jersey, Inc., Tias, Inc. and Morrison
Health Care, Inc.*
10.3 Form of Agreement Respecting Employee Benefit Matters among
Morrison Restaurants Inc., Morrison Fresh Cooking, Inc. and
Morrison Health Care, Inc.+
10.4 Form of License Agreement between Morrison Fresh Cooking, Inc.
and Morrison Health Care, Inc.*
10.5 Form of License Agreement between Ruby Tuesday, Inc. and Morrison
Health Care, Inc.*
10.6 Form of Amended and Restated Operating Agreement of MRT
Purchasing, LLC among Morrison Restaurants Inc., Ruby Tuesday,
Inc., Morrison Fresh Cooking, Inc. and Morrison Health Care,
Inc.*
<PAGE>
10.7*** Form of Morrison Health Care, Inc. 1996 Stock Incentive Plan.+
10.8*** Form of Morrison Health Care, Inc. Stock Incentive and Deferred
Compensation Plan for Directors.+
10.9*** Form of 1996 Non-Executive Stock Incentive Plan.+
10.10*** Form of Morrison Health Care, Inc. Executive Supplemental Pension
Plan.+
10.11*** Form of Morrison Health Care, Inc. Management Retirement Plan.+
10.12*** Form of Morrison Health Care, Inc. Salary Deferral Plan together
with related form of Trust Agreement.+
10.13*** Form of Morrison Health Care, Inc. Deferred Compensation Plan and
related form of Trust Agreement.+
10.14*** Form of Morrison Health Care, Inc. Executive Group Life and Executive
Accidental Death and Dismemberment Plan.+
10.15*** Form of Morrison Health Care, Inc. Executive Life Insurance Plan.+
10.16 Form of Indemnification Agreement to be entered into with executive
officers and directors.*
10.17*** Form of Change of Control Agreement to be entered into with executive
officers.+
10.18 Non-Qualified Stock Option Agreement between Morrison Restaurants
Inc. and Eugene E. Bishop.+
10.19 Non-Qualified Stock Option Agreement between Morrison Restaurants
Inc. and Samuel E. Beall, III.+
10.20 Form of Amended and Restated Credit Agreement dated July 2, 1998,
together with related Amended and Restated Revolving Credit Notes,
Amended and Restated Swing Line Note and Subsidiary Guaranty.
10.21*** Form of First Amendment to the Morrison Health Care, Inc.
Executive Supplemental Pension Plan.++
10.22*** Form of First Amendment to the Morrison Health Care, Inc.
Management Retirement Plan.++
10.23*** Form of First Amendment to the Morrison Health Care, Inc. Salary
Deferral Plan.++
10.24*** Form of Second Amendment to the Morrison Health Care, Inc.
Salary Deferral Plan.++
<PAGE>
10.25*** Form of First Amendment to the Morrison Health Care, Inc.
Deferred Compensation Plan.++
10.26*** Form of Second Amendment to the Morrison Health Care, Inc.
Deferred Compensation Plan.++
10.27*** Form of Morrison Health Care, Inc. Salary Deferral Plan together with
related form of Amended Trust Agreement.
10.28*** Form of Morrison Health Care, Inc. Deferred Compensation Plan and
related form of Amended Trust Agreement.
10.29*** Form of First Amendment to the 1996 Executive Stock Incentive Plan.
10.30*** Form of First Amendment to the 1996 Non-Executive Stock Incentive
Plan.
10.31*** Form of Second Amendment to the 1996 Executive Stock Incentive Plan.
10.32*** Form of Second Amendment to the 1996 Non-Executive Stock Incentive
Plan.
10.33*** Form of Third Amendment to the. Morrison Health Care, Inc. Salary
Deferral Plan.
10.34 Stock Purchase Agreement of Drake Management Services, Inc.
10.35 Asset Purchase Agreement of Spectra Services, Inc.
11 Statement regarding computation of per share earnings.
13 Annual Report to Shareholders for the fiscal year ended May 31, 1998
(Only portions specifically incorporated by reference in the
Form 10-K are incorporated herewith.)
21.1 List of subsidiaries of Morrison Health Care, Inc.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
* Incorporated by reference to Exhibit of the same number in the Registrant's
Registration Statement on Form 10 filed with the Commission on February 8,
1996.
** Incorporated by reference to Exhibit of the same number in the Registrant's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998.
*** Denotes a management contract or compensatory plan or arrangement.
+ Incorporated by reference to Exhibit of the same number in the Registrant's
amendment to Registration Statement on Form 10/A filed with the Commission
on February 29, 1996.
++ Incorporated by reference to Exhibit of the same number in the Registrant's
Annual report on Form 10-K for the fiscal year ended May 31, 1997.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the most recent fiscal
quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MORRISON HEALTH CARE, INC.
Date 09/3/98 By:/s/ Glenn A. Davenport
Glenn A. Davenport
President, Chief Executive Officer
and Director
<PAGE>
<TABLE>
Morrison Health Care, Inc.
Schedule II - VALUATION AND QUALIFYING ACCOUNTS For the Periods Ended May 31, 1998,
May 31, 1997 and June 1, 1996
(Dollars in Thousands)
Column A Column B Column C Column D (A) Column E
- -----------------------------------------------------------------------------------------------
Additions
-----------------------
Balance Charged Charged Balance
at to to at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
-----------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1998:
Trade receivables:
Allowance for doubtful accounts $ 744 $ 0 $ 196 $ 53 $ 887
===========================================================
Year ended May 31, 1997:
Trade receivables:
Allowance for doubtful accounts $1,122 $ 0 $ 0 $ 378 $ 744
===========================================================
Year ended June 1, 1996:
Trade receivables:
Allowance for doubtful accounts $1,641 $ 0 $ 0 $ 519 $1,122
===========================================================
</TABLE>
Notes: (A) Write-off of trade receivables determined to be uncollectible against
the allowance for doubtful accounts.
EXHIBIT 4.6
AMENDMENT NUMBER 1 TO
RIGHTS AGREEMENT
This Amendment, made this 29th day of May, 1998 between Morrison Health
Care, Inc., a Georgia corporation (the "Company"), and SunTrust Bank, Atlanta
("SunTrust"), amends that certain Rights Agreement between the Company and
AmSouth Bank of Alabama ("AmSouth"), dated as of March 2, 1996 (the "Rights
Agreement").
W I T N E S S E T H
WHEREAS, pursuant to Section 21 of the Rights Agreement, the Company has
removed AmSouth as Rights Agent under the Rights Agreement, effective as of June
1, 1998 (the "Effective Date"); and
WHEREAS, the Company desires to appoint SunTrust, and SunTrust desires to
serve as, Successor Rights Agent under the Rights Agreement, effective as of the
Effective Date.
NOW, THEREFORE, in consideration of the premises 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. Appointment of Successor Rights Agent. The Company hereby appoints
SunTrust to serve as the Successor Rights Agent under the Rights Agreement, to
be effective as of the Effective Date, and SunTrust hereby accepts such
appointment.
2. Amendment of Rights Agreement. The Rights Agreement is hereby amended
effective as of the Effective Date such that all references to the "Rights
Agent" under the Rights Agreement shall refer to SunTrust rather than AmSouth.
3. Undertakings. Each of the parties hereto agrees to take any and all
actions necessary to cause SunTrust to serve as Rights Agent under the Rights
Agreement, including, without limitation, the Company sending notice, prior to
the Effective Date, to AmSouth and each transfer agent of the Company's stock
that SunTrust has been appointed Successor Rights Agent under the Rights
Agreement.
4. Continuation of Rights Agreement. Except as explicitly amended above,
the Rights Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Amendment as of the date first above written.
MORRISON HEALTH CARE, INC.
By:/s/John E. Fountain
Title:Vice President and General
Counsel
SUNTRUST BANK, ATLANTA
By:/s/ Sue Hampton
Title:Assistant Vice President
<PAGE>
EXHIBIT 10.20
EXECUTION COUNTERPART
==================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of July 2, 1998
among
MORRISON HEALTH CARE, INC.,
THE LENDERS LISTED HEREIN,
SUNTRUST BANK, ATLANTA, as Issuing Bank,
SUNTRUST BANK, ATLANTA, as Agent, and
WACHOVIA BANK, N.A., as Co-Agent
for the Issuing Bank and the Lenders
==================================================================
TABLE OF CONTENTS
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS; CONSTRUCTION ........................................1
Section 1.01 Definitions...............................................1
Section 1.02 Accounting Terms and Determination...................... 16
Section 1.03 Other Definitional Terms.................................16
Section 1.04 Exhibits and Schedules...................................16
ARTICLE II. LOANS AND LETTERS OF CREDIT.....................................17
Section 2.01 Commitments; Use of Proceeds.............................17
Section 2.02 Swing Line Subfacility...................................18
Section 2.03 Letter of Credit Subfacility.............................20
Section 2.04 Notes; Repayment of Principal............................23
Section 2.05 Voluntary Reduction of Commitments.......................23
Section 2.06 Increase of the Commitments..............................24
ARTICLE III. GENERAL LOAN TERMS.............................................25
Section 3.01 Funding Notices..........................................25
Section 3.02 Disbursement of Funds....................................26
Section 3.03 Interest.................................................28
Section 3.04 Interest Periods.........................................29
Section 3.05 Fees.....................................................29
Section 3.06 Voluntary Prepayments of Borrowings......................30
Section 3.07 Payments, etc............................................31
Section 3.08 Interest Rate Not Ascertainable, etc.....................34
Section 3.09 Illegality...............................................34
Section 3.10 Increased Costs..........................................35
Section 3.11 Lending Offices..........................................36
Section 3.12 Funding Losses...........................................37
Section 3.13 Assumptions Concerning Funding of Eurodollar Advances....37
Section 3.14 Apportionment of Payments................................37
Section 3.15 Termination of Commitments...............................38
Section 3.16 Sharing of Payments, Etc.................................38
Section 3.17 Capital Adequacy.........................................38
Section 3.18 Letter of Credit Obligations Absolute....................39
ARTICLE IV. CONDITIONS TO BORROWINGS........................................40
Section 4.01 Conditions Precedent to Initial Loans....................40
Section 4.02 Conditions to Each Loan..................................42
ARTICLE V. REPRESENTATIONS AND WARRANTIES...................................43
Section 5.01 Corporate Existence; Compliance with Law.................43
Section 5.02 Corporate Power; Authorization...........................43
Section 5.03 Possession of Franchises, Licenses, Etc..................43
Section 5.04 Enforceable Obligations..................................44
Section 5.05 No Legal Bar.............................................44
Section 5.06 No Material Litigation...................................44
Section 5.07 Investment Company Act, Etc..............................44
Section 5.08 Margin Regulations.......................................44
Section 5.09 Compliance With Environmental Laws.......................44
Section 5.10 Insurance................................................45
Section 5.11 No Default...............................................45
Section 5.12 No Burdensome Restrictions...............................46
Section 5.13 Taxes....................................................46
Section 5.14 Subsidiaries.............................................46
Section 5.15 Financial Statements.....................................46
Section 5.16 ERISA....................................................47
Section 5.17 Patents, Trademarks, Licenses, Etc.......................48
Section 5.18 Ownership of Property....................................48
Section 5.19 Indebtedness.............................................48
Section 5.20 Financial Condition......................................48
Section 5.21 Labor Matters............................................49
Section 5.22 Payment or Dividend Restriction..........................49
Section 5.23 Sharing Agreements.......................................49
Section 5.24 Disclosure...............................................49
Section 5.25. Year 2000 Compliant......................................50
ARTICLE VI. AFFIRMATIVE COVENANTS ..........................................50
Section 6.01 Corporate Existence, Etc.................................50
Section 6.02 Compliance with Laws, Etc................................50
Section 6.03 Payment of Taxes and Claims, Etc.........................50
Section 6.04 Keeping of Books.........................................50
Section 6.05 Visitation, Inspection, Etc..............................50
Section 6.06 Insurance; Maintenance of Properties.....................51
Section 6.07 Reporting Covenants......................................51
Section 6.08 Financial Covenants......................................55
Section 6.09 Notices Under Certain Other Indebtedness.................55
Section 6.10 Additional Credit Parties and Collateral.................55
ARTICLE VII. NEGATIVE COVENANTS.............................................56
Section 7.01 Indebtedness.............................................56
Section 7.02 Liens....................................................57
Section 7.03 Mergers, Sales, Acquisitions.............................58
Section 7.04 Investments, Loans, Etc..................................59
Section 7.05 Letters of Credit........................................60
Section 7.06 Sale and Leaseback Transactions..........................61
Section 7.07 Transactions with Affiliates.............................61
Section 7.08 Changes in Business......................................61
Section 7.09 ERISA....................................................61
Section 7.10. Limitation on Payment Restrictions Affecting Consolidated
Companies................................................62
Section 7.11 Actions Under Certain Documents..........................62
Section 7.12 Additional Negative Pledges..............................62
Section 7.13 Changes in Fiscal Year...................................62
Section 7.14 Issuance of Stock by Subsidiaries........................62
Section 7.15 Dividends................................................62
ARTICLE VIII. EVENTS OF DEFAULT.............................................63
Section 8.01 Payments.................................................63
Section 8.02 Covenants Without Notice.................................63
Section 8.03 Other Covenants..........................................63
Section 8.04 Representations..........................................63
Section 8.05 Non-Payments of Other Indebtedness.......................63
Section 8.06. Defaults Under Other Agreements; Change In Control
Provisions...............................................63
Section 8.07 Bankruptcy...............................................64
Section 8.08 ERISA....................................................64
Section 8.09 Judgments................................................65
Section 8.10 Ownership of Credit Parties..............................65
Section 8.11 Change in Control of Borrower............................65
Section 8.12 Default Under Other Credit Documents; Sharing Agreements.66
ARTICLE IX. THE AGENT.......................................................66
Section 9.01 Appointment of Agent.....................................66
Section 9.02 Authorization of Agent with Respect to the Security
Documents................................................67
Section 9.03 Nature of Duties of Agent................................67
Section 9.04 Lack of Reliance on the Agent............................67
Section 9.05 Certain Rights of the Agent..............................68
Section 9.06 Reliance by Agent........................................68
Section 9.07 Indemnification of Agent.................................68
Section 9.08 The Agent in its Individual Capacity.....................69
Section 9.09 Holders of Notes.........................................69
Section 9.10 Successor Agent..........................................69
ARTICLE X. MISCELLANEOUS....................................................70
Section 10.01 Notices.................................................70
Section 10.02 Amendments, Etc.........................................70
Section 10.03 No Waiver; Remedies Cumulative..........................71
Section 10.04 Payment of Expenses, Etc................................71
Section 10.05 Right of Setoff.........................................73
Section 10.06 Benefit of Agreement; Assignments; Participations.......73
Section 10.07 Governing Law; Submission to Jurisdiction...............75
Section 10.08 Independent Nature of Lenders' Rights...................76
Section 10.09 Counterparts............................................76
Section 10.10 Effectiveness; Termination of Commitments; Survival.....77
Section 10.11 Severability............................................77
Section 10.12 Independence of Covenants...............................77
Section 10.13 Change in Accounting Principles, Fiscal Year or Tax
Laws....................................................77
Section 10.14 Headings Descriptive; Entire Agreement..................78
SCHEDULES
Schedule 5.01 Organization and Ownership of
Subsidiaries
Schedule 5.05 Certain Pending and Threatened
Litigation
Schedule 5.09(a) Environmental Compliance
Schedule 5.09(b) Environmental Notices
Schedule 5.09(c) Environmental Permits
Schedule 5.11 No Defaults
Schedule 5.12 Burdensome Restrictions
Schedule 5.13 Tax Filings and Payments
Schedule 5.14 Material Subsidiaries
Schedule 5.16 Employee Benefit Matters
Schedule 5.17 Patent, Trademark, License, and
Other Intellectual Property
Matters
Schedule 5.18 Ownership of Properties
Schedule 5.19 Labor and Employment Matters
Schedule 5.22 Dividend Restrictions
Schedule 5.23 Disclosure
Schedule 7.01 Existing Indebtedness
Schedule 7.02 Existing Liens
EXHIBITS
Exhibit A - Form of Amended and Restated Revolving Credit Note
Exhibit B - Form of Amended and Restated Swing Line Note
Exhibit C - Subsidiary Guaranty Agreement
Exhibit D - Form of Closing Certificate
Exhibit E - Form of Opinion of Powell, Goldstein,
Frazer & Murphy, LLP
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Letter of Credit Application
Exhibit H - Form of Compliance Certificate
Exhibit A
AMENDED AND RESTATED CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") made and entered into as
of July 2, 1998, by and among MORRISON HEALTH CARE, INC., a Georgia
corporation (the "Borrower"), SUNTRUST BANK, ATLANTA, a banking corporation
organized under the laws of the State of Georgia ("SunTrust"), the other
banks and lending institutions listed on the signature pages hereof, and any
assignees of SunTrust, or such other banks and lending institutions which
become "Lenders" as provided herein (SunTrust and such other banks, lending
institutions, and assignees referred to collectively herein as the
"Lenders"), SUNTRUST BANK, ATLANTA, as the issuing bank (the "Issuing Bank"),
SUNTRUST BANK, ATLANTA, as Agent (the "Agent") for the Issuing Bank and the
Lenders, and WACHOVIA BANK, N.A., as Co-Agent (the "Co-Agent") for the
Issuing Bank and the Lenders;
W I T N E S S E T H:
WHEREAS, on March 6, 1996, Borrower entered into a Credit
Agreement by and among Borrower, SunTrust, the other banks and lending
institutions listed on the signature pages thereof, and SunTrust Bank,
Atlanta in its capacity as agent for such banks and lending institutions (the
"Original Credit Agreement");
WHEREAS, in connection with this Agreement, Borrower, the
Lenders, and the Agent wish to amend and restate the Original Credit
Agreement to increase the revolving credit facility thereunder and provide
for a letter of credit subfacility, all as more particularly evidenced herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Borrower, the Lenders, the Issuing Bank, the
Agent and the Co-Agent agree, upon the terms and subject to the conditions
set forth herein as follows:
ARTICLE I.
DEFINITIONS; CONSTRUCTION
Section I.1. Definitions. In addition to the other terms
defined herein, the following terms used herein shall have the meanings
herein specified (to be equally applicable to both the singular and plural
forms of the terms defined):
"Account Party" shall mean the Borrower or any Guarantor in whose
account a Letter of Credit is to be or has been issued.
"Advance" shall mean any principal amount advanced and remaining
outstanding at any time as (i) the Revolving Loans, which Advances shall be
made or outstanding as Base Rate Advances or Eurodollar Advances, as the case
may be, or (ii) a Swing Line Loan, which Advances shall be made or
outstanding as Swing Rate Advances.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person.
"Agent" shall mean, SunTrust Bank, Atlanta, a Georgia banking
corporation, as Agent for the Lenders and the Issuing Bank under this
Agreement and the other Loan Documents and any successor agent appointed
pursuant to Section 9.10 hereto.
"Agreement" shall mean this Credit Agreement, as hereafter
amended, restated, supplemented or otherwise modified from time to time.
"Applicable Margin" shall mean the percentage designated below
based on the Leverage Ratio of the Consolidated Companies, measured
quarterly, effective in the next fiscal quarter immediately following the
date of delivery of the Compliance Certificate to the Agent:
------------------------------------------
Applicable Margin
Leverage Ratio (LIBOR Advance)
==========================================
Less than 1.00:1.00 0.50%
------------------------------------------
Greater than or equal
to 1.00:1.00 and less
than 2.00:1.00 0.625%
------------------------------------------
Greater than or equal
to 2.00:1.00 and less
than 2.50:1.00 0.75%
------------------------------------------
Greater than or equal
to 2.50:1.00 and less
than 3.00:1.00 1.00%
------------------------------------------
For purposes of the foregoing, (i) the Applicable Margin as of the
Closing Date is 1.00% and shall remain 1.00% through and including August 31,
1998 (by way of example, as of the first day of the second fiscal quarter of
the Borrower the Applicable Margin shall be calculated based upon the
Leverage Ratio of the Consolidated Companies in the Compliance Certificate
delivered by the Borrower for the first fiscal quarter of such year); and
(ii) if the Borrower fails to provide the Compliance Certificate and related
financial statements required under Section 6.07(c) within the applicable
time period set forth therein, the Applicable Margin shall be adjusted to
1.00% on the first day of the following fiscal quarter until such Compliance
Certificate and related financial statements are delivered.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by the Issuing Bank or a Lender and an Eligible
Assignee in accordance with the terms of this Agreement and substantially in
the form of Exhibit F.
"Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as
amended and in effect from time to time (11 U.S.C. Section 101 et seq.).
"Base Rate" shall mean (with any change in the Base Rate to be
effective as of the date of change of either of the following rates) the
higher of (i) the rate which the Agent publicly announces from time to time
as its prime lending rate, as in effect from time to time, and (ii) the
Federal Funds Rate, as in effect from time to time, plus one-half of one
percent (0.50%) per annum. The Agent's prime lending rate is a reference
rate and does not necessarily represent the lowest or best rate actually
charged to customers; the Agent may make commercial loans or other loans at
rates of interest at, above or below the Agent's prime lending rate.
"Base Rate Advance" shall mean an Advance made or outstanding as
a Revolving Loan bearing interest based on the Base Rate.
"Base Rate Borrowing" shall mean a Borrowing made up of Base Rate
Advances.
"Borrower" shall mean Morrison Health Care, Inc., a Georgia
corporation, its successors and permitted assigns.
"Borrowing" shall mean the incurrence by Borrower under the
Commitments of Advances of one Type concurrently having the same Interest
Period or the continuation or conversion of an existing Borrowing or
Borrowings in whole or in part.
"Business Day" shall mean any day excluding Saturday, Sunday and
any other day on which banks are required or authorized to close in Atlanta,
Georgia and, if the applicable Business Day relates to Eurodollar Advances,
any day on which trading is not carried on by and between banks in deposits
of the applicable currency in the applicable interbank Eurocurrency market.
"Capital Lease" shall mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee
which would, in accordance with GAAP, be required to be classified and
accounted for as a capital lease on a balance sheet of such Person, other
than, in the case of Borrower or any of its Subsidiaries, any such lease
under which Borrower or a wholly-owned Subsidiary of Borrower is the lessor.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder which
would, in accordance with GAAP, appear on a balance sheet of such lessee in
respect of such Capital Lease.
"Change in Control Provision" shall mean any term or provision
contained in any indenture, debenture, note, or other agreement or document
evidencing or governing Indebtedness of Borrower evidencing debt or a
commitment to extend loans in excess of $500,000.00 which requires, or
permits the holder(s) of such Indebtedness of Borrower to require that such
Indebtedness of Borrower be redeemed, repurchased, defeased, prepaid or
repaid, either in whole or in part, or the maturity of such Indebtedness of
Borrower to be accelerated in any respect, as a result of a change in
ownership of the capital stock of Borrower or voting rights with respect
thereto.
"Closing Certificate" shall mean that certificate of an officer
of the Borrower substantially in the form of Exhibit D attached hereto.
"Closing Date" shall mean July 2, 1998 or such later date on
which the conditions to the initial loans set forth in Sections 4.01 and 4.02
are satisfied.
"Co-Agent" shall mean, Wachovia Bank, N.A., a national banking
association, as Co-Agent for the Lenders and the Issuing Bank under this
Agreement and the other Loan Documents.
"Commitment" shall mean, for any Lender at any time, the
revolving credit facility severally established by such Lender pursuant to
Section 2.01, including, without duplication, such Lender's Pro Rata Share
of the Letter of Credit Subfacility and, in the case of SunTrust, the Swing
Line Subfacility, as the same may be decreased from time to time as a result
of any reduction thereof pursuant to Section 2.05, or increased from time to
time as a result of any increase thereof pursuant to Section 2.06, any
assignment thereof pursuant to Section 10.06, or any amendment thereof
pursuant to Section 10.02.
"Commitment Fee" shall have the meaning ascribed to it in Section
3.05(a).
"Compliance Certificate" shall mean the certificate delivered by
the Borrower to the Agent substantially in the form of Exhibit H attached
hereto.
"Consolidated Companies" shall mean, collectively, Borrower and
all of its Subsidiaries.
"Consolidated EBITDA" shall mean for any period, an amount equal
to the sum for the trailing four fiscal quarter period of Consolidated Net
Income (Loss), plus, to the extent deducted therefrom in determining such
Consolidated Net Income (Loss), the sum of (i) taxes based on income (whether
paid or deferred), (ii) Consolidated Interest Expense, (iii) depreciation of
assets, and (iv) amortization.
"Consolidated EBITR" shall mean for any period, an amount equal
to the sum for the trailing four fiscal quarter period of Consolidated Net
Income (Loss) of the Consolidated Companies, plus, to the extent deducted
therefrom in determining Consolidated Net Income (Loss), the sum of (i)
Consolidated Interest Expense, (ii) taxes based on income (whether paid or
deferred), and (iii) Rental Obligations for such period.
"Consolidated Funded Debt" shall mean, as of any date of
determination, the Funded Debt of the Consolidated Companies.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense of the Consolidated Companies (including without limitation,
interest expense attributable to Capital Leases, all capitalized interest,
all commissions, discounts and other fees and charges owed with respect to
bankers acceptance financing, net costs (i.e., costs minus benefits) under
Interest Rate Contracts, and total interest expense (whether shown as
interest expense or as loss and expenses on sales of receivables) under a
receivables purchase facility) determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income (Loss)" shall mean, with reference to
any period, the net income (or deficit) of the Consolidated Companies for
such period (taken as a cumulative whole), after deducting all operating
expenses, provisions for all taxes and reserves (including reserves for
deferred income taxes) and all other proper deductions, all determined in
accordance with GAAP on a consolidated basis, after eliminating all
intercompany transactions and after deducting portions of income properly
attributable to minority interests, if any, in the stock and surplus of the
Subsidiaries of the Borrower.
"Consolidated Net Worth" shall mean the shareholders' equity of
the Borrower calculated in accordance with GAAP, less treasury stock.
"Contractual Obligation" of any Person shall mean any provision
of any security issued by such Person or of any agreement, instrument or
undertaking under which such Person is obligated or by which it or any of the
property owned by it is bound.
"Credit Documents" shall mean, collectively, this Agreement, the
Notes, the Guaranty Agreement, all Letter of Credit Applications and all
other instruments, documents, certificates, agreements and writings executed
in connection herewith, each as amended, restated, supplemented or otherwise
modified from time to time.
"Credit Parties" shall mean, collectively, each of the Borrower
and the Guarantor.
"Default" shall mean any condition or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Dollar" and "U.S. Dollar" and the sign "$" shall mean lawful
money of the United States of America.
"Eligible Assignee" shall mean (i) a commercial bank organized
under the laws of the United States or any state thereof having total assets
in excess of $1,000,000,000.00 or any commercial finance or asset-based
lending Affiliate of any such commercial bank and (ii) any Lender.
"Environmental Laws" shall mean all federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder, now or hereafter in effect (including,
without limitation, those with respect to asbestos or asbestos containing
material or exposure to asbestos or asbestos containing material), relating
to pollution or protection of the environment and relating to public health
and safety, relating to (i) emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial toxic or
hazardous constituents, substances or wastes, including without limitation,
any Hazardous Substance, petroleum including crude oil or any fraction
thereof, any petroleum product or other waste, chemicals or substances
regulated by any Environmental Law into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), or (ii) the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transport or handling of any
Hazardous Substance, petroleum including crude oil or any fraction thereof,
any petroleum product or other waste, chemicals or substances regulated by
any Environmental Law, and (iii) underground storage tanks and related
piping, and emissions, discharges and releases or threatened releases
therefrom, such Environmental Laws to include, without limitation (a) the
Clean Air Act (42 U.S.C. Section 7401 et seq.), (b) the Clean Water Act (33
U.S.C. Section 1251 et seq.), (c) the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), (d) the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), (e) the Comprehensive Environmental
Response Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act (42 U.S.C. Section 9601 et seq.), and (f)
all applicable national and local laws or regulations with respect to
environmental control.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended and in effect from time to time.
"ERISA Affiliate" shall mean, with respect to any Person, each
trade or business (whether or not incorporated) which is a member of a group
of which that Person is a member and which is under common control within the
meaning of the regulations promulgated under Section 414 of the Tax Code.
"Eurodollar Advance" shall mean an Advance made or outstanding as
a Revolving Loan bearing interest equal to LIBOR plus the Applicable Margin
for such Advance.
"Eurodollar Borrowing" shall mean a Borrowing made up of
Eurodollar Advances.
"Event of Default" shall have the meaning provided in Article
VIII.
"Executive Officer" shall mean with respect to any Person, the
President, Vice Presidents, Chief Financial Officer, Treasurer, Secretary and
any Person holding comparable offices or duties.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with member
banks 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 Atlanta, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent.
"Fiscal Year" shall mean any twelve calendar month period ending
on May 31 of any year; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., "Fiscal Year 1996") refer to the
Fiscal Year ending on the first Saturday occurring after May 30 of that year.
"Fiscal Year End" shall mean the last day of any Fiscal Year.
"Fixed Charge Coverage Ratio" shall mean, for any period, the
ratio of (i) Consolidated EBITR to (ii) Fixed Charges for such period.
"Fixed Charges" shall mean, with reference to any period,
determined in accordance with GAAP on a consolidated basis, the sum of the
following for the Consolidated Companies, after eliminating all intercompany
items:
(a) Consolidated Interest Expense for such period; and
(b) all Rental Obligations payable as lessee under any operating
lease properly charged or chargeable to income during such period
in accordance with GAAP;
provided that any interest charges or rentals paid or accrued by any Person
acquired by the Borrower or any of its Subsidiaries during such period,
through purchase, merger, consolidation or otherwise, shall be included in
"Fixed Charges" only to the extent that the earnings of such Person are
taken into account in determining EBITR for such period.
"Funded Debt" shall mean, as applied to any Person, all
Indebtedness of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures, or which is otherwise
payable or unpaid, one year or more from, or is directly or indirectly
renewable or extendable at the option of the debtor to a date one year or
more (including an option of the debtor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
one year or more) from, the date of the creation thereof, provided that
Funded Debt shall include, as at any date of determination, any portion of
such Indebtedness outstanding on such date which matures on demand or within
one year from such date (whether by sinking fund, other required prepayment,
or final payment at maturity) and shall also include all Indebtedness of such
Person for borrowed money outstanding under a line of credit, guidance line,
revolving credit, bankers acceptance facility or similar arrangement for
borrowed money, including, without limitation, all unpaid drawings under
letters of credit and unreimbursed amounts pursuant to letter of credit
reimbursement agreements, regardless of the maturity date thereof.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or, if no such
statements are promulgated, then such other statements by such other entity
as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination.
"Guarantors" shall mean, (i) Culinary Solutions, Inc. and (ii)
all other Material Subsidiaries of the Borrower, and their respective
successors and permitted assigns.
"Guaranty" shall mean any contractual obligation, contingent or
otherwise (other than letters of credit), of a Person with respect to any
Indebtedness or other obligation or liability of another Person, including
without limitation, any such Indebtedness, obligation or liability directly
or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including contractual obligations (contingent
or otherwise) arising through any agreement to purchase, repurchase, or
otherwise acquire such Indebtedness, obligation or liability or any security
therefor, or any agreement to provide funds for the payment or discharge
thereof (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition, or to make any payment other than for
value received. The amount of any Guaranty shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in
respect of which guaranty is made or, if not so stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in
good faith.
"Guaranty Agreement" shall mean the Subsidiary Guaranty Agreement
executed initially by Culinary Solutions, Inc. and thereafter by any and all
Material Subsidiaries of the Borrower in favor of the Lenders, the Issuing
Bank and the Agent, substantially in the form of Exhibit C as the same may be
amended, restated or supplemented from time to time.
"Hazardous Substances" shall have the meaning assigned to that
term in the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts
of 1986.
"Hostile Acquisition" shall mean any Investment resulting in
control of a Person involving a tender offer or proxy contest that has not
been recommended or approved by the board of directors of the Person that is
the subject of the Investment prior to the first public announcement or
disclosure relating to such Investment.
"Indebtedness" of any Person shall mean, without duplication (i)
all obligations of such Person which in accordance with GAAP would be shown
on the balance sheet of such Person as a liability (including, without
limitation, obligations for borrowed money and for the deferred purchase
price of property or services, and obligations evidenced by bonds,
debentures, notes or other similar instruments); (ii) all Capital Lease
Obligations; (iii) all Guaranties of such Person; (iv) Indebtedness of others
secured by any Lien upon property owned by such Person, whether or not
assumed; and (v) obligations or other liabilities under currency contracts,
Interest Rate Contracts, or similar agreements or combinations thereof.
Notwithstanding the foregoing, in determining the Indebtedness of any Person,
there shall be included all obligations of such Person of the character
referred to in clauses (i) through (v) above deemed to be extinguished under
GAAP but for which such Person remains legally liable except to the extent
that such obligations (x) have been defeased in accordance with the terms of
the applicable instruments governing such obligations and (y) the accounts
or other assets dedicated to such defeasance are not included as assets on
the balance sheet of such Person.
"Interest Period" shall mean (i) as to any Eurodollar Advances,
the interest period selected by the Borrower pursuant to Section 3.04(a)
hereof, and (ii) as to any Swing Rate Advances, the interest period requested
by the Borrower and agreed to by the Swing Line Lender pursuant to Section
3.01(a)(ii) hereof.
"Interest Rate Contract" shall mean all interest rate swap
agreements, interest rate cap agreements, interest rate collar agreements,
interest rate insurance and other agreements and arrangements designed to
provide protection against fluctuations in interest rates, in each case as
the same may be from time to time amended, restated, renewed, supplemented or
otherwise modified.
"Investment" shall mean, when used with respect to any Person,
any direct or indirect advance, loan or other extension of credit (other than
the creation of receivables in the ordinary course of business) or capital
contribution by such Person (by means of transfers of property to others or
payments for property or services for the account or use of others, or
otherwise) to any Person, or any direct or indirect purchase or other
acquisition by such Person of, or of a beneficial interest in, capital stock,
partnership interests, bonds, notes, debentures or other securities issued by
any other Person.
"Issuing Bank" shall mean SunTrust Bank, Atlanta or any other
Lender who hereafter may be designated as an Issuing Bank pursuant to an
Assignment and Acceptance Agreement or otherwise.
"Lender" or "Lenders" shall mean SunTrust, the other banks and
lending institutions listed on the signature pages hereof, and each assignee
thereof, if any, pursuant to Section 10.06(c).
"Lending Office" shall mean for each Lender, the office such
Lender may designate in writing from time to time to Borrower and the Agent
with respect to each Type of Loan.
"Letter of Credit Application" shall mean an "Application and
Agreement for Standby Letter of Credit" duly executed and delivered by the
Borrower or any of its Subsidiaries substantially in the form of Exhibit G
attached hereto.
"Letter of Credit Obligations" shall mean, with respect to
Letters of Credit, as at any date of determination, the sum of (a) the
maximum aggregate amount which at such date of determination is available to
be drawn by the beneficiaries thereof (assuming the conditions for drawing
thereunder have been met) under all Letters of Credit outstanding, plus (b)
the aggregate amount of all drawings under Letters of Credit honored by the
Agent not theretofore reimbursed by the Borrower.
"Letter of Credit Subfacility" shall mean the $5,000,000 letter
of credit facility established by the Lenders pursuant to which the Issuing
Bank will issue Letters of Credit for the account of an Account Party
pursuant to Section 2.03 hereof.
"Letters of Credit" shall mean all letters of credit issued
pursuant to Article II hereof after the Closing Date by the Issuing Bank for
the account of the Borrower pursuant to the Commitments.
"Leverage Ratio" shall mean for any period the ration of (i)
Total Funded Debt to (ii) EBITDA.
"LIBOR" shall mean, for any Interest Period, with respect to
Eurodollar Advances the offered rate for deposits in U.S. Dollars, for a
period comparable to the Interest Period and in an amount comparable to the
Agent's portion of such Advances, appearing on the Telerate Screen Page 3750
as of 11:00 A.M. (London, England time) on the day that is two London
Business Days prior to the first day of the Interest Period. If two or more
of such rates appear on the Reuters Screen LIBO Page, the rate for that
Interest Period shall be the arithmetic mean of such rates. If the foregoing
rate is unavailable from the Telerate Page for any reason, then such rate
shall be determined by the Agent from Reuters Screen LIBO Page or, if such
rate is also unavailable on such service, then on any other interest rate
reporting service of recognized standing designated in writing by the Agent
to Borrower and the other Lenders; in any such case rounded, if necessary, to
the next higher 1/16 of 1.0%, if the rate is not such a multiple.
"Lien" shall mean any mortgage, pledge, security interest, lien,
charge, hypothecation, assignment, deposit arrangement, title retention,
preferential property right, trust or other arrangement having the practical
effect of the foregoing and shall include the interest of a vendor or lessor
under any conditional sale agreement, capitalized lease or other title
retention agreement.
"Loans" shall mean, collectively, the Revolving Loans and the
Swing Line Loans.
"Margin Regulations" shall mean Regulation G, Regulation T,
Regulation U and Regulation X of the Board of Governors of the Federal
Reserve System, as the same may be in effect from time to time.
"Material Subsidiary" shall mean (i) each Credit Party other than
the Borrower, and (ii) each other Subsidiary of the Borrower, now existing or
hereafter established or acquired, that at any time prior to the Maturity
Date, has or acquires total assets in excess of $1,000,000.00, or that
accounted for or produced more than 5% of the Consolidated Net Income (Loss)
of the Borrower on a consolidated basis during any of the three most recently
completed Fiscal Years of the Borrower, or that is otherwise material to the
operations or business of the Borrower or another Material Subsidiary.
"Materially Adverse Effect" shall mean any materially adverse
change in (i) the business, results of operations, financial condition,
assets or prospects of the Consolidated Companies, taken as a whole, (ii) the
ability of Borrower to perform its obligations under this Agreement, or (iii)
the ability of the other Credit Parties (taken as a whole) to perform their
respective obligations under the Credit Documents.
"Maturity Date" shall mean the earlier of (i) July 2, 2003, and
(ii) the date on which all amounts outstanding under this Agreement have been
declared or have automatically become due and payable pursuant to the
provisions of Article VIII.
"MFCI" shall mean Morrison Fresh Cooking, Inc., a wholly-owned
subsidiary of Morrison.
"Morrison" shall mean Morrison Restaurants, Inc., a Delaware
corporation.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Proceeds" shall mean, with respect to any equity offering or
issuance of Subordinated Debt, (i) all cash received with respect thereto,
whether by way of deferred payment pursuant to a promissory note, a
receivable or otherwise (and interest paid thereon), plus (ii) the higher of
the book value or the fair market value of any assets (including any stock)
received with respect thereto, in each case, net of reasonable and customary
sale expenses, fees and commissions incurred and taxes paid or expected to be
payable within the next twelve months in connection therewith.
"Notes" shall mean, collectively, the Revolving Credit Notes and
the Swing Line Note.
"Notice of Borrowing" shall have the meaning provided in Section
3.01(a)(i).
"Notice of Conversion/Continuation" shall have the meaning
provided in Section 3.01(b)(i).
"Notice of Swing Line Loan" shall have the meaning provided in
Section 3.01(b)(ii).
"Obligations" shall mean all amounts owing to the Agent, the
Co-Agent, the Issuing Bank or any Lender pursuant to the terms of this
Agreement or any other Credit Document, including, without limitation, all
Loans (including all principal and interest payments due thereunder), Letter
of Credit Obligations, fees, expenses, indemnification and reimbursement
payments, indebtedness, liabilities, and obligations of the Credit Parties,
direct or indirect, absolute or contingent, liquidated or unliquidated, now
existing or hereafter arising, together with all renewals, extensions,
modifications or refinancings thereof.
"Payment Office" shall mean with respect to payments of
principal, interest, fees or other amounts relating to the Revolving Loans,
the Swing Line Loans, Letter of Credit Obligations and all other Obligations,
the office specified as the "Payment Office" for the Agent on the signature
page of the Agent, or such other location as to which the Agent shall have
given written notice to the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Permitted Liens" shall mean those Liens expressly permitted by
Section 7.02.
"Person" shall mean any individual, partnership, firm,
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
"Plan" shall mean any "employee benefit plan" (as defined in
Section 3(3) of ERISA), including, but not limited to, any defined benefit
pension plan, profit sharing plan, money purchase pension plan, savings or
thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer
Plan, or any plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical), hospitalization, accident,
sickness, disability, or life insurance benefits.
"Pro Rata Share" shall mean, with respect to each of the
Commitments of each Lender, each Revolving Loan to be made by, and each
payment (including, without limitation, any payment of principal, interest or
fees) to be made to each Lender with respect to the Revolving Loans, the
percentage designated as such Lender's Pro Rata Share of such Commitments,
such Loans or such payments, as applicable, set forth in Section 2.01, in
each case as such Pro Rata Share may change from time to time as a result of
assignments or amendments made pursuant to this Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System, as the same may be in effect from time to time.
"Rental Obligations" shall mean, with reference to any period,
the aggregate amount of all rental obligations for which the Consolidated
Companies are directly or indirectly liable (as lessee or as guarantor or
other surety but without duplication) under all leases in effect at any time
during such period (other than operating leases for motor vehicles,
computers, office equipment and other similar items used in the ordinary
course of business of the Consolidated Companies), including all such amounts
for which any Person was liable during the period immediately prior to the
date such Person became a Subsidiary of the Borrower or was merged into or
consolidated with the Borrower or a Subsidiary of the Borrower, as determined
in accordance with GAAP.
"Requested Commitment Amount" shall have the meaning set forth in
Section 2.06(a).
"Required Lenders" shall mean at any time, the Lenders holding at
least 66 2/3% of the committed funds under the Commitments, whether or not
advanced, or, following the termination of all of the Commitments, the
Lenders holding at least 66 2/3% of the aggregate outstanding Advances at
such time.
"Requirement of Law" for any person shall mean the articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a 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.
"Reuters Screen" shall mean, when used in connection with any
designated page and LIBOR, the display page so designated on the Reuters
Monitor Money Rates Service (or such other page as may replace that page on
that service for the purpose of displaying rates comparable to LIBOR).
"Revolving Credit Notes" shall mean, collectively, the amended
and restated promissory notes evidencing the Revolving Loans in the form
attached hereto as Exhibit A, either as originally executed or as hereafter
amended, modified or supplemented.
"Revolving Loans" shall mean, collectively, the revolving loans
made to the Borrower by the Lenders pursuant to Section 2.01.
"RTI" shall mean Ruby Tuesday, Inc., a Georgia corporation.
"Security Documents" shall mean, collectively, the Guaranty
Agreement and each other guaranty agreement, mortgage, deed of trust,
security agreement, pledge agreement, or other security or collateral
document guaranteeing or securing the Obligations, now or hereafter executed,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
"Sharing Agreements" shall mean, collectively, (i) that certain
Distribution Agreement, dated as of March 2, 1996 by and among Morrison, MFCI
and Borrower, as amended (ii) that certain License Agreement, dated as of
March 2, 1996, by and between MFCI and Borrower, as amended (iii) that
certain License Agreement, dated as of March 2, 1996, by and between
Borrower and RTI, as amended (iv) that certain Amended and Restated Tax
Allocation and Indemnification Agreement, dated as of March 2, 1996, by and
among Morrison, Borrower, MFCI and certain other subsidiaries of Morrison, as
amended and (v) that certain Agreement Respecting Employee Benefit Matters,
dated as of March 2, 1996, by and among Morrison, MFCI and Borrower, as
amended.
"Subordinated Debt" shall mean all Indebtedness of Borrower
subordinated to all obligations of Borrower or any other Credit Party arising
under this Agreement, the Notes, and the Guaranty Agreement, created,
incurred or assumed on terms and conditions satisfactory in all respects to
the Agent, the Issuing Bank and the Lenders, including without limitation,
with respect to interest rates, payment terms, maturities, amortization
schedules, covenants, defaults, remedies, and subordination provisions, as
evidenced by the written approval of the Agent, the Issuing Bank and the
Lenders.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity (including, without limitation, partnerships,
joint ventures, and associations) regardless of its jurisdiction of
organization or formation, at least a majority of the total combined voting
power of all classes of voting stock or other ownership interests of which
shall, at the time as of which any determination is being made, be owned by
such Person, either directly or indirectly through one or more other
Subsidiaries.
"Swing Line Lender" shall mean SunTrust and its successors and
assigns.
"Swing Line Note" shall mean the amended and restated promissory
note of the Borrower payable to the order of the Swing Line Lender, in
substantially the form of Exhibit B hereto, evidencing the maximum aggregate
principal indebtedness of the Borrower to the Swing Line Lender with respect
to outstanding Swing Line Loans made by the Swing Line Lender pursuant to the
Swing Line Subfacility, either as originally executed or as it may be from
time to time supplemented, modified, amended, renewed or extended.
"Swing Line Subfacility" shall mean $10,000,000, as such amount
may be reduced pursuant to Section 2.05 or amended or modified pursuant to
Section 10.02 hereof.
"Swing Rate" shall mean, as to any Swing Line Loan, the interest
rate per annum agreed to by the Borrower and the Swing Line Lender for such
Loan for the requested Interest Period pursuant to the procedure set forth in
Section 3.01(a)(ii).
"Swing Rate Advance" shall mean any Advance outstanding hereunder
bearing interest based upon the Swing Rate.
"Swing Line Loan" shall mean a Loan made by the Swing Line Lender
pursuant to Section 2.02 hereof.
"Tax Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time.
"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of
whatever nature, including without limitation, income, receipts, excise,
property, sales, transfer, license, payroll, withholding, social security and
franchise taxes now or hereafter imposed or levied by the United States, or
any state, local or foreign government or by any department, agency or other
political subdivision or taxing authority thereof or therein and all
interest, penalties, additions to tax and similar liabilities with respect
thereto.
"Telerate" shall mean, when used in connection with any
designated page and LIBOR, the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying rates comparable to LIBOR).
"Total Capitalization" shall mean, as of any date of
determination, the sum of (i) Total Funded Debt, plus (ii) Consolidated Net
Worth.
"Total Funded Debt" shall mean, for any Person Consolidated
Funded Debt plus the present value of all minimum lease commitments to make
payments with respect to operating leases of such Person, determined based
upon a discount of ten percent (10%) in accordance with the Standard & Poor's
methodology.
"Type" of Borrowing shall mean a Borrowing consisting of Base
Rate Advances, Eurodollar Advances or Swing Rate Advances.
"Voting Stock" shall mean securities of any class or classes, the
holders of which are entitled to elect all of the corporate directors (or
Persons performing similar functions).
"Year 2000 Compliant" shall mean that neither the performance nor
functionality of the operating systems for Borrower's or its Subsidiaries'
computers, all software applications that run on Borrower's and its
Subsidiaries' computers, and all of Borrower's and its Subsidiaries'
machinery and equipment, is affected by dates prior to, during, spanning or
after January 1, 2000, and shall include, but not be limited to (a)
accurately processing (including, but not limited to calculating, comparing
and sequencing) date and time data from, into, and between the years 1999 and
2000 and leap year calculations, (b) functioning without error, interruption
or decreased performance relating to such date and time data, (c) accurately
processing such date and time data when used in combination with other
technology, if the other technology properly exchanges date and time data,
(d) accurate date and time data century recognition, (e) calculations that
accurately use same century and multi-century formulas and date and time
values, (f) date and time data interface values which reflect the correct
century, and (g) processing, storing, receiving and outputting all date and
time data in a format that accurately indicates the century of the date and
time data.
Section I.2. Accounting Terms and Determination. Unless
otherwise defined or specified herein, all accounting terms shall be
construed herein, all accounting determinations hereunder shall be made, all
financial statements required to be delivered hereunder shall be prepared,
and all financial records shall be maintained in accordance with, GAAP.
Section I.3. Other Definitional Terms. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section, Schedule, Exhibit and like
references are to this Agreement unless otherwise specified.
Section I.4. Exhibits and Schedules. All Exhibits and
Schedules attached hereto are by reference made a part hereof.
ARTICLE II.
LOANS AND LETTERS OF CREDIT
Section II.1. Commitments; Use of Proceeds.
(a) Commitments. Subject to and upon the terms and conditions
herein set forth, each Lender severally establishes in favor of the
Borrower, from on and after the Closing Date, but prior to the Maturity
Date, a revolving credit facility in favor of the Borrower in aggregate
principal at any one time outstanding not to exceed the sum set forth
opposite such Lender's name below, ("Commitment"), as the same may be
reduced from time to time pursuant to the terms hereof:
ProRata Share of
Commitments Commitments
SunTrust Bank, Atlanta $25,000,000.00 33.3333%
Wachovia Bank, N.A. $20,000,000.00 26.6667%
NationsBank, N.A. $15,000,000.00 20.0000%
First Union National Bank $15,000,000.00 20.0000%
-------------- ---------
Total $75,000,000.00 100.0000%
============== =========
The Lenders, subject to and upon the terms and conditions set forth
herein, from time to time, agree to make to the Borrower Revolving
Loans in an aggregate principal amount outstanding at any time not to
exceed such Lender's Commitment. Borrower shall be entitled to repay
and reborrow Revolving Loans in accordance with the provisions hereof.
In addition to Revolving Loans, the Borrower may request, from on and
after the Closing Date but prior to the Maturity Date, that the Swing
Line Lender extend to the Borrower Swing Line Loans subject to and upon
the terms and conditions herein set forth. Notwithstanding any
provision of this Agreement to the contrary, within the limits of the
Commitments, the Borrower may borrow, repay and reborrow under the
terms of this Agreement, provided however, that (i) the Borrower may
neither borrow nor reborrow should there exist a Default or an Event of
Default, (ii) the aggregate outstanding amount of Advances after giving
effect to each Borrowing plus the Letter of Credit Obligations shall
not exceed the aggregate Commitments.
(b) Amount and Terms of Loans. Each Revolving Loan shall, at
the option of Borrower, be made or continued as, or converted into,
part of one or more Borrowings that shall consist entirely of Base Rate
Advances or Eurodollar Advances. Each Swing Line Loan shall consist of
Swing Rate Advances made by the Swing Line Lender in accordance with
the procedure described in Section 2.02. Each Eurodollar Borrowing
shall be in a principal amount of not less than $5,000,000 or a greater
integral multiple of $1,000,000, and each Base Rate Borrowing shall be
in a principal amount of not less than $1,000,000 or a greater integral
multiple of $100,000. At no time shall the aggregate number of
Eurodollar Borrowings outstanding under this Article II exceed six (6).
(c) Use of Proceeds. The proceeds of Revolving Loans, Swing
Line Loans and Letters of Credit shall be used solely to refinance
Indebtedness of Borrower existing on the Closing Date, to make
Investments and finance acquisitions permitted by the terms hereof, to
fund working capital needs of the Borrower and for other general
corporate purposes of the Borrower.
Section II.2. Swing Line Subfacility.
(a) Swing Line Subfacility. Subject to and upon the terms and
conditions herein set forth, the Swing Line Lender severally
establishes in favor of the Borrower, from on and after the Closing
Date, but prior to the Maturity Date, its Swing Line Subfacility within
its Commitment. Sections 3.01 and 3.02 shall apply equally to
Borrowings made under the Swing Line Subfacility and Borrowings
requested or made through Section 2.01. The Swing Line Lender, subject
to and upon the terms and conditions set forth herein, from time to
time, agrees to make to the Borrower Swing Line Loans in an aggregate
principal amount outstanding at any time not to exceed the Swing Line
Subfacility. Borrower shall be entitled to repay and reborrow Swing
Line Loans in accordance with the provisions hereof. Notwithstanding
any provision of this Agreement to the contrary, the sum of (x) the
aggregate principal amount of the Revolving Loans, plus (y) the
aggregate principal amount of the Swing Line Loans at any one time
outstanding, plus (z) the Letter of Credit Obligations, shall not
exceed the aggregate Commitments.
(b) Amount and Terms of Swing Line Loans. Each Swing Line Loan
shall be made as a Swing Rate Advance from the Swing Line Lender at the
Swing Rate and Interest Period established by the Borrower and the
Swing Line Lender on the date of each request for a Swing Line Loan in
accordance with Section 3.01(a)(ii). Each Swing Line Loan shall be in
a principal amount of not less than $100,000 or a greater integral
multiple of $10,000. At no time shall the aggregate number of Swing
Line Loans outstanding under this Article II exceed two.
(c) Repayment by Revolving Loans. If (i) any Swing Line Loan
shall be outstanding upon the occurrence of an Event of Default, or
(ii) after giving effect to any request for a Swing Line Loan or a
Revolving Loan, the aggregate principal amount of the Revolving Loans,
Swing Line Loans and Letter of Credit Obligations outstanding to the
Swing Line Lender would exceed the Swing Line Lender's Commitment, then
each Lender hereby agrees, upon request from the Swing Line Lender, to
make a Revolving Loan (which shall be initially funded as a Base Rate
Borrowing) in an amount equal to such Lender's Pro Rata Share of the
outstanding principal amount of the Swing Line Loans (the "Refunded
Swing Line Loans") outstanding on the date such notice is given. On or
before 11:00 a.m. (local time for the Agent) on the first Business Day
following receipt by each Lender of a request to make Revolving Loans
as provided in the preceding sentence, each such Lender (other than the
Swing Line Lender) shall deposit in an account specified by the Agent
to the Lenders from time to time the amount so requested in same day
funds, whereupon such funds shall be immediately delivered to the Swing
Line Lender (and not the Borrower) and applied to repay the Refunded
Swing Line Loans. On the day such Revolving Loans are made, the Swing
Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be
deemed to be paid with the proceeds of the Revolving Loans made by the
Swing Line Lender. Upon the making of any Revolving Loan pursuant to
this clause, the amount so funded shall become due under such Lender's
Revolving Credit Note and shall no longer be owed under the Swing Line
Note. Each Lender's obligation to make the Revolving Loans referred to
in this clause shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any
setoff, counterclaim, recoupment, defense or other right which such
Lender may have against the Swing Line Lender, the Borrower 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 condition (financial or otherwise) of the Borrower or any
other Credit Party; (iv) the acceleration or maturity of any Loans or
the termination of the Commitments after the making of any Swing Line
Loan; (v) any breach of this Agreement by the Borrower or any other
Lender; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(d) Purchase of Participations. In the event that (i) the
Borrower or any Subsidiary is subject to any bankruptcy or insolvency
proceedings as provided in Section 8.07 or (ii) if the Swing Line
Lender otherwise requests, each Lender shall acquire without recourse
or warranty an undivided participation interest equal to such Lender's
Pro Rata Share of the Commitments of any Swing Line Loan otherwise
required to be repaid by such Lender pursuant to the preceding clause
by paying to the Swing Line Lender on the date on which such Lender
would otherwise have been required to make a Revolving Loan in respect
of such Swing Line Loan pursuant to the preceding clause, in same day
funds, an amount equal to such Lender's Pro Rata Share of such Swing
Line Loan, and no Revolving Loans shall be made by such Lender pursuant
to the preceding clause. From and after the date on which any Lender
purchases an undivided participation interest in a Swing Line Loan
pursuant to this clause, the Swing Line Lender shall distribute to such
Lender (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participation
interest is outstanding and funded) its ratable amount of all payments
of principal and interest in respect of such Swing Line Loan in like
funds as received; provided, however, that in the event such payment
received by the Swing Line Lender is required to be returned to the
Borrower, such Lender shall return to the Swing Line Lender the portion
of any amounts which such Lender had received from the Swing Line
Lender in like funds.
(e) Swing Line Loans Following Notice of Event of Default.
Notwithstanding the foregoing provisions of this Section 2.02, no
Lender shall be required to make a Revolving Loan to Borrower for the
purpose of refunding a Refunded Swing Line Loan pursuant to Section
2.02(c) above or to purchase a participating interest in a Swing Line
Loan pursuant to Section 2.02(d) above if a Default or Event of Default
has occurred and is continuing, and, prior to the making by the Swing
Line Lender of such Swing Line Loan, the Swing Line Lender had received
written notice from the Borrower or any Lender specifying that such
Default or Event of Default had occurred and was continuing (and
identifying the same as a Default or Event of Default hereunder).
Section II.3. Letter of Credit Subfacility.
(a) Terms of Issuance of Letters of Credit. Subject to, and
upon the terms and conditions set forth herein, the Borrower may
request, in accordance with the provisions of this Section 2.03 and the
other terms of this Agreement, that on and after the Closing Date but
prior to the Maturity Date, that the Issuing Bank, on behalf of the
Lenders, and in reliance on the agreements of the Lenders set forth
below, issue a Letter of Credit or Letters of Credit for the account of
the Borrower or any Guarantor; provided that the Borrower or such
Guarantor executes and delivers to the Agent and the Issuing Bank a
Letter of Credit Application, provided further that (i) no Letter of
Credit shall have an expiration date that is later than one year after
the date of issuance thereof (provided that a Letter of Credit may
provide that it is extendible for consecutive one year periods); (ii)
the Borrower shall not request that the Issuing Bank issue any Letter
of Credit, if, after giving effect to such issuance, the sum of the
aggregate Letter of Credit Obligations plus the aggregate outstanding
principal amount of the Advances would exceed the aggregate amount of
the Commitments; and (iii) the Borrower shall not request that the
Issuing Bank issue any Letter of Credit if after giving effect to such
issuance, the aggregate Letter of Credit Obligations would exceed the
amount of the Letter of Credit Subfacility. To the extent of any
conflict between the terms of this Agreement and any Letter of Credit
Application, this Agreement shall control.
(b) Notice of Issuance of Letter of Credit; Agreement to
Issue. Whenever the Borrower desires the issuance of a Letter of
Credit, it shall, in addition to any application and documentation
procedures reasonably required by the Agent and the Issuing Bank for
the issuance of such Letter of Credit, deliver to the Agent and the
Issuing Bank a written notice no later than 11:00 AM (local time for
the Agent) at least two (2) Business Days in advance of the proposed
date of issuance and the Agent shall promptly forward a copy of such
notice to each Lender. Each such notice shall specify (i) the Account
Party, (ii) the proposed date of issuance (which shall be a Business
Day); (iii) the face amount of the Letter of Credit; (iv) the
expiration date of the Letter of Credit; and (v) the name and address
of the beneficiary with respect to such Letter of Credit and shall
attach a precise description of the documentation and a verbatim text
of any certificate to be presented by the beneficiary of such Letter of
Credit which would require the Issuing Bank to make payment under the
Letter of Credit, provided that the Issuing Bank may require reasonable
changes in any such documents and certificates in accordance with its
customary letter of credit practices, and provided further, that no
Letter of Credit shall require payment against a conforming draft to be
made thereunder on the same Business Day that such draft is presented
if such presentation is made after 11:00 AM (Atlanta, Georgia time).
In determining whether to pay any draft under any Letter of Credit, the
Issuing Bank shall be responsible only to determine that the documents
and certificate required to be delivered under its Letter of Credit
have been delivered, and that they comply on their face with the
requirements of the Letter of Credit. Promptly after receiving the
notice of issuance of a Letter of Credit, the Agent shall notify each
Lender of such Lender's respective participation therein, determined in
accordance with its respective Pro Rata Share of the Commitments.
(c) Agreement to Issue Letters of Credit. The Issuing Bank
agrees, subject to the terms and conditions set forth in this
Agreement, to issue for the account of such Account Party a Letter of
Credit in a face amount equal to the face amount requested under
paragraph (b) above, following its receipt of a notice required by
paragraph (d) below. Immediately upon the issuance of each Letter of
Credit, each Lender shall be deemed to, and hereby agrees to, have
irrevocably purchased from the Issuing Bank a participation in such
Letter of Credit and any drawing thereunder in an amount equal to such
Lender's Pro Rata Share of the Commitments multiplied by the face
amount of such Letter of Credit. Upon issuance and amendment or
extension of any Letter of Credit, the Issuing Bank shall provide a
copy of each such Letter of Credit issued, amended or extended
hereunder to the Agent and each Lender.
(d) Payment of Amounts Drawn Under Letters of Credit. In the
event of any request for a drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Bank shall notify the Borrower, the
Agent and the Lenders on or before the date on which the Agent intends
to honor such drawing, and the Borrower and the Account Party (if other
than the Borrower) jointly and severally agree to reimburse the Issuing
Bank on the day on which such drawing is honored in an amount, in
same day funds, equal to the amount of such drawing.
(i) Notwithstanding any provision of this Agreement to
the contrary, to the extent that any Letter of Credit or portion
thereof remains outstanding on the Maturity Date, for any reason
whatsoever, the Borrower, each Guarantor and the Lenders hereby
agree that the beneficiary or beneficiaries thereof shall be
deemed to have made a drawing under the Commitments of all
available amounts outstanding pursuant to such Letters of Credit
on the Maturity Date, which amount shall be held by the Issuing
Bank as cash collateral for its remaining obligations pursuant to
such Letters of Credit. provided however, that if any such
Letter of Credit Outstanding on the Maturity Date is
(i) surrendered for cancellation by the beneficiary,
(ii) expires, or (iii) is terminated for any reason, prior to the
Issuing Bank honoring a request for a drawing under such Letter
of Credit for less than the full amount available under such
Letter of Credit, the Issuing Bank shall promptly refund (x) the
cash collateral to the extent of the undrawn amount of each
Letter of Credit plus (y) the amount of each Letter of Credit
honored by the Issuing Bank not theretofore reimbursed by the
Borrower. The immediately preceding sentence will survive
termination of this Agreement.
(ii) As between the Borrower, any Account Party and the
Issuing Bank, the Borrower and such Account Party assume all risk
of the acts and omissions of, or misuse of, the Letters of Credit
issued by the Issuing Bank, by the respective beneficiaries of
such Letters of Credit, other than losses resulting from the
gross negligence or willful misconduct of the Issuing Bank. In
furtherance and not in limitation of the foregoing but subject to
the exception for the Issuing Bank's gross negligence or willful
misconduct set forth above, the Issuing Bank shall not be
responsible (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of such
Letters of Credit, even if it should in fact prove to be in any
or all respects insufficient, inaccurate, fraudulent or forged or
otherwise invalid; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof in whole or in part which may
prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such Letter of Credit to comply
fully with the conditions required in order to draw upon such
Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, telecopy or otherwise; (v) for good
faith errors in interpretation of technical terms; (vi) for any
loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of
Credit or the proceeds thereof; (vii) for the misapplication by
the beneficiary of any such Letter of Credit; and (viii) for any
consequences arising from causes beyond the control of the
Issuing Bank.
(e) Payment of Letter of Credit Draws by Banks. In the event
that the Borrower or the Account Party shall fail to reimburse the
Issuing Bank as provided in paragraph (d) above, the Issuing Bank shall
promptly notify each Lender of the unreimbursed amount of such drawing
and of such Lender's respective participation therein. Each Lender
shall make available to the Issuing Bank an amount equal to its
respective participation, in immediately available funds, at the office
of the Issuing Bank specified in such notice not later than 1:00 P.M.
(Atlanta, Georgia time) on the Business Day after the date notified by
the Issuing Bank and such amount shall be deemed to be outstanding
hereunder as an Advance. Each Lender shall be obligated to make such
Advance hereunder regardless of whether the conditions precedent in
Article IV are satisfied and regardless of whether such Advance
complies with the minimum borrowing requirements hereunder. In the
event that any such Lender fails to make available to the Issuing Bank
the amount of such Lender's participation in such Letter of Credit, the
Issuing Bank shall be entitled to recover such amount on demand from
such Lender together with interest. The Issuing Bank shall distribute
to each Lender which has paid all amounts payable under this
Section with respect to any Letter of Credit, such Lender's Pro Rata
Share of all payments received by the Issuing Bank from the Account
Party in reimbursement of drawings honored by the Issuing Bank under
such Letter of Credit when such payments are received.
Section II.4. Notes; Repayment of Principal.
(a) The Borrower's obligations to pay the principal of, and
interest on, the Revolving Loans to each Lender shall be evidenced by
the records of the Agent and such Lender and by the Revolving Credit
Note payable to such Lender (or the assignor of such Lender) in the
amount of such Lender's Commitment completed in conformity with this
Agreement.
(b) The Borrower's obligations to pay the principal of, and
interest on, the Swing Line Loans to the Swing Line Lender shall be
evidenced by the records of the Swing Line Lender and the Swing Line
Note payable to such Lender (or the assignor of such Lender) completed
in conformity with this Agreement.
(c) All outstanding Borrowings outstanding under the Notes
shall be due and payable in full on the Maturity Date.
Section II.5. Voluntary Reduction of Commitments. Upon at least
three (3) Business Days' prior telephonic notice (promptly confirmed in
writing) to the Agent, Borrower shall have the right, without premium or
penalty, to terminate the unutilized Commitments, in part or in whole,
provided that (i) any such termination shall apply to proportionately and
permanently reduce the Commitments of each of the Lenders, and (ii) any
partial termination pursuant to this Section 2.05 shall be in an amount of at
least $5,000,000 and integral multiples of $1,000,000. Unless otherwise
specified by the Borrower in the applicable notice, each of the Swing Line
Subfacility and the Letter of Credit Subfacility shall not be reduced by any
such reduction unless and until the aggregate Commitments are reduced to an
amount less than the sum of the Swing Line Subfacility and the Letter of
Credit Subfacility in which case each of the Swing Line Subfacility shall be
reduced as determined by the Borrower and the Agent.
Section II.6. Increase of the Commitments.
(a) Borrower may, at any time by written notice to the Agent
and the Lenders, request that the Commitments be increased up to an amount
not to exceed $100,000,000 in the aggregate (the "Requested Commitment
Amount") on a pro rata basis based on the Pro Rata Shares of the Lenders. No
Lender (or any successor thereto) shall have any obligation to increase its
Commitment or its other obligations under this Agreement and the other Credit
Documents, and any decision by a Lender to increase its Commitment shall be
made in its sole discretion independently from any other Lender, the Agent or
the Co-Agent. Within fifteen (15) Business Days from each Lender's receipt
of such request from the Borrower, each Lender shall notify the Agent in
writing of whether or not it will agree to increase its Commitment and by
what amount it will agree to increase its Commitment, up to its Pro Rata
Share of the Requested Commitment Amount. Decisions to increase a Commitment
must be affirmatively communicated in writing and shall not be presumed based
upon a failure to respond to Borrower's request.
(b) In the event that the aggregate amount to which the Lenders
are willing to increase their Commitments is less than the Requested
Commitment Amount based on the written notices delivered by the Lenders to
the Agent, the Agent shall first offer to the Lenders who have agreed to
increase their Commitments the opportunity to further increase their
Commitments up to an amount equal to the Requested Commitment Amount. Such
Lenders shall promptly respond in writing to the Agent of whether or not it
will agree to further increase its Commitment and by what amount it will
agree to further increase its Commitment. Within five (5) Business Days
after receipt of all responses from such Lenders, the Agent shall inform the
Borrower and all Lenders in writing of the amount by which each Lender will
increase its Commitment.
(c) In the event that the aggregate amount to which the Lenders
are willing to increase their Commitments is less than the Requested
Commitment Amount based on the notice from the Agent to the Borrower and all
Lenders, the Borrower shall have the right, within sixty days (60) after
receipt of such notice from the Agent, to obtain commitments from one or more
new banks or financial institutions in an aggregate amount such that the
existing Commitments, plus the aggregate principal amount by which the
Lenders are willing to increase their Commitments, plus the aggregate
principal amount of the new commitments by the new banks or financial
institutions does not exceed the Requested Commitment Amount; provided,
however, that (1) the new banks or financial institutions must be acceptable
to the Agent and Required Lenders in their sole discretion, which acceptance
will not be unreasonably withheld or delayed, and (2) the new banks or
financial institutions must become parties to this Agreement pursuant to a
joinder agreement in form and substance satisfactory to the Agent and the
Required Lenders, pursuant to which (x) they shall be granted all of the
rights that existing Lenders have under this Agreement and the other Credit
Documents, (y) they shall assume the same liabilities and obligations that
the existing Lenders have under this Agreement and (z) the existing Lenders
and such new banks or financial institutions shall agree to either purchase
or sell outstanding Advances, as the case may be such that each Lender
(existing and new) shall have outstanding Advances in an amount equal to its
Pro Rate Share of all Advances then outstanding.
ARTICLE III.
GENERAL LOAN TERMS
Section III.1. Funding Notices.
(a) (i) Whenever Borrower desires to make a Borrowing with
respect to the Commitments (other than one resulting from a conversion
or continuation pursuant to Section 3.01(b)(i)), it shall give the
Agent prior written notice (or telephonic notice promptly confirmed in
writing) of such Borrowing (a "Notice of Borrowing"), such Notice of
Borrowing to be given prior to 12:00 noon (local time for the Agent) at
the Payment Office of the Agent (x) one Business Day prior to the
requested date of such Borrowing in the case of Base Rate Advances, and
(y) three Business Days prior to the requested date of such Borrowing
in the case of Eurodollar Advances. Notices received after 12:00 noon
shall be deemed received on the next Business Day. Each Notice of
Borrowing shall be irrevocable and shall specify the aggregate
principal amount of the Borrowing, the date of Borrowing (which shall
be a Business Day), and whether the Borrowing is to consist of Base
Rate Advances or Eurodollar Advances and (in the case of Eurodollar
Advances) the Interest Period to be applicable thereto.
(ii) Whenever Borrower desires to obtain a Swing Line Loan, it
shall give the Swing Line Lender prior written notice (or telephonic
notice promptly confirmed in writing) of such Swing Line Loan (a
"Notice of Swing Line Loan"), such Notice of Swing Line Loan to be
given prior to 11:00 A.M. (local time for Agent) at the Payment Office
of the Swing Line Lender on the Business Day of the such Swing Line
Loan. Notices received after 11:00 A.M. shall be deemed received on
the next Business Day. Each Notice of Swing Line Loan shall specify
the aggregate principal amount of the Swing Line Loan, the date of the
Swing Line Loan (which shall be a Business Day) and the requested
Interest Period to be applicable thereto. The Swing Line Lender, shall
within two (2) hours of receipt of such notice, provide to the Borrower
telephonic or written notice of a quote of the Swing Rate to be
applicable to such Swing Line Loan for the amount and the Interest
Period requested by the Borrower. Within one (1) hour of receipt of
such quote, the Borrower shall notify the Swing Line Lender whether or
not it has elected to accept the offered Swing Rate and if accepted,
the Swing Line Lender shall confirm such Borrowing in writing.
(b) (i) Whenever Borrower desires to convert all or a portion
of an outstanding Borrowing under the Commitments consisting of Base
Rate Advances into a Borrowing consisting of Eurodollar Advances, or to
continue outstanding a Borrowing consisting of Eurodollar Advances for
a new Interest Period, it shall give the Agent at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each such Borrowing to be converted into or continued as
Eurodollar Advances. Such notice (a "Notice of
Conversion/Continuation") shall be given prior to 11:00 A.M. (local
time for the Agent) on the date specified at the Payment Office of the
Agent. Each such Notice of Conversion/Continuation shall be
irrevocable and shall specify the aggregate principal amount of the
Advances to be converted or continued, the date of such conversion or
continuation and the Interest Period to be applicable thereto. If,
upon the expiration of any Interest Period in respect of any Borrowing
consisting of Eurodollar Advances, Borrower shall have failed to
deliver the Notice of Conversion/Continuation, Borrower shall be deemed
to have elected to convert or continue such Borrowing to a Borrowing
consisting of Base Rate Advances. So long as any Executive Officer of
Borrower has knowledge that any Default or Event of Default shall have
occurred and be continuing, no Borrowing may be converted into or
continued as (upon expiration of the current Interest Period)
Eurodollar Advances unless the Agent and each of the Lenders shall have
otherwise consented in writing. No conversion of any Borrowing of
Eurodollar Advances shall be permitted except on the last day of the
Interest Period in respect thereof.
(ii) Upon the expiration of the applicable Interest Period with
respect to any Swing Line Loan, the Borrower shall repay such Swing
Line Loan to the Swing Line Lender, and in the event that the other
Lenders have purchased a participation in such Swing Line Loan pursuant
to Section 2.02 hereof, the Swing Line Lender shall distribute such
payments pro rata amongst the Lenders participating therein.
(c) Without in any way limiting Borrower's obligation to
confirm in writing any telephonic notice, the Agent and the Swing Line
Lender may act without liability upon the basis of telephonic notice
believed by the Agent or the Swing Line Lender in good faith to be from
Borrower prior to receipt of written confirmation. In each such case,
Borrower hereby waives the right to dispute the Agent's or the Swing
Line Lender's record of the terms of such telephonic notice.
(d) The Agent shall promptly give each Lender notice by
telephone (confirmed in writing) or by telex, telecopy or facsimile
transmission of the matters covered by the notices given to the Agent
pursuant to this Section 3.01 with respect to the Commitments.
Section III.2. Disbursement of Funds.
(a) No later than 12:00 noon (local time for the Agent) on the
date of each Borrowing pursuant to the Commitments (other than one
resulting from a conversion or continuation pursuant to Section
3.01(b)(i)), each Lender will make available its Pro Rata Share of the
amount of such Borrowing in immediately available funds at the Payment
Office of the Agent. The Agent will make available to Borrower the
aggregate of the amounts (if any) so made available by the Lenders to
the Agent in a timely manner by crediting such amounts to Borrower's
demand deposit account maintained with the Agent or at Borrower's
option, by effecting a wire transfer of such amounts to Borrower's
account specified by the Borrower, by the close of business on such
Business Day. In the event that the Lenders do not make such amounts
available to the Agent by the time prescribed above, but such amount is
received later that day, such amount may be credited to Borrower in the
manner described in the preceding sentence on the next Business Day
(with interest on such amount to begin accruing hereunder on such next
Business Day).
(b) No later than 3:00 p.m. (local time for the Swing Line
Lender) on the date of each Swing Line Loan (other than one resulting
from a continuation of a Swing Line Loan pursuant to 3.01(b)(ii)), the
Swing Line Lender will make available the amount of such Swing Line
Loan in immediately available funds by crediting such amount to the
Borrower's demand deposit account maintained with the Swing Line Lender
or, at Borrower's option, by effecting a wire transfer of such amounts
to Borrower's account specified by the Borrower.
(c) Unless the Agent shall have been notified by any Lender
prior to the date of a Borrowing that such Lender does not intend to
make available to the Agent such Lender's portion of the Borrowing to
be made on such date, the Agent may assume that such Lender has made
such amount available to the Agent on such date and the Agent may make
available to Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Lender on the
date of Borrowing, the Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest
at the Federal Funds Rate. If such Lender does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify Borrower, and Borrower shall immediately
pay such corresponding amount to the Agent together with interest at
the rate specified for the Borrowing which includes such amount paid
and any amounts due under Section 3.12 hereof. Nothing in this
subsection shall be deemed to relieve any Lender from its obligation to
fund its Commitments or its obligations pursuant to Section 2.02
hereunder or to prejudice any rights which Borrower may have against
any Lender as a result of any default by such Lender hereunder.
(d) All Borrowings under the Commitments (other than Swing Line
Loans) shall be loaned by the Lenders on the basis of their Pro Rata
Share of the Commitments. No Lender shall be responsible for any
default by any other Lender in its obligations hereunder, and each
Lender shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Lender to fund its
Commitments hereunder.
Section III.3. Interest.
(a) Borrower agrees to pay interest in respect of all unpaid
principal amounts of the Revolving Loans from the respective dates such
principal amounts were advanced to maturity (whether by acceleration,
notice of prepayment or otherwise) at rates per annum equal to the
applicable rates indicated below:
(i) For Base Rate Advances--The Base Rate in effect from
time to time; and
(ii) For Eurodollar Advances--LIBOR plus the Applicable
Margin.
(b) Borrower agrees to pay interest in respect of all unpaid
principal amounts of the Swing Line Loans made to Borrower from the
respective dates such principal amounts were advanced to maturity
(whether by acceleration, notice of prepayment or otherwise) at the
Swing Rate agreed to by the Borrower and the Swing Line Lender for each
such Swing Line Loan.
(c) Overdue principal and, to the extent not prohibited by
applicable law, overdue interest, in respect of the Loans, and all
other overdue amounts owing hereunder, shall bear interest from each
date that such amounts are overdue at the applicable rate plus two
percent (2%) per annum, provided however that for any Eurodollar
Advance or Swing Line Loan, at the end of the applicable Interest
Period, interest shall accrue at the Base Rate plus two percent (2%).
(d) Interest on each Loan shall accrue from and including the
date of such Loan to but excluding the date of any repayment thereof;
provided that, if a Loan is repaid on the same day made, one day's
interest shall be paid on such Loan. Interest on all outstanding Base
Rate Advances shall be payable quarterly in arrears on the last day of
each fiscal quarter, commencing on August 31, 1998. Interest on all
outstanding Eurodollar Advances shall be payable on the last day of
each Interest Period applicable thereto, and, in the case of Eurodollar
Advances having an Interest Period in excess of three months, on each
three month anniversary of the initial date of such Interest Period.
Interest on all outstanding Swing Rate Advances shall be payable
monthly in arrears on the last day of each fiscal quarter, commencing
on August 31, 1998. Interest on all Loans shall be payable on any
conversion of any Advances comprising such Loans into Advances of
another Type, prepayment (on the amount prepaid), at maturity (whether
by acceleration, notice of prepayment or otherwise) and, after
maturity, on demand.
(e) The Agent, upon determining LIBOR for any Interest Period,
shall promptly notify by telephone (confirmed in writing) or in writing
Borrower and the other Lenders. Any such determination shall, absent
manifest error, be final, conclusive and binding for all purposes.
Section III.4. Interest Periods.
(a) In connection with the making or continuation of, or
conversion into, each Borrowing of Eurodollar Advances, Borrower shall
select an Interest Period to be applicable to such Eurodollar Advances,
which Interest Period shall be either a 1, 2, 3 or 6 month period.
(b) In connection with the making or continuation of each Swing
Line Loan, Borrower shall request an Interest Period to be applicable
to such Swing Line Loan for a period equal to a minimum of one (1) day
and a maximum of thirty (30) days which request may be accepted by the
Swing Line Lender as provided herein.
(c) Notwithstanding paragraphs (a) and (b) of this Section 3.04:
(i) The initial Interest Period for any Borrowing of
Eurodollar Advances shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing consisting
of Base Rate Advances) and each Interest Period occurring
thereafter in respect of such Borrowing shall commence on the day
on which the next preceding Interest Period expires;
(ii) If any Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day, provided that if any
Interest Period in respect of Eurodollar Advances would otherwise
expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business
Day;
(iii) Any Interest Period in respect of Eurodollar Advances
which begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period shall, subject to part (v) below, expire on the
last Business Day of such calendar month; and
(iv) No Interest Period with respect to the Loans shall
extend beyond the Maturity Date.
Section III.5. Fees.
(a) Commitment Fee. Borrower shall pay to the Agent, for the
ratable benefit of each Lender, a commitment fee (the "Commitment Fee")
for the period commencing on the Closing Date to and including the
Maturity Date, payable quarterly in arrears on the last day of each
fiscal quarter, commencing on August 31, 1998, and on the Maturity
Date, equal to the percentage per annum designated below based on the
Leverage Ratio of the Consolidated Companies, multiplied by the average
daily unused portion of the Commitment of each Lender:
-----------------------------------------------------
Leverage Ratio Commitment Fee
=====================================================
Less than 2.00:1.00 0.20%
-----------------------------------------------------
Greater than or equal to 0.25%
2.00:1.00 and less than
2.50:1.00
-----------------------------------------------------
Greater than or equal to 0.30%
2.50:1.00 and less than
3.0:1.00
-----------------------------------------------------
For the purposes of computing the Commitment Fee, (i) outstanding
Letter of Credit Obligations shall not be usage of the Commitment, and
(ii) in addition to the utilization by Revolving Loans, the Commitment
of each Lender shall be deemed to be utilized by the amount of Swing
Line Loans extended by such Lender (or in which such Lender has
purchased a participation) but in no event shall the computation of any
other Lender's Commitment Fee be affected by the Swing Line Loans
extended by the Swing Line Lender unless and until a participation in
such Swing Line Loans is purchased by the other Lenders pursuant to
Section 2.02(d) hereof, and (iii) if the Borrower fails to provide the
Compliance Certificate and related financial statements required under
Section 6.07(c) within the applicable time period set forth therein,
the Commitment Fee shall be adjusted to 0.30% on the first day of the
following fiscal quarter until such Compliance Certificate and related
financial statements are delivered.
(b) Administrative Fees. The Borrower shall pay to the Agent
an administrative fee in the amount and on the dates previously agreed
in writing by Borrower with the Agent. The Borrower shall also pay to
each Issuing Bank, following receipt of an invoice, in reasonable
detail therefor, any customary fees charged by such Issuing Bank for
issuance and administration of its Letters of Credit, which fees shall
be fully earned when due, and non-refundable when paid.
Section III.6. Voluntary Prepayments of Borrowings.
(a) Borrower may, at its option, prepay Borrowings consisting
of Base Rate Advances at any time in whole, or from time to time in
part, in amounts aggregating $1,000,000 or any greater integral
multiple of $100,000, by paying the principal amount to be prepaid
together with interest accrued and unpaid thereon to the date of
prepayment. Borrowings consisting of Swing Rate Advances may be prepaid
at any time in whole, or from time to time in part, in amounts
aggregating $100,000 or any greater integral multiple of $10,000, by
paying the principal amount to be prepaid together with interest
accrued and unpaid thereon to the date of prepayment. Borrowings
consisting of Eurodollar Advances may be prepaid, at Borrower's option,
in whole, or from time to time in part, in amounts aggregating
$5,000,000 or any greater integral multiple of $1,000,000, by paying
the principal amount to be prepaid, together with interest accrued and
unpaid thereon to the date of prepayment, and all compensation payments
pursuant to Section 3.12 if such prepayment is made on a date other
than the last day of an Interest Period applicable thereto. Each such
optional prepayment shall be applied in accordance with Section 3.06(c)
below.
(b) Borrower shall give written notice (or telephonic notice
confirmed in writing) to the Agent of any intended prepayment of the
Revolving Loans not less than three Business Days prior to any
prepayment of Base Rate Advances or Eurodollar Advances. Borrower shall
give written notice (or telephonic notice confirmed in writing) to the
Agent of any intended prepayment of the Swing Line Loans not less than
one (1) Business Day prior to such prepayment of such Swing Line
Loans. Such notice, once given, shall be irrevocable. Upon receipt
of such notice of prepayment pursuant to the first sentence of this
paragraph (b), the Agent shall promptly notify each Lender of the
contents of such notice and of such Lender's Pro Rata Share of such
prepayment. Upon receipt of any notice of prepayment pursuant to the
second sentence of this paragraph (b), the Agent shall promptly notify
each Lender participating in such Swing Line Loan of the contents of
such notice and of such Lender's Pro Rata Share of such prepayment.
(c) Borrower, when providing notice of prepayment pursuant to
Section 3.06(b), may designate the Types of Advances and the specific
Borrowing or Borrowings which are to be prepaid, provided that (i) if
any prepayment of Eurodollar Advances made pursuant to a single
Borrowing of the Revolving Loans shall reduce the outstanding Advances
made pursuant to such Borrowing to an amount less than $5,000,000, such
Borrowing shall immediately be converted into Base Rate Advances; and
(ii) each prepayment made pursuant to a single Borrowing shall be
applied pro rata among the Advances comprising such Borrowing. In the
absence of a designation by Borrower, the Agent shall, subject to the
foregoing, make such designation in its discretion but using reasonable
efforts to avoid funding losses to the Lenders pursuant to Section
3.12. All voluntary prepayments shall be applied to the payment of
interest before application to principal.
Section III.7. Payments, etc.
(a) Except as otherwise specifically provided herein, all
payments under this Agreement and the other Credit Documents shall be
made without defense, set-off or counterclaim to the Agent not later
than 11:00 A.M. (local time for the Agent) on the date when due and
shall be made in Dollars in immediately available funds at its Payment
Office.
(b) (i) All such payments shall be made free and clear of and
without deduction or withholding for any Taxes in respect of this
Agreement, the Notes or other Credit Documents, or any payments of
principal, interest, fees or other amounts payable hereunder or
thereunder (but excluding, except as provided in paragraph (iii)
hereof, any Taxes imposed on the overall net income of the Lenders or
the Issuing Bank pursuant to the laws of the jurisdiction in which the
principal executive office or appropriate Lending Office of such Lender
or the Issuing Bank is located). If any Taxes are so levied or
imposed, Borrower agrees (A) to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every net payment
of all amounts due hereunder and under the Notes and other Credit
Documents, after withholding or deduction for or on account of any such
Taxes (including additional sums payable under this Section 3.07), will
not be less than the full amount provided for herein had no such
deduction or withholding been required, (B) to make such withholding or
deduction and (C) to pay the full amount deducted to the relevant
authority in accordance with applicable law. Borrower will furnish to
the Agent, the Co-Agent and the Issuing Bank and each Lender, within 30
days after the date the payment of any Taxes is due pursuant to
applicable law, certified copies of tax receipts evidencing such
payment by Borrower. Borrower will indemnify and hold harmless the
Agent, the Co-Agent, the Issuing Bank and each Lender and reimburse the
Agent, the Co-Agent, the Issuing Bank and each Lender upon written
request for the amount of any Taxes so levied or imposed and paid by
the Agent, the Co-Agent, the Issuing Bank or such Lender and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes were
correctly or illegally asserted. A certificate as to the amount of
such payment by such Lender, the Issuing Bank, the Agent or the
Co-Agent absent manifest error, shall be final, conclusive and binding
for all purposes provided that the Agent, the Co-Agent, the Issuing
Bank and each Lender shall use reasonable efforts to furnish Borrower
notice of the imposition of any Taxes as soon as practicable
thereafter; provided, however, that no delay or failure to furnish such
notice shall in any event release or discharge Borrower from its
obligations to the Agent, the Co-Agent, the Issuing Bank or such Lender
pursuant to Section 3.07(b) or otherwise result in any liability of the
Agent, the Co-Agent, the Issuing Bank or such Lender; provided that
such notice is provided to the Borrower within forty-five (45) days of
such Lender or the Issuing Bank obtaining knowledge of the application
of such Taxes to payments under this Agreement.
(ii) Each Lender or Issuing Bank that is organized under the laws of
any jurisdiction other than the United States of America or any State
thereof (including the District of Columbia) agrees to furnish to Borrower
and the Agent, prior to the time it becomes a Lender or Issuing Bank
hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 or any successor forms thereto
(wherein such Lender claims entitlement to complete exemption from or
reduced rate of U.S. Federal withholding tax on interest paid by Borrower
hereunder) and to provide to Borrower and the Agent a new Form 4224 or Form
1001 or any successor forms thereto if any previously delivered form is
found to be incomplete or incorrect in any material respect or upon the
obsolescence of any previously delivered form; provided, however, that no
Lender or Issuing Bank shall be required to furnish a form under this
paragraph (ii) after the date that it becomes a Lender or Issuing Bank
hereunder if it is not entitled to claim an exemption from or a reduced
rate of withholding under applicable law.
(iii) Borrower shall also reimburse each Lender and the Issuing
Bank, upon written request, for any Taxes imposed (including,
without limitation, Taxes imposed on the overall net income of such
Lender or Issuing Bank or its respective Lending Office pursuant to the
laws of the jurisdiction in which the principal executive office or the
applicable Lending Office of such Lender or the Issuing Bank is
located) as such Lender or the Issuing Bank shall determine are payable
by such Lender or the Issuing Bank in respect of amounts paid by or on
behalf of Borrower to or on behalf of such Lender or the Issuing Bank
pursuant to paragraph (i) hereof.
(c) Subject to Section 3.04(c)(ii), whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the applicable rate
during such extension.
(d) All computations of interest and fees shall be made on the
basis of a year of 360 days for the actual number of days (including
the first day but excluding the last day) occurring in the period for
which such interest or fees are payable (to the extent computed on the
basis of days elapsed). Interest on Base Rate Advances shall be
calculated based on the Base Rate from and including the date of such
Loan to but excluding the date of the repayment or conversion thereof.
Interest on Eurodollar Advances and Swing Rate Advances shall be
calculated as to each Interest Period from and including the first day
thereof to but excluding the last day thereof. Each determination by
the Agent of an interest rate or fee hereunder shall be made in good
faith and, except for manifest error, shall be final, conclusive and
binding for all purposes.
(e) Payment by the Borrower to the Agent in accordance with the
terms of this Agreement shall, as to the Borrower, constitute payment
to the Lenders under this Agreement.
Section III.8. Interest Rate Not Ascertainable, etc. In the
event that the Agent shall have determined (which determination shall be made
in good faith and, absent manifest error, shall be final, conclusive and
binding upon all parties) that on any date for determining LIBOR for any
Interest Period, by reason of any changes arising after the date of this
Agreement affecting the London interbank market, or the Agent's position in
such market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
LIBOR, then, and in any such event, the Agent shall forthwith give notice (by
telephone confirmed in writing) to Borrower and to the Lenders, of such
determination and a summary of the basis for such determination. Until the
Agent notifies Borrower that the circumstances giving rise to the suspension
described herein no longer exist, the obligations of the Lenders to make or
permit portions of the Revolving Loans to remain outstanding past the last
day of the then current Interest Periods as Eurodollar Advances shall be
suspended, and such affected Advances shall bear the same interest as Base
Rate Advances.
Section III.9. Illegality.
(a) In the event that any Lender or the Issuing Bank shall have
determined (which determination shall be made in good faith and, absent
manifest error, shall be final, conclusive and binding upon all
parties) at any time that the making or continuance of any Eurodollar
Advance or Letter of Credit has become unlawful by compliance by such
Lender or Issuing Bank in good faith with any applicable law,
governmental rule, regulation, guideline or order (whether or not
having the force of law and whether or not failure to comply therewith
would be unlawful), then, in any such event, the Lender or Issuing Bank
shall give prompt notice (by telephone confirmed in writing) to
Borrower and to the Agent of such determination and a summary of the
basis for such determination (which notice the Agent shall promptly
transmit to the other Lenders).
(b) Upon the giving of the notice to Borrower referred to in
subsection (a) above, (i) Borrower's right to request and such Lender's
obligation to make Eurodollar Advances or participate in such Letters
of Credit, as the case may be, or the Issuing Bank's obligation to
issue Letters of Credit shall be immediately suspended, and such Lender
shall make an Advance as part of the requested Borrowing of Eurodollar
Advances as a Base Rate Advance, which Base Rate Advance shall, for all
other purposes, be considered part of such Borrowing, and (ii) if the
affected Eurodollar Advance or Advances are then outstanding, Borrower
shall immediately, or if permitted by applicable law, no later than
the date permitted thereby, upon at least one Business Day's written
notice to the Agent and the affected Lender, convert each such Advance
into a Base Rate Advance or Advances, provided that if more than one
Lender is affected at any time, then all affected Lenders must be
treated the same pursuant to this Section 3.09(b).
(c) Notwithstanding any other provision contained in this
Agreement, the Issuing Bank shall not be obligated to issue any Letter
of Credit, nor shall any Lender be obligated to purchase its
participation in any Letter of Credit to be issued hereunder, if the
issuance of such Letter of Credit or purchase of such participation
shall have become unlawful or prohibited by compliance by the Issuing
Bank or such Lender in good faith with any law, governmental rule,
guideline, request, order, injunction, judgment or decree (whether or
not having the force of law); provided that in the case of the
obligation of a Lender to purchase such participation, such Lender
shall have notified the Issuing Bank to such effect at least three (3)
Business Days' prior to the issuance thereof by the Issuing Bank, which
notice shall relieve the Issuing Bank of its obligation to issue such
Letter of Credit pursuant to Section 2.03 hereof.
Section III.10. Increased Costs.
(a) If, by reason of (x) after the date hereof, the
introduction of or any change (including, without limitation, any
change by way of imposition or increase of reserve requirements) in or
in the interpretation of any law or regulation, or (y) the compliance
with any guideline or request from any central bank or other
governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally made after the
date hereof (whether or not having the force of law):
(i) any Lender (or its applicable Lending Office) shall
be subject to any tax, duty or other charge with respect to its
Eurodollar Advances or its obligation to make Eurodollar Advances
or the basis of taxation of payments to any Lender of the
principal of or interest on its Eurodollar Advances or its
obligation to make Eurodollar Advances shall have changed (except
for changes in the tax on the overall net income of such Lender
or its applicable Lending Office imposed by the jurisdiction in
which such Lender's principal executive office or applicable
Lending Office is located); or
(ii) any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any
Lender's applicable Lending Office shall be imposed or deemed
applicable or any other condition affecting its Eurodollar
Advances or its obligation to make Eurodollar Advances shall be
imposed on any Lender or its applicable Lending Office or the
London interbank market;
and as a result thereof there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining Eurodollar
Advances (except to the extent already included in the determination of the
applicable interest rate for Eurodollar Advances) or its obligation to make
Eurodollar Advances, or there shall be a reduction in the amount received or
receivable by such Lender or its applicable Lending Office, then Borrower
shall from time to time (subject, in the case of certain Taxes, to the
applicable provisions of Section 3.07(b)), upon written notice from and
demand by such Lender on Borrower (with a copy of such notice and demand to
the Agent), pay to the Agent for the account of such Lender within five
Business Days after the date of such notice and demand, additional amounts
sufficient to indemnify such Lender against such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower
and the Agent by such Lender in good faith and accompanied by a statement
prepared by such Lender describing in reasonable detail the basis for and
calculation of such increased cost, shall, except for manifest error, be
final, conclusive and binding for all purposes.
(b) If any Lender shall advise the Agent that at any time,
because of the circumstances described in clauses (x) or (y) in Section
3.10(a) or any other circumstances beyond such Lender's reasonable
control arising after the date of this Agreement affecting such Lender
or the London interbank market or such Lender's position in such
market, LIBOR as determined by the Agent will not adequately and fairly
reflect the cost to such Lender of funding its Eurodollar Advances,
then, and in any such event:
(i) the Agent shall forthwith give notice (by telephone
confirmed in writing) to Borrower and to the other Lenders of
such advice;
(ii) Borrower's right to request and such Lender's
obligation to make or permit portions of the Loans to remain
outstanding past the last day of the then current Interest
Periods as Eurodollar Advances shall be immediately suspended; and
(iii) such Lender shall make a Loan as part of the
requested Borrowing of Eurodollar Advances as a Base Rate
Advance, which such Base Rate Advance shall, for all other
purposes, be considered part of such Borrowing.
Section III.11. Lending Offices.
(a) Each Lender agrees that, if requested by Borrower, it will
use reasonable efforts (subject to overall policy considerations of
such Lender) to designate an alternate Lending Office with respect to
any of its Eurodollar Advances affected by the matters or circumstances
described in Sections 3.07(b), 3.08, 3.09 or 3.10 to reduce the
liability of Borrower or avoid the results provided thereunder, so long
as such designation is not disadvantageous to such Lender as reasonably
determined by such Lender, which determination shall be conclusive and
binding on all parties hereto. Nothing in this Section 3.11 shall
affect or postpone any of the obligations of Borrower or any right of
any Lender provided hereunder.
(b) If the Issuing Bank or any Lender that is organized under
the laws of any jurisdiction other than the United States of America or
any State thereof (including the District of Columbia) issues a public
announcement with respect to the closing of its lending offices in the
United States such that any withholdings or deductions and additional
payments with respect to Taxes may be required to be made by Borrower
thereafter pursuant to Section 3.07(b), such Lender or the Issuing Bank
shall use reasonable efforts to furnish Borrower notice thereof as soon
as practicable thereafter; provided, however, that no delay or failure
to furnish such notice shall in any event release or discharge Borrower
from its obligations to such Lender or the Issuing Bank pursuant to
Section 3.07(b) or otherwise result in any liability of such Lender or
the Issuing Bank; provided that such notice is provided to the Borrower
within forty-five (45) days of such Lender or the Issuing Bank
obtaining knowledge of the application of such Taxes to payments under
this Agreement.
Section III.12. Funding Losses. Borrower shall compensate each
Lender, upon its written request to Borrower (which request shall set forth
the basis for requesting such amounts in reasonable detail and which request
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all of the parties hereto), for all losses,
expenses and liabilities (including, without limitation, any interest paid by
such Lender to lenders of funds borrowed by it to make or carry its
Eurodollar Advances to the extent not recovered by such Lender in connection
with the re-employment of such funds and including loss of anticipated
profits), which the Lender may sustain: (i) if for any reason (other than a
default by such Lender) a borrowing of, or conversion to or continuation of,
Eurodollar Advances to Borrower does not occur on the date specified therefor
in a Notice of Borrowing, a Notice of Conversion/Continuation (whether or not
withdrawn), (ii) if any repayment (including mandatory prepayments and any
conversions pursuant to Section 3.09(b)) of any Eurodollar Advances to
Borrower occurs on a date which is not the last day of an Interest Period
applicable thereto, or (iii), if, for any reason, Borrower defaults in its
obligation to repay its Eurodollar Advances when required by the terms of
this Agreement.
Section III.13. Assumptions Concerning Funding of Eurodollar
Advances. Calculation of all amounts payable to a Lender under this Article
IV shall be made as though that Lender had actually funded its relevant
Eurodollar Advances through the purchase of deposits in the relevant market
bearing interest at the rate applicable to such Eurodollar Advances in an
amount equal to the amount of the Eurodollar Advances and having a maturity
comparable to the relevant Interest Period and through the transfer of such
Eurodollar Advances from an offshore office of that Lender to a domestic
office of that Lender in the United States of America; provided, however,
that each Lender may fund each of its Eurodollar Advances in any manner it
sees fit and the foregoing assumption shall be used only for calculation of
amounts payable under this Article IV.
Section III.14. Apportionment of Payments. Aggregate principal
and interest payments in respect of Revolving Loans and Commitment Fees shall
be apportioned among all outstanding Commitments and Revolving Loans to which
such payments relate, proportionately to the Lenders' respective Pro Rata
Share of such Commitments and outstanding Revolving Loans. Each payment of
principal and interest of any Swing Line Loan shall be payable solely to the
Swing Line Lender except as provided in Section 2.02(d). The Agent shall
promptly distribute to each Lender at its payment office set forth beside its
name on the appropriate signature page hereof or such other address as any
Lender may request its share of all such payments received by the Agent.
Section III.15. Termination of Commitments The unpaid
principal balance and all accrued and unpaid interest on the Notes will be
due and payable upon the first of the following dates or events to occur: (i)
acceleration of the maturity of any Note in accordance with the remedies
contained in Article VIII of this Agreement, or (ii) upon the expiration of
the Commitments.
Section III.16. Sharing of Payments, Etc. If any Lender or the
Issuing Bank shall obtain any payment or reduction (including, without
limitation, any amounts received as adequate protection of a deposit treated
as cash collateral under the Bankruptcy Code) of the Obligations (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its Pro Rata Share of payments or reductions on
account of such obligations obtained by all the Lenders (other than payments
of principal, interest and fees with respect to the Swing Line Loans which
are payable solely to the Swing Line Lender or Lenders participating therein
pursuant to Section 2.02(d)), such Lender or the Issuing Bank shall forthwith
(i) notify each of the other Lenders, the Issuing Bank, Agent and the
Co-Agent of such receipt, and (ii) purchase from the other Lenders or the
Issuing Bank such participations in the affected obligations as shall be
necessary to cause such purchasing Lender or the Issuing Bank to share the
excess payment or reduction, net of costs incurred in connection therewith,
ratably with each of them, provided that if all or any portion of such excess
payment or reduction is thereafter recovered from such purchasing Lender or
the Issuing Bank or additional costs are incurred, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery or
such additional costs, but without interest unless the Lender or the Issuing
Bank is obligated to return such funds is required to pay interest on such
funds. Borrower agrees that any Lender or the Issuing Bank so purchasing a
participation from another Lender or the Issuing Bank pursuant to this
Section 3.16 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender or the Issuing Bank were the direct
creditor of Borrower in the amount of such participation.
Section III.17. Capital Adequacy. Without limiting any other
provision of this Agreement, in the event that any Lender or the Issuing Bank
shall have determined that any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy not currently in effect or fully applicable as of the Closing Date,
or any change therein or in the interpretation or application thereof, or
compliance by such Lender or Issuing Bank with any request or directive
regarding capital adequacy not currently in effect or fully applicable as of
the Closing Date (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) from a central bank or
governmental authority or body having jurisdiction, does or shall have the
effect of reducing the rate of return on such Lender's or Issuing Bank's
capital as a consequence of its obligations hereunder to a level below that
which such Lender or Issuing Bank could have achieved but for such law,
treaty, rule, regulation, guideline or order, or such change or compliance
(taking into consideration such Lender's or Issuing Bank's policies with
respect to capital adequacy) by an amount deemed by such Lender or Issuing
Bank to be material, then within ten (10) Business Days after written notice
and demand by such Lender or Issuing Bank (with copies thereof to the Agent),
Borrower shall from time to time pay to such Lender or Issuing Bank
additional amounts sufficient to compensate such Lender or Issuing Bank for
such reduction (but, in the case of outstanding Base Rate Advances, without
duplication of any amounts already recovered by such Lender or Issuing Bank
by reason of an adjustment in the applicable Base Rate). Each certificate as
to the amount payable under this Section 3.17 (which certificate shall set
forth the basis for requesting such amounts in reasonable detail), submitted
to Borrower by any Lender or Issuing Bank in good faith, shall, absent
manifest error, be final, conclusive and binding for all purposes.
Section III.18. Letter of Credit Obligations Absolute. The
obligation of each Account Party to reimburse the Issuing Bank for drawings
made under Letters of Credit issued for the account of the Account Party and
the Lenders' obligation to honor their participations purchased therein shall
be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances, including without
limitation, the following circumstances:
(a) Any lack of validity or enforceability of any Letter of
Credit;
(b) The existence of any claim, set-off, defense or other right
which the Borrower or any Subsidiary or Affiliate of the Borrower may have at
any time against a beneficiary or any transferee of any Letter of Credit (or
any Persons or entities for whom any such beneficiary or transferee may be
acting), any Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction
(including without limitation any underlying transaction between the Borrower
or any of its Subsidiaries and Affiliates and the beneficiary for which such
Letter of Credit was procured);
(c) Any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect;
(d) Payment by the Issuing Bank under any Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Letter of Credit;
(e) Any other circumstance or happening whatsoever which is
similar to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
Nothing in this Section 3.17 shall prevent an action against the Issuing Bank
for its gross negligence or willful misconduct in honoring drafts under the
Letters of Credit.
ARTICLE IV.
CONDITIONS TO BORROWINGS
The obligations of each Lender to make Advances to Borrower
hereunder is subject to the satisfaction of the following conditions:
Section IV.1. Conditions Precedent to Initial Loans. At the
time of the making of the initial Loans hereunder on the Closing Date, all
obligations of Borrower hereunder incurred prior to the initial Loans and
prior to the obligation of the Issuing Bank to issue the initial Letter of
Credit (including, without limitation, Borrower's obligations to reimburse
fees and expenses payable to the Agent as previously agreed with Borrower),
shall have been paid in full, and the Agent shall have received the
following, in form and substance reasonably satisfactory in all respects to
the Agent:
(a) the duly executed counterparts of this Agreement;
(b) the duly executed Revolving Credit Notes evidencing the
Revolving Credit Commitments and the duly executed Swing Line Note
evidencing the Swing Line Subfacility;
(c) the duly executed Guaranty Agreement;
(d) the duly executed Closing Certificate;
(e) certificates of the Secretaries or Assistant Secretaries of
the Credit Parties attaching and certifying copies of the resolutions
of the board of directors of the Credit Parties, authorizing as
applicable the execution, delivery and performance of the Credit
Documents by the Credit Parties party thereto;
(f) certificates of the Secretaries or an Assistant Secretary
of the Credit Parties certifying (i) the name, title and true signature
of each officer of the Credit Parties executing the Credit Documents,
and (ii) the bylaws of the Credit Parties;
(g) certified copies of the articles or certificate of
incorporation of the Credit Parties certified by the Secretaries of
State and by the Secretaries or Assistant Secretaries of the Credit
Parties, together with certificates of good standing or existence, as
may be available from the Secretaries of State of the jurisdiction of
incorporation or organization of the Credit Parties and each other
jurisdiction where the Credit Parties ownership of property or the
conduct of its business require it to be qualified, except where a
failure to be so qualified would not have a Materially Adverse Effect;
(h) acknowledgments from CSC Corporation as to its appointment
as agent for service of process for the Credit Parties;
(i) the favorable opinion of Powell, Goldstein, Frazer &
Murphy, LLP, counsel to the Borrower in the form of Exhibit E,
addressed to the Agent, the Co-Agent and each of the Lenders.
(j) copies of all documents and instruments, including all
consents, authorizations and filings, required or advisable under any
Requirement of Law or by any material Contractual Obligation of the
Credit Parties, in connection with the execution, delivery,
performance, validity and enforceability of the Credit Documents and
the other documents to be executed and delivered hereunder, and such
consents, authorizations, filings and orders shall be in full force and
effect and all applicable waiting periods shall have expired;
(k) certificates, reports and other information as the Agent
may reasonably request from any Consolidated Company in order to
satisfy the Lenders as to the absence of any material liabilities or
obligations arising from matters relating to employees of the
Consolidated Companies, including employee relations, collective
bargaining agreements, Plans and other compensation and employee
benefit plans;
(l) [Reserved]
(m) certified copies of the Sharing Agreements;
(n) certificate of insurance issued by the Borrower's insurers,
describing in reasonable detail the insurance maintained by the Borrower.
(o) the Agent shall have received, for its own account, all
costs and expenses incurred which have been invoiced and are payable on the
date hereof, including without limitation, all costs and expenses actually
incurred associated with the execution and delivery of this Agreement and the
other documents contemplated hereby. The Agent shall have received for the
account of King & Spalding, counsel to the Agent, all reasonable costs and
expenses actually incurred which have been invoiced and are due and payable
as of the date hereof.
(p) certificates, reports and other information as the Agent
may reasonably request from any Consolidated Company in order to satisfy
the Lenders as to the absence of any material liabilities or obligations
arising from litigation (including without limitation, products liability and
patent infringement claims) pending or threatened against the Consolidated
Companies; and
(q) evidence assuring the Agent, the Co-Agent and the Lenders
that all corporate proceedings and all other legal matters in connection with
the authorization, legality, validity and enforceability of the Credit
Documents and the Transaction are in form and substance satisfactory to the
Lenders.
Section IV.2. Conditions to Each Loan. At the time of the
making of each Loan (but not including the continuation or conversion of any
Revolving Loan or in the same principal amount or any Revolving Loan pursuant
to Section 2.02(c)), including the initial Loans hereunder, (before as well
as immediately after giving effect to such Loans and to the proposed use of
the proceeds thereof), the following conditions shall have been satisfied or
shall exist:
(a) there shall exist no Default or Event of Default and no
Default or Event of Default shall result after giving effect to such
Loan;
(b) all representations and warranties by Borrower contained
herein shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on
and as of the date of such Loans;
(c) the Loans to be made and the use of proceeds thereof shall
not contravene, violate or conflict with, or involve the Agent, the
Co-Agent or any Lender in a violation of, any law, rule, injunction, or
regulation, or determination of any court of law or other governmental
authority applicable to Borrower;
(d) since the date of the most recent financial statements of
the Consolidated Companies described in Section 5.15 or delivered to
the Agent pursuant to Section 6.07, there shall have been no change
which has had or could reasonably be expected to have a Materially
Adverse Effect; and
(e) the Agent shall have received such other documents or legal
opinions as the Agent or any Lender may reasonably request, all in form
and substance reasonably satisfactory to the Agent.
Each request for a Borrowing or a Swing Line Loan and the
acceptance by Borrower of the proceeds thereof shall constitute a
representation and warranty by Borrower, as of the date of the Loans
comprising such Borrowing, that the applicable conditions specified in
Sections 4.01 and 4.02 have been satisfied.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Borrower (as to itself and all other Consolidated Companies)
represents and warrants as follows.
Section V.1. Corporate Existence; Compliance with Law. Each of
the Consolidated Companies is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation,
and each of the Consolidated Companies has the corporate power and authority
and the legal right to own and operate its property and to conduct its
business. Each of the Consolidated Companies (i) has the corporate power and
authority and the legal right to own and operate its property and to conduct
its business, (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership of property
or the conduct of its business requires such qualification, and (iii) is in
compliance with all Requirements of Law, where (a) the failure to have such
power, authority and legal right as set forth in clause (i), (b) the failure
to be so qualified or in good standing as set forth in clause (ii), or (c)
the failure to comply with Requirements of Law as set forth in clause (iii),
would reasonably be expected, in the aggregate, to have a Materially Adverse
Effect. The jurisdiction of incorporation or organization, and the ownership
of all issued and outstanding capital stock, for each Subsidiary as of the
date of this Agreement is accurately described on Schedule 5.01.
Section V.2. Corporate Power; Authorization. Each of the
Credit Parties has the corporate power and authority to make, deliver and
perform the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of such Credit Documents. No consent or authorization of, or
filing with, any Person (including, without limitation, any governmental
authority), is required in connection with the execution, delivery or
performance by any Credit Party, or the validity or enforceability against
any Credit Party, of the Credit Documents, other than such consents,
authorizations or filings which have been made or obtained.
Section V.3. Possession of Franchises, Licenses, Etc. Except
as set forth on Schedule 5.03 or as otherwise would not have a Material
Adverse Effect, (a) each of the Credit Parties possesses all franchises,
certificates, licenses, permits and other authorizations from governmental
political subdivisions or regulatory authorities that are necessary in any
material respect for the ownership, maintenance and operation of its
properties and assets, and (b) no Credit Party is in violation of any thereof
in any material respect.
Section V.4. Enforceable Obligations. This Agreement has been
duly executed and delivered, and each other Credit Document will be duly
executed and delivered, by the respective Credit Parties, and this Agreement
constitutes, and each other Credit Document when executed and delivered will
constitute, legal, valid and binding obligations of the Credit Parties,
respectively, enforceable against the Credit Parties in accordance with their
respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity.
Section V.5. No Legal Bar. The execution, delivery and
performance by the Credit Parties of the Credit Documents will not violate
any Requirement of Law or cause a breach or default under any of their
respective material Contractual Obligations.
Section V.6. No Material Litigation. Except as set forth on
Schedule 5.06 or in any notice furnished to the Lenders and the Issuing Bank
pursuant to Section 6.07(e) at or prior to the respective times the
representations and warranties set forth in this Section 5.06 are made or
deemed to be made hereunder, no litigation, investigations or proceedings of
or before any courts, tribunals, arbitrators or governmental authorities are
pending or, to the knowledge of Borrower, threatened by or against any of the
Consolidated Companies, or against any of their respective properties or
revenues, which, if adversely determined would reasonably be expected to have
a Material Adverse Effect.
Section V.7. Investment Company Act, Etc. None of the Credit
Parties is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended). None of the Credit Parties is
subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, or any foreign, federal or local statute or regulation
limiting its ability to incur indebtedness for money borrowed, guarantee such
indebtedness, or pledge its assets to secure such indebtedness, as
contemplated hereby or by any other Credit Document.
Section V.8. Margin Regulations. No part of the proceeds of
any of the Loans will be used for any purpose which violates, or which would
be inconsistent or not in compliance with, the provisions of the applicable
Margin Regulations.
Section V.9. Compliance With Environmental Laws.
(a) The Consolidated Companies have received no notices of
claims or potential liability under, and are in compliance with, all
applicable Environmental Laws, where such claims and liabilities under,
and failures to comply with, such statutes, regulations, rules,
ordinances, laws or licenses, would reasonably be expected to result in
penalties, fines, claims or other liabilities to the Consolidated
Companies in amounts in excess of $2,500,000, either individually or in
the aggregate (including any such penalties, fines, claims, or
liabilities relating to the matters set forth on Schedule 5.09(a)),
except as set forth on Schedule 5.09(a) or in any notice furnished to
the Lenders and the Issuing Bank pursuant to Section 6.07(f) at or
prior to the respective times the representations and warranties set
forth in this Section 5.09(a) are made or deemed to be made hereunder.
(b) Except as set forth on Schedule 5.09(b) or in any notice
furnished to the Lenders and the Issuing Bank pursuant to Section
6.07(f) at or prior to the respective times the representations and
warranties set forth in this Section 5.09(b) are made or deemed to be
made hereunder, none of the Consolidated Companies has received any
notice of violation, or notice of any action, either judicial or
administrative, from any governmental authority (whether United States
or foreign) relating to the actual or alleged violation of any
Environmental Law, including, without limitation, any notice of any
actual or alleged spill, leak, or other release of any Hazardous
Substance, waste or hazardous waste by any Consolidated Company or its
employees or agents, or as to the existence of any contamination on any
properties owned by any Consolidated Company, where any such violation,
spill, leak, release or contamination would reasonably be expected to
result in penalties, fines, claims or other liabilities to the
Consolidated Companies in amounts in excess of $2,500,000, either
individually or in the aggregate.
(c) Except as set forth on Schedule 5.09(c), the Consolidated
Companies have obtained all necessary governmental permits, licenses
and approvals which are material to the operations conducted on their
respective properties, including without limitation, all required
material permits, licenses and approvals for (i) the emission of air
pollutants or contaminants, (ii) the treatment or pretreatment and
discharge of waste water or storm water, (iii) the treatment, storage,
disposal or generation of hazardous wastes, (iv) the withdrawal and
usage of ground water or surface water, and (v) the disposal of solid
wastes.
Section V.10. Insurance. The Consolidated Companies currently
maintain insurance with respect to their respective properties and
businesses, with financially sound and reputable insurers, having coverages
against losses or damages of the kinds customarily insured against by
reputable companies in the same or similar businesses, such insurance being
in amounts no less than those amounts which are customary for such companies
under similar circumstances. The Consolidated Companies have paid all
material amounts of insurance premiums now due and owing with respect to
such insurance policies and coverages, and such policies and coverages are in
full force and effect.
Section V.11. No Default. Except as set forth on Schedule 5.11,
none of the Consolidated Companies is in default under or with respect to any
Contractual Obligation in any respect which default or defaults would be
reasonably expected in the aggregate to have a Materially Adverse Effect.
Section V.12. No Burdensome Restrictions. Except as set forth
on Schedule 5.12 or in any notice furnished to the Lenders and the Issuing
Bank pursuant to Section 6.07(k) at or prior to the respective times the
representations and warranties set forth in this Section 5.12 are made or
deemed to be made hereunder, none of the Consolidated Companies is a party to
or bound by any Contractual Obligation or Requirement of Law which has had or
would reasonably be expected to have a Materially Adverse Effect.
Section V.13. Taxes. Except as set forth on Schedule 5.13, each
of the Consolidated Companies have filed or caused to be filed all
declarations, reports and tax returns which are required to have been filed,
and has paid all taxes, custom duties, levies, charges and similar
contributions ("taxes" in this Section 5.13) shown to be due and payable on
said returns or on any assessments made against it or its properties, and all
other taxes, fees or other charges imposed on it or any of its properties by
any governmental authority (other than those the amount or validity of which
is currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided in
its books); and no tax liens have been filed and, to the knowledge of
Borrower, no claims are being asserted with respect to any such taxes, fees
or other charges.
Section V.14. Subsidiaries. Except as disclosed on Schedule
5.01, on the date of this Agreement, Borrower has no Subsidiaries and neither
Borrower nor any Subsidiary is a joint venture partner or general partner in
any partnership. Except as disclosed on Schedule 5.14 or in any notice
furnished to the Lenders and the Issuing Bank pursuant to Section 6.07(l) at
or prior to the respective times the representations and warranties set forth
in this Section 5.14 are made or deemed to be made hereunder, Borrower has no
Material Subsidiaries.
Section V.15. Financial Statements. Borrower has furnished to
the Agent, the Co-Agent, the Issuing Bank and the Lenders:
(a) Audited Reports. The audited consolidated balance sheet as
of May 31, 1997 of the Consolidated Companies and the related
consolidated statements of income, shareholders' equity and cash flows
for the Fiscal Years then ended, including in each case the related
schedules and notes, setting forth in each case in comparative form the
figures for the previous Fiscal Year of the Consolidated Companies.
The foregoing financial statements fairly present in all material
respects the consolidated financial condition of the Consolidated
Companies as at the dates thereof and results of operations for such
periods in conformity with GAAP consistently applied;
(b) No Material Adverse Change. Since the date of the
preparation of the financial statements set forth above, there have
been no changes with respect to the Consolidated Companies which has
had or would reasonably be expected to have a Materially Adverse
Effect.
Section V.16. ERISA. Except as disclosed on Schedule 5.16 or in
any notice furnished to the Lenders and the Issuing Bank pursuant to Section
6.07(g) at or prior to the respective times the representations and
warranties set forth in this Section 5.16 are made or deemed to be made
hereunder:
(1) Identification of Plans. None of the Consolidated
Companies nor any of their respective ERISA Affiliates maintains or
contributes to, or has during the past seven years maintained or contributed
to, any Plan that is subject to Title IV of ERISA;
(2) Compliance. Each Plan maintained by the Consolidated
Companies have at all times been maintained, by their terms and in operation,
in compliance with all applicable laws, and the Consolidated Companies are
subject to no tax or penalty with respect to any Plan of such Consolidated
Company or any ERISA Affiliate thereof, including without limitation, any tax
or penalty under Title I or Title IV of ERISA or under Chapter 43 of the Tax
Code, or any tax or penalty resulting from a loss of deduction under Sections
162, 404, or 419 of the Tax Code, where the failure to comply with such laws,
and such taxes and penalties, together with all other liabilities referred to
in this Section 5.16 (taken as a whole), would in the aggregate have a
Materially Adverse Effect;
(3) Liabilities. The Consolidated Companies are subject to no
liabilities (including withdrawal liabilities) with respect to any Plans of
such Consolidated Companies or any of their ERISA Affiliates, including
without limitation, any liabilities arising from Titles I or IV of ERISA,
other than obligations to fund benefits under an ongoing Plan and to pay
current contributions, expenses and premiums with respect to such Plans,
where such liabilities, together with all other liabilities referred to in
this Section 6.15 (taken as a whole), would in the aggregate have a
Materially Adverse Effect;
(4) Funding. The Consolidated Companies and, with respect to
any Plan which is subject to Title IV of ERISA, each of their respective
ERISA Affiliates, have made full and timely payment of all amounts (A)
required to be contributed under the terms of each Plan and applicable law,
and (B) required to be paid as expenses (including PBGC or other premiums) of
each Plan, where the failure to pay such amounts (when taken as a whole,
including any penalties attributable to such amounts) would have a Materially
Adverse Effect. No Plan subject to Title IV of ERISA (other than a
Multiemployer Plan) has an "amount of unfunded benefit liabilities" (as
defined in Section 4001(a)(18) of ERISA), determined as if such Plan
terminated on any date on which this representation and warranty is deemed
made, in any amount which, together with all other liabilities referred to in
this Section 5.16 (taken as a whole), would have a Materially Adverse Effect
if such amount were then due and payable. None of the Consolidated Companies
would be subject to withdrawal liability with respect to any Multiemployer
Plan, determined as if the event resulting in such withdrawal liability
occurred on any date on which this representation is made or deemed to be
made based on the most recent actuarial valuation data made available to
employers participating in the Multiemployer Plan, in any amount which,
together with all other liabilities referred to in this Section 5.16 (taken
as a whole), would have a Materially Adverse Effect if such amounts were then
due and payable. The Consolidated Companies are subject to no liabilities
with respect to post-retirement medical benefits in any amounts which,
together with all other liabilities referred to in this Section 5.16 (taken
as a whole), would have a Materially Adverse Effect if such amounts were then
due and payable.
Section V.17. Patents, Trademarks, Licenses, Etc. Except as
set forth on Schedule 5.17, (i) the Consolidated Companies have obtained and
hold in full force and effect all material patents, trademarks, service
marks, trade names, copyrights, licenses and other such rights, free from
material burdensome restrictions, which are necessary for the operation of
their respective businesses as presently conducted, and (ii) to the best of
Borrower's knowledge, no product, process, method, service or other item
presently sold by or employed by any Consolidated Company in connection with
such business infringes any patents, trademark, service mark, trade name,
copyright, license or other right owned by any other person and there is not
presently pending, or to the knowledge of Borrower, threatened, any claim or
litigation against or affecting any Consolidated Company contesting such
Person's right to sell or use any such product, process, method, substance or
other item where the result of such failure to obtain and hold such benefits
or such infringement would have a Materially Adverse Effect.
Section V.18. Ownership of Property. Except as set forth on
Schedule 5.18, each Consolidated Company has good and marketable fee simple
title to or a valid leasehold interest in all of its real property and good
title to, or a valid leasehold interest in, all of its other property, as
such properties are reflected in the financial statements referred to in
Section 5.15(a), other than properties disposed of in the ordinary course of
business since such date or as otherwise permitted by the terms of this
Agreement, subject to no Lien or title defect of any kind, except Permitted
Liens. The Consolidated Companies enjoy peaceful and undisturbed possession
under all of their respective material leases.
Section V.19. Indebtedness. As of the Closing Date, except for
the Indebtedness set forth on Schedule 7.01, none of the Consolidated
Companies is an obligor in respect of any Indebtedness for borrowed money or
any commitment to create or incur any Indebtedness for borrowed money.
Section V.20. Financial Condition. On the Closing Date,
including without limitation, the use of the proceeds of the Loans as
provided in Section 2.01, (i) the assets of each Credit Party at fair
valuation and based on their present fair saleable value (including, without
limitation, the fair and realistic value of any contribution or subrogation
rights in respect of any Guaranty Agreement given by such Credit Party) will
exceed such Credit Party's debts, including contingent liabilities (as such
liabilities may be limited under the express terms of any Guaranty Agreement
of such Credit Party), (ii) the remaining capital of such Credit Party will
not be unreasonably small to conduct the Credit Party's business, and (iii)
such Credit Party will not have incurred debts, or have intended to incur
debts, beyond the Credit Party's ability to pay such debts as they mature.
For purposes of this Section 5.20, "debt" means any liability on a claim, and
"claim" means (a) the right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, or (b) the
right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an equitable remedy
is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
Section V.21. Labor Matters. Except as set forth in Schedule
5.21 or in any notice furnished to the Lenders and the Issuing Bank pursuant
to Section 6.07(k) at or prior to the respective times the representations
and warranties set forth in this Section 5.21 are made or deemed to be made
hereunder, the Consolidated Companies have experienced no strikes, labor
disputes, slow downs or work stoppages due to labor disagreements which have
had, or would reasonably be expected to have, a Materially Adverse Effect,
and, to the best knowledge of Borrower, there are no such strikes, disputes,
slow downs or work stoppages threatened against any Consolidated Company.
The hours worked and payment made to employees of the Consolidated Companies
have not been in violation in any material respect of the Fair Labor
Standards Act or any other applicable law dealing with such matters. All
payments due from the Consolidated Companies, or for which any claim may be
made against the Consolidated Companies, on account of wages and employee
health and welfare insurance and other benefits have been paid or accrued as
liabilities on the books of the Consolidated Companies where the failure to
pay or accrue such liabilities would reasonably be expected to have a
Materially Adverse Effect.
Section V.22. Payment or Dividend Restrictions. Except as
described on Schedule 5.22, none of the Consolidated Companies is party to or
subject to any agreement or understanding restricting or limiting the payment
of any dividends or other distributions by any such Consolidated Company.
Section V.23. Sharing Agreements. Each of the Sharing
Agreements is in full force and effect and no material default exists
thereunder.
Section V.24. Disclosure. No representation or warranty
contained in this Agreement (including the Schedules attached hereto) or in
any other document furnished from time to time pursuant to the terms of this
Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary to make the
statements herein or therein not misleading in any material respect as of the
date made or deemed to be made. Except as may be set forth herein (including
the Schedules attached hereto), there is no fact known to Borrower which has
had, or is reasonably expected to have, a Materially Adverse Effect.
Section V.25. Year 2000 Compliant. Borrower and its
Subsidiaries shall be Year 2000 Compliant by December 31, 1999,
except where a failure to be Year 2000 Compliant will not have a Materially
Adverse Effect.
ARTICLE VI.
AFFIRMATIVE COVENANTS
So long as any Commitment remains in effect hereunder or any Note
shall remain unpaid, Borrower will:
Section VI.1. Corporate Existence, Etc. Preserve and maintain,
and cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, its material rights, franchises, and licenses, and its
material patents and copyrights (for the scheduled duration thereof),
trademarks, trade names, and service marks, necessary or desirable in the
normal conduct of its business, and its qualification to do business as a
foreign corporation in all jurisdictions where it conducts business or other
activities making such qualification necessary, where the failure to be so
qualified would reasonably be expected to have a Materially Adverse Effect.
Section VI.2. Compliance with Laws, Etc. Comply, and cause each
of its Subsidiaries to comply with all Requirements of Law (including,
without limitation, the Environmental Laws subject to the exception set forth
in Section 5.09 where the penalties, claims, fines, and other liabilities
resulting from noncompliance with such Environmental Laws do not involve
amounts in excess of $2,500,000 in the aggregate) and Contractual Obligations
applicable to or binding on any of them where the failure to comply with such
Requirements of Law and Contractual Obligations would reasonably be expected
to have a Materially Adverse Effect.
Section VI.3. Payment of Taxes and Claims, Etc. Pay, and cause
each of its Subsidiaries to pay, (i) all taxes, assessments and governmental
charges imposed upon it or upon its property, and (ii) all claims (including,
without limitation, claims for labor, materials, supplies or services) which
might, if unpaid, become a Lien upon its property, unless, in each case, the
validity or amount thereof is being contested in good faith by appropriate
proceedings and adequate reserves are maintained with respect thereto.
Section VI.4. Keeping of Books. Keep, and cause each of its
Subsidiaries to keep, proper books of record and account, containing complete
and accurate entries of all their respective financial and business
transactions.
Section VI.5. Visitation, Inspection, Etc. Permit, and cause
each of its Subsidiaries to permit, any representative of the Agent, the
Co-Agent, the Issuing Bank or any Lender to visit and inspect any of its
property, to examine its books and records and to make copies and take
extracts therefrom, and to discuss its affairs, finances and accounts with
its officers, all at such reasonable times and as often as the Agent, the
Co-Agent, the Issuing Bank or such Lender may reasonably request.
Section VI.6. Insurance; Maintenance of Properties.
(a) Maintain or cause to be maintained with financially sound
and reputable insurers, insurance with respect to its properties and
business, and the properties and business of its Subsidiaries, against
loss or damage of the kinds customarily insured against by reputable
companies in the same or similar businesses, such insurance to be of
such types and in such amounts as is customary for such companies under
similar circumstances; provided, however, that in any event Borrower
shall use its best efforts to maintain, or cause to be maintained,
insurance in amounts and with coverages not materially less favorable
to any Consolidated Company as in effect on the date of this Agreement.
(b) Cause, and cause each of the Consolidated Companies to
cause, all properties used or useful in the conduct of its business to
be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, settlements and improvements
thereof, all as in the judgment of Borrower may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section VI.7. Reporting Covenants. Furnish to each Lender and
the Issuing Bank:
(a) Annual Financial Statements. As soon as available and in
any event within 90 days after each Fiscal Year End of Borrower,
balance sheets of the Consolidated Companies as at the end of such
year, presented on a consolidated basis, and the related statements of
income, shareholders' equity, and cash flows of the Consolidated
Companies for such Fiscal Year, presented on a consolidated basis,
setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail and accompanied by a
report thereon of Ernst & Young, L.L.P. or other independent public
accountants of comparable recognized national standing, which such
report shall be unqualified as to going concern and scope of audit and
shall state that such financial statements present fairly in all
material respects the financial condition as at the end of such Fiscal
Year on a consolidated basis, and the results of operations and
statements of cash flows of the Consolidated Companies for such Fiscal
Year in accordance with GAAP and that the examination by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards;
(b) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the end of each fiscal quarter of
Borrower (other than the fourth fiscal quarter), balance sheets of the
Consolidated Companies as at the end of such quarter presented on a
consolidated basis and the related statements of income, shareholders'
equity, and cash flows of the Consolidated Companies for such fiscal
quarter and for the portion of Borrower's Fiscal Year ended at the end
of such quarter, presented on a consolidated basis setting forth in
each case in comparative form the figures for the corresponding quarter
and the corresponding portion of Borrower's previous Fiscal Year, all
in reasonable detail and certified by the chief financial officer or
principal accounting officer of Borrower that such financial
statements fairly present in all material respects the financial
condition of the Consolidated Companies as at the end of such fiscal
quarter on a consolidated basis, and the results of operations and
statements of cash flows of the Consolidated Companies for such fiscal
quarter and such portion of Borrower's Fiscal Year, in accordance with
GAAP consistently applied (subject to normal year-end audit adjustments
and the absence of certain footnotes);
(c) No Default/Compliance Certificate. Together with the
financial statements required pursuant to subsections (a) and (b)
above, a certificate of the treasurer or chief financial officer of
Borrower (i) to the effect that, based upon a review of the activities
of the Consolidated Companies and such financial statements during the
period covered thereby, there exists no Event of Default and no Default
under this Agreement, or if there exists an Event of Default or a
Default hereunder, specifying the nature thereof and the proposed
response thereto, and (ii) demonstrating in reasonable detail
compliance as at the end of such Fiscal Year or such fiscal quarter
with Section 6.08 and Sections 7.01 through 7.05;
(d) Notice of Default. Promptly after any Executive Officer of
Borrower has notice or knowledge of the occurrence of an Event of
Default or a Default, a certificate of the chief financial officer or
principal accounting officer of Borrower specifying the nature thereof
and the proposed response thereto;
(e) Litigation. Promptly after (i) the occurrence thereof,
notice of the institution of or any material adverse development in any
material action, suit or proceeding or any governmental investigation
or any arbitration, before any court or arbitrator or any governmental
or administrative body, agency or official, against any Consolidated
Company, or any material property of any thereof seeking money damages
in excess of $2,500,000 or which, if adversely determined, would
otherwise reasonably be expected to have a Materially Adverse Effect,
or (ii) actual knowledge thereof, notice of the threat of any such
action, suit, proceeding, investigation or arbitration;
(f) Environmental Notices. Promptly after receipt thereof,
notice of any actual or alleged violation, or notice of any action,
claim or request for information, either judicial or administrative,
from any governmental authority relating to any actual or alleged
claim, notice of potential responsibility under or violation of any
Environmental Law, or any actual or alleged spill, leak, disposal or
other release of any waste, petroleum product, or hazardous waste or
Hazardous Substance by any Consolidated Company which could result in
penalties, fines, claims or other liabilities to any Consolidated
Company in amounts in excess of $2,500,000;
(g) ERISA. (i) Promptly after the occurrence thereof with
respect to any Plan of any Consolidated Company or any ERISA Affiliate
thereof, or any trust established thereunder, notice of (A) a
"reportable event" described in Section 4043 of ERISA and the
regulations issued from time to time thereunder (other than a
"reportable event" not subject to the provisions for 30-day notice to
the PBGC under such regulations), or (B) any other event which could
subject any Consolidated Company to any tax, penalty or liability
under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, or
any tax or penalty resulting from a loss of deduction under Sections
162, 404 or 419 of the Tax Code, where any such taxes, penalties or
liabilities exceed or could exceed $2,500,000 in the aggregate;
(ii) Promptly after such notice must be provided to the
PBGC, or to a Plan participant, beneficiary or alternative payee, any
notice required under Section 101(d), 302(f)(4), 303, 307,
4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or under Section 401(a)(29) or
412 of the Tax Code with respect to any Plan of any Consolidated
Company or any ERISA Affiliate thereof;
(iii) Promptly after receipt, any notice received by any
Consolidated Company or any ERISA Affiliate thereof concerning the
intent of the PBGC or any other governmental authority to terminate a
Plan of such Company or ERISA Affiliate thereof which is subject to
Title IV of ERISA, to impose any liability on such Company or ERISA
Affiliate under Title IV of ERISA or Chapter 43 of the Tax Code;
(iv) Upon the request of the Agent, promptly upon the
filing thereof with the Internal Revenue Service ("IRS") or the
Department of Labor ("DOL"), a copy of IRS Form 5500 or annual report
for each Plan of any Consolidated Company or ERISA Affiliate thereof
which is subject to Title IV of ERISA;
(v) Upon the request of the Agent, (A) true and complete
copies of any and all documents, government reports and IRS
determination or opinion letters or rulings for any Plan of any
Consolidated Company from the IRS, PBGC or DOL, (B) any reports filed
with the IRS, PBGC or DOL with respect to a Plan of the Consolidated
Companies or any ERISA Affiliate thereof, or (C) a current statement of
withdrawal liability for each Multiemployer Plan of any Consolidated
Company or any ERISA Affiliate thereof;
(h) Liens. Promptly upon any Consolidated Compnay becoming
aware thereof, notice of the filing of any federal statutory Lien, tax
or other state or local government Lien or any other Lien affecting
their respective properties, other than Permitted Liens;
(i) Public Filings, Etc. Promptly upon the filing thereof or
otherwise becoming available, copies of all financial statements,
annual, quarterly and special reports, proxy statements and notices
sent or made available generally by Borrower to its public security
holders, of all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any of them with any
securities exchange, and of all press releases and other statements
made available generally to the public containing material developments
in the business or financial condition of Borrower and the other
Consolidated Companies;
(j) Accountants' Reports. Promptly upon receipt thereof,
copies of all financial statements of, and all reports submitted by,
independent public accountants to Borrower in connection with each
annual, interim, or special audit of Borrower's financial statements,
including without limitation, the comment letter submitted by such
accountants to management in connection with their annual audit;
(k) Burdensome Restrictions, Etc. Promptly upon the existence
or occurrence thereof, notice of the existence or occurrence of (i) any
Contractual Obligation or Requirement of Law described in Section 5.12,
(ii) failure of any Consolidated Company to hold in full force and
effect those material trademarks, service marks, patents, trade names,
copyrights, licenses and similar rights necessary in the normal conduct
of its business, and (iii) any strike, labor dispute, slow down or work
stoppage as described in Section 5.21;
(l) New Material Subsidiaries. Within 30 days after the
formation or acquisition of any Material Subsidiary, or any other event
resulting in the creation of a new Material Subsidiary, notice of the
formation or acquisition of such Material Subsidiary or such
occurrence, including a description of the assets of such entity, the
activities in which it will be engaged, and such other information as
the Agent, the Co-Agent, the Issuing Bank and any of the Lenders may
request;
(m) Intercompany Asset Transfers. Promptly upon the occurrence
thereof, notice of the transfer of any assets from any Credit Party to
any other Consolidated Company that is not a Credit Party in any
transaction or series of related transactions, where either the book
value or the fair market value of such assets is greater than
$2,500,000 (excluding sales or other transfers of assets in the
ordinary course of business); and
(n) Other Information. With reasonable promptness, such other
information about the Consolidated Companies as the Agent, the
Co-Agent, the Issuing Bank or any Lender may reasonably request from
time to time.
Section VI.8. Financial Covenants.
(a) Fixed Charge Coverage. Maintain a Fixed Charge Coverage
Ratio at all times greater than 3.00:1.00, measured as of the last day
of each fiscal quarter of the Borrower, commencing on the last day of
the fiscal quarter ending on August 31, 1998, for the immediately
preceding four quarters ending on such date.
(b) Leverage Ratio. Maintain a Leverage Ratio at all times of
not more than 3.00:1.0, measured as of the last day of each fiscal
quarter of the Borrower, commencing on the last day of the fiscal
quarter ending on August 31, 1998, for the immediately preceding four
quarters ending on such date.
Section VI.9. Notices Under Certain Other Indebtedness.
Immediately upon its receipt thereof, Borrower shall furnish the Agent a copy
of any notice received by it or any other Consolidated Company from the
holder(s) of Indebtedness referred to in Section 7.01(b), (c), (f), (g) or
(i) (or from any trustee, agent, attorney, or other party acting on behalf of
such holder(s)) in an amount which, in the aggregate, exceeds $2,500,000,
where such notice states or claims (i) the existence or occurrence of any
default or event of default with respect to such Indebtedness under the terms
of any indenture, loan or credit agreement, debenture, note, or other
document evidencing or governing such Indebtedness, or (ii) the existence or
occurrence of any event or condition which requires or permits holder(s) of
any Indebtedness to exercise rights under any Change in Control Provision.
Section VI.10. Additional Credit Parties and Collateral.
Promptly after (i) the formation or acquisition of any Material Subsidiary
not listed on Schedule 5.14, (ii) the transfer of assets to any Consolidated
Company if notice thereof is required to be given pursuant to Section 6.07(m)
and as a result thereof the recipient of such assets becomes a Material
Subsidiary, or (iii) the occurrence of any other event creating a new
Material Subsidiary, Borrower shall cause to be executed and delivered a
Supplement to Subsidiary Guaranty Agreement from each such Material
Subsidiary, together with related corporate authorization documents,
organizational documents, secretary's certificates and opinions, all in form
and substance satisfactory to the Agent and the Required Lenders.
ARTICLE VII.
NEGATIVE COVENANTS
So long as any Commitment remains in effect hereunder or any Note
shall remain unpaid, Borrower will not and will not permit any Subsidiary to:
Section VII.1. Indebtedness. Create, incur, assume, guarantee,
suffer to exist or otherwise become liable on or with respect to, directly or
indirectly, any Indebtedness, other than:
(a) Indebtedness of the Borrower under this Agreement and of
the Material Subsidiary of Borrower pursuant to the Guaranty Agreement;
(b) Indebtedness outstanding or incurred on the Closing Date
and described on Schedule 7.01
(c) purchase money Indebtedness to the extent secured by a Lien
permitted by Section 7.02(b) in an aggregate principal amount at any
time outstanding not to exceed $5,000,000;
(d) unsecured current liabilities (other than liabilities for
borrowed money or liabilities evidenced by promissory notes, bonds or
similar instruments) incurred in the ordinary course of business and
either (i) not more than 30 days past due, or (ii) being disputed in
good faith by appropriate proceedings with reserves for such disputed
liability maintained in conformity with GAAP;
(e) Indebtedness of Borrower or any of its Subsidiaries under
Interest Rate Contracts;
(f) Subordinated Debt of the Borrower (but not Subsidiaries of
the Borrower) expressly approved in writing by the Lenders;
(g) Guarantees of advances to officers and employees in the
ordinary course of business, or Guarantees otherwise disclosed to and
approved in writing by the Agent and the Required Lenders;
(h) Endorsements of instruments for deposit or collection in
the ordinary course of business;
(i) Unsecured Indebtedness of the Borrower pursuant to short
term lines of credit in an aggregate principal amount at any one time
outstanding not to exceed $5,000,000;
Section 7.05;
(k) Up to $25,000,000 of additional Indebtedness at any time
outstanding for the purpose of issuing variable or fixed rate demand
notes or bonds for the benefit of Borrower or any of its Subsidiaries
to finance one or more advanced culinary center.
Section VII.2. Liens. Create, incur, assume or suffer to exist
any Lien on any of its property now owned or hereafter acquired to secure any
Indebtedness other than:
(a) Liens existing on the Closing Date and disclosed on
Schedule 7.02;
(b) any Lien on any property and proceeds thereof securing
Indebtedness permitted by Section 7.01(c) or 7.01(k) above incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring, developing, constructing, installing or equipping such
property and any refinancing thereof, provided that such Lien does not
extend to any other property (other than the proceeds of such property);
(c) Liens for taxes not yet due, and Liens for taxes or Liens
imposed by ERISA which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being
maintained in accordance with GAAP;
(d) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law and
created in the ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves are being maintained in
accordance with GAAP;
(e) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(f) zoning, easements and restrictions on the use of real
property which do not materially impair the use of such property; and
(g) rights in property reserved or vested in any governmental
authority which do not materially impair the use of such property.
Section VII.3. Mergers, Sales, Acquisitions.
(a) Merge or consolidate with any other Person, except that
this Section 7.03 shall not apply to:
(i) any merger or consolidation of Borrower with any
other Person provided that the Borrower is the surviving
corporation after such merger or consolidation,
(ii) any merger or consolidation of any of the Borrower's
Subsidiaries with any other Person provided that any such
Subsidiary shall be the surviving corporation after such merger
or consolidation, or
(iii) any merger between Subsidiaries of Borrower; or
(b) sell, lease, transfer or otherwise dispose of its
accounts, property or other assets (including capital stock of any
Subsidiary of Borrower), except that this Section 7.03 shall not apply
to:
(i) any sale, lease, transfer or other disposition of
assets of any Subsidiary of the Borrower to the Borrower or any
of its Material Subsidiaries,
(ii) sales of inventory in the ordinary course of business
of the Borrower and its Subsidiaries,
(iii) disposition of equipment or inventory determined in
good faith to be obsolete or unusable by the Borrower or its
Subsidiaries, or
(iv) any other sale of the Borrower's assets during the
term of this Agreement; provided that, such assets (x) have an
aggregate book value, which when aggregated with all other such
sales since the Closing Date, do not exceed seven and one-half
percent (7.5%) of the aggregate book value of all of the
Borrower's assets on the date of such transfer, and (y) when
aggregated with all other assets of Borrower sold during such
Fiscal Year, did not produce or otherwise account for more than
ten percent (10%) of Consolidated EBITDA during the preceding
Fiscal Year (or in the case of the first year of this Agreement,
any of the four preceding fiscal quarters of the Borrower);
(c) purchase, lease or otherwise acquire for cash, stock or
other consideration, the stock of any Person or all or any substantial
portion of the assets of any Person, unless such stock, assets or other
considerations have fair market value in any one transaction less than
$10,000,000, or less than $20,000,000 in the aggregate per Fiscal Year,
and the Borrower provides to the Lenders the following information:
(i) a description in reasonable detail of the assets
proposed to be purchased in the transaction; and
(ii) a certificate by the Chief Financial Officer of the
Borrower stating that (1) after giving effect any such
transaction in this Section 7.03(c) the covenants described in
Section 6.08 have been met and (2) that no Default or Event of
Default will exist as a result of the transaction;
provided, however, that no transaction pursuant to clause (a), clause (b)(i),
clause (b)(iv) or clause (c) above shall be permitted if any Default or Event
of Default exists at the time of such transaction or would exist as a result
of such transaction.
Section VII.4. Investments, Loans, Etc. Make, permit or hold any
Investments in any Person, or otherwise acquire or hold any Subsidiaries,
other than:
(a) Investments in (i) Subsidiaries of Borrower existing as of
the Closing Date, (ii) Material Subsidiaries with respect to which the
Borrower has complied with Section 6.10, and (iii) Subsidiaries created
or acquired thereafter in connection with any acquisition permitted by
Section 7.03(c) to the extent permitted by Section 7.03 in any Fiscal
Year.
(b) Investments in the stock or other assets of any other
Person that is engaged in a business permitted by Section 7.08 hereof
that, as a result of such Investment, becomes a wholly-owned Subsidiary
of Borrower (other than Hostile Acquisitions); provided, however, that
the aggregate amount of Investments made pursuant to this subsection
(b) shall not exceed, (x) in the case of the acquisition of the stock
or assets of any Person or related Persons, an aggregate amount of
$1,500,000, and (y) an aggregate amount of $5,000,000 during any Fiscal
Year of the Borrower;
(c) marketable direct obligations of the United States or any
agency thereof, or obligations guaranteed by the United States or any
agency thereof, in each case supported by the full faith and credit of
the United States and maturing within one year from the date of
creation thereof;
(d) Investments received in settlement of Indebtedness created
in the ordinary course of business;
(e) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state
or any public instrumentality thereof, the interest from which is
exempt from Federal income taxes, maturing within one year from the
date of acquisition thereof and either having as at any date of
determination the one of the two highest ratings obtainable from either
Standard & Poor's or Moody's;
(f) unsecured commercial paper, the interest from which is
exempt from Federal income taxes, maturing no more than 270 days from
the date of creation and having as at any date of determination either
the highest rating obtainable from either Standard & Poor's or Moody's;
(g) commercial paper issued by corporations, each of which has
a consolidated net worth of not less than $500,000,000, and conducts a
substantial portion of its business in the United States of America,
maturing no more than 365 days from the date of acquisition thereof and
having as at any date of determination the highest rating obtainable
from either Standard & Poor's or Moody's; and
(h) money market or similar depository accounts, certificates
of deposit or bankers acceptances, in each case redeemable upon demand
or maturing within one year from the date of acquisition thereof,
issued by commercial banks incorporated under the laws of the United
States of America or any state thereof or the District of Columbia,
provided (x) each such bank has at any date of determination combined
capital and surplus of not less than $1,000,000,000 and a rating of its
long-term debt of at least A by Standard & Poor's or at least A by
Moody's or a long-term deposit rating of at least A issued by Standard
& Poor's or at least A issued by Moody's, (y) the aggregate amount of
all such certificates of deposit issued by such bank are fully insured
at all times by the Federal Deposit Insurance Company;
provided however, notwithstanding the foregoing, the Borrower and any
Subsidiary may continue to own any Investment which (A) complied with the
provisions of clauses (f), (g) or (h) at the time such Investment was made
and (B) at any date of determination does not so comply solely because (x)
such Investment no longer has the rating required from Standard & Poor's or
Moody's or (y) the bank having the money market or depository account or
issuing the certificate of deposit or bankers acceptance ceases to have the
required level of capital and surplus or to have a rating of its long-term
debt of at least A by Standard & Poor's or at least A by Moody's or to have a
long-term deposit rating of at least A by Standard & Poor's or at least A by
Moody's, if, and for so long as, in the good faith judgment of the relevant
Executive Officer, no loss of the principal amount of such Investment would
occur as the result of the Borrower or such Subsidiary continuing to own such
Investment to maturity. Nothing contained in the foregoing proviso shall be
deemed to be applicable to any new or renewed Investment at the time such
Investment is made or renewed.
Section VII.5. Letters of Credit. Create, incur, issue, assume,
guarantee, suffer to exist or otherwise become liable on or with respect to,
directly or indirectly, letters of credit other than Letters of Credit issued
pursuant to this Agreement and letters of credit issued to provide credit or
liquidity support, or both in connection with Indebtedness permitted by
Section 7.01(k), where the maximum amount available to be drawn under all
such letters of credit would exceed, at any one time outstanding, $20,000,000
in the aggregate.
Section VII.6. Sale and Leaseback Transactions. Sell or transfer
any property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which any
Consolidated Company intends to use for substantially the same purpose or
purposes as the property being sold or transferred.
Section VII.7. Transactions with Affiliates.
(a) Enter into any transaction or series of related
transactions which in the aggregate would be material, whether or not
in the ordinary course of business, with any Affiliate of any
Consolidated Company (but excluding any Affiliate which is also a
wholly-owned Subsidiary of Borrower and any compensation arrangement
with an officer or director of the Borrower or any other Consolidated
Company entered into in the ordinary course of business), other than on
terms and conditions substantially as favorable to such Consolidated
Company as would be obtained by such Consolidated Company at the time
in a comparable arm's-length transaction with a Person other than an
Affiliate.
(b) Convey or transfer to any other Person (including any other
Consolidated Company) any real property, buildings, or fixtures used in
the manufacturing or production operations of any Consolidated Company,
or convey or transfer to any other Consolidated Company any other
assets (excluding conveyances or transfers in the ordinary course of
business) if at the time of such conveyance or transfer any Default or
Event of Default exists or would exist as a result of such conveyance
or transfer.
Section VII.8. Changes in Business. Enter into or engage in any
business which is substantially different from the business engaged in by the
Borrower and its Subsidiaries on the Closing Date.
Section VII.9. ERISA. Take or fail to take any action with
respect to any Plan of any Consolidated Company or, with respect to its ERISA
Affiliates, any Plans which are subject to Title IV of ERISA or to
continuation health care requirements for group health plans under the Tax
Code, including without limitation (i) establishing any such Plan, (ii)
amending any such Plan (except where required to comply with applicable law),
(iii) terminating or withdrawing from any such Plan, or (iv) incurring an
amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA, or any withdrawal liability under Title IV of ERISA with respect to
any such Plan, which together with any other action or omission referred to
in this Section 7.09 (taken as a whole) would have a Materially Adverse
Effect, without first obtaining the written approval of the Required Lenders.
Section VII.10. Limitation on Payment Restrictions Affecting
Consolidated Companies. Create or otherwise cause or suffer to exist or
become effective, any consensual encumbrance or restriction on the ability of
any Consolidated Company to (i) pay dividends or make any other distributions
on any stock of a Subsidiary of the Borrower, or (ii) pay any intercompany
debt owed to Borrower or any other Consolidated Company, or (iii) transfer
any of its property or assets to Borrower or any other Consolidated Company,
except any consensual encumbrance or restriction existing as of the Closing
Date.
Section VII.11. Actions Under Certain Documents. Without the
prior written consent of the Required Lenders (i) modify, amend, cancel or
rescind any agreements or documents evidencing or governing Subordinated Debt
or intercompany debt, (ii) make any payment with respect to Subordinated
Debt, except that current interest accrued on such Subordinated Debt as of
the date of this Agreement and all interest subsequently accruing thereon
(whether or not paid currently) may be paid unless a Default or Event of
Default has occurred and is continuing, (iii) voluntarily prepay any portion
of intercompany debt, or (iv) amend or modify any of the Sharing Agreements
to materially increase the obligations or liabilities of the Consolidated
Companies thereunder.
Section VII.12. Additional Negative Pledges. Create or
otherwise cause or suffer to exist or become effective, directly or
indirectly, any prohibition or restriction on the creation or existence of
any Lien upon any asset of any Consolidated Company, other than pursuant to
(i) Section 7.02, (ii) the terms of any agreement, instrument or other
document pursuant to which any Indebtedness permitted by Sections 7.01(k) or
7.02(b) is incurred by any Consolidated Company, so long as such prohibition
or restriction (in the case of Indebtedness permitted pursuant to
Section 7.02(b)) applies only to the property or asset being financed by such
Indebtedness, and (iii) any requirement of applicable law or any regulatory
authority having jurisdiction over any of the Consolidated Companies.
Section VII.13. Changes in Fiscal Year. Change the calculation
of the Fiscal Year of the Borrower.
Section VII.14. Issuance of Stock by Subsidiaries. Permit any
Subsidiary (either directly or indirectly by the issuance of rights or
options for, or securities convertible into such shares) to issue, sell or
dispose of any shares of its stock of any class (other than directors'
qualifying shares, if any) except to the Borrower or another Subsidiary.
Section VII.15. Dividends. In any Fiscal Year the Borrower
shall not pay or declare dividends in an aggregate amount in excess of twenty
percent (20%) of its Consolidated Net Income.
ARTICLE VIII.
EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following specified events (each an "Event of Default"):
Section VIII.1. Payments. Borrower shall fail to make
promptly when due (including, without limitation, by mandatory prepayment)
any principal payment with respect to the Loans, or Borrower shall fail to
make any payment of interest, fee or other amount payable hereunder within
five (5) days of its due date;
Section VIII.2. Covenants Without Notice. Borrower shall fail
to observe or perform any covenant or agreement contained in Sections 6.01,
6.05, 6.07, 6.08, 6.09 or Article VII;
Section VIII.3. Other Covenants. Borrower shall fail to
observe or perform any covenant or agreement contained in this Agreement,
other than those referred to in Sections 8.01 and 8.02, and, if capable of
being remedied, such failure shall remain unremedied for 30 days after the
earlier of (i) Borrower's obtaining knowledge thereof, or (ii) written notice
thereof shall have been given to Borrower by Agent, the Co-Agent, the Issuing
Bank or any Lender;
Section VIII.4. Representations. Any representation or
warranty made or deemed to be made by Borrower or any other Credit Party or
by any of its officers under this Agreement or any other Credit Document
(including the Schedules attached thereto), or any certificate or other
document submitted to the Agent, the Co-Agent, the Issuing Bank or the
Lenders by any such Person pursuant to the terms of this Agreement or any
other Credit Document, shall be incorrect in any material respect when made
or deemed to be made or submitted;
Section VIII.5. Non-Payments of Other Indebtedness. Any
Consolidated Company shall fail to make when due (whether at stated maturity,
by acceleration, on demand or otherwise, and after giving effect to any
applicable grace period) any payment of principal of or interest on any
Indebtedness (other than the Obligations) exceeding $2,500,000 individually
or in the aggregate;
Section VIII.6. Defaults Under Other Agreements; Change In
Control Provisions. (a) Any Consolidated Company shall fail to observe or
perform any covenants or agreements (whether or not waived) contained in any
agreements or instruments relating to any of its Indebtedness exceeding
$500,000 individually or in the aggregate, or any other event shall occur if
the effect of such failure or other event is to accelerate, or with notice or
passage of time or both, to permit the holder of such Indebtedness or any
other Person to accelerate, the maturity of such Indebtedness; or any such
Indebtedness shall be required to be prepaid (other than by a regularly
scheduled required prepayment) in whole or in part prior to its stated
maturity; or (b) any event or condition shall occur or exist which, pursuant
to the terms of any Change in Control Provision, requires or permits the
holder(s) of the Indebtedness subject to such Change in Control Provision to
require that such Indebtedness be redeemed, repurchased, defeased, prepaid or
repaid, in whole or in part, or the maturity of such Indebtedness to be
accelerated;
Section VIII.7. Bankruptcy. The Borrower or any Material
Subsidiary shall commence a voluntary case concerning itself under the
Bankruptcy Code or applicable foreign bankruptcy laws; or an involuntary case
for bankruptcy is commenced against Borrower or any Material Subsidiary and
the petition is not controverted within 10 days, or is not dismissed within
60 days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) or similar official under applicable foreign bankruptcy laws
is appointed for, or takes charge of, all or any substantial part of the
property of the Borrower or any Material Subsidiary; or the Borrower or any
Material Subsidiary commences proceedings of its own bankruptcy or to be
granted a suspension of payments or any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction,
whether now or hereafter in effect, relating to the Borrower or any Material
Subsidiary or there is commenced against the Borrower or any Material
Subsidiary any such proceeding which remains undismissed for a period of 60
days; or the Borrower or any Material Subsidiary is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any Material Subsidiary suffers any
appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
the Borrower or any Material Subsidiary makes a general assignment for the
benefit of creditors; or the Borrower or any Material Subsidiary shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Borrower or any Material
Subsidiary shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Borrower or any Material
Subsidiary shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate action
is taken by the Borrower or any Material Subsidiary for the purpose of
effecting any of the foregoing;
Section VIII.8. ERISA. A Plan of either a Consolidated Company
or of any of its ERISA Affiliates which is subject to Title IV of ERISA:
(i) shall fail to be funded in accordance with the minimum
funding standard required by applicable law, the terms of
such Plan, Section 412 of the Tax Code or Section 302 of
ERISA for any plan year or a waiver of such standard is
sought or granted with respect to such Plan under
applicable law, the terms of such Plan or Section 412 of
the Tax Code or Section 303 of ERISA; or
(ii) is being, or has been, terminated or the subject of
termination proceedings under applicable law or the terms
of such Plan; or
(iii) shall require a Consolidated Company to provide security
under applicable law, the terms of such Plan, Section 401
or 412 of the Tax Code or Section 306 or 307 of ERISA; or
(iv) results in a liability to a Consolidated Company under
applicable law, the terms of such Plan, or Title IV of
ERISA;
and there shall result from any such failure, waiver, termination or other
event described in clauses (i) through (iv) above a liability to the PBGC or
a Plan that would have a Materially Adverse Effect;
Section VIII.9. Judgments. Judgments or orders for the payment
of money in excess of $2,500,000 individually or in the aggregate or
otherwise having a Materially Adverse Effect shall be rendered against
Borrower or any other Consolidated Company and such judgment or order shall
continue unsatisfied (in the case of a money judgment) and in effect for a
period of 30 days during which execution shall not be effectively stayed or
deferred (whether by action of a court, by agreement or otherwise);
Section VIII.10. Ownership of Credit Parties. If Borrower shall
at any time fail to own and control the shares of Voting Stock of any
Guarantor which it owned or controlled at the time such Guarantor became a
Credit Party hereunder other than due to sale of the Voting Stock of such
Guarantor permitted pursuant to Section 7.03 hereof;
Section VIII.11. Change in Control of Borrower. (x) With the
exception of Morrison prior to the Closing Date, any person or group (within
the meaning of Rule 13d-5 of the Securities and Exchange Commission as in
effect on the date hereof) shall become the owner, beneficially or of record,
of shares representing more than twenty-five percent (25%) of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of the Borrower, or (y) a change in the board of directors of the Borrower
shall occur such that the individuals who constituted the board of directors
of the Borrower at the beginning of the two-year period immediately preceding
such change (together with any other director whose election by the board of
directors of the Borrower or whose nomination for election by the
shareholders of the Borrower was approved by a vote of at least a majority of
the directors then in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then
in office; or
Section VIII.12. Default Under Other Credit Documents; Sharing
Agreements. (x) There shall exist or occur any "Event of Default" as
provided under the terms of any other Credit Document, or any Credit Document
ceases to be in full force and effect or the validity or enforceability
thereof is disaffirmed by or on behalf of Borrower or any other Credit Party,
or at any time it is or becomes unlawful for Borrower or any other Credit
Party to perform or comply with its material obligations under any Credit
Document, or the material obligations of Borrower or any other Credit Party
under any Credit Document are not or cease to be legal, valid and binding on
Borrower or any such Credit Party; or (y) any party to the Sharing Agreements
shall default with respect to its covenants or obligations thereunder where
such default results in a Materially Adverse Effect with respect to the
Credit Parties;
then, and in any such event, and at any time thereafter if any Event of
Default shall then be continuing, the Agent may, and upon the written or
telex request of the Required Lenders, shall, take any or all of the
following actions, without prejudice to the rights of the Agent, the
Co-Agent, the Issuing Bank, any Lender or the holder of any Note to enforce
its claims against Borrower or any other Credit Party: (i) declare all
Commitments terminated, whereupon the Commitments of each Lender shall
terminate immediately and any commitment fee shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest on the Loans, and all other Obligations owing
hereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower; provided, that, if an Event of
Default specified in Section 8.07 shall occur, the result which would occur
upon the giving of notice by the Agent to any Credit Party, shall occur
automatically without the giving of any such notice, and (iii) may exercise
any other rights or remedies available under the Credit Documents, at law or
in equity.
ARTICLE IX.
THE AGENT
Section IX.1. Appointment of Agent. The Issuing Bank and each
Lender hereby designates SunTrust as Agent to administer all matters
concerning the Loans and Letters of Credit and to act as herein specified.
The Issuing Bank and each Lender hereby irrevocably authorizes, and each
holder of any Note by the acceptance of a Note shall be deemed irrevocably to
authorize, the Agent to take such actions on its behalf under the provisions
of this Agreement, the other Credit Documents, and all other instruments and
agreements referred to herein or therein, and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through their agents or employees.
Section IX.2. Authorization of Agent with Respect to the
Security Documents. (a) The Issuing Bank and each Lender hereby authorizes
the Agent to enter into each of the Security Documents substantially in the
form attached hereto, and to take all action contemplated thereby. All
rights and remedies under the Security Documents may be exercised by the
Agent for the benefit of the Agent, the Issuing Bank and the Lenders and the
other beneficiaries thereof upon the terms thereof. The Issuing Bank and the
Lenders further agree that the Agent may assign its rights and obligations
under any of the Security Documents to any affiliate of the Agent or to any
trustee, if necessary or appropriate under applicable law, which assignee in
each such case shall (subject to compliance with any requirements of
applicable law governing the assignment of such Security Documents) be
entitled to all the rights of the Agent under and with respect to the
applicable Security Document.
(b) In each circumstance where, under any provision of any
Security Document, the Agent shall have the right to grant or withhold any
consent, exercise any remedy, make any determination or direct any action by
the Agent under such Security Document, the Agent shall act in respect of
such consent, exercise of remedies, determination or action, as the case may
be, with the consent of and at the direction of the Required Lenders;
provided, however, that no such consent of the Required Lenders shall be
required with respect to any consent, determination or other matter that is,
in the Agent's judgment, ministerial or administrative in nature. In each
circumstance where any consent of or direction from the Required Lenders is
required, the Agent shall send to the Issuing Bank and the Lenders a notice
setting forth a description in reasonable detail of the matter as to which
consent or direction is requested and the Agent's proposed course of action
with respect thereto. In the event the Agent shall not have received a
response from any Lender or the Issuing Bank within five (5) Business Days
after such Lender's or the Issuing Bank's receipt of such notice, such Lender
or the Issuing Bank shall be deemed to have agreed to the course of action
proposed by the Agent.
Section IX.3. Nature of Duties of Agent. The Agent shall have
no duties or responsibilities except those expressly set forth in this
Agreement and the other Credit Documents. None of the Agent nor any of its
respective officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such hereunder or in connection herewith,
unless caused by its or their gross negligence or willful misconduct. The
duties of the Agent shall be ministerial and administrative in nature; the
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender or the Issuing Bank; and nothing in this Agreement,
express or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of this Agreement or the other Credit
Documents except as expressly set forth herein.
Section IX.4. Lack of Reliance on the Agent.
(a) Independently and without reliance upon the Agent, each
Lender and the Issuing Bank, to the extent each deems appropriate, has
made and shall continue to make (i) its own independent investigation
of the financial condition and affairs of the Credit Parties in
connection with the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of the
Credit Parties, and, except as expressly provided in this Agreement,
the Agent shall have no duty or responsibility, either initially or on
a continuing basis, to provide any Lender or the Issuing Bank with any
credit or other information with respect thereto, whether coming into
its possession before the making of the Loans or the issuance of the
Letters of Credit or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender or the
Issuing Bank for any recitals, statements, information, representations
or warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or
sufficiency of this Agreement, the Notes, the Guaranty Agreement or any
other documents contemplated hereby or thereby, or the financial
condition of the Credit Parties, or be required to make any inquiry
concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Notes, the Guaranty
Agreement or the other documents contemplated hereby or thereby, or the
financial condition of the Credit Parties, or the existence or possible
existence of any Default or Event of Default.
Section IX.5. Certain Rights of the Agent. If the Agent shall
request instructions from the Required Lenders with respect to any action or
actions (including the failure to act) in connection with this Agreement, the
Agent shall be entitled to refrain from such act or taking such act, unless
and until the Agent shall have received instructions from the Required
Lenders; and the Agent shall not incur liability in any Person by reason of
so refraining. Without limiting the foregoing, no Lender or the Issuing Bank
shall have any right of action whatsoever against the Agent as a result of
the Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Lenders.
Section IX.6. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cable gram, radiogram, order or other documentary, teletransmission
or telephone message believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person. The Agent may consult with
legal counsel (including counsel for any Credit Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
Section IX.7. Indemnification of Agent. To the extent the Agent
is not reimbursed and indemnified by the Credit Parties, each Lender will
reimburse and indemnify the Agent, ratably according to the respective
amounts of the Loans outstanding under all Commitments (or if no amounts are
outstanding, ratably in accordance with the Commitments), in either case, for
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its
duties hereunder, in any way relating to or arising out of this Agreement or
the other Credit Documents; provided that no Lender or the Issuing Bank shall
be liable to the Agent for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct.
Section IX.8. The Agent in its Individual Capacity. With
respect to its obligation to lend under this Agreement, the Loans made by it
and the Notes issued to it, the Agent shall have the same rights and powers
hereunder as any other Lender or holder of a Note and may exercise the same
as though it were not performing the duties specified herein; and the terms
"Lenders", "Required Lenders", "holders of Notes", or any similar terms
shall, unless the context clearly otherwise indicates, include the Agent in
its individual capacity. The Agent may accept deposits from, lend money to,
and generally engage in any kind of banking, trust, financial advisory or
other business with the Consolidated Companies or any affiliate of the
Consolidated Companies as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Consolidated
Companies for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders or the Issuing Bank.
Section IX.9. Holders of Notes. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any Person who,
at the time of making such request or giving such authority or consent, is
the holder of any Note shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Note or of any Note or Notes issued in
exchange therefor.
Section IX.10. Successor Agent.
(a) The Agent may resign at any time by giving written notice
thereof to the Lenders, the Issuing Bank and Borrower and may be
removed at any time with or without cause by the Required Lenders;
provided, however, the Agent may not resign or be removed until a
successor Agent has been appointed and shall have accepted such
appointment. Upon any such resignation or removal, the Required
Lenders shall have the right to appoint a successor Agent subject to
Borrower's prior written approval. If no successor Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice
of resignation or the Required Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent subject to Borrower's prior written approval, which
shall be a bank which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of
America or any State thereof, or any Affiliate of such bank, having a
combined capital and surplus of at least $1,000,000,000.
(b) Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After
any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was an Agent under
this Agreement.
ARTICLE X.
MISCELLANEOUS
Section X.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, telecopy or similar teletransmission or writing) and shall be
given to such party at its address or applicable teletransmission number set
forth on the signature pages hereof, or such other address or applicable
teletransmission number as such party may hereafter specify by notice to the
Agent and Borrower. Each such notice, request or other communication shall
be effective (i) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the appropriate answerback is
received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as
aforesaid, (iii) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified in this Section and the appropriate
confirmation is received, or (iv) if given by any other means (including,
without limitation, by air courier), when delivered or received at the
address specified in this Section; provided that notices to the Agent shall
not be effective until received.
Section X.2. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the other Credit Documents, nor consent to any
departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders (and
in the case of any amendment, the applicable Credit Party), and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided that no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders and the
Issuing Bank to do any of the following: (i) waive any of the conditions
specified in Section 4.01 or 4.02, (ii) increase the Commitments or
contractual obligations of the Lenders or the Issuing Bank to Borrower under
this Agreement, (iii) reduce the principal of, or interest on, the Notes or
any fees hereunder, (iv) postpone any date fixed for the payment in respect
of principal of, or interest on, the Notes or any fees hereunder, (v) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Notes, or the number or identity of Lenders which shall be required
for the Lenders or any of them to take any action hereunder, (vi) agree to
release any Guarantor from its obligations under any Guaranty Agreement,
(vii) modify the definition of "Required Lenders," or (viii) modify this
Section 10.02. Notwithstanding the foregoing, no amendment, waiver or
consent shall, unless in writing and signed by the Agent and the Co-Agent, in
addition to the Lenders and the Issuing Bank required hereinabove to take
such action, affect the rights or duties of the Agent under this Agreement or
under any other Credit Document.
Section X.3. No Waiver; Remedies Cumulative. No failure or
delay on the part of the Agent, the Co-Agent, any Lender, the Issuing Bank or
any holder of a Note in exercising any right or remedy hereunder or under any
other Credit Document, and no course of dealing between any Credit Party and
the Agent, any Lender, the Issuing Bank or the holder of any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right or remedy hereunder or under any other Credit Document preclude any
other or further exercise thereof or the exercise of any other right or
remedy hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Agent, the Co-Agent, any Lender, the Issuing Bank or the holder of any Note
would otherwise have. No notice to or demand on any Credit Party not
required hereunder or under any other Credit Document in any case shall
entitle any Credit Party to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Agent, the
Co-Agent, the Lenders, the Issuing Bank or the holder of any Note to any
other or further action in any circumstances without notice or demand.
Section X.4. Payment of Expenses, Etc. Borrower shall:
(i) whether or not the transactions hereby contemplated
are consummated, pay all reasonable, out-of-pocket costs and
expenses of the Agent in the administration (both before and
after the execution hereof and including reasonable expenses
actually incurred relating to advice of counsel as to the
rights and duties of the Agent, the Co-Agent, the Issuing Bank
and the Lenders with respect thereto) of, and in connection
with the preparation, execution and delivery of, preservation
of rights under, enforcement of, and, after a Default or Event
of Default, refinancing, renegotiation or restructuring of,
this Agreement and the other Credit Documents and the
documents and instruments referred to therein, and any
amendment, waiver or consent relating thereto (including,
without limitation, the reasonable fees actually incurred and
disbursements of counsel for the Agent), and in the case of
enforcement of this Agreement or any Credit Document after an
Event of Default, all such reasonable, out-of-pocket costs and
expenses (including, without limitation, the reasonable fees
actually incurred and reasonable disbursements and changes of
counsel), for any of the Lenders or the Issuing Bank;
(ii) subject, in the case of certain Taxes, to the
applicable provisions of Section 3.07(b), pay and hold each of
the Lenders and the Issuing Bank harmless from and against any
and all present and future stamp, documentary, and other
similar Taxes with respect to this Agreement, the Notes and
any other Credit Documents, any collateral described therein,
or any payments due thereunder, and save the Issuing Bank and
each Lender harmless from and against any and all liabilities
with respect to or resulting from any delay or omission to pay
such Taxes; and
(iii) indemnify the Agent, the Co-Agent, the Issuing Bank
and each Lender, and their respective officers, directors,
employees, representatives and agents from, and hold each of
them harmless against, any and all costs, losses, liabilities,
claims, damages or expenses incurred by any of them (whether
or not any of them is designated a party thereto) (an
"Indemnitee") arising out of or by reason of any
investigation, litigation or other proceeding related to any
actual or proposed use of the proceeds of any of the Loans or
any Credit Party's entering into and performing of the
Agreement, the Notes, or the other Credit Documents,
including, without limitation, the reasonable fees actually
incurred and disbursements of counsel incurred in connection
with any such investigation, litigation or other proceeding;
provided, however, Borrower shall not be obligated to
indemnify any Indemnitee for any of the foregoing arising out
of such Indemnitee's gross negligence or willful misconduct;
(iv) without limiting the indemnities set forth in
subsection (iii) above, indemnify each Indemnitee for any and
all expenses and costs (including without limitation,
remedial, removal, response, abatement, cleanup,
investigative, closure and monitoring costs), losses, claims
(including claims for contribution or indemnity and including
the cost of investigating or defending any claim and whether
or not such claim is ultimately defeated, and whether such
claim arose before, during or after any Credit Party's
ownership, operation, possession or control of its business,
property or facilities or before, on or after the date
hereof, and including also any amounts paid incidental to any
compromise or settlement by the Indemnitee or Indemnitees to
the holders of any such claim), lawsuits, liabilities,
obligations, actions, judgments, suits, disbursements,
encumbrances, liens, damages (including without limitation
damages for contamination or destruction of natural
resources), penalties and fines of any kind or nature
whatsoever (including without limitation in all cases the
reasonable fees actually incurred, other charges and
disbursements of counsel in connection therewith) incurred,
suffered or sustained by that Indemnitee based upon, arising
under or relating to Environmental Laws based on, arising out
of or relating to in whole or in part, the existence or
exercise of any rights or remedies by any Indemnitee under
this Agreement, any other Credit Document or any related
documents.
If and to the extent that the obligations of Borrower under this
Section 10.04 are unenforceable for any reason, Borrower hereby agrees
to make the maximum contribution to the payment and satisfaction of
such obligations which is permissible under applicable law.
Section X.5. Right of Setoff. In addition to and not in
limitation of all rights of offset that any Lender, the Issuing Bank or other
holder of a Note may have under applicable law, each Lender, Issuing Bank or
other holder of a Note shall, upon the occurrence of any Event of Default and
whether or not such Lender, Issuing Bank or such holder has made any demand
or any Credit Party's obligations have matured, have the right to appropriate
and apply to the payment of any Credit Party's obligations hereunder and
under the other Credit Documents, all deposits of any Credit Party (general
or special, time or demand, provisional or final) then or thereafter held by
and other indebtedness or property then or thereafter owing by such Lender,
the Issuing Bank or other holder to any Credit Party, whether or not related
to this Agreement or any transaction hereunder.
Section X.6. Benefit of Agreement; Assignments; Participations.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns
of the parties hereto, provided that Borrower may not assign or
transfer any of its interest hereunder without the prior written
consent of the Lenders and the Issuing Bank.
(b) Any Lender may make, carry or transfer Loans at, to or for
the account of, any of its branch offices or the office of an Affiliate
of such Lender.
(c) Each Lender and may assign all or a portion of its
interests, rights and obligations under this Agreement (including all
or a portion of any of its Commitments and the Loans at the time owing
to it and the Notes held by it) to any Eligible Assignee; provided,
however, that (i) the Borrower and the Agent each must give its prior
written consent to such assignment (which consent shall not be
unreasonably withheld or delayed) unless such assignment is an
Affiliate of the assigning Lender or unless (in the case of Borrower's
consent) an Event of Default has occurred and is continuing hereunder,
(ii) the amount of the Commitments of the assigning Lender subject to
each assignment (determined as of the date the assignment and
acceptance with respect to such assignment is delivered to the Agent)
shall not be less than an amount equal to $10,000,000 or greater
integral multiplies of $1,000,000 unless such assignment is to an
Affiliate of the assigning Lender or such Lender is assigning it
commitment in its entirety, (iii) the parties to each such assignment
shall execute and deliver to the Agent an Assignment and Acceptance,
together with a Note or Notes subject to such assignment and, unless
such assignment is to an Affiliate of such Lender, a processing and
recordation fee of $3,000. Borrower shall not be responsible for such
processing and recordation fee or any costs or expenses incurred by any
Lender or the Agent in connection with such assignment. From and after
the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the
execution thereof, the assignee thereunder shall be a party hereto and
to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this
Agreement. Within five (5) Business Days after receipt of the notice
and the Assignment and Acceptance, Borrower shall execute and deliver
to the Agent, in exchange for the surrendered Note or Notes, a new Note
or Notes to the order of such assignee in a principal amount equal to
the applicable Commitments assumed by it pursuant to such Assignment
and Acceptance and new Note or Notes to the assigning Lender in the
amount of its retained Commitment or Commitments. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the
date of the surrendered Note or Notes which they replace, and shall
otherwise be in substantially the form attached hereto.
(d) Each Lender may, without the consent of Borrower or the
Agent, sell participations to one or more banks or other entities in
all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitments in the Loans owing to it
and the Notes held by it), provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the participating bank or
other entity shall not be entitled to the benefit (except through its
selling Lender) of the cost protection provisions contained in Article
III of this Agreement, and (iv) Borrower and the Agent and other
Lenders shall continue to deal solely and directly with each Lender in
connection with such Lender's rights and obligations under this
Agreement and the other Credit Documents, and such Lender shall retain
the sole right to enforce the obligations of Borrower relating to the
Loans and to approve any amendment, modification or waiver of any
provisions of this Agreement. Each Lender shall promptly notify in
writing the Agent and the Borrower of any sale of a participation
hereunder.
(e) Any Lender or participant may, in connection with the
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 Borrower
or the other Consolidated Companies furnished to such Lender by or on
behalf of Borrower or any other Consolidated Company. With respect to
any disclosure of confidential, non-public, proprietary information,
such proposed assignee or participant shall agree to use the
information only for the purpose of making any necessary credit
judgments with respect to this credit facility and not to use the
information in any manner prohibited by any law, including without
limitation, the securities laws of the United States. The proposed
participant or assignee shall agree not to disclose any of such
information except (i) to directors, employees, auditors or counsel to
whom it is necessary to show such information, each of whom shall be
informed of the confidential nature of the information, (ii) in any
statement or testimony pursuant to a subpoena or order by any court,
governmental body or other agency asserting jurisdiction over such
entity, or as otherwise required by law (provided prior notice is given
to Borrower and the Agent unless otherwise prohibited by the subpoena,
order or law), and (iii) upon the request or demand of any regulatory
agency or authority with proper jurisdiction. The proposed participant
or assignee shall further agree to return all documents or other
written material and copies thereof received from any Lender, the
Agent, the Co-Agent or Borrower relating to such confidential
information unless otherwise properly disposed of by such entity.
(f) Any Lender may at any time assign all or any portion of its
rights in this Agreement and the Notes issued to it to a Federal
Reserve Bank; provided that no such assignment shall release the Lender
from any of its obligations hereunder.
(g) If (i) any Taxes referred to in Section 3.07(b) have been
levied or imposed so as to require withholdings and reductions by the
Borrower and payment by the Borrower of additional amounts to any
Lender as a result thereof or any Lender shall make demand for payment
of any material additional amounts as compensation for increased cost
pursuant to Section 3.10, then and in such event, upon request from the
Borrower delivered to such Lender, such Lender shall assign, in
accordance with the provisions of Section 10.06(c), all of its rights
and obligations under this Agreement and the other Credit Documents to
an Eligible Assignee selected by the Borrower and consented to by the
Agent in consideration for the payment by such assignee to the Lender
of the principal of and interest on the outstanding Loans accrued to
the date of such assignment, the assumption of such Lender's
Commitments hereunder, together with any and all other amounts owing to
such Lender under any provisions of this Agreement or the other Credit
Documents accrued to the date of such assignment.
Section X.7. Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE
SUPERIOR COURT OF FULTON COUNTY, GEORGIA, OR ANY OTHER COURT OF 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, BORROWER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) BORROWER HEREBY IRREVOCABLY DESIGNATES CSC CORPORATION
SERVICES, ATLANTA, GEORGIA, AS ITS DESIGNEE, APPOINTEE AND LOCAL AGENT TO
RECEIVE, FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE
JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR THE NOTES OR ANY DOCUMENT RELATED THERETO. IT IS UNDERSTOOD
THAT A COPY OF SUCH PROCESS SERVED ON SUCH LOCAL AGENT WILL BE PROMPTLY
FORWARDED BY SUCH LOCAL AGENT AND BY THE SERVER OF SUCH PROCESS BY MAIL TO
BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, BUT THE
FAILURE OF BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING.
(d) Nothing herein shall affect the right of the Agent, the
Co-Agent, the Issuing Bank any Lender, any holder of a Note or any Credit
Party to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against Borrower in any other
jurisdiction.
Section X.8. Independent Nature of Lenders' Rights. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce
its rights pursuant to this Agreement and its Notes, and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
Section X.9. Counterparts. This Agreement may be executed in
any number of counterparts and by the 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.
Section X.10. Effectiveness; Termination of Commitments;
Survival.
(a) This Agreement shall become effective on the date on which
all of the parties hereto shall have signed a copy hereof (whether the
same or different copies) and shall have delivered the same to the
Agent or, in the case of the Lenders or the Issuing Bank, shall have
given to the Agent written or telex notice (actually received) that the
same has been signed and mailed to them; provided that, the Lenders
have no obligation to make a Loan and the Issuing Bank has no
obligation is issue Letters of Credit hereunder until the Closing
Date. In the event that the Closing Date does not occur by July 2,
1998 , the Commitments and this Agreement shall terminate, subject to
the survival of the Sections referenced below.
(b) The obligations of Borrower under Sections 3.07(b), 3.10,
3.12, 3.13, 3.16 and 10.04 hereof shall survive the payment in full of
the Notes after the Maturity Date. All representations and warranties
made herein, in the certificates, reports, notices, and other documents
delivered pursuant to this Agreement shall survive the execution and
delivery of this Agreement, the other Credit Documents, and such other
agreements and documents, the making of the Loans hereunder, and the
execution and delivery of the Notes.
Section X.11. Severability. In case any provision in or
obligation under this Agreement or the other Credit Documents shall be
invalid, illegal or unenforceable, in whole or in part, in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
Section X.12. Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would
be permitted by an exception to, or be otherwise within the limitation of,
another covenant, shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
Section X.13. Change in Accounting Principles, Fiscal Year or
Tax Laws. If (i) any preparation of the financial statements referred to in
Section 6.07 hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting
Standards Board or the American Institute of Certified Public Accounts (or
successors thereto or agencies with similar functions) result in a material
change in the method of calculation of financial covenants, standards or
terms found in this Agreement, (ii) there is any change in Borrower's fiscal
quarter or Fiscal Year, or (iii) there is a material change in federal tax
laws which materially affects any of the Consolidated Companies' ability to
comply with the financial covenants, standards or terms found in this
Agreement, Borrower and the Required Lenders agree to enter into negotiations
in order to amend such provisions so as to equitably reflect such changes
with the desired result that the criteria for evaluating any of the
Consolidated Companies' financial condition shall be the same after such
changes as if such changes had not been made. Unless and until such
provisions have been so amended, the provisions of this Agreement shall
govern.
Section X.14. Headings Descriptive; Entire Agreement. The
headings of the several sections and subsections of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement. This Agreement, the other
Credit Documents, and the agreements and documents required to be delivered
pursuant to the terms of this Agreement constitute the entire agreement among
the parties hereto and thereto regarding the subject matters hereof and
thereof and supersede all prior agreements, representations and
understandings related to such subject matters.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in Atlanta, Georgia, by their duly
authorized officers as of the day and year first above written.
Address for Notices: MORRISON HEALTH CARE, INC.
1955 Lake Park Drive
Atlanta, Georgia 30080-8855 By:/s/ K. W. Engwall
Attn: K. Wyatt Engwall Name: K. Wyatt Engwall
Senior Vice President, Finance and Title: Senior Vice President, Finance
Assistant Secretary and Assistant Secretary
Telecopy: (770) 437-3349
[CORPORATE SEAL]
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Address for Notices: SUNTRUST BANK, ATLANTA,
As Agent
25 Park Place, N.E.
23rd Floor
Atlanta, Georgia 30303 By:/s/ Daniel S. Komitor
Attention: Dan Komitor Name: Daniel S. Komitor
Title: Vice President
Telecopy No.: (404) 588-8833
By:/s/ R.Michael Dunlap
Name: R. Michael Dunlap
Title: Vice President
Payment Office:
25 Park Place, N.E.
23rd Floor
Atlanta, Georgia 30303
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Address for Notices: WACHOVIA BANK, N.A., as Co-Agent
191 Peachtree Street, N.E.
29th Floor
Atlanta, Georgia 30303
By:/s/ John C. Canty
Name: John C. Canty
Title: Banking Officer
Attention: Mr. John Canty
Telecopy: (404) 332-5016
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Address for Notices: SUNTRUST BANK, ATLANTA
25 Park Place, N.E.
23rd Floor
Atlanta, Georgia 30303 By:/s/ Daniel S. Komitor
Attention: Dan Komitor Name: Daniel S. Komitor
Title: Vice President
Telecopy No.: (404)588-8833
By:/s/R. Michael Dunlap
Name: R. Michael Dunlap
Title:Vice President
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Address for Notices: NATIONSBANK, N.A.
600 Peachtree Street, N.E.
19th Floor
Atlanta, Georgia 30308 By:/s/Melinda M. Bergbom
Name: Melinda M. Bergbom
Title:Senior Vice President
Attention: Melinda Bergbom
Telecopy: (404) 407-6343
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Address for Notices:
WACHOVIA BANK, N.A.
191 Peachtree Street, N.E.
29th Floor
Atlanta, Georgia 30303
By:/s/ John C.Canty
Name: John C. Canty
Title: Banking Officer
Attention: Mr. John Canty
Telecopy: (404) 332-5016
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Address for Notices:
FIRST UNION NATIONAL BANK
First Union National Bank
999 Peachtree Street
12th Floor
Atlanta, Georgia 30309
By:/s/ Kimberly Daniel
Name: Kimberly Daniel
Title: Corporate Banking Officer
Assistant Secretary
Attention: Ms. Kimberly Daniel
Telecopy:
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
MHCI SCHEDULES
Schedule 5.01
Organization and Ownership of Subsidiaries
1. The following corporations are wholly-owned subsidiaries of Borrower:
State of
Corporation Incorporation
----------------------------------------------------------------------
Custom Management Corporation Pennsylvania
John C. Metz & Associates, Inc. Pennsylvania
Culinary Solutions, Inc. Georgia
Drake Management Services, Inc. Arizona
2. The following are wholly-owned subsidiaries of Custom Management
Corporation:
Place of
Corporation Incorporation
----------------------------------------------------------------------
Custom Management Corporation of Pennsylvania
Pennsylvania
Morrison Custom Management Corporation Pennsylvania
of Pennsylvania
3. Borrower owns a 49% interest in Marcorp Diversified, Inc., a joint
venture between the Borrower and Harry Miller, who beneficially owns
the remaining 51% interest.
Schedule 5.05
Certain Pending and Threatened Litigation
A. Borrower has assumed the liability for the following claims from
Morrison Restaurants Inc. and has indemnified Morrison Restaurants Inc. with
respect to the following claims pursuant to the Sharing Agreements:
1. The EEOC charge brought by Karol Suskey alleges sex harassment by
the CEO of Jackson Memorial Hospital and alleges that Morrison
failed to take appropriate steps to prevent the harassment.
2. A claim of race discrimination has been brought by five employees
of Fort Sanders Regional Medical Center in Knoxville, Tennessee.
B. Please see the attached schedule of pending or threatened litigation,
claims and assessments against the Borrower.
PENDING OR THREATENED LITIGATION, CLAIMS AND ASSESSMENTS AGAINST MORRISON
HEALTH CARE, INC.
A. Suskey, Karol v. Morrison Restaurants Inc. et al. A lawsuit was filed
by an employee, Karol Suskey, against both the Company and our client,
Jackson Memorial Hospital and its CEO, alleging sexual harassment against
our client and alleging further that Morrison failed to take appropriate
steps to prevent the harassment and retaliated against plaintiff. The
Company has investigated the matter and believes the claims are not
valid. Plaintiff has filed an amended complaint. Defendants filed
motions to dismiss which were denied. Discovery will be suspended pending
appeal of co-defendants to the denial of motions to dismiss. The Company
intends to vigorously defend itself against these claims.
B. Burems, Cozart, Dupree, Robinson & Stepherson v. Morrison Restaurants
Inc. A claim of race discrimination and retaliation was made to the State
of Tennessee Human Rights Commission by five employees of Fort Sanders
Regional Medical Center in Knoxville, Tennessee. The Commission dismissed
the claims and issued Right to Sue letters. Suit has been filed and an
answer by the Company has been made. Discovery is in progress.
Plaintiffs were deposed on July 2, 1997. Plaintiffs have offered to
settle for $20,000. Discovery is continuing. The Company intends to
vigorously defend this claim.
C. Bines, Melvin v. Realty South Investors, Inc. and Morrison Health
Care. This suit was filed in U.S. District Court, Southern District of
Florida and Morrison first received notice of its existence on April 23,
1997 (the suit was originally filed in December, 1996 with misnamed
defendants that were never properly served). An answer has been filed.
Discovery is continuing. The plaintiff was formerly employed by
Fountainview Retirement Center, West Palm Beach, Florida, a former account
of Morrison, and alleges race discrimination by Fountainview and Morrison
under federal and Florida law. The Company has retained outside counsel.
The Company does not believe the claim has any merit and intends to
vigorously defend itself against it.
D. Marcillac v. Morrison Restaurants, Inc. - A management employee filed
a disability discrimination charge with the California Fair Employment and
Housing Commission, San Francisco, California related to a worker's
compensation injury. The Company believes there is no merit to this
claim. It filed a position statement with the Commission on May 28,
1996. The California Commission closed its investigation and case on
March 3, 1997. Marcillac filed an EEOC charge on March 21, 1997, but then
filed a lawsuit on June 27, 1997 (served July 9, 1997) alleging
disability, discrimination and contract breach. On May 6, 1998, the Court
granted the Company's Motion for Summary Judgment. Absent appeal, this
matter will be concluded.
E. Morrison Health Care, Inc. v. Efthymios Hristopoulos. Morrison filed
suit in Circuit Court, Pinellas County, Florida, for recovery of unpaid
rent and right to possession against Efthymios Hristopoulos ("EH"), a
tenant of Morrison's leased property located in St. Petersburg, Florida.
On May 6, 1997, EH submitted an Answer and counter-claimed against
Morrison, alleging breach of contract and intentional interference with a
business relationship. At this time, the Company believes that its claims
against EH have merit, that EH's counter-claims are without merit, and
intends to vigorously protect and pursue its interests in this matter.
The parties shortly may enter into an agreement whereby EH will purchase
the property which will effectively resolve these matters.
F. Kramer, William L. v. Morrison Health Care, Inc. A former employee was
terminated in August, 1997. An EEOC Charge was filed and a Right to Sue
Letter requested on December 22, 1997. On June 4, 1998, the Company
received a suit alleging wrongful discharge, breach of implied contract,
breach of implied covenant of good faith and fair dealing, age
discrimination and tortious termination in violation of public policy.
The suit is in its early stages, but the Company believes this claim is
without merit and intends to vigorously defend these claims.
G. State of Tennessee Tax Assessment. Morrison received an audit report
from the State of Tennessee Department of Revenue issuing a estimated
sales tax assessment in the original amount of approximately $3.29
million, based primarily upon Morrison's use of client-provided capital
assets and supply expenses. The sales tax application to client-provided
capital assets and expenses has not been applied to Morrison in the past.
Morrison believes at this time that the estimated assessment amount for
client-provided assets and expenses is arbitrary and for the most part
based upon estimates of the value of capital assets and expenses of an
unrelated hospital audit. Further, the Company believes that the language
in most, if not all, of the contracts for the applicable accounts provides
that the clients are responsible for a material portion of any tax which
may ultimately be paid as a result of this assessment. The State thus far
has reduced the assessment amount to $995,983. In order to protect its
interest, the Company filed suit contesting the assessment in January,
1998. Morrison intends to vigorously defend itself against this claim and
has engaged outside counsel.
H. State of Florida Tax Assessment. The Company received on August 18,
1997, an assessment from the State of Florida in the amount of $109, 000.
The Company intends to vigorously protect its interest in this matter.
Outside counsel has filed the appropriate protest.
I. Trannon, Comminita v. Morrison's Cafeterias, et al., Circuit Court,
Jefferson County, Alabama. A workers' compensation benefit complaint was
forwarded to GAB for handling. An amended complaint was filed alleging
wrongful termination. The workers' compensation claim was subsequently
settled. The Plaintiff was granted a partial summary judgment related to
a defense by the Company related to issues resolved in a hearing held by
the State of Alabama Department of Industrial Relations. Plaintiff's
counsel has stated he is unwilling to reconvene mediation unless the
Company is willing to come to the table with at least $50,000. The
Company believes the claim to be without merit and intends to vigorously
defend itself.
J. Crawley v. Morrison's Health Care, Inc. A former management employee
filed a race and sex discrimination charge with the EEOC on April 25,
1996, arising out of removal from her assignment at Metropolitan Hospital,
Richmond, Virginia. The Company has no reason to believe that the charge
has any merit, and intends to vigorously defend the claim. A response was
sent to the EEOC on April 28, 1998.
K. Theodore, Pierre v. Morrison Health Care, Inc. A former employee was
terminated in November, 1997. A charge was filed for age and disability
discrimination with the Ohio Civil Rights Commission and the EEOC on
December 23, 1997 and a Notice of Right to Sue issued on March 31, 1998.
An Amended Complaint (original complaint never served) was filed May 12,
1998. The Company believes this claim is without merit and intends to
vigorously defend itself.
L. Johnson, Robert v. Morrison Health Care, Inc. The Company received
notice of this disability discrimination charge on June 18, 1997. It was
filed with the EEOC and the South Carolina Human Affairs Commission on
June 10, 1997 by an employee in Columbia, South Carolina. The Company
responded to this allegation and a Determination Letter of No Reasonable
Cause Found was issued in our favor on February 2, 1998.
M. Metts, Calvin v. Morrison Health Care. This is an age discrimination
charge filed on May 23, 1997, with the Jacksonville, Florida office of the
Equal Employment Opportunity Commission (EEOC). Metts' employment as an
Assistant Manager terminated in April, 1997, pursuant to a reduction in
personnel at Methodist Hospital, Jacksonville, Florida. The Company has
no reason to believe that the charge has merit, and intends to vigorously
defend the charge.
N. Patterson, Uhra v. Morrison Health Care, Inc. This is a charge of
disability discrimination filed in April, 1997 with the EEOC and the City
of St. Louis Civil Rights Enforcement Agency (SLCREA) in St. Louis,
Missouri. The Company received notice of investigation/processing by the
SLCREA on May 5, 1997. Patterson is a former cashier whose employment
terminated in January, 1997. At present, Company does not believe this
claim has merit and intends to vigorously defend against it. The
Company's response to the claim was filed on December 24, 1997.
O. Odom, Christopher v. Covenant Medical Center, Morrison Restaurants Inc.
and Morrison-Crothall. A Notice of Substantial Evidence & Initiation of
Conciliation was very recently received by the Company in December, 1996
from the Illinois Human Rights Commission. This involves a claim by
another employer's former employee alleging race discrimination by
Covenant Medical Center, Morrison and the employer company. Morrison
intends to vigorously defend this claim.
P. Winston, Keith L. v. Morrison's Health Care, Inc. This is a race
discrimination charge filed on May 6, 1997 with the Tennessee Human Rights
Commission. The Company received notice of this charge on June 30, 1997
via letter dated June 27, 1997. It was filed by a former assistant
manager of Morrison at Methodist Medical Center, Oak Ridge, TN. The
Company has begun its investigation of the claim, is not aware of any
reason to suggest that the claim has merit, and intends vigorously defend
against it.
Q. Robinson, Sherrie v. Morrison Health Care, Inc. The Company received
in November, 1997 a copy of a charge previously filed in November, 1995,
alleging race, sex and color discrimination. Since the allegations may
reference circumstances in the Burems, et al. suit referenced above, this
claim has been sent to outside counsel in the Burems suit for handling.
The Company intends to vigorously defend itself against these claims.
R. Petillo, Michael O. v. Morrison Health Care, Inc. The Company received
notice of a complaint being referred to the EEOC on January 6, 1998
alleging sex and national origin discrimination. The Company's
investigation was begun. On April 24, 1998, the Company received a Notice
of Right to Sue. The Complainant has ninety (90) days from receipt of the
Right to Sue to file suit. The Company believes the claims to be without
merit and intends to vigorously defend itself against these claims.
S. Cole, Arthur v. Morrison Health Care, Inc. The Company received on
March 6, 1998 a complaint with the Ohio Civil Rights Commissions alleging
race and age discrimination. The Company's investigation is in the early
stages but the Company believes the claims are without merit and it
intends to vigorously defend itself against these claims.
T. Conner, Demetruis J. v. Morrison Health Care, Inc. In April, 1998, the
Company received a charge of discrimination filed with the EEOC alleging
sex discrimination. The Company has investigated the matter and believes
the allegations are without merit. A response to the charge was sent by
the Company on May 22, 1998. The Company intends to vigorously defend
itself against this claim.
U. Onyeberechi, Francisca v. Morrison Health Care, Inc. This is a
national origin discrimination charge filed in May, 1997 with the EEOC in
Washington, D.C. Onyeberechi was an assistant manager at Stoddard Baptist
Nursing Home in Washington, D.C. whose employment was terminated effective
December, 1997. The Company submitted a response to the EEOC on December
8, 1997, and has not been notified of further action. The Company does
not believe that the charge has merit and intends to continue to
vigorously defend against it.
V. McIntosh, Carrie Ann v. Morrison Health Care, Inc. This is a race
discrimination complaint filed in December, 1996, with the New York State
Division of Human Rights (through the Suffolk County Human Rights
Commission). McIntosh was an assistant manager at University Hospital
(SUNY), Stony Brook, New York, who was terminated in May, 1996. The
Company has begun investigation of this claim, retained outside counsel to
assist in its response and defense, and has informed the Commission of
this. At this early stage of the investigation, it is too early to
determine the merit or value of the claim, but the Company intends to
vigorously defend against it.
W. Ladson, Avemaria v. Morrison Health Care, Inc. This is a sex and
disability discrimination complaint filed with the District of Columbia
Department of Human Rights and Minority Business Development in July, 1997
and received by the Company in September, 1997. Ladson was an hourly
employee at Lisner Louise Nursing Home, Washington, D.C., and her claims
relate to an alleged on the job slip and fall type injury. The Company
has begun investigating the claim, believes it is without merit and
intends to vigorously defend its interests. A mediation meeting took
place on March 13, 1998, and the Company may attempt to settle for
nuisance value.
X. Hall, Barbara v. Morrison Health Care, Inc. This is a claim of sex
discrimination and retaliation for a complaint of discrimination filed
with the New York State Division of Human Rights in March, 1998, by a
former employee at University Hospital (SUNY), Stony Brook, New York. The
Company has begun investigating this claim and has enlisted the assistance
of outside counsel. The Company cannot yet determine with certainty as to
any potential merit of value, but it intends to vigorously defend against
it.
Y. Shaw, Harold v. Morrison Heathcare Services. This is a race and sex
discrimination claim filed in March, 1997 with the EEOC in Atlanta,
Georgia. Shaw was an applicant from a placement agency that was not
selected for a clerk position in the corporate headquarters in Smyrna,
Georgia. The Company has conducted its initial investigation and does not
believe the claim has merit. The Company plans to submit a response to
the EEOC before the end of June, 1998, and intends to vigorously defend
itself.
Z. Pla, Rosa Maria v. Morrison Health Service. The Company received notice
of this age and national origin discrimination charge on June 1, 1998. It
was filed with the City of Tampa Department of Community Affairs, Office
of Human Rights/ Community Services (and EEOC) in May, 1998 by an employee
in Tampa, Florida. The Company has begun investigating, intends to
respond to this allegation and vigorously protect its interests, but at
this time cannot determine the merits or potential liability of the claims
since all relevant facts are not yet known.
Section 5.09(a)
Environmental Compliance
NONE
Section 5.09(b)
Environmental Notices
NONE
Schedule 5.09(c)
Environmental Permits
NONE
Schedule 5.11
No Default
None, other than alleged defaults which are the subject of pending or
threatened litigation disclosed in Schedule 5.05.
Schedule 5.12
Burdensome Restrictions
NONE
Schedule 5.13
Tax Filings and Payments
1. Borrower periodically receives notices of assessment from the IRS and
other taxing authorities, the aggregate amount of which at any time is
immaterial. These notices generally relate to misunderstandings regarding
Borrower's tax situation, payments which have crossed in the mail with
notices, and disputes which have been or are in the process of being resolved.
2. The Borrower owes the state of Arkansas $350.42 for franchise taxes due
for years 1997 and 1998.
3. See also Schedule 5.05 - Certain Pending and Threatened Litigation.
Section 5.14
Material Subsidiaries
None
Section 5.16
Employee Benefit Matters
1. Title IV Plans. The Consolidated Companies and its ERISA Affiliates
maintain or contribute to the following Plans subject to Title IV of
ERISA:
a. Morrison Restaurants Inc. Retirement Plan
b. Local 1115 District Council Pension Fund
2. Funding.
a. The Morrison Inc. Retirement Plan (the "Retirement Plan"), if
terminated as of June 6, 1998, would have had an amount of
unfunded benefit liabilities equal to approximately
$__471,000___, projected using a _5.93__% interest rate and the
GATT-required mortality tables.
b. As of June 6, 1998, Morrison Health Care has accrued $1,051,246
with respect to post-retirement medical expenses.
Section 5.17
Patents, Trademarks, Licenses, and
Other Intellectual Property Matters
The National Livestock and Meat Board, a/k/a The Meat Board, The American
Meat Institute and the Food Marketing Institute opposed Borrower's
application for federal registration of the mark NUTRI-FACTS, which Borrower
uses for certain computer software programs. Morrison entered into a license
agreement with those parties under which Borrower may continue to use the
mark NUTRI-FACTS, and Morrison has filed an abandonment of the subject
trademark application.
Section 5.18
Ownership of Properties
NONE
Section 5.19
Labor and Employment Matters
NONE
Section 5.22
Dividend Restrictions
NONE
Existing Indebtedness
As of May 31, 1998
(In thousands)
Revolving Credit Loans under
Original Credit Facility $ 5,000/1
Term Loans under Original
Credit Facility 31,000/1
----------------
$ 36,000
================
The Borrower has entered into the Sharing Agreements with MFCI and RTI
providing for the assumptions of liabilities and cross-indemnities designed
to allocate, generally, among these three companies, financial
responsibility for liabilities arising out of or in connection with
business activities prior to Distribution.
/1To be refinanced by initial borrowing under this Agreement on the Closing
Date.
Schedule 7.02
Existing Liens
NONE
EXHIBIT A
AMENDED AND RESTATED REVOLVING CREDIT NOTE
July 2, 1998 $15,000,000.00
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, MORRISON HEALTH CARE, INC.,
a Georgia corporation ("Borrower"), promises to pay to the order of FIRST
UNION NATIONAL BANK, a national banking association ("Lender") at the
principal office of the Agent at 25 Park Place, Atlanta, Georgia 30303, or at
such other place as the holder hereof may designate in immediately available
funds in lawful money of the United States, the principal sum of (i) FIFTEEN
MILLION AND NO/100 DOLLARS ($15,000,000.00) or (ii) so much as shall have
been advanced hereunder as Eurodollar Advances and Base Rate Advances
pursuant to Article II of the Credit Agreement and remaining outstanding as
shown on the records of the Agent and the Lender, plus all accrued and unpaid
interest thereon as set forth in that certain Amended and Restated Credit
Agreement dated as of July 2, 1998 among the Borrower, the financial
institutions from time to time a party thereto (the "Lenders"), SunTrust
Bank, Atlanta, as the issuing bank (the "Issuing Bank"), SunTrust Bank,
Atlanta, as Agent for the Issuing Bank and the Lenders (the "Agent"), and
Wachovia Bank, N.A. as Co-Agent for the Issuing Bank and the Lenders (the
"Co-Agent") (as the same may hereafter be amended, modified, extended or
supplemented from time to time, the "Agreement"). Interest shall accrue from
the date hereof up to and through the date on which all principal and
interest hereunder is paid in full, shall be computed on the basis of actual
days elapsed in a 360-day year, and shall be calculated on the outstanding
principal balance hereunder at the interest rates specified in Section 3.03
of the Agreement.
Principal and interest hereunder shall be paid on the dates
specified in the Agreement and shall be due and payable in full on the
Maturity Date (as defined in the Agreement). Any installment of principal
and, to the extent permitted by law, interest due under this Amended and
Restated Revolving Credit Note (the "Note") that is not paid on the due date
therefor whether on the Maturity Date, or resulting from the acceleration of
maturity upon the occurrence of an Event of Default (as defined in the
Agreement), shall bear interest from the date due until payment in full at
the default rate specified in Section 3.03(c) of the Agreement.
This Note is one of the Notes defined in, and evidences Advances
incurred pursuant to, the Agreement, to which Agreement reference is hereby
made for a full and complete description of such terms and conditions,
including, without limitation, provisions for the acceleration of the
maturity hereof upon the existence or occurrence of certain conditions or
events, and the terms of any permitted prepayments hereof. All capitalized
terms used in this Note shall have the same meanings as set forth in the
Agreement.
Upon the existence or occurrence of any Event of Default, the
principal and all accrued interest hereof shall automatically become, or may
be declared, due and payable in the manner and with the effect provided in
the Agreement.
Lender shall at all times have a right of set-off against any
deposit balances of Borrower in the possession of Lender, and Lender may
apply the same against payment of this Note or any other indebtedness of
Borrower to Lender arising under the Credit Documents. The payment of any
indebtedness evidenced by this Note shall not affect the enforceability of
this Note as to any future, different or other indebtedness evidenced
hereby. In the event the indebtedness evidenced by this Note is collected by
legal action or through an attorney-at-law, or in bankruptcy or other
judicial proceedings, Lender shall be entitled to recover from Borrower all
costs of collection, including, without limitation, reasonable attorneys'
fees actually incurred.
Failure or forbearance of Lender to exercise any right hereunder,
or otherwise granted by the Agreement or by law, shall not affect or release
the liability of Borrower hereunder, and shall not constitute a waiver of
such right unless so stated by Lender in writing. This Note shall be deemed
to be made under, and shall be construed in accordance with and governed by,
the laws of the State of Georgia (without giving effect to the conflict of
laws provisions thereof).
DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST
ARE HEREBY WAIVED.
Time is of the essence hereunder.
EXECUTED AND DELIVERED under seal of Borrower by its duly
authorized officers as of the day and year first above written in Atlanta,
Georgia.
MORRISON HEALTH CARE, INC.
[CORPORATE SEAL] By: /s/ K. W. Engwall
Name: K. Wyatt Engwall
Title: Senior Vice President
Attest: /s/ John E. Fountain
Name: John E. Fountain
Title: Secretary
EXHIBIT B
FORM OF AMENDED AND RESTATED SWING LINE NOTE
July 2, 1998 $10,000,000.00
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, MORRISON HEALTH CARE, INC.,
a Georgia corporation ("Borrower"), promises to pay to the order of SUNTRUST
BANK, ATLANTA, a Georgia banking corporation ("Swing Line Lender") at its
principal office at 25 Park Place, Atlanta, Georgia 30303, or at such other
place as the holder hereof may designate in immediately available funds in
lawful money of the United States, the principal sum of (i) TEN MILLION AND
NO/100 DOLLARS ($10,000,000.00) or (ii) so much as shall have been advanced
hereunder as Swing Rate Advance pursuant to Article II of the Credit
Agreement and remaining outstanding as shown on the records of the Swing Line
Lender, plus all accrued and unpaid interest thereon as set forth in that
certain Amended and Restated Credit Agreement dated as of July 2, 1998 among
the Borrower, SunTrust Bank, Atlanta, a banking corporation organized under
the laws of the State of Georgia, the other banks and lending institutions
from time to time a party thereto (the "Lenders"), SunTrust Bank, Atlanta, as
the issuing bank (the "Issuing Bank"), and SunTrust Bank, Atlanta, as Agent
(the "Agent") for the Issuing Bank and the Lenders, and Wachovia Bank, N.A.
as Co-Agent (the "Co-Agent") for the Issuing Bank and the Lenders (as the
same may hereafter be amended, modified, extended or supplemented from time
to time, the "Agreement"). Interest shall accrue from the date hereof up to
and through the date on which all principal and interest hereunder is paid in
full, shall be computed on the basis of actual days elapsed in a 360-day
year, and shall be calculated on the outstanding principal balance hereunder
at the interest rates specified in Section 3.03 of the Agreement.
Principal and interest hereunder shall be paid on the dates
specified in the Agreement and shall be due and payable in full on the
Maturity Date (as defined in the Agreement). Any installment of principal
and, to the extent permitted by law, interest due under this Amended and
Restated Swing Line Note (the "Note") that is not paid on the due date
therefor whether on the maturity date, or resulting from the acceleration of
maturity upon the occurrence of an Event of Default (as defined in the
Agreement), shall bear interest from the date due until payment in full at
the default rate specified in Section 3.03(c) of the Agreement.
This Note evidences the Swing Line Loans made pursuant to the
terms and conditions of the Agreement, to which Agreement reference is hereby
made for a full and complete description of such terms and conditions,
including, without limitation, provisions for the acceleration of the
maturity hereof upon the existence or occurrence of certain conditions or
events, and the terms of any permitted prepayments hereof. This Note is being
delivered by the Borrower and accepted by the Borrower as a substitution for
that certain Swing Line Note, dated as of March 6, 1996 by the Borrower in
favor of the Swing Line Lender, but not as payment of such indebtedness or as
a novation with respect thereto. All capitalized terms used in this Note
shall have the same meanings as set forth in the Agreement.
Upon the existence or occurrence of any Event of Default, the
principal and all accrued interest hereof shall automatically become, or may
be declared, due and payable in the manner and with the effect provided in
the Agreement.
Swing Line Lender shall at all times have a right of set-off
against any deposit balances of Borrower in the possession of Swing Line
Lender, and Swing Line Lender may apply the same against payment of this Note
or any other indebtedness of Borrower to Swing Line Lender arising under the
Credit Documents. The payment of any indebtedness evidenced by this Note
shall not affect the enforceability of this Note as to any future, different
or other indebtedness evidenced hereby. In the event the indebtedness
evidenced by this Note is collected by legal action or through an
attorney-at-law, or in bankruptcy or other judicial proceedings, Swing Line
Lender shall be entitled to recover from Borrower all costs of collection,
including, without limitation, reasonable attorneys' fees actually incurred.
Failure or forbearance of Swing Line Lender to exercise any right
hereunder, or otherwise granted by the Agreement or by law, shall not affect
or release the liability of Borrower hereunder, and shall not constitute a
waiver of such right unless so stated by Lender in writing. This Note shall
be deemed to be made under, and shall be construed in accordance with and
governed by, the laws of the State of Georgia.
DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST
ARE HEREBY WAIVED.
Time is of the essence hereunder.
EXECUTED AND DELIVERED under seal of Borrower by its duly
authorized officers as of the day and year first above written in Atlanta,
Georgia.
MORRISON HEALTH CARE, INC.
[CORPORATE SEAL] By: /s/ K. W. Engwall
Name: K. Wyatt Engwall
Title: Senior Vice President
Attest:/s/ John E. Fountain
Name: John E. Fountain
Title: Secretary
EXHIBIT C
SUBSIDIARY GUARANTY AGREEMENT
This SUBSIDIARY GUARANTY AGREEMENT (this "Guaranty"), dated as of
July 2, 1998 is made by CULINARY SOLUTIONS, INC., a corporation organized and
existing under the laws of Georgia (hereinafter, collectively with all
Additional Guarantors hereafter becoming a party hereto, the "Guarantor"), in
favor of SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as Agent (the
"Agent"), and WACHOVIA BANK, N.A., a national banking association, as
Co-Agent (the "Co-Agent) for the banks and other lending institutions parties
to the Credit Agreement (as hereinafter defined) and each assignee thereof
becoming a "Lender" as provided therein (the "Lenders"), and SUNTRUST BANK,
ATLANTA, in its capacity as Issuing Bank (the "Issuing Bank") (the Lenders,
the Issuing Bank, the Agent and the Co-Agent being collectively referred to
herein as the "Guaranteed Parties");
W I T N E S S E T H:
WHEREAS, MORRISON HEALTH CARE, INC., a corporation organized and
existing under the laws of the State of Georgia (the "Borrower"), the
Lenders, the Issuing Bank, the Agent and the Co-Agent have entered into that
certain Amended and Restated Credit Agreement dated as of July 2, 1998 (as
the same may hereafter be amended, restated, supplemented or otherwise
modified from time to time, and including all schedules, riders, and
supplements thereto, the "Credit Agreement"; terms defined therein and not
otherwise defined herein being used herein as therein defined);
WHEREAS, the Borrower owns, directly or indirectly, all or a
majority of the outstanding capital stock of the Guarantor;
WHEREAS, the Borrower and the Guarantor share an identity of
interest as members of a consolidated group of companies engaged in
substantially similar businesses with the Borrower providing certain
centralized financial, accounting and management services to the Guarantor;
WHEREAS, consummation of the transactions pursuant to the Credit
Agreement will facilitate expansion and enhance the overall financial
strength and stability of the Borrower's entire corporate group, including
the Guarantor; and
WHEREAS, it is a condition precedent to the Lenders' and Issuing
Bank's obligations to enter into the Credit Agreement and to make extensions
of credit thereunder that the Guarantor execute and deliver this Guaranty,
and the Guarantor desires to execute and deliver this Guaranty to satisfy
such condition precedent;
NOW, THEREFORE, in consideration of the premises and in order to
induce the Issuing Bank and the Lenders to enter into and perform their
obligations under the Credit Agreement, the Guarantor hereby agrees as
follows:
SECTION 1. Guaranty. The Guarantor hereby, irrevocably and
unconditionally, guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Loans, Letter of Credit
Obligations and all other Obligations owing by the Borrower to the Lenders,
the Issuing Bank, the Agent or the Co-Agent, or any of them, under the Credit
Agreement, the Notes, any Letter of Credit and the other Credit Documents,
including all renewals, extensions, modifications and refinancings thereof,
now or hereafter owing, whether for principal, interest, fees, expenses or
otherwise, and any and all reasonable out-of-pocket expenses (including
reasonable attorneys' fees actually incurred and expenses) incurred by the
Agent in enforcing any rights under this Guaranty (collectively, the
"Guaranteed Obligations"), including without limitation, all interest which,
but for the filing of a petition in bankruptcy with respect to the Borrower,
would accrue on any principal portion of the Guaranteed Obligations. Any and
all payments by the Guarantor hereunder shall be made free and clear of and
without deduction for any set-off, counterclaim, or withholding so that, in
each case, each Guaranteed Party will receive, after giving effect to any
Taxes (as such term is defined in the Credit Agreement, but excluding Taxes
imposed on overall net income of the Guaranteed Party to the same extent as
excluded pursuant to the Credit Agreement), the full amount that it would
otherwise be entitled to receive with respect to the Guaranteed Obligations
(but without duplication of amounts for Taxes already included in the
Guaranteed Obligations). The Guarantor acknowledges and agrees that this is
a guarantee of payment when due, and not of collection, and that this
Guaranty may be enforced up to the full amount of the Guaranteed Obligations
without proceeding against the Borrower, against any security for the
Guaranteed Obligations or under any other guaranty covering any portion of
the Guaranteed Obligations.
SECTION 2. Guaranty Absolute. The Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of
the Credit Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Guaranteed Party with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute and unconditional in
accordance with its terms and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation, the following (whether or not the Guarantor consents
thereto or has notice thereof):
(a) any change in the time, place or manner of payment of, or
in any other term of, all or any of the Guaranteed Obligations, any
waiver, indulgence, renewal, extension, amendment or modification of or
addition, consent or supplement to or deletion from or any other action
or inaction under or in respect of the Credit Agreement, the other
Credit Documents, or any other documents, instruments or agreements
relating to the Guaranteed Obligations or any other instrument or
agreement referred to therein or any assignment or transfer of any
thereof;
(b) any lack of validity or enforceability of the Credit
Agreement, the other Credit Documents, or any other document,
instrument or agreement referred to therein or any assignment or
transfer of any thereof;
(c) any furnishing to the Guaranteed Parties of any additional
security for the Guaranteed Obligations, or any sale, exchange, release
or surrender of, or realization on, any security for the Guaranteed
Obligations;
(d) any settlement or compromise of any of the Guaranteed
Obligations, any security therefor, or any liability of any other party
with respect to the Guaranteed Obligations, or any subordination of the
payment of the Guaranteed Obligations to the payment of any other
liability of the Borrower;
(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating
to the Guarantor or the Borrower, or any action taken with respect to
this Guaranty by any trustee or receiver, or by any court, in any such
proceeding;
(f) any nonperfection of any security interest or lien on any
collateral, or any amendment or waiver of or consent to departure from
any guaranty or security, for all or any of the Guaranteed Obligations;
(g) any application of sums paid by the Borrower or any other
Person with respect to the liabilities of the Borrower to the
Guaranteed Parties, regardless of what liabilities of the Borrower
remain unpaid;
(h) any act or failure to act by any Guaranteed Party which may
adversely affect the Guarantor's subrogation rights, if any, against
the Borrower to recover payments made under this Guaranty; and
(i) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Guarantor.
If claim is ever made upon any Guaranteed Party for repayment or recovery of
any amount or amounts received in payment or on account of any of the
Guaranteed Obligations, and any Guaranteed Party repays all or part of said
amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over the Guaranteed Party or any of
its property, or (b) any settlement or compromise of any such claim effected
by the Guaranteed Party with any such claimant (including the Borrower or a
trustee in bankruptcy for the Borrower), then and in such event the Guarantor
agrees that any such judgment, decree, order, settlement or compromise shall
be binding on it, notwithstanding any revocation hereof or the cancellation
of the Credit Agreement, the other Credit Documents, or any other instrument
evidencing any liability of the Borrower, and the Guarantor shall be and
remain liable to the Guaranteed Party for the amounts so repaid or recovered
to the same extent as if such amount had never originally been paid to the
Guaranteed Party.
SECTION 3. Waiver. The Guarantor hereby waives notice of acceptance
of this Guaranty, notice of any liability to which it may apply, and further
waives presentment, demand of payment, protest, notice of dishonor or
nonpayment of any such liabilities, suit or taking of other action by the
Guaranteed Parties against, and any other notice to, the Borrower or any
other party liable with respect to the Guaranteed Obligations (including the
Guarantor or any other Person executing a guaranty of the obligations of the
Borrower).
SECTION 4. Waiver of Subrogation; Rights of Contribution. No
Guarantor will exercise any rights against the Borrower which it may acquire
by way of subrogation or contribution, by any payment made hereunder or
otherwise and each Guarantor hereby expressly waives any claim, right or
remedy which such Guarantor may now have or hereafter acquire against the
Borrower that arises hereunder and/or from the performance by the Guarantor
hereunder, including, without limitation, any claim, right or remedy of any
Guaranteed Party against the Borrower or any security which any Guaranteed
Party now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under color of law or
otherwise unless and until the Guaranteed Obligations have been indefeasibly
paid in full.
The following provisions of this Section 4 shall be effective at
all times when there are multiple guarantors party hereto. In the event that
any Guarantor (the "Funding Guarantor") shall make any payment or payments
under this Guaranty or shall suffer any loss as a result of any realization
upon any collateral granted by it to secure its obligations hereunder, each
other Guarantor (each, a "Contributing Guarantor") hereby agrees to
contribute to the Funding Guarantor an amount equal to such Contributing
Guarantor's pro rata share of such payment or payments made, or losses
suffered, by such Funding Guarantor determined by reference to the ratio of
(a) the dollar amount of the percentage of each such Contributing Guarantor's
Net Assets (without giving effect to any right to receive any contribution or
subrogation or obligation to make any contribution hereunder), to (b) the sum
of the Net Assets of all Guarantors (including the Funding Guarantor)
hereunder (without giving effect to any right to receive contribution or
subrogation hereunder or any obligation to make any contribution hereunder);
provided, that the Contributing Guarantor shall not be obligated to make any
such payment to the Funding Guarantor if the Contributing Guarantor is not
solvent at the time of such contribution or if the Contributing Guarantor
would be rendered not solvent as a result thereof. Nothing in this Section
shall affect each Guarantor's several liability for the entire amount of the
Guaranteed Obligations, subject only to the limitations set forth in
Section 14. For the purposes of this Section 4, (x) the "Net Assets" of any
Guarantor shall mean the highest amount, as of any Determination Date, by
which (A) the aggregate present fair saleable value of the assets of such
Guarantor exceeds (B) the amount of all the debts and liabilities of such
Guarantor (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding the obligations of such Guarantor hereunder), and
(y) "Determination Date" shall mean each of (1) the Closing Date, (2) the
date of commencement of a case under the Bankruptcy Code in which a Guarantor
is a debtor, and (3) the date enforcement hereunder is sought with respect
to such Guarantor. Each Funding Guarantor covenants and agrees that its
right to receive any contribution from any Contributing Guarantor hereunder
shall be subordinated and junior in right of payment in full of all of the
Guaranteed Obligations.
SECTION 5. Severability. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing executed
by the Agent.
SECTION 7. Notices. All notices and other communications provided for
hereunder shall be given in the manner specified in the Credit Agreement (i)
in the case of the Agent, at the address specified for the Agent in the
Credit Agreement, and (ii) in the case of the Guarantor, at the addresses
specified for the Guarantor in this Guaranty or the applicable supplement
hereto.
SECTION 8. No Waiver; Remedies. No failure on the part of the Agent
or other Guaranteed Parties to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. No notice to or demand
on the Guarantor in any case shall entitle the Guarantor to any other further
notice or demand in any similar or other circumstances or constitute a waiver
of the rights of the Agent or other Guaranteed Parties to any other or
further action in any circumstances without notice or demand. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 9. Right Of Set Off. In addition to and not in limitation of
all rights of offset that the Agent or other Guaranteed Parties may have
under applicable law, the Agent or other Guaranteed Parties shall, upon the
occurrence of any Event of Default and whether or not the Agent or other
Guaranteed Parties have made any demand or the Guaranteed Obligations are
matured, have the right to appropriate and apply to the payment of the
Guaranteed Obligations, all deposits of the Guarantor (general or special,
time or demand, provisional or final) then or thereafter held by and other
indebtedness or property then or thereafter owing by the Agent or other
Guaranteed Parties to the Guarantor, whether or not related to this Guaranty
or any transaction hereunder. The Guaranteed Parties shall promptly notify
the Guarantor of any offset hereunder.
SECTION 10. Continuing Guaranty; Transfer Of Obligations. This
Guaranty is a continuing guaranty and shall (i) remain in full force and
effect until payment in full of the Guaranteed Obligations and all other
amounts payable under this Guaranty and the termination of the Commitments,
(ii) be binding upon the Guarantor, its successors and assigns, and (iii)
inure to the benefit of and be enforceable by the Agent, its successors,
transferees and assigns, for the benefit of the Guaranteed Parties.
SECTION 11. Governing Law; Appointment Of Agent For Service Of Process;
Submission To Jurisdiction; Waiver of Jury Trial.
(a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY OR OTHERWISE RELATED HERETO MAY BE BROUGHT IN THE SUPERIOR
COURT OF FULTON COUNTY OF THE STATE OF GEORGIA OR OF THE UNITED STATES
OF AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, AND, BY EXECUTION AND
DELIVERY OF THIS GUARANTY, THE GUARANTOR HEREBY CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF THE AFORESAID
COURTS SOLELY FOR THE PURPOSE OF ADJUDICATING ITS RIGHTS OR THE RIGHTS
OF THE AGENT AND OTHER GUARANTEED PARTIES WITH RESPECT TO THIS GUARANTY
OR ANY DOCUMENT RELATED HERETO. THE GUARANTOR HEREBY IRREVOCABLY
DESIGNATES PRENTICE HALL CORPORATION OF ATLANTA, GEORGIA, AS THE
DESIGNEE, APPOINTEE AND AGENT OF THE GUARANTOR TO RECEIVE, FOR AND ON
BEHALF OF THE GUARANTOR, SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY
DOCUMENT RELATED HERETO AND SUCH SERVICE SHALL BE DEEMED COMPLETED
THIRTY DAYS AFTER MAILING THEREOF TO SAID AGENT. IT IS UNDERSTOOD THAT
A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED
BY SUCH LOCAL AGENT AND BY THE SERVER OF PROCESS BY MAIL TO THE
GUARANTOR AT ITS ADDRESS SET FORTH HEREIN, BUT THE FAILURE OF THE
GUARANTOR TO RECEIVE SUCH COPY SHALL NOT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. THE
GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED
THERETO. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER
JURISDICTION.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER CREDIT DOCUMENT OR ANY MATTER ARISING IN
CONNECTION HEREUNDER OR THEREUNDER.
SECTION 12. Subordination Of the Borrower's Obligations To the
Guarantor. As an independent covenant, the Guarantor hereby expressly
covenants and agrees for the benefit of the Agent and other Guaranteed
Parties that all obligations and liabilities of the Borrower to the
Guarantor of whatsoever description including, without limitation, all
intercompany receivables of the Guarantor from the Borrower ("Junior Claims")
shall be subordinate and junior in right of payment to all obligations of the
Borrower to the Agent and other Guaranteed Parties under the terms of the
Credit Agreement and the other Credit Documents ("Senior Claims").
If an Event of Default shall occur, then, unless and until such
Event of Default shall have been cured, waived, or shall have ceased to
exist, no direct or indirect payment (in cash, property, securities by setoff
or otherwise) shall be made by the Borrower to the Guarantor on account of or
in any manner in respect of any Junior Claim except such payments and
distributions the proceeds of which shall be applied to the payment of Senior
Claims.
In the event of a Proceeding (as hereinafter defined), all Senior
Claims shall first be paid in full before any direct or indirect payment or
distribution (in cash, property, securities by setoff or otherwise) shall be
made to any Guarantor on account of or in any manner in respect of any Junior
Claim except such payments and distributions the proceeds of which shall be
applied to the payment of Senior Claims. For the purposes of the previous
sentence, "Proceeding" means the Borrower or the Guarantor shall commence a
voluntary case concerning itself under the Bankruptcy Code or any other
applicable bankruptcy laws; or any involuntary case is commenced against the
Borrower or the Guarantor; or a custodian (as defined in the Bankruptcy Code
or any other applicable bankruptcy laws) is appointed for, or takes charge
of, all or any substantial part of the property of the Borrower or the
Guarantor, or the Borrower or the Guarantor commences any other proceedings
under any reorganization arrangement, adjustment of debt, relief of debtor,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or the Guarantor,
or any such proceeding is commenced against the Borrower or the Guarantor, or
the Borrower or the Guarantor is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is
entered; or the Borrower or the Guarantor suffers any appointment of any
custodian or the like for it or any substantial part of its property; or the
Borrower or the Guarantor makes a general assignment for the benefit of
creditors; or the Borrower or the Guarantor shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts generally as
they become due; or the Borrower or the Guarantor shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts;
or the Borrower or the Guarantor shall by any act or failure to act indicate
its consent to, approval of or acquiescence in any of the foregoing; or any
corporate action shall be taken by the Borrower or the Guarantor for the
purpose of effecting any of the foregoing.
In the event any direct or indirect payment or distribution is
made to the Guarantor in contravention of this Section 12, such payment or
distribution shall be deemed received in trust for the benefit of the Agent
and other Guaranteed Parties and shall be immediately paid over to the Agent
for application against the Guaranteed Obligations in accordance with the
terms of the Credit Agreement.
The Guarantor agrees to execute such additional documents as the
Agent may reasonably request to evidence the subordination provided for in
this Section 12.
SECTION 13. Automatic Acceleration in Certain Events. Upon the
occurrence of an Event of Default specified in Section 8.07 of the Credit
Agreement, all Guaranteed Obligations shall automatically become immediately
due and payable by the Guarantor, without notice or other action on the part
of the Agent or other Guaranteed Parties, and regardless of whether payment
of the Guaranteed Obligations by the Borrower has then been accelerated. In
addition, if any event of the types described in Section 8.07 of the Credit
Agreement should occur with respect to the Guarantor, then the Guaranteed
Obligations shall automatically become immediately due and payable by the
Guarantor, without notice or other action on the part of the Agent or other
Guaranteed Parties, and regardless of whether payment of the Guaranteed
Obligations by the Borrower has then been accelerated.
SECTION 14. Savings Clause. (a) It is the intent of the Guarantor and
the Guaranteed Parties that the Guarantor's maximum obligations hereunder
shall be, but not in excess of:
(i) in a case or proceeding commenced by or against the
Guarantor under the Bankruptcy Code on or within one year from
the date on which any of the Guaranteed Obligations are incurred,
the maximum amount which would not otherwise cause the Guaranteed
Obligations (or any other obligations of the Guarantor to the
Guaranteed Parties) to be avoidable or unenforceable against the
Guarantor under (A) Section 548 of the Bankruptcy Code or (B) any
state fraudulent transfer or fraudulent conveyance act or statute
applied in such case or proceeding by virtue of Section 544 of
the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against the
Guarantor under the Bankruptcy Code subsequent to one year from
the date on which any of the Guaranteed Obligations are incurred,
the maximum amount which would not otherwise cause the
Guaranteed Obligations (or any other obligations of the Guarantor
to the Guaranteed Parties) to be avoidable or unenforceable
against the Guarantor under any state fraudulent transfer or
fraudulent conveyance act or statute applied in any such case or
proceeding by virtue of Section 544 of the Bankruptcy Code; or
(iii) in a case or proceeding commenced by or against the
Guarantor under any law, statute or regulation other than the
Bankruptcy Code (including, without limitation, any other
bankruptcy, reorganization, arrangement, moratorium, readjustment
of debt, dissolution, liquidation or similar debtor relief laws),
the maximum amount which would not otherwise cause the Guaranteed
Obligations (or any other obligations of the Guarantor to the
Guaranteed Parties) to be avoidable or unenforceable against the
Guarantor under such law, statute or regulation including,
without limitation, any state fraudulent transfer or fraudulent
conveyance act or statute applied in any such case or proceeding.
(The substantive laws under which the possible avoidance or unenforceability
of the Guaranteed Obligations (or any other obligations of the Guarantor to
the Guaranteed Parties) shall be determined in any such case or proceeding
shall hereinafter be referred to as the "Avoidance Provisions").
(b) To the end set forth in Section 14(a), but only to the
extent that the Guaranteed Obligations would otherwise be subject to
avoidance under the Avoidance Provisions if the Guarantor is not deemed
to have received valuable consideration, fair value or reasonably
equivalent value for the Guaranteed Obligations, or if the Guaranteed
Obligations would render the Guarantor insolvent, or leave the
Guarantor with an unreasonably small capital to conduct its business,
or cause the Guarantor to have incurred debts (or to have intended to
have incurred debts) beyond its ability to pay such debts as they
mature, in each case as of the time any of the Guaranteed Obligations
are deemed to have been incurred under the Avoidance Provisions and
after giving effect to the contribution by the Guarantor, the maximum
Guaranteed Obligations for which the Guarantor shall be liable
hereunder shall be reduced to that amount which, after giving effect
thereto, would not cause the Guaranteed Obligations (or any other
obligations of the Guarantor to the Guaranteed Parties), as so reduced,
to be subject to avoidance under the Avoidance Provisions. This
Section 14(b) is intended solely to preserve the rights of the
Guaranteed Parties hereunder to the maximum extent that would not cause
the Guaranteed Obligations of the Guarantor to be subject to avoidance
under the Avoidance Provisions, and neither the Guarantor nor any
other Person shall have any right or claim under this Section 14 as
against the Guaranteed Parties that would not otherwise be available to
such Person under the Avoidance Provisions.
(c) None of the provisions of this Section 14 are intended in
any manner to alter the obligations of any holder of Subordinated Debt
or the rights of the holders of "senior indebtedness" as provided by
the terms of the Subordinated Debt. Accordingly, it is the intent of
the Guarantor that, in the event that any payment or distribution is
made with respect to the Subordinated Debt prior to the payment in full
of the Guaranteed Obligations by virtue of the provisions of this
Section 14, in any case or proceeding of the kinds described in clauses
(i)-(iii) of Section 14(a), the holders of the Subordinated Debt shall
be obligated to pay or deliver such payment or distribution to or for
the benefit of the Guaranteed Parties. Furthermore, in respect of the
Avoidance Provisions, it is the intent of the Guarantor that the
subrogation rights of the holders of Subordinated Debt with respect to
the obligations of the Guarantor under this Guaranty, be subject in all
respects to the provisions of Section 14(b).
SECTION 15. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
the Guarantor assumes and incurs hereunder, and agrees that none of the
Guaranteed Parties will have any duty to advise the Guarantor of information
known to it or any of them regarding such circumstances or risks.
SECTION 16. Representations and Warranties. The Guarantor represents
and warrants as to itself that all representations and warranties relating to
it contained in Sections 6.01 through 6.06 of the Credit Agreement are true
and correct.
SECTION 17. Survival of Agreement. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Guaranty and the Credit Agreement, the making of the Loans, the issuance of
the Letters of Credit, and the execution and delivery of the Notes and the
other Credit Documents.
SECTION 18. Counterparts. This Guaranty and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
SECTION 19. Additional Guarantors. Upon execution and delivery by any
Subsidiary of the Borrower of an instrument in the form of Annex 1, such
Subsidiary of the Borrower shall become a Guarantor hereunder with the same
force and effect as if originally named a Guarantor herein (each an
"Additional Guarantor") and its obligations hereunder shall be joint and
several with the Guarantor. The execution and delivery of any such
instrument shall not require the consent of any other Guarantor hereunder.
The rights and obligations of the Guarantor hereunder shall remain in full
force and effect notwithstanding the addition of any Additional Guarantor as
a party to this Guaranty.
IN WITNESS WHEREOF, the Guarantor and the Agent have caused this
Guaranty to be duly executed and delivered by their respective duly
authorized officers as of the date first above written in Atlanta, Georgia.
Address for Notices: CULINARY SOLUTIONS, INC.
1955 Lake Park Dr., S.E.
Suite 400
Smyrna, Georgia 30080
By:/s/ K. W.Engwall
Name: K. Wyatt Engwall
Attn: Wyatt Engwall Title: Senior Vice President, Finance
Telecopy: (770) 437-3349
Attest:/s/ John E. Fountain
Name: John E. Fountain
Title: Secretary
[CORPORATE SEAL]
STATE OF GEORGIA
COUNTY OF COBB
Signed, sealed and delivered
in the presence of:
NICOLE DORNBUSCH
Notary Public
Date Executed by Notary:
July 1, 1998
My commission expires:
November 11, 2000
[NOTARIAL SEAL]
SUNTRUST BANK, ATLANTA
("Agent")
By:/s/ Daniel S. Komitor
Name: Daniel S. Komitor
Title: Vice President
By:/s/ R. Michael Dunlap
Name: R. Michael Dunlap
Title:Vice President
WACHOVIA BANK, N.A.
("Co-Agent")
By:/s/ John C. Canty
Name: John C. Canty
Title:Banking Officer
SECTION 12 OF THE
FOREGOING GUARANTY
ACKNOWLEDGED AND
AGREED TO:
MORRISON HEALTH CARE, INC.
By:/s/ K. W. Engwall
Name: K. Wyatt Engwall
Title:Senior Vice President, Finance
and Assistant Secretary
SUPPLEMENT
TO
SUBSIDIARY GUARANTY AGREEMENT
THIS SUPPLEMENT TO SUBSIDIARY GUARANTY AGREEMENT (this
"Supplement to Guaranty Agreement"), dated as of ___________, _____, made by
______________________, a ________ corporation (the "Additional Guarantor"),
in favor of SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as Agent
(the "Agent") and WACHOVIA BANK, N.A., a national bank association, as
Co-Agent (the "Co-Agent") for the banks and other lending institutions
parties to the Credit Agreement (as hereinafter defined) and each assignee
thereof becoming a "Lender" as provided therein (the "Lenders"), and SUNTRUST
BANK ATLANTA, as Issuing Bank (the "Issuing Bank"), the Lenders, the Issuing
Bank, the Agent and the Co-Agent being collectively referred to herein as the
"Guaranteed Parties").
W I T N E S S E T H:
WHEREAS, MORRISON HEALTH CARE, INC. (the "Borrower"), the
Lenders, the Issuing Bank, the Agent and the Co-Agent are parties to an
Amended and Restated Credit Agreement, dated as of July 2, 1998 (as the same
may hereafter be amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement") pursuant to which the Lenders have made
commitments to make loans and the Issuing Bank has committed to issue Letters
of Credit to the Borrower;
WHEREAS, Culinary Solutions, Inc., a Subsidiary of the Borrower (
the "Subsidiary Guarantor") has executed and delivered a Subsidiary Guaranty
Agreement dated as of July 2, 1998 (the "Subsidiary Guaranty") pursuant to
which the Subsidiary Guarantor has agreed to guarantee all of the obligations
of the Borrower under the Credit Agreement and the other Credit Documents (as
defined in the Credit Agreement);
WHEREAS, the Borrower, the Subsidiary Guarantor and the
Additional Guarantor share an identity of interests as members of a
consolidated group of companies engaged in substantially similar businesses;
the Borrower provides certain centralized financial, accounting and
management services to the Additional Guarantor; and the making of the loans
will facilitate expansion and enhance the overall financial strength and
stability of the Borrower's corporate group, including the Additional
Guarantor;
WHEREAS, it is a condition subsequent to the Lenders' obligation
to make loans to the Borrower and the Issuing Bank's obligation to issue
letters of credit on behalf of the Borrower under the Credit Agreement that
the Additional Guarantor execute and deliver to the Agent this Supplement to
Guaranty Agreement, and the Additional Guarantor desires to execute and
deliver this Supplement to Guaranty Agreement to satisfy such condition
subsequent;
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to make the loans to the Borrower and the Issuing Bank to
issue letters of credit on behalf of the Borrower under the Credit Agreement,
the Additional Guarantor hereby agrees as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein which
are used in the Subsidiary Guaranty are used herein with the meanings
specified for such terms in the Subsidiary Guaranty.
2. Additional Guarantor. The Additional Guarantor agrees that it shall be
and become a Guarantor for all purposes of the Subsidiary Guaranty and shall
be fully liable, jointly and severally thereunder to the Agent and other
Guaranteed Parties to the same extent and with the same effect as though the
Additional Guarantor had been a Guarantor originally executing and delivering
the Subsidiary Guaranty. Without limiting the foregoing, the Additional
Guarantor hereby jointly and severally (with respect to the guaranties made
by the Subsidiary Guarantor under the Subsidiary Guaranty), irrevocably and
unconditionally, guarantees the punctual payment when due, whether at stated
maturity by acceleration of otherwise, of the Borrowings and all other
Obligations (as defined in the Credit Agreement, and including all renewals,
extensions, modifications and refinancings thereof, now or hereafter
existing, whether for principal, interest, fees, expenses or otherwise, and
any and all expenses (including reasonable attorneys' fees actually incurred
and reasonable out-of-pocket expenses) incurred by the Agent and other
Guaranteed Parties in enforcing any rights under the Subsidiary Guaranty (as
supplemented hereby), subject, however, to the limitations expressly provided
in the Subsidiary Guaranty in Section 14 thereof. All references in the
Subsidiary Guaranty to the "Guarantor" shall be deemed to include and to
refer to the Additional Guarantor.
3. Governing Law; Appointment of Agent for Service of Process;
Submission to Jurisdiction; Waiver of Jury Trial.
(a) THIS SUPPLEMENT TO GUARANTY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
SUPPLEMENT TO GUARANTY AGREEMENT RELATED HERETO MAY BE BROUGHT IN THE
SUPERIOR COURT OF FULTON COUNTY OF THE STATE OF GEORGIA OR OF THE UNITED
STATES OF AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, AND, BY EXECUTION AND
DELIVERY OF THIS SUPPLEMENT TO GUARANTY AGREEMENT, THE ADDITIONAL GUARANTOR
HEREBY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
JURISDICTION OF THE AFORESAID COURTS SOLELY FOR THE PURPOSE OF ADJUDICATING
ITS RIGHTS OR THE RIGHTS OF THE AGENT OR OTHER GUARANTEED PARTIES WITH
RESPECT TO THIS SUPPLEMENT TO GUARANTY AGREEMENT OR ANY DOCUMENT RELATED
HERETO. THE ADDITIONAL GUARANTOR HEREBY IRREVOCABLY DESIGNATES CSC
CORPORATION SERVICES OF ATLANTA, GEORGIA, AS THE DESIGNEE, APPOINTEE AND
AGENT OF THE ADDITIONAL GUARANTOR TO RECEIVE, FOR AND ON BEHALF OF THE
ADDITIONAL GUARANTOR, SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS SUPPLEMENT TO GUARANTY AGREEMENT OR
ANY DOCUMENT RELATED HERETO AND SUCH SERVICE SHALL BE DEEMED COMPLETED THIRTY
(30) DAYS AFTER MAILING THEREOF TO SAID AGENT. IT IS UNDERSTOOD THAT A COPY
OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY SUCH LOCAL
AGENT AND BY THE SERVER OF PROCESS BY MAIL TO THE ADDITIONAL GUARANTOR AT ITS
ADDRESS SET FORTH HEREIN, BUT THE FAILURE OF THE ADDITIONAL GUARANTOR TO
RECEIVE SUCH COPY SHALL NOT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. THE ADDITIONAL GUARANTOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS IN RESPECT OF THIS SUPPLEMENT
TO GUARANTY AGREEMENT OR ANY DOCUMENT RELATED THERETO. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE AGENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
ADDITIONAL GUARANTOR IN ANY OTHER JURISDICTION.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE ADDITIONAL
GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
SUPPLEMENT TO GUARANTY AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR ANY MATTER
ARISING IN CONNECTION HEREUNDER OR THEREUNDER.
IN WITNESS WHEREOF, the Additional Guarantor has caused this
Supplement to Guaranty to be duly executed and delivered under seal by its
duly authorized officers as of the date first above written.
Address for Notices: ADDITIONAL GUARANTOR:
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
EXHIBIT D
CLOSING CERTIFICATE
The undersigned, being the SVP - FINANCE of MORRISON HEALTH CARE,
INC., a Georgia corporation (the "Borrower"), hereby gives this certificate
to induce SUNTRUST BANK, ATLANTA, a Georgia banking corporation, and the
other Lenders party to the Credit Agreement described below (referred to
collectively as the "Lenders"), SUNTRUST BANK, ATLANTA, as the issuing bank
(the "Issuing Bank"), and SUNTRUST BANK, ATLANTA, as Agent (the "Agent") for
the Issuing Bank and the Lender, and WACHOVIA BANK, N.A. as Co-Agent (the
"Co-Agent") for the Issuing Bank and the Lender, to consummate certain
financial accommodations with the Borrower pursuant to the terms of the
Amended and Restated Credit Agreement dated as of July 2, 1998 by and among
the Borrower, Lenders, the Issuing Bank, the Agent and the Co-Agent (the
"Credit Agreement"). Capitalized terms used herein and not defined herein
have the same meanings assigned to them in the Credit Agreement:
The undersigned hereby certifies to the Agent, the Co-Agent, the
Issuing Bank and the Lenders that:
1. In his aforesaid capacity as the SVP FINANCE of the
Borrower, he has knowledge of the business and financial affairs of the
Borrower sufficient to issue this certificate and is authorized and empowered
to issue this certificate for and on behalf of the Borrower.
2. All representations and warranties contained in Article V of the Credit
Agreement are true and correct in all material respects on and as of the date
hereof.
3. After giving effect to the initial Loans to be made to, or initial
Letters of Credit to be issued on behalf of, the Borrower pursuant to the
Credit Agreement on the Closing Date, no Default or Event of Default has
occurred and is continuing.
4. Since the date of the unaudited proforma financial statements of the
Consolidated Companies described in Section 5.15 of the Credit Agreement,
there has been no change which has had or could reasonably be expected to
have a Materially Adverse Effect.
5. The Advances to be made or Letters of Credit issued on the date hereof
are being used solely for the purposes provided in the Credit Agreement, and
such Advances and Letters of Credit and use of proceeds thereof will not
contravene, violate or conflict with, or involve the Agent, the Issuing Bank
or any Lender in a violation of, any law, rule, injunction, or regulation, or
determination of any court of law or other governmental authority, applicable
to the Borrower.
6. The conditions precedent set forth in Sections 4.01 and 4.02 of the
Credit Agreement have been or will be satisfied (or have been waived pursuant
to the terms of the Credit Agreement) prior to or concurrently with the
making of the initial Loans or issuance of initial Letters of Credit under
the Credit Agreement.
7. The execution, delivery and performance by the Credit Parties of the
Credit Documents will not violate any Requirement of Law or cause a breach or
default under any of their respective Contractual Obligations.
8. Each of the Credit Parties has the corporate power and authority to
make, deliver and perform the Credit Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance of such Credit Documents. No consents or authorization of, or
filing with, any Person (including, without limitation, any governmental
authority), is required in connection with the execution, delivery or
performance by any Credit Party, or the validity or enforceability against
any Credit Party, of the Credit Documents, other than such consents,
authorizations or filings which have been made or obtained.
IN WITNESS WHEREOF, the undersigned has executed this certificate in
his aforesaid capacity as of this 2nd day of July, 1998.
By: /S/K. W. Engwall
Name:K. Wyatt Engwall
Title: Senior Vice President - Finance
Exhibit E
---------
Form of Opinion of Powell, Goldstein, Frazer & Murphy, LLP
July 2, 1998
To: Each of the Lenders who are parties to the Credit Agreement referenced
below and each assignee thereof that becomes a "Lender" as provided
therein, SunTrust Bank, Atlanta, as Swing Line Lender, Issuing Bank and
Agent, and Wachovia Bank, N.A., as Co-Agent
Re: Amended and Restated Credit Agreement dated as of July 2, 1998
(the "Credit Agreement"), among Morrison Health Care, Inc., each
of the Lenders listed on the signature pages thereto, SunTrust
Bank, Atlanta, as Swing Line Lender , Issuing Bank and Agent, and
Wachovia Bank, N.A., as Co-Agent
Ladies and Gentlemen:
This opinion is furnished pursuant to Section 4.01(i) of the Credit
Agreement. Terms used herein which are defined in the Credit Agreement shall
have the respective meanings set forth or referred to in the Credit
Agreement, unless otherwise defined herein.
We have acted as counsel for Morrison Health Care, Inc., a Georgia
corporation (the "Borrower"), and Culinary Solutions, Inc., a Georgia
corporation (the "Guarantor"; and together with the Borrower, the "Credit
Parties"), in connection with the preparation, negotiation, execution and
delivery of the following documents (the "Credit Documents"):
1. The Credit Agreement;
2. The Revolving Credit Notes;
3. The Swing Line Note; and
4. The Guaranty Agreement.
In connection with our opinion we have examined the Credit Documents
and the corporate proceedings of the Boards of Directors of the Credit
Parties. We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and law as we have deemed necessary or
advisable for purposes of this opinion.
This opinion letter is limited by, and is rendered in accordance with,
the January 1, 1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions adopted by the Legal
Opinion Committee of the Corporate and Banking Law Section of the State Bar
of Georgia ("Interpretive Standards"), which Interpretative Standards are
incorporated in this opinion letter by this reference.
We have assumed the genuineness of all signatures (other than those on
behalf of the Credit Parties) on, and authenticity of, all documents
submitted to as originals and the conformity to original documents of all
documents submitted to us as copies.
With respect to any element of mutuality which may be required in order
to support the enforceability of the Credit Documents, we have assumed that
all parties thereto other than the Credit Parties (the "Other Parties") have
all requisite power and authority to enter into and perform their respective
obligations under the Credit Agreement and the other Credit Documents to
which they are parties, that the Credit Agreement and such other Credit
Documents have been duly authorized, executed and delivered by the Other
Parties, and that the Credit Agreement and such other Credit Documents
constitute the legal, valid and binding obligations of the Other Parties.
Based on the foregoing, and subject to the qualifications hereunder set
forth, we are of the opinion that:
1. Each of the Credit Parties is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation.
2. Each of the Credit Parties has the corporate power to own
and operate its property and to conduct its business as now conducted and to
make, deliver and perform the Credit Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance of such Credit Documents. Each of the Credit Parties has duly
authorized, executed and delivered each Credit Document to which it is a
party.
3. No consent, approval or authorization of, or registration,
declaration or filing with any governmental authority of the United States of
America or the State of Georgia is required in connection with the execution,
delivery, performance, validity or enforceability of the Credit Documents.
4. (a) The execution, delivery and performance by each of
the Credit Parties of the Credit Documents to which it is a party do not and
will not violate (i) the articles of incorporation of such Credit Party,
(ii) any existing Requirement of Law (other than any determination of an
arbitrator or a court or other governmental authority) of the United States
of America or the State of Georgia applicable to such Credit Party, or
(iii) insofar as known to us, any determination of an arbitrator or a court
or other governmental authority applicable to such Credit Party.
(b) The execution, delivery and performance by the Borrower of the
Credit Documents to which it is a party do not and will not result in a
breach of or default under any material written agreements or the creation or
imposition of a contractual lien or security interest in, on or against any
of its properties under any material written agreements. With your
permission we have assumed the term "material written agreements" as used in
the preceding sentence includes only the Sharing Agreements.
5. Each of the Credit Documents constitutes the legal, valid
and binding obligation of each of the Credit Parties that is a party thereto,
enforceable against each such Credit Party in accordance with its terms. The
provisions of the Credit Documents with respect to payment of interest, fees,
costs and other charges for the use of money deemed to be interest under
Georgia law (collectively "Interest Charges") do no violate the interest and
usury laws as in effect in the State of Georgia.
6. None of the Credit Parties is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7. The making of any Loans and the application of the proceeds
thereof as provided in the Credit Agreement do not violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
Our opinions set forth above are subject to the following
qualifications:
A. Our opinions are limited to the laws of the United States of
America and the State of Georgia.
B. With respect to the opinions contained in paragraph 1 above, we
have not obtained tax clearance certificates from the taxing authorities of
the relevant jurisdictions.
C. With respect to the opinion expressed in paragraph 5 above, we
have assumed that:
i) the Interest Charges have been or will be applied for the
purposes described in the Credit Documents; and
ii) all such Interest Charges have been or will be applied for
purposes described in the Credit Documents;
iii) interest will not be charged on overdue interest, in
violation of O.C.G.A. Section 7-4-17; and
iv) the Interest Charges shall not exceed five percent (5%) per
month in violation of O.C.G.A. Section 7-4-18;
Based upon the limitations and qualifications set forth above, we
confirm to you that:
i) Except for the claims described in Schedule 5.05 to the
Credit Agreement, to our knowledge (but without independent investigation),
no litigation, investigation or proceeding of or before any court, tribunal,
arbitrator or governmental authority is pending or overtly threatened by a
written communication by or against any of the Credit Parties or against any
of their respective properties or revenues or with respect to the Credit
Documents or any of the transactions contemplated thereby which would have a
Materially Adverse Effect.
ii) Each of the Credit Parties is qualified to transact
business as a foreign corporation in the states set forth in Exhibit A
hereto, except as noted to the contrary hereinbelow. The foregoing statement
is based solely upon certificates provided by agencies of those states,
copies of which Borrower has delivered to you on the date hereof, and is
limited to the meaning ascribed to such certificates by each applicable state
agency. In this connection, we draw to your attention that we were unable to
obtain certificates of authority for the Borrower from the District of
Columbia and Arkansas, due to the apparent failure of the Borrower to file
its annual reports and/or pay any applicable franchise taxes in those
jurisdictions. We have been advised that curative measures are being taken
by the Borrower to bring itself into good standing in those two jurisdictions.
This opinion has been delivered solely for the benefit of the Lenders,
the Issuing Bank, the Agent and the Co-Agent, and their permitted successors
and assigns under the Credit Agreement, and may not be relied upon by any
other person or entity or for any other purpose without the express written
permission of the undersigned.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
EXHIBIT A
Morrison Health Care, Inc. (GA)
Foreign Qualifications:
Alabama
Arizona
Arkansas*
California
Colorado
Connecticut
Delaware
District of Columbia*
Florida
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Missouri
New Hampshire
New Jersey
New York
North Carolina
Ohio (d/b/a Morrison Food and Nutrition Services)
Oklahoma
Pennsylvania
South Carolina
Tennessee
Texas
Vermont
Virginia
West Virginia
Culinary Solutions, Inc. (GA)
Foreign Qualifications:
Maryland
* Not in good standing.
EXHIBIT_F
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
ASSIGNMENT AND ACCEPTANCE AGREEMENT (the "Assignment Agreement")
dated as of _____________, 19__ between
______________________________________________ ("Assignor") and
__________________________________ ("Assignee"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings provided
such terms in the Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, Assignor is a party to an Amended and Restated Credit
Agreement, dated as of July 2, 1998 (as amended to the date hereof, the
"Credit Agreement"), among Morrison Health Care, Inc. (the "Borrower"), the
financial institutions from time to time party thereto (including Assignor,
the "Lenders") SunTrust Bank, Atlanta, as the Issuing Bank (the "Issuing
Bank"), SunTrust Bank, Atlanta, as Agent (the "Agent") for the Issuing Bank
and the Lenders, and Wachovia Bank, N.A., as Co-Agent ("Co-Agent") for the
Issuing Bank and Lenders (the "Co-Agent");
WHEREAS, Assignor has a Revolving Loan Commitment of $___________
under the Credit Agreement pursuant to which it has made outstanding Advances
of $_____________; and
WHEREAS, Assignor and Assignee wish Assignor to assign to
Assignee its rights under the Credit Agreement with respect to all or a
portion of its Commitment and its outstanding Advances;
WHEREAS, Assignor and Assignee wish Assignee to assume the
obligations of Assignor under the Credit Agreement to the extent of the
rights so assigned;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Assignment. Assignor hereby assigns to Assignee, without
recourse, or representation or warranty (other than expressly provided
herein) and subject to Section 4(b) hereof, ___% as the "Assignee's Share"
("Assignee's Share") of all of Assignor's rights, title and interest arising
under the Credit Agreement relating to Assignor's Commitment, including with
respect to Assignee's Share of the Advances heretofore made by the Assignor
under the Credit Agreement. The dollar amount of Assignee's Share of
Assignor's Commitment is $__________, the dollar amount of Assignee's Share
of Assignor's outstanding Advances pursuant thereto is $__________.
2. Assumption. Assignee hereby assumes from Assignor all of
Assignor's obligations arising under the Credit Agreement relating to
Assignee's Share of Assignor's Commitment and of the Advances. It is the
intent of the parties hereto that Assignor shall be released from all of its
obligations under the Credit Agreement relating to Assignee's Share.
3. Assignments; Participations. Assignee may not assign all
or any part of the rights granted to it hereunder. Assignee may sell or
grant participations in all or any part of the rights granted to it hereunder
in accordance with the provisions of Section 10.06 of the Credit Agreement.
4. Payment of Interest and Fees to Assignee.
(a) As of the date hereof interest is payable by the
Borrower in respect of Assignee's Share of the Eurodollar Advances at a rate
equal to ___% per annum above LIBOR for Revolving Loans and a Commitment Fee
equal to ___% per annum on the Assignee's Share of the average daily unused
portion of the Commitments.
(b) Notwithstanding anything to the contrary contained in
this Assignment Agreement, if and when Assignor receives or collects any
payment of interest on any Advance attributable to Assignee's Share or any
payment of the Commitment Fee attributable to Assignee's Share which, in any
such case, are required to be paid to Assignee pursuant to clause (a) above,
Assignor shall distribute to Assignee such payment but only to the extent
such interest or fee accrued after the Assignment Effective Date (as
hereinafter defined).
(c) Notwithstanding anything to the contrary contained in
this Assignment Agreement, if and when Assignee receives or collects any
payment of interest on any Advance or any payment of the Commitment Fee
which, in any such case, is required to be paid to Assignor pursuant to
clause (a) above, Assignee shall distribute to Assignor such payment.
5. Payments on Assignment Effective Date. In consideration of
the assignment by Assignor to Assignee of Assignee's Share of Assignor's
Revolving Loan Commitment, Term Loan and Advances as set forth above,
Assignee agrees to pay to Assignor on or prior to the Assignment Effective
Date an amount specified by Assignor in writing on or prior to the Assignment
Effective Date which represents Assignee's Share of the principal amount of
the respective Advances made by Assignor pursuant to the Credit Agreement and
outstanding on the Assignment Effective Date.
6. Effectiveness. (a) This Assignment Agreement shall become
effective on the date (the "Assignment Effective Date") (which is at least
five days after the date hereof) on which (i) Assignor and Assignee shall
have signed a copy hereof (whether the same or different copies) and, in the
case of Assignee, shall have delivered the same to Assignor, (ii) the
Borrower shall have consented hereto, (iii) a copy of the fully executed
Assignment, a fee of $2,500 and the Note evidencing the Commitment and
assigned hereby shall have been delivered to the Agent, and (iv) Assignee
shall have paid to Assignor the amount set forth in Section 5.
(b) It is agreed that all interest on any Advance
attributable to Assignee's Share and all Commitment Fees attributable to
Assignee's Share, which, in each case, accrues on and after the Assignment
Effective Date shall be paid directly to the Assignee in accordance with the
Credit Agreement.
7. Amendment of Credit Agreement. On the Assignment Effective
Date the Credit Agreement shall be amended by deeming the signature of
Assignee herein as a signature to the Credit Agreement. The Assignee shall
be deemed a "Lender" for all purposes under the Credit Agreement and shall be
subject to and shall benefit from all of the rights and obligations of a
Lender under the Credit Agreement. The address of the Assignee for notice
purposes shall be as set forth below, and the Credit Agreement shall be
amended by deeming such signature page and address to be included thereon.
Without limiting the generality of the foregoing, Assignee agrees that it
will perform its obligations as a Lender under the Credit Agreement as
required by the terms thereof and Assignee appoints and authorizes the Agent
to take such actions as Agent on its behalf and exercise such powers under
the Credit Agreement and the other loan documents as are delegated to the
Agent by the terms of the Credit Agreement and the other credit documents,
together with such powers as are reasonably incidental thereto.
8. Representations and Warranties. Each of the Assignor and
the Assignee represents and warrants to the other party as follows:
(a) it has full power and authority, and has taken all
action necessary, to execute and deliver this Assignment Agreement and to
fulfill its obligations under, and to consummate the transactions
contemplated by, this Assignment Agreement;
(b) the making and performance by it of this Assignment
Agreement and all documents required to be executed and delivered by it
hereunder do not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation applicable
to it;
(c) this Assignment Agreement has been duly executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms; and
(d) all consents, licenses, approvals, authorizations,
exemptions, registrations, filings, opinions and declarations from or with
any agency, department, administrative authority, statutory corporation or
judicial entity necessary for the validity or enforceability of its
obligations under this Assignment Agreement have been obtained, and no
governmental authorizations other than any already obtained are required in
connection with its execution, delivery and performance of this Assignment
Agreement.
9. Expenses. The Assignor and the Assignee agree that each
party shall bear its own expenses in connection with the preparation and
execution of this Assignment Agreement.
10. Miscellaneous. (a) Assignor shall not be responsible to
Assignee for the execution (by any party other than the Assignor),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of the Credit Agreement, the Note or the Guaranty Agreement or
for any representations, warranties, recitals or statements made therein or
in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents made or furnished
or made available by Assignor to Assignee or by or on behalf of the Borrower
or any Guarantor to Assignor or Assignee in connection with the Credit
Agreement, the Note or the Guaranty Agreement and the transactions
contemplated thereby. Assignor shall not be required to ascertain or inquire
as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in the Credit Agreement, the
Note or the Guaranty Agreement or as to the use of the proceeds of the
Advances or as to the existence or possible existence of any event which
constitutes an Event of Default or which with the giving of notice or the
passage of time or both would constitute an Event of Default.
(b) Assignee represents and warrants that it has made its
own independent investigation of the financial condition and affairs of the
Borrower and each Guarantor in connection with the making of the Advances and
the assignment of Assignee's Share of Assignor's Commitments and of
Assignor's Advances to Assignee hereunder and has made and shall continue to
make its own appraisal of the creditworthiness of the Borrower and each
Guarantor. Assignor shall have no duty or responsibility either initially or
on a continuing basis to make any such investigation or any such appraisal on
behalf of Assignee or to provide Assignee with any credit or other
information with respect thereto, whether coming into its possession before
the making of the Advances or at any time or times thereafter and shall
further have no responsibility with respect to the accuracy of, or the
completeness of, any information provided to Assignee, whether by Assignor or
by or on behalf of either the Borrower or any Guarantor.
(c) THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA.
(d) No term or provision of this Assignment Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by both parties.
(e) This Assignment Agreement may be executed in one or
more counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
(f) The Assignor may at any time or from time to time
grant to others assignments or participations in its Commitments or the
Advances but not in the portions thereof assigned to Assignee pursuant to
this Assignment Agreement. The Assignor represents and warrants that it has
not at any time prior to the Assignment Effective Date encumbered or assigned
the portion of its Commitments or Advances being assigned hereunder.
(g) All payments hereunder or in connection herewith
shall be made in Dollars and in immediately available funds, if payable to
the Assignor, to the account of the Assignor at its address as designated in
the Credit Agreement, and, if payable to the Assignee, to the account of the
Assignee's address, as designated on the signature page hereof.
(h) This Assignment Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns. Neither of the parties hereto may assign or transfer any of its
rights or obligations under this Assignment Agreement without the prior
consent of the other party.
(i) All representations and warranties made herein and
indemnities provided for herein shall survive the consummation of the
transaction contemplated hereby.
(j) The Assignee acknowledges receipt of copies of the
documents received in connection with the transactions contemplated by the
Credit Agreement, the Guaranty Agreement and this Assignment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment Agreement as of the date first above written.
[NAME OF ASSIGNOR]
By:
Title:
Assignee's Share of [NAME OF ASSIGNEE]
Revolving Loan Commitment:
$ By:
Title:
Address:
Tel. No:
Fax No:
CONSENTED TO AS OF THE
DATE SET FORTH ABOVE:
MORRISON HEALTH CARE, INC.
By:
Title:
EXHIBIT 10.27
MORRISON HEALTH CARE, INC.
SALARY DEFERRAL PLAN
TRUST AGREEMENT
THIS AGREEMENT has been made as of the 30th day of September, 1997, between
Morrison Health Care, Inc. (the "Company") and Merrill Lynch Trust Company of
(Florida)(the "Trustee") with respect to a trust (the "Trust") forming part of
the Morrison Health Care, Inc. Salary Deferral Plan (the "Plan").
WHEREAS, the Plan qualifies both as an "employee stock ownership plan"
("ESOP") within the meaning of section 4975(e)(7) of the Internal Revenue Code
of 1986 (the "Code") and as a cash or deferred profit sharing plan under
sections 401(a) and 401(k) of the Code; and
WHEREAS, in order to effectuate the purposes of the Plan, the Company
hereby establishes this Trust, designed to meet the applicable requirements of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); and
WHEREAS, it is a principal purpose of the Trust to maintain assets in the
form of and invest in stock of the Company ("Company Stock") qualifying as
"employer securities" within the meaning of section 409(1) of the Code and
section 407(d)(5) of ERISA;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Company and the Trustee do hereby covenant and
agree as follows:
SECTION I
THE TRUST
1.1 Establishment of the Trust. The Company hereby establishes with the
Trustee the Trust, which shall be known as the Morrison Health Care, Inc. Salary
Deferral Plan Trust, for the purposes of holding and administering the Trust
Fund in accordance with this Agreement. Except as provided in section 4.4 and
4.5 below, nothing contained in the Plan, either expressly or by implication,
shall impose any additional powers, duties or responsibilities upon the Trustee.
The Trustee shall not be responsible for the administration of the Plan. The
"Trust Fund" shall at any time mean all property of every kind then held by the
Trustee pursuant to this Trust Agreement, including the contributions of cash or
Company Stock made to the Trust by the Company or any employer participating in
the Plan (an "Employer"), any property into which such contributions may from
time to time be converted, and any appreciation therein or income thereon less
any depreciation therein, any losses thereon and any distributions payments
therefrom. Except as otherwise provided herein, title to the assets of the Trust
Fund shall at all times be vested in the Trustee, subject to the right of the
Trustee to hold title in
<PAGE>
bearer form or in the name of a nominee, and the interests of others in the
Trust Fund shall only be the right to have such assets received, held, invested,
administered and distributed in accordance with the provisions of the Trust.
1.2 Appointment of Trustee. The Company represents that all necessary
action has been taken for the appointment of the Trustee as trustee of the Trust
and that the Trust Agreement constitutes a legal, valid and binding obligation
of the Company. The Trustee accepts its appointment as trustee of the Trust.
1.3 Status of Trust. The Trust is intended to be a qualified trust under
section 401(a) of the Code and exempt from taxation pursuant to section 501(a)
of the Code.
1.4 Exclusive Purpose. Notwithstanding anything to the contrary in this
Agreement, or in any amendment thereto, except as otherwise provided under
ERISA, the Named Fiduciaries (as defined in Section 2.1) and the Trustee, as a
directed trustee shall discharge their respective duties with respect to the
Trust Fund for, and the Trust Fund shall be used solely for and not diverted
from, the exclusive purpose of providing benefits for Plan participants and
their beneficiaries and defraying reasonable expenses of administering the Plan.
Notwithstanding the preceding sentence, however, contributions may be returned
by the Trustee at the direction of a Named Fiduciary if the Named Fiduciary
certifies in writing to the Trustee that one or more of the following
circumstances exist.
(a) if a contribution is made by the Company by reason of a mistake of
fact, the contribution or the value thereof, if less, may be returned within one
year after it was paid to the Trustee;
(b) if a contribution is conditioned upon its deductibility under section
404 of the Code, to the extent the deduction is disallowed by the Internal
Revenue Service, the contribution or the value thereof, if less, may be returned
to the Company within one year after the disallowance; or
(c) if a contribution is conditioned upon initial qualification of the
Plan, as amended, under sections 401, 409 and 4975(e)(7) of the Code, the
contribution or the value thereof, if less, may be returned to the Company
within one year after such qualification has been denied.
1.5 Receipt of Contributions and Transfers of Assets. The Trustee shall
receive in cash or Company Stock all contributions paid or delivered to it which
are allocable under the Plan and to the Trust and all transfers paid or
delivered under the Plan to the Trust from a predecessor trustee or another
trust (including a trust forming part of another plan qualified under section
401(a) of the Code), provided that the Trustee shall not be obligated to receive
any such contribution or transfer unless prior thereto or coincident therewith,
as the Trustee may specify, the Trustee has received such reconciliation,
allocation, investment or other information concerning, or such direction,
<PAGE>
instruction or representation with respect to, the contribution or transfer or
the source thereof as the Trustee may reasonably require. The Trustee shall have
no duty or authority to (a) require any contributions or transfers to be made
under the Plan or to the Trustee, (b) compute any amount to be contributed or
transferred under the Plan to the Trustee, or (c) determine whether amounts
received by the Trustee comply with the Plan.
1.6 Directed Trustee. The Trustee shall hold the Trust Fund, without
distinction between principal and income, as a nondiscretionary trustee pursuant
to the terms of this Trust Agreement. Assets of the Trust may, absent direction
from the Named Investment Fiduciary (as defined in Section 2.1) to the contrary,
be held in an account maintained with an affiliate of the Trustee. Except as
required by ERISA, the Trustee shall invest the Trust Fund as directed by the
Named Investment Fiduciary, as defined herein, an Investment Manager, as defined
herein, or a Plan participant or beneficiary, as the case may be, and the
Trustee shall have no discretionary control over, nor any other discretion
regarding, the investment or reinvestment of any asset of the Trust Fund.
SECTION II
NAMED FIDUCIARIES
2.1 Named Administrative and Investment Fiduciaries. For purposes of this
Trust Agreement, the term "Named Administrative Fiduciary" refers to the person
or persons named or provided for under the Plan as responsible for the
administration and operation of the Plan, and the term "Named Investment
Fiduciary" refers to the person or persons provided for under the Plan as
responsible for the investment and management of Plan assets to the extent
provided for in this Trust Agreement (together, the "Named Fiduciaries"). The
Named Administrative Fiduciary and the Named Investment Fiduciary may be the
same person or persons. If no such person or persons is named or provided for
under the Plan, or if so named or provided for but not then serving, the Company
shall be the Named Administrative Fiduciary or the Named Investment Fiduciary or
both, as the case may be.
2.2 Identification of Named Fiduciaries and Designees. The Named
Administrative Fiduciary and the Named Investment Fiduciary under the Plan shall
each be identified to the Trustee in writing by the Company, and specimen
signatures of each, or of each member thereof, as appropriate, shall be provided
to the Trustee by the Company. The Company shall promptly give written notice to
the Trustee of a change in the identity either of the Named Administrative
Fiduciary or the Named Investment Fiduciary, or any member thereof, as
appropriate, and until such notice is received by the Trustee, the Trustee shall
be fully protected in assuming that the identity of the Named Administrative
Fiduciary or Named Investment Fiduciary, and the members thereof, as
appropriate, is unchanged. Each person authorized in accordance with the Plan to
give a direction to the Trustee on behalf of the Named Administrative Fiduciary
or the Named Investment Fiduciary shall be identified to the Trustee by written
notice from the Company or the Named Administrative Fiduciary or the Named
Investment Fiduciary, as the case may be, and such notice shall contain a
specimen of the signature. The Trustee shall be entitled to
<PAGE>
rely upon each such written notice as evidence of the identity and authority of
the persons appointed until a written cancellation of the appointment, or the
written appointment of a successor, is received by the Trustee from the Company,
the Named Administrative Fiduciary or the Named Investment Fiduciary, as the
case may be.
2.3 Named Fiduciary's Directions. Directions from or on behalf of the Named
Fiduciaries or their designees shall be communicated to the Trustee or the
Trustee's designee only in accordance with procedures acceptable to the Trustee
and the Named Administrative Fiduciary. Neither the Trustee nor the Trustee's
designee shall be empowered to implement any such directions except in
accordance with procedures acceptable to the Trustee and the Named
Administrative Fiduciary. The Trustee shall have no liability for following any
such directions or failing to act in the absence of any such directions. The
Trustee shall have no liability for the acts or omissions of any person making
or failing to make any direction under the Plan or this Trust Agreement nor any
duty or obligation to review any such direction, act or omission, SECTION III
POWERS OF TRUSTEE
3.1 Nondiscretionary Investment Powers. At the direction of the Named
Administrative Fiduciary or the Named Investment Fiduciary or such other person
authorized hereunder to direct such action, and in accordance with the direction
of such person, the Trustee, or the Trustee's designee or a broker/dealer as
referred to in section 4.3, is authorized and empowered:
(a) to invest and reinvest the Trust Fund, together with the income
therefrom, in common stock, preferred stock, convertible preferred stock, bonds,
debentures, convertible debentures and bonds, mortgages, notes, commercial paper
and other evidences of indebtedness (including those issued by the Trustee),
shares of mutual funds (which funds may be sponsored, managed or offered by an
affiliate of the Trustee), guaranteed investment contracts, bank investment
contracts, other securities, polices of life insurance, annuity contracts,
options, options to buy or sell securities or other assets, and all other
property of any type (personal, real or mixed, and tangible or intangible);
(b) to deposit or invest all or any part of the assets of the Trust in
savings accounts or certificates of deposit or other deposits in a bank or
savings and loan association or other depository institution, including the
Trustee or any of its affiliates; provided that, with respect to such deposits
with the Trustee or an affiliate, the deposits bear a reasonable interest rate;
(c) to hold, manage, improve, repair and control all property, real or
personal, forming part of the Trust Fund; to sell, convey, transfer, exchange,
partition, lease for any term, even extending beyond the duration of this Trust,
and otherwise dispose of the same from time to time;
<PAGE>
(d) to have, subject to sections 4.4 and 4.5 below, respecting securities,
all the rights, powers and privileges of an owner, including the power to give
proxies, pay assessments and other sums deemed by the Trustee necessary for the
protection of the Trust Fund; to vote, subject to sections 4.4 and 4,5 below,
any corporate stock either in person or by proxy, with or without power of
substitution, for any purpose; to participate in voting trusts, pooling
agreements, foreclosures, reorganizations, consolidations, mergers and
liquidations, and in connection therewith to deposit securities with or transfer
title to any protective or other committee; to exercise or sell stock
subscriptions or conversion rights; and, regardless of any limitation elsewhere
in this instrument relative to Investments by the Trustee to accept and retain
as an investment any securities or other property received through the exercise
of any of the foregoing powers;
(e) to hold in cash such portion of the Trust Fund which it is directed to
so hold pending investments, or payment of expenses, or the distribution of
benefits;
(f) to take such actions as may be necessary or desirable to protect the
Trust from loss due to the default on mortgages held in the Trust, including the
appointment of agents or trustees in such other jurisdictions as may seem
desirable, to transfer property to such agents or trustees, to grant to such
agents such powers as are necessary or desirable to protect the Trust Fund, to
direct such agent or trustee, or to delegate such power to direct, and to remove
such agent or trustee;
(g) to settle, compromise or abandon all claims and demands in favor of or
against the Trust Fund;
(h) to invest in any common or collective trust fund maintained by the
Trustee or its affiliate;
(i) to exercise all of the further rights, powers, options and privileges
granted, provided for, or vested in trustees generally under the laws of the
state in which the Trustee is incorporated, so that the powers conferred upon
the Trustee herein shall not be in limitation of any authority conferred by law,
but shall be in addition thereto;
(j) to borrow money from any source and to execute promissory notes,
mortgages or other obligations and to pledge or mortgage any trust assets as
security, subject to applicable requirements of the Code and ERISA;
(k) to compromise, compound, and settle any debt or obligation owing to or
from it as Trustee; to reduce or increase the rate of interest on, extend or
otherwise modify, foreclose upon default, or otherwise enforce any such
obligation; and
(l) to maintain accounts at, execute transactions through, and lend on an
adequately secured basis stocks, bonds or other securities to, any brokerage or
other firm, including any firm which is an affiliate of the Trustee; and
<PAGE>
(m) subject to Section 5, to borrow from any lender (including the Company
or any shareholder of the Company) to acquire shares of Company Stock as
authorized by this Agreement.
3.2 Additional Powers of Trustee. To the extent necessary or which it deems
appropriate to implement its powers under Section 3.1 or otherwise to fulfill
any of its duties and responsibilities as trustee of the Trust Fund, the Trustee
shall have the following additional powers and authority:
(a) to register securities, or any other property, in its name or in the
name of any nominee, including the name of any affiliate or the nominee name
designated by any affiliate, with or without indication of the capacity in which
property shall be held, or to hold securities in bearer form and to deposit any
securities or other property in a depository or clearing corporation;
(b) to designate and engage the services of and to delegate powers and
responsibilities to, such agents, representatives, advisers, counsel and
accountants as the Trustee considers necessary or appropriate, any of whom may
be an affiliate of the Trustee or a person who renders services to such an
affiliate, and, as a part of its expenses under this Trust Agreement, to pay
their reasonable expenses and compensation;
(c) to make, execute and deliver, as Trustee, any and all deeds, leases,
mortgages, conveyances, waivers, releases or other instruments in writing
necessary or for the accomplishment of any of the powers listed in this Trust
Agreement;
(d) to determine the market value of any securities or other property held
by the Trustee in the Trust Fund. and where any securities or other property are
determined by the Trustee not to be marketable, to determine their value in
accordance with sound practice and standards for evaluating such property,
including valuation by an independent appraiser selected by the Trustee, for
whose services the Company shall be obligated to pay the fees and expenses;
(e) to employ legal counsel, brokers and other advisors, agents or
employees to perform services for the Trust Fund or to advise it with respect to
its duties and obligations under this Agreement and in connection with the
Trust, and to pay from the Trust Fund such compensation as it deems appropriate;
and
(f) generally to do all other acts which the Trustee deems necessary or
appropriate for the protection of the Trust Fund.
SECTION IV
INVESTMENTS
4.1 Investment in Company Stock. The assets of the ESOP Fund (as defined in
the Plan) shall be invested primarily in Company Stock, although up to 100% of
the
<PAGE>
assets of the Trust Fund may be invested in Company Stock. To the extent that
Company contributions are made in Company Stock, the Trustee will be expected to
retain such Company Stock. To the extent Company contributions or dividends are
made in cash and are not used to pay principal or interest on an ESOP Loan (as
defined in Section 5) or to pay expenses of the Fund, the Trustee will, at the
direction of the Named Investment Fiduciary, acquire Company Stock either from
other shareholders or directly from the Company. The Trustee will pay adequate
consideration for all Company Stock it acquires (other than a contribution). If,
at the time of any purchase, Company Stock is not actively traded on an
established securities market, the amount of such consideration will be
determined by the Named Fiduciary, however, the Trustee may also make such
determination or may retain, on the Company's behalf and at the Company's
expense, an independent fiduciary to make such a determination, in either case,
on the basis of the advice provided by an independent appraiser selected by the
Trustee or independent fiduciary, as applicable, and the Company shall be
obligated to pay the fees and expenses of such independent appraiser.
If at the time Company Stock is to be purchased, the Company has
outstanding more than one class of Stock, the Named Investment Fiduciary shall
direct the Trustee as to which class of Stock shall be purchased (which class
shall satisfy Code section 409(e)).
To the extent consistent with the foregoing, at the direction of a Named
Fiduciary, the Fund may hold temporary investments other than Company Stock, may
hold such portion of the Fund in such investments as may be required under the
investment diversification provisions of the Plan, may hold such portion of the
Fund uninvested as a Named Fiduciary directs for making, distributions under the
Plan, may invest assets of the Fund in short-term investments bearing a
reasonable rate of interest, including, without limitation, any common or
collective investment trust (including one established at the institution that
serves as Trustee hereunder or any of its affiliates) which provides for the
pooling of assets of plans described in section 401(a) of the Code and exempt
from tax under section 501(a) of the Code, the terms of which are incorporated
by reference,
4.2 Investment Management. The Named Investment Fiduciary shall manage the
investment of the Trust Fund except insofar as (a) the Named Investment
Fiduciary appoints a person (an "Investment Manager") who meets the requirements
of section 3(38) of ERISA to manage Trust assets, or (b) the Plan provides for,
and the Named Administrative Fiduciary elects to allow, Plan participant or
beneficiary direction of the investment of assets allocable under the Plan to
the accounts of such participants and beneficiaries.
In situation (a) above, the Company or the Named Investment Fiduciary may
appoint one or more Investment Managers, who may be affiliate(s) of the Trustee,
to direct the Trustee in the investment of all or a specified portion of the
assets of the Trust. The Named Investment Fiduciary shall notify the Trustee in
writing before the effective date of the appointment or removal of any
Investment Manager. If there is more than one Investment Manager whose
appointment is effective under the Plan at any one time, the
<PAGE>
Trustee shall, upon written instructions from the Company or the Named
Investment Fiduciary, establish separate funds for control by each such
Investment Manager. The funds shall consist of those Trust assets designated by
the Company or the Named Investment Fiduciary.
In situation (b) above, a list of the participants and beneficiaries and
such information concerning them as the Trustee may specify shall be provided by
the Company or the Named Administrative Fiduciary to the Trustee and/or such
other person(s) as are necessary for the implementation of the participants'
directions in accordance with procedures reasonably acceptable to the Trustee
and the Named Administrative Fiduciary.
4.3 Investment Directions. Directions for the investment or reinvestment of
Trust Fund assets from the Named Investment Fiduciary, an Investment Manager or
a Plan participant or beneficiary, as the case may be, shall, in a manner and in
accordance with procedures reasonably acceptable to the Trustee and the Named
Administrative Fiduciary, be communicated to and implemented by, as the case may
be, the Trustee, the Trustee's designee or, with the Trustee's consent, the
broker/dealer designated for the purpose by the Company or the Named Investment
Fiduciary. Communication of any such direction to such a designee or
broker/dealer shall conclusively be deemed an authorization to the designee or
broker/dealer to implement the direction even though coming from a person other
than the Trustee.
If the Trustee does not receive written directions with respect to any part
of the Trust Fund subject to the Named Fiduciaries' direction (including,
without limitation, income, sale proceeds, or contributions), the Trustee shall,
pending receipt of such directions, be deemed to be directed to hold and invest
such amount in short-term securities or other such short-term investments that
the Trustee deems appropriate.
Except as required by ERISA, the Trustee shall have no duty to determine or
inquire into whether any directions received from the Named Fiduciaries in
accordance with the terms of this Agreement represent proper and lawful
decisions or result in prohibited transactions as defined in section 406 of
ERISA. The Trustee shall have no duty to review any investment to be acquired,
held or disposed of pursuant to such instructions from the Named Fiduciaries.
Except as required by ERISA, the Trustee shall have no liability for following
or any other person's following such directions or failing to act in the absence
of any such directions. The Trustee shall have no liability for the acts or
omissions of any person directing the investment or reinvestment of Trust Fund
assets or making or failing to make any direction referred to in section 4.4.
Neither shall the Trustee have any duty or obligation to review any such
investment or other direction, act or omission or, except upon receipt of a
proper direction, to invest or otherwise manage any asset of the Trust which is
subject to the control of any such person or to exercise any voting or other
right referred to in Section 4.4.
<PAGE>
4.4 Voting Rights
(a) With respect to Company Stock, each participant (or beneficiary) is,
for purposes of this Section 4.4(a), hereby designated a "named fiduciary"
(within the meaning of section 403(a)(l) of ERISA) with respect to the shares of
Company Stock allocated to his account and shall have the right to direct the
Trustee with respect to the vote of the shares of Company Stock allocated to his
or her account on each matter brought before any meeting of the stockholders of
the Company. Upon timely receipt of such directions from each participant (or
beneficiary), the Trustee shall on each such matter vote as directed by the
participant (or beneficiary) the number of shares (including fractional shares)
of Company Stock allocated to each participant's (or beneficiary's) account, and
except as otherwise required by ERISA, the Trustee shall have no discretion in
the matter
(b) With respect to all Trust Fund assets not described in section 4.4(a)
above, including shares of Company Stock not allocated to the accounts of
participants or beneficiaries, and, with respect to shares of Company Stock
where the Company (or any Employer) does not have a "registration-type class of
securities" (as described in Section 409(e)(4) of the Code), for matters that
the Plan does not pass through to participants (or beneficiaries), the voting
and other rights in Company Stock, securities or other assets held a the Trust
shall be exercised by the Trustee solely as directed by the Named Investment
Fiduciary, Investment Manager or other person who at the time has the right to
direct the investment or reinvestment of the Company Stock, security or other
asset involved.
(c) The Company or Named Administrative Fiduciary shall establish a
procedure reasonably acceptable to the Trustee for the timely dissemination to
each person entitled to direct the Trustee or its designee as to voting or other
decision called for thereby or referred to therein of all proxy and other
materials hearing on the decision and a form requesting confidential directions
to the Trustee as to how the Trustee should vote or otherwise decide. In the
case of Company Stock, at such time as proxy or other materials bearing thereon
are disseminated generally to owners of Company Stock in accordance with
applicable law, the Company shall cause a copy of such proxy or other materials
to be delivered directly to the Trustee and, thereafter, shall promptly deliver
to the Trustee such number of additional copies of the proxy or other materials
as the Trustee may request.
(d) In the event a Plan participant or beneficiary or an Investment Manager
with the right to direct a voting or other decision with respect to any security
or other asset held in the Trust does not communicate any decision on the matter
to the Trustee or the Trustee's designee by the time prescribed by the Trustee
or the Trustee's designee for that purpose, or if the Trustee notifies the Named
Investment Fiduciary either that it does not have precise information as to the
securities or other assets involved allocated on the applicable record date to
the accounts of all participants and beneficiaries, or that time constraints
make it unlikely that participant, beneficiary or Investment
<PAGE>
Manager direction, as the case may be, can be received on a timely basis, the
decision shall be the responsibility of the Named Investment Fiduciary and shall
be communicated to the Trustee on a timelv basis. In the event the Named
Investment Fiduciary with any right or responsibility under the Plan or
hereunder to direct a voting or other decision with respect to any security or
other asset held in the Trust does not, or is unable in accordance with ERISA,
communicate any decision on the matter to the Trustee or the Trustee's designee
by the time prescribed by the Trustee for that purpose or to the extent the
Trustee determines that the Trustee must exercise discretion with respect to any
decision, the Trustee may retain an independent fiduciary, on behalf of the
Company, to direct it as to the voting of Company Stock or other assets of the
Trust Fund, and the Company shall be obligated to pay the fees and expenses of
such fiduciary, including fees of any advisor to the independent fiduciary.
Except as required by ERISA, the Trustee shall follow all directions referred to
above in this section and shall have no duty to exercise voting or other rights
relating to any such Company Stock, security or other asset.
4.5 Tender and Exchange Offers. The provisions of this section 4.5 shall
apply in the event of a tender or exchange offer including, but not limited to,
a tender offer or exchange offer within the meaning of the Securities Exchange
Act of 1934, as from time to time amended and in effect, (hereinafter, a "tender
offer") for Company Stock is commenced by a person or persons.
The Trustee shall have no discretion or authority to sell, exchange or
transfer any of such shares pursuant to such tender offer except to the extent,
and only to the extent, provided in this Agreement. Each participant (or
beneficiary) is hereby designated a named fiduciary within the meaning of
section 403(a)(l) of ERISA with respect to the shares of Company Stock allocated
to his account. and shall have the right, to the extent of the number of whole
shares of Company Stock allocated to his account, to direct the Trustee as to
the manner in which to respond to a tender offer with respect to shares of
Company Stock.
The Company shall use its best efforts to timely distribute or cause to be
distributed to each participant (or beneficiary) such information as will be
distributed to stockholders of the Company in connection with any such tender
offer. The Trustee shall solicit confidentially from each participant (or
beneficiary) the directions described in this section as to whether shares are
to be tendered. The Trustee shall respond as instructed by each participant (or
beneficiary) with respect to such shares of Company Stock. The instructions
received by the Trustee from participants (or beneficiaries) shall be held by
the Trustee in confidence and shall not be divulged or released to any person,
including the Named Administrative Fiduciary or officers or employees of the
Company or any affiliated company.
With respect to (1) any shares of Company Stock allocated to a participant
or beneficiary's account for which the Trustee has not received timely
instructions from the participant (or beneficiary) as to the manner in which to
respond to such a tender offer. (2) unallocated shares of Company Stock, and (3)
fractional shares of Company Stock
<PAGE>
allocated to participants' (or beneficiaries') accounts, such shares shall be
tendered or exchanged by the Trustee as directed by the Named Investment
Fiduciary. If the Named Investment Fiduciary fails, or is unable in accordance
with ERISA, to give such direction, or to the extent the Trustee determines that
the Trustee must exercise discretion with respect to any decision, the Trustee
may retain an independent fiduciary to direct it as to whether to tender or
exchange Company Stock, and the Company shall be obligated to pay the fees and
expenses of such fiduciary, including fees of any advisor to the fiduciary.
SECTION V
LEVERAGED ACQUISITIONS OF STOCK
The Named Fiduciary may from time to time direct the Trustee to incur
indebtedness (including indebtedness to the company) to purchase Company Stock
(an "ESOP Loan") on such terms and conditions as the Named Fiduciary shall
determine. Any such ESOP Loan shall meet all of the requirements necessary to
constitute an "exempt loan" within the meaning of section 4975(d)(3) of the code
and Treasury Regulation section 54.4975-7(b)(1)(iii) and shall be used primarily
for the benefit of the Plan participants and their beneficiaries.
Payments of principal and interest on any such ESOP Loan shall be made by
the Trustee (as directed by a Named Fiduciary) only from (1) Company
contributions made under the Plan for the purpose of satisfying such ESOP Loan
obligation, earnings on such contributions and earnings on shares of Stock
acquired with the proceeds of such ESOP Loan, (2) the proceeds of a subsequent
ESOP Loan made to repay a prior ESOP Loan, and/or (3) the proceeds of the sale
of collateralized shares of Company Stock acquired with the proceeds of such
ESOP Loan.
In the event of a default under an ESOP Loan, the value of Trust assets
transferred to the lender shall not exceed the amount of the default, provided
further that if the lender is a "party in interest" within the meaning of ERISA
section 3(14), a transfer of Trust assets upon default shall be made only if;
and to the extent of, the Trust's failure to meet the ESOP Loan's payment
schedule.
To the extent that the Trustee determines that the Trustee must exercise
discretion with respect to acts contemplated by this Section V, the Trustee may
retain an independent fiduciary, on behalf of the Company, to direct it as to
those acts, and the Company shall be obligated to pay the fees and expenses of
such fiduciary, including fees of any advisor to the fiduciary.
SECTION VI
PAYMENT OF BENEFITS, TRUSTEE'S COMPENSATION AND EXPENSES
6.1 Payments by Trustee. The Trustee shall pay benefits unde the Plan only
when it receives (and in accordance with) written instructions of the Named
<PAGE>
Administrative Fiduciary, indicating the amount of the payment and the name and
address of the recipient. The Trustee shall have no duty to inquire into whether
any payment the Named Administrative Fiduciary instructs it to make is
consistent with the terms of the Plan or applicable law or otherwise proper. If
the Named Administrative Fiduciary advises the Trustee that benefits have become
payable respecting a participant's (or beneficiary's) interest in the Trust
Fund, but does not instruct the Trustee as to the manner of payment, the Trustee
shall hold the participant's (or beneficiary's) interest in the Trust until it
receives written instructions from the Named Administrative Fiduciary as to the
manner of payment. The Trustee shall not pay benefits from the Trust Fund
without such instructions, even though it may be informed from other sources,
including, without limitation, a participant (or beneficiary), that benefits are
payable under the Plan. The Trustee shall have no responsibility to determine
when, to whom, or in what amounts benefits are payable under the Plan,
The Trustee may pay any benefit or expense under the Plan by mailing
certificates representing shares of Company Stock and/or its check, as the case
may be, for the amount thereof to the person designated by the Named
Administrative Fiduciary as entitled to receive such payment to such address as
may have last been furnished to the Trustee by the Named Administrative
Fiduciary. If no such address has been so furnished, benefits or expenses may be
mailed by the Trustee to such person in care of the Company.
The Trustee is authorized to make any payments directed by court order in
any action in which the Trustee is a party or pursuant to a "qualified domestic
relations order" under section 414(p) of the Code or pursuant to a court order
pertaining to the enforcement of a federal tax levy or the collection by the
United States on a judgment resulting from an unpaid tax assessment. The
determination of whether a court order constitutes a "qualified domestic
relations order" shall be determined by the Named Administrative Fiduciary and
the Trustee shall have no authority to make such a determination. Except as may
otherwise be required by ERISA, the Trustee is not obligated to defend actions
in which the Trustee is named but shall notify the Company or Named
Administrative Fiduciary of any such action and may tender defense of the action
to the Company, the Named Administrative Fiduciary or the participant or
beneficiary whose interest is affected. The Trustee may in its discretion defend
any action in which the Trustee is named and any expenses, including reasonable
attorneys' fees, incurred by the Trustee in that connection shall be paid or
reimbursed from the Trust Fund to the extent permitted under ERISA.
6.2 Disputed Payment. If a dispute arises over the propriety of the
Trustee's making any payment from the Trust Fund, the Trustee may withhold the
payment until the dispute has been resolved by a court of competent jurisdiction
or settled by the parties to the dispute. The Trustee may consult legal counsel
and rely upon the advice of counsel.
6.3 Trustee's Compensation and Expenses. Except to the extent specifically
provided otherwise herein, the Trustee's compensation for its services under
this Trust Agreement shall be paid in accordance with the Trustee's fee schedule
currently in effect.
<PAGE>
Without the written consent of the Company, the Trustee's fee schedule may not
be modified more than once every twelve months. Any compensation or expenses
incurred by the Trustee in connection with or relating to the performance of its
duties under this Trust Agreement or its status as Trustee, including reasonable
attorneys' fees shall be paid from the Trust Fund, unless the Company elects to
pay any of such compensation and expenses. If the Company does not so elect,
such compensation and expenses shall be charged against and withdrawn from the
Trust Fund as provided below.
The Trustee is authorized to charge the Trust Fund for and withdraw from
the Trust Fund, without direction from the Named Administrative Fiduciary or any
other person, the amount of any such fees or expenses 30 days after presentation
of a statement for such amount to the Company, except to the extent the Company
pays such amounts before such date. Trust Fund assets shall be applied to pay
such fees and expenses in the following priority by asset category to the extent
thereof held at the time of withdrawal in the Trust Fund subfund or account to
which the fee or expense is allocated: (i) uninvested cash balances; (ii) shares
of any money market fund or funds held in the Trust Fund; and (iii) any other
Trust Fund assets. The Trustee is authorized to allocate its fees and expenses
among these subfunds or accounts to which the fees or expenses pertain in such
manner as the Trustee deems appropriate under the circumstances unless prior to
such allocation the Company or the Named Administrative Fiduciary specifies the
manner in which the allocation is to be made. The Trustee is also authorized but
not required to sell any shares or other assets referred to above to the extent
necessary for the purpose.
By signing this Trust Agreement, the Company authorizes the Trustee and/or
its affiliates to receive payments from certain mutual funds (and/or collective
trusts) for which no affiliate of the Trustee acts as investment manager or
adviser (or from the principal distributors and/or advisors of those funds or
trusts), in connection with the performance of reasonable and necessary services
(including recordkeeping, subaccounting, account maintenance. administrative and
other shareholder services); provided such payments are properly made in
accordance with applicable law. Because different mutual funds (or collective
trusts) may be subject to different fee arrangements, the Company should contact
the Trustee or its designee to obtain further details on any specific fee
arrangements that may be applicable to investments under the Plan, and the
Trustee or its designee shall provide such information upon request.
6.4 Other Expenses.The Trustee is authorized upon direction from the Named
Administrative Fiduciary or any other person, to withdraw from the Trust Fund
and pay any federal, state or local taxes, charges or assessments of any kind
levied or assessed against the Trust or assets thereof. Until paid, such taxes
shall be a lien against the Trust Fund. The Trustee shall give notice to the
Named Administrative Fiduciary of its receipt of a demand for any such taxes,
charges or assessments. The Trustee shall not be personally liable for any such
taxes, charges or assessments.
Expenses incurred by the Company, the Named Administrative Fiduciary, the
Named Investment Fiduciary, any Investment Manager or any other persons
<PAGE>
designated to act on behalf of the Company, the Named Administrative Fiduciary
or the Named Investment Fiduciary, including reimbursement for expenses incurred
in the performance of their respective duties, may be paid from the Trust Fund
upon the written direction to the Trustee by the Named Administrative Fiduciary.
SECTION VII
LIABILITY AND INDEMNITY
7.1 Trustee's Reliance. Unless the Trustee has actual knowledge to the
contrary, the Trustee shall have no duty to inquire whether directions by the
Company, the Named Administrative Fiduciary, the Named Investment Fiduciary or
any other person conform to the Plan, and the Trustee shall be fully protected
in relying on any such direction, communicated in accordance with procedures
acceptable to the Trustee and the Named Administrative Fiduciary, from any
person who is a proper person to give the direction. The Trustee shall be fully
protected in acting upon any instrument, certificate, or paper delivered by the
Company, the Named Administrative Fiduciary, any participant or beneficiary
(acting as a named fiduciary) and reasonably believed by the Trustee to be
genuine and to be signed or presented by the proper person or persons, and the
Trustee shall be under no duty to make investigation or inquiry as to any
statement contained in any such writing, but may accept the same as conclusive
evidence of the truth and accuracy of the statements therein contained.
The Trustee shall have no liability to any participant, any beneficiary or
any other person for payments made, any failure to make payments, or any
discontinuance of payments, on direction of the Named Administrative Fiduciary,
the Named Investment Fiduciary or any designee of either of them or for any
failure to make payments in the absence of directions from the Named
Administrative Fiduciary or any person responsible for or purporting to be
responsible for directing the investment of Trust assets. The Trustee shall have
no obligation to request proper directions from any person. The Trustee may
request instructions from the Named Administrative Fiduciary or the Named
Investment Fiduciary and shall have no duty to act or liability for failure to
act if such instructions are not forthcoming. The Trustee shall have no
responsibility to determine whether the Trust Fund is sufficient to meet the
liabilities under the Plan, and shall not be liable for payments or Plan
liabilities in excess of the Trust Fund. The Trustee in its corporate capacity
shall not be liable for claims of any persons arising under the Plan.
7.2 Advice of Counsel The Trustee may consult with legal counsel with
respect to the meaning and construction of this Agreement or its powers, duties
and conduct hereunder.
Notwithstanding any other provision of this Agreement, the Trustee shall
not be required to take any action or refrain from taking any action that
violates ERISA, and for this purpose, the determination of whether such action
or inaction violates ERISA shall be determined by (a) a written opinion or
advice of counsel based upon such
<PAGE>
counsel's interpretation of any statute or final regulation, or (b) an opinion
or order of a court of competent jurisdiction issued to the Plan, the Company or
the Trustee.
7.3 Other Fiduciaries. Each fiduciary of the Plan and the Trust shall be
solely responsible for its own acts or omissions. The Trustee shall have no duty
to question any other Plan fiduciary's performance of fiduciary duties allocated
to such other fiduciary pursuant to the Plan. The Trustee shall not be
responsible for the breach of responsibility by any other Plan fiduciary except
as provided under ERISA.
7.4 Indemnification. The Company hereby indemnifies the Trustee against,
and shall hold the Trustee harmless from, any and all loss, claims, liability,
and expense, including reasonable attorneys' fees, imposed upon the Trustee or
incurred by the Trustee as a result of any acts taken in accordance with the
directions from the Named Administrative Fiduciary, Named Investment Fiduciary,
Investment Manager or any other person specified herein, or any designee of any
such person, or by the failure to act due to a lack of direction from such
parties or by reason of the Trustee's execution of its duties with respect to
the Trust, including, but not limited to, its holding of assets of the Trust,
the Company's obligations in the foregoing regard to be satisfied promptly on
request by the Trustee, unless the loss, claim, liability or expense involved
resulted from the negligence or willful misconduct of the Trustee.
7.5 Protection of Designees. To the extent that any designee of the Trustee
is performing a function of the Trustee under this Trust Agreement, the designee
shall have the benefit of all of the applicable limitations on the scope of the
Trustee's duties and liabilities, all applicable rights of indemnification
granted hereunder to the Trustee and all other applicable protections of any
nature afforded to the Trustee, except as provided under ERISA.
SECTION VIII
ADMINISTRATION
8.1 Records. The Trustee shall maintain books of account and records with
respect to the Trust Fund. Except to the extent required by applicable law, the
Trustee shall not be required to maintain any separate records or accounts with
respect to any participant, and any records or accounts required to be
maintained pursuant to the Plan or to comply with ERISA shall be the
responsibility of the Named Administrative Fiduciary or its designee.
8.2 Accounting. Within 90 days following the close of each fiscal year of
the Plan or the effective date of the removal or resignation of the Trustee, the
Trustee shall file with the Named Administrative Fiduciary a written accounting
setting forth all transactions since the end of the period covered by the last
previous accounting. The accounting shall include a listing of the assets of the
Trust showing the value of such assets at the close of the period covered by the
accounting. On direction of the Named Administrative Fiduciary, and if
previously agreed to by the Trustee, the Trustee shall
<PAGE>
submit to the Named Administrative Fiduciary interim valuations reports or other
information pertaining to the Trust.
The Named Administrative Fiduciary may approve the accounting by written
approval delivered to the Trustee. Any such affirmative approval shall be
binding on the Company, the Named Administrative Fiduciary, the Named Investment
Fiduciary and, to the extent permitted by ERISA, all other persons, and such
approval shall release and discharge the Trustee from any liability or
accountability to the Company and the Named Administrative Fiduciary with
respect to the transactions shown or reflected on the account.
8.3 Valuation. The assets of the Trust shall be valued a of each valuation
date under the Plan at fair market value as determined by the Trustee based upon
such sources of information as it may deem reliable, including, but not limited
to, stock market quotations, statistical evaluation services, newspapers of
general circulation, financial publications, advice from investment counselors
or brokerage firms, or any combination of sources. The Trustee may retain, on
the Company's behalf and at the Company's expense, an independent fiduciary to
make such a determination, in either case, on the basis of the advice provided
by an Independent Appraiser" (as described in section 401(a)(28)(C) of the Code)
selected by the Trustee or the independent fiduciary, as applicable, and the
reasonable costs incurred in establishing values of the Trust Fund shall be a
charge against the Trust Fund, unless paid by the Company. If there is no
generally recognized market (as described in section 3(l8)(A) of ERISA) for
shares of Company Stock, all valuations of shares of company stock shall be made
by an Independent Appraiser in accordance with section 3(l8)(B) of ERISA. If the
Department of Labor issues final regulations under ERISA regarding the valuation
of securities or other assets for purposes of the reports required by ERISA, the
Trustee shall use such valuation methods.
SECTION IX
RESIGNATION AND REMOVAL OF TRUSTEE
9.1 Manner of Resignation or Removal. The Trustee may resign as Trustee
under this Agreement at any time by a written statement delivered to the Company
giving notice of such resignation, which shall be effective 60 days after
receipt or at such other time as is agreed by the Company and the Trustee. The
Trustee may be removed at any time by the Company by an instrument in writing
and delivered to the Trustee, which shall be effective 60 days after receipt or
at such other time as is agreed between the Company and the Trustee.
9.2 Appointment of Successor. Upon resignation or removal of the Trustee,
the Company shall appoint a successor trustee and shall deliver to the Trustee
copies of (a) a written instrument executed by the Company appointing such
successor, and (b) a written instrument executed by the successor in which it
accepts such appointment. Such instruments shall indicate their effective date.
<PAGE>
9.3 Settlement of Account. Upon resignation or removal of the Trustee, the
Trustee shall have the right to a settlement of its account, which settlement
shall be made, at the Trustee's option, either by an agreement of settlement
between the Trustee and the Company or by a judicial settlement in an action
instituted by the Trustee. The Trustee shall not be obligated to transfer Trust
assets until the Trustee is provided written assurance by the Company that all
fees and expenses reasonably anticipated will be paid.
9.4 Termination of Responsibility and Liability. Upon settlement of the
account and transfer of the Trust Fund to the successor trustee, all rights and
privileges under this Trust Agreement shall vest in the successor trustee and
all responsibility and liability of the Trustee with respect to the Trust and
assets thereof shall, except as otherwise required by ERISA, terminate subject
only to the requirement that the Trustee execute all necessary documents to
transfer the Trust assets to the successor trustee.
SECTION X
AMENDMENT AND TERMINATION OF TRUST
10.1 Amendment. The Company reserves the right to amend this Trust
Agreement, provided that no amendment of this Trust Agreement or the Plan shall
be effective which would (a) cause any assets of the Trust Fund to be used for,
or diverted to, purposes other than the exclusive benefit of Plan participants
or their beneficiaries other than an amendment permissible under the Code and
ERISA, or (b) affect the rights duties, responsibilities, obligations or
liabilities of the Trustee without notice to the Trustee and the Trustee's prior
written consent. Subject to approval by the legal counsel of the Company, the
Company shall amend this Trust Agreement as requested by the Trustee to reflect
changes in law which counsel for the Trustee advises the Trustee require such
changes. Amendments to the Trust Agreement or a certified copy of the amendments
shall be delivered to the Trustee promptly after adoption, and if practicable
under the circumstances, any proposed amendment under consideration by the
Company shall be communicated to the Trustee to permit the Trustee to review and
comment thereon in due course before the Company acts on the proposed amendment.
10.2 Termination. The Trust may be terminated by the Company in accordance
with the Plan. Upon such termination, the Trust Fund shall be distributed by the
Named Administrative Fiduciary in accordance with the terms of the Plan.
SECTION XI
MISCELLANEOUS
11.1 Restriction on Alienation. Except as provided in section 6.1 or under
section 401(a)(13) of the Code, the interest of any Plan participant or
beneficiary in the Trust Fund shall not be subject to the claims of such
person's creditors and may not be assigned, sold, transferred, alienated or
encumbered. Any attempt to do so shall be void; and the Trustee shall disregard
any attempt. Trust assets shall not in any manner be liable
<PAGE>
for or subject to debts, contracts, liabilities, engagement or tons of any Plan
participant or beneficiary, and benefits shall not be considered an asset of any
such a person in the event of the person's insolvency or bankruptcy.
11.2 Successors and Assigns. This Agreement shall be binding upon, and the
powers granted to the Company and the Trustee, respectively, shall be exercised
by the respective successors and assigns of the Company and the Trustee. Any
corporation which shall, by merger, consolidate, purchase or otherwise, succeed
to substantially all the trust business of the Trustee shall, upon such
succession and without any appointment or other action by the Company, be and
become successor trustee hereunder, upon notification to the Company.
11.3 Governing Law and Construction. This Trust Agreement and the Trust
shall be construed, administered and governed under ERISA and other pertinent
federal law, and to the extent that federal law is inapplicable, under the laws
of the state in which the Trustee is incorporated. If any provision of this
Trust Agreement is susceptible to more than one interpretation, the
interpretation to be given is that which is consistent with the Trust being a
qualified trust under section 401(a) of the Code. If any provision of this Trust
Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions shall continue to be fully effective to
the extent possible under the circumstances.
11.4 Equity Interest. Neither the creation of the Trust nor anything
contained in the Trust shall be considered as giving any person any equity
interest in the assets, business or affairs or the Company except to the extent
that the Trust Fund is invested in Company Stock.
11.5 Refunds to Company. The Trustee shall, upon the written direction of
the Named Administrative Fiduciary which shall include a certification that such
action is proper under the Plan, ERISA and the Code specifying any relevant
sections thereof, return to the Company any amount referred to in section
403(c)(2) of ERISA.
11.6 Authorized Action. Any action to be taken under this Trust Agreement
by a company or other person which is: (a) a corporation shall be taken by the
board of directors of the corporation or any person or persons duly empowered by
the board of directors to take the action involved, (b) a partnership shall be
taken by an authorized general partner of the partnership, and (c) a sole
proprietorship by the sole proprietor.
11.7 Text of Plan. The Company represents that, prior to the execution of
this Trust Agreement by both parties, it delivered to the Trustee's designee the
text of the Plan as in effect as of the date of this Trust Agreement. The
Company shall deliver to the Trustee promptly after adoption thereof a certified
copy of any amendment of the Plan.
11.8 Conflict with Plan. The rights, duties, responsibilities, obligations
and liabilities of the Trustee are as set forth in this Trust Agreement, and no
provision of the
<PAGE>
Plan or any other document shall be deemed to affect such rights, duties,
responsibilities, obligations and liabilities, except as otherwise provided
herein. If there is a conflict between provisions of the Plan and this Trust
Agreement with respect to any subject involving the Trustee, including but not
limited to the responsibility, authority or powers of the Trustee, the
provisions of this Trust Agreement shall be controlling, except as otherwise
provided herein.
11.9 Failure to Maintain Qualification. If the Trust fails to qualify as a
qualified trust under section 401(a) of the Code, or loses its status as such a
qualified trust, the Company shall immediately so notify the Trustee, and the
Trustee shall, without further notice or direction, remove the Trust assets from
any common or collective trust fund maintained by the Trustee or its affiliate
for investments by qualified trusts.
11.10 Gender. As used in this Trust Agreement, the masculine gender shall
include the feminine and the neuter genders and the singular shall include the
plural and the plural the singular, as the context requires.
11.11 Headings. Headings and subheadings in this Trust Agreement are for
convenience of reference only and are not to be considered in the construction
of the provisions of the Trust Agreement.
11.12 Counterparts. This Trust Agreement may be executed in several
counterparts, each of which shall be deemed an original, and these counterparts
shall constitute one and the same instrument which may be sufficiently evidenced
by any one counterpart.
IN WITNESS WHEREOF, the Company and the Trustee have executed this Trust
Agreement each by action of a duly authorized person.
MERRILL LYNCH TRUST MORRISON HEALTH CARE, INC.
COMPANY (FLORIDA)
By: /s/ Melanie Madeira By: /s/ K. W. Engwall
---------------------- -----------------------
Name: Melanie Madeira Name: K. W. Engwall
Title: New Account Trust Officer Title: Senior Vice President, Finance
EXHIBIT 10.28
TRUST AGREEMENT
FOR THE
MORRISON HEALTH CARE, INC.
DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT is made this 2nd day of October, 1997, by and among
MORRISON HEALTH CARE, INC., a corporation organized under the laws of the State
of Georgia (the "Primary Sponsor"), each related corporation or business
executing this Trust Agreement (the Primary Sponsor and each related corporation
or business being sometimes hereinafter referred to as a "Plan Sponsor"); and
MERRILL LYNCH TRUST COMPANY (FLORIDA) (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Health Care, Inc.
Deferred Compensation Plan (the "Plan"), which was established by indenture
dated March 7, 1996, to provide benefits in the form of deferred compensation to
a select group of management or highly compensated employees of the Primary
Sponsor or any of its related corporations or businesses; and
WHEREAS, the Primary Sponsor, by agreement dated March 7, 1996 established
an irrevocable grantor trust (the "Trust"), within the meaning of Section 671 of
the Internal Revenue Code of 1986, as amended (the "Code") to assist it and any
of its related corporations or businesses in meeting its obligations under the
Plan; and
WHEREAS, the Primary Sponsor desires to amend and restate the existing
trust agreement originally executed by and between Morrison Health Care, Inc.
and AmSouth Bank of Alabama, which agreement, as amended, contains the existing
terms of the Trust (the "Prior Trust Agreement"); and
WHEREAS, the Board of Directors of the Primary Sponsor has authorized the
amendment and restatement of the Prior Trust Agreement as embodied herein (the
"Trust Agreement");
NOW, THEREFORE, the Primary Sponsor hereby restates the Trust, effective
as of October 1, 1997, as follows:
<PAGE>
SECTION 1.
GOVERNING INSTRUMENT
The rights, duties, responsibilities, obligations and liabilities of the
Trustee are as set forth in this Trust Agreement, and no provision of the Plan
or any other document shall affect such rights, duties, responsibilities,
obligations and liabilities. In the event of a conflict between the terms and
provisions of the Trust Agreement and those of the Plan, the terms and
provisions of the Trust Agreement shall govern. However, nothing contained in
the Trust Agreement is intended to diminish the amount of benefits required to
be paid for the benefit of any participant under the terms of the Plan.
SECTION 2.
ESTABLISHMENT OF THE FUND
The Primary Sponsor has established a fund with the Trustee (the "Fund")
to be held and administered in accordance with this Trust. The Fund shall
consist of all assets as may be delivered by a Plan Sponsor to the Trustee and
reasonably accepted by the Trustee, and shall also include all income accruing
thereon, except as otherwise provided in this Trust Agreement. The Trustee shall
not be obligated to receive any assets unless prior thereto the Trustee has
agreed that such assets are reasonably acceptable to it and the Trustee has
received such reconciliation, allocation, investment or other information
concerning, or representations with respect to, such assets as the Trustee may
reasonably require.
SECTION 3.
INVESTMENT OF THE FUND
(a) Subject to the provisions of Subsections (b) and (c) below and Section
4 hereof, the Trustees shall invest the principal and income of the Fund without
distinction between principal and income in securities or in property, real or
personal and wherever situated, as the Trustee shall deem advisable, in its sole
discretion. Without limiting the foregoing, the Trustee may purchase, acquire,
retain, sell, transfer, pledge or encumber common or preferred stocks, including
stock of the Primary Sponsor or any affiliate, shares of mutual funds, including
mutual funds for which the Trustee is an advisor, trust and participation
certificates, bonds and mortgages, other evidences of indebtedness or ownership,
annuity contracts and ordinary and term life insurance contracts of life
insurance companies, savings accounts or plans, including savings accounts or
plans established or to be established by the Trustee, and group trusts or
collective investment funds including group trusts or collective investment
funds operated by the Trustee.
(b) The Fund shall be invested by the Trustee consistent with the overall
investment objectives of the Trust as identified by the Primary Sponsor and
communicated to the Trustee in writing from time to time and in the absence of
such communication, consistent with the objective of preservation of capital
(the "Investment Goals"). The Trustee shall incur no liability merely for a
failure to achieve the Investment Goals for any period; provided that during any
such period the Fund was invested in accordance with applicable fiduciary
standards and with a view towards achieving the Investment Goals.
<PAGE>
(c) The Primary Sponsor may appoint one or more investment managers (the
"Investment Managers") which shall be banks, investment advisers registered
under the Investment Advisers Act of 1940, or insurance companies, to direct the
Trustee as to the investment of all or a portion of the Fund for the exclusive
benefit of the participants of the Plan and their beneficiaries. Notwithstanding
the foregoing, the Primary Sponsor may appoint the Trustee (or any of its
affiliates) as an Investment Manager, if the Trustee (or its affiliate) agrees
to such appointment and is otherwise qualified to serve as an Investment Manager
and in such instance, the Trustee (or its affiliate) shall have discretion over
the investment of the Fund, subject to the provisions of Subsection (b) above.
The Primary Sponsor shall notify the Trustee of the appointment of any
Investment Manager (other than the Trustee) under this Subsection by delivering
to the Trustee (i) an executed copy of an instrument under which the Investment
Manager was appointed to act hereunder and setting forth the investment powers
of the Investment Manager and (ii) a written instrument executed by the
Investment Manager in which it acknowledges that it has agreed to act as such
and accepts fiduciary status. Any notice of appointment pursuant to this
Subsection shall constitute a representation and warranty by the Primary Sponsor
that the Investment Manager is qualified under and has been appointed in
accordance with the provisions hereof. Notwithstanding anything herein contained
to the contrary, during the term of its appointment, the Investment Manager
shall have the sole responsibility for the investment and reinvestment of the
portion of the Fund for which it was appointed to act, and, subject to the
limitations on the types of appropriate investments set forth in Subsection (b)
hereof, shall have full power and responsibility in its discretion to direct the
Trustee with respect to the exercise by it of its investment powers, including
the voting of shares (except as otherwise provided by Section 13(d) hereof).
Pending receipt of instructions from any Investment Manager with respect thereto
and subject to any investment guidelines agreed to in writing from time to time
pursuant to Subsection (b) hereof, any cash received by the Trustee from time to
time shall be invested by the Trustee in a money market mutual fund designated
by the Primary Sponsor or the Investment Manager.
The Primary Sponsor may terminate its appointment of an Investment Manager
at any time and shall in writing notify the Trustee of such termination, and may
thereafter appoint a successor Investment Manager in the same manner as provided
above in this Subsection. Any successor Investment Manager shall thereafter,
until its appointment is terminated, be deemed to be an "Investment Manager" for
all purposes of this Agreement. If there shall be more than one Investment
Manager, the portion of the Fund to be invested by each Investment Manager shall
be held in a separate account and the powers and authority of each Investment
Manager shall be divided as set forth in the instruments appointing such
Investment Managers.
So long as an Investment Manager (other than the Trustee or one of its
affiliates) is serving as such, the Trustee shall be under no duty or obligation
to review the assets comprising any portion of the Fund managed by the
Investment Manager, to make any recommendations with respect to the investment
or reinvestment thereof, or to determine whether any direction received from any
Investment Manager is proper or within the terms of this Trust Agreement or to
monitor the activities of any Investment Manager.
<PAGE>
(d) The Trustee shall have no liability or responsibility to the Primary
Sponsor or any persons claiming any interest in the Fund for acting without
question on the direction of, or for failing to act in the absence of any
direction from, any Investment Manager, unless the Trustee participated
knowingly in, or knowingly undertook to conceal, an act or omission of any
Investment Manager constituting a breach of its duties hereunder, knowing such
act or omission was a breach of such duties; provided, however, that the Trustee
shall not be deemed to have "participated" in a breach by any Investment Manager
for the purposes of this undertaking solely as a result of the performance by
the Trustee or its officers, employees or agents of any custodial, reporting,
recording, and bookkeeping functions with respect to any assets of the Fund
managed by any Investment Manager or solely as a result of settling purchase and
sale transactions entered into or directed by any Investment Manager, or to have
"knowledge" of any such breach solely as a result of the information received by
the Trustee or its officers, employees or agents in the normal course in
performing such functions or settling such transactions. If the Trustee has
actual knowledge of a breach committed by any Investment Manager, it shall
promptly notify the Primary Sponsor in writing thereof, and the Trustee, except
as required by applicable law, shall thereafter have no responsibility to remedy
such breach.
(e) In accordance with Section 5 below, the Primary Sponsor may from time
to time direct the Trustee in writing as to the specific investments of the Fund
and the Trustee shall invest and reinvest the principal and income of the Fund
in accordance with such directions. The Trustee shall have no liability or
responsibility to the Primary Sponsor or any other person claiming an interest
in the Fund for actions taken in accordance with such directions of the Primary
Sponsor.
SECTION 4.
POWERS OF THE TRUSTEE
In the administration of the Trust, in addition to any powers or authority
of the Trustee under this Trust or which the Trustee may have under applicable
law, the Trustee is authorized and empowered to do the following, without
advertisement, without order of court and without having to post bond or make
any returns or report of its doings to any court:
(a) To purchase or subscribe for any securities or property including,
without limitation, securities of a Plan Sponsor and real property leased to or
used by a Plan Sponsor;
(b) To sell, exchange, convey, transfer, or otherwise dispose of any
securities or property held by it, by private contract or at public auction,
with or without advertising, and no person dealing with the Trustee shall be
bound to see to the application of the purchase money or to inquire into the
validity, expediency or propriety of any disposition;
(c) Except as provided in Section 13(d) hereof, to vote any stocks, bonds
or other securities, including securities of the Plan Sponsor; to give general
or special proxies or powers of attorney with or without power of substitution;
to exercise any conversion privileges, subscription rights or other options, and
to make any payments incidental thereto; to oppose, consent to, or otherwise
participate in corporate reorganizations or other changes affecting corporate
securities, to
<PAGE>
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an owner
with respect to securities or other property held as part of the Fund;
(d) To register any investment in its own name or in the name of a
nominee, and-to hold any investment in bearer form or through or by a central
clearing corporation maintained by institutions active in the national
securities markets, but the records of the Trustee shall at all times show that
all the investments are part of the Trust;
(e) To employ and act through suitable agents, accountants, appraisers,
actuaries and attorneys (who may be counsel for the Trustee) and to pay their
reasonable expenses and compensation, to consult with counsel (who, without
limitation, may be counsel to the Trustee).and shall be protected to the extent
the law permits in acting upon the advice of counsel in regard to legal
questions, and the Trustee shall periodically review the performance of the
persons to whom these duties have been delegated, but the Trustee shall not be
liable for relying upon the advice and expertise of any such person to the
extent permitted by law, provided the Trustee's decisions in selecting and
retaining such person were prudently made;
(f) To borrow or raise moneys for the purposes of the Trust in the
amounts, and upon the terms and conditions, as the Trustee in its discretion may
deem advisable; and for any sums borrowed to issue its promissory note as
Trustee, and to secure the repayment thereof by pledging all or any part of the
Trust; and no person lending money to the Trustee shall be bound to see to the
application of the money lent or to inquire into the validity, expediency or
propriety of any borrowing;
(g) To make, execute, acknowledge and deliver any documents of transfer
and conveyance and any other instruments or agreements that may be necessary or
appropriate to carry out the powers of the Trustee under the Trust or incidental
thereto;
(h) To settle, compromise or submit to arbitration any claims, debts or
damages due or owing to or from the Trust, to commence or defend any suits or
legal or administrative proceedings arising, necessary or appropriate in
connection with the Trust, the administration and operation thereof or the
powers or authority of the Trustee under the Trust, and to represent the Trust
in all suits and legal and administrative proceedings;
(i) To keep portions of the Trust in cash or cash balances as the Trustee
may deem to be in the best interest of the Trust;
(j) To register any investment in its own name or in the name of a
nominee, and to hold any investment in bearer form or through or by a central
clearing corporation maintained by institutions active in the national
securities markets, but the records of the Trustee shall at all times show that
all the investments are part of the Trust; and
(k) Generally, to do all acts and to execute and deliver all instruments
as in the judgment of the Trustee may be necessary or desirable to carry out any
powers or authority of the
<PAGE>
Trustee.
SECTION 5.
INVESTMENT FUNDS
(a) The assets of the Fund shall be invested in mutual funds selected,
from time to time, by the Primary Sponsor and communicated in writing to the
Trustee and in a fund investing primarily in securities of the Primary Sponsor
as directed by the Primary Sponsor (each of which is sometimes hereinafter
referred to as an "Investment Fund"), which Investment Funds shall have varying
investment objectives, as the Primary Sponsor shall determine and communicate in
writing to the Trustee. The Primary Sponsor by written direction to the Trustee
may eliminate the availability of any Investment Fund; provided that on and
after a Change of Control, no Investment Fund in place immediately prior to the
Change of Control may be eliminated although the Primary Sponsor may designate
additional Investment Funds.
(b) Contributions shall be paid to the Trustee within a reasonable period
of time after the date that salary deferrals under the Plan otherwise would have
been paid to participants in an amount equal to said deferral amounts and any
corresponding matching contributions under the Plan shall be paid to the Trustee
at the same time.
(c) The Trustee shall be responsible for assets actually received by it as
Trustee and shall have no duty or authority to compute amounts to be contributed
or to review the computation of amounts to be contributed pursuant to this
Section.
SECTION 6.
DUTIES OF THE TRUSTEE
(a) Except for records dealing solely with the Trust and its investments
and disbursements, which shall be maintained by the Trustee, the Primary Sponsor
shall maintain all records contemplated by the Plan. The Trustee shall have no
responsibility to determine whether the Fund is sufficient to meet liabilities
under the Plan, and shall not be liable for payments or Plan liabilities in
excess of the assets held in the Fund.
(b) The Primary Sponsor shall furnish to the Trustee, in a form reasonably
acceptable to the Trustee, all the information necessary to determine the
benefits payable to or with respect to each participant in the Plan, including
any benefits payable after a participant's death. The Primary Sponsor shall from
time to time, and at least annually, and promptly upon the request of the
Trustee furnish updated information to the Trustee. In the event the Primary
Sponsor refuses or neglects to provide any updated information as contemplated
herein, the Trustee shall rely upon the most recent information furnished to it
by the Primary Sponsor; provided, however, that on or after a Change of Control,
where the Trustee does not have updated information or in the event the Trustee
is aware of a dispute between the Primary Sponsor and any participant or
beneficiary as to the amount or timing of benefits payable to the participant or
beneficiary, the Trustee shall rely upon a direction from the Designated
Accounting Firm (as defined below) to resolve the dispute. For purposes of this
Agreement, the term "Designated Accounting Firm" shall mean Ernst & Young
<PAGE>
LLP or any other accounting firm subsequently communicated in writing to the
Trustee; provided, however, that no subsequent designation of an accounting firm
shall be given effect by the Trustee if the designation occurs after the
effective date of a Change of Control. The Trustee has no responsibility to
verify information provided to it by the Primary Sponsor or the Designated
Accounting Firm.
(c) When, in the opinion of the Primary Sponsor or Designated Accounting
Firm, as applicable, a participant's benefits under the Plan have become
payable, the Trustee shall be notified by the Primary Sponsor or the Designated
Accounting Firm, as applicable. Such notice shall include the amount of such
benefits, the terms of payment, the amount of any taxes required to be withheld
from such amount, and the name, address and social security number of the
recipient. Upon the receipt of a notification, the Trustee shall commence
distributions from the Fund in accordance therewith to the person or persons so
indicated and shall forward a check to the Primary Sponsor in the amount of the
applicable withholdings.
(d) The Primary Sponsor shall have full responsibility for the payment of
all taxes of any nature levied, assessed or imposed upon the Fund, including the
payment of all withholding taxes to the appropriate taxing authority and shall
provide the Trustee with such information as necessary to allow it to furnish
each participant or beneficiary with the appropriate tax information form
evidencing such payment and the amount thereof.
(e) Prior to a Change of Control, the Trustee shall have no responsibility
for determining whether any participant or beneficiary has died or whether a
participant's rights under the terms of the Plan have been forfeited and shall
be entitled to rely upon information and direction received from the Primary
Sponsor; provided, that on or after a Change of Control, in the event of a
dispute or lack of information, the Trustee shall rely on directions received
from the Designated Accounting Firm in accordance with Subsection (b) hereof.
(f) Nothing provided in this Trust Agreement shall relieve the Primary
Sponsor or any Plan Sponsor of its liabilities to pay the benefits provided
under the Plan except to the extent such liabilities are met by application of
Fund assets.
(g) Arbitration is final and binding on the parties. The parties waive
their right to seek remedies in court, including the right to jury trial. In
that regard, the parties acknowledge the following: (i) pre-arbitration
discovery is generally more limited than and different from court proceedings;
(ii) the arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or seek modification of rulings by the
arbitrators is strictly limited; and (iii) the panel of arbitrators will
typically include a minority of arbitrators who were or are affiliated with the
securities industry.
The Primary Sponsor agrees that all controversies which may arise between
it and the Trustee (or any of its affiliates) with respect to obligations
arising under the Trust Agreement, including, but not limited to, those
involving any transactions, or the construction, performance, or breach of this
Agreement shall be determined by arbitration. Any arbitration under this
Agreement shall be conducted only before the New York Stock Exchange, Inc., the
American Stock Exchange,
<PAGE>
Inc., or arbitration facility provided by any other exchange of which any
affiliate of the Trustee is a member, the National Association of Securities
Dealers, Inc, or the Municipal Securities Rulemaking Board, and in accordance
with the arbitration rules then in force. The Primary Sponsor may elect in the
first instance whether arbitration shall be conducted before the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., other exchange of which any
affiliate of the Trustee is a member, the National Association of Securities
Dealers, Inc. or the Municipal Securities Rulemaking Board, but if the Primary
Sponsor fails to make such election, by registered letter or telegram addressed
to Merrill Lynch Trust Companies, Employee Benefit Trust Operations, P.O. Box
30532, New Brunswick, New Jersey 08989-0532, before the expiration of five days
after receipt of a written request from the Trustee to make such election, then
the Trustee may make such election. Judgment upon the award of arbitrators may
be entered in any court, state or federal, having jurisdiction. No person shall
bring a putative or certified class action to arbitration, nor seek to enforce
any pre-dispute arbitration agreement against any person who has initiated in
court a putative class action, who is a member of the putative class who has not
opted out of the class with respect to any claims encompassed by the putative
class action until: (i) the class certification is denied; (ii) the class is
decertified; or (iii) the customer is excluded from the class by the court. Such
forebearance to enforce an agreement to arbitrate shall not constitute a waiver
of any rights under this Agreement except to the extent stated herein.
SECTION 7.
DISTRIBUTIONS FROM THE FUND
(a) Consistent with the provisions of Section 9 hereof, the Trustee is
authorized to pay from the Fund reasonable expenses of the Trustee, including
fees of accountants and legal counsel to the Trust, and the Trustee's
compensation.
(b) The Trustee shall make any distribution required pursuant to this
Trust Agreement by mailing its check or other evidence of payment (less
applicable withholdings) to the person to whom such distribution or payment is
to be made at such address as was last furnished to the Trustee or, if agreeable
to the Trustee and the Primary Sponsor and the affected participant and so
directed in a written notice to the Trustee by the Primary Sponsor or affected
participants, by crediting the account of such person or by transferring funds
to such person's account by bank or wire transfer. The Trustee shall not be
required to make any investigation to determine the whereabouts or mailing
address of any person. If the person to receive a distribution can not be found,
the Trustee shall hold payment or deposit same in a bank (including the Trustee,
if a financial institution is serving as such) for the credit of that person
without liability for interest thereon. If a check or other evidence of payment
of the benefit hereunder has been mailed to the last address of the person
furnished the Trustee and is returned unclaimed, the Trustee shall notify the
Primary Sponsor and shall discontinue further payments to the payee until it
receives instructions from the Primary Sponsor.
(c) The Trustee shall not be bound by any instruction, direction or notice
unless and until it has been received in writing by the Trustee and may rely
upon any instruction, direction or notice of a continuing nature until the
Trustee receives a writing which revokes that instruction, direction or notice.
The Trustee may without liability assume that any such
<PAGE>
instruction, direction or notice is genuine unless it has actual knowledge
or, after receiving notification of a problem, has reasonably determined that
the instruction, direction or notice is not genuine.
(d) The Trustee shall not be responsible for the application of any assets
held as part of the Fund which have been distributed pursuant to the Plan and
the Trust Agreement.
SECTION 8.
CLAIMS OF CREDITORS
(a) The Fund assets shall be treated as general assets of the Plan Sponsor
and shall remain subject to claims of the general creditors of the Plan Sponsor
under applicable state and federal law. Nothing in the Trust Agreement shall
affect the rights of any participant as general creditor of the Plan Sponsor. No
participant shall have a preferred claim on or any beneficial ownership in the
Fund prior to the time for distribution to the participant under the terms of a
Plan or the terms of this Trust Agreement. In the event that the Plan Sponsor
becomes insolvent as described in Subsection (c) below, each participant shall
be deemed to waive any priority the participant may have under law as an
employee with respect to any claim against the Plan Sponsor and the Trust beyond
the rights the participant would have as a general creditor of the Plan Sponsor.
(b) Except as otherwise provided by Subsection (c) below, no benefit which
shall be payable under the Trust to any person shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of the same shall be void. No benefit
shall in any manner be subject to the debts, contracts, liabilities, engagements
or torts of any person, nor shall it be subject to attachment or legal process
for or against any person, except to the extent provided by Subsection C below
and as may otherwise be required by law.
(c) The board of directors of a Plan Sponsor shall immediately notify the
Trustee in writing of the insolvency of the Plan Sponsor. For purposes of this
Subsection (c), the term "insolvency" shall mean the inability of the Plan
Sponsor to pay its debts as they become due in the usual course of its business
or that the liabilities of the Plan Sponsor are in excess of its assets or the
Plan Sponsor becomes subject to a proceeding as a debtor under the United States
Bankruptcy Code. Upon receipt of the written notice, the Trustee shall suspend
all further payments to participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of the creditors of the Plan Sponsor in the
manner directed by a court of competent jurisdiction. If the Trustee should
receive any written allegation of the insolvency of the Plan Sponsor, the
Trustee shall suspend payments to participants and hold the assets of the Trust
for the benefit of the creditors of the Plan Sponsor and, within a period of
sixty (60) days after the receipt of the written allegation, determine whether
the Plan Sponsor is insolvent. If the Trustee determines that the Plan Sponsor
is solvent, it shall immediately resume payments to the participants or their
beneficiaries. In the event that the Trustee has actual knowledge of the
insolvency of the Plan Sponsor, the Trustee shall hold the assets of the Trust
for the benefit of the creditors of the Plan Sponsor in the manner directed by a
court of competent jurisdiction. Unless the Trustee (i) has been notified in
writing by the board of directors of a Plan Sponsor of the insolvency of a Plan
Sponsor, (ii) has
<PAGE>
received any written allegation of the insolvency of a Plan Sponsor or (iii) has
actual knowledge of the insolvency of a Plan Sponsor, the Trustee shall have no
duty to inquire whether a Plan Sponsor is insolvent.
SECTION 9.
FEES AND EXPENSES
The compensation and expenses of the Trustee shall be paid from the assets
of the Fund. Expenses of the Trustee shall include the reasonable expenses and
compensation of third parties employed by the Trustee pursuant to Section 4(f)
hereof. However, the expenses and compensation of the Designated Accounting Firm
shall not be payable from the Fund.
SECTION 10.
ACCOUNTS
(a) The Trustee shall keep such records as the Trustee considers necessary
for the management of the Trust. The Trustee's books and records of the Fund
shall be open to inspection by the Primary Sponsor and Designated Accounting
Firm during regular business hours of the Trustee.
(b) The Plan Sponsors shall maintain or cause to be maintained accounting
records for the Plan sufficient to allow the determination of the portion of the
Fund which is allocable to each of the Plan Sponsors. Irrespective of the
commingling of assets of the Plan for investment in the Fund, no portion of the
Fund which is allocable to any one of the Plan Sponsors shall be used to pay
benefits or discharge liabilities or obligations specifically allocable or
attributable, respectively, to any other Plan or any other Plan Sponsor.
(c) Within ninety (90) days after the close of each calendar year, the
date of the removal or resignation of the Trustee, or the termination of the
Trust, the Trustee shall render to the Primary Sponsor a written account and
report of its management of the Fund covering the period (or relevant portion
thereof if the written account and report becomes due on account of the removal
or resignation of the Trustee) since the previous such written account and
report. The written approval of that accounting and report by the Primary
Sponsor or the failure of the Primary Sponsor to notify the Trustee of its
disapproval of such accounting within ten (10) months after the end of the
relevant period shall be final and binding as to the Trustee's administration of
the Trust for the period upon the Primary Sponsor and all persons who have or
may thereafter have an interest in the Fund. The Trustee may satisfy its
obligation under this Subsection (c) by rendering to the Primary Sponsor monthly
statements setting forth the information required by this Subsection separately
for the month covered by the statement.
<PAGE>
SECTION 11.
RESIGNATION, REMOVAL AND SUCCESSION
(a) The Trustee may resign at any time upon giving sixty (60) days' prior
written notice to the Primary Sponsor.
(b) The Trustee may be removed by the Primary Sponsor at any time upon
giving sixty (60) days' prior written notice to the Trustee; provided, however,
that in the event of a Change of Control, the Trustee may thereafter be removed
only after securing the written consent of a majority of the participants of the
Plan and the designated beneficiaries of deceased participants.
(c) Upon the removal or resignation of the Trustee, any successor
appointed shall have the same powers and duties as those conferred upon the
Trustee under this Trust. Prior to a Change of Control, the appointment of any
successor Trustee shall be in the sole discretion of the Primary Sponsor. On or
after a Change of Control, any successor Trustee shall be a bank or trust
company having assets under management (including assets under management by
affiliates) of not less than $1,000,000,000. Upon receipt by the Trustee of a
written acceptance of the appointment by the successor Trustee, the Trustee
shall transfer to the successor Trustee the assets constituting the Trust;
provided, however, the Trustee shall not be required to pay over assets to a
successor Trustee unless the Trustee shall be discharged from all liability for
any taxes which may be due and owing by the Trust, or unless the successor
Trustee, who must be acceptable to the Trustee, indemnifies the Trustee and the
Trustee in its sole discretion agrees to accept indemnification. In the event
that within ninety (90) days after the removal or resignation of the Trustee the
Primary Sponsor shall have failed to appoint a successor Trustee or the Trustee
shall not have received a written acceptance from a successor Trustee, then the
Trustee may file an appropriate action in a court of competent jurisdiction and
transfer to the custody of the court the assets then held by the Trustee
constituting the Trust. Upon transfer to a successor Trustee or to the court, as
the case may be, the Trustee shall be relieved of all further responsibilities
and liabilities in connection with the Trust. The Trustee is authorized,
however, to reserve therefrom any assets as it may deem advisable for payment of
its fees and expenses in connection with the settlement of its account or
otherwise, and any balance of the reserve remaining after the payment of the
Trustee's fees and expenses shall be paid over to the successor Trustee or to
the court.
SECTION 12.
AMENDMENT AND TERMINATION
(a) Prior to a Change of Control, the Trust Agreement may be amended any
time and to any extent by a written instrument executed by the Primary Sponsor,
provided, however, that no such amendment shall be effective to the extent that
it purports to make the Trust revocable. On or after a Change of Control, this
Trust Agreement may be amended any time and to any extent by a written
instrument executed by the Primary Sponsor, provided, however, no such amendment
shall diminish the authority of the Designated Accounting Firm, diminish the
obligation of the Trustee to follow the directions of the Designated Accounting
Firm or provide for the elimination of any Investment Fund. In addition, whether
before or after a Change of Control, no such amendment shall have the effect of
reducing benefits accrued by participants under the Plan, delaying the times at
which distributions are made from the Fund to participants and their
beneficiaries or allowing a Plan Sponsor or any other person to receive
distributions of the assets of the Fund not then permitted under the terms of
the Trust Agreement. No amendment that purports to increase the duties or
responsibilities of the Trustee or to alter materially the manner in which the
Trustee is to discharge any continuing duties or responsibilities shall be given
effect without the consent of the Trustee and no other amendment shall be given
effect without first providing notice of same to the Trustee. The Trustee and
Primary Sponsor may amend the Trust Agreement in any manner not otherwise
specifically precluded by this Subsection, including any amendment regarding the
removal of an existing Trustee or the appointment of a successor Trustee.
(b) Notwithstanding any other provisions of the Trust Agreement to the
contrary, the Trust shall terminate and all Fund assets shall be distributed (i)
on the complete distribution of the Fund in accordance with the terms and
provisions of the Plan; (ii) upon the delivery to the Trustee of a writing
terminating the Trust signed by the Primary Sponsor, all participants of the
Plan and the designated beneficiaries of deceased participants; or (iii) in the
event the Internal Revenue Service makes a final determination that the assets
of the Fund constitute compensation currently taxable as income to participants.
Any assets remaining in the Fund after satisfaction of all liabilities and
expenses of the Plan shall be returned to the Plan Sponsors.
SECTION 13.
MISCELLANEOUS
(a) The Trustee shall under no circumstances be required to recognize any
conveyance, transfer, assignment, mortgage, pledge or encumbrance by any
participant or any person entitled to receive benefits under the Plan, any part
of it, or any interest in it, or to pay any money or thing of value to any
creditor or assignee of any participant or person for any cause whatsoever;
provided, however, this Subsection (a) does not affect the provisions of Section
8 of the Trust Agreement.
(b) The Primary Sponsor hereby agrees to indemnify and hold harmless the
Trustee from and against any and all losses, claims, damages, liabilities, costs
and expenses, including but not limited to, liability for any judgments or
settlements consented to in writing by the Trustee, as applicable, which
consents will not be unreasonably withheld, and reasonable attorneys' fees
arising
<PAGE>
out of or in connection with or as a direct or indirect result of its serving,
respectively, as the trustee (including but not limited to the Trustee's acts or
omissions with respect to (i) the voting of any share of stock held as part of
the assets of the Trust; (ii) establishing or maintaining investment funds or
effecting investments therein in accordance with the terms and provisions of the
Trust; or (iii) the determinations by the Trustee of insolvency or of a Change
of Control (including acts or omissions in accordance with the terms and
provisions of the Trust following any determination of insolvency or a Change of
Control); except those losses, claims, damages, liabilities, costs and expenses,
if any, arising out of or in connection with or as a direct or indirect result
of the Trustee's gross negligence or willful misconduct. The Trustee shall
promptly notify the Primary Sponsor of any claim, action or proceeding for which
it may seek indemnity. This indemnity is a continuing obligation and shall be
binding on the Primary Sponsor and its successors, whether by merger or
otherwise, and assigns. In addition, this indemnity shall survive the
resignation or removal of the Trustee, the liquidation of the Trust, or both
events. For purposes of this Subsection (b), all references to the Trustee shall
be deemed to include a reference to all affiliates of the Trustee and any
officer, director or employee of the Trustee or any of its affiliates.
(c) As used in this Trust Agreement, the term "Change of Control" means
any event that pursuant to the requirements of Article X of the Primary
Sponsor's Certificate of Incorporation, as amended from time to time, requires
the affirmative vote of the holders of not less than eighty percent (80%) of the
Voting Stock (as defined therein); provided, however, that no event shall
constitute a Change of Control if approved by the Board of Directors of the
Primary Sponsor a majority of whom are "present directors" and "new directors."
For purposes of the preceding sentence, "present directors" shall mean
individuals who as of the date of this Trust Agreement were members of the Board
of Directors of the Primary Sponsor and "new directors" shall mean any director
whose election by the Board of Directors of the Primary Sponsor (in the event of
vacancy) or whose nomination for election by the Primary Sponsor's stockholders
was approved by a vote of at least three-fourths of the directors then still in
office who are present directors and new directors; provided that any director
elected to the Board of Directors of the Primary Sponsor solely to settle a
threatened or actual proxy contest shall in no event be deemed to be a new
director. The board of directors of the Primary Sponsor shall immediately notify
the Trustee of the occurrence of a Change of Control. Upon receipt of such
written notice or in the event the Trustee has actual knowledge that a Change of
Control has occurred, the Trustee shall take no action nor facilitate the taking
of any action contemplated by the Trust Agreement as being taken prior to a
Change of Control if (i) an alternative procedure for taking such action is
prescribed on or after a Change of Control, or (ii) any action of the type
described is expressly limited to the period prior to a Change of Control. If
the Trustee should receive any written allegation to the effect that a Change of
Control has occurred, the Trustee shall take no action nor facilitate the taking
of any action described: in the immediately preceding sentence until making an
independent determination as to whether a Change of Control has occurred. The
Trustee shall make this determination within a period of thirty (30) days after
the receipt of the written allegation. Following the determination, the Trustee
shall discharge its duties under the Trust Agreement in a manner consistent with
that determination.
(d) The authority and responsibility with regard to the voting of and
control over any securities of a Plan Sponsor held in the Trust shall be
exercised by the Trustee pursuant to
<PAGE>
directions in writing provided by the Primary Sponsor or Investment Manager. All
other decisions affecting such securities, including, without limitation,
decisions to oppose or consent to tender or exchange offers, shall be similarly
directed by the Primary Sponsor or the Investment Manager. The Trustee shall
take such steps as may be necessary or appropriate to carry out the directions
of the Primary Sponsor or Investment Manager, as applicable, given pursuant to
this Subsection.
(e) Whenever the context requires, words of the masculine gender used
herein shall include the feminine and the neuter, and the words used in the
singular shall include the plural.
(f) Each provision of the Trust Agreement is severable and if any
provision is found to be void as against public policy it shall not affect the
validity of any other provision hereof.
(g) The Trust Agreement shall be binding upon the successors and assigns
of each Plan Sponsor and the Trustee.
(h) The provisions of the Trust shall be construed according to the laws
of the State of Florida and, to the extent applicable, according to the laws of
the United States.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
PRIMARY SPONSOR:
MORRISON HEALTH CARE, INC.
By: /s/ John E. Fountain
------------------------------------------
Title:V.P., Secretary and General Counsel
ATTEST:
By: /s/ Henry Page
---------------------
Title: Director of Finance
[CORPORATE SEAL]
TRUSTEE:
MERRILL LYNCH COMPANY (FLORIDA)
By: /s/ Melanie Madeira
-------------------------------------
Title: New Account Trust Officer
ATTEST:
By: _____________________________
Title:_____________________________
[SEAL]
Exhibit 10.29
FIRST AMENDMENT TO THE
MORRISON HEALTH CARE, INC. 1996 STOCK INCENTIVE PLAN
THIS FIRST AMENDMENT is made this 26th day of June, 1996, by Morrison
Health Care, Inc., a corporation duly organized and existing under the laws of
the State of Georgia (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Morrison Health Care, Inc. 1996
Stock Incentive Plan under an indenture which was adopted as of February
23, 1996 (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to reflect increases in the
number of shares authorized for issuance thereunder and to increase the limit on
the number of shares that may be the subject of awards granted to certain
executives during any single fiscal year of the Company; and
WHEREAS, the Board of Directors of the Company has duly approved
and authorized these amendments to the Plan;
NOW, THEREFORE, the Company does hereby amend the Plan as follows:
1. By deleting, effective March 26, 1996, the first sentence of Section 2.2 in
its entirety and by substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 750,000 shares of
Stock (the `Maximum Plan Shares') are hereby reserved exclusively for
issuance pursuant to Stock Incentives."
2. By deleting, effective June 26, 1996, the first sentence of Section 2.2 in
its entirety and by substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 850,000 shares of
Stock (the `Maximum Plan Shares') are hereby reserved exclusively for
issuance pursuant to Stock Incentives."
3. By deleting, effective March 26, 1996, the number "100,000" where it appears
in the last sentence of Section 2.4 and by substituting therefor the number
"300,000".
4. Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to the adoption of this First Amendment.
5. Notwithstanding the foregoing, the adoption of this First Amendment is
subject to the approval of the stockholders of the Company and in the event that
the stockholders of the Company fail to approve such adoption within twelve
months of March 26, 1996, the adoption of this First Amendment shall be null and
void.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed on the day and year first above written.
MORRISON HEALTH CARE, INC.
By: /s/Glenn Davenport
Title: President and Chief Executive Officer
ATTEST:
By: /s/John E. Fountain
Title: Secretary
(CORPORATE SEAL)
EXHIBIT 10.30
FIRST AMENDMENT TO THE MORRISON HEALTH CARE, INC.
1996 NON-EXECUTIVE STOCK INCENTIVE PLAN
THIS FIRST AMENDMENT is made as of this 26th day of June, 1996, by
Morrison Health Care, Inc., a Georgia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Morrison Health Care, Inc. 1996
Non-Executive Stock Incentive Plan under an indenture which was adopted
as of February 23, 1996 (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to reflect increases in the
number of shares authorized for issuance thereunder; and
WHEREAS, the Board of Directors of the Company has duly approved
and authorized these amendments to the Plan;
NOW, THEREFORE, the Company does hereby amend the Plan, effective as of
the date first set forth above, by deleting the first sentence of Section 2.2 in
its entirety and by substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2 below, 2,250,000
shares of Stock (the `Maximum Plan Shares') are hereby reserved
exclusively for issuance pursuant to Stock Incentives."
Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to the adoption of this First Amendment.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed on the day and year first above written.
MORRISON HEALTH CARE, INC.
By: /s/ Glenn Davenport
[CORPORATE SEAL]
Title:President and Chief Executive Officer
ATTEST:
By: /s/John E. Fountain
Title: Secretary
EXHIBIT 10.31
SECOND AMENDMENT TO THE
MORRISON HEALTH CARE, INC. 1996 STOCK INCENTIVE PLAN
THIS SECOND AMENDMENT is made as of this 26th day of June, 1997, by
Morrison Health Care, Inc., a corporation duly organized and existing under the
laws of the State of Georgia (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Morrison Health Care, Inc. 1996
Stock Incentive Plan under an indenture which was adopted as of February 23,
1996 (the "Plan");
WHEREAS, the Company desires to amend the Plan to reflect an increase in
the number of shares authorized for issuance thereunder; and
WHEREAS, the Board of Directors of the Company has duly approved and
authorized this amendment to the Plan;
NOW, THEREFORE, the Company does hereby amend the Plan, effective as of
the date first set forth above, as follows:
1. By deleting the first sentence of Section 2.2 in its entirety and by
substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 1,750,000 shares of
Stock (the `Maximum Plan Shares') are hereby reserved exclusively for
issuance pursuant to Stock Incentives."
2. Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to the adoption of this Second Amendment.
3. Notwithstanding the foregoing, the adoption of this Second Amendment is
subject to the approval of the stockholders of the Company and in the event that
the stockholders of the Company fail to approve such adoption within twelve
months from the date first set forth above, the adoption of this Second
Amendment shall be null and void.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed on the day and year first above written.
MORRISON HEALTH CARE, INC.
By: /s/ Glenn Davenport
-----------------------
Title:President and CEO
ATTEST:
By: /s/John E. Fountain
Title: Secretary
(CORPORATE SEAL)
EXHIBIT 10.32
SECOND AMENDMENT TO THE MORRISON HEALTH CARE, INC.
1996 NON-EXECUTIVE STOCK INCENTIVE PLAN
THIS SECOND AMENDMENT is made as of this 26th day of June, 1997, by
Morrison Health Care, Inc., a corporation duly organized and existing under the
laws of the State of Georgia (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Morrison Health Care, Inc. 1996
Non-Executive Stock Incentive Plan under an indenture which was adopted
as of February 23, 1996 (the "Plan");
WHEREAS, the Company desires to amend the Plan to reflect a decrease in
the number of shares authorized for issuance thereunder; and
WHEREAS, the Board of Directors of the Company has duly approved
and authorized this amendment to the Plan;
NOW, THEREFORE, the Company does hereby amend the Plan, effective as of
the date first set forth above, as follows:
1. By deleting the first sentence of Section 2.2 in its entirety and by
substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 1,350,000 shares of
Stock (the `Maximum Plan Shares') are hereby reserved exclusively for
issuance pursuant to Stock Incentives."
2. Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to the adoption of this Second Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed on the day and year first above written.
MORRISON HEALTH CARE, INC.
By: /s/ Glenn Davenport
-----------------------
Title:President and CEO
ATTEST:
By: /s/John E. Fountain
Title: Secretary
(CORPORATE SEAL)
Exhibit 10.33
THIRD AMENDMENT TO THE
MORRISON HEALTH CARE, INC.
SALARY DEFERRAL PLAN
THIS THIRD AMENDMENT is made on this 9th day of January, 1998, by MORRISON
HEALTH CARE, INC., a corporation duly organized and existing under the laws of
the State of Georgia (the "Primary Sponsor").
W I T N E S S E T H:
WHEREAS, the Primary Sponsor established by indenture dated March 7, 1996,
the Morrison Health Care, Inc. Salary Deferral Plan (the "Plan"); and
WHEREAS, the Primary Sponsor requested a determination letter from the
Internal Revenue Service as to the qualified status of the Plan which has
resulted in some necessary changes to the Plan;
NOW, THEREFORE, the Primary Sponsor does hereby amend the Plan, effective
as of March 7, 1996, as follows:
1. By substituting the following language for the last sentence of Section
1.31 of the Plan:
"Notwithstanding the foregoing, the Primary Sponsor may elect to
determine each Highly Compensated Employee using the snapshot day of
December 31, in a manner consistent with Section 4 of Revenue Procedure
93-42; provided that, for those Plan Years following December 31, 1996,
the Plan Sponsor shall follow the procedures published by the Internal
Revenue Service pursuant to Notice 97-45, Section III(1)."
2. By substituting the following language for Section 3.4A of the Plan:
"3.4A Qualified Contributions. At the sole discretion of the Primary
Sponsor, each Plan Sponsor shall make `Qualified Nonelective
Contributions' and/or `Qualified Matching Contributions,' as those terms
are defined in Section 1 of Appendix A, in an amount together with any
supplement allocations under Plan Sections 4.2(b)(1) or (2) as determined
by the Primary Sponsor are necessary to satisfy, as applicable, the
testing requirements of Code Section 401(m)(2)(A)."
3. By deleting Paragraph (1) of Section 4.1(b) of the Plan in its entirety
and redesignating existing Paragraphs (2) and (3) as new Paragraphs (1)
and (2), respectively.
4. By substituting the following language for Plan Section 4.2(b)(3):
"(3) any remaining excess, to the Supplemental Account of each
Member who is employed by a Plan Sponsor on the last day of the Plan Year
in the proportion that the Member's Annual Compensation bears to the
Annual Compensation of all Members entitled to an allocation pursuant to
this Section 4.2(b)(3)."
5. By substituting the following language for Section 4.4(b) of the Plan:
"(b) Any shares of Company Stock which are released from the Loan
Suspense Account that are attributable (1) to Plan Sponsor contributions
under Plan Section 3.3 and forfeitures; (2) to cash dividends paid on
shares of Company Stock allocated to the Loan Suspense Account that are
used to make a payment on an Acquisition Loan and (3) to proceeds on the
sale of shares of Company Stock held in the Loan Suspense Account that are
used to make a payment on an Acquisition Loan (to the extent such proceeds
are to be treated as annual additions for purposes of Appendix B in
accordance with Section 4.4(e) below) shall be allocated to Company
Matching Accounts in accordance with Plan Section 4.2(a). Proceeds on the
sale of shares of Company Stock held in the Loan Suspense Account may be
used to repay an Acquisition Loan if the transaction, based on all the
surrounding facts and circumstances, satisfies the requirements of
Treasury Regulations Section 54.4975-7(b)(3)."
6. By adding a new final sentence to Section 5.1(c) as follows:
"Payments made with respect to an Acquisition Loan must be made solely
from ESOP assets."
7. By substituting the following language for Section 8.4 of the Plan:
"8.4 Payment of the Member's Accrued Benefit shall be made as soon
as administratively feasible after the Member terminates employment, but
in no event later than, unless the Member otherwise elects, the 60th day
after the latest of the close of the Plan Year in which the Member
terminates his service with the Plan Sponsor; provided, however, if the
Member's Accrued Benefit exceeds $3,500 it will not be distributed before
the Member's 'required beginning date,' within the meaning of Plan Section
11.3(c), without the Member's consent."
8. By substituting the following language for Section 9.3 of the Plan:
"9.3 Payment of the Member's Accrued Benefit shall be made as soon
as administratively feasible after the Member terminates employment, but
in no event later than, unless the Member otherwise elects, the 60th day
after the latest of the close of the Plan Year in which the Member
terminates his service with the Plan Sponsor; provided, however, if the
Member's Accrued Benefit exceeds $3,500 it will not be distributed before
the Member's 'required beginning date,' within the meaning of Plan Section
11.3(c), without the Member's consent."
9. By substituting the following for Appendix A to the Plan
"APPENDIX A
SPECIAL NONDISCRIMINATION RULES
SECTION 1
As used in this Appendix, the following words shall have the following
meanings:
(a) 'Eligible Member' means a Member who is an Employee during any
particular Plan Year.
(b) 'Highly Compensated Eligible Member' means any Eligible Member
who is a Highly Compensated Employee.
(c) 'Matching Contribution' means any contribution made by a Plan
Sponsor to a Company Matching Account and any other contribution made to a
plan by a Plan Sponsor or an Affiliate on behalf of an Employee on account
of a contribution made by an Employee or on account of an Elective
Deferral.
(d) 'Qualified Matching Contributions' means Matching Contributions
which are immediately nonforfeitable when made, and which would be
nonforfeitable, regardless of the age or service of the Employee or
whether the Employee is employed on a certain date, and which may not be
distributed, except upon one of the events described under Code Section
401(k)(2)(B) and the regulations thereunder.
(e) 'Qualified Nonelective Contributions' means contributions of the
Plan Sponsor or an Affiliate, other than Matching Contributions or
Elective Deferrals, which are nonforfeitable when made, and which would be
nonforfeitable regardless of the age or service of the Employee or whether
the Employee is employed on a certain date, and which may not be
distributed, except upon one of the events described under Code Section
401(k)(2)(B) and the regulations thereunder.
SECTION 2
In addition to any other limitations set forth in the Plan, for each Plan
Year one of the following tests must be satisfied for the Profit Sharing Plan:
(a) the actual deferral percentage for the Highly Compensated
Eligible Members for the Plan Year must not be more than the actual
deferral percentage of all other Eligible Members for the preceding Plan
Year multiplied by 1.25; or
(b) the excess of the actual deferral percentage for the Highly
Compensated Eligible Members for the Plan Year over that of all other
Eligible Members for the preceding Plan Year must not be more than two (2)
percentage points, and the actual deferral percentage for the Highly
Compensated Eligible Members for the Plan Year must not be more than the
actual deferral percentage of all other Eligible Members for the preceding
Plan Year multiplied by two (2).
Notwithstanding the foregoing, the Plan Administrator may utilize any
transition rule permitted by Internal Revenue Service 97-2 or otherwise
regarding the use of current year data for calculating actual deferral
percentages.
The 'actual deferral percentage' for the Highly Compensated Eligible
Members and all other Eligible Members for a Plan Year is the average in each
group of the ratios, calculated separately for each Employee, of the Deferral
Amounts contributed by the Plan Sponsor on behalf of an Employee for the Plan
Year to the Annual Compensation of the Employee in the Plan Year. In addition,
for purposes of calculating the 'actual deferral percentage' as described above,
Deferral Amounts of Employees who are not Highly Compensated Employees which are
prohibited by Code Section 401(a)(30) shall not be taken into consideration.
SECTION 3
If the Deferral Amounts contributed on behalf of any Highly Compensated
Eligible Member exceeds the amount permitted under the 'actual deferral
percentage' test described in Section 2 of this Appendix A for any given Plan
Year, then before the end of the Plan Year following the Plan Year for which the
Excess Deferral Amount was contributed, (a) the amount of the Excess Deferral
Amount for the Plan Year, as adjusted to reflect income, gain, or loss
attributable to it through the date the Excess Deferral Amount is distributed to
the Member and reduced by any excess Elective Deferrals as determined pursuant
to Plan Section 3.1 previously distributed to the Member for the Member's
taxable year ending with or within the Plan Year, may be distributed to the
Highly Compensated Eligible Member or (b) to the extent provided in regulations
issued by the Secretary of the Treasury, the Plan Administrator may, in its
discretion, allow each affected Member to elect, within two and one-half months
after the end of the Plan Year for which the Excess Deferral Amount was
contributed, to treat the Excess Deferral Amount, unadjusted for earnings,
gains, and losses, but as so reduced, as an amount distributed to the Member and
then contributed as an after-tax contribution by the Member to the Plan
('recharacterized amounts'). The income allocable to such Excess Deferral Amount
shall be determined in a similar manner as described in Plan Section 4.3(a). The
portion of the Matching Contributions on which such Excess Deferral Amount was
based shall be forfeited upon the distribution of such Excess Deferral Amount.
The Excess Deferral Amount to be distributed or recharacterized shall be reduced
by Deferral Amounts previously distributed or recharacterized for the taxable
year ending in the same Plan Year, and shall also be reduced by Deferral Amounts
previously distributed or recharacterized for the Plan Year beginning in such
taxable year. For all other purposes under the Plan other than this Appendix A,
recharacterized amounts shall continue to be treated as Deferral Amounts. In the
event the multiple use of limitations contained in Sections 2(b) and 5(b) of
this Appendix, pursuant to Treasury Regulations Section 1.40(m)-2 as promulgated
by the Secretary of the Treasury, requires a corrective distribution, such
distribution shall be made pursuant to this Section 3, and not Section 6 of
Appendix A. The portion of the Matching Contributions on which such Excess
Deferral Amount was based shall be forfeited upon the distribution or
recharacterization, as the case may be, of such Excess Deferral Amount.
For purposes of this Section 3, 'Excess Deferral Amount' means, with respect to
a Plan Year, the excess of:
(a) the aggregate amount of Deferral Amounts contributed by a Plan
Sponsor on behalf of Highly Compensated Eligible Members for the Plan
Year, over
(b) the maximum amount of Deferral Amounts permitted under Section 2
of this Appendix A for the Plan Year, which shall be determined by
reducing the Deferral Amounts contributed on behalf of Highly Compensated
Eligible Members in order of the amount of Deferral Amounts beginning with
the greatest of such amounts.
Distribution of the Excess Deferral Amounts for any Plan Year shall be made to
the Highly Compensated Eligible Members on the basis of the respective portions
of the Excess Deferral Amount attributable to each Highly Compensated Eligible
Member. As to any Highly Compensated Employee who is subject to the family
aggregation rules of Subsection (b) of the Plan Section containing the
definition of the term 'Highly Compensated Employee,' any distribution of such
Highly Compensated Employee's allocable portion of the Excess Deferral Amount
for a Plan Year shall be allocated among the family members of such Highly
Compensated Employee who are combined to determine the actual deferral
percentage in proportion to the Deferral Amounts taken into account under this
Section 3.
SECTION 4
The Plan Administrator shall have the responsibility of monitoring the
Plan's compliance with the limitations of this Appendix A and shall have the
power to take all steps it deems necessary or appropriate to ensure compliance,
including, without limitation, restricting the amount which Highly Compensated
Eligible Members can elect to have contributed pursuant to Plan Section 3.1. Any
actions taken by the Plan Administrator pursuant to this Section 4 shall be
pursuant to non-discriminatory procedures consistently applied.
SECTION 5
In addition to any other limitations set forth in the Plan, Matching
Contributions under the Plan and the amount of nondeductible employee
contributions under the Plan, for each Plan Year, must each separately satisfy
one of the following tests:
(a) The contribution percentage for the Highly Compensated Eligible
Members for the Plan Year must not exceed 125% of the contribution
percentage for all other Eligible Members for the preceding Plan Year; or
(b) The contribution percentage for Highly Compensated Eligible
Members for the Plan Year must not exceed the lesser of (1) 200% of the
contribution percentage for all other Eligible Members for the preceding
Plan Year, and (2) the contribution percentage for all other Eligible
Members for the preceding Plan Year plus two (2) percentage points.
Notwithstanding the foregoing, the Plan Administrator may utilize any transition
rule permitted by Internal Revenue Service 97-2 or otherwise regarding the use
of current year data for calculating actual contribution percentages.
Notwithstanding the foregoing, for purposes of this Section 5, the terms Highly
Compensated Eligible Member or Eligible Member shall not include any Member who
is not eligible to receive a Matching Contribution under the provisions of the
Plan, other than as a result of the Member failing to contribute to the Plan or
failing to have an Elective Deferral contributed to the Plan on the Member's
behalf. In applying the above tests, the Plan Administrator shall comply with
any regulations promulgated by the Secretary of the Treasury which prevent or
restrict the use of the test contained in Section 2(b) of this Appendix A and
the test contained in Section 5(b) of this Appendix A. The 'contribution
percentage' for Highly Compensated Eligible Members and for all other Eligible
Members for a Plan Year shall be the average of the ratios, calculated
separately for each Member, of (A) to (B), where (A) is, as the case may be,
either the amount of Matching Contributions under the Plan (excluding Matching
Contributions which are used to satisfy the minimum required contributions to
the Accounts of Eligible Members who are not Key Employees pursuant to Section 1
of Appendix C to the Plan) or nondeductible employee contributions made under
the Plan for the Eligible Member for the Plan Year, and where (B) is the Annual
Compensation of the Eligible Member for the Plan Year. Except to the extent
limited by Treasury Regulation Section 1.401(m)-1(b)(5) and any other applicable
regulations promulgated by the Secretary of the Treasury, a Plan Sponsor may
elect to treat Qualified Nonelective Contributions and/or Qualified Matching
Contributions as Matching Contributions for purpose of determining the
'contribution percentage.'
SECTION 6
If either (a) the Matching Contributions and, if taken into account under
Section 5 of this Appendix A, the Qualified Nonelective Contributions and
Qualified Matching Contributions made on behalf of Highly Compensated Eligible
Members or (b) nondeductible employee contributions made by Highly Compensated
Eligible Employees exceed the amount permitted under the `contribution
percentage test' for any given Plan Year, then, before the close of the Plan
Year following the Plan Year for which the excess aggregate contributions were
made, the amount of the excess aggregate contributions attributable to the Plan
for the Plan Year under either Section 6(a) or 6(b), or both, as adjusted to
reflect any income, gain or loss attributable to such contributions through the
date the excess aggregate contributions are distributed, shall be distributed.
The income allocable to such contributions shall be determined in a similar
manner as described in Plan Section 4.3. As between the Plan and any other plan
or plans maintained by the Plan Sponsor in which excess aggregate contributions
for a Plan Year are held, each such plan shall distribute a pro-rata share of
each class of contribution based on the respective amounts of a class of
contribution made to each plan during the Plan Year. The payment of the excess
aggregate contributions shall be made without regard to any other provision in
the Plan. In the event the multiple use of limitations contained in Sections
2(b) and 5(b) of this Appendix, pursuant to Treasury Regulation Section
1.401(m)-2 as promulgated by the Secretary of the Treasury, requires a
corrective distribution, such distribution shall be made pursuant to Section 3
of Appendix A, and not this Section 6.
For purposes of this Section 6, with respect to any Plan Year, 'excess
aggregate contributions' means the excess of:
(a) the aggregate amount of either (i) Matching Contributions,
Qualified Nonelective Contributions and Qualified Matching Contributions
or (ii) nondeductible employee contributions actually made by or on behalf
of Highly Compensated Eligible Members for the Plan Year, over
(b) the maximum amount of the contributions permitted under the
limitations of Section 5 of this Appendix A, determined by reducing
contributions made on behalf of Highly Compensated Eligible Members
beginning with the greatest of such amounts.
Distribution of nondeductible employee contributions or Matching Contributions
in the amount of the excess aggregate contributions for any Plan Year shall be
made with respect to Highly Compensated Employees on the basis of the respective
portions of each class of excess aggregate contributions attributable to each
Highly Compensated Employee. As to any Highly Compensated Employee who is
subject to the family aggregation rules of Subsection (b) of the Plan Section
containing the definition of the term 'Highly Compensated Employee,' any
distribution of such Highly Compensated Employee's allocable portion of the
excess aggregate contributions for a Plan Year shall be allocated among the
family members of such Highly Compensated Employee which are combined to
determine the contribution percentage in proportion to the contributions taken
into account under this Section 6.
SECTION 7
Except to the extent limited by rules promulgated by the Secretary of the
Treasury, if a Highly Compensated Eligible Member is a participant in any other
plan of the Plan Sponsor or any Affiliate which includes Matching Contributions,
deferrals under a cash or deferred arrangement pursuant to Code Section 401(k),
or nondeductible employee contributions, any contributions made by or on behalf
of the Member to the other plan shall be allocated with the same class of
contributions under the Plan for purposes of determining the 'actual deferral
percentage' and 'contribution percentage' under the Plan; provided, however,
contributions that are made under an 'employee stock ownership plan' (within the
meaning of Code Section 4975(e)(7)) shall not be combined with contributions
under any plan which is not an employee stock ownership plan (within the meaning
of Code Section 4975(e)(7)).
Except to the extent limited by rules promulgated by the Secretary of the
Treasury, if the Plan and any other plans which include Matching Contributions,
deferrals under a cash or deferred arrangement pursuant to Code Section 401(k),
or nondeductible employee contributions are considered as one plan for purposes
of Code Section 401(a)(4) and 410(b)(1), any contributions under the other plans
shall be allocated with the same class of contributions under the Plan for
purposes of determining the 'contribution percentage' and 'actual deferral
percentage' under the Plan; provided, however, contributions that are made under
an 'employee stock ownership plan' (within the meaning of Code Section
4975(e)(7)) shall not be combined with contributions under any plan which is not
an employee stock ownership plan (within the meaning of Code Section
4975(e)(7))."
1. By adding the following language to the end of Section 4 of Appendix B of
the Plan:
"For purposes of applying the limitations set forth in this Appendix B,
the term `Plan Sponsor' shall mean a Plan Sponsor and any other
corporations which are members of the same controlled group of
corporations (as described in Section 414(b) of the Code, as modified by
Code Section 415(b)) as is a Plan Sponsor, any other trades or businesses
(whether or not incorporated) under common control (as described in Code
Section 414(c), as modified by Code Section 415(h) with a Plan Sponsor,
any other corporations, partnerships, or other organizations which are
members of an affiliated service group (as described in Section 414(m) of
the Code) with a Plan Sponsor, and any other entity required to be
aggregated with a Plan Sponsor pursuant to regulations under Code Section
414(o)."
2. By deleting the last sentence of Section 1(b)(1) of Appendix C in its
entirety.
3. By substituting the following language for the last sentence of Section
1(d)(3)(B) of Appendix C of the Plan:
"The actuarial assumptions utilized in calculating the present value of
the accrued benefit for any participant in a defined benefit plan for
purposes of this Subsection (b) shall be established by the Plan
Administrator after consultation with the actuary for the Plan, and shall
be reasonable in the aggregate and shall comport with the requirements set
forth by the Internal Revenue Service in Q&A T-26 and T-27 of Regulation
Section 1.416-1; provided that, the accrued benefit for any participant
(other than a Key Employee) in a defined benefit plan shall be determined
in accordance with Code Section 416(g)(4)(F)."
4. By substituting the following language for Section 2(a) of Appendix C of
the Plan:
"(a) Notwithstanding anything contained in the Plan to the contrary,
except as otherwise provided in Subsection (b) of this Section, in any
Plan Year during which the Plan is Top-Heavy, allocations of Plan Sponsor
contributions for the Plan Year for the Account of each Member which is
not a Key Employee and who has not separated from service with the Plan
Sponsor prior to the end of the Plan Year shall not be less than three (3)
percent of the Member's Annual Compensation. The Plan Sponsor shall make
such allocations to each Member who is not a Key Employee regardless of
whether such Member has declined to make a contribution to the Plan. For
purposes of this Subsection, an allocation to a Member's Account resulting
from any Plan Sponsor contribution attributable to a salary reduction or
similar arrangement shall not be taken into account."
5. By deleting Section 4 of Appendix C of the Plan in its entirety.
Except as specifically provided herein, the Plan shall remain in full
force and effect as prior to this Third Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
be executed as the day and year first above written.
MORRISON HEALTH CARE, INC.
By: /s/ Glenn Davenport
Title:President and Chief Executive Officer
ATTEST:
By: /s/John E. Fountain
Title: Secretary
[CORPORATE SEAL]
EXHIBIT 10.34
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made this 9th day of
January, 1998, by Morrison Health Care, Inc., a Georgia corporation
("Buyer"), the Drake Family Revocable Trust, Richard or Dianne Drake Trustees
under agreement (the "Trust Agreement") dated September 17, 1991 (the "Drake
Trust"), Richard Drake, an individual resident of the State of Arizona ("R.
Drake"), Dianne Drake, an individual resident of the State of Arizona ("D.
Drake"), and Philippe Michelin, an individual resident of the State of
Arizona ("Michelin" and, collectively with the Drake Trust, R. Drake and D.
Drake, "Sellers") and Drake Management Services, Inc., an Arizona corporation
(the "Company").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of the Company,
for the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"AAA"-- as defined in Section 11.2(c).
"Adjustment Amount"-- the principal and interest due on the Promissory
Note on the Closing Date.
"Affiliate" -- with respect to an individual, any family member, any
Person that is directly or indirectly controlled by such individual or such
individual's family members, or any Person with respect to which such
individual, or a member of such individual's family, serves as a director,
officer, partner, executor, or trustee (or similar capacity, and with respect
to any Person other than an individual, any person that controls, in
controlled by or under common control with such Person, and each Person that
serves as a director, officer, partners, executor or trustee (or similar
capacity) of such Person.
"Agreement"-- as defined in the Preamble.
"Applicable Contract"-- any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject
to any obligation or liability, or (c) by which the Company or any of the
assets owned or used by it is or may become bound.
"Balance Sheet"-- as defined in Section 3.4.
"Buyer"-- as defined in the Preamble.
"Buyer's Closing Documents"-- as defined in Section 4.2.
"Closing"-- as defined in Section 2.3.
"Closing Date"-- the date and time as of which the Closing actually
takes place.
"COBRA Rights" - as defined in Section 3.13(k)
"Company"-- as defined in the Preamble.
"Company Plans"-- as defined in Section 3.13(b).
"Company Qualified Plans"-- as defined in Section 3.13(c).
"Competing Business"-- as defined in Section 3.25.
"Contemplated Transactions"-- all of the transactions contemplated by
this Agreement, including: (a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Promissory Note, the
Employment Agreements, the Noncompetition Agreements, the Earnout Agreement
and the Sellers' Releases; (c) the performance by Buyer and Sellers of their
respective covenants and obligations under this Agreement; and (d) Buyer's
acquisition and ownership of the Shares and exercise of control over the
Company.
"Contract"-- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Copyrights"-- as defined in Section 3.22(a)(ii).
"CPR" - as defined in Section 11.2(b).
"D. Drake"-- as defined in the Preamble.
"Damages"-- as defined in Section 10.2.
"Disclosure Letter"-- the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"Dispute" -- as defined in Section 11.1.
"Drake Trust" - as defined in the Preamble.
"Efron Assignment" - assignment of a limited partnership interest in
Efron Apartment Investors, an Indiana limited partnership, as payment for a
debt to the Company.
"Earnout Agreement" -- as defined in Section 2.4(a)(vii).
"Employment Agreements"-- as defined in Section 2.4(a)(iii).
"Employees" -- as defined in Section 3.13(b).
"Encumbrance"-- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right
of first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute
of ownership.
"Environment"-- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins,
and wetlands), groundwaters, drinking water supply, stream sediments, ambient
air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities"-- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law including fines,
penalties, financial responsibility for cleanup costs, corrective action,
removal, remedial actions and response actions, and any other compliance,
corrective, investigative or remedial measures required under any
Environmental Law or Occupational Safety and Health Law. The terms
"removal," "remedial," and "response action," include the types of activities
covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended("CERCLA").
"Environmental Law"-- any Legal Requirement that requires or relates to
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions that relate to the Environment.
"ERISA"-- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities"-- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by the Company.
"Governmental Authorization"-- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body"-- any federal, state, local, municipal, foreign, or
other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
"Hazardous Materials"-- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or
synthetic substitutes therefor and asbestos or asbestos-containing materials.
"Indemnified Persons" -- as defined in Section 10.2.
"Initial Purchase Price"-- as defined in Section 2.2.
"Intellectual Property Assets" -- as defined in Section 3.22
Intellectual Property..
"Interim Balance Sheet"-- as defined in Section 3.4
"IRC"-- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"-- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge"-- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or other matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course
of conducting a reasonable investigation concerning the existence of such
fact or other matter. A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at
any time had, Knowledge of such fact or other matter.
"Legal Requirement"-- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"Marks"-- as defined in Section 3.22(a)(i).
"Mediation Request"-- as defined in Section 11.2(b).
"Michelin"-- as defined in the Preamble.
"Noncompetition Agreements"-- as defined in Section 2.4(a)(iv).
"Occupational Safety and Health Law"-- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working
conditions.
"Order"-- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"-- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person.
"Organizational Documents"-- the articles or certificate of
incorporation and the bylaws of a corporation and any amendment to any of the
foregoing.
"Person"-- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union, or
other entity or Governmental Body.
"Proceeding"-- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative,
or informal) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Promissory Note"-- as defined in Section 6.2.
"R. Drake"-- as defined in the Preamble.
"Release"-- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative"-- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of
such Person, including legal counsel, accountants, and financial advisors.
"Sellers"-- as defined in the Preamble.
"Sellers' Closing Documents"-- as defined in Section 3.2(a).
"Sellers' Releases"-- as defined in Section 2.4
"Shares"-- as defined in the Preamble.
"Tax"-- all tax (including income tax, capital gains tax, value added
tax, sales tax, property tax, gift tax or estate tax), levy, assessment,
tariff, duty, deficiency or other fee and any related charge or amount
(including fine, penalty and interest) imposed, assessed or collected by or
under the authority of any Governmental Body.
"Tax Return"-- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"TBA" -- tax basis of accounting required for the preparation of
Federal Tax Returns, applied on a basis consistent with the basis on which
the Balance Sheet and the other financial statements referred to in Section
3.4 hereof were prepared.
"Threatened"-- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances
exist, that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
"Trade Secrets" -- as defined in Section 3.22(a)(iii).
"Trust Agreement" -- as defined in the Preamble.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 Shares. Subject to the terms and conditions of this Agreement,
at the Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer
will purchase the Shares from Sellers free and clear of any and all
Encumbrances.
2.2 Purchase Price. The purchase price for the Shares will be
(i) $5,000,000 minus the Adjustment Amount (the "Initial Purchase Price")
plus (ii) any and all amounts payable to Sellers under the Earnout Agreement.
2.3 Closing. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Powell, Goldstein, Frazer & Murphy
LLP, Sixteenth Floor, 191 Peachtree St., N.E., Atlanta, Georgia, 30303 at 10:00
a.m. (local time) on January [5], 1998 or at such other time and place as the
parties may agree. Subject to the provisions of Article 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and at
the place determined pursuant to this Section 2.3 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2.4 Closing Obligations. At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares accompanied by
duly executed stock powers;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed
by D. Drake, R. Drake and Michelin (collectively, the "Sellers'
Releases");
(iii) employment agreements in the form of Exhibit
2.4(a)(iii), executed by R. Drake and Michelin (collectively, the
"Employment Agreements");
(iv) noncompetition agreements in the form of Exhibit
2.4(a)(iv), executed by R. Drake and Michelin (collectively, the
"Noncompetition Agreements");
(v) resignations from all current officers and directors
of the Company other than R. Drake who shall remain President of
the Company and Michelin who shall remain Vice President of the
Company;
(vi) a certificate executed by Sellers to the effect that
(A) each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date; and (B) each of the covenants and
agreements of Sellers to be performed prior to the Closing Date
has been duly performed or complied with by the Seller;
(vii) a certificate from the Secretary of the Company
attaching and certifying to (a) the Company's Organizational
Documents and (b) resolutions of the board of directors of the
Company approving the Contemplated Transactions;
(viii) the earnout agreement in the form of Exhibit
2.4(a)(vii), execute by Sellers (the "Earnout Agreement"); and
(ix) the documents contemplated by Section 7.3 hereof.
(b) Buyer will deliver to Sellers:
(i) the Initial Purchase Price by bank cashier's check or
by wire transfer to the accounts specified by Sellers, to be
allocated among the Sellers pursuant to the allocation schedule
set forth on Part 2.4 of the Disclosure Letter;
(ii) a certificate executed by Buyer to the effect that,
(A) each of Buyer's representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date; and (B) each of the covenants and
agreements of Buyer to be performed prior to the Closing Date has
been duly performed and complied with by Buyer;
(iii) a certificate from the Secretary of Buyer attaching
and certifying to (a) the Buyer's Organizational Documents and
(b) resolutions of the board of directors of Buyer authorizing
the Contemplated Transactions;
(iv) the Employment Agreements, executed by the Company
and Buyer;
(v) the Noncompetition Agreements, executed by Buyer;
(vi) the Earnout Agreement, executed by Buyer; and
(vii) the documents contemplated by Section 8.3 hereof.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as
follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list of the Company's name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder of the Company and
the number of shares held by each). The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification. The Drake Trust is a trust duly organized
and validly existing under the laws of the state in which it was formed.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of the Company and the Trust Agreement, as currently
in effect.
(c) The Company has no subsidiaries and no ownership interest
in any Person, except as may be deemed to exist as a result of the Efron
Assignment.
3.2 Authority; No Conflict.
(a) The Agreement constitutes the legal, valid and binding
obligation of the Company and the Sellers, enforceable against the Company
and Sellers in accordance with its terms, and upon the execution and delivery
by Sellers of the Employment Agreements, the Sellers' Releases, the Earnout
Agreement, the Promissory Note and the Noncompetition Agreements to which
each such Seller is a party (collectively, the "Sellers' Closing Documents"),
Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of each Seller party thereto and the Company, enforceable against
such Seller and/or the Company in accordance with their respective terms.
Sellers and the Company have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the
Sellers' Closing Documents to which it is party and to perform their
obligations under this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the
Company or the Trust Agreement, or (B) any resolution adopted by
the board of directors or the stockholders of the Company;
(ii) in any material respect, contravene, conflict with,
or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or
any Seller, or any of the assets owned or used by the Company,
may be subject;
(iii) in any material respect, contravene, conflict with,
or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise
relates to the business of, or any of the assets owned or used
by, the Company;
(iv) cause Buyer or the Company to become subject to, or
to become liable for the payment of, any Tax except as the
Company or Buyer would otherwise be subject to in the Ordinary
Course of Business;
(v) in any material respect, cause any of the assets
owned the Company to be reassessed or revalued by any taxing
authority or other Governmental Body;
(vi) in any material respect, contravene, conflict with,
or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract; or
(vii) in any material respect, result in the imposition or
creation of any Encumbrance upon or with respect to any of the
assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller nor
the Company is or will be required to give any notice to or obtain any
consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 Capitalization. The authorized equity securities of the Company
consist of 1,000,000 shares of common stock, par value $1.00 per share, of
which 3,157 shares are issued and outstanding, and 100,000 shares of eight
percent (8%) convertible, cumulative preferred stock, par value $100.00 per
share, none of which is issued and outstanding, and all issued and
outstanding shares as set forth above constitute the Shares. Sellers are and
will be on the Closing Date the record and beneficial owners and holders of
the Shares, free and clear of all Encumbrances, in the amounts set forth on
Part 3.3 of the Disclosure Letter. No legend or other reference to any
purported Encumbrance appears or will appear upon any certificate
representing the Shares except as otherwise set forth in Section 4.3. All of
the Shares have been duly authorized and validly issued and are fully paid
and nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of the Shares or other securities of the Company. None of the
outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement. The
Company does not own, or have any Contract to acquire, any equity securities
or other securities of any Person or any direct or indirect equity or
ownership interest in any other business.
3.4 Financial Statements. Sellers have delivered to Buyer:
(a) unaudited balance sheets of the Company as at December 31 in each of the
years 1995 and 1996, and the related unaudited statements of income, changes
in stockholders' equity, and cash flow for each of the fiscal years then
ended, (b) an unaudited balance sheet of the Company as at September 30, 1997
(including the notes thereto, the "Balance Sheet"), and the related
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year then ended, and (c) an unaudited balance sheet of the Company as
at September 30, 1997 (the "Interim Balance Sheet") and the related unaudited
statements of income, changes in stockholders' equity, and cash flow for the
nine (9) months then ended. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates
of and for the periods referred to in such financial statements, all in
accordance with TBA, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse); the financial
statements referred to in this Section 3.4 reflect the consistent
application of TBA accounting principles throughout the periods involved.
Each of the supporting documents listed on Part 3.4 of the Disclosure
Letter is true and correct in all material respects.
3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls for a company the size of the Company
with the number of employees as the Company has. The minute books of the
Company contains accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Company. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the Disclosure
Letter contains a complete and accurate list of all leaseholds or other
interests therein owned by the Company. Sellers have delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Company acquired such real property and interests, and copies of
all title insurance policies, opinions, abstracts, and surveys in the
possession of Sellers or the Company and relating to such property or
interests. The Company owns all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to
own located in the facilities owned or operated by the Company or reflected
as owned in the books and records of the Company, including all of the
properties and assets reflected in the Interim Balance Sheet (except for
assets held under capitalized leases disclosed or not required to be
disclosed in Part 3.6 of the Disclosure Letter and personal property sold
since the date of the Interim Balance Sheet in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Interim Balance Sheet (except
for personal property acquired and sold since the date of the Balance Sheet
in the Ordinary Course of Business and consistent with past practice). All
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances except (a) mortgages or security
interests shown on the Balance Sheet or the Interim Balance Sheet as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (b) mortgages or security interests incurred in connection with the
purchase of property or assets after the date of the Interim Balance Sheet
(such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, and
(c) liens for current taxes not yet due. The Company does not currently own,
and has never owned, any real property.
3.7 Condition and Sufficiency of Assets. In all material respects,
the buildings, structures, and equipment of the Company are structurally
sound, are in good operating condition and repair, and are adequate for the
uses to which they are being put, and none of such buildings, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The
building, structures, and equipment of the Company are sufficient for the
continued conduct of the Company's businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
3.8 Accounts Receivable. All accounts receivable of the Company that
are reflected on the Interim Balance Sheet or on the accounting records of
the Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually
made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be
as of the Closing Date current and, to the Company's and the Seller's
Knowledge, collectible (other than those accounts in bankruptcy which are set
forth on Part 3.8 of the Disclosure Letter). There is no contest, claim, or
right of set-off under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Part 3.8 of the Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which
list sets forth the aging of such Accounts Receivable.
3.9 Inventory. All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which
have been written off or written down to net realizable value in the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at cost on a first in, first out basis.
The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in
the present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of
the Disclosure Letter, the Company has no material liabilities or obligations
of any nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations reflected or
reserved against in the Balance Sheet or the Interim Balance Sheet,
liabilities associated with the Promissory Note and current liabilities
incurred in the Ordinary Course of Business since the date of the Interim
Balance Sheet and the respective dates thereof.
3.11 Taxes.
(a) The Company has filed or caused to be filed, on a timely
basis, all Tax Returns that are or were required to be filed by or with
respect to it, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. Sellers have delivered to Buyer
copies of, and Part 3.11 of the Disclosure Letter contains a complete and
accurate list of, all such Tax Returns filed for 1994, 1995 and 1996. The
Company has paid, or made provision for the payment of, all Taxes that have
or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Sellers or the Company, except such
Taxes, if any, as are listed in Part 3.11 of the Disclosure Letter and are
being contested in good faith and as to which adequate reserves, if any
(determined in accordance with TBA) have been provided in the Balance Sheet
and the Interim Balance Sheet.
(b) Except as described in Part 3.11 of the Disclosure Letter,
no Seller nor the Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes
of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined in accordance
with TBA). There exists no proposed tax assessment against the Company
except as disclosed in the Balance Sheet or in Part 3.11 of the Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC has
been filed with respect to any property or assets held, acquired, or to be
acquired by the Company. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete in all material respects.
There is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement.
3.12 No Material Adverse Change. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.13 Employee Benefits
(a) Except as disclosed on Part 3.13 of the Disclosure Letter,
no other corporation, trade, business, or other entity, other than the
Company, together with the Company would now or in the past constitute a
single employer within the meaning of Section 414 of the IRC. The Company
and any other entities that now or in the past constitute a single employer
within the meaning of IRC Section 414 are hereinafter collectively referred
to as the "Company Group."
(b) Part 3.13(b) of the Disclosure Letter contains a true and
complete list of all the following agreements or plans which are presently in
effect or which have previously been in effect and which cover employees of
any member of the Company Group ("Employees"), and indicating, with respect
to each, the plans for which the Company maintains or contributes to on
behalf of their employees:
(i) Any employee benefit plan as defined in Section 3(3)
of ERISA and any trust or other funding agency created
thereunder, or under which any member of the Company Group, with
respect to Employees, has any outstanding, present, or future
obligation or liability, or under which any Employee or former
Employee has any present or future right to benefits which are
covered by ERISA; or
(ii) Any other pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive,
bonus, vacation, severance, disability, hospitalization, medical,
life insurance or other employee benefit plan, program, policy,
or arrangement, whether written or unwritten, formal or informal,
which any member of the Company Group maintains or to which any
member of the Company Group has any outstanding, present or
future obligations to contribute or make payments under, whether
voluntary, contingent or otherwise.
The plans, programs, policies, or arrangements described in
subparagraph (i) or (ii) above are hereinafter collectively referred to as
the "Company Plans." Sellers have delivered to Buyer true and complete
copies of all written plan documents and contracts evidencing the Company
Plans, as they may have been amended to the date hereof, together with (A)
all documents, including without limitation, Forms 5500, relating to any
Company Plans required to have been filed prior to the date hereof with
governmental authorities for each of the three most recently completed plan
years; (B) attorney's response to any auditor's request for information for
each of the three most recently completed plan years; and (C) financial
statements and actuarial reports, if any, for each Company Plan for the three
most recently completed plan years.
(c) Except as to those plans identified on Part 3.13(c) of the
Disclosure Letter as tax-qualified Company Plans (the "Company Qualified
Plans"), no member of the Company Group maintains or previously maintained a
Company Plan which meets or was intended to meet the requirements of IRC
Section 401(a). Except as set forth on Part 3.13(c) of the Disclosure
Letter, the IRS has issued favorable determination letters to the effect that
each Company Qualified Plan qualifies under IRC Section 401(a) and that any
related trust is exempt from taxation under IRC Section 501(a), and such
determination letters remain in effect and have not been revoked or, in the
alternative, the members of the Company Group currently maintain only one
Company Qualified Plan and such Company Qualified Plan is a standardized form
plan, within the meaning of Revenue Procedure 97-6, Section 8.05, with
respect to which the IRS has issued a favorable determination letter and such
determination letter remains in effect and has not been revoked. Copies of
the most recent determination letters and any outstanding requests for a
determination letter with respect to each Company Qualified Plan have been
delivered to Buyer. Except as disclosed on Part 3.13(c) of the Disclosure
Letter, no Company Qualified Plan has been amended since the issuance of each
respective determination letter. The Company Qualified Plans currently
comply in form with the requirements under IRC Section 401(a), other than
changes required by statutes, regulations and rulings for which amendments
are not yet required. To the Knowledge of Sellers and the Company, no issue
concerning qualification of the Company Qualified Plans is pending before or
is threatened by the IRS. To the Knowledge of Sellers and the Company, the
Company Qualified Plans have been administered according to their terms
(except for those terms which are inconsistent with the changes required by
statutes, regulations, and rulings for which changes are not yet required to
be made, in which case the Company Qualified Plans have been administered in
accordance with the provisions of those statutes, regulations and rulings)
and in accordance with the requirements of IRC Section 401(a). No member of
the Company Group or any fiduciary of any Company Qualified Plan has done
anything that would adversely affect the qualified status of the Company
Qualified Plans or the related trusts. Any Company Qualified Plan which is
required to satisfy IRC Section 401(k)(3) and 401(m)(2) has been tested for
compliance with, and has satisfied the requirements of, IRC Section 401(k)(3)
and 401(m)(2) for each plan year ending prior to the Closing Date.
(d) Each member of the Company Group is in compliance with the
requirements prescribed by any and all statutes, orders, governmental rules
and regulations applicable to the Company Plans and all reports and
disclosures relating to the Company Plans required to be filed with or
furnished to any governmental entity, participants or beneficiaries prior to
the Closing Date have been or will be filed or furnished in a timely manner
and in accordance with applicable law.
(e) Except as expressly identified on Part 3.13(e) of the
Disclosure Letter, no termination or partial termination of any Company
Qualified Plan has occurred nor has a notice of intent to terminate any
Company Qualified Plan been issued by a member of the Company Group.
(f) No member of the Company Group maintains or has maintained
an "employee benefit pension plan" within the meaning of ERISA Section 3(2)
that is or was subject to Title IV of ERISA.
(g) Except as listed in Part 3.13(g) of the Disclosure Letter,
any Company Plan can be terminated on or prior to the Closing Date without
liability to any member of the Company Group or Buyer, including without
limitation, any additional contributions, penalties, premiums, fees or any
other charges as a result of the termination, except to the extent of funds
set aside for such purpose or reflected as reserved for such purpose on the
Balance Sheet.
(h) Each member of the Company Group has made full and timely
payment of, or has accrued pending full and timely payment, all amounts which
are required under the terms of each of the Company Plans and in accordance
with applicable laws to be paid as a contribution to each Company Plan and no
excise taxes are assessable as a result of any non-deductible or other
contributions made or not made to a Company Plan. The assets of all Company
Plans which are required under applicable laws to be held in trust are in
fact held in trust and the assets of each Company Plan equal or exceed the
liabilities of each such Company Plan. The assets of each Company Plan are
reported at their fair market value on the books and records of each plan.
(i) No member of the Company Group has any past, present or
future obligation or liability to contribute or has contributed to any
multiemployer plan as defined in ERISA Section 3(37).
(j) No member of the Company Group nor any other "disqualified
person" or "party in interest" (as defined in IRC Section 4975 and ERISA
Section 3(14), respectively) with respect to the Company Plans, has engaged
in any "prohibited transaction" (as defined in IRC Section 4975 or ERISA
Section 406). All members of the Company Group and all "fiduciaries" (as
defined in ERISA Section 3(21)) with respect to the Company Plans, including
any members of the Company Group which are fiduciaries as to a Company Plan,
have complied in all respects with the requirements of ERISA Section 404. No
member of the Company Group and no party in interest or disqualified person
with respect to the Company Plans has taken or omitted any action which could
lead to the imposition of an excise tax under the IRC or a fine under ERISA.
(k) Each member of the Company Group has complied with the
continuation coverage requirements of Section 1001 of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601
through 608 (collectively, "COBRA Rights") and with the portability, access
and renewability provisions of Subtitle K, Chapter 100 of the IRC and Section
701 et. seq. of ERISA.
(l) Except as disclosed on Part 3.13(l) of the Disclosure
Letter, no member of the Company Group has made or is obligated to make any
nondeductible contributions to any Company Plan.
(m) Except as set forth in Part 3.13(m) of the Disclosure
Letter, no member of the Company Group is obligated, continently or
otherwise, under any agreement to pay any amount which would be treated as a
"parachute payment," as defined in IRC Section 280G(b) (determined without
regard to IRC Section 280G(b)(2)(A)(ii)).
(n) Other than routine claims for benefits, to the Knowledge of
Sellers and the Company, there are no actions, audits, investigations, suits
or claims pending, or threatened against any Company Plan, any trust or other
funding agency created thereunder, or against any fiduciary of any Company
Plan or against the assets of any Company Plan.
(o) The consummation of the transactions contemplated hereby
will not accelerate or increase any liability under any Company Plan because
of an acceleration or increase of any of the rights or benefits to which
Employees may be entitled thereunder.
(p) No member of the Company Group has any obligation to any
retired or former employee or any current employee of the Company upon
retirement or termination of employment under any Company Plan, other than
COBRA Rights.
(q) Except as set forth in Part 3.13(q) of the Disclosure
Letter or otherwise provided in this Agreement, since the last date through
which the Interim Balance Sheet reflects financial information, no member of
the Company Group has (i) increased the rate of compensation payable or to
become payable to any of the employees of the Company, other than in the
normal course of business and consistent with past practice; (ii) has not
made any commitment and has not incurred any liability to any labor union;
(iii) has not paid or agreed to pay any bonuses or severance pay; (iv) has
not increased any benefits or rights under any Company Plan; and (v) has not
adopted any new plan, program, policy or arrangement, which if it existed as
of the Closing Date, would constitute a Company Plan.
3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since September 30,
1997 has been, in full compliance in all material respects with
each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of
any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or
result in a material violation by the Company of, or a material
failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time since
September 30, 1997, any notice or other communication (whether
oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement,
(B) any actual, alleged, possible, or potential obligation on the
part of the Company to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature, or (C) either
to revoke, withdraw or suspend any license to operate the Company
or any of its assets, or to terminate or decertify or exclude
from any participation of the Company in Medicare, Medicaid,
CHAMPUS or other governmental health care programs.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company
or that otherwise relates to the business of, or to any of the assets owned
or used by, the Company. Each Governmental Authorization listed or required
to be listed in Part 3.14 of the Disclosure Letter is valid and in full force
and effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
1994 has been, in full compliance in all material respects with
all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part
3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a material violation of or a
material failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter;
(iii) the Company has not received, at any time since
January 1, 1994, any notice or other communication (whether oral
or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of
any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to
be listed in Part 3.14 of the Disclosure Letter have been duly
filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to
such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate their
businesses in the manner they currently conduct and operate such businesses
and to permit the Company to own and use its assets in the manner in which it
currently owns and uses such assets.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any
of the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
To the Knowledge of Sellers and the Company, (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Part 3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of
the Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company;
and
(iii) to the Knowledge of Sellers and the Company, no
officer, director, agent, or employee of the Company is subject
to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or
practice relating to the business of the Company.
3.16 Absence of Certain Changes and Events. Except as set forth in
Part 3.16 of the Disclosure Letter, since the date of the Interim Balance
Sheet, the Company has conducted its businesses only in the Ordinary Course
of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits
under, any Company Plans;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $25,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance
on any material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value
to the Company in excess of $25,000;
(i) change in the accounting methods used by the Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and Sellers have delivered to Buyer true and complete
copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an
amount or value in excess of $25,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an
amount or value in excess of $25,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts of the Company in excess of $25,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $10,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of the
Company or any Affiliate of the Company or limit the freedom of
the Company or any Affiliate of the Company to engage in any line
of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an
express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $25,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a)
of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter:
(i) the Company is, and at all times since September 30,
1997 has been, in full compliance with all applicable material
terms and requirements of each Contract under which it has or had
any obligation or liability or by which it or any of the assets
owned or used by it is or was bound;
(ii) to Sellers' Knowledge, each other Person that has or
had any obligation or liability under any Contract under which
the Company has or had any rights is, and at all times since
September 30, 1997 has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received from any
other Person, at any time since September 30, 1997, any notice or
other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of,
or default under, any Contract.
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person that would have
a material adverse effect on the business of the Company and, to the
Knowledge of Sellers and the Company, no such Person has made written demand
for such renegotiation.
3.18 Insurance.
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance
to which the Company is a party or under which the Company, or
any director of the Company, is currently covered; and
(ii) true and complete copies of all pending applications
for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such
coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year,
for the current policy year:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) All policies to which the Company is a party or that
provide coverage to any Seller, the Company, or any director or
officer of the Company: (A) are valid, outstanding, and
enforceable; (B) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by
which it is bound; (C) will continue in full force and effect
following the consummation of the Contemplated Transactions or
Sellers will exert their best, good faith efforts to continue
such policies and, to Sellers' Knowledge, such policies will
continue in full force and effect; and (D) do not provide for any
retrospective premium adjustment or other experienced-based
liability on the part of the Company, except that the Company's
general liability insurance issued by Hartford is priced
according to the level of the Company's sales and adjustments may
be made based upon a sales audit, although any such adjustment
will not be of a material dollar amount.
(ii) No Seller or the Company has received (A) any refusal
of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations
thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed its obligations, under each policy to which
it is a party or that provides coverage to the Company or
director thereof, except for an adjustment as noted in Section
3.18(d)(i) hereof.
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
(v) For the five-year period prior to the effective date
of all current policies listed on Part 3.18(c) of the
Disclosure Letter, the Company has had in effect coverage
at least equivalent to all current coverages.
3.19 Environmental Matters. Except as set forth in part 3.19 of the
Disclosure Letter:
(a) The Company is, and at all times has been, in all material
respects, in full compliance with, and has not been and is not in violation
of or liable under, any Environmental Law. No Seller nor the Company has any
basis to expect, nor has any of them or any other Person for whose conduct
they are or may be held to be responsible received, any actual or Threatened
order, notice, or other communication from (i) any Governmental Body or
private citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other
properties or assets used by the Company.
(b) There are no pending or, to the Knowledge of Sellers and
the Company, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets used by
the Company.
(c) No Seller nor the Company has received or has any basis to
expect any citation, directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Materials, or any alleged,
actual, or potential violation or failure to comply with any Environmental
Law, or of any alleged, actual, or potential obligation to undertake or bear
the cost of any Environmental, Health, and Safety Liabilities with respect to
any of the Facilities or any other properties or assets used by the Company,
or with respect to any property or facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed
by Sellers, the Company, or any other Person for whose conduct they are or
may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) Neither Seller nor the Company has any material
Environmental, Health, and Safety Liabilities with respect to the Facilities.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities except in full compliance in all material
respects with all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of Sellers
and the Company, threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets used by the Company.
(g) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by Sellers or any the Company pertaining to Hazardous Materials
in, on, or under the Facilities, or concerning compliance by Sellers or the
Company.
3.20 Employees.
(a) Part 3.20 of the Disclosure Letter contains (i) a complete
and accurate list of the following information for each employee or director
of the Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any
change in compensation since September 30, 1997; and (ii) a list of all
written contracts of employment with the Company.
(b) No director or officer, or to the Knowledge of Seller,
employee of the Company, is a party to, or is otherwise bound by, any
agreement or arrangement, including any employment, confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any
way adversely affects or will affect (i) the performance of his duties as an
employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers
or the Company by any such employee or director. To Sellers' Knowledge, no
director, officer, or other key employee of the Company intends to terminate
his employment with the Company.
(c) There are no retired employees or directors of the Company
or dependants who are receiving benefits or are scheduled to receive benefits
in the future, except for Company Plan benefits set forth in Section 3.13
which are properly accrued on the Financial Statements.
3.21 Labor Relations; Compliance. Since September 30, 1997, the
Company has not been and is not a party to any collective bargaining or other
labor Contract. Since September 30, 1997, there has not been, there is not
presently pending or existing, and to Sellers' and the Company's Knowledge
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage,
or employee grievance process, (b) any Proceeding against or affecting the
Company relating to the alleged violation of any Legal Requirement pertaining
to labor relations or employment matters, including any charge or complaint
filed by an employee or union with the National Labor Relations Board, the
Equal Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (c) any application for
certification of a collective bargaining agent. To Sellers' and the Company's
Knowledge, no event has occurred or circumstance exists that could provide
the basis for any work stoppage or other labor dispute. There is no lockout
of any employees by the Company, and no such action is contemplated by the
Company. The Company has complied in all material respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. The Company is not liable for the
payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.22 Intellectual Property.
(a) Intellectual Property Assets -- The term "Intellectual
Property Assets" includes:
(i) the name "Drake Management Services, Inc.", all
fictional business names, trading names, registered and
unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iii) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets"); owned, used, or licensed by the
Company as licensee or licensor.
(b) Agreements. Part 3.22(b) of the Disclosure Letter contains
a complete and accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which Company is a party or by which any
Company is bound. There are no outstanding and, to Sellers' and the
Company's Knowledge, no Threatened disputes or disagreements with respect to
any such agreement.
(c) Know-How Necessary for the Business. The Intellectual
Property Assets are all those necessary for the operation of the Company's
businesses as it is currently conducted. The Company is the owner of all
right, title, and interest in and to each of the Intellectual Property
Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the right to use
without payment to a third party all of the Intellectual Property Assets.
(d) Patents. The Company owns no patents.
(e) Trademarks.
(i) Part 3.22(e) of Disclosure Letter contains a complete
and accurate list and summary description of all Marks. The
Company is the owner of all right, title and interest in and to
each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims.
(ii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Sellers' and
the Company's Knowledge, no such action is Threatened with the
respect to any of the Marks.
(iii) To Sellers' and the Company's Knowledge, there is no
potentially interfering trademark or trademark application of any
third party.
(iv) No Mark is infringed or, to Sellers' and the
Company's Knowledge, has been challenged or threatened in any
way. None of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service mark of
any third party.
(f) Copyrights.
(i) Part 3.22(f) of the Disclosure Letter contains a
complete and accurate list and summary description of all
registered Copyrights. The Company is the owner of all right,
title and interest in and to each of the registered Copyrights,
free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) No Copyright is infringed or, to Sellers' and the
Company's Knowledge, has been challenged or threatened in any
way. None of the subject matter of any of the registered
Copyrights infringes or is alleged to infringe any copyright of
any third party or is a derivative work based on the work of a
third party.
(iii) All works encompassed by the registered Copyrights
have been marked with the proper copyright notice.
(g) Trade Secrets.
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and
to allow its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) Sellers and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of
their Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and,
to Sellers' and the Company's Knowledge, have not been used,
divulged, or appropriated either for the benefit of any Person or
to the detriment of the Company. No Trade Secret is subject to
any adverse claim or has been challenged or threatened in any way.
3.23 Certain Payments. Since January 1, 1994, neither the Company nor
any director, officer, agent, or employee of the Company, or any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made, directly or indirectly, any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any Affiliate of the Company, or (iv) in violation of any
Legal Requirement, (b) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits
from any vendor, governmental employee or other Person with whom the Company
has done business, directly or indirectly, which would reasonably be expected
to subject the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, or (c) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.24 Fraud and Abuse; Financial Relationships. The Company does not
have any government contracts, and the Company has no claims relating to
Medicare, Medicaid CHAMPUS or other governmental reimbursements.
3.25 Relationships with Related Persons. No Seller or any Affiliate
of Sellers or of the Company has, or since January 1, 1994, has had, any
interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's businesses.
No Seller or any Affiliate of Sellers or of the Company is, or since
January 1, 1994 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i)
had business dealings or a material financial interest in any transaction
with the Company, or (ii) engaged in competition with the Company with
respect to any line of the products or services of the Company (a "Competing
Business") in any market presently served by the Company except for less than
five percent (5%) of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the over-the-counter
market. Except as set forth in Part 3.25 of the Disclosure Letter, no Seller
nor any Affiliate of Sellers or of the Company is a party to any Contract
with, or has any claim or right against, the Company.
3.26 Brokers or Finders. Sellers and their Representatives have
incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in
connection with the Contemplated Transactions.
3.27 Disclosure.
(a) No representation or warranty of Sellers in this Agreement
and no statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to any Seller that has specific
application to any Seller or the Company (other than general economic or
industry conditions) and that materially adversely affects the assets,
business, prospects, financial condition, or results of operations of the
Company (on a consolidated basis) that has not been set forth in this
Agreement or the Disclosure Letter.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Georgia.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Earnout Agreement, the
Employment Agreements, and the Noncompete Agreements (collectively, the
"Buyer's Closing Documents"), the Buyer's Closing Documents will constitute
the legal, valid, and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms. Buyer has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its obligations
under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Part 4.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
will not materially breach and/or give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or
the shareholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject;
(iv) any Governmental Authorization that is held by Buyer;
or
(v) any Contract to which Buyer is a party or by which
Buyer may be bound.
Except as set forth in Part 4.2 of the Disclosure Letter, Buyer is not
and will not be required to obtain any consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 Investment Intent. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act of 1933, as amended. Buyer understands
that any resale of the shares must be made in compliance with the
registration requirements of the Securities Act of 1933, as amended, or
pursuant to an exemption therefrom. Buyer understands that the certificate
representing the Shares shall be endorsed with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND (B) MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SAID ACT.
4.4 Certain Proceedings. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has
been Threatened.
4.5 Brokers or Finders. Buyer and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with the
Contemplated Transactions.
4.6 Disclosure.
(a) No representation or warranty of Buyer in this Agreement
omits to state a material fact necessary to make the statements herein, in
light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.4 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to Buyer that has specific
application to Buyer (other than general economic or industry conditions) and
that materially adversely affects the assets, business, prospects, financial
condition, or results of operations of Buyer (on a consolidated basis) that
has not been set forth in this Agreement.
5. COVENANTS OF SELLERS
5.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
Representatives to, (a) afford Buyer and its Representatives full and free
access to the Company's offices, facilities, properties, equipment,
inventories, books, contracts, commitments, records and other relevant
information of the business and shall furnish such persons with all
information concerning the business, assets and financial condition of the
Company as Buyer and its Representatives shall reasonably request; provided,
however, that no direct contact with Company customers shall be made without
the consent of R. Drake and such access shall occur in a manner that does not
disrupt Company employees or business.
5.2 Operation of the Businesses of the Company. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the Company
to:
(a) conduct the business of the Company only in the Ordinary
Course of Business consistent with past practices;
(b) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) not make any material change in the operation of the
business;
(d) not enter into any material agreement or incur any material
liabilities;
(e) make all payments to vendors when due;
(f) confer with Buyer concerning operational matters of a
material nature; and
(g) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date,
Sellers will not, and will cause the Company not to, without the prior
consent of Buyer, take any affirmative action, or fail to take any reasonable
action within their or its control, as a result of which any of the changes
or events listed in Section 3.16 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause the Company to, (a) cooperate with
Buyer with respect to all filings that Buyer elects to make or is required by
Legal Requirements to make in connection with the Contemplated Transactions,
and (b) cooperate with Buyer in obtaining all consents identified in Part 4.2
of the Disclosure Letter.
5.5 Notification. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of
this Agreement, or if such Seller or the Company becomes aware of the
occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. During the same period, each Seller will
promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Article 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Article 7 impossible or unlikely.
5.6 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Company by its Seller or any Affiliate of any Seller to be paid in full prior
to Closing.
5.7 No Negotiation. Sellers agree that until the earlier of March 5,
1998 or such date upon which Buyer notifies Seller that it has abandoned the
Contemplated Transactions, the Company and Sellers shall deal exclusively
with Buyer with respect to the Contemplated Transactions and the Company and
Sellers will not, and will direct the Company's Representatives not to, (i)
solicit the submission of proposals or offers from any person relating to any
acquisition or purchase of all or a material part of the assets or stock of
the Company or any merger, consolidation, or similar transaction with respect
to the Company; (ii) participate in any discussions or negotiations
regarding, or furnish any information to any other person other than Buyer
with respect to any such possible transaction; or (iii) enter into any
agreement or understanding, whether oral or in writing, that would prevent
the consummation of the Contemplated Transactions. If, notwithstanding the
foregoing, the Company or the Sellers should receive any such proposal from a
third party or any inquiry regarding any such proposal, the Company shall
promptly inform Buyer thereof.
5.8 Satisfaction of Obligations. On or before December 31, 1997, the
Company shall pay in full all amounts owed to Graeme Crothall and R. Drake.
5.9 Payment of 1997 Profits. Prior to the Closing, the Company may
pay out to its employees and shareholders as bonuses or other compensation
such amounts as the Company deems appropriate, not to exceed $447,445 in the
aggregate, provided that (i) there is sufficient cash in the Company to pay
such bonuses and all related payroll taxes; (ii) if the Villa DeAnza accounts
receivable is not collected at the time of such payment, such receivable must
be written off and there shall be a dollar-for-dollar reduction in the total
amount paid as bonuses hereunder; and (iii) all year-end adjustments,
including without limitation expensing fixed assets purchased during the
year, must be booked prior to the payment of such bonuses.
5.10 Termination of Company Qualified Plan. The Company shall take
all appropriate corporate action no later than the day before the Closing
Date to terminate the sole Company Qualified Plan maintained by the Company,
effective no later than the day before the Closing Date. Unless the
provisions of the Company Qualified Plan expressly provide to the contrary,
appropriate corporate action shall mean duly authorized action by the Board
of Directors of the Company.
6. COVENANTS OF BUYER
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Buyer will, and will cause each of its
Affiliate to, make all filings required by Legal Requirements to be made by
them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Buyer will, and will cause each Affiliate to,
(a) cooperate with Sellers with respect to all filings that Sellers are
required by Legal Requirements to make in connection with the Contemplated
Transactions, and (b) cooperate with Sellers in obtaining all consents
identified in Part 3.2 of the Disclosure Letter; provided that this Agreement
will not require Buyer to dispose of or make any change in any portion of its
business or to suffer any other material adverse effect to obtain a
Governmental Authorization.
6.2 Loan to the Company. On or before December 31, 1997, subject to
customary conditions, Buyer shall lend the Company sufficient funds (or
arrange for financing) to pay off the obligations of the Company due to
Graeme Crothall and R. Drake in the aggregate amount of approximately
$289,750.06 as of December 31, 1997. The Company shall execute and deliver
to Buyer a promissory note (the "Promissory Note") in the form attached
hereto as Exhibit 6.2. The Note shall be secured by a security interest in
all accounts receivable of the Company and the proceeds thereof.
6.3 Notification. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of
any fact or condition that causes or constitutes a Breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact
or condition that would (except as expressly contemplated by this Agreement)
cause or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time or occurrence of
discovery of such fact or condition. During the same period, Buyer will
promptly notify Seller of the occurrence of any Breach of any covenant of
Buyer in this Article 6 or of the occurrence of any event that may make the
satisfaction of the conditions in Article 8 impossible or unlikely.
6.4 Employment Matters.
(a) After the Closing, the Company will maintain a bonus
program comparable to the existing bonus program of the Company for a period
of two years following the Closing, and all employees of the Company other
than Mr. Drake will be entitled to participate in such program.
(b) David Hershberger, Julius Sacco, Joel Strandgard, Ken Wohl
and Janet Keating shall be guaranteed employment with the Company for one
year following the Closing, except that such individuals may be terminated
for cause.
(c) Any employee of the Company who is employed as of the
Closing Date and who is subsequently terminated involuntarily by the Company
without cause during the one-year period following the Closing shall receive
no less than three months of base salary as severance pay, provided such
employee continues to work for the Company until the termination date.
(d) Upon the Closing, Michelin shall receive 5,000 options to
purchase shares of Buyer's common stock, $.01 par value, pursuant to Buyer's
standard stock option agreement, and each of David Hershberger, Julius Sacco,
Joel Strandgard, Ken Wohl and Janet Keating shall receive 3,000 options to
purchase shares of Buyer's Common Stock, $.01 par value, pursuant to Buyer's
standard stock option agreement.
(e) The Buyer shall provide credit for an employee's service
with the Company prior to the Closing Date with respect to those
employees of the Company who remain employed with the Company
immediately after the Closing Date for the following purposes:
(i) for purposes of determining both eligibility to participate
and vesting under the Morrison Health Care, Inc. Salary Deferral
Plan (the "SDP"), the Morrison Health Care, Inc. Deferred
Compensation Plan (the "DCP"), the Morrison Health Care, Inc.
Management Retirement Plan (the "MRP") and the Morrison Health
Care, Inc. Executive Supplemental Pension Plan (the "ESP"); (ii)
for purposes of determining the level of matching contributions
under the SDP and DCP; and (iii) for purposes of determining the
accrual of benefits under the MRP and ESP; provided, however,
that for purposes of crediting service under this clause (iii),
only one year of service credit shall be given for every two full
years of service with the Company prior to the Closing Date and
no more than a total of five years of service credit shall be
granted to any Company employee for service performed prior to
the Closing Date.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations.
(a) All of Sellers' representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
(b) Each of Sellers' representations and warranties in Sections
3.3, 3.4, 3.12, and 3.24 must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all respects as of the
Closing Date as if made on the Closing Date.
7.2 Sellers' Performance.
(a) All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.4 must have been delivered.
7.3 Due Diligence. Buyer shall have completed its due diligence
inquiry into the business, affairs and financial condition of the Company.
7.4 Consents. Each of the consents identified in Part 3.2 of the
Disclosure Letter, and each consent identified in Part 4.2 of the Disclosure
Letter, must have been obtained and must be in full force and effect.
7.5 Termination of Agreements. Each of (a) the Shareholders and
Voting Agreement dated June 6, 1997, (b) the Stock Cross Purchase and
Redemption Agreement dated June 6, 1997, and (c) the Stock Retirement and
Subscription Agreement dated February 8, 1996, as amended, shall be
terminated.
7.6 Additional Documents. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Bonn, Luscher, Padden & Wilkins, dated the
Closing Date, in the form of Exhibit 7.6(a);
(b) an certificate executed on behalf of the Sellers dated as
of the Closing Date, in the form of Exhibit 7.6(b);
(c) a UCC-3 termination statement shall be filed with respect
to all obligations of the Company previously owed to Graeme Crothall and Mr.
Drake and any collateral held by such individuals shall be released; and
(d) such other documents as Buyer may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4 Additional Documents. Buyer must have caused the following
documents to be delivered to Sellers:(a), (ii) evidencing the accuracy of any
of Sellers' representations and warranties, (iii) evidencing the performance
by either Seller of, or the compliance by either Seller with, any covenant or
obligation required to be performed or complied with by such Seller,
(iv) evidencing the satisfaction of any condition referred to in this
Section 7, or (v) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.7 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.8 No Claim Regarding Stock Ownership or Sale Proceeds. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to
all or any portion of the Initial Purchase Price payable for the Shares.
7.9 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated
with Buyer to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise formally proposed by or
before any Governmental Body.
7.10 Board Approval. The contemplated transaction must be approved by
the Board of Directors of Buyer.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers, in whole or in part):
8.1 Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the documents required to
be delivered by Buyer pursuant to Section 2.4 Closing Obligations. At the
Closing: and must have made the cash payments required to be made by Buyer
pursuant to Section 2.4(b)(i).
8.3 Consents. Each of the consents identified in Part 4.2 of the
Disclosure Letter must have been obtained and must be in full force and
effect.
8.4 Additional Documents. Buyer must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Powell, Goldstein, Frazer & Murphy LLP dated
the Closing Date, in the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for
the purpose of (i) enabling their counsel to provide the opinion referred to
in Section (a) an opinion of Bonn, Luscher, Padden & Wilkins, dated the
Closing Date, in the form of Exhibit 7.6(a);, (ii) evidencing the accuracy of
any representation or warranty of Buyer, (iii) evidencing the performance by
Buyer of, or the compliance by Buyer with, any covenant or obligation
required to be performed or complied with by Buyer, (ii) evidencing the
satisfaction of any condition referred to in this Section 8, or (v) otherwise
facilitating the consummation of any of the Contemplated Transactions.
8.5 No Injunction. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the sale of the Shares by
Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
8.6 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause any Seller to suffer any material
adverse consequence under (a) any applicable Legal Requirement or Order, or
(b) any Legal Requirement or Order that has been published, introduced, or
otherwise formally proposed by or before any Governmental Body.
9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Sellers, if any of the conditions in
Section 8. CONDITIONS PRECEDENT TO SELLERS'OBLIGATION TO CLOSE has not
been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Sellers to comply
with their obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before January 31, 1998, or such later date as the parties may agree upon.
9.2 Effect of Termination. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will
not be an election of remedies. If this Agreement is terminated pursuant
to Section 9.1, all further obligations of the parties under this Agreement
will terminate, except that the obligations in Sections 12.1 and 12.3 will
survive; provided, however, that if this Agreement is terminated by a party
because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification Not Affected by Knowledge.
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected
by any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 Indemnification and Payment of Damages by Sellers. Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company,
and their respective Representatives, stockholders, controlling persons, and
Affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by
Sellers in this Agreement as if such representation or warranty were made on
and as of the Closing Date;
(c) any Breach by any Seller of any covenant or obligation of
such Seller in this Agreement;
(d) any product shipped or manufactured by, or any services
provided by, any the Company prior to the Closing Date;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Seller or the Company
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
10.3 Indemnification and Payment of Damages by Sellers --
Environmental Matters. In addition to the provisions of Section 10.2. Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company,
and the other Indemnified Persons for, and will pay to Buyer, the Company,
and the other Indemnified Persons the amount of, any Damages (including
costs of cleanup, containment, or other remediation) arising, directly or
indirectly, from or in connection with any Environmental, Health, and Safety
Liabilitie arising out of or relating to: (i) (A) the ownership,
operation, or condition at any time on or prior to the Closing Date of the
Facilities or any other properties and assets used by the Company, or any
Hazardous Materials or other contaminants that were present on the Facilities
or such other properties and assets at any time on or prior to the Closing
Date; or (ii) any Hazardous Materials or other contaminants, wherever
located, that were, or were allegedly, generated, transported, stored,
treated, Released, or otherwise handled by Sellers or the Company or by any
other Person for whose conduct they are or may be held responsible at any
time on or prior to the Closing Date.
10.4 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of
any Damages arising, directly or indirectly, from or in connection with (a)
any Breach of any representation or warranty made by Buyer in this Agreement
or in any certificate delivered by Buyer pursuant to this Agreement, (b) any
Breach by Buyer of any covenant or obligation of Buyer in this Agreement, or
(c) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have
been made by such Person with Buyer (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions. Notwithstanding the
foregoing, in the case of any Damages arising out of a third party claim
brought against Parent based on the conduct of its business as a whole (as
opposed to just the business of Drake), Parent will pay any reasonable
defense costs related thereto. The remedies provided in this Section 10.4
will not be exclusive of or limit any other remedies that may be available to
Sellers.
10.5 Time Limitations. If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Sections 3.3,
3.11, 3.13 (with respect to matters other than Tax), 3.19, 3.23 and 3.24
unless on or before the second anniversary of the Closing Date Buyer notifies
Sellers of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer; a claim with respect to Section
3.11, 3.13, 3.23 or 3.24 shall be made within the applicable statute of
limitations; a claim with respect to Sections 3.3 or 3.19 or a claim for
indemnification or reimbursement based upon any covenant or obligation to be
performed and complied with after the Closing Date, may be made at any time.
If the Closing occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date,
unless on or before the second anniversary from the Closing Date, Sellers
notify Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Sellers; a claim for
indemnification or reimbursement based upon any covenant or obligation to be
performed or complied with after the Closing Date may be made at any time.
Notwithstanding the foregoing, no party hereto shall waive any applicable
statute of limitations with respect to any third party claim.
10.6 Limitations on Amount -- Sellers. Sellers will have no liability
(for indemnification or otherwise) with respect to the matters described in
Section 10.2 until the total of all Damages with respect to such matters
exceeds $25,000, and once such threshold is met, Sellers shall be liable for
all Damages, including, without limitation, such $25,000. However, this
Section 10.6 will not apply to any intentional Breach by any Seller of any
representation, warranty, covenant or obligation, and Sellers will be jointly
and severally liable for all Damages with respect to such Breaches.
10.7 Limitations on Amount -- Buyers. Buyer will have no liability
(for indemnification or otherwise) with respect to the matters described in
Section 10.4 until the total of all Damages with respect to such matters
exceeds $25,000, and once such threshold is met, Buyer shall be liable for all
Damages, including, without limitation, such $25,000. However, this Section
10.7 will not apply to any intentional Breach by Buyer of any representation,
warranty, covenant or obligation, and Buyer will be liable for all Damages
with respect to such Breaches.
10.8 Procedure For Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 10.2, 10.4, or (to the extent provided in the last sentence of Section
10.3) Section 10.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party
of the commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may
have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.8(a) is brought
against an indemnified party and it gives notice to the indemnifying party
of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying
party is also a party to such Proceeding and the indemnified party determines
in good faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of
such Proceeding with counsel reasonably satisfactory to the indemnified
party and, after notice from the indemnifying party to the indemnified party
of its election to assume the defense of such Proceeding, the indemnifying
party will not, as long as it diligently conducts such defense, be liable to
the indemnified party under this Section 10 for any fees of other counsel or
any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in connection
with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that
the claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without
its consent. If notice is given to an indemnifying party of the commencement
of any Proceeding and the indemnifying party does not, within ten days after
the indemnified party's notice is given, give notice to the indemnified party
of its election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party, absent gross
negligence or willful misconduct on the part of the indemnified party.
Notwithstanding the foregoing, the indemnified party in such cases shall use
its reasonable best efforts to provide notice of material events in any
Proceeding and attempt to obtain the consent of the indemnifying party to any
compromise or settlement.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result
of monetary damages for which it would be entitled to indemnification under
this Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
Proceeding, but the indemnifying party will not be bound by any determination
of a Proceeding so defended or any compromise or settlement effected without
its consent (which may not be unreasonably withheld).
(d) Sellers and Buyer hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Sellers or Buyer
with respect to such a claim anywhere in the world.
10.9 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.10 Insurance Coverages. Notwithstanding any of the foregoing, an
indemnifying party shall not be liable for the amount of damages recovered by
the indemnified party from any insurance policies unless otherwise agreed to
by the parties, and this indemnification shall not be interpreted or
construed, and the parties do not intend it, to negate or limit any such
coverages.
11. Dispute Resolution
11.1 Dispute Defined. As used in this Agreement, "Dispute" shall mean
any dispute or disagreement between the Buyer and the Sellers concerning the
interpretation of this Agreement, the validity of this Agreement, any breach
or alleged breach by any party under this Agreement or any other matter
relating in any way to this Agreement.
11.2 Dispute Resolution Procedures.
(a) If a Dispute arises, the parties shall follow the
procedures specified in this Article 11. The parties shall promptly attempt
to resolve any Dispute by negotiations between themselves. Either the Buyer
or the Sellers may give the other party written notice of any Dispute not
resolved in the normal course of business. The parties shall meet at a
mutually acceptable time and place within 15 calendar days after delivery of
such notice, and thereafter as often as they reasonably deem necessary, to
exchange relevant information and to attempt to resolve the Dispute. If the
Dispute has not been resolved by the parties within 30 calendar days of the
disputing party's notice, or if the parties fail to meet within such 15
calendar days, either the Buyer or the Company may initiate mediation as
provided in Section 11.2(b) of this Agreement. If a negotiator intends to be
accompanied at a meeting by legal counsel, the other negotiator shall be given
at least three (3) business days' notice of such intention and may also be
accompanied by legal counsel.
(b) If the Dispute is not resolved by negotiations pursuant to
Section 11.2(a), the parties shall attempt in good faith to resolve any such
Dispute by nonbinding mediation. Either the Buyer or the Sellers may
initiate a nonbinding mediation proceeding by a request in writing to the
other party (the "Mediation Request"), and both parties will then be
obligated to engage in a mediation. The proceeding will be conducted in
accordance with the then current Center for Public Resources ("CPR") Model
Procedure for Mediation of Business Disputes, with the following exceptions:
(i) if the parties have not agreed within 15 calendar
days of the Mediation Request on the selection of a mediator
willing to serve, CPR, upon the request of either the Buyer or
the Sellers, shall appoint a member of the CPR Panels of Neutrals
as the mediator, and
(ii) efforts to reach a settlement will continue until the
conclusion of the proceedings, which shall be deemed to occur
upon the earliest of the date that: (A) a written settlement is
reached, or (B) the mediator concludes and informs the parties in
writing that further efforts would not be useful, or (C) the
parties agree in writing that an impasse has been reached, or (D)
a period of 30 calendar days has passed since the Mediation
Request and none of the events specified in the foregoing clauses
(A), (B) or (C) has occurred. No party may withdraw before the
conclusion of the proceeding.
(c) If a Dispute is not resolved by negotiation pursuant to
Section 11.2(a) of this Agreement or by mediation pursuant to Section 11.2(b)
of this Agreement within 70 calendar days after initiation of the negotiation
process pursuant to Section 11.2(a), such Dispute and any other claims
arising out of or relating to this Agreement may be heard, adjudicated and
determined by arbitration before a single arbitrator pursuant to the rules of
the American Arbitration Association ("AAA"). Arbitration may be commenced
at any time by any party hereto giving written notice to each other party to
a dispute that such a dispute has been referred to arbitration under this
Section 11.2. The arbitrator shall be selected by the joint agreement of the
parties, but if they do not so agree within 20 days after the date of the
notice referred to in the preceding sentence, the selection shall be made
pursuant to the rules from the panels of arbitrators maintained by the AAA.
Any award rendered by the arbitrator shall be conclusive and binding upon the
parties hereto; provided, however, that any such award shall be accompanied
by a written opinion of the arbitrator giving the reasons for the award.
This provision for arbitration shall be specifically enforceable by the
parties, and the decision of the arbitrator in accordance herewith shall be
final and binding and there shall be no right of appeal therefrom. Unless
otherwise designated by the arbitrator as a result of fault, each party shall
pay its own expenses of arbitration and the expenses of the arbitrator shall
be equally shared.
11.3 Provisional Remedies. At any time during the procedures
specified in Sections 11.2(a) and 11.2(b) of this Agreement, a party may seek
preliminary injunction or other provisional judicial relief if in its judgement
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the parties will continue to participate in good faith
in the procedures specified in Section 11.2(a) and 11.2(b).
11.4 Tolling Statue Limitations. All applicable statutes of limitations
and defenses based upon the passage of time shall be tolled while the procedures
specified in Section 11.2(a) and 11.2(b) of this Agreement are pending. The
parties will take such action, if any, as is required to effectuate such
tolling.
11.5 Performance to Continue. Each party shall continue to perform
its or his obligations under this Agreement pending final resolution of any
Dispute.
11.6 Extension of Deadlines. All deadlines specified in this Article
11 may be extended by mutual agreement between the parties.
11.7 Enforcement. The parties regard the obligations in this Article
11 to constitute an essential provision of this Agreement and one that is
legally binding on them. In case of a violation of the obligations in this
Article 11 by either the Buyer or the Sellers, the other party may bring an
action to seek enforcement of such obligations in any state or federal court
specified in Section 11.2(c).
11.8 Costs. The parties shall pay their own costs, fees, and expenses
incurred in connection with the application of the provisions of sections
11.2(a) and 11.2(b) of this Agreement. In addition, the fees and expenses of
CPR and the mediator in connection with the application of the provisions of
Section 11.2(b) of this Agreement shall be borne fifty percent (50%) by the
Buyer and fifty percent (50%) by the Sellers.
11.9 Replacement. If CPR is no longer in business or is unable or
refuses or declines to act or to continue to act under Section 11.2(b) of this
Agreement for any reason, then the functions specified in Section 11.2(b) to
be performed by CPR shall be performed by AAA.
11.10 Injunctive Relief Notwithstanding any provision to the contrary
contained in this Article II, in the event a remedy at law for a breach of any
provision would be inadequate, the non-breaching party shall be entitled to
seek temporary or permanent injunctive relief.
12. GENERAL PROVISIONS
12.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of
this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants.
12.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions
will be issued, if at all, at such time and in such manner as Buyer
determines with prior notice, if possible, given to Sellers. Unless
consented to by Buyer in advance or required by Legal Requirements, prior to
the Closing Sellers shall, and shall cause the Company to, keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Sellers and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for
any such communication.
12.3 Confidentiality. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause
the directors, officers, employees, agents, and advisors of Buyer and the
Company to maintain in confidence, any written, oral, or other information
obtained in confidence, any written oral, or other information obtained in
confidence from another party or the Company in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no
fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval
required for the consummation of the Contemplated Transactions, or (c) the
furnishing or use of such information is required by or necessary or
appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
12.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested,
or (c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by notice to
the other parties):
The Company or Sellers:
Drake Management Services, Inc.
6263 North Scottsdale Road
Suite 210
Scotsdale, Arizona 85250
Facsimile: (602) 951-9372
with a copy to:
Bonn, Luscher, Padden & Wilkins
805 North Second Street
Phoenix, Arizona 85004
Attn: Jon D. Ehlinger
Facsimile: (602) 254-0656
Buyer:
Morrison Health Care, Inc.
Suite 400
1955 Lake Park Drive, S.E.
Smyrna, Georgia 30080-3300
Attn: General Counsel
Facsimile: (770) 437-3342
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn.: Thomas R. McNeill, Esq.
Facsimile: (404) 572-6999
12.5 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things,
all as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
12.6 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
12.7 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated December 5,
1997) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not be amended except by a written agreement executed by the party to be
charged with the amendment.
12.8 Disclosure Letter.
(a) The disclosures in the Disclosure Letter must relate only
to the representations and warranties in the Section of the Agreement to
which they expressly relate and not to any other representation or warranty
in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect
to a specifically identified representation or warranty), the statements in
the body of this Agreement will control.
12.9 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer may assign any of its rights
under this Agreement to any subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
12.10 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.11 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or number, as
the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
12.12 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.13 Governing Law. This Agreement will be governed by the laws of
the State of Arizona without regard to conflicts of laws principles.
12.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
MORRISON HEALTH CARE, INC.
By: /s/ Glenn Davenport
--------------------------
Name: Glenn Davenport
Title: President & CEO
THE COMPANY:
DRAKE MANAGEMENT SERVICES, INC.
By: /s/ Richard Drake
--------------------------
Name: Richard Drake
Title: President
SELLERS:
Richard Drake
----------------------------------------
Drake Family Revocable Trust, Richard
or Dianne Drake Trustee under agreement
dated September 17, 1991
By: Richard Drake, Trustee
/s/ Richard Drake
------------------------------
RICHARD DRAKE
/s/ Dianne L. Drake
------------------------------
DIANNE DRAKE
/s/ Philippe Michelin
------------------------------
PHILIPPE MICHELIN
EXHIBIT 10.35
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made this 20th day
of March, 1998, by Morrison Health Care, Inc., a Georgia corporation (the
"Buyer") and Spectra Services, Inc., a Delaware corporation (the "Company").
RECITALS
The Company desires to sell, and Buyer desires to purchase,
substantially all of the assets of the Company and the business as a going
concern (collectively, the "Business"), for the consideration and on the
terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article 1:
"Accounts Receivable" - as defined in Section 3.6.
"Affiliate" - with respect to an individual, any family member, any
Person that is directly or indirectly controlled by such individual or such
individual's family members, or any Person with respect to which such
individual, or a member of such individual's family, serves as a director,
officer, partner, executor, or trustee (or similar capacity, and with respect
to any Person other than an individual, any person that controls, is
controlled by or under common control with such Person, and each Person that
serves as a director, officer, partner, executor or trustee (or similar
capacity) of such Person.
"Agreement" - as defined in the Preamble.
"Applicable Contract" - any Contract (a) under which the Business has
or may acquire any rights, (b) under which the Business has or may become
subject to any obligation or liability, or (c) by which the Business or any
of the Assets is or may become bound.
"Assets" - shall mean all of the assets of the Business including,
without limitation,
(a) The Company's leasehold interests in any buildings,
facilities and other structures or improvements located at or related to the
Business;
(b) All machinery, equipment, office furniture and tools,
leasehold improvements and other tangible personal property owned by the
Company;
(c) All franchises, licenses, permits, consents and
certificates of any regulatory, administrative, or other governmental agency
or body issued to or held by the Company related to the Business;
(d) All contracts, agreements, understandings, contract rights,
license agreements, purchase and sales orders and other executory commitments
of the Company, including, without limitation, all management or service
agreements.
(e) All inventories and supplies located at or related to the
Business;
(f) All customer lists, vendor lists, distributor or agency
agreements, catalogues, and advertising materials owned by the Company;
(g) The Company's books and records related to the Business;
(h) All prepaid items related to the Business that will accrue
to the Company's benefit;
(i) All accounts, notes, and other receivables of the Company
or prepaid accounts or notes, but only to the extent such receivables or
payments relate to services to be provided by the Business from and after the
Effective Date;
(j) The name "Spectra Services;" and
(k) All goodwill relating to the Business;
provided, however, that Assets shall not include any Excluded Assets
held by the Company or any Company Plans.
"Assumed Liabilities" - the liabilities and obligations of the Company
arising from and after the Effective Date under the Applicable Contracts, and
such other liabilities as are set forth in Part 2.2 of the Disclosure Letter.
"Balance Sheet" - as defined in Section 3.3.
"Bill of Sale" - as defined in Section 2.5(a)(i).
"Business" - as defined in the Recitals.
"Buyer" - as defined in the Preamble.
"Buyer's Closing Documents" - as defined in Section 4.2(a).
"Closing" - as defined in Section 2.4.
"Closing Date" - the date and time as of which the Closing actually
takes place.
"Company" - as defined in the Preamble.
"Company Plans" - any (a) "employee welfare benefit plans" and
"employee pension benefit plans" as defined in Section 3(1) and 3(2) of
ERISA; or (b) any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, health, hospitalization, automobile, fringe benefit or
other employee benefit plan or arrangement, whether written or unwritten,
formal or informal, which the Company maintains or to which the Company has
any outstanding present or future obligation to contribute or to make
payments under.
"Company's Closing Documents" - as defined in Section 3.2(a).
"Competing Business" - as defined in Section 3.24.
"Contemplated Transactions" - all of the transactions contemplated by
this Agreement, including: (a) the sale of the Business by the Company to
Buyer; (b) the execution, delivery, and performance of the Employment
Agreements, the Noncompetition Agreements, the Earnout Agreement and the Bill
of Sale; (c) the performance by Buyer and the Company of their respective
covenants and obligations under this Agreement; and (d) Buyer's acquisition
and ownership of the Business.
"Contract" - any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Copyrights" - as defined in Section 3.20(a)(ii).
"CPR" - as defined in Section 11.2(b).
"Damages" - as defined in Section 10.2.
"Disclosure Letter" - the disclosure letter delivered by the Company to
Buyer concurrently with the execution and delivery of this Agreement.
"Dispute" - as defined in Section 11.1.
"Earnout Agreement" - as defined in Section 2.5(a)(v).
"Effective Date" - March 1, 1998, which shall be the effective date of
the Closing.
"Employment Agreements" - as defined in Section 2.5(a)(ii).
"Encumbrance" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right
of first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute
of ownership.
"Environment" - soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins,
and wetlands), groundwaters, drinking water supply, stream sediments, ambient
air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" - any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law including fines,
penalties, financial responsibility for cleanup costs, corrective action,
removal, remedial actions and response actions, and any other compliance,
corrective, investigative or remedial measures required under any
Environmental Law or Occupational Safety and Health Law. The terms
"removal," "remedial," and "response action," include the types of activities
covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA").
"Environmental Law" - any Legal Requirement that requires or relates to
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions that relate to the Environment.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Excluded Assets" - (a) all cash and accounts receivable held by the
Company related to services rendered prior to the Effective Date, (b) all
Company Plans, (c) the microwave, (d) the refrigerator, and (e) pictures and
other personal effects located at the Company's principal place of business
in Naperville, Illinois.
"Facilities" - any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by the Company.
"GAAP" - generally accepted United States accounting principles,
applied on a basis consistent with the basis which the Balance Sheet and
other financial statements referred to in Section 3.3 were prepared.
"Governmental Authorization" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body" - any federal, state, local, municipal, foreign, or
other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).
"Hazardous Materials" - any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or
synthetic substitutes therefor and asbestos or asbestos-containing materials.
"Initial Purchase Price" - as defined in Section 2.3.
"Intellectual Property Assets" - as defined in Section 3.20(a).
"Interest" - shall be the highest one-year rate available at Citibank
for a cash or certificate of deposit account as of the Closing Date to be
applied to the Conditional Sales Price from the Closing Date through the date
that the Conditional Sales Price is paid to the Company.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or other matter; or (b) with respect to an officer or director of a
Person, a prudent individual acting in such capacity could reasonably be
expected to discover or otherwise become aware of such fact or other matter
in the ordinary course of conducting his duties as an officer or director. A
Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has
at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
"Legal Requirement" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"Marks" - as defined in Section 3.20(a)(i).
"Mary Hospital Account" - the Little Company of Mary Hospital
(Evergreen Park, Illinois) account.
"Mediation Request" - as defined in Section 11.2(b).
"Noncompetition Agreements" - as defined in Section 2.5(a)(iii).
"Occupational Safety and Health Law" - any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"Order" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person.
"Organizational Documents" - the articles or certificate of
incorporation and the bylaws of a corporation and any amendment to any of the
foregoing.
"Person" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union, or
other entity or Governmental Body.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative,
or informal) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Purchase Price" - as defined in Section 2.3.
"Release" - any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Replacement" - as defined in Section 11.9.
"Representative" - with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of
such Person, including legal counsel, accountants, and financial advisors.
"Stock Option" - an option to purchase a designated number of shares of
common stock of the Buyer, $.01 par value per share. All Stock Options in
favor of any employee will vest and become fully exercisable on the third
anniversary of the date of grant (provided that the option holder remains an
employee of Buyer at that time) and expire on the earlier of (i) ninety (90)
days following termination of employment, or (ii) the tenth anniversary of
the date of grant. All Stock Options shall have an exercise price equal to
the closing price of Buyer's common stock on the day before the date of
grant; provided that if the day before the date of grant is not a trading
day, the exercise price shall be the closing price of Buyer's common stock on
the last previous trading day prior to the grant.
"Tax" - all tax (including income tax, capital gains tax, value added
tax, sales tax, property tax, gift tax or estate tax), levy, assessment,
tariff, duty, deficiency or other fee and any related charge or amount
(including fine, penalty and interest) imposed, assessed or collected by or
under the authority of any Governmental Body.
"Tax Return" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"Threatened" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances
exist, that would lead a prudent Person acting in the capacity of such Person
to conclude that such a claim, Proceeding, dispute, action, or other matter
is reasonably likely to be asserted, commenced, taken, or otherwise pursued
in the future.
"Trade Secrets" - as defined in Section 3.20(a)(iii).
2. TRANSFER OF ASSETS AND ASSUMED LIABILITIES; CLOSING
2.1 Agreement to Sell and Purchase Assets. Subject to the terms and
conditions of this Agreement, at the Closing, the Company shall sell,
transfer, convey, assign and deliver to Buyer the Assets, and Buyer shall
purchase, acquire and accept from the Company the Assets.
2.2 Assumed Liabilities. Subject to the terms and conditions of this
Agreement, the Company shall transfer and assign to Buyer the Assumed
Liabilities and Buyer shall assume the Assumed Liabilities and only the
Assumed Liabilities.
2.3 Purchase Price. The purchase price (the "Purchase Price") for the
Assets will be (a) $1,100,000 (the "Initial Purchase Price") payable at the
Closing; plus (b) $400,000 on the terms and conditions set forth in Section
2.7 below (the "Conditional Purchase Price"); plus (c) any and all amounts
payable to the Company under the Earnout Agreement; plus or minus (d)
prorations for Assets, Assumed Liabilities, income and expenses as of the
Effective Date.
2.4 Closing. The purchase and sale (the "Closing") provided for in
this Agreement will take place at the offices of Nagle & Higgins, P.C., 1755
Park Street, Suite 360, Naperville, Illinois at 10:00 a.m. (local time) on
March 20, 1998, or at such other time and place as the parties may agree
effective as of the Effective Date. Subject to the provisions of Article 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.4
will not result in the termination of this Agreement and will not relieve any
party of any obligation under this Agreement.
2.5 Closing Obligations. At the Closing:
(a) The Company will deliver to Buyer:
(i) a bill of sale, assignment and assumption agreement
with respect to the Assets and the Assumed Liabilities in the
form of Exhibit 2.5(a)(i) (the "Bill of Sale") executed by the
Company;
(ii) employment agreements in the form of Exhibit
2.5(a)(ii), executed by James W. Hemphill and Mark De Iorio
(collectively, the "Employment Agreements");
(iii) noncompetition agreements in the form of Exhibit
2.5(a)(iii), executed by James W. Hemphill and Mark De Iorio
(collectively, the "Noncompetition Agreements");
(iv) a certificate executed by the Company to the effect
that: (A) each of the Company's representations and warranties
in this Agreement was accurate in all respects as of the date of
this Agreement and is accurate in all respects as of the Closing
Date as if made on the Closing Date; and (B) each of the
covenants and agreements of the Company to be performed prior to
the Closing Date has been duly performed or complied with by the
Company;
(v) the earnout agreement in the form of Exhibit
2.5(a)(v), executed by the Company (the "Earnout Agreement"); and
(vi) the documents contemplated by Section 7.5 hereof; and
(b) Buyer will deliver to the Company:
(i) the Initial Purchase Price, plus or minus such
prorations of Assets, Assumed Liabilities, income and expenses
from the Effective Date to the Closing Date as may reasonably be
determined and agreed to by the parties prior to the Closing
Date, by bank cashier's check or by wire transfer to the accounts
specified by the Company;
(ii) a certificate executed by Buyer to the effect that:
(A) each of Buyer's representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date; and (B) each of the covenants and
agreements of Buyer to be performed prior to the Closing Date has
been duly performed and complied with by Buyer;
(iii) the Bill of Sale, executed by Buyer;
(iv) the Employment Agreements, executed by Buyer;
(v) the Earnout Agreement, executed by Buyer; and
(vi) the documents contemplated by Section 8.4 hereof.
2.6 Post-Closing Purchase Price Adjustment. As soon as practicable
following the Closing Date, but in no event later than thirty (30) days
following the Closing Date, Buyer and the Company shall re-determine all
prorations of Assets, Assumed Liabilities, income and expenses from the
Effective Date to the Closing Date, and shall settle any upward or downward
adjustments in the Purchase Price required by such re-determination. If the
parties cannot reach agreement within such thirty (30) day period, the
dispute shall be settled pursuant to the provisions of Article 11 hereof.
2.7 Conditional Purchase Price Payment. The Conditional Sales Price,
plus Interest thereon, shall be paid by cashiers check or wire transfer to
the Company as follows:
(a) If Little Company Mary Hospital ("Mary Hospital") rescinds
its termination of the Mary Hospital Account on or before June 30, 1998,
within seven (7) days of receipt by the Company of such notice of rescission;
or
(b) If Mary Hospital enters into a new contract for a minimum
term of one (1) year with the Company on or before March 1, 1999, within
seven (7) days of execution of such contract.
If neither of the foregoing events occur, then the Company shall not be
entitled to receive the Conditional Purchase Price.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer as follows:
3.1 Organization and Good Standing.
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under the Applicable Contracts. The
Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which
either the ownership or use of its properties, or the nature of the
activities conducted by it, requires such qualification, which jurisdictions
are set forth on Part 3.1 of the Disclosure Letter.
(b) The Company has delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
(c) The Company has no subsidiaries and no ownership interest
in any Person.
3.2 Authority; No Conflict.
(a) The Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, and upon the execution and delivery by the Company of the
Employment Agreements, the Earnout Agreement, the Bill of Sale and the
Noncompetition Agreements (collectively, the "Company's Closing Documents"),
the Company's Closing Documents will constitute the legal, valid, and binding
obligations of the Company, enforceable against it in accordance with their
respective terms. The Company has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the
Company's Closing Documents and to perform its obligations under this
Agreement and the Company's Closing Documents.
(b) Except as set forth in Part 3.2(b) of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of: (A) any provision of the Organizational Documents of the
Company; or (B) any resolution adopted by the board of directors
or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under any Legal Requirement or any
Order to which the Company or any of the Assets may be subject,
the breach of which would result in Damages to Buyer;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any Governmental Authorization that is held by the
Business or that otherwise relates to any of the Assets;
(iv) cause Buyer or the Business to become subject to, or
to become liable for the payment of, any Tax imposed with respect
to the transfer of the Assets, or otherwise imposed on the
Company;
(v) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; or
(vi) result in the imposition or creation of any
Encumbrance upon or with respect to any of the Assets arising
from any mortgage, lease, contract or other agreement to which
the Company or any of its stockholders is a party.
Except as set forth in Part 3.2(b) of the Disclosure Letter, the
Company is not or will not be required to give any notice to or obtain any
consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 Financial Statements. The Company has delivered to Buyer:
unaudited balance sheets of the Business as at December 31 in each of the
years 1995, 1996 and 1997 and the related unaudited statements of income and
changes in stockholders' equity for each of the fiscal years then ended,
including a balance sheet of the Business as at December 31, 1997 (including
the notes thereto, the "Balance Sheet"), and the related statements of
income, changes in stockholders' equity and cash flow for the year then
ended. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders' equity and
cash flow of the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, with
the following exceptions: (a) there are no notes; (b) there are no accounts
receivable reflected; (c) there is no accrued vacation reflected; and
(d) depreciation is determined on a tax basis. The financial statements
referred to in this Section 3.3 reflect the consistent application of such
accounting principles throughout the periods involved.
3.4 Title to Properties; Encumbrances. Part 3.4 of the Disclosure
Letter contains a complete and accurate list of all leaseholds or other
interests therein owned by the Company. The Company does not own and has
never owned any real property. The Company owns all the Assets (whether
tangible or intangible) including all of the properties and assets reflected
in the Balance Sheet (except for Assets held under capitalized leases
disclosed or not required to be disclosed in Part 3.4 of the Disclosure
Letter and personal property sold since the date of the Balance Sheet in the
Ordinary Course of Business), and all of the properties and assets purchased
or otherwise acquired by the Company since the date of the Interim Balance
Sheet (except for personal property acquired and sold since the date of the
Balance Sheet in the Ordinary Course of Business and consistent with past
practice). All properties and assets reflected in the Balance Sheet are free
and clear of all Encumbrances except for liens for current taxes not yet due.
3.5 Condition and Sufficiency of Assets. Except for the vehicles
which are being conveyed in their "as is" condition, to the Company's
Knowledge, the Assets are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such Assets is
in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. The Assets constitute
every thing that the Company used to conduct the Business.
3.6 Accounts Receivable. All accounts receivable of the Company to
be conveyed herein, if any, relate to services to be provided from and after
the Effective Date.
3.7 Inventory. The only inventory of the Company is miscellaneous
office supplies.
3.8 No Undisclosed Liabilities. Except as set forth in Part 3.8 of
the Disclosure Letter, to the Company's Knowledge, the Company has no
liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities
or obligations reflected or reserved against in the Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the date
thereof.
3.9 Taxes.
(a) The Company has elected and is, and has at all times been
fully eligible to be taxed in accordance with the provisions of subchapter S
of the IRC.
(b) The Company has filed or caused to be filed, on a timely
basis, all Tax Returns that are or were required to be filed by or with
respect to it, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements (all of which returns were true,
correct and complete in all material respects), the failure of which to file
would result in Damages to Buyer. The Company has delivered to Buyer copies
of, and Part 3.9 of the Disclosure Letter contains a complete and accurate
list of, all such Tax Returns filed for the past three years. The Company
has paid, or made provision for the payment of, all Taxes that have or may
have become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by the Company.
(c) Except as described in Part 3.9 of the Disclosure Letter,
the Company has not given or been requested to give waivers or extensions (or
is or would be subject to a waiver or extension given by any other Person) of
any statute of limitations relating to the payment of Taxes of the Company or
for which the Business may be liable.
(d) There exists no proposed tax assessment against the Company
except as disclosed in the Balance Sheet or in Part 3.9 of the Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC has
been filed with respect to any property or assets held, acquired, or to be
acquired by the Company. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person, the breach of which would result in
Damages to Buyer.
3.10 No Material Adverse Change. Since the date of the Balance Sheet,
there has not been any material adverse change in the Business, operations,
properties, Assets, or condition of the Company, and to the Company's
Knowledge, no event has occurred or circumstance exists with respect to the
Contracts or vendor relationships that is reasonably likely to result in such
a material adverse change other than those events which effect the health
care or food service industry as a whole.
3.11 Employee Benefits.
(a) Part 3.11 of the Disclosure Letter contains an accurate and
complete description of, and sets forth the annual amount payable pursuant
to, each Company Plan, whether formal or informal, relating to the Business.
The Company has no commitment, whether formal or informal and whether legally
binding or not, to create any additional such plan or arrangement.
(b) The Assets are not, and the Company does not reasonably
expect them to become, subject to a lien imposed under IRC Section 412 or
ERISA Section 4068.
(c) Neither the Company nor any entity which together with the
Company is required to be treated as a single employer under IRC Section 414
has ever had and neither currently has any obligation to contribute to any
Multi-Employer Plan (as defined in ERISA Section 3(37).
(d) Neither the Company nor any entity which together with the
Company is required to be treated as a single employer under IRC Section 414
has ever maintained and does not currently maintain any Company Plan which is
or was subject to Title IV of ERISA.
(e) The Company and each entity which together with the Company
is required to be treated as a single employer under IRC Section 414 have
complied with the continuation coverage requirements of IRC Section 4980B and
ERISA Sections 601 through 608 and with the portability, access and
renewability provisions of Subtitle K, Chapter 100 of the IRC and Section 701
et seq. of ERISA.
(f) No assets of the Company, including the Assets, have been,
and the Company does not reasonably expect them to be, provided as security
to any Company Plan pursuant to IRC Section 401(a)(29).
(g) The Company has not received any notice of any actions,
audits, or claims pending or to the Company's Knowledge, threatened against
the Assets or the Business with respect to the maintenance of any Company
Plans.
3.12 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.12 of the Disclosure Letter:
(i) the Company is, and at all times since its
incorporation has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or
operation of its Business or the ownership or use of any of the
Assets, the breach of which would result in Damages to Buyer;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or
result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Legal Requirement, or (B) may
give rise to any obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature, the breach of which would result
in Damages to Buyer; and
(iii) the Company has not received, at any time since its
incorporation, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Part 3.12 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company
or that otherwise relates to the Business or to the Assets. Each
Governmental Authorization listed or required to be listed in Part 3.12 of
the Disclosure Letter is valid and in full force and effect. Except as set
forth in Part 3.12 of the Disclosure Letter:
(i) the Company is, and at all times since its
incorporation has been, in full compliance with all of the terms
and requirements of each Governmental Authorization identified or
required to be identified in Part 3.12 of the Disclosure Letter,
the breach of which would result in Damages to Buyer;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.12 of the
Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination
of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.12 of the Disclosure Letter,
the breach of which would result in Damages to Buyer;
(iii) the Company has not received, at any time since its
incorporation, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to
be listed in Part 3.12 of the Disclosure Letter have been duly
filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to
such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies, the breach of
which would result in Damages to Buyer.
The Governmental Authorizations listed in Part 3.12 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate the Business
in the manner it currently conducts and operates the Business and to permit
the Company to own and use the Assets in the manner in which it currently
owns and uses such Assets.
3.13 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.13 of the Disclosure Letter,
the Company has not received any notice of any pending Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the Business or the
Assets; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
To the Company's Knowledge, (1) no such Proceeding has been Threatened,
and (2) no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such Proceeding. The Company has
delivered to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.13 of the Disclosure
Letter. The Proceedings listed or required to be listed in Part 3.13 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, or condition, of the Company, the Business or the Assets.
(b) Except as set forth in Part 3.13 of the Disclosure Letter:
(i) No Order has been received by the Company that
relates to the Business or any of the Assets; and
(ii) to the Company's Knowledge, no officer, director,
agent, or employee of the Company is subject to any Order that
prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice
relating to the Business.
3.14 Absence of Certain Changes and Events. Except as set forth in
Part 3.14 of the Disclosure Letter, since the date of the Balance Sheet, the
Company has conducted its business only in the Ordinary Course of Business
and there has not been any:
(a) amendment to the Organizational Documents of the Company;
(b) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(c) adoption of, or increase in the payments to or benefits
under, any Company Plan;
(d) damage to or destruction or loss of any personal property
of the Company, whether or not covered by insurance, materially and adversely
affecting the properties, Assets, Business, or financial condition of the
Company;
(e) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $5,000;
(f) sale, lease, or other disposition of any asset or property
of the Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any asset or property of the Company;
(g) cancellation or waiver of any claims or rights with a value
to the Company in excess of $5,000;
(h) change in the accounting methods used by the Company; or
(i) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.15 Contracts; No Defaults.
(a) Part 3.15(a) of the Disclosure Letter contains a complete
and accurate list, and the Company have delivered to Buyer true and complete
copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Business of an
amount or value in excess of $5,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Business of an
amount or value in excess of $5,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts of the Business in excess of $5,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $5,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of the
Business or limit the freedom of the Business to engage in any
line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an
express undertaking by the Business to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $5,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.15(b) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.15(a)
of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(c) Except as set forth in Part 3.15(c) of the Disclosure
Letter:
(i) the Company is, and at all times has been, in
material compliance with all applicable terms and requirements of
each Contract under which it has or had any obligation or
liability or by which it or any of the assets owned or used by it
is or was bound, and any material non-compliance has been cured;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or had
any rights is, and at all times has been, in material compliance
with all applicable terms and requirements of such Contract, and
any previous non-compliance has been cured;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received from any
other Person, at any time, any notice or other communication
(whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under,
any Contract.
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and, to the
Knowledge of the Company, no such Person has made written demand for such
renegotiation.
3.16 Insurance. Except as set forth on Part 3.16 of the Disclosure
Letter:
(a) All policies to which the Company is a party or that
provide coverage to the Company: (i) are, to the Company's Knowledge, valid,
outstanding, and enforceable; (ii) are, to the Company's Knowledge, issued by
an insurer that is financially sound and reputable; (iii) to the Company's
Knowledge, provide adequate insurance coverage for the Assets and the
Business of the Company for all risks normally insured against by a Person
carrying on the same business as the Company; (iv) are sufficient for
compliance with all Legal Requirements and Contracts to which the Company is
a party or by which it is bound, the breach of which would result in Damages
to Buyer; and (v) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company.
(b) The Company has not received (i) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or
(ii) any notice of cancellation or any other indication that any insurance
policy is no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its obligations
thereunder.
(c) The Company has paid all premiums due, and to the Company's
Knowledge has otherwise performed its obligations, under each policy to which
it is a party or that provides coverage to the Company.
(d) The Company has given notice to the insurer of all known
claims that may be insured thereby.
3.17 Environmental Matters. Except as set forth in part 3.17 of the
Disclosure Letter:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. The Company has no basis to expect, nor has it or any
other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with any Environmental
Law, or of any actual or Threatened obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets used by the Company.
(b) There are no pending or, to the Company's Knowledge,
Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any
of the Facilities or any other properties and assets used by the Company.
(c) The Company has not received nor has any basis to expect,
any citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of
any alleged, actual, or potential obligation to undertake or bear the cost of
any Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets used by the Company, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the
Company, or any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) The Company has no Environmental, Health, and Safety
Liabilities with respect to the Facilities.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Knowledge of the
Company, threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets used by the Company.
(g) The Company has delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by the Company pertaining to Hazardous Materials in, on, or
under the Facilities, or concerning compliance by the Company.
3.18 Employees.
(a) Part 3.18 of the Disclosure Letter contains: (i) a
complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or
layoff status: employer name; job title; current compensation paid or payable
and any change in compensation since January 1, 1996; and (ii) a list of all
written contracts of employment with the Company.
(b) To the Company's Knowledge, no employee or director of the
Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any employment, confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of
the Company, or (ii) the ability of the Company to conduct its business,
including any Proprietary Rights Agreement with the Company by any such
employee or director. To the Company's Knowledge, no account managers of the
Business nor James Hemphill, Mark De Iorio or Elizabeth Kolkman intends not
to accept employment with the Buyer following the Closing.
(c) There are no retired employees or directors of the Company.
3.19 Labor Relations; Compliance. The Company has not been in the
past and is not now a party to any collective bargaining or other labor
Contract. There has not been, there is not presently pending or existing,
and to the Company's Knowledge there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting the Company relating to the alleged violation
of any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor
or employment dispute against or affecting the Company or its premises, the
breach of which would result in Damages to Buyer, or (c) any application for
certification of a collective bargaining agent. To the Company's Knowledge,
no event has occurred or circumstance exists that could provide the basis for
any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company.
The Company has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closing where
the failure of such compliance would have an adverse effect on the Buyer.
The Company is not liable for the payment of any compensation, damages,
taxes, fines, penalties, or other amounts, however designated, for failure to
comply with any of the foregoing Legal Requirements where the failure of such
compliance would result in Damages to Buyer.
3.20 Intellectual Property.
(a) Intellectual Property Assets. The term "Intellectual
Property Assets" includes:
(i) the name "Spectra Services, Inc.", all fictional
business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively,
"Marks");
(ii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iii) all know-how, trade secrets, confidential
information, customer lists, software, recipes, technical
information, data, process technology, plans, drawings, and blue
prints (collectively, the "Trade Secrets"); owned, used, or
licensed by the Company as licensee or licensor.
(b) Agreements. Part 3.20(b) of the Disclosure Letter contains
a complete and accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which Company is a party or by which any
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $5,000 under which the Company is the licensee. There are
no outstanding and, to the Company's Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business. The Intellectual
Property Assets are all those used in the operation of the Business as it is
currently conducted. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, free and clear
of all liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a third party all
of the Intellectual Property Assets.
(d) Patents. The Company does not own any patents.
(e) Trademarks. Other than a common-law trademark in the name
"Spectra Services," the Company does not own any trademarks.
(f) Copyrights. The Company does not own any Copyrights.
(g) Trade Secrets.
(i) The Company has taken reasonable precautions to
protect the secrecy, confidentiality and value of its Trade
Secrets.
(ii) To the Company's Knowledge, the Company has good
title and an absolute (but not necessarily exclusive) right to
use the Trade Secrets. To the Company's Knowledge, the Trade
Secrets are not part of the public knowledge or literature, and,
to the Company's Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person or to the
detriment of the Company. To the Company's Knowledge, no Trade
Secret is subject to any adverse claim or has been challenged or
threatened in any way.
3.21 Certain Payments. Except as set forth in Part 3.21 of the
Disclosure Letter, since the Company's incorporation, neither the Company nor
any director, officer, agent, or employee of the Company, or any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made, directly or indirectly, any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services, in violation of any Legal Requirement with respect to federal or
state laws, rules or regulations relating to payments to or from health care
providers or financial reporting or accounting requirements in connection
therewith including without limitation applicable medicare and medicaid laws,
rules and regulations, the breach of which would result in Damages to Buyer,
(b) received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits from any vendor,
governmental employee or other Person with whom the Company has done
business, directly or indirectly, which would reasonably be expected to
subject the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, or (c) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.22 Fraud and Abuse; Financial Relationships. The Company does not
have any government contract, and the Company has not made any claims
relating to Medicare, Medicaid CHAMPUS or other governmental reimbursements.
3.23 Disclosure.
(a) To the Company's Knowledge, no representation or warranty
of the Company in this Agreement and no statement in the Disclosure Letter
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.6 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) To the Company's Knowledge, there is no fact that has
specific application to the Company (other than general economic or industry
conditions) that materially adversely affects the Assets, Business, financial
condition, or results of operations of the Company (on a consolidated basis)
that has not been set forth in this Agreement or the Disclosure Letter.
3.24 Relationships with Related Persons. Except for the microwave,
refrigerator, pictures and other personal effects located at the principal
office of the Company, neither the Company nor any Affiliate of the Company
has, or in the past three (3) years has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used
in or pertaining to the Business. Neither the Company nor any Affiliate of
the Company owns, or in the past three years has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit
interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company, or (ii) engaged in
competition with the Company with respect to any line of the products or
services of the Company (a "Competing Business") in any market presently
served by the Company except for less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
Part 3.23 of the Disclosure Letter, neither the Company nor any Affiliate of
the Company is a party to any Contract with, or has any claim or right
against, the Company.
3.25 Brokers or Finders. The Company and its Representatives have
incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in
connection with the Contemplated Transactions.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Georgia.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Earnout Agreement, the
Employment Agreements, the Bill of Sale and the Noncompetition Agreements
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing
Documents will constitute the legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms. Buyer
has the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Part 4.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
will give any Person the right to prevent, delay, or otherwise interfere with
any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or
the shareholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which
Buyer may be bound.
Except as set forth in Part 4.2 of the Disclosure Letter, Buyer is not
and will not be required to obtain any consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 Certain Proceedings. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has
been Threatened.
4.4 Brokers or Finders. Buyer and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with the
Contemplated Transactions.
5. COVENANTS OF THE COMPANY
5.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, the Company will, and will cause its Representatives to,
(a) afford Buyer and its Representatives full and free access to the
Company's properties, contracts, books and records, and other documents and
data at the Company's principal office in Naperville, Illinois, (b) furnish
Buyer and it Representatives with copies of all such contracts, books and
records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and its Representatives with such additional
financial, operating, and other data and information as Buyer may reasonably
request.
5.2 Operation of the Businesses of the Company. Between the
Effective Date and the Closing Date, the Company will:
(a) conduct the Business only in the Ordinary Course of
Business;
(b) use its good faith efforts to preserve intact the current
business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) upon request of Buyer, report to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 No Distributions. Prior to the Closing, the Company shall not
make or declare any dividend or distribution to any of its stockholders, or
grant or declare any raises or bonuses to any employee of the Company, except
in the Ordinary Course of Business, and except for any distributions to Mr.
Hemphill of cash (which cash would otherwise constitute an Excluded Asset) in
the form of salary or dividends. Following the Closing, the Company may make
distributions of the Purchase Price, provided, however, that if the Company
distributes some or all of the Purchase Price to its shareholder, the
shareholder shall reimburse the Company for the amount of said distributions
as may be necessary in order for the Company to pay any amounts due to Buyer
pursuant to this Agreement.
5.4 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company will not, without the prior consent of Buyer, take any affirmative
action, or fail to take any reasonable action within its control, as a result
of which any of the changes or events listed in Section 3.12 is likely to
occur.
5.5 Required Approvals. As promptly as practicable after the date of
this Agreement, the Company will make all filings required by Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, the
Company will (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Buyer in obtaining
all consents identified in Part 4.2 of the Disclosure Letter; provided that
this Agreement will not require the Company to dispose of or make any change
in any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
5.6 Notification. Between the date of this Agreement and the Closing
Date, the Company will promptly notify Buyer in writing if it becomes aware
of any fact or condition that causes or constitutes a Breach of any of the
Company's representations and warranties as of the date of this Agreement, or
if the Company becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. During the
same period, the Company will promptly notify Buyer of the occurrence of any
Breach of any covenant of the Company in this Article 5 or of the occurrence
of any event that may make the satisfaction of the conditions in Article 7
impossible or unlikely.
5.7 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, the Company will cause all indebtedness owed to
the Company by the Company or any Affiliate of the Company to be paid in full
prior to its due date.
5.8 Name Change. As soon as reasonable practicable following the
Closing, the Company shall change its name to a name not containing the word
"Spectra" or any word or phrase substantially similar to "Spectra" or
"Spectra Services."
5.9 No Negotiation. Until the earlier of April 15, 1998 or such date
on which Buyer notifies the Company that it has abandoned the Contemplated
Transactions, the Company shall deal exclusively with Buyer with respect to
the Contemplated Transactions and the Company will not, and will direct its
representatives not to, (a) solicit the submission of proposals or offers
from any person relating to any acquisition or purchase of all or any
material part of the assets or stock of the Company or any merger,
consolidation or similar transaction with respect to the Company;
(b) participate in any discussions or negotiations regarding, or furnish any
information to any other person other than the Company with respect to such
possible transaction, or (c) enter into any agreement or understanding,
whether oral or in writing, that would prevent the consummation of the
Contemplated Transactions. If, notwithstanding the foregoing, the Company
should receive any such proposal from a third party or any inquiry regarding
any such proposal, the Company shall promptly inform Buyer thereof.
6. COVENANTS OF BUYER
6.1 Required Approvals. As promptly as practicable after the date of
this Agreement, Buyer will make all filings required by Legal Requirements to
be made by it to consummate the Contemplated Transactions. Between the date
of this Agreement and the Closing Date, Buyer will, (a) cooperate with the
Company with respect to all filings that the Company is required by Legal
Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with the Company in obtaining all consents identified in Part
3.2 of the Disclosure Letter; provided that this Agreement will not require
Buyer to dispose of or make any change in any portion of its business or to
incur any other burden to obtain a Governmental Authorization.
6.2 Employment Matters.
(a) All employees of the Company who accept Buyer's offer of
employment shall be eligible for participation in Buyer's employee benefit
programs on the same terms and conditions as similarly situated persons and
will receive credit for service with the Company prior to the Closing for
participation and vesting purposes under Buyer's employee benefit programs
and for purposes of determining paid-time off benefits and matching
contributions under the Morrison Health Care, Inc. Salary Deferral Plan and
the Morrison Health Care, Inc. Deferred Compensation Plan.
(b) Each full time employee of the Company who accepts
employment with Buyer (other than Mr. DeIorio and Mr. Hemphill) shall enter
into an employment agreement with Buyer pursuant to which, among other
things, such individuals shall receive a Stock Option to purchase two hundred
(200) shares of Buyer's Common Stock upon the Closing. Mr. De Iorio and Mr.
Hemphill shall receive Stock Options to purchase that number of shares of
Buyer's Common Stock as set forth in their respective Employment Agreements.
6.3 Post Closing Covenants. Buyer agrees to assume all of the
Assumed Liabilities from and after the Closing Date.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Business and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations. All of the Company's
representations and warranties in this Agreement (considered collectively),
and each of these representations and warranties (considered individually),
must have been accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as of the Closing
Date as if made on the Closing Date.
7.2 The Company's Performance.
(a) All of the covenants and obligations that the Company is
required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.5(a) must have been delivered.
7.3 Due Diligence. Buyer shall have completed its due diligence
inquiry into the business, affairs and financial condition of the Company.
7.4 Consents. Each of the consents identified in Part 3.2 of the
Disclosure Letter, and each consent identified in Part 4.2 of the Disclosure
Letter, must have been obtained and must be in full force and effect.
7.5 Additional Documents. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Nagle & Higgins, P.C., dated the Closing
Date, in the form of Exhibit 7.4(a);
(b) estoppel certificates executed on behalf of the landlord
dated as of a date not more than twenty (20) days prior to the Closing Date,
in the form of Exhibit 7.4(b);
(c) such other documents as Buyer may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4 (ii) evidencing the accuracy of any of the Company's
representations and warranties, (iii) evidencing the performance by the
Company of, or the compliance by either the Company with, any covenant or
obligation required to be performed or complied with by it, (iv) evidencing
the satisfaction of any condition referred to in this Section 7, or (v)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.6 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.7 No Claim Regarding Stock Ownership or Sale Proceeds. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to
all or any portion of the Initial Purchase Price payable for the Business.
7.8 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated
with Buyer to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise formally proposed by or
before any Governmental Body.
8. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
The Company's obligation to sell the Assets of the Business and to take
the other actions required to be taken by the Company at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Company, in whole or
in part):
8.1 Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the documents required to
be delivered by Buyer pursuant to Section 2.5(b) and must have made the cash
payments required to be made by Buyer pursuant to Section 2.5(b)(i).
8.3 Consents. Each of the consents identified in Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and
effect.
8.4 Additional Documents. Buyer must have caused the following
documents to be delivered to the Company;
(a) an opinion of Powell, Goldstein, Frazer & Murphy LLP dated
the Closing Date, in the form of Exhibit 8.4(a);
(b) stock option agreements executed by Buyer in the form of
Exhibit 8.4(b) with all employees of the Company (other than Mr. De Iorio and
Mr. Hemphill) who accept employment with Buyer; and
(c) such other documents as the Company may reasonably request
for the purpose of (i) enabling their counsel to provide the opinion referred
to in Section 7.5(a), (ii) evidencing the accuracy of any representation or
warranty of Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be performed
or complied with by Buyer, (iv) evidencing the satisfaction of any condition
referred to in this Section, or (v) otherwise facilitating the consummation
of any of the Contemplated Transactions.
8.5 No Injunction. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the sale of the Business
by the Company to Buyer, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or the Company if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) by Buyer if any of the conditions in Section 7. CONDITIONS
PRECEDENT TO BUYER'S OBLIGATION TO CLOSE has not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Buyer to comply with its obligations under
this Agreement) and Buyer has not waived such condition on or before the
Closing Date;
(c) by the Company, if any of the conditions in Section 8.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE has not been
satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of the Company to comply
with its obligations under this Agreement) and the Company has not waived
such condition on or before the Closing Date;
(d) by mutual consent of Buyer and the Company; or
(e) by either Buyer or the Company if the Closing has not
occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on
or before April 30, 1998, or such later date as the parties may agree upon.
9.2 Effect of Termination. Each party's right of termination under
Section 9.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated: is in addition to any other rights it may
have under this Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1 Termination Events. This Agreement may, by
notice given prior to or at the Closing, be terminated:, all further
obligations of the parties under this Agreement will terminate, except that
the obligations in Sections 12.1 and 12.2 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification Not Affected by
Investigation. All representations, warranties, covenants, and obligations
in this Agreement, the Disclosure Letter, and any other certificate or
document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected
by any investigation conducted with respect to the accuracy or inaccuracy of
or compliance with, any such representation, warranty, covenant, or
obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment
of Damages, or other remedy if such representations or warranties prove to be
inaccurate, or if such covenants and obligations prove to be nonfulfilled.
10.2 Indemnification and Payment of Damages by the Company. The
Company will indemnify and hold harmless Buyer for, and will pay to the Buyer
the amount of, any loss, liability, claim, damage, or expense (including
costs of investigation and defense and reasonable attorneys' fees), whether
or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by the
Company in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by the
Company pursuant to this Agreement;
(b) any Breach of any representation or warranty made by the
Company in this Agreement as if such representation or warranty were made on
and as of the Closing Date;
(c) any Breach by the Company of any covenant or obligation of
the Company in this Agreement;
(d) any services provided by the Company prior to the Closing
Date; or
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Company (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions.
10.3 Indemnification and Payment of Damages by the Company -
Environmental Matters. In addition to the provisions of Section 10.2, the
Company will indemnify and hold harmless Buyer for, and will pay to Buyer
the amount of, any Damages (including costs of cleanup, containment, or
other remediation) arising, directly or indirectly, from or in connection with
any Environmental, Health, and Safety Liabilities arising out of or relating
to: (i) (A) the ownership, operation, or condition at any time on or prior
to the Closing Date of any properties and assets used by the Company, or any
Hazardous Materials or other contaminants that were present on such properties
and assets at any time on or prior to the Closing Date; or (ii) any Hazardous
Materials or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released, or otherwise
handled by the Company or by any other Person for whose conduct they are or
may be held responsible at any time on or prior to the Closing Date.
10.4 Indemnification and Payment of Damages by the Company -
Liabilities which are not Assumed Liabilities. Notwithstanding anything to
the contrary contained herein, (a) the Company will indemnify and hold
harmless Buyer for, and will pay Buyer the amount of, any Damages arising
from liabilities or obligations of the Company which are not Assumed
Liabilities, and (b) such indemnification shall not be limited in time or
amount or subject to any deductible or cap.
10.5 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless the Company, and will pay to the Company the
amount of any Damages arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by the
Company in the Agreement as if such representation or warranty were made on
and as of the Closing Date;
(c) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement;
(d) any services provided by the Buyer from and after the
Closing Date;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions;
(f) any liabilities or obligations of the Buyer; or
(g) the Assumed Liabilities.
10.6 Limitations on Indemnification. Notwithstanding the provisions
of Sections 10.2, 10.3, 10.4, and 10.5 hereof, a party shall not be entitled
to be indemnified to the extent:
(a) that such party acted in bad faith with respect to a claim
or failed to reasonably attempt to mitigate damages with respect to a claim;
(b) that such party receives indemnity and collects for any
Damages under the terms of any insurance policy then in force; or
(c) of the net amount of any income tax deduction available to
such party in the year in which the claim is made or any previous year.
10.7 Time Limitations. If the Closing occurs, the Company will have
no liability (for indemnification or otherwise) for a claim with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Sections 3.4,
3.9, 3.11 (with respect to matters other than Tax), 3.17, 3.21 and 3.22
unless on or before the third anniversary of the Closing Date Buyer
notifies the Company of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by Buyer; a claim with respect
to Sections 3.9 or 3.11, shall be made within the applicable statute of
limitation for Tax matters; a claim with respect to Sections 3.21 or 3.22
shall be made within the applicable statute of limitations, provided, however,
that in no event may such a claim be brought after the seventh anniversary
of the Closing Date; a claim with respect to Sections 3.4, 3.17, or a claim
for indemnification or reimbursement based upon any covenant or obligation to
be performed and complied with after the Closing Date, may be made at any time.
If the Closing occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date,
unless on or before the third anniversary from the Closing Date, the Company
notifies Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by the Company, provided, however,
that a claim for indemnification under Section 10.5(f) or (g) shall not be
limited in time or amount or subject to any deductible or cap.
10.8 Limitations on Amount - the Company.
(a) The Company will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a), clause
(b) or, to the extent relating to any failure to perform or comply prior to
the Closing Date, clause (c) of Section 10.2 and Section 10.3 until the total
of all Damages with respect to such matters exceeds $15,000, and then only for
the amount by which such Damages exceed $15,000. However, this Section
10.8(a) will not apply to any intentional Breach by the Company of any
representation, warranty, covenant or obligation contained in this
Agreement, and the Company will be liable for all Damages with respect to
such Breaches.
(b) The maximum liability the Company shall have under Section
10.2 shall be the $500,000; provided, however, that the foregoing limitation
shall not apply to any intentional Breach by the Company of any
representation, warranty, covenant or obligation contained in this Agreement,
and the Company will be liable for all Damages with respect to such Breaches.
10.9 Limitations on Amount - Buyers. Buyer will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause (a) or (b) or, to the extent relating to any failure to perform or
comply prior to the Closing Date, clause (c) of Section 10.5 until the total
of all Damages with respect to such matters exceeds $15,000, and then only
for the amount by which such Damages exceed $15,000. However, this Section
10.9 will not apply to any intentional Breach by Buyer of any representation,
warranty, covenant or obligation contained in this Agreement, and Buyer will
be liable for all Damages with respect to such Breaches.
10.10 Procedure For Indemnification - Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 10.2, 10.4, 10.5 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party
of the commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may
have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.10(a) is brought
against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines
in good faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of
such Proceeding with counsel satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party
will not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense
of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made
in that Proceeding are within the scope of and subject to indemnification; ii)
no compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding
or admission of any violation of Legal Requirements or any violation of the
rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to
an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound
by any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result
of monetary damages for which it would be entitled to indemnification under
this Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
Proceeding, but the indemnifying party will not be bound by any determination
of a Proceeding so defended or any compromise or settlement effected without
its consent (which may not be unreasonably withheld).
10.11 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.12 Exclusive Remedy. The remedies provided in this Article 10 shall
be exclusive of and limit any other remedies that may be available at law or
in equity.
11. DISPUTE RESOLUTION
11.1 Dispute Defined. As used in this Agreement, "Dispute" shall mean
any dispute or disagreement between the Buyer and the Company concerning the
interpretation of this Agreement, the validity of this Agreement, any breach
or alleged breach by any party under this Agreement or any other matter
relating in any way to this Agreement.
11.2 Dispute Resolution Procedures.
(a) If a Dispute arises, the parties shall follow the
procedures specified in this Article 11. The parties shall promptly attempt
to resolve any Dispute by negotiations between themselves. Either Buyer or
the Company may give the other party written notice of any Dispute not
resolved in the normal course of business. The parties shall meet at a
mutually acceptable time and place within fifteen (15) calendar days after
delivery of such notice, and thereafter as often as they reasonably deem
necessary, to exchange relevant information and to attempt to resolve the
Dispute. If the Dispute has not been resolved by the parties within thirty
(30) calendar days of the disputing party's notice, or if the parties fail to
meet within such fifteen (15) calendar days, either Buyer or the Company may
initiate mediation as provided in Section 11.2(b) of this Agreement. If a
negotiator intends to be accompanied at a meeting by legal counsel, the other
negotiator shall be given at least three (3) business days' notice of such
intention and may also be accompanied by legal counsel.
(b) If the Dispute is not resolved by negotiations pursuant to
Section 11.2(a), the parties shall attempt in good faith to resolve any such
Dispute by nonbinding mediation. Either Buyer or the Company may initiate
a nonbinding mediation proceeding by a request in writing to the other party
(the "Mediation Request"), and both parties will then be obligated to engage
in a mediation. The proceeding will be conducted in accordance with the then
current Center for Public Resources ("CPR") Model Procedure for Mediation of
Business Disputes, with the following exceptions:
(i) if the parties have not agreed within thirty (30)
calendar days of the Mediation Request on the selection of a
mediator willing to serve, CPR, upon the request of either Buyer
or the Company, shall appoint a member of the CPR Panels of
Neutrals as the mediator, and
(ii) efforts to reach a settlement will continue until the
conclusion of the proceedings, which shall be deemed to occur
upon the earliest of the date that: (A) a written settlement is
reached, or (B) the mediator concludes and informs the parties in
writing that further efforts would not be useful, or (C) the
parties agree in writing that an impasse has been reached, or (D)
a period of sixty (60) calendar days has passed since the
Mediation Request and none of the events specified in the
foregoing clauses (A), (B) or (C) has occurred. No party may
withdraw before the conclusion of the proceeding.
(c) If a Dispute is not resolved by negotiation pursuant to
Section 11.2(a) of this Agreement or by mediation pursuant to Section 11.2(b)
of this Agreement within one hundred (100) calendar days after initiation of
the negotiation process pursuant to Section 11.2(a), such Dispute and any other
claims arising out of or relating to this Agreement shall be resolved pursuant
to Section 12.2(d).
(d) The parties shall submit the dispute to binding arbitration
in accordance with the following procedures:
(i) Any arbitration proceeding shall take place in
Nashville, Tennessee, and shall be conducted in accordance with
the then current rules of the Nashville Chapter of the American
Arbitration Association.
(ii) The parties shall have ten (10) days after the first
to occur of the events in Sections 11.2(b)(ii) (B), (C) or (D) or
Section 11.2(c) to agree upon an arbitrator to conduct such
proceeding. If the parties fail to so agree within such ten (10)
day period, then within five (5) days after the end of such ten
(10) day period, each party shall select an arbitrator and,
within ten (10) days after the end of such five (5) day period,
such two (2) arbitrators shall select a third arbitrator. Each
arbitrator shall have professional experience relating to the
business, accounting or legal aspects of the subject of the
arbitration. No arbitrators shall have any material interest in
the result of the arbitration or be, or shall ever have been, an
affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant, for any Party to such
arbitration proceeding.
(iii) Each arbitration proceeding shall start as soon as
reasonably practical after the selection of the arbitrator(s).
Specific timing, including the setting of the dates for hearings,
shall be subject to the mutual agreement of each party, including
the arbitrator(s); provided, however, that if agreement cannot be
reached within a reasonable time, the arbitrator(s) shall have
the sole authority to settle all timing issues after taking into
account the needs of each party to prepare for, resolve and
dispose of the matter as soon as reasonably practicable.
(iv) The decision of the arbitrator or, if there are three
(3) arbitrators, the decision of any two (2) arbitrators, shall
be final and binding upon the Parties, and judgment may be
entered upon any such decision in any court having jurisdiction.
(v) Except as otherwise specifically provided herein, all
costs incurred in connection with any arbitration proceeding,
including the American Arbitration Association fees, the
arbitrator(s) fees, the cost of using any facilities for the
arbitration hearings and the reasonable fees and expenses of
expert witnesses, legal counsel and accountants of the prevailing
party may be included in whole or in part in the award to be paid
by the non-prevailing party.
11.3 Provisional Remedies. At any time during the procedures
specified in Sections 11.2(a) and 11.2(b) of this Agreement, a party may seek a
preliminary injunction or other provisional judicial relief in its judgment such
action is necessary to avoid irreparable damage or to preserve the status quo.
Despite such action, the parties will continue to participate in good faith in
the procedures specified in Section 11.2(a) and 11.2(b).
11.4 Tolling Statute of Limitations. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while
the procedures specified in Sections 11.2(a) and 11.2(b)of this Agreement are
pending. The parties will take such action, if any, as is required to
effectuate such tolling.
11.5 Performance to Continue. Each party shall continue to perform
its or his obligations under this Agreement and the Earnout Agreement pending
final resolution of any Dispute.
11.6 Extension of Deadlines. All deadlines specified in this Article
11 may be extended by mutual agreement between the parties.
11.7 Enforcement. The parties regard the obligations in this Article
11 to constitute an essential provision of this Agreement and one that is
legally binding on them. In case of a violation of the obligations in this
Article 11 by either Buyer or the Company, the other party may bring an
action to seek enforcement of such obligations in the United States District
Court for the Middle District of Tennessee.
11.8 Costs. The parties shall pay their own costs, fees, and expenses
incurred in connection with the application of the provisions of sections
11.2(a) and 11.2(b) of this Agreement. In addition, the fees and expenses of
CPR and the mediator in connection with the application of the provisions of
Section 11.2(b) of this Agreement shall be borne fifty percent (50%) by the
Buyer and fifty percent (50%) by the Company.
11.9 Replacement. If CPR is no longer in business or is unable or
refuses or declines to act or to continue to act under Section 11.2(b) of this
Agreement. for any reason, then the functions specified in Section 11.2(b) to
be performed by CPR shall be performed by another Person engaged in a business
environment to that conducted by the CPR as is agreed upon by the Parties (the
"Replacement"). If the parties cannot agree on the identity of the Replacement
within ten (10) calendar days, after a Request, the Replacement shall be
selected by the Chief Judge of the United States District Court for the
Northern District of Georgia upon application. If a Replacement is selected
by either means, Section 11.2(b) shall be deemed appropriately amended to refer
to such Replacement.
12. GENERAL PROVISIONS
12.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of
this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants.
12.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions
will be issued, if at all, at such time and in such manner as Buyer
determines. Unless consented to by Buyer and the Company in advance or
required by Legal Requirements, prior to the Closing the parties shall keep
this Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person other than their representatives. The Company and
Buyer will consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having dealings with
the Company will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
12.3 Confidentiality. The Confidentiality Agreement dated October 27,
1997, executed by Buyer shall remain in full force and effect, and to the
extent the following does not contradict such Confidentiality Agreement,
between the date of this Agreement and the Closing Date, Buyer and the
Company will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Company to maintain in
confidence, any written oral, or other information obtained in confidence
from another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b)
the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information
is required by or necessary or appropriate in connection with legal
proceedings. If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
12.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given:
(a) when personally delivered;
(b) upon delivery by United States Express Mail or other
nationally recognized overnight courier service which provides evidence of
delivery when sent by such courier;
(c) five (5) days after posting when sent by registered or
certified mail, postage prepaid, return receipt requested; or
(d) upon confirmation of transmission when delivered by
facsimile transmission, provided a copy thereof is also delivered by regular
mail;
in each case to the appropriate addresses and facsimile numbers set
forth below (or to such other addresses and facsimile numbers as a party may
designate by notice to the other parties):
Notice to the Buyer shall be sufficient if given to:
Morrison Health Care, Inc.
Suite 400
1955 Lake Park Drive, SE
Smyrna, Georgia 30080-3300
Attn: General Counsel
Phone: 770-437-3300
Facsimile: 770-437-3342
with a copy to:
Powell, Goldstein, Frazer & Murphy, LLP
191 Peachtree Street, N.E.
Sixteenth Floor
Atlanta, Georgia 30303
Attn.: Thomas R. McNeill, Esq.
Phone: 404-572-6681
Facsimile: 404-572-6999
Notice to the Company shall be sufficient if given to:
Spectra Systems, Inc.
300 East 5th Avenue
Suite 340
Naperville, Illinois 60563
Attn: James W. Hemphill
Phone: 630-961-2555
Facsimile: 630-961-3785
with a copy to:
Nagle & Higgins, P.C.
1755 Park Street
Suite 260
Naperville, Illinois 60563
Attn: Brien J. Nagle
Phone 630-355-8100
Facsimile : 630-355-8185
12.5 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things,
all as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
12.6 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
12.7 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and the Company, dated December
17, 1997, but excluding the Confidentiality Agreement dated October 27, 1997)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
12.8 Disclosure Letter.
(a) The disclosures in the Disclosure Letter must relate only
to the representations and warranties in the Section of the Agreement to
which they expressly relate and not to any other representation or warranty
in this Agreement except that a disclosure may specifically cross-reference a
duplicate disclosure.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect
to a specifically identified representation or warranty), the statements in
the body of this Agreement will control.
12.9 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer may assign any of its rights
under this Agreement to any subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
12.10 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.11 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or number, as
the circumstances require. Unless otherwise expressly provided, the work
"including" does not limit the preceding words or terms.
12.12 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.13 Governing Law. This Agreement will be governed by the laws of
the State of Illinois without regard to the laws of conflicts.
12.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
MORRISON HEALTH CARE, INC.
By: /s/ John E. Fountain
Name: John E. Fountain
Title: Vice President, General Counsel and
Secretary
THE COMPANY:
SPECTRA SERVICES, INC.
By: /s/ James W. Hemphill
Name: James W. Hemphill
Title: President
I, James W. Hemphill, the sole shareholder of Spectra Services, Inc.,
hereby agree that in the event the Company distributes some or all of the
Purchase Price, I shall reimburse the Company for such amount of said
distributions as may be necessary in order for the Company to pay any amounts
due to Buyer pursuant to the Agreement.
/s/ James W. Hemphill
James W. Hemphill
/s/ Jarrett Franklin
Jarrett Franklin
WITNESS
MORRISON HEALTH CARE, INC.
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands, except per share data)
<TABLE>
Year ended
------------------------------------------------------------
May 31, 1998 May 31, 1997 June 1, 1996
---------------- ----------------- -----------------
<CAPTION>
<S> <C> <C> <C>
Basic
- -----
Average shares outstanding........... 11,938 11,785 11,673
Net income........................... $11,552 $10,286 $ 9,280
================ ================= =================
Per share amount..................... $ 0.97 $ 0.87 $ 0.79
================ ================= =================
Diluted
- -------
Average shares outstanding........... 11,938 11,785 11,673
Net effect of dilutive stock
options and nonvested stock awards-
based on the treasury stock
method using average market price... 254 56 51
---------------- ----------------- -----------------
Total................................ 12,192 11,841 11,724
================ ================= =================
Net income........................... $11,552 $10,286 $ 9,280
================ ================= =================
Per Share amount..................... $ 0.95 $ 0.87 $ 0.79
================ ================= =================
</TABLE>
EXHIBIT 13
Morrison Financials
1998 Financial Review
Morrison Health Care, Inc. and Subsidiaries
Selected Financial Data..........................................14
Management's Discussion and Analysis of
Financial Condition and Results of Operations....................15
Consolidated Financial Statements................................18
Notes to Consolidated Financial Statements.......................22
Report of Independent Auditors...................................32
Directors and Officers...........................................33
Shareowner Information...........................................33
Selected Financial Data
Morrison Health Care, Inc. and Subsidiaries
The following table summarizes certain selected financial information with
respect to Morrison Health Care, Inc. (the Company or MHCI) and is derived from
the Financial Statements of MHCI. The Selected Financial Data of MHCI is
presented as if MHCI had been a separate entity for fiscal years 1996, 1995 and
1994. The financial information presented below for 1996, 1995 and 1994, may not
be indicative of MHCI's future performance as an independent company. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Financial Statements of MHCI and notes thereto, and the Unaudited Pro Forma
Financial Information of MHCI included in Note 2 of the Notes to Consolidated
Financial Statements. Weighted average shares for 1996 were determined as if the
shares issued in connection with the Distribution were outstanding from the
beginning of the year. Earnings per share and dividend data have not been
presented for fiscal years 1995 and 1994 as MHCI was not a separate publicly
held company prior to March 1996.
Net income for fiscal year 1994 includes the results of education, business and
industry ("B&I") operations which were sold in fiscal year 1995. Net income for
fiscal year 1995 includes an after-tax gain of $25.8 million from the sale of
certain B&I contracts and assets to Gardner Merchant Services, Inc. for a cash
payment of $100 million. The remaining B&I accounts were closed.
<TABLE>
For the fiscal year+
-----------------------------------------------------
(in thousands, except per share data) 1998 1997 1996 1995 1994
-----------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Consolidated statements of income data:
Managed volume (estimated and unaudited)..... $504,400 $464,800 $435,600 $408,300 *
Revenues..................................... $250,371 $221,011 $219,995 $225,392 $461,780
Income before provision for income taxes..... $ 19,065 $ 17,576 $ 16,011 $ 65,295 $ 21,588
Provision for federal and state income taxes. 7,513 7,290 6,731 28,469 8,351
Net income................................... $ 11,552 $ 10,286 $ 9,280 $ 36,826** $ 13,237
Earnings per share - Basic................... $ 0.97 $ 0.87 $ 0.79
Earnings per share - Diluted................. $ 0.95 $ 0.87 $ 0.79
Weighted average common shares - Basic....... 11,938 11,785 11,673
Net dilutive effect of stock options and
nonvested stock awards..................... 254 56 51
-------- --------- --------
Weighted average common shares - Diluted..... 12,192 11,841 11,724
======== ========= ========
</TABLE>
+ Fiscal year 1998 is a 12-month year. Fiscal years 1997, 1996, 1995 and 1994
are composed of 52 weeks.
* Fiscal year 1994 information is not presented because it included B&I
information.
** Includes an after-tax gain of $25.8 million from the sale of the B&I
operations.
<TABLE>
<S> <C> <C> <C> <C> <C>
Other Financial Data:
Total assets............................. $ 84,374 $ 60,203 $ 61,101 $ 69,028 $105,964
Long-term debt........................... $ 31,690 $ 15,022 $ 20,034 $ 19,245 $ 3,128
Stockholders' equity..................... $ 8,372 $ 5,628 $ 4,716 $ 9,015 $ 51,164
Cash dividends per share of common stock. $ 0.82 $ 0.82 $ 0.205*** - -
Working capital.......................... $ 7,344 $ 3,891 $ 8,677 $ 13,318 $ 9,239
Current ratio............................ 1.2:1 1.1:1 1.3:1 1.5:1 1.2:1
</TABLE>
***Dividends were not paid prior to the fourth quarter of fiscal year 1996.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Morrison Health Care, Inc. and Subsidiaries
This discussion should be read in conjunction with the Financial Statements and
related notes found on pages 18 to 31.
RESULTS OF OPERATIONS
Effects of Distribution on Results of Operations
Effective March 9, 1996, Morrison Health Care, Inc. (the Company or MHCI) was
spun-off (the Distribution) from Morrison Restaurants Inc. (MRI), becoming an
independent corporation trading under the symbol MHI on the New York Stock
Exchange. Management believes that the Distribution (see Note 2 of the Notes to
Consolidated Financial Statements) has had a material impact on the results of
operations due to the added separate company costs that are incurred by MHCI.
The estimated effect of the Distribution on the results of operations of MHCI
for the fiscal year ended June 1, 1996, is presented in the Unaudited Pro Forma
Financial Information on pages 23 to 24. Such pro forma financial information is
presented as if the Distribution had been effective as of June 3, 1995.
1998 Compared To 1997
Overview
In MHCI's second full year as an independent company, fiscal year 1998 again
demonstrated strong financial results, with increases in managed volume,
revenue, operating profit and net income. The accomplishments are due to
continued focus on cost reductions in all accounts, growth in existing accounts,
strong new account sales, and the acquisitions of Drake Management Services,
Inc. (January 1998) and Spectra Services, Inc. (March 1998) in the senior living
market. (See Note 3 of the Notes to Consolidated Financial Statements for more
information.)
MHCI is the only national, publicly held company which specializes
exclusively in health care food and nutrition services. MHCI's client base
includes some of the largest and most prestigious hospitals in the United
States.
Managed Volume/Revenue
The Company performs its services pursuant to one of two types of contracts,
either management fee or profit and loss. While actual services performed are
the same, revenue recognition varies by type of contract. In a management fee
account, MHCI manages the services and facilities, but the client is responsible
for all or nearly all the costs. Revenues and fees are recognized for the amount
of the contractually agreed-upon management fee plus any earned incentives plus
the amount of any expenses or employee payroll costs paid by the Company and
charged back to the client. In a profit and loss account, MHCI assumes the risk
of profit or loss for the foodservice operation. For such accounts, the amount
of revenue reported is the actual revenue generated from meals served to
patients, client employees and visitors. Because of the difference between the
amount of revenue that is reported for the fee account (net management fees plus
reimbursed expenses) and the profit and loss account (gross revenues of meal
sales), Management uses the concept of managed volume to evaluate the Company's
true growth. Managed volume is defined by MHCI as the total cost of operating
the foodservices, regardless of which type of contract exists with the client.
Management believes managed volume is a better indicator of performance because
it measures total activity from all client accounts and provides an indication
of what gross revenues would be if the Company performed all services pursuant
to profit and loss contracts.
Managed volume increased $39.6 million or 8.5% in fiscal year 1998 when
compared to fiscal year 1997. Revenue increased $29.4 million or 13.3% in 1998
as compared to 1997. The primary sources of these increases were growth at
existing accounts, including adding vending operations and increasing employee
payrolls, opening more accounts and larger accounts than accounts which were
closed, and key acquisitions.
Gross Profit
Gross profit, defined as revenue less operating expenses, increased $3.3 million
or 8.4% for 1998. Growth of existing account business, continued emphasis on
food and labor cost reductions, and acquisitions all contributed to the
favorable results.
Selling, General and Administrative
Although selling, general and administrative expenses increased compared to the
prior year, they decreased as a percentage of managed volume and revenue. The
expenses were 4.5% of managed volume in fiscal year 1998 and were 4.6% of
managed volume in fiscal year 1997. In fiscal year 1998, these expenses were
9.2% of revenues versus 9.7% in fiscal year 1997. Compared to fiscal year 1997,
the expenses increased $1.5 million or 7.1%, versus the revenue increase of
13.3% for the same period.
Interest Expense, Net
Interest expense increased 39.0% compared to the prior year due to higher debt
levels associated with the Company's acquisitions and increased capital
expenditures for both the Advanced Culinary Centers(TM) and improvements to the
management information systems.
Federal and State Income Taxes
The combined federal and state effective tax rate decreased to 39.4% in 1998
from 41.5% in 1997. The higher effective income tax rate in fiscal 1997 as
compared to fiscal 1998 is primarily due to higher non-deductible expenses in
fiscal 1997.
1997 COMPARED TO UNAUDITED PRO FORMA 1996
Overview
In MHCI's first full year as an independent company, fiscal year 1997 showed
strong financial results with increases in managed volume, revenue, operating
profit and net income. These achievements were due to continued focus on cost
reduction in accounts and growth in existing accounts.
Managed Volume/Revenue
Managed volume is the Company's method of measuring total growth by determining
the total amount of foodservices that the Company manages. In fiscal year 1997,
managed volume increased $29.2 million or 6.7% when compared to fiscal year
1996. This increase was due to growth at existing accounts and to opening
accounts with larger managed volumes than at accounts which were closed.
Revenue increased $1.0 million or 0.5% in fiscal year 1997 when compared
to fiscal year 1996. The increase was due to the increases in revenues at
existing accounts, attributable primarily to adding vending operations and
employee payroll at those accounts.
Gross Profit
Gross profit, defined as revenue less operating expenses, increased $0.4 million
or 1% for 1997. The continuing emphasis on food and labor cost reductions
combined with the general business growth at numerous existing accounts
generated the improvements in gross profit.
Selling, General and Administrative
Selling, general and administrative expenses decreased slightly as a percentage
of managed volume and revenue due to improved control of expenses.
Interest Expense, Net
Interest expense decreased 47% as the Company funded most of its activities with
internally-generated funds, resulting in lower debt levels in fiscal year 1997.
Federal and State Income Taxes
The combined federal and state effective tax rate decreased to 41.5% in 1997
from 42.1% in 1996.
IMPACT OF YEAR 2000
Currently, there is significant uncertainty within the software industry and
among software users regarding the impact of installed software that has been
programmed to accept only two-digit entries in the date code fields and use such
two-digit entries in the software's calculation and report generation formats.
Current versions of the Company's products have been and are being assessed to
determine the impact of becoming "Year 2000" compliant. Similarly, as part of
its continuing review and improvement of systems and operations, the Company is
in the process of modifying or replacing certain software programs to avoid any
detrimental effects in its installed software programs while upgrading and
enhancing the overall effectiveness of its information management systems. The
project is expected to be completed well in advance of December 31, 1999. While
this project includes both Year 2000 issues and general improvements, the
estimate of the costs to address both issues is less than $5 million, most of
which has already been spent. The Company does not expect this project to pose
significant operational problems for the Company. However, the Company cannot
make any assurances that the Company will not be exposed to any potential claims
resulting from the system problems associated with the century change. See
"Special Note Regarding Forward-Looking Information."
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow, Capital Expenditures and Financing
Due to the nature of its contract foodservice business, MHCI is able to maintain
a relatively steady cash flow. Cash flow from operations has historically
financed MHCI's capital investments. MHCI plans for controlled expansion over
the next several years and anticipates that cash flow from operations plus
utilization of the existing lines of credit will be sufficient to provide for
this expansion. See "Special Note Regarding Forward-Looking Information."
To partially finance its activities in fiscal 1998, MHCI used a $50
million, five-year credit facility from various financial institutions. Of the
total facility, $30 million was revolving lines of credit. The Company had $17.5
million outstanding under the terms of these lines of credit at May 31, 1998.
The remaining $20 million of the credit facility was a five-year term note which
was being repaid in quarterly installments of $1.25 million since June 30, 1997.
The credit facility contained restrictions on incurring additional indebtedness
and certain funded debt, net worth and fixed charge coverage requirements.
The Company managed the interest costs of the term note through an
interest rate swap agreement. This swap agreement effectively fixed the interest
rate for the period of the term note at 6.7%.
For day-to-day operating activities, additional lines of credit allow
borrowing up to $5 million. The Company had $4.2 million under this agreement at
May 31, 1998.
On May 31, 1998, MHCI had $36.7 million outstanding in total debt, an
increase of $16.7 million from the prior year.
Subsequent to May 31, 1998, the Company replaced its $50 million credit
facility with a $75 million revolving credit line from four financial
institutions. Concurrent with this transaction, the Company cancelled the
related interest rate swap agreement that had effectively fixed the interest
rate for the term portion of that facility. The new credit line has a variable
interest rate based upon LIBOR and variable interest payment requirements. The
principal is due no later than June 30, 2003. The initial amount borrowed was
$35.4 million, all of which was used to repay the balance due on the $50 million
and $5 million credit facilities.
Also in June 1998, the Company entered into two interest rate swap
agreements to reduce the impact of changes in the interest rates on its floating
rate debt and to exchange floating rate for fixed rate payments at certain
dates. These swap agreements expire in June 2003 and June 2008 and effectively
convert $20 million of variable rate borrowings to fixed.
Trade accounts receivable make up the majority of MHCI's total current
assets. Historically, the average days outstanding in trade accounts receivable
is less than one month and bad debt expense has been minimal.
MHCI requires capital principally for acquisitions, new accounts,
equipment replacement and remodeling of existing accounts and the construction
of Advanced Culinary Centers,(TM) a food preparation and delivery system that
was initiated in fiscal 1998. Cash provided by operating activities approximated
$10.3 million for fiscal year 1998. Capital expenditures were approximately $8.9
million, an increase of $4.1 million or 83% compared to the prior year period.
Capital expenditures are anticipated to total $12 million to $15 million in
fiscal year 1999. MHCI plans to finance this amount primarily through internally
generated funds. See "Special Note Regarding Forward-Looking Information."
Working Capital
As of May 31, 1998, working capital was $7.3 million while the current ratio was
1.2:1. Working capital increased $3.5 million and the current ratio increased
0.1 when compared to the prior year.
Dividends
MHCI paid approximately $9.9 million in cash dividends to stockholders during
fiscal year 1998. The Company plans to pay annual dividends of approximately
$1.9 million in the next fiscal year. See "Special Note Regarding
Forward-Looking Information."
Deferred Tax Assets
The recognition of deferred tax assets depends on the anticipated existence of
taxable income in future periods in amounts sufficient to realize the assets. A
valuation allowance must be provided for the deferred tax asset if such future
income is not likely to be generated. Management believes that future taxable
income should be sufficient to realize all of MHCI's deferred tax assets based
on historical earnings of MHCI; therefore, a valuation allowance has not been
established.
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
Impact of Inflation
In the past, MHCI has been able to recover inflationary cost increases through
contract inflation adjustments, increased productivity and menu changes. There
have been and there may be in the future, delays in contract inflation
adjustments and competitive pressures which limit MHCI's ability to recover such
cost increases in their entirety. Historically, the effects of inflation on
MHCI's net income have not been materially adverse. See "Special Note Regarding
Forward-Looking Information."
Management's Outlook
In fiscal year 1997, Management began an extensive program of expanding,
restructuring and training of the sales team. Management anticipates that its
continued focus on the sales team will facilitate increases in the number and
economic value of accounts sold in fiscal year 1999 and beyond. Management
believes that growth will also occur through expanding services at existing
accounts and the Advanced Culinary Centers,(TM) a food preparation and delivery
system that was initiated in fiscal 1998. In addition, Management believes the
acquisition of companies that complement its core competencies will allow the
Company to increase its presence in the senior living market while providing
quality services for health care facilities nationwide.
Several MHCI accounts are among the largest acute care and teaching
hospitals in the United States. The Company strives to maintain its long-term
partnerships with these facilities while continuing to increase quality and
lower costs. MHCI believes that ongoing investments in people and programs
designed to enhance its aggressive sales drive will add new clients while
building stronger relationships with current accounts. By focusing on its
primary market of hospitals and expanding into the senior living market, the
Company believes that it is strategically positioned to maintain its steady
growth. See "Special Note Regarding Forward-Looking Information."
Special Note Regarding Forward-Looking Information
The foregoing section contains various "forward-looking statements" which
represent the Company's expectations or beliefs concerning future events,
including the following: statements regarding account growth, impact of the Year
2000, future capital expenditures and borrowings, the payment of dividends, the
impact of inflation and the effects of Management's strategies for growth. The
Company cautions that a number of important factors could, individually or in
the aggregate, cause actual results to differ materially from those included in
the forward-looking statements, including, without limitation, the following:
health care spending trends; the growth of systems and group purchasing
organizations; changes in health care regulations; increased competition in the
health care food and nutrition market; customers' acceptance of the Company's
cost saving programs; and laws and regulations affecting labor and employee
benefit costs.
Consolidated Statements of Income
Morrison Health Care, Inc. and Subsidiaries
<TABLE>
For the Fiscal Year Ended
--------------------------------------------
(In thousands, except per share data) May 31, 1998 May 31, 1997 June 1, 1996
------------ ------------ ------------
<CAPTION>
<S> <C> <C> <C>
Revenues....................................... $250,371 $221,011 $219,995
Operating costs and expenses:
Operating expenses....................... 207,265 181,233 180,607
Selling, general and administrative...... 22,919 21,395 20,670
Restructuring costs............................ 0 0 1,398
Asset impairment............................... 0 0 193
Interest expense, net of interest
income of $406 in 1998, $687
in 1997 and $428 in 1996................... 1,122 807 1,116
------------ ------------ ------------
Total costs and expenses................. 231,306 203,435 203,984
------------ ------------ ------------
Income before provision for income taxes....... 19,065 17,576 16,011
Provision for federal and state income taxes... 7,513 7,290 6,731
------------ ------------ ------------
Net income..................................... $ 11,552 $ 10,286 $ 9,280
============ ============ ============
Earnings per share - Basic..................... $ 0.97 $ 0.87 $ 0.79
Earnings per share - Diluted................... $ 0.95 $ 0.87 $ 0.79
Weighted average common shares - Basic......... 11,938 11,785 11,673
Net dilutive effect of stock options
and non-vested stock awards................... 254 56 51
------------ ------------ ------------
Weighted average common shares - Diluted....... 12,192 11,841 11,724
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Consolidated Balance Sheets
Morrison Health Care, Inc. and Subsidiaries
<TABLE>
------------ ------------
(In thousands) May 31, 1998 May 31, 1997
------------ ------------
<CAPTION>
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments......... $ 5,720 $ 6,347
Receivables:
Trade, less allowance for
doubtful accounts of $887 at
May 31, 1998 and $744 at
May 31, 1997...................... 21,381 16,387
Other............................. 6,372 4,884
Inventories............................. 2,936 2,686
Prepaid expenses........................ 1,262 1,006
Deferred income tax benefits............ 1,949 1,929
------------ ------------
Total current assets........ 39,620 33,239
------------ ------------
Property and equipment - at cost:
Buildings and improvements.............. 3,425 2,326
Equipment............................... 16,037 13,251
Construction in progress................ 4,729 766
------------ ------------
24,191 16,343
Less accumulated depreciation........... 10,232 8,471
------------ ------------
13,959 7,872
Deferred income tax benefits.................. 2,503 1,610
Cost in excess of net assets acquired, net.... 12,097 4,582
Notes receivable, less current portion........ 3,729 3,817
Deferred charges.............................. 4,083 2,830
Other assets.................................. 8,383 6,253
------------ ------------
Total assets................ $84,374 $60,203
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable........................ $14,545 $12,977
Accrued liabilities:
Taxes, other than income taxes.... 1,818 1,546
Payroll and related costs......... 6,395 4,133
Insurance......................... 2,289 3,436
Other............................. 2,207 2,245
Current portion of long-term debt....... 5,022 5,011
------------ ------------
Total current liabilities...... 32,276 29,348
------------ ------------
Long-term debt................................ 31,690 15,022
Other liabilities............................. 12,036 10,205
Stockholders' equity:
Common stock, $0.01 par value
(authorized 100,000 shares;
issued: 1998 - 12,379 shares,
1997 - 12,165 shares)................... 124 122
Capital in excess of par value.......... 12,859 9,717
Unearned ESOP shares.................... (3,195) (3,517)
Retained earnings....................... 2,322 647
------------ ------------
12,110 6,969
Less cost of treasury stock............. 3,738 1,341
------------ ------------
Total stockholders' equity...... 8,372 5,628
------------ ------------
Total liabilities and
stockholders' equity....... $84,374 $60,203
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
Consolidated Statements of Cash Flows
Morrison Health Care, Inc. and Subsidiaries
For the Fiscal Year Ended
------------------------------------------------
(In thousands) May 31, 1998 May 31, 1997 June 1, 1996
- -------------- ------------ ------------ ------------
<CAPTION>
<S> <C> <C> <C>
Operating activities:
Net income $ 11,552 $ 10,286 $ 9,280
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.......................... 2,538 1,992 2,330
Amortization of intangibles............................ 377 153 152
Other, net............................................. 0 1,066 1,172
Deferred income taxes.................................. (811) 514 4,927
(Gain)/Loss on disposition of assets................... (19) 29 170
Changes in operating assets and liabilities:
(Increase)/Decrease in receivables............... (6,359) 2,486 1,345
(Increase)/Decrease in inventories............... (246) (24) 218
(Increase)/Decrease in prepaid and other
assets........................................ (675) 631 (2,005)
Increase/(Decrease) in accounts payable,
accrued and other liabilities................. 3,936 6,046 (12,112)
Increase/(Decrease) in income taxes payable 0 (935) 6,928
------------ ------------ ------------
Net cash provided by operating activities.................... 10,293 22,244 12,405
------------ ------------ ------------
Investing activities:
Purchases of property and equipment.......................... (8,850) (4,843) (2,170)
Proceeds from disposal of assets............................. 268 459 387
Acquisition of businesses, net of cash acquired.............. (7,464) 0 0
Other, net................................................... (2,745) (1,456) 764
Net cash used by investing activities........................ (18,791) (5,840) (1,019)
Financing activities:
Net proceeds from long-term debt............................. 21,690 0 800
Principal payments on long-term debt......................... (5,011) (11) (11)
Net change in short-term borrowings.......................... 0 (6,760) 6,760
Proceeds from exercise of stock options and issuance
of stock, net of income tax benefits....................... 3,054 679 1,544
Dividends paid............................................... (9,877) (9,725) (2,403)
Payments to acquire Treasury Stock........................... (1,891) 0 0
(Increase)/Decrease in Treasury Stock held by Deferred
Compensation Plan.......................................... (506) (412) 29
ESOP shares released......................................... 412 84 0
Net transfers to Morrison Restaurants Inc.................... 0 0 (12,749)
------------ ------------ ------------
Net cash provided/(used) by financing activities............. 7,871 (16,145) (6,030)
------------ ------------ ------------
(Decrease)/Increase in cash and short-term investments....... (627) 259 5,356
Cash and short-term investments at the beginning of the year. 6,347 6,088 732
------------ ------------ ------------
Cash and short-term investments at the end of the year....... $ 5,720 $ 6,347 $ 6,088
============ ============ ============
Supplemental disclosure of cash flow information -
cash paid for:
Interest............................................... 1,696 1,190 1,533
Income taxes........................................... 7,933 8,000 18,586
</TABLE>
The accompanying notes are an integral part of the financial statements.
Consolidated Statements of Stockholders' Equity
Morrison Health Care, Inc. and Subsidiaries
<TABLE>
For the Fiscal Year Ended
--------------------------------------------------------------------
May 31, 1998 May 31, 1997 June 1, 1996
------------------- ------------------- --------------------
Shares Amounts Shares Amounts Shares Amounts
------------------- ------------------- --------------------
(In Thousands except per share data)
CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Beginning balance........................... 12,165 $ 122 11,791 $ 118 0 $ 0
Shares issued pursuant to spin-off from
Morrison Restaurants Inc.................. 0 0 0 0 11,678 117
Shares issued to ESOP....................... 0 0 255 3 0 0
Shares issued under Stock Incentive Plans... 214 2 119 1 113 1
------------------- ------------------- --------------------
Ending balance.................. 12,379 124 12,165 122 11,791 118
------------------- ------------------- --------------------
Capital in Excess of Par Value
Beginning balance........................... 9,717 5,441 0
Shares issued to ESOP....................... 0 3,592 0
Shares issued under Stock Incentive Plans,
net of income tax benefits................ 3,052 678 1,543
Shares released from ESOP................... 90 6 0
Distribution of Morrison Restaurants
Inc.'s investment in the Company
to Morrison Restaurants Inc.
stockholders.......................... 0 0 3,898
------------------- ------------------- --------------------
Ending balance.................. 12,859 9,717 5,441
------------------- ------------------- --------------------
Morrison Restaurants Inc. Equity Investment
Beginning balance........................... 0 0 9,015
Net income.................................. 0 0 6,791
Cash transfers to Morrison Restaurants Inc.. 0 0 (12,749)
Distribution of Morrison Restaurants Inc.'s.
investment in the Company to Morrison
Restaurants Inc. stockholders.......... 0 0 (3,057)
------------------- ------------------- --------------------
Ending balance.................. 0 0 0
------------------- ------------------- --------------------
Unearned ESOP Shares
Beginning balance........................... (249) (3,517) (255) (3,595) 0
Shares issued to ESOP....................... 0 0 0 0 0
Shares released from ESOP................... 23 322 6 78 0
------------------- ------------------- --------------------
Ending balance.................. (226) (3,195) (249) (3,517) 0
------------------- ------------------- --------------------
Retained Earnings
Beginning balance........................... 647 86 0
Net income.................................. 11,552 10,286 2,489
Cash dividends of $0.82 per share in fiscal
1998 and 1997 and $0.205 per share in
fiscal 1996........................... (9,877) (9,725) (2,403)
------------------- ------------------- --------------------
Ending balance.................. 2,322 647 86
------------------- ------------------- --------------------
Treasury Stock
Beginning balance........................... (1,341) (929) 0
Distribution of Morrison Restaurants
Inc.'s investment in the Company to
Morrison Restaurants Inc. stockholders.. 0 0 (958)
Purchase of Treasury Stock.................. (1,891) 0 0
(Purchase)/Sale of Treasury Stock -
held by Deferred Compensation Plan.... (506) (412) 29
------------------- ------------------- --------------------
Ending balance.................. (3,738) (1,341) (929)
------------------- ------------------- --------------------
Total Stockholders' Equity.................. $ 8,372 $ 5,628 $4,716
=================== =================== ====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
On March 9, 1996, Morrison Health Care, Inc. and Subsidiaries (the "Company" or
"MHCI") was spun off ("the Distribution") from Morrison Restaurants Inc.
("MRI"). Prior to the Distribution, MHCI was a wholly owned health care contract
food and nutrition business of MRI.
The accompanying financial statements for fiscal 1998 and 1997 reflect
MHCI as a stand-alone entity. The financial statements for fiscal 1996 have been
prepared as if MRI's health care contract food and nutrition business had
operated as a stand-alone entity for fiscal year 1996. The fiscal 1996
statements include the assets, liabilities, revenues and expenses that are
directly related to the Company's operations. They also include an allocation of
certain assets, liabilities and general corporate expenses of MRI, such as
executive payroll, legal, data processing and interest, which are related to the
Company. Amounts were allocated on a specific identification method where
appropriate and on a pro rata basis otherwise. Management believes the
allocation methods used are reasonable.
Use of estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company primarily competes in the health care food and nutrition services
industry, and encounters significant competition in the market in which it
operates. The length of contract varies by customer. Concentration of credit
risk with respect to accounts receivable are limited due to the large number of
customers that make up the Company's customer base, thus spreading trade credit
risk. The Company maintains reserves for potential uncollectible amounts which,
in the aggregate, have not exceeded Management's expectations.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of MHCI
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Fiscal Year
Effective with the fiscal year ended in 1998, the Company's fiscal year ends on
May 31. The fiscal years ended May 31, 1997 and June 1, 1996 were each comprised
of 52 weeks. Starting with fiscal year 1998, the Company changed from a 52-53
week fiscal year to a 12-month fiscal year ending May 31 each year.
Cash and Short-Term Investments
The Company's cash management program provides for the investment of excess cash
balances in short-term money market instruments. Short-term investments are
stated at cost, which approximates market. The Company considers marketable
securities with a maturity of three months or less when purchased to be
short-term investments.
Inventories
Inventories consist of materials, food supplies, china and silver and are stated
at the lower of cost (first in-first out) or market.
Property and Equipment and Depreciation
Property and equipment are stated at cost and are being depreciated for
financial reporting purposes using the straight-line method over the estimated
useful lives of the assets. Annual rates of depreciation range from 3% to 5% for
buildings and from 8% to 34% for kitchen and other equipment. Costs incurred in
connection with the construction at major facilities or of Advanced Culinary
Centers(TM) are capitalized as construction in progress until such facilities or
centers become operational. Interest is capitalized in connection with these
capitalized construction costs. The capitalized interest is recorded as part of
the asset to which it relates and is amortized over the asset's estimated useful
life. In fiscal 1998, $127,000 of interest cost was capitalized. No interest was
capitalized in fiscal 1997 and 1996.
Property and equipment are periodically reviewed for impairment based on
an assessment of future operations. The Company records impairment losses on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount.
Intangible Assets
Excess of costs over the fair value of net assets acquired with purchased
businesses generally is amortized on a straight-line basis over periods ranging
from 10 to 40 years. At May 31, 1998, May 31, 1997 and June 1, 1996, the
accumulated amortization for costs in excess of net assets acquired was $1.9
million, $1.6 million and $1.4 million, respectively.
The carrying value of goodwill and other intangibles is evaluated
periodically in relation to the operating performance and future undiscounted
cash flows of each operating business acquired. Adjustments are made if the sum
of expected future net cash flows is less than net book value. The Company
believes that the remaining amounts of these assets have continuing value.
Revenue Recognition
Revenue is recognized upon performance of services. The Company performs its
services pursuant to one of two types of contracts, either management fee or
profit and loss. While actual services performed are the same, revenue
recognition varies by type of contract. In a management fee account, MHCI
manages the services and facilities, but the client is responsible for all or
nearly all the costs. Revenues and fees are recognized for the amount of the
contractually agreed-upon management fee plus any earned incentives plus the
amount of any expenses or employee payroll costs paid by the Company and charged
back to the client. In a profit and loss account, MHCI assumes the risk of
profit or loss for the foodservice operation. For such accounts, the amount of
revenue reported is the actual revenue generated from meals served to patients,
client employees and visitors.
Income Taxes
For the first three quarters of 1996, the 1996 statement of income reflects an
income tax expense representing the Company's allocated share of MRI's tax
expense, which approximates the tax expense of the Company on a stand-alone
basis. Beginning with the fourth quarter of fiscal year 1996, the accompanying
statements of income reflect the Company's actual tax expenses.
Deferred income taxes are determined utilizing a liability approach. This
method gives consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities.
Stock-Based Compensation
Stock options are recorded in accordance with Accounting Principles Board
Opinion ("APB") No. 25, with pro forma disclosures of net income and earnings
per share as if Statement of Financial Accounting Standards ("SFAS") No. 123 had
been applied.
Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS No. 128), and has restated earnings per share amounts
reported in prior periods in accordance with SFAS No. 128. Basic earnings per
share is based on the weighted average number of shares outstanding during each
quarter. Diluted earnings per share is based on the weighted average number of
shares outstanding during each quarter plus the effect of outstanding stock
options using the treasury stock method.
New Accounting Standards
In 1997, the Financial Accounting Standards Board issued Statements of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" and No. 131,
"Disclosures about Segments of an Enterprise and Related Information." In 1998,
the Financial Accounting Standards Board issued Statements of Financial
Accounting Standards No. 132, "Employer's Disclosures about Pensions and other
Postretirement Benefits." These statements, which are effective for fiscal years
beginning after December 15, 1997, expand or modify disclosures and will have no
impact on the Company's consolidated financial position, results of operations
or cash flow. In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999 and will be adopted by the Company in fiscal year
2001. Based upon the Company's current limited use of derivative instruments and
hedging activities, Management does not believe the statement will have a
material impact on the Company's consolidated financial position, results of
operations or cash flows.
Pre-Opening Expenses
Pre-opening costs, such as salaries, personnel training costs and other expenses
of opening a new account, are often reimbursed by the client. In circumstances
when they are not reimbursed, these costs are charged to expense as incurred.
Financial Instruments
The Company's financial instruments at May 31, 1998, May 31, 1997 and June 1,
1996 consisted of cash and short-term investments, accounts and notes
receivable, long-term debt and interest rate swap agreements. The fair value of
these financial instruments approximated the carrying amounts reported in the
balance sheets. Cash is deposited in financial institutions which carry FDIC
insurance. From time to time, the cash balances at these institutions exceed the
insured amount. Management does not believe that this is a significant risk to
the Company.
Although substantially all of the Company's trade accounts receivable are
from health care institutions, Management believes that concentrations of credit
risk are limited due to the geographic diversity of the Company's customer base.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Historically, the Company
has not experienced significant losses related to trade accounts receivable from
individual customers or from groups of customers in any geographic area.
Reclassification
Certain prior year amounts and balances have been reclassified to conform to the
current year presentation.
NOTE 2 DISTRIBUTION
On March 7, 1996, the stockholders of MRI approved the Distribution by MRI of
all the outstanding shares of common stock of MHCI, a wholly owned subsidiary of
MRI. The Board of Directors of MRI believed that the Distribution was in the
best interests of MRI and its stockholders because the separation of MRI's three
lines of business, among other things, (i) allowed management of each of the
three companies to concentrate its full attention on its business and allowed
each company to reward management and employees based on the performance of its
business; (ii) allowed each company to access the capital markets directly to
raise capital; (iii) established a value for each company that is independent of
the other businesses and provided investors and securities analysts a clearer
basis on which to understand and analyze the three businesses; and (iv) allowed
each company to establish equity-based benefit plans which can hold its own
common stock.
The following Unaudited Pro Forma Consolidated Statement of Income has
been prepared to illustrate certain estimated effects of the Distribution. This
statement includes adjustments for the effect of costs and expenses which might
have been incurred had the Distribution occurred June 3, 1995. Adjustments are
based on the assumptions set forth below the statement.
<TABLE>
(In thousands, except per share data)
For the fiscal year ended
June 1, 1996
-----------------------------------------
UNAUDITED
PRO FORMA UNAUDITED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<CAPTION>
<S> <C> <C> <C>
Revenues........................... $219,995 $ 0 $219,995
Operating costs and expenses:
Operating expenses........... 180,607 0 180,607
Selling, general and
administrative............. 20,670 1,420(a) 22,090
Restructuring cost........... 1,398 0 1,398
Asset impairment............. 193 0 193
Interest expense, net........ 1,116 400(b) 1,516
---------- ----------- ----------
203,984 1,820 205,804
Income before provision for
income taxes..................... 16,011 (1,820) 14,191
Provision for federal and state
income taxes .................... 6,731 (760)(c) 5,971
---------- ----------- ----------
Net income......................... $ 9,280 $ (1,060) $ 8,220
========== =========== ==========
Earnings per common and common
equivalent share................. $ 0.70
Weighted average common and
common equivalent shares......... 11,811(d)
</TABLE>
The pro forma adjustments to the accompanying historical statements of income
for the fiscal year ended June 1, 1996 are described below:
(a) To record the increase in selling and general and administrative expenses
which presumably would have been incurred by MHCI had MHCI been a separate and
stand-alone entity.
(b) To record the increase in interest expense which would have been incurred by
MHCI had MHCI been a separate and stand-alone entity.
(c) To record the estimated income tax benefit associated with pro forma
adjustments (a) and (b) at an assumed combined state and federal effective
income tax rate of 41.8% for the year ended June 1, 1996. The assumed effective
income tax rate is comprised of a 35% statutory federal income tax rate plus
applicable state income taxes and permanent differences, less applicable tax
credits.
(d) The number of equivalent shares for periods prior to the spin-off is based
on the number of MRI's common and common equivalent shares adjusted for the 1
for 3 distribution ratio.
NOTE 3 ACQUISITIONS
In January 1998, the Company acquired all of the outstanding common stock of
Phoenix-based Drake Management Services, Inc. In March 1998, the Company
acquired substantially all of the assets of Chicago-based Spectra Services, Inc.
Both companies, which provide nutrition services in the senior living market,
were acquired for cash, with a total acquisition price of $6.1 million.
Additional contingent payments of $950,000 (of which $400,000 was paid during
June 1998) may be earned by the sellers in fiscal year 1999. The acquisitions
were accounted for using the purchase method. The resulting goodwill of $6.7
million is being amortized over 20 years using the straight-line method. The
operating results of these companies have been included from their respective
acquisition dates. Pro forma results are not presented for these acquisitions as
they are not significant during the periods presented.
NOTE 4 NOTES PAYABLE
Notes payable consists of the following:
(In thousands) Fiscal Year Ended
------------------------------
May 31, 1998 May 31, 1997
------------ ------------
Variable rate revolving credit facility
due in full 3/11/01................ $17,500 $ 0
Variable rate demand lines of credit..... 4,190 0
Term note due in equal quarterly
installments of $1,250 from
1998-2001............................ 15,000 20,000
Other notes and mortgages................ 22 33
------------ ------------
36,712 20,033
Less current maturities.................. 5,022 5,011
------------ ------------
$31,690 $15,022
============ ============
Aggregate maturities of long-term borrowings over the next
five years are as follows: 1999 - $5,022; 2000 - $5,000; and
2001 - $26,690.
In March 1996, the Company entered into a five-year $50 million unsecured
credit facility with various banks. The credit facility includes a $30 million
revolving line of credit which allows the Company to borrow under various
interest rate options. Commitment fees of 0.25% per annum are payable on the
unused portion of the credit facility. At May 31, 1998, the Company had $17.5
million in borrowings under the revolver, with a weighted average variable rate
of approximately 6.6%.
The balance of the $50 million credit facility, $20 million, is a term
note which will be repaid in quarterly installments of $1.25 million commencing
June 30, 1997. At May 31, 1998, the balance on the term note was $15 million. In
order to control the interest cost on the term note, the Company entered into an
interest rate swap agreement. This swap agreement effectively fixes the interest
rate on the outstanding term note balance at 6.7% per annum for the period of
the term note.
In addition, the Company had uncommitted demand lines of credit amounting
to $5 million. At May 31, 1998, the Company had $4.2 million outstanding under
these lines, at a rate of 6.4%.
The credit facility contains certain restrictions on incurring additional
indebtedness and certain funded debt, net worth and fixed charge coverage
requirements.
See Note 11 regarding Subsequent Events.
NOTE 5 INCOME TAXES
The components of income tax expense are as follows:
(In thousands) For the Fiscal Year Ended
-------------------------------------------------
May 31, 1998 May 31, 1997 June 1, 1996
------------ ------------ ------------
Current:
Federal............... $6,875 $5,960 $1,479
State................. 1,449 816 325
8,324 6,776 1,804
Deferred:
Federal............... (670) 440 4,127
State................. (141) 74 800
(811) 514 4,927
------------ ------------ ------------
$7,513 $7,290 $6,731
============ ============ ============
Deferred tax assets and liabilities are comprised of the following:
(In thousands) Fiscal Year Ended
------------------------------
May 31, 1998 May 31, 1997
------------ ------------
Deferred tax assets:
Employee benefits........................ $4,346 $3,547
Insurance reserves....................... 1,366 1,841
Bad debt reserve......................... 349 293
Other.................................... 487 438
------------ ------------
Total deferred tax assets................ 6,548 6,119
------------ ------------
Deferred tax liabilities:
Depreciation............................. 282 254
Retirement plans......................... 479 452
Prepaid deductions....................... 131 133
Other.................................... 1,204 1,741
----------- -------------
Total deferred tax liabilities........... 2,096 2,580
----------- -------------
Net deferred tax asset................... $4,452 $3,539
=========== =============
SFAS 109 specifies that deferred tax assets are to be reduced by a
valuation allowance if it is more likely than not that some portion of the
deferred tax assets will not be realized. Management believes that future
taxable income will be sufficient to realize all of the Company's deferred tax
assets based on historical earnings of the Company and, therefore, a valuation
allowance has not been established.
A reconciliation from the statutory federal income tax expense to the
reported income tax expense is shown below:
(In thousands)
For the Fiscal Year Ended
------------------------------------------------
May 31, 1998 May 31, 1997 June 1, 1996
------------ ------------ ------------
Statutory federal income taxes.. $6,673 $6,152 $5,604
State income taxes, net of
federal income tax benefit..... 853 804 732
Other, net...................... (13) 334 395
------------ ------------ ------------
$7,513 $7,290 $6,731
============ ============ ============
The effective income tax rate was 39.4%, 41.5% and 42.0% in 1998, 1997 and
1996, respectively. The higher effective income tax rates in fiscal years 1997
and 1996 were due to the nondeductibility of certain expenses.
In connection with the Distribution, the Company entered into a tax
allocation agreement with Morrison Fresh Cooking, Inc. ("MFC") and Ruby Tuesday,
Inc. ("RTI"). This agreement provides that the Company will pay its share of
RTI's consolidated tax liability for the periods in which the Company was
included in MRI's consolidated federal income tax return. It also provides for
sharing, where appropriate, of state, local and foreign taxes attributable to
periods prior to the date of Distribution. Management does not believe this
agreement will have a material effect on the Company.
NOTE 6 EMPLOYEE BENEFIT PLANS
Salary Deferral Plan
Under the Morrison Health Care, Inc. Salary Deferral Plan, each eligible
employee may elect to make pre-tax contributions to a trust fund in amounts
ranging from 2% to 10% of their annual earnings. Employees contributing a
pre-tax contribution of at least 2% may elect to make after-tax contributions
not in excess of 10% of annual earnings. The Company's contribution to the Plan
is based on the employee's pre-tax contribution and years of service. After
three years of service (including service with MRI prior to the Distribution),
the Company contributes 20% of the employee's pre-tax contribution, 30% after
ten years of service and 40% after 20 years of service. Normally, the full
amount of each participant's interest in the trust fund will be paid upon
retirement or total disability. However, the Plan allows participants to make
early withdrawals of pre-tax and after-tax contributions, subject to certain
restrictions. Under the provisions of the plan, highly compensated employees, as
defined by the Internal Revenue Code, are limited to contributions of 3% and
receive a maximum of a 20% match. The Company's contributions to the trust fund
approximated $414,000, $257,000 and $244,000 for 1998, 1997 and 1996,
respectively.
During fiscal year 1997, the Company began sponsorship of an employee
stock ownership feature ("ESOP") covering participants in the Salary Deferral
Plan. The Company loaned the Plan $3.6 million (with outstanding balances of
$3.2 million and $3.5 million at May 31, 1998 and May 31, 1997, respectively) to
purchase approximately 255,000 shares of common stock, at an interest rate of
5.47%. The loan is payable in 120 monthly installments of principal and
interest. The Company makes monthly contributions sufficient to cover principal
and interest on the loan made to the Plan. Shares are released and allocated to
participant accounts monthly as loan repayments are made.
The Company adopted the provisions of AICPA Statement of Position No. 93-6
which requires that compensation expense be measured based on the fair value of
the shares over the period the shares are earned. Dividends paid on unallocated
shares held by the Plan are used to make principal and interest payments and are
not charged to retained earnings, and shares not yet committed to be released
are not considered outstanding in the calculation of earnings per share. The
fair value of unearned shares at May 31, 1998 and May 31, 1997 was approximately
$3,874,000 and $4,046,000, respectively.
Deferred Compensation Plan
The Company maintains the Morrison Health Care, Inc. Deferred Compensation Plan
for certain selected employees. The provisions of this Plan are similar to those
of the Salary Deferral Plan. Differences include which employees are eligible to
participate and the limitations on the amount of deferrals that may be elected
by participants. The Company's contributions under the Plan approximated
$104,000, $125,000 and $137,000, for 1998, 1997 and 1996, respectively. Assets
of the Plan are held by a rabbi trust. Under current accounting rules, assets
and liabilities of a rabbi trust must be accounted for as if they are assets and
liabilities of the Company. Therefore, all earnings and expenses of the rabbi
trust are recorded in the Company's financial statements. Assets and liabilities
of the Plan approximated $6,043,000 and $4,667,000 at May 31, 1998 and 1997,
respectively, and include $1,848,000 and $1,341,000, respectively, of MHCI
common stock, which is accounted for as treasury stock at cost.
Retirement Plan
The Retirement Plan was frozen by RTI (formerly Morrison Restaurants Inc.) on
December 31, 1987. The Company is a joint sponsor of the Retirement Plan. No
additional benefits accrued and no new participants entered the Plan after that
date. The Company will continue to share in future expenses of the Plan.
Participants will receive benefits based upon salary and length of service. The
Plan's assets include common stock, fixed income securities, short-term
investments and cash. There were no contributions made to the Plan in 1998, 1997
or 1996.
Executive Supplemental Pension Plan
Under the Morrison Health Care, Inc. Executive Supplemental Pension Plan,
employees with average compensation of at least $100,000 for five consecutive
years (including service with MRI prior to the Distribution) in a qualifying
position become eligible to earn supplemental retirement payments based upon
salary and length of service (including service as part of MRI prior to the
Distribution), reduced by Social Security benefits and amounts otherwise
receivable under the Retirement Plan.
Management Retirement Plan
Under the Morrison Health Care, Inc. Management Retirement Plan, individuals who
have 15 years of credited service (including service with MRI prior to the
Distribution) and earn an average annual compensation of at least $40,000 for
the immediately preceding three years become participants. Participants receive
benefits based upon salary and length of service (including service with MRI
prior to the Distribution), reduced by social security benefits and benefits
payable under the Retirement Plan and Executive Supplemental Pension Plan.
To provide a funding source for the payment of benefits under the
Executive Supplemental Pension Plan and the Management Retirement Plan, the
Company owns various life insurance contracts on some of the participants. The
cash value of these policies, net of loans, was $1,897,000 at May 31, 1998, and
$1,256,000 at May 31, 1997. The policies have been placed in a rabbi trust which
will hold the policies and death benefits as they are received.
The following table presents the components of pension expense, the funded
status and amounts recognized in the Company's financial statements for the
Retirement Plan, the Executive Supplemental Pension Plan and the Management
Retirement Plan.
<TABLE>
Accumulated Benefits Exceed Assets -
Assets Exceed Accumulated Benefits - Executive Supplemental Pension Plan
(IN THOUSANDS) Retirement Plan and Management Retirement Plan
- -------------- ------------------------------------- -------------------------------------
For the Fiscal Year Ended May 31, May 31, June 1, May 31, May 31, June 1,
1998 1997 1996 1998 1997 1996
------------------------------------- -------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Components of pension
(income)/expense:
Service cost................. $ 0 $ 0 $ 0 $ 108 $ 81 $ 63
Interest cost................ 347 341 354 270 230 251
Actual return on plan assets..... (1,046) (700) (833) 0 0 0
Amortization and deferral........ 629 341 526 149 122 122
-------------------------------------- -------------------------------------
$ (70) $ (18) $ 47 $ 527 $ 433 $ 436
-------------------------------------- -------------------------------------
Plan assets at fair value........ $ 4,425 $4,859 $4,766 $ 0 $ 0 $ 0
-------------------------------------- -------------------------------------
Actuarial present value of
projected benefit
obligations:
Accumulated benefit
obligations:
Vested............... 3,895 4,210 4,691 2,615 1,950 1,606
Nonvested............ 0 0 0 274 0 0
Provision for future salary
increases ..................... 0 0 0 1,429 1,296 1,116
-------------------------------------- -------------------------------------
Total projected benefit
obligations................... 3,895 4,210 4,691 4,318 3,246 2,722
-------------------------------------- -------------------------------------
Excess (deficit) of plan
assets over projected
benefit obligations.......... 530 649 75 (4,318) (3,246) (2,722)
Unrecognized net loss (gain)..... 407 150 642 913 258 216
Unrecognized prior service cost.. 0 0 0 276 289 351
Unrecognized net transition
obligations.................... 280 348 412 516 576 541
Additional minimum liability..... 0 0 0 (658) (452) (376)
------------------------------------- -------------------------------------
Prepaid (accrued)
pension cost................... $ 1,217 $1,147 $1,129 $(3,271) $(2,575) $(1,990)
===================================== =====================================
</TABLE>
The weighted average discount rate for all three plans was 7.5%, 8.25% and 7.75%
for 1998, 1997 and 1996, respectively. The rate of increase in compensation
levels for the Executive Supplemental Pension Plan and Management Retirement
Plan was 4% for all three years presented. The expected long-term rate of return
on Plan assets for the Retirement Plan was 10% for all three years.
NOTE 7 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care benefits and life insurance benefits to
eligible retirees. Benefits are funded as medical claims and life insurance
premiums are incurred. Retirees become eligible for retirement benefits if they
have met certain service and minimum age requirements at date of retirement. The
Company accrues expenses related to postretirement health care and life
insurance benefits during the years an employee provides services.
The actuarial present value of accumulated postretirement benefit
obligations and the amounts recognized in the Company's balance sheet are as
follows:
(In thousands) Fiscal Year Ended
------------------------------
May 31, 1998 May 31, 1997
------------ ------------
Retirees................................. $1,504 $1,609
Fully eligible active plan participants.. 245 202
Other active plan participants........... 170 123
Accumulated postretirement
benefit obligation..................... 1,919 1,934
Unrecognized net loss.................... (366) (328)
------------ ------------
Accrued postretirement benefit cost...... $1,553 $1,606
============ ============
The postretirement benefit cost is as follows:
(In thousands) For the Fiscal Year Ended
------------------------------------------------
May 31, 1998 May 31, 1997 June 1, 1996
------------ ------------ ------------
Service cost............. $ 7 $ 7 $ 8
Interest cost............ 147 140 155
Amortization of
unrecognized net loss.. 4 23 28
------------ ------------ ------------
Postretirement benefit
cost................... $ 158 $ 170 $ 191
============ ============ ============
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 0% because the Company has frozen current
and future contribution levels. Increases in health care cost due to factors
such as inflation, changes in health care utilization or delivery patterns,
technological advances and changes in the health status of Plan participants
will be borne by the participants. Measurement of the accumulated postretirement
benefit obligation was based on an assumed 7.50%, 8.25% and 7.75% discount rate
for fiscal years 1998, 1997 and 1996, respectively.
NOTE 8 PREFERRED STOCK
Under its Certificate of Incorporation, the Company is authorized to issue
preferred stock with a par value of $0.01 in an amount not to exceed 250,000
shares which may be divided into and issued in designated series, with dividend
rates, rights of conversion, redemption, liquidation prices and other terms or
conditions as determined by the Board of Directors. No preferred shares have
been issued as of May 31, 1998. The Board of Directors has designated 50,000 of
such shares as Series A Junior Participating Preferred Stock and has issued
rights to acquire such shares, upon certain events, with an exercise price to be
determined, but substantially above the expected trading price. The rights will
expire ten years after the date such rights are issued, and may be redeemed
prior to ten days after the acquisition of 20% or more of the Company's common
stock.
NOTE 9 STOCK INCENTIVE PLANS
Under the Company's stock incentive plans, incentive and non-qualified stock
options may be granted to Management, key employees and outside directors to
purchase shares of Company stock. The Morrison Health Care, Inc. 1996 Stock
Incentive Plan and the Morrison Health Care, Inc. 1996 Non-Executive Stock
Incentive Plan (the "Plans") are administered by a Committee, appointed by the
Board, which has complete discretion to determine participants and the terms and
provisions of stock incentives, subject to the Plans. The Plans permit the
Committee to make awards of a variety of stock incentives, including (but not
limited to) dividend equivalent rights, incentive stock options, non-qualified
stock options, performance unit awards, phantom shares, stock appreciation
rights and stock awards. These discretionary awards may be made on an individual
basis or pursuant to a program approved by the Committee for the benefit of a
group of eligible persons. All options awarded under the Plans have been at the
prevailing market value at the time of issue or grant. All options granted have
five- or ten-year terms and become exercisable at the end of two or three years
of continued employment. At May 31, 1998 and 1997, the Company had reserved a
total of 1,704,376 and 804,376 shares, respectively, of common stock under the
Company's 1996 Stock Incentive Plan.
In March 1997, the Board of Directors approved a resolution to offer the
Company's non-executive employees the opportunity to reprice certain options
which were originally granted under the Company's 1996 Non-Executive Stock
Incentive Plan. The repricing occurred on March 25, 1997, and resulted in the
cancellation of approximately 290,000 options and the granting of approximately
174,000 new options with an exercise price equal to $13.125, the closing price
on March 24, 1997. The canceled options were replaced with fewer new options in
accordance with a formula to result in economic equivalence between the old and
new options. The new options were granted with two-year vesting periods and
ten-year terms. At May 31, 1998 and 1997, the Company had reserved a total of
1,464,820 and 2,582,127 shares, respectively, of common stock for this Plan.
The Morrison Health Care, Inc. Stock Incentive and Deferred Compensation
Plan for Directors provides nonmanagement directors with opportunities to defer
the receipt of their retainer fees or to allocate their retainer fees to
purchase shares of the Company. In general, the Plan sets a target ownership
level for nonmanagement directors. To facilitate attaining the target ownership
level, the Plan provides that the directors must use at least 60% of their
retainer to purchase shares of the Company until they reach the target ownership
level. Each director purchasing stock receives additional shares equal to 15% of
the shares purchased and three times the total shares in options, which vest
after six months and become exercisable for five years from the grant date. All
options awarded under the Plan have been at the prevailing market value at the
time of grant. Pursuant to this Plan, a one-time restricted stock award totaling
5,000 shares was made in fiscal year 1997 to a nonmanagement director. A
Committee, appointed by the Board, administers the Plan on behalf of the
Company. At May 31, 1998 and 1997, the Company had reserved 81,917 and 85,251
shares, respectively, of common stock for this Plan.
Under the terms of the Distribution, holders of MRI stock options received
adjusted, substitute options in MHCI, MFC and RTI which, in the aggregate,
preserved the economic value as well as the material terms, such as option
period, vesting provisions and payment terms, the optionee had in the original
MRI options prior to the Distribution. For SFAS No. 123 disclosure purposes,
these options, if granted in fiscal year 1996, were valued as of the original
grant date.
The Company applies APB No. 25 and related interpretations in
accounting for its stock incentive plans. Under APB No. 25, because the
exercise price of the Company's employee stock options equals the market
price of the stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share has been
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS No. 123. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1998, 1997 and 1996,
respectively: risk-free interest rates of 5.7%, 6.6% and 6.0%; volatility
factors of .24, .19 and .22; dividend yields of 0.9%, 4.3% and 4.7%; and
weighted average expected lives of 7.5, 7.6 and 4.8 years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except earnings per share amounts):
<TABLE>
For the Fiscal Year Ended
------------------------------------------------
May 31, 1998 May 31, 1997 June 1, 1996
------------ ------------ ------------
<CAPTION>
<S> <C> <C> <C>
Pro forma net income...................... $10,771 $9,618 $9,157
Pro forma earnings per share - Basic...... $ 0.90 $ 0.82 $ 0.78
Pro forma earnings per share - Diluted.... $ 0.89 $ 0.82 $ 0.78
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards made
prior to fiscal year 1996, and additional awards are anticipated.
A summary of the Company's stock option activity and related information
for the years ended May, 31, 1998, May 31, 1997 and June 1, 1996 follows:
<TABLE>
May 31, 1998 May 31, 1997 June 1, 1996
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Options Exercise Options Exercise Options Exercise
(000) Price (000) Price (000) Price
------------------- -------------------- --------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
Beginning of year........ 2,307 $15.82 2,368 $15.97 0 $ 0.00
Converted MRI options....... 0 0.00 0 0.00 1,493 15.55
Granted..................... 357 17.76 493 13.21 950 16.50
Exercised................... (274) 12.05 (200) 9.69 (57) 11.38
Forfeited................... (144) 15.55 (354) 16.78 (18) 24.44
------------------ ------------------ -------------------
Outstanding - End of year... 2,246 $16.45 2,307 $15.82 2,368 $15.97
================== ================== ===================
Exercisable at end of year 1,110 $17.09 1,068 $15.95 1,056 $14.52
================== ================== ===================
Weighted average fair value of options
granted during the year $ 6.66 $ 1.89 $ 2.70
</TABLE>
The following table summarizes information about stock options outstanding at
the end of:
<TABLE>
May 31, 1998
-----------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------ ------------------------------------------------------
Weighted Average
Range of Number Weighted Average Remaining Number Weighted Average
Exercise Prices Outstanding Exercise Price Contractual Life Exercisable Exercise Price
- --------------- ----------- ---------------- ---------------- ----------- ---------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$ 8.98 - $14.38 567 $12.77 5.70 187 $11.93
$14.50 - $16.38 469 $14.78 1.83 432 $14.68
$16.50 - $16.50 578 $16.50 3.11 110 $16.50
$16.56 - $31.59 632 $20.94 4.48 381 $22.51
----------- ---------------- ---------------- ----------- ---------------
2,246 $16.45 3.88 1,110 $17.09
=========== ================ ================ =========== ===============
</TABLE>
<TABLE>
May 31, 1997
-----------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------ ------------------------------------------------------
Weighted Average
Range of Number Weighted Average Remaining Number Weighted Average
Exercise Prices Outstanding Exercise Price Contractual Life Exercisable Exercise Price
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$ 8.98 - $13.13 676 $12.16 5.96 317 $11.15
$13.50 - $15.75 596 $14.56 2.70 475 $14.62
$16.50 - $16.50 622 $16.50 3.84 0 $ 0.00
$17.03 - $31.59 413 $22.61 2.40 276 $23.72
----------- ---------------- ---------------- ----------- ---------------
2,307 $15.82 3.91 1,068 $15.95
=========== ================ ================ =========== ===============
</TABLE>
NOTE 10 CONTINGENCIES
At May 31, 1998, the Company was contingently liable for approximately $4.6
million in letters of credit, issued primarily in connection with its Workers'
Compensation and Casualty insurance programs.
The Company is presently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of its business. In the opinion of
Management, the ultimate resolution of these pending legal proceedings will not
have a material adverse effect on the Company's operations or financial
position.
Prior to the Distribution, the Company entered into an agreement with MFC
and RTI providing for assumptions of liabilities and cross-indemnities. The
agreements are designed to allocate generally, among the three companies,
effective as of the Distribution date, financial responsibility for liabilities
arising out of or in connection with business activities prior to the
Distribution. No significant amounts were incurred under this agreement during
fiscal year 1998 or 1997.
NOTE 11 SUBSEQUENT EVENTS
Subsequent to May 31, 1998, the Company replaced its $50 million credit facility
with a $75 million revolving credit line from four financial institutions.
Concurrent with this transaction, the Company cancelled the related interest
rate swap agreement that had effectively fixed the interest rate for the term
portion of that facility. The new credit line has a variable interest rate based
upon LIBOR and variable interest payment requirements. The principal is due no
later than June 30, 2003. The initial amount borrowed was $35.4 million, all of
which was used to repay the balance due on the $50 million and $5 million credit
facilities.
Also in June 1998, the Company entered into two interest rate swap
agreements to reduce the impact of changes in the interest rates on its floating
rate debt and to exchange floating rate for fixed rate payments at certain
dates. These swap agreements expire in June 2003 and June 2008 and effectively
convert $20,000,000 of variable rate borrowings to fixed.
NOTE 12 SUPPLEMENTAL QUARTERLY FINANCIAL DATA (Unaudited)
Quarterly financial
results for the years ended May 31, 1998 and May 31, 1997 are summarized below.
For the year ended May 31, 1998, all quarters are composed of three months. For
the year ended May 31, 1997, all quarters are composed of 13 weeks.
<TABLE>
First Second Third Fourth
(Amounts presented are in thousands) Quarter Quarter Quarter Quarter Total
- ------------------------------------ -------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the year ended May 31, 1998
Revenues................................. $57,754 $60,646 $63,337 $68,634 $250,371
=============================================================
Gross profit*............................ $10,027 $10,688 $10,541 $11,850 $ 43,106
Income before income taxes............... $ 4,674 $ 5,035 $ 4,292 $ 5,064 $ 19,065
Provision for federal and state
income taxes........................... 1,846 1,989 1,695 1,983 7,513
-------------------------------------------------------------
Net income............................... $ 2,828 $ 3,046 $ 2,597 $ 3,081 $ 11,552
=============================================================
Earnings per share:
Basic.............................. $ 0.24 $ 0.25 $ 0.22 $ 0.26 $ 0.97
Diluted............................ $ 0.24 $ 0.25 $ 0.21 $ 0.25 $ 0.95
For the year ended May 31, 1997
Revenues................................. $52,658 $54,355 $57,483 $56,515 $221,011
=============================================================
Gross profit*............................ $ 9,634 $10,291 $ 9,416 $10,437 $ 39,778
Income before income taxes............... $ 4,619 $ 4,648 $ 3,695 $ 4,614 $ 17,576
Provision for federal and state
income taxes........................... 1,923 1,922 1,533 1,912 7,290
-------------------------------------------------------------
Net income............................... $ 2,696 $ 2,726 $ 2,162 $ 2,702 $ 10,286
=============================================================
Earnings per share:
Basic.............................. $ 0.23 $ 0.23 $ 0.18 $ 0.23 $ 0.87
Diluted............................ $ 0.23 $ 0.23 $ 0.18 $ 0.23 $ 0.87
</TABLE>
*The Company defines gross profit as revenue less operating expenses.
Common Stock Market Prices and Dividends
Morrison Health Care, Inc. common stock is publicly traded on the New York Stock
Exchange (NYSE) under the ticker symbol MHI. The following table sets forth the
reported high and low prices on the NYSE or the high and low bid prices for each
quarter during fiscal years 1998 and 1997.
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------------------------------------------
1998 market price per share:
High.................. $17.250 $19.750 $20.188 $22.875
Low................... $15.375 $15.750 $17.063 $16.250
1997 market price per share:
High................. $15.000 $14.375 $14.875 $16.500
Low.................. $11.125 $10.750 $13.250 $13.000
Cash dividends on the common stock of Morrison Health Care, Inc. were paid
during each quarter of fiscal years 1998 and 1997 as follows:
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 cash dividends
per share................ $0.205 $0.205 $0.205 $0.205 $0.820
1997 cash dividends
per share................. $0.205 $0.205 $0.205 $0.205 $0.820
</TABLE>
On July 1, 1998, the Company's Board of Directors declared a quarterly
dividend of $0.04 per share, payable July 31, 1998, to 5,525 shareowners of
record on July 13, 1998.
Report of Independent Auditors
Morrison Health Care, Inc. and Subsidiaries
Stockholders and Board of Directors
Morrison Health Care, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Morrison
Health Care, Inc. and Subsidiaries as of May 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years in the period ended May 31, 1998. These financial
statements are the responsibility of the Company's Management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Morrison Health
Care, Inc. and Subsidiaries at May 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three fiscal
years in the period ended May 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 23, 1998
MORRISON HEALTH CARE, INC.
EXHIBIT 21.1 List of Subsidiaries
-------------------------------------------------------------------
State of Incorporation - Arizona
Drake Management Services, Inc.
State of Incorporation - Georgia
Culinary Solutions, Inc.
State of Incorporation - Tennessee
Culinary Concepts, Inc.
State of Incorporation - Pennsylvania
Custom Management Corporation
Custom Management Corporation of Pennsylvania
Morrison Custom Management Corporation of Pennsylvania
John C. Metz & Associates, Inc.
State of Incorporation - Texas
Morrison's Health Care of Texas, Inc.
MORRISON HEALTH CARE, INC.
EXHIBIT 23 Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Morrison Health Care, Inc. and Subsidiaries of our report dated
June 23, 1998, included in the 1998 Annual Report to Stockholders of
Morrison Health Care, Inc. and Subsidiaries.
Our audits also included the financial statement schedule of Morrison
Health Care, Inc. and Subsidiaries listed in Item 14(a). This schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements of Morrison Health Care, Inc. and Subsidiaries listed below of
our report dated June 23, 1998, with respect to the consolidated financial
statements incorporated herein by reference, and our report included in the
preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Morrison Health Care, Inc.
and Subsidiaries for the year ended May 31, 1998.
-Registration Statement No. 333-2098 on Form S-8 dated March 8, 1996
and related Prospectus
-Registration Statement No. 333-2100 on Form S-8 dated March 8, 1996
and related Prospectus
-Registration Statement No. 333-2102 on Form S-8 dated March 8, 1996
and related Prospectus
-Registration Statement No. 333-2104 on Form S-8 dated March 8, 1996
and related Prospectus
-Registration Statement No. 333-2106 on Form S-8 dated March 8, 1996
and related Prospectus
-Registration Statement No. 333-2108 on Form S-8 dated March 8, 1996
and related Prospectus
-Registration Statement No. 333-4504 on Form S-8 dated May 3, 1996
and related Prospectus
-Registration Statement No. 333-4508 on Form S-8 dated May 3, 1996
and related Prospectus
-Registration Statement No. 333-20197 on Form S-8 dated January 22, 1997
and related Prospectus
-Registration Statement No. 333-40177 on Form S-8 dated November 13, 1997
and related Prospectus
/s/ Ernst & Young LLP
Atlanta, Georgia
August 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income on pages
18 through 19 of the Company's 1998 Annual Report to Stockholders and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001007507
<NAME> Morrison Health Care, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 5,720
<SECURITIES> 0
<RECEIVABLES> 22,268
<ALLOWANCES> 887
<INVENTORY> 2,936
<CURRENT-ASSETS> 39,620
<PP&E> 24,191
<DEPRECIATION> 10,232
<TOTAL-ASSETS> 84,374
<CURRENT-LIABILITIES> 32,276
<BONDS> 31,690
0
0
<COMMON> 124
<OTHER-SE> 8,248
<TOTAL-LIABILITY-AND-EQUITY> 84,374
<SALES> 250,371
<TOTAL-REVENUES> 250,371
<CGS> 207,265
<TOTAL-COSTS> 207,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,528
<INCOME-PRETAX> 19,065
<INCOME-TAX> 7,513
<INCOME-CONTINUING> 11,552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,552
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.95
</TABLE>
