<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1996
REGISTRATION NO. 333-9013
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MILESTONE HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8099 75-2592398
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
2501 CEDAR SPRINGS ROAD
SUITE 600, LB15
DALLAS, TEXAS 75201
(214) 871-9600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CHARLES L. ALLEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2501 CEDAR SPRINGS ROAD
SUITE 600, LB15
DALLAS, TEXAS 75201
(214) 871-9600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
With Copies to:
<TABLE>
<S> <C>
J. KENNETH MENGES, JR., P.C. FREDERICK W. KANNER, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. DEWEY BALLANTINE
1700 PACIFIC AVENUE 1301 AVENUE OF THE AMERICAS
SUITE 4100 NEW YORK, NEW YORK 10019
DALLAS, TEXAS 75201 (212) 259-8000
(214) 969-2800
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
The purpose of this Amendment No. 1 to Registration Statement No.
333-9013 (the "Registration statement") is to file certain exhibits to the
Registration Statement. Accordingly, only Part II of the Registration
Statement is included in this Amendment No. 1.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions, are set forth in the following table. All of such expenses will be
borne by MileStone Healthcare, Inc. (the "Company").
<TABLE>
<S> <C>
SEC registration fees...................................................... $11,897
NASD filing fees........................................................... 3,950
Nasdaq National Market System application and listing fees................. *
Printing and engraving expenses............................................ *
Legal fees and expenses.................................................... *
Accounting fees and expenses............................................... *
Blue sky fees and expenses................................................. *
Transfer agent and registrar fees and expenses............................. *
Miscellaneous.............................................................. *
-------
Total............................................................ $ *
=======
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company, a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "Delaware Act"), subject to the procedures
and limitations stated therein, to indemnify certain parties. Section 145 of the
Delaware Act provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred in the
defense or settlement of any threatened, pending or completed action or suit by
or in the right of the corporation, if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and provided further that (unless a court of competent
jurisdiction otherwise provides) such person shall not have been adjudged liable
to the corporation. Any such indemnification may be made only as authorized in
each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Where an officer or a director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually or reasonably incurred. Section 145 provides further that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
The Company's Restated Certificate of Incorporation (the "Certificate")
will provide that the Company shall indemnify any and all persons whom it has
the power to indemnify under Section 145 of the Delaware Act to the fullest
extent permitted under such section, and such indemnity shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person. If claim for indemnification is not paid in full by the Company within
sixty
II-1
<PAGE> 4
(60) days after a written claim has been received by the Company, the claimant
may bring a suit against the Company to recover the unpaid amount, and if
successful, the claimant shall be entitled to be paid the expenses in
prosecuting such claim.
The Company's Certificate eliminates the personal liability of the
Company's directors to the fullest extent permitted under Section 102(b)(7) of
the Delaware Act, as amended. Such section permits a company's certificate of
incorporation to eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director: (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the Delaware Act (which addresses director
liability for unlawful payment of a dividend or unlawful stock purchase or
redemption) or (iv) for any transaction from which the director derived an
improper personal benefit.
As set forth below, Article VI of the bylaws of the Company (the "Bylaws")
provides for indemnification of directors and officers, and Section 6.3 of the
Bylaws provides for the authority to purchase insurance with respect to
indemnification of directors and officers.
Article VI of the Bylaws provides that the Company shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding to the fullest extent permitted by Delaware law.
Section 9 of the Underwriting Agreement among the Company, the Underwriters
and the Selling Stockholders, a copy of which is filed herein as Exhibit 1,
provides for the indemnification by the Company of the Underwriters and each
person, if any, who controls any Underwriter against certain liabilities and
expenses, as stated therein, which may include liabilities under the Securities
Act of 1933, as amended. The Underwriting Agreement also provides that the
Underwriters shall similarly indemnify the Company, its directors, officers and
controlling persons, as set forth therein.
The Company intends to apply for a directors and officers insurance policy.
The Company has adopted provisions in its Bylaws and will adopt provisions
in its Restated Certificate of Incorporation which provide for indemnification
of its officers and directors to the maximum extent permitted under the Delaware
General Corporation Law. In addition, the Company has entered into separate
indemnification agreements with each of its directors which may require the
Company, among other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as directors to the maximum
extent permitted under the Delaware General Corporation Law, to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified, and to establish a trust for the provision of such
expenses under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On May 31, 1995, in an acquisition of the Company by management and others
from an indirectly wholly-owned subsidiary of Columbia/HCA Healthcare, Inc. (the
"Acquisition"), the Company issued and sold an aggregate of 5,000,000 shares of
its Series A Preferred Stock, par value $.001 per share (the "Series A
Preferred"), at a purchase price of $1.00 per share as follows: (i) Morgan
Stanley Venture Capital Fund II, L.P. purchased 2,651,335 shares; (ii) Morgan
Stanley Venture Capital Fund II, C.V. purchased 660,546 shares; (iii) Morgan
Stanley Venture Investors, L.P. purchased 688,119 shares; (iv) Charles L. Allen
purchased 535,714 shares; (v) Roy W. Griffitts, Jr. purchased 392,857 shares;
and (vi) William A. Brosius purchased 71,429 shares. Also in connection with the
Acquisition, on May 31, 1995, the Company sold 294,000 shares of its Common
Stock, par value $.001 per share (the "Common Stock"), at a purchase price of
II-2
<PAGE> 5
$.82 per share as follows: Charles L. Allen purchased 147,000 shares; (ii) Roy
W. Griffitts, Jr. purchased 79,154 shares; and (iii) William A. Brosius
purchased 67,846 shares.
On May 31, 1995, in connection with the Acquisition, Internationale
Nederlanden (U.S.) Capital Corporation ("ING") extended credit to the Company to
effect the Acquisition. The credit facility consisted of a revolving loan
commitment of up to $5,000,000 and a term loan in the principal amount of
$10,000,000. As condition precedent to extending such credit, ING received a
warrant by the Company which entitles the holder to purchase up to 297,973
shares of Class B Common Stock, par value $.001 per share, of the Company (the
"Class B Common Stock") at an initial exercise price of $.82 per share (the
"Exercise Price") until May 31, 2005. The Exercise Price and the securities
issuable upon the exercise of each warrant are subject to adjustment from time
to time upon the occurrence of certain events as set forth in the related
warrant purchase agreement.
On May 31, 1995, in connection with the Acquisition, the Company issued the
Subordinated Indebtedness to Morgan Stanley Venture Capital in the principal
amount of $9,000,000 at an annual interest rate of 16.5%.
The Company has reserved for issuance a total of 699,242 shares of its
Common Stock for issuance to employees and directors of and consultants to the
Company under the 1995 Stock Option Plan. On May 31, 1995, the Company granted
incentive stock options for 351,608 shares of its Common Stock pursuant to the
1995 Stock Option Plan as follows: Charles L. Allen, 175,804 shares; Roy W.
Griffitts, Jr., 94,664 shares; and William A. Brosius, 81,140 shares.
As of July 16, 1996, the Company has granted options to purchase a total of
550,571 shares of Common Stock under the 1995 Stock Option Plan. All of such
options have been incentive stock options. On June 30, 1996, William A. Brosius
exercised options under the Company's 1995 Stock Option Plan to purchase 10,142
shares of Common Stock at an exercise price of $.82 per share for an aggregate
purchase price of $8,279.40.
Each of the foregoing issuances which occurred in 1995 were exempt from
registration under Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
1** -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Company, dated as of July
26,1996.
3.2 -- Bylaws of the Company adopted July 26, 1996.
3.3** -- Amended and Restated Certificate of Incorporation of the Company.
3.4** -- Amended and Restated Bylaws of the Company.
4.1 -- Specimen Certificate for shares of Common Stock, $.001 par value, of
the Company.
4.2 -- Registration Rights Agreement, dated as of May 31, 1995, among MHI
and Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley
Venture Capital Fund II, C.V., Morgan Stanley Venture Investors,
L.P., Charles L. Allen, Roy W. Griffitts, Jr., William A. Brosius,
and ING.
4.3 -- Stockholders Agreement, dated as of May 31, 1995, among MHI and
Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture
Capital Fund II, C.V., Morgan Stanley Venture Investors, L.P.,
Charles L. Allen, Roy W. Griffitts, Jr. and William A. Brosius.
4.4 -- Warrant Purchase Agreement, dated as of May 31, 1995, between MHI and
ING.
4.5 -- Warrant Certificate, dated May 31, 1995, pursuant to which MHI issued
297,973 warrants to ING.
</TABLE>
II-3
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
4.6 -- Put and Call Agreement, dated as of May 31, 1995, among the Company,
MHI, MHI Acquisition Corporation I and ING.
4.7 -- Form of Founder Performance Stock Purchase Agreement dated as of May
31, 1995, between: MHI and each of Charles L. Allen, Roy W.
Griffitts, Jr., and William A. Brosius.
4.8 -- Series A Preferred Stock Purchase Agreement, dated as of May 31,
1995, among MHI and Morgan Stanley Venture Capital Fund II, L.P.,
Morgan Stanley Venture Capital Fund II, C.V., Morgan Stanley Venture
Investors, L.P., Charles L. Allen, Roy W. Griffitts, Jr., and William
A. Brosius.
4.9 -- Morgan Stanley Letter Agreement, dated May 31, 1995, between Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
Fund II, C.V., Morgan Stanley Venture Investors, L.P., MHI, MHI
Acquisition Corporation I, the Company, MileStone Healthcare
Management, Inc., Trucare Health Systems, Inc., Trucare
Rehabilitation Systems, Inc., and Trucare Physical Therapy Services,
Inc., and ING.
4.10 -- 1996 Stock Option Plan, including form of Stock Option Agreement.
4.11 -- Form of Warrant dated April 30, 1996, issued by each of Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
Fund II C.V. and Morgan Investors, L.P. to each of Alan Gerry and SV
Capital Partners, L.P. for purchase of shares of Series A Preferred
Stock of MHI.
4.12 -- Merger Agreement between MHI and the Company dated July 26, 1996.
5** -- Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 -- Credit Agreement, dated as of May 31, 1995, among MHI Acquisition
Corporation I, the Company and ING.
10.2 -- Revolving Note, dated May 31, 1995, executed by MHI Acquisition
Corporation I and the Company in favor of ING.
10.3 -- Term Note, dated May 31, 1995, executed by MHI Acquisition
Corporation I and the Company in favor of ING.
10.4 -- Security Agreement, dated as of May 31, 1995, among MHI Acquisition
Corporation I, MHI Acquisition Corporation II, the Company, MileStone
Healthcare Management, Inc., Trucare Health Systems, Inc., Trucare
Rehabilitation Services, Inc., and Trucare Physical Therapy Services,
Inc. and ING.
10.5 -- Stock and Notes Pledge Agreement, dated as of May 31, 1995, among MHI
Acquisition Corporation I, the Company and ING.
10.6 -- Assumption Agreement, dated as of June 1, 1995, between the Company
and ING.
10.7 -- Guaranty, dated as of May 31, 1995, made by MHI in favor of ING.
10.8 -- Pledge Agreement, dated as of May 31, 1995, between MHI and ING.
10.9 -- Subsidiary Guaranty, dated as of May 31, 1995, made by MHI
Acquisition Corporation II, MileStone Healthcare Management, Inc.,
Trucare Health Systems, Inc., Trucare Rehabilitation Services, Inc.,
and Trucare Physical Therapy Services, Inc. in favor of ING.
10.10 -- Subsidiary Pledge Agreement, dated as of May 31, 1995, between
Trucare Health Systems, Inc. and Trucare Physical Therapy Services,
Inc. and ING.
10.11 -- Employment Agreement dated May 31, 1995, between MHI and Charles L.
Allen.
10.12 -- Employment Agreement dated May 31, 1995, between MHI and Roy W.
Griffitts, Jr.
10.13 -- Employment Agreement dated May 31, 1995, between MHI and William A.
Brosius.
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.14 -- Form of Indemnification Agreement dated as of May 31, 1995, between
MHI and each of Charles L. Allen, Roy W. Griffitts, Jr., William A.
Brosius, Scott S. Halsted, and Guy L. de Chazal.
10.15 -- Note Purchase Agreement, dated as of May 31, 1995, between MHI and
Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture
Capital Fund II, C.V., and Morgan Stanley Venture Investors, L.P.
10.16 -- Note Purchase and Sale Agreement dated as of May 6, 1996, by and
among Morgan Stanley Venture Capital Fund II L.P., Morgan Stanley
Venture Capital Fund II C.V. and Morgan Investors, L.P. and Alan
Gerry and SV Capital Partners, L.P. and MHI.
10.17 -- Amended and Restated Senior Subordinated Note Due 2000, dated as of
July 25, 1996, from MHI to Alan Gerry as Holder.
10.18 -- Amended and Restated Senior Subordinated Note Due 2000, dated as of
July 25, 1996, from MHI to SV Capital Partners, L.P. as Holder.
10.19 -- Agreement entered into May 6, 1996 by and among Alan Gerry and SV
Capital Partners L.P., as Purchasers, and MHI.
10.20 -- Lease of Office Space in The 2501 Cedar Springs Building between 2501
Cedar Springs Investors, as Landlord, and the Company, as Tenant,
effective May 1, 1992.
10.21 -- Lease Agreement dated June 11, 1992, between North Dallas Tower,
Ltd., as Landlord, and TruCare Health Systems, Inc., as Tenant.
21 -- List of subsidiaries of the Company.
23.1* -- Consent of Ernst & Young LLP.
23.2** -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in its
opinion filed as Exhibit 5 hereto).
24* -- Power of Attorney (included on signature page of this Registration
Statement).
27* -- Financial Data Schedule.
</TABLE>
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* Previously filed.
** To be filed by amendment
(b) Financial Statement Schedules
All schedules have been omitted because they are not required, are not
applicable or the information is included in the Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement
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<PAGE> 8
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on August 21, 1996.
MILESTONE HEALTHCARE, INC.
By: /s/ CHARLES L. ALLEN
------------------------------------
Charles L. Allen,
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities indicated on August , 1996.
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- ------------------------------------------
<C> <S>
/s/ CHARLES L. ALLEN President, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
Charles L. Allen
WILLIAM A. BROSIUS* Chief Financial Officer and Secretary
- --------------------------------------------- (Principal Financial and Accounting
William A. Brosius Officer)
ROY W. GRIFFITTS, JR.* Chief Operating Officer and Director
- ---------------------------------------------
Roy W. Griffitts, Jr.
GUY L. DE CHAZAL* Director
- ---------------------------------------------
Guy L. de Chazal
SCOTT S. HALSTED* Director
- ---------------------------------------------
Scott S. Halsted
*By: /s/ CHARLES L. ALLEN
- ---------------------------------------------
Charles L. Allen
Attorney-in-Fact
</TABLE>
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<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
1** -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Company, dated as of July
26,1996.
3.2 -- Bylaws of the Company adopted July 26, 1996.
3.3** -- Amended and Restated Certificate of Incorporation of the Company.
3.4** -- Amended and Restated Bylaws of the Company.
4.1 -- Specimen Certificate for shares of Common Stock, $.001 par value, of
the Company.
4.2 -- Registration Rights Agreement, dated as of May 31, 1995, among MHI
and Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley
Venture Capital Fund II, C.V., Morgan Stanley Venture Investors,
L.P., Charles L. Allen, Roy W. Griffitts, Jr., William A. Brosius,
and ING.
4.3 -- Stockholders Agreement, dated as of May 31, 1995, among MHI and
Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture
Capital Fund II, C.V., Morgan Stanley Venture Investors, L.P.,
Charles L. Allen, Roy W. Griffitts, Jr. and William A. Brosius.
4.4 -- Warrant Purchase Agreement, dated as of May 31, 1995, between MHI and
ING.
4.5 -- Warrant Certificate, dated May 31, 1995, pursuant to which MHI issued
297,973 warrants to ING.
4.6 -- Put and Call Agreement, dated as of May 31, 1995, among the Company,
MHI, MHI Acquisition Corporation I and ING.
4.7 -- Form of Founder Performance Stock Purchase Agreement dated as of May
31, 1995, between: MHI and each of Charles L. Allen, Roy W.
Griffitts, Jr., and William A. Brosius.
4.8 -- Series A Preferred Stock Purchase Agreement, dated as of May 31,
1995, among MHI and Morgan Stanley Venture Capital Fund II, L.P.,
Morgan Stanley Venture Capital Fund II, C.V., Morgan Stanley Venture
Investors, L.P., Charles L. Allen, Roy W. Griffitts, Jr., and William
A. Brosius.
4.9 -- Morgan Stanley Letter Agreement, dated May 31, 1995, between Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
Fund II, C.V., Morgan Stanley Venture Investors, L.P., MHI, MHI
Acquisition Corporation I, the Company, MileStone Healthcare
Management, Inc., Trucare Health Systems, Inc., Trucare
Rehabilitation Systems, Inc., and Trucare Physical Therapy Services,
Inc., and ING.
4.10 -- 1996 Stock Option Plan, including form of Stock Option Agreement.
4.11 -- Form of Warrant dated April 30, 1996, issued by each of Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
Fund II C.V. and Morgan Investors, L.P. to each of Alan Gerry and SV
Capital Partners, L.P. for purchase of shares of Series A Preferred
Stock of MHI.
4.12 -- Merger Agreement between MHI and the Company dated July 26, 1996.
5** -- Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 -- Credit Agreement, dated as of May 31, 1995, among MHI Acquisition
Corporation I, the Company and ING.
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.2 -- Revolving Note, dated May 31, 1995, executed by MHI Acquisition
Corporation I and the Company in favor of ING.
10.3 -- Term Note, dated May 31, 1995, executed by MHI Acquisition
Corporation I and the Company in favor of ING.
10.4 -- Security Agreement, dated as of May 31, 1995, among MHI Acquisition
Corporation I, MHI Acquisition Corporation II, the Company, MileStone
Healthcare Management, Inc., Trucare Health Systems, Inc., Trucare
Rehabilitation Services, Inc., and Trucare Physical Therapy Services,
Inc. and ING.
10.5 -- Stock and Notes Pledge Agreement, dated as of May 31, 1995, among MHI
Acquisition Corporation I, the Company and ING.
10.6 -- Assumption Agreement, dated as of June 1, 1995, between the Company
and ING.
10.7 -- Guaranty, dated as of May 31, 1995, made by MHI in favor of ING.
10.8 -- Pledge Agreement, dated as of May 31, 1995, between MHI and ING.
10.9 -- Subsidiary Guaranty, dated as of May 31, 1995, made by MHI
Acquisition Corporation II, MileStone Healthcare Management, Inc.,
Trucare Health Systems, Inc., Trucare Rehabilitation Services, Inc.,
and Trucare Physical Therapy Services, Inc. in favor of ING.
10.10 -- Subsidiary Pledge Agreement, dated as of May 31, 1995, between
Trucare Health Systems, Inc. and Trucare Physical Therapy Services,
Inc. and ING.
10.11 -- Employment Agreement dated May 31, 1995, between MHI and Charles L.
Allen.
10.12 -- Employment Agreement dated May 31, 1995, between MHI and Roy W.
Griffitts, Jr.
10.13 -- Employment Agreement dated May 31, 1995, between MHI and William A.
Brosius.
10.14 -- Form of Indemnification Agreement dated as of May 31, 1995, between
MHI and each of Charles L. Allen, Roy W. Griffitts, Jr., William A.
Brosius, Scott S. Halsted, and Guy L. de Chazal.
10.15 -- Note Purchase Agreement, dated as of May 31, 1995, between MHI and
Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture
Capital Fund II, C.V., and Morgan Stanley Venture Investors, L.P.
10.16 -- Note Purchase and Sale Agreement dated as of May 6, 1996, by and
among Morgan Stanley Venture Capital Fund II L.P., Morgan Stanley
Venture Capital Fund II C.V. and Morgan Investors, L.P. and Alan
Gerry and SV Capital Partners, L.P. and MHI.
10.17 -- Amended and Restated Senior Subordinated Note Due 2000, dated as of
July 25, 1996, from MHI to Alan Gerry as Holder.
10.18 -- Amended and Restated Senior Subordinated Note Due 2000, dated as of
July 25, 1996, from MHI to SV Capital Partners, L.P. as Holder.
10.19 -- Agreement entered into May 6, 1996 by and among Alan Gerry and SV
Capital Partners L.P., as Purchasers, and MHI.
10.20 -- Lease of Office Space in The 2501 Cedar Springs Building between 2501
Cedar Springs Investors, as Landlord, and the Company, as Tenant,
effective May 1, 1992.
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.21 -- Lease Agreement dated June 11, 1992, between North Dallas Tower,
Ltd., as Landlord, and TruCare Health Systems, Inc., as Tenant.
21 -- List of subsidiaries of the Company.
23.1* -- Consent of Ernst & Young LLP.
23.2** -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in its
opinion filed as Exhibit 5 hereto).
24* -- Power of Attorney (included on signature page of this Registration
Statement).
27* -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF MERGER
OF
MHI ACQUISITION, INC.
INTO
MILESTONE HEALTHCARE, INC.
The undersigned corporation, organized and existing under the Delaware
General Corporation Law, does hereby certify:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
MileStone Healthcare, Inc. Delaware
MHI Acquisition, Inc. Delaware
</TABLE>
SECOND: An Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of Section
251 of the Delaware General Corporation Law.
THIRD: The name of the surviving corporation of the merger is
MileStone Healthcare, Inc.
FOURTH: The Certificate of Incorporation of the surviving corporation
shall be as set forth on Exhibit A hereto.
FIFTH: The executed Agreement and Plan of Merger is on file at the
principal place of business of the surviving corporation, the address of which
is 2501 Cedar Springs Road, Suite 600, LB 15, Dallas, Texas 75201.
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by
the surviving corporation on request and without cost to any stockholder of any
constituent corporation.
Dated this 26th day of July, 1996.
MILESTONE HEALTHCARE, INC.
By: /s/William A. Brosius
------------------------------
Name: William A. Brosius
Title: Secretary
<PAGE> 2
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
MILESTONE HEALTHCARE, INC.
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
MileStone Healthcare, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in City of Wilmington, County of New Castle,
Delaware 19801. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
(A) CLASSES OF STOCK. The total number of shares of stock which
the Corporation shall have authority to issue is 30,000,000 shares, consisting
of 20,000,000 shares of Common Stock, 10,000,000 of which shall be designated
Class A Common Stock (the "Class A Common") and 10,000,000 of which shall be
designated Class B Common Stock (the "Class B Common") having par value of
$.001 per share (the Class A Common and Class B Common are collectively
referred to hereinafter as the "Common Stock"), and 10,000,000 shares of
Preferred Stock, 5,000,000 of which shall be designated Series A Preferred
Stock, par value $.001 per share ("Series A Preferred").
(B) RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF COMMON
STOCK. All shares of Common Stock will be identical and will entitle the
holders thereof to the same rights, preferences and privileges as set forth
below in this Article (IV)(B), except as otherwise provided herein and as
provided by law.
1. Voting Rights.
(a) Class A Common. Except as set forth herein
or as otherwise required by law, each outstanding share of Class A Common shall
be entitled to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each holder of Class A Common shall be entitled
to one vote for each share of such stock held by such holder. The holders of
Class A Common shall have separate voting rights as a class with regard to the
election of directors of the Corporation as set forth in Section(C)(4) of this
Article IV.
<PAGE> 3
(b) Class B Common. Except as set forth herein
or as otherwise required by law, each outstanding share of Class B Common shall
not be entitled to vote on any matter on which the stockholders of the
Corporation shall be entitled to vote, and shares of Class B Common shall not
be included in determining the number of shares voting or entitled to vote on
any such matters. On any matter on which the holders of shares of Class A
Common and the holders of shares of Class B Common are entitled to vote, except
as otherwise required by law, both classes of Common Stock shall vote together
as a single class, and each holder of shares of Class B Common entitled to vote
shall be entitled to one vote for each share of such stock held by such holder;
provided, however, that notwithstanding the foregoing, holders of shares of the
Class B Common shall be entitled to vote as a separate class on any amendment
to this paragraph (b) of this Section (B)(1) and on any amendment, repeal or
modification of any provision of this Restated Certificate of Incorporation
that adversely affects the powers, preferences or special rights of the Class B
Common.
2. Dividends. Dividends may be paid by the Corporation,
whenever funds are legally available therefor, to the holders of shares of
Common Stock in accordance with the provisions of Section (D) of this Article
IV.
3. Liquidation. Holders of Common Stock shall be
entitled to certain rights in the event of a liquidation, dissolution or
winding up of the Corporation in accordance with the provisions of Section
(C)(1) of this Article IV.
4. Conversion.
(a) Conversion of Class A Common. Subject to and
upon compliance with the provisions of this Section (B)(4), any Regulated
Stockholder (as defined below) shall be entitled to convert, at any time and
from time to time, any or all of the shares of Class A Common held by such
stockholder into the same number of shares of Class B Common.
(b) Conversion of Class B Common. Subject to and
upon compliance with the provisions of this Section (B)(4), each record holder
of Class B Common shall be entitled to convert, at any time and from time to
time, any or all of the shares of Class B Common held by such stockholder into
the same number of shares of Class A Common; provided, however, that no holder
of shares of Class B Common shall be entitled to convert any such shares to the
extent that, as a result of such conversion, such holder and its Affiliates (as
defined below), directly or indirectly, would own, control or have the power to
vote a greater number of shares of Common Stock or other securities of any kind
issued by the Corporation that such holder and its Affiliates shall be
permitted to own, control or have power to vote under any law, regulation, rule
or other requirement of any governmental authority at the time applicable to
such holder or its Affiliates.
(c) Conversion Procedure. Each conversion of
shares of Common Stock of the Corporation into shares of another class of
Common Stock of the Corporation shall be effected by the surrender of the
certificate or certificates representing the shares to be converted (the
"Converting Common Shares") at the principal office of the Corporation (or such
other office or agency of the Corporation as the Corporation may designate by
written notice to the holders of Common Stock) at any time during its usual
business hours, together with written notice by the holder of such Converting
Common Shares, stating that such holder desires to convert the Converting
Common Shares, or a stated number of the shares represented by such
-2-
<PAGE> 4
certificate or certificates, into an equal number of shares of the class into
which such shares may be converted (the "Converted Common Shares"). Such
notice shall also state the name or names (with addresses) and denominations in
which the certificate or certificates for Converted Common Shares are to be
issued and shall include instructions for the delivery thereof and shall also
contain a representation that the conversion of such shares is permitted under
applicable law. The Corporation shall promptly notify each Regulated
Stockholder of its receipt of such notice. Subject to the provisions of this
Section (B)(4), promptly after such surrender and the receipt of such written
notice, the Corporation will issue and deliver in accordance with the
surrendering holder's instructions the certificate or certificates evidencing
the Converted Common shares issuable upon such conversion, and the Corporation
will deliver to the converting holder a certificate which shall contain such
legends as were set forth on the surrendered certificate or certificates unless
at the time of issuance, such legends are no longer required) representing any
shares which were represented by the certificate or certificates that were
delivered to the Corporation in connection with such conversion, but which were
not converted, provided, however, that if such conversion is subject to
paragraph (d) of this Section (B)(4) below, the Corporation shall not issue
such certificate or certificates until the expiration of the Deferral Period
referred to therein. Subject to the provisions of this Section (B)(4), such
conversion, to the extent permitted by law, shall be deemed to have been
effected as of the close of business on the date on which such certificate or
certificates shall have been surrendered and such notice shall have been
received by the Corporation, and at such time the rights of the holder of the
Converting Common Shares as such holder shall cease (except that, in the case
of a conversion subject to paragraph (d) of this Section (B)(4) below, the
conversion shall be deemed to be effective upon the expiration of the Deferral
Period referred to therein), and the person or persons in whose name or names
the certificate or certificates for the Converted Common Shares are to be
issued upon such conversion shall be deemed to have become the holder or
holders of record of the Converted Common Shares. Upon issuance of shares in
accordance with this Section (B)(4), such Converted Common Shares shall be
deemed to be duly authorized, validly issued fully paid and non-assessable.
Notwithstanding any provision of this Section (B)(4) to the contrary,
the Corporation shall not be required to record the conversion of, and no
holder of shares shall be entitled to convert, shares of Class B Common into
shares of Class A Common unless such conversion is permitted hereunder or under
applicable law; provided, however, that the Corporation shall be entitled to
rely without independent verification upon the representation of any holder
that the conversion of shares by such holder is permitted under applicable law,
and in no event shall the Corporation be liable to any such holder or any third
party arising from any such conversion whether or not permitted by applicable
law.
(d) Notice of Conversion to Other Regulated
Stockholders Deferral. The Corporation shall not convert or directly or
indirectly redeem, purchase or otherwise acquire any shares of Class A Common
or any other class of capital stock of the Corporation or take any other action
affecting the voting rights of such shares, if such action will increase the
percentage of any class of outstanding voting securities owned or controlled by
any Regulated Stockholder above 4.9% of the Corporation's outstanding voting
stock (other than any such stockholder which requested that the Corporation
take such action, or which otherwise waives in writing its rights under this
paragraph (d) of this Section (B)(4)), unless the Corporation gives written
notice (the "Deferral Notice") of such action to each Regulated Stockholder.
The Corporation will defer making any such conversion, redemption purchase or
other acquisition, or taking any such other action for a period of twenty (20)
days (the "Deferral Period") after
-3-
<PAGE> 5
giving the Deferral Notice in order to allow each Regulated Stockholder to
determine whether it wishes to convert or take any other action with respect to
the Common Stock it owns, controls or has the power to vote, and if any such
Regulated Stockholder then elects to convert any shares of Class A Common, it
shall notify the Corporation in writing within ten (10) days of the issuance of
the Deferral Notice, in which case the Corporation shall (i) promptly notify
from time to time prior to the end of such 20-day period each other Regulated
Stockholder holding shares of each proposed conversion and the proposed
transactions, and (ii) effect the conversions requested by all Regulated
Stockholders in response to the notices issued pursuant to this paragraph (d)
of this Section (B)(4) at the end of the Deferral Period. Without giving each
Regulated Stockholder at least twenty (20) days prior written notice, the
Corporation will not directly or indirectly redeem, purchase, acquire or take
any other action affecting outstanding shares of Common Stock if such action
will increase over 24.9% the percentage of outstanding capital stock owned or
controlled by any Regulated Stockholder and its Affiliates (other than a
stockholder which waives in writing its rights under this Section (d)).
(e) Stock Splits; Adjustments. If the
Corporation shall in any manner subdivide (by stock split, stock dividend or
otherwise) or combine (by reverse stock split or otherwise) the outstanding
shares of the Class A Common or the Class B Common, then the outstanding shares
of each other class of Common Stock shall be subdivided or combined, as the
case may be, to the same extent, share and share alike, and effective provision
shall be made for the protection of the conversion rights hereunder.
In case of any reorganization, reclassification or change of shares of
the Class A Common or the Class B Common (other than a change in par value or
from par to no par value as a result of a subdivision or combination), or in
case of any consolidation of the Corporation with one or more corporations or a
merger of the Corporation with another corporation (other than a consolidation
or merger in which the Corporation is the resulting or surviving corporation
and which does not result in any reclassification or change of outstanding
shares of Class A Common or Class B Common), provision shall be made so that
each holder of a share of Class A Common or Class B Common shall have the right
at any time thereafter as nearly as practicable, so long as the conversion
right hereunder with respect to such share would exist had such event not
occurred, to convert such share into the kind and amount of shares of stock and
other securities and properties (including cash) receivable upon such
reorganization, reclassification, change, consolidation or merger by a holder
of the number of shares of Class A Common or Class B Common into which such
shares of Class A Common or Class B Common, as the case may be, might have been
converted immediately prior to such reorganization, reclassification, change,
consolidation or merger. In the event of such a reorganization,
reclassification, change, consolidation or merger, effective provision shall be
made in the certificate of incorporation of the resulting or surviving
corporation or otherwise for the protection of the conversion rights of the
shares of Class A Common or Class B Common that shall be applicable, as nearly
as reasonably may be, to any such other shares of stock and other securities
and property deliverable upon conversion of shares of Class A Common or Class B
Common into which such Class A Common or Class B Common, as the case may be,
might have been converted immediately prior to such event.
The Corporation shall not be a party to any merger, consolidation or
recapitalization pursuant to which any Regulated Stockholder would be required
to take (i) any voting securities which would cause such holder to violate any
law, regulation or other requirement of any governmental body applicable to
such holder, or (ii) any securities convertible into voting
-4-
<PAGE> 6
securities which, if such conversion took place, would cause such holder to
violate any law, regulation or other requirement of any governmental body
applicable to such holder other than securities which are specifically provided
to be convertible only in the event that such conversion may occur without any
such violation.
(f) Reservation of Shares. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Class A Common and Class B Common or its treasury shares, solely for
the purpose of issuance upon the conversion of shares of outstanding Class A
Common and Class B Common, such number of shares of such class as are then
issuable upon the conversion of all outstanding shares of Class A Common and
Class B Common.
Shares of Class A Common and Class B Common that are converted into
shares of another class shall not be reissued, except for reissuances in
connection with the conversion of shares of Class A Common held by Regulated
Stockholders into shares of Class B Common, and the conversion of shares of
Class B Common into shares of Class A Common.
5. As used in this Section (B) of this Article IV, the
following terms shall have the meanings shown below:
(a) "Affiliate" shall mean with respect to any
Person, any other person, directly or indirectly controlling, controlled by or
under common control with such Person. For the purpose of the above
definition, the term "control" (including with correlative meaning, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
(b) "Person" shall mean an individual, a
partnership, a corporation, a trust, a joint venture, an unincorporated
organization or a government or any department or agency thereof.
(c) "Regulated Stockholder" shall mean (i) any
stockholder that is subject to the provisions of Regulation Y of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 225 (or any successor
to such Regulation) ("Regulation Y") and that holds shares of Common Stock of
the Corporation originally issued upon exercise of warrants issued pursuant to
that certain Warrant Agreement dated May 31, 1995 between the Corporation and
the investor party thereto, or shares issued upon the conversion(s) of such
shares, so long as such stockholder shall hold, and only with respect to, such
shares of Common Stock or shares issued upon conversion(s) of such shares, (ii)
any Affiliate of any such Regulated Stockholder that is a transferee of any
shares of Common Stock of the Corporation, so long as such Affiliate shall
hold, and only with respect to, such shares of Common Stock or shares issued
upon conversion(s) of such shares and (iii) any Person to which such Regulated
Stockholder or any of its Affiliates has transferred such shares, so long as
such transferee shall hold, and only with respect to, any such shares or any
shares issued upon conversion(s) of such shares but only if such Person (or any
Affiliate of such Person) is subject to the provisions of Regulation Y.
-5-
<PAGE> 7
(C) RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF PREFERRED
STOCK. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred are as set forth below in this Section (C)
of this Article IV.
1. Liquidation Preference.
(a) Series A Preferred. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary (a "Liquidation"), the holders of the shares of the Series A
Preferred shall be entitled, before any distribution or payment is made upon
any share of the Common Stock or upon any other class of the capital stock of
the Corporation which by its terms ranks junior to the Series A Preferred upon
Liquidation, to be paid (first, in cash, to the extent of cash assets
available, then second, in non-cash assets) in an amount equal to $1.00 for
each such share then held by them, adjusted for any recapitalizations, stock
combinations, stock splits, stock dividends and the like with respect to such
shares and, in addition, an amount equal to all declared but unpaid dividends
on the Series A Preferred held by them. If upon such Liquidation the assets to
be distributed among the holders of the shares of Series A Preferred shall be
insufficient to permit payment to such holders of the full aforesaid
preferential amount, then all of the assets of the Corporation then remaining
shall be distributed ratably among the holders of the shares of Series A
Preferred in proportion to the aggregate amount owed to such holders.
(b) Common Stock. After payment has been made to
the holders of the Series A Preferred of the full amounts to which they shall
be entitled as aforesaid, any remaining assets shall be distributed among all
holders of Common Stock in proportion to the number of shares of Common Stock
held by each such holder.
(c) Special Provisions.
(i) For purposes of this Section (C)(1),
a Liquidation shall be deemed to occur upon the Corporation's sale of all or
substantially all of its assets or the acquisition of the Corporation by
another entity or by another corporation by means of merger, consolidation or
any other transaction or series of related transactions resulting in the
exchange of the outstanding shares of the Corporation for securities or
consideration issued or caused to be issued by the acquiring corporation or its
subsidiary as a result of which stockholders of the Corporation own less than
fifty percent (50%) of the equity securities of the surviving corporation.
(ii) If any assets distributed pursuant
to this Section (C)(1) are other than cash, then, unless the provisions of this
Section (C)(1)(c) are waived by the holders of a majority of the Common Stock
and a majority of the Series A Preferred, the Board shall promptly engage
independent, competent appraisers to determine the value of such assets to be
distributed to the holders of the stock of the Corporation. The Corporation
shall, upon receipt of such appraiser's valuation give prompt written notice to
each holder of Series A Preferred and Common Stock.
2. Conversion. The holders of Series A Preferred shall
have conversion rights as follows (the "Conversion Rights"):
-6-
<PAGE> 8
(a) Conversion.
(i) Optional Conversion. Each share of
Series A Preferred shall be convertible, at the option of the holder thereof,
at any time after the date of issuance of such share at the office of the
Corporation or any transfer agent for the Series A Preferred, into that number
of fully-paid and non-assessable shares of Class A Common that is equal to
$1.00 divided by the Conversion Price (as hereinafter defined). The price at
which Class A Common shall be deliverable upon conversion of the Series A
Preferred (the "Conversion Price") shall initially be $1.00 per share of Class
A Common, and shall be subject to adjustment as provided herein.
(ii) Automatic Conversion. Each share of
Series A Preferred shall automatically be converted into shares of Class A
Common at the then effective Conversion Price upon (A) the written consent of
holders of not less than a majority of the Series A Preferred or (B) upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, covering the
offer and the sale of Class A Common for the account of the Corporation to the
public at a price per share (prior to underwriting commissions and offering
expenses) of not less than $3.00 per share (approximately adjusted for any
recapitalizations, stock combinations, stock splits, stock dividends and the
like) and an aggregate offering price to the public of not less than
$10,000,000 (a "Public Offering").
(b) Mechanics of Conversion.
(i) No fractional shares of Class A
Common shall be issued upon conversion of Series A Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then fair
market value of a share of Class A Common, as determined by the Board of
Directors.
(ii) Before any holder of Series A
Preferred shall be entitled to convert the same into full shares of Class A
Common pursuant to Section (C)(2)(a)(i) above, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series A Preferred, and shall give
written notice to the Corporation at such office that such holder elects to
convert the same. In the event of an automatic conversion pursuant to Section
(C)(2)(a)(ii) above, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Class A Common issuable upon such automatic conversion unless either
the certificates evidencing such shares of Series A Preferred as delivered to
the Corporation or its transfer agent as provided above, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation
to indemnify the Corporation from any loss incurred by it in connection with
such certificates.
The Corporation shall, as soon as practicable after such delivery, or
after such agreement and indemnification, issue and deliver at such office to
such holder of Series A Preferred, a certificate or certificates for the number
of shares of Class A Common to which such holder
-7-
<PAGE> 9
shall be entitled as aforesaid and a check payable to the holder in the amount
of any cash amounts payable as the result of a conversion into fractional
shares of Class A Common, plus, in the case of a conversion pursuant to
(C)(2)(a)(i) above, any accrued and unpaid dividends on the converted Series A
Preferred. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series
A Preferred to be converted, and the person or persons entitled to receive the
shares of Class A Common issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Class A Common on
such date; provided, however, that if the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act
the conversion may, at the option of any holder tendering Series A Preferred
for conversion, be conditioned upon the closing of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Class A Common issuable upon such conversion of the Series A Preferred shall
not be deemed to have converted such Series A Preferred until immediately prior
to the closing of the sale of such securities.
(c) Adjustments to Conversion Price.
(i) Adjustments for Subdivisions, Stock
Dividends or Combinations of Common. In the event the outstanding shares of
Class A Common shall be subdivided (by stock split, stock dividend or
otherwise) into a greater number of shares of Class A Common and the
outstanding shares of Series A Preferred are not similarly subdivided, the
Conversion Price in effect immediately prior to such subdivision shall,
concurrently with the effectiveness of such subdivision, be proportionately
decreased. In the event the outstanding shares of Class A Common shall be
combined (by reclassification, reverse stock split or otherwise) into a lesser
number of shares of Class A Common and the outstanding shares of Series A
Preferred are not similarly combined, the Conversion Price in effect
immediately prior to such combination shall, concurrently with the
effectiveness of such combination, be proportionately increased.
(ii) Adjustment for Other Distributions.
In the event the Corporation at any time or from time to time makes or fixes a
record date for the determination of holders of Class A Common entitled to
receive any distribution payable in securities of the Corporation other than
shares of Class A Common and other than as otherwise adjusted in this Section
(C)(2), then and in each such event provision shall be made so that the holders
of Series A Preferred shall receive upon conversion thereof, in addition to the
number of shares of Class A Common receivable thereupon, the amount of
securities of the Corporation which they would have received had their Series A
Preferred been converted into Class A Common on the date of such event and had
they thereafter, during the period from the date of such event to and including
the date of conversion, retained such securities receivable by them as
aforesaid during such period, subject to all other adjustments called for
during such period under this Section (C)(2) with respect to the rights of the
holders of the Series A Preferred.
(iii) Adjustments for Reclassification,
Exchange and Submission. If the Class A Common issuable upon conversion of the
Series A Preferred shall be changed into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the Conversion Price then in effect
shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Series A Preferred
shall be convertible into, in lieu of the number of shares of Class A Common
-8-
<PAGE> 10
which the holders would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock equivalent to the number of
shares of Class A Common that would have been subject to receipt by the holders
upon conversion of the Series A Preferred immediately before that change.
(d) No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation but
will at all times in good faith assist in the carrying out of all the
provisions of this Section (C)(2) and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred against impairment.
(e) Certificate as to Adjustment. Upon the
occurrence of each adjustment or readjustment of the Conversion Price pursuant
to this Section (C)(2), the Corporation at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of Series A Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price and (iii) the number of shares of
Class A Common and the amount, if any, of other property which at the time
would be received upon the conversion of Series A Preferred.
(f) Notice of Record Date. In the event that the Corporation shall propose
at any time:
(i) to declare any dividend or
distribution upon its Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and whether or not out of
earnings or earned surplus;
(ii) to offer for subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iv) to merge with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of the Series A Preferred at least twenty (20) business days' prior
written notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights to
vote in respect of any such matters.
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<PAGE> 11
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holders of Series A Preferred at the address for each
such holder as shown on the books of the Corporation.
(g) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Class A Common solely for the purpose
of effecting the conversion of the shares of the Series A Preferred, such
number of its shares of Class A Common as shall from time to time be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred; and if at any time the number of authorized but unissued shares of
Class A Common shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Class A Common to such number of
shares as shall be sufficient for such purpose.
3. Voting Rights of Series A Preferred. Except as
otherwise required by law or by Sections (C)(4) or (C)(5) of this Article
IV(C), the holder of each share of Class A Common issued and outstanding shall
have one vote and the holder of each share of Series A Preferred shall be
entitled to the number of votes equal to the number of shares of Class A Common
into which such share of Series A Preferred could be converted at the record
date for determination of the stockholders entitled to vote on such matters,
or, if no such record date is established, at the date such vote is taken or
any written consent of stockholders is solicited, such votes to be counted
together with all other shares of stock of the Corporation having general
voting power and not separately as a class. Holders of Class A Common and
Series A Preferred shall be entitled to notice of any stockholders meeting in
accordance with the Bylaws of the Corporation. Fractional voting by the
holders of Series A Preferred shall not, however, be permitted and any
fractional voting rights shall (after aggregating all shares into which shares
of Series A Preferred held by each holder could be converted) be rounded to the
nearest whole number.
4. Board of Directors; Voting Rights for Directors.
(a) Size of Board of Directors. The Board of
Directors shall consist of five (5) persons until the earlier of (i) a proper
amendment of this Section (C)(4)(a); (ii) an increase in the Board to seven (7)
persons in accordance with the provisions of Section (C)(4)(b) below; or (iii)
a termination of the provisions of this Section 4 in accordance with Section
(C)(4)(c) below.
(b) Voting. Holders of Series A Preferred shall
have a right to a separate class vote with respect to the election of two (2)
members of the Board of Directors. Holders of Class A Common shall have a
right to a separate class vote with respect to the election of two (2) members
of the Board of Directors. One (1) member of the Board of Directors shall be
elected by the vote of the holders of Series A Preferred and Class A Common,
voting together as a single class, in accordance with the provisions of Section
(C)(3) of this Article IV. In the event the Corporation shall be placed in
default under that certain Credit Agreement dated May 31, 1995 among the
Corporation, the lenders named therein and Internationale Nederlander (U.S.)
Capital Corporation (as such agreement may hereafter be amended, modified or
succeeded by another agreement or agreements concerning the Corporation's
indebtedness for borrowed money, the "Credit Agreement"), and the Corporation
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<PAGE> 12
does not obtain a letter from holders of the secured debt evidenced by the
Credit Agreement of a waiver of such default within 30 days after such a
default, then thereafter until such time as the Corporation is no longer in
default under the Credit Agreement (as evidenced by a written acknowledgement
of the holders of the secured debt evidenced by the Credit Agreement) (i) the
number of members of the Board of Directors shall be increased from five (5) to
seven (7) and (ii) the holders of Series A Preferred shall have a right to a
separate class vote with respect to an additional two (2) members of the Board
of Directors.
(c) Termination. The provisions of this Section
(C)(4) shall terminate upon the closing of a Public Offering.
5. Special Voting Rights of Series A Preferred. The
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Series A Preferred:
(i) create any new class or series of
stock having a preference over, or being on parity with, the Series A Preferred
with respect to dividends, or upon Liquidation or otherwise;
(ii) pay or declare any dividend or
distribution on any shares of Preferred Stock or Common Stock;
(iii) amend or repeal any provision of, or
add any provision to, the Certificate of Incorporation if such action would
adversely alter or change the rights, preferences, privileges or powers of the
Series A Preferred; or
(iv) with regard to the Corporation or
any subsidiary of the Corporation, undertaken any transaction or series of
transactions involving a reorganization, consolidation or merger as a result of
which the holders of the voting stock of the Corporation or such Subsidiary
prior thereto hold less than 50% of the voting stock of the surviving or
successor corporation or entity.
6. Dividends. Dividends may be paid by the Corporation,
whenever funds are legally available theretofore, to the holders of shares of
Series A Preferred in accordance with the provisions of Section (D) of this
Article IV.
(D) DIVIDENDS. Subject to Section (C)(5) of this
Article IV, the Board of Directors of the Corporation may cause dividends to be
paid to holders of shares of capital stock out of funds legally available for
the payment of dividends. Any dividends shall be paid ratably to the holders
of shares of Series A Preferred and Common Stock on and as if converted to
Class A Common basis. In the case of dividends payable in shares of Common
Stock of the Corporation, or options, warrants or rights to acquire shares of
Common Stock, or securities convertible or exchangeable for shares of such
Common Stock, the shares, options, warrants, rights or securities so payable
shall be payable (with respect to holders of Common Stock) in shares of, or
options, warrants or rights to acquire, or securities convertible or
exchangeable for, Common Stock of the same class upon which the dividends or
distribution is being paid.
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<PAGE> 13
ARTICLE V
The Board is expressly authorized to adopt, amend or repeal the Bylaws
of the Corporation. In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the
General Corporation Law of the State of Delaware, this Certificate of
Incorporation, and any Bylaws adopted by the stockholders; provided, that no
Bylaw hereafter adopted by the stockholders shall invalidate any prior act of
the directors which would have been valid if such Bylaws had not been adopted.
ARTICLE VI
Elections of directors need not be done by written ballot unless the
Bylaws of the Corporation shall otherwise provide. The books of the
Corporation may be kept (subject to any provision contained in the General
Corporation Law of the State of Delaware) outside the State of Delaware at such
place as may be designated from time to time by the Board or in the Bylaws of
the Corporation.
ARTICLE VII
The directors of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided that the foregoing shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper benefit.
No repeal, modification or amendment of, or adoption of any provision
inconsistent with, this Article VII nor, to the fullest extent permitted by
law, any modification of law shall adversely affect any right or protection of
a director of the Corporation existing at the time of such repeal, amendment,
adoption or modification or affect the liability of any director of the
Corporation for any action taken or any omission that occurred prior to the
time of such repeal, amendment, adoption or modification.
If the General Corporation Law of the State of Delaware shall be
amended, after these Bylaws are amended to include this Article VII, to
authorize corporate action further eliminating or limiting the liability of
directors, then a director of the Corporation, in addition to the circumstances
in which he is not liable immediately prior to such amendment, shall be free of
liability to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute and by this Certificate of Incorporation,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
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<PAGE> 14
ARTICLE IX
No holder of any shares of any class or series of capital stock of the
Corporation shall be entitled to any preemptive right to subscribe for or
otherwise acquire any additional shares of any class or series of capital stock
of the Corporation or any securities convertible into, or exercisable or
exchangeable for, any shares of any class or series of capital stock of the
Corporation, unless otherwise provided pursuant to any agreement with the
Corporation.
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
MILESTONE HEALTHCARE, INC.
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I - CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 REGISTERED OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . 3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS . . . . . . . . . . . . . . . . . . 4
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III - DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 6
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 FIRST MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.15 REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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4.3 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 TREASURER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 ASSISTANT SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.12 ASSISTANT TREASURER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.13 AUTHORITY AND DUTIES OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI - INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII - RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 MAINTENANCE AND INSPECTION OF RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII - GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 CHECKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 SPECIAL DESIGNATION ON CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.8 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.9 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.10 TRANSFER OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.11 STOCK TRANSFER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.12 REGISTERED STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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ARTICLE IX - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X - DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI - CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.2 DUTIES OF CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE> 5
BYLAWS
OF
MILESTONE HEALTHCARE, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the
registered agent of the corporation at such location is The Corporation Trust
Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors in accordance with
applicable law. However, if such day falls on a legal holiday, then the meeting
shall be held at the same time and place on the next succeeding full business
day. At the meeting, directors shall be elected and any other proper business
may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called, at any time for
any purpose or purposes, by the board of directors or by
<PAGE> 6
such person or persons as may be authorized by the certificate of incorporation
or these bylaws.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
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<PAGE> 7
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as
may be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock, or of any class or classes or of a series or series thereof,
who elects to cumulate votes shall be entitled to as many votes as equals the
number of votes which (absent this provision as to cumulative voting) he would
be entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them, as he may see fit.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or
these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stock-
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holders, may be taken without a meeting, without prior notice, and without a
vote if a consent in writing, setting forth the action so taken, is signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such
section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without
a meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the board of directors is necessary, shall be the day on which
the first written consent is expressed.
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(iii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board
of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed
by the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be
managed and all corporate power shall be exercised by or under the direction of
the board of directors.
3.2 NUMBER OF DIRECTORS
The authorized number of directors shall be five (5). This number may
be changed by a duly adopted amendment to the certificate of incorporation or
by an amendment to this bylaw adopted by the vote or written consent of the
holders of a majority of the stock issued and outstanding and entitled to vote
or by resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
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Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the provisions
of the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the certificate of incorporation or these
bylaws, or may apply to the Court of Chancery for a decree summarily ordering
an election as provided in Section 211 of the General Corporation Law of
Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in
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a meeting of the board of directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of
directors, or in the event such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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3.9 QUORUM
At all meetings of the board of directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any meeting of
the board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
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Unless otherwise restricted by the certificate of incorporation or
these bylaws, the board of directors shall have the authority to fix the
compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the places of any such absent or
disqualified member.
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Any such committee, to the extent provided in the resolution of the board of
directors or in the bylaws of the corporation, shall have and may exercise all
the powers and authority of the board of directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers that may require it; but no such
committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation), (ii) adopt an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of the corporation or
a revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section
253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
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government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
bylaws, shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the
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acceptance of the resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and
shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY
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The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all shareholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name
and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.
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5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other
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enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (i) who is or was an
employee or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or agent
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
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Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney
or such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
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<PAGE> 22
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the board
of directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be
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<PAGE> 23
entitled to have a certificate signed by, or in the name of the corporation by
the chairman or vice-chairman of the board of directors, or the president or
vice-president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the
designations, the preferences, and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and
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<PAGE> 24
canceled at the same time. The corporation may issue a new certificate of stock
or uncertificated shares in the place of any certificate theretofore issued by
it, alleged to have been lost, stolen or destroyed, and the corporation may
require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions
contained in the certificate of incorporation, may declare and pay dividends
upon the shares of its capital stock pursuant to the General Corporation Law of
Delaware. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation shall have power to have a corporate seal, which may
be altered at pleasure, and use the same by causing it or a facsimile thereof,
to be impressed or affixed or in any other manner reproduced.
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<PAGE> 25
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of shareholders of any one or more classes of stock
of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
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<PAGE> 26
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation
Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution
consent in writing, either in person or by duly authorized attorney, to a
dissolution, no meeting of directors or stockholders shall be necessary. The
consent shall be filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such consent's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved. If the consent is signed by an
attorney, then the original power of attorney or a photocopy thereof shall be
attached to and filed with the consent. The consent filed with the Secretary of
State shall have attached to it the affidavit of the secretary or some other
officer of the corporation stating that the consent has been signed by or on
behalf of all the stockholders entitled to vote on a dissolution; in addition,
there shall be attached to the consent a certification by the secretary or some
other officer of the corporation setting forth the names and residences of the
directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the
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<PAGE> 27
corporation is insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE> 1
EXHIBIT 4.1
[MILESTONE HEALTHCARE LOGO]
NUMBER SHARE
MH
MILESTONE HEALTHCARE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR CERTAIN DEFINITIONS AND
DALLAS, TEXAS; OR NEW YORK, NEW YORK RESTRICTIONS ON TRANSFER
THIS CERTIFIES THAT
is the OWNER of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK,
$.001 PAR VALUE PER SHARE, OF
MILESTONE HEALTHCARE, INC.
(herein called the "Corporation") transferable on the books of the Corporation
by the holder hereof, in person or by duly authorized attorney, upon surrender
of this Certificate properly endorsed or accompanied by a proper assignment.
This Certificate and the shares represented hereby are issued under and shall
be held subject to all of the provisions of the Certificate of Incorporation
and the By-laws of the Corporation, and all amendments thereto, copies of which
are on file at the principal offices of the Corporation and the Transfer Agent,
to all of which the holder of this Certificate, by acceptance hereof, assents.
This Certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures
of its duly authorized officers and its facsimile seal to be hereunto affixed.
DATED:
COUNTERSIGNED AND REGISTERED:
/s/ CHARLES L. ALLEN CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
PRESIDENT AND TRANSFER AGENT
CHIEF EXECUTIVE OFFICER AND REGISTRAR
/s/ WILLIAM A. BROSIUS BY
SECRETARY
AUTHORIZED SIGNATURE
[CORPORATE SEAL]
<PAGE> 2
MILESTONE HEALTHCARE, INC.
The Corporation will furnish to any stockholder, upon request and
without charge, a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof which the Corporation is authorized to issue and the
qualifications, limitations or restrictions of such preferences and/or rights
of each such class of stock or series thereof. Any such request should be made
to the Secretary of the Corporation at its principal place of business or to
the Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________ Custodian ________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
Additional abbreviations may also be used though no in the above list.
For Value Received, _____________________________ hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/____________________________________ / ____________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE
____________________________________________________________________________________________________
____________________________________________________________________________________________________
_____________________________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate and do(es) hereby irrevocably constitute
and appoint
____________________________________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with full power of
substitution in the premises.
Dated _________________________________
NOTICE: X ____________________________________________________
(SIGNATURE)
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE X ____________________________________________________
IN EVERY PARTICULAR, WITHOUT (SIGNATURE)
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
-------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION AS DEFINED IN RULE 17Ad-15 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
-------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 4.2
MHI ACQUISITION, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of May 31, 1995 by and
among MHI ACQUISITION, INC., a Delaware corporation (the "Company"), and the
entities and individuals listed on the Schedule of Purchasers attached to this
Agreement as Exhibit A (collectively, the "Purchasers").
RECITALS
WHEREAS, the Company and the Series A Investors (as defined below) are
parties to that certain Series A Preferred Stock Purchase Agreement dated as of
May 31, 1995 (the "Series A Purchase Agreement") providing for, among other
things, the sale by the Company and the several purchases by the Series A
Investors of shares of the Company's Series A Preferred Stock, par value $.001
per share (the "Series A Preferred"), and the Company and the Management
Investors (as defined below) are parties to those certain Founder Performance
Stock Purchase Agreements dated as of May 31, 1995 (the "Founder Performance
Stock Purchase Agreements"), providing for, among other things, the sale by the
Company and the several purchases by the Management Investors of the Company's
Class A Common Stock, par value $.001 per share (the "Class A Common");
WHEREAS, the Company and Internationale Nederlanden (U.S.) Capital
Corporation ("ING") are parties to that certain Warrant Purchase Agreement
dated May 31, 1995 (the "Warrant Purchase Agreement") providing for the sale by
the Company to ING of warrants (the "Warrants") to purchase 404,405 shares of
the Company's Class B Common Stock, par value $.001 per share (the "Class B
Common"); and
WHEREAS, the sales of the Series A Preferred to the Series A
Investors, the sales of the Class A Common to the Management Investors and the
sale of the Warrants to ING are conditioned upon the registration rights being
extended to the respective Purchasers.
NOW THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Acceptance Notice" shall have the meaning set forth in
Section 2(b)(ii)(F).
"Class A Common" shall mean the Class A Common Stock, $.001
par value, of the Company.
<PAGE> 2
"Class B Common" shall mean the Class B Common Stock, $.001
par value, of the Company.
"Commission" shall mean the Securities and Exchange Commission
of the United States or any other U.S. federal agency at the time
administering the Securities Act.
"Common Stock" shall mean shares now or hereafter authorized
of any class of common stock of the Company and any other capital stock of the
Company, however designated, that has the right (subject to any prior rights of
any class or series of preferred stock) to participate in any distribution of
the assets upon voluntary or involuntary liquidation, dissolution or winding up
of the Company or in the earnings of the Company without limit as to per share
amount, and shall include, without limitation the presently authorized Class A
Common and Class B Common. "Common Stock" shall not include preferred or
special stock.
"Founder Performance Stock Purchase Agreements" shall have the
meaning set forth in the first paragraph of the recitals.
"Holder" shall mean each of the Purchasers (and their
transferees as permitted by Section 11) holding Registrable Securities or
securities convertible into or exercisable for Registrable Securities.
"ING" shall mean Internationale Nederlanden (U.S.) Capital
Corporation.
"Initiating Holders" shall mean Holders who in the aggregate
hold greater than forty percent (40%) of the Registrable Securities.
"Initiating Warrant Holders" shall mean Warrant Holders who in
the aggregate hold greater than twenty percent (20%) of the Warrant Shares.
"Management Investors" shall mean the purchasers of the
Company's Class A Common under the Founder Performance Stock Purchase
Agreements.
"Offer" shall have the meaning set forth in Section
2(b)(ii)(F).
"Other Holders" shall mean holders of Company securities,
other than Holders, proposing to distribute their securities pursuant to a
registration under this Agreement.
"Person" shall mean any natural person, corporation, firm,
association, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
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<PAGE> 3
"Promissory Notes" shall mean those certain Notes issued in
connection with that certain Note Purchase Agreement dated May 31, 1995 by and
among the Company and the purchasers set forth on the signature pages thereto.
"Promissory Note Purchaser" shall have the meaning set forth
in Section 11.
"Purchasers" shall mean, collectively, the Series A Investors,
the Management Investors and ING.
"Quoted Prices" shall have the meaning set forth in Section
2(b)(ii)(F).
"Registrable Securities" means (i) the Class A Common issued
or issuable on conversion of the Series A Preferred, (ii) the Class A Common
issued pursuant to the Founder Performance Stock Purchase Agreements which are
not subject to repurchase by the Company pursuant to the terms of such
agreements, (iii) the Class A Common issued or issuable upon exercise of
options held by the Management Investors pursuant to Stock Option Agreements
dated May 31, 1995 (issued pursuant to the Company's 1995 Stock Option Plan),
(iv) the Class A Common issuable upon conversion of the Class B Common issued
or issuable upon exercise of the Warrants and (v) any shares of Class A Common
issued or issuable in respect of such Class A Common upon any stock split,
stock dividend, recapitalization, or similar event. Shares of Class A Common
or other securities shall only be treated as Registrable Securities if they
have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, (B) sold in a single
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act pursuant to Rule 144(k) so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale or (C) this Agreement is terminated with respect to the holder of
such securities pursuant to Section 13 hereof. The Company shall only be
required to register Class A Common pursuant to this Agreement and, consistent
therewith, all Holders shall convert (or exercise Warrants and convert, if
applicable), as a condition to participation in any registration under this
Agreement, their shares of Series A Preferred or Class B Common into Class A
Common in conjunction with the inclusion of such shares in any registration by
the Company contemplated by this Agreement.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 2, 3
and 4 hereof, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, one counsel for holders of the Warrants and the
Warrant Shares, and one counsel for the other Purchasers, blue sky fees and
expenses, fees and disbursements of all independent certified public
accountants of the Company (including, without limitation, the expenses of any
special audit and, in connection with any underwritten offering, "cold comfort"
letters
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<PAGE> 4
required by or incident to such performance), fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which securities of the same class are then listed or
the qualification for trading of the securities to be registered in each
inter-dealer quotation system in which securities of the same class are then
traded, and fees and expenses associated with any NASD filing required to be
made in connection with such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar United States federal statute.
"Series A Investors" shall mean the purchasers of the
Company's Series A Preferred under the Series A Purchase Agreement.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by Holders.
"Selling Holders" shall mean each Holder who holds Registrable
Securities included in a registration statement under the Securities Act
pursuant to this Agreement.
"Series A Preferred" shall mean the Series A Preferred Stock,
$.001 par value, of the Company.
"Series A Purchase Agreement" shall have the meaning set forth
in the first paragraph of the recitals.
"Warrant Holders" shall have the meaning set forth in Section
2(b).
"Warrant Holders' Registration Notice" shall have the meaning
set forth in Section 2(b).
"Warrant Purchase Agreement" shall have the meaning set forth
in the second paragraph of the recitals.
"Warrants" shall mean those certain warrants for the purchase
of 404,405 shares of Class B Common sold by the Company to ING pursuant to the
Warrant Purchase Agreement.
"Warrant Shares" shall mean the shares of Class B Common
issued or issuable upon exercise of the Warrants together with any other
securities issuable or which such holder may acquire on account of any such
Class B Common, including, without limitation, as the result of the shares of
Class B Common being converted into shares of Class A Common and/or any
dividend or other distribution on Common Stock, any split-up of such Common
Stock, or in accordance with a recapitalization, merger, consolidation, share
exchange, reorganization or other transaction or
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<PAGE> 5
series of related transactions in which shares of Common Stock are changed into
or exchanged for securities of another corporation, or the exercise of any
preemptive right (or the exercise or conversion of any security which such
holder may acquire in connection with the exercise of any preemptive right)
with respect to such Common Stock.
2. REQUESTED REGISTRATION.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to a public offering of
shares of then outstanding Registrable Securities the reasonably anticipated
aggregate price to the public of which would equal or exceed $5,000,000 (a
"Registration Notice"), the Company will:
(i) give prompt (and in any case within ten (10)
days after receiving such request) written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of written notice from the Company pursuant to clause (i) above;
Notwithstanding the foregoing, the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 2(a):
(A) In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier to occur of (i)
six (6) months after the effective date of the Company's first registered
public offering of its stock or (ii) January 1, 1997;
(C) During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date six (6) months immediately following the effective date of,
any registration statement pertaining to securities of the Company sold by the
Company (other than a registration of securities in a Rule 145 transaction or
with respect
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<PAGE> 6
to an employee benefit plan), provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective;
(D) After the Company has effected two
(2) registrations pursuant to this Section 2(a), and such registrations have
been declared or ordered effective; or
(E) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 2(a) shall be
deferred for a period not to exceed ninety (90) days from the date of receipt
of written request from the Initiating Holders, provided, however, that the
Company shall not utilize this right more than once in any twelve (12) month
period.
Subject to the foregoing clauses (A) through (E), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the request
or requests of the Initiating Holders.
(b) Warrant Holders Request for Registration. In
addition to all other rights holders of the Warrants and Warrant Shares (the
"Warrant Holders") possess as Holders pursuant to the terms of this Agreement,
Initiating Warrant Holders shall have the right, following the Company's first
registered public offering of its stock (subject to certain limitations set
forth below), to request that the Company effect any registration,
qualification or compliance with respect to a public offering of Warrant Shares
the reasonably anticipated aggregate price to the public of which would equal
or exceed $100,000 (the "Warrant Holders' Registration Notice"). Following
receipt of the Warrant Holder's Registration Notice, the Company will:
(i) give prompt (and in any event within ten (10)
days of receipt of the Warrant Holders' Registration Notice) written notice of
the proposed registration, qualification or compliance to all Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder of Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of written notice from the Company pursuant to clause (i) above;
Notwithstanding the foregoing, the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 2(b):
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<PAGE> 7
(A) In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may
required by the Securities Act;
(B) Prior to six (6) months after the
effective date of the Company's first registered public offering of its stock;
(C) If the Company has delivered a
written notice to the Warrant Holders pursuant to Section 3(a), during the
period starting with the date thirty (30) days prior to the Company's good
faith estimated date of filing (which shall be specified in such notice) of,
and ending on the date six (6) months immediately following the effective date
of, any registration statement pertaining to securities of the Company sold by
the Company (other than a registration of securities in a Rule 145 transaction
or with respect to an employee benefit plan), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(D) After the Company has effected two
(2) registrations pursuant to this Section 2(b), and such registrations have
been declared or ordered effective; provided, however, that no such
registration will be deemed declared or ordered effective for purposes of this
clause (D) unless a registration statement covering all Warrant Shares
requested by one or more Warrant Holders to be registered pursuant to this
Section 2(b) shall have become effective and, if the method of disposition is a
firm commitment underwritten public offering, all such Warrant Shares shall
have been sold pursuant thereto (unless the failure to close such sale did not
result from a failure of the Company to comply with its obligations under this
Agreement, in which case such obligation shall be deemed satisfied upon such
effectiveness);
(E) If the Company shall furnish to
Warrant Holders a certificate signed by the President of the Company stating
that in the good faith judgment of the Board of Directors the filing of a
registration statement would require the disclosure of material information
that the Company has a bona fide business purpose for preserving as
confidential and that is not then otherwise required to be disclosed, then the
Company's obligation to use its best efforts to register, qualify or comply
under this Section 2(b) shall be deferred for a period not to exceed ninety
(90) days from the date of receipt of written request from the Warrant Holders,
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; or
(F) If the Company notifies the Warrant
Holders of its good faith intention to purchase such Registrable Securities in
accordance with the terms of this clause (F), then the Company's obligations to
use its best efforts to register, qualify or comply under this Section 2(b)
shall be deferred for a period not to exceed thirty (30) days following the
expiration of the 20-day period during which Holders may deliver requests
pursuant to Section 2(b)(ii), unless the Company delivers an Acceptance Notice
(as defined in clause (1) below) to the Warrant Holders,
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<PAGE> 8
in which case the Company's obligations shall be deferred for a period not to
exceed fifty (50) days following the expiration of such 20-day period.
(1) The Warrant Holders'
Registration Notice and the written requests delivered by any Warrant Holders
joining in such Warrant Holders' Registration Notice, if any, shall be an offer
by each Warrant Holder (the "Offer") to sell to the Company all Warrant Shares
proposed to be included in such registration by such Warrant Holder for a cash
purchase price equal to the product of (I) the average of the Quoted Prices (as
defined below) for the Class A Common for the thirty (30) consecutive trading
days commencing forty-five (45) trading days prior to such Warrant Holders'
Registration Notice multiplied by (II) the number of Warrant Shares offered to
the Company by each such Warrant Holder. Upon expiration of the 20-day period
during which Holders may deliver requests pursuant to Section 2(b)(ii), the
Company shall have thirty (30) days to give written notice of its intention to
accept or reject the Offer and agree to purchase all, but not less than all,
Warrant Shares proposed to be included in such registration. Failure to
respond within such 30-day period shall be deemed notice of rejection. In the
event that the Company notifies the Warrant Holders of its intention to accept
such Offer (the "Acceptance Notice"), then the Acceptance Notice, taken in
conjunction with the Offer, shall constitute a valid and legally binding
purchase and sale agreement, and payment in cash for such Warrant Shares shall
be made by the Company within twenty (20) days following the receipt by the
Warrant Holders of the Acceptance Notice. If the Company rejects or is deemed
to reject the Offer (or if the Company did not in good faith intend to accept
the Offer), the Company will expeditiously prepare and file a registration
statement with respect to, and use its best efforts to effect the registration
of, the Warrant Shares requested to be registered pursuant to this Section
2(b).
(2) The "Quoted Price" of the Class
A Common is the last reported sales price of the Class A Common on such day as
reported by NASDAQ or, if the Class A Common is listed on a national securities
exchange, the last reported sales price of the Class A Common on such exchange
(which shall be for consolidated trading if applicable to such exchange) on
such day or, if the Class A Common is neither reported nor listed, the average
of the last reported bid and asked prices of the Class A Common on such day.
Subject to the foregoing clauses (A) through (F), the Company
shall prepare and file a registration statement covering the Warrant Shares and
other Registrable Securities so requested to be registered as soon as
practicable, after receipt of the Warrant Holders Registration Notice.
(c) Underwriting. If a registration pursuant to Section
2 is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as part of the notice given pursuant to Sections
2(a)(i) and 2(b)(i). In such event, the right of any Holder to registration
pursuant to Section 2 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 2(c), and the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
requested shall be limited to the extent provided herein.
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<PAGE> 9
The Company shall (together with all Holders and Other Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company, but subject to the reasonable
approval of a majority in interest of the Initiating Holders (or, with respect
to a registration pursuant to Section 2(b), the reasonable approval of a
majority in interest of the Initiating Warrant Holders). Notwithstanding any
other provision of this Section 2, if the managing underwriter advises the
Initiating Holders (or the Initiating Warrant Holders with respect to
registration under Section 2(b)) in writing that marketing factors require a
limitation of the number of shares to be underwritten whether pursuant to a
registration under Sections 2(a) or Section 2(b), then the Company shall so
advise all Holders and Other Holders, and the number of shares that may be
included in the registration and underwriting shall be allocated,first, among
the Warrant Holders who have requested that Warrant Shares held by them be
included in such registration in proportion, as nearly as practicable, to the
respective amounts of Warrant Shares held by them at the time of filing the
registration statement, second, among all other Holders (other than the Warrant
Holders) in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement and, third, among the Other Holders in proportion to the
number of shares proposed to be included in such registration by such Other
Holders. No Registrable Securities or other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any holder to the nearest one hundred (100)
shares.
If any Holder or Other Holder disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders (or, in the
case of a registration pursuant to Section 2(b), the Initiating Warrant
Holders). The Registrable Securities and/or other securities withdrawn from
such underwriting shall also be withdrawn from such registration.
3. COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders (including,
without limitation, pursuant to Section 2), other than (i) a registration
relating solely to employee benefit plans or (ii) a registration relating
solely to a Commission Rule 145 transaction, the Company will:
(i) give prompt (and in any event within twenty
(20) days before the anticipated filing date of the related registration
statement) written notice thereof to each Holder indicating the proposed
offering price and describing the plan of distribution; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance) and, at the request of
any Holder, in any underwriting involved
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<PAGE> 10
therein, all the Registrable Securities specified in a written request or
requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Holder.
No registration of Registrable Securities effected under this Section
3(a) shall relieve the Company of its obligation to effect registration of
Registrable Securities pursuant to Section 2(a) or 2(b).
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 3(a)(i). In such event the right of any
Holder to registration pursuant to Section 3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided in this Section 3(b).
All Holders proposing to distribute their securities through such
underwriting shall, together with the Company and Other Holders, enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. The Company shall use its reasonable
best efforts to cause the managing underwriter of such proposed underwritten
offering to permit the Registrable Securities proposed to be included in such
registration to be included in the registration statement for such offering on
the same terms and conditions as any similar securities of the Company included
therein. Notwithstanding any other provision of this Section 3, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities and other securities to be included in such
registration. The Company shall so advise all Holders and Other Holders, and
the number of shares that may be included in the registration and underwriting
by all Holders and Other Holders shall be allocated among them, as nearly as
practicable, first, among the Warrant Holders who have requested that Warrant
Shares held by them be included in such registration in proportion, as nearly
as practicable, to the respective amounts of Warrant Shares held by them at the
time of filing the registration statement, second, among the Holders (other
than the Warrant Holders) in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time
of filing of the registration statement, and, third, among the Other Holders in
proportion to the number of shares proposed to be included in such registration
by such Other Holders. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any Holder or Other Holder to the nearest one hundred (100) shares.
If any Holder or Other Holder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting also shall be withdrawn from such registration, and
shall not be transferred in a public distribution prior to ninety (90) days
after the effective date of the registration statement relating thereto, or
such other shorter period of time as the underwriters may require.
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<PAGE> 11
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 3 prior to the effectiveness of such registration whether or not
any Holder has elected to include Registrable Securities in such registration.
4. REGISTRATION ON FORM S-3.
(a) Request for Registration. If any Holder or Holders
request that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3) for a public offering of shares of the Registrable
Securities the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000, and the Company is a registrant entitled to use Form
S-3 to register the Registrable Securities for such an offering, the Company
shall use its best efforts to cause such Registrable Securities to be
registered for the offering on such form and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request. The substantive provisions of Section 2(c) shall be
applicable to each registration initiated under this Section 4 involving an
underwriting; provided, however, that the rights granted to the Holders
pursuant to this Section 4 shall be in addition to, and not in lieu of, the
rights granted to Holders pursuant to Section 2 of this Agreement.
(b) Limitations. Notwithstanding the foregoing, the
Company shall not be obligated to take any action pursuant to this Section 4:
(i) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(ii) if the Company, within ten (10) days of the
receipt of the request of the Initiating Holders requesting registration under
this Section 4, gives notice of its bona fide intention to effect the filing of
a registration statement with the Commission within ninety (90) days of receipt
of such request (other than with respect to a registration statement relating
to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities);
(iii) during the period starting with the date
thirty (30) days prior to the Company's good faith estimated date of filing of,
and ending on the date six (6) months immediately following, the effective date
of any registration statement pertaining to securities of the Company (other
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(iv) if the Company shall furnish to such Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors the filing
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<PAGE> 12
of a registration statement would require the disclosure of material
information that the Company has a bona fide business purpose for preserving as
confidential and that is not then otherwise required to be disclosed, then the
Company's obligation to use its best efforts to file a registration statement
shall be deferred for a period not to exceed ninety (90) days from the receipt
of the request to file such registration by such Holder, provided, however,
that the Company shall not utilize this right more than once in any twelve (12)
month period; or
(v) more than once in any twelve (12) month
period.
5. LIMITATIONS ON REGISTRATION RIGHTS OF OTHERS. The Company
represents and warrants that it has not granted to any Person the right to
request or require the Company to register any securities issued by the
Company. The Company also covenants and agrees that, from and after the date
hereof, the Company will not, without the prior written consent of holders of a
majority of each of the then outstanding Registrable Securities and the then
outstanding Warrant Shares, enter into any agreement with any holder or
prospective holder of any securities of the Company which allows such holder or
prospective holder of any securities of the Company to include such securities
in any registration filed under Sections 2, 3 or 4 hereof, unless the rights
granted under the terms of such agreement are expressly subject and
subordinated to the rights of registration granted to the Holders pursuant to
Sections 2, 3 or 4 hereof.
6. EXPENSES OF REGISTRATION.
(a) Registration Expenses. The Company shall bear all
Registration Expenses incurred in connection with all registrations pursuant to
Sections 2 and 3. In the event any Initiating Holders (or, in the case of a
registration pursuant to Section 2(b), the Initiating Warrant Holders) withdraw
a Registration Notice (or a Warrant Holders' Registration Notice, as the case
may be), abandon a registration statement or, following an effective
registration pursuant to Section 2 hereof, does not sell the Registrable
Securities held by such Holders that were included in such registration, then
all Registration Expenses in respect of such Registration Notice (or Warrant
Holders' Registration Notice, as the case may be) shall be borne, at the
Initiating Holders' option (or, in the case of Section 2(b), at the Initiating
Warrant Holders' option), either by the Initiating Holders (or the Initiating
Warrant Holders, as the case may be) or by the Company (in which case, if borne
by the Company, such withdrawn or abandoned registration shall be deemed to be
an effective registration for purposes of Section 2(a)(ii)(D) or Section
2(b)(ii)(D) hereof, as the case may be). The Company shall bear the
Registration Expenses incurred with respect to the first three (3) S-3
registrations pursuant to Section 4, and the Selling Holders shall pay the
Registration Expenses on any additional S-3 registrations pro rata on the basis
of the number of shares so registered.
(b) Selling Expenses. All Selling Expenses relating to
securities registered on behalf of the Holders and Other Holders shall be borne
by the Holders and Other Holders pro rata on the basis of the number of shares
so registered.
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<PAGE> 13
7. REGISTRATION AND QUALIFICATION. If and whenever the Company
is required to use its best efforts to effect the registration of any
Registrable Securities pursuant to Section 2, the Company will use its best
efforts to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto it will, as promptly as is practicable:
(a) before filing a registration statement or prospectus
or any amendments or supplements thereto, furnish to the counsel of the Holders
of the Registrable Securities covered by such registration statement copies of
all documents proposed to be filed, which documents will be made available on a
timely basis, for review by such counsel to the Holders;
(b) prepare and file with the Commission, as soon as
practicable, and use its best efforts to cause to become effective, a
registration statement under the Securities Act relating to the Registrable
Securities to be offered on such form under the Securities Act as the
Initiating Holders (or, in the case of a registration pursuant to Section 2(b),
the Initiating Warrant Holders), or if not filed pursuant to Section 2 hereof,
the Company, determines and for which the Company then qualifies;
(c) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until the earlier of such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition set forth in such registration
statement or the expiration of one hundred twenty (120) days after such
registration statement becomes effective; provided that such one hundred twenty
(120) day period shall be extended in the case of a registration pursuant to
Section 2 hereof for such number of days that equals the number of days
elapsing from (i) the date the written notice contemplated by Section 7(g)
hereof is given by the Company to (ii) the date on which the Company delivers
to the Selling Holders the supplement or amendment contemplated by Section 7(g)
hereof;
(d) furnish to the Selling Holders and to any underwriter
of Registrable Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any amendment or supplement thereto, in conformity with
the requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as the Selling Holders or such underwriter may reasonably request,
and, if requested, a copy of any and all transmittal letters or other
correspondence to, or received from, the Commission or any other governmental
agency or self-regulatory body or other body having jurisdiction (including any
domestic or foreign securities exchange) relating to such offering;
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<PAGE> 14
(e) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of such registration statement at the
earliest possible moment;
(f) if requested by a Selling Holder, (i) furnish to each
Selling Holder and to any underwriter an opinion of counsel for the Company
addressed to each Selling Holder and underwriter and dated the date of the
closing under the underwriting agreement (if any) (or if such offering is not
underwritten, dated the effective date of the registration statement), (ii) use
its best efforts to furnish to each Selling Holder a " cold comfort" or
"special procedures" letter addressed to each Selling Holder and signed by the
independent public accountants who have audited the Company's financial
statements included in such registration statement, (iii) make such
representations and warranties to the Selling Holders and, in connection with
any underwritten offering, to the underwriters, in each such case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters and in
underwriting agreements in underwritten public offerings of securities and such
other matters as the Selling Holders may reasonably request and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements;
(g) immediately notify the Selling Holders in writing (i)
at any time when a prospectus relating to a registration hereunder is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) of any request by the Commission or any other
regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document relating to such
offering, and in either such case, at the request of a Selling Holder, prepare
and furnish to such Selling Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made,
not misleading;
(h) use its best efforts to list all such Registrable
Securities covered by such registration statement on each securities exchange
and inter-dealer quotation system on which a class of common equity securities
of the Company is then listed, and to pay all fees and expenses in connection
therewith;
(i) upon the transfer of shares by a Selling Holder in
connection with a registration hereunder, furnish unlegended certificates
representing ownership of the Registrable Securities in such denominations as
shall be requested by the Selling Holders or the underwriters;
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<PAGE> 15
(j) promptly notify the Selling Holders and the managing
underwriter, if any, and if requested by any such Person, confirm such advice
in writing,
(A) of the issuance by the Commission of any stop
order suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose,
(B) of the Company's becoming aware at any time
that the representations and warranties of the Company contemplated by Section
7(f)(iii) above have ceased to be true and correct, and
(C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or threat
of any proceeding for such purpose;
(k) if reasonably requested by the managing underwriter,
if any, or a majority in interest of the Warrant Shares being sold in
connection with an underwritten offering, immediately incorporate in a
prospectus supplement or post-effective amendment to such registration
statement such information as the managing underwriter or such majority in
interest of the Warrant Shares being sold reasonably request to have included
therein relating to the plan of distribution with respect to such Warrant
Shares, including, without limitation, information with respect to the amount
of Warrant Shares being sold to such underwriters and any other terms of the
underwritten (or best-efforts underwritten) offering of the Warrant Shares to
be sold in such of offering; and make all required filings of such prospectus
supplement or post-effective amendment to such registration statement as soon
as notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment to such registration statement;
(l) prior to any public offering of Registrable
Securities, register or qualify or reasonably cooperate with the Selling
Holders, the managing underwriter, if any, and their respective counsel in
connection with the registration or qualification of such Warrant Shares for
offer and sale under the securities or blue sky laws of such jurisdictions as
any Selling Holder or managing underwriter reasonably requests (the
reasonableness of any request in connection with any registration under Section
2 to be determined by comparing the filing costs and fees that would be
incurred by the Company in complying with such request with the benefits to be
realized by the Selling Holders from such registration or qualification) and do
any and all other facts or things necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement;
(m) cooperate and assist in any filings required to be
made with the NASD and any performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter" as required
to be retained in accordance with the rules and regulations of the NASD); and
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<PAGE> 16
(n) otherwise use its best efforts to comply with the
Securities Act, the Exchange Act of 1934, as amended, all applicable rules and
regulations of the Commission and all applicable state blue sky and other
securities laws, rules and regulations.
8. INDEMNIFICATION.
(a) By the Company. The Company will indemnify each
Holder, each of its officers and directors, partners, employees and agents, and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained (or incorporated by reference) in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers, directors, partners,
employees and agents, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable to any such Holder, controlling
person or underwriter in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission, or alleged untrue statement or omission, made or incorporated by
reference in such registration statement, prospectus, offering circular or
other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use
therein. If the Holders are represented by counsel other than counsel for the
Company, the Company will not be obligated under this Section 8(a) to reimburse
legal fees and expenses of more than one separate counsel for the Warrant
Holders and one separate counsel for all other Holders.
(b) By Holders. Each Selling Holder will indemnify the
Company, each of its directors, officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, and each other Selling Holder, each of its officers,
directors, partners, employees and agents and each person controlling such
Selling Holders within the meaning of Section 15 of the Securities Act, against
all expenses, claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
state
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<PAGE> 17
ment) of a material fact contained (or incorporated by reference) in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Selling Holders, such directors, officers,
partners, employees and agents, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made (or incorporated by
reference) in such registration statement, prospectus, offering circular or
other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Selling Holder
and stated to be specifically for use therein. Notwithstanding the foregoing,
the liability of each Selling Holder under this subsection (b) shall be limited
in an amount equal to the net proceeds of the shares sold by such Selling
Holder, unless such liability arises out of or is based on willful misconduct
by such Selling Holder.
(c) Procedure for Indemnification. Each party entitled
to indemnification under paragraph (a) or (b) of this Section 8 (the
"Indemnified Party") shall, promptly after receipt of notice of any claim or
the commencement of any action against such Indemnified Party in respect of
which indemnity may be sought, notify the party required to provide
indemnification (the "Indemnifying Party") in writing of the claim or the
commencement thereof; provided that the failure of the Indemnified Party to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to an Indemnified Party pursuant to the provisions
of this Section 8, unless the Indemnifying Party was materially prejudiced by
such failure, and in no event shall such failure relieve the Indemnifying Party
from any other liability which it may have to such Indemnified Party. If any
such claim or action shall be brought against an Indemnified Party, it shall
notify the Indemnifying Party thereof and the Indemnifying Party shall be
entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel satisfactory to the Indemnified Party. After notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable
(except to the extent the proviso to this sentence is applicable, in which
event it will be so liable) to the Indemnified Party under this Section 8 for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided that each Indemnified Party shall have the right to
employ separate counsel to represent it and assume its defense (in which case,
the Indemnifying Party shall not represent it) if (i) upon the advice of
counsel, the representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party will not have the right to assume
the defense of such claim or action on behalf of such Indemnified Party), or
(ii) in the event the Indemnifying Party has not assumed the defense thereof
within ten (10) days of receipt of notice of such claim or commencement of
action, in which case the fees and expenses of one such separate counsel shall
be paid by the Indemnifying Party (and, in the event the Warrant Holders are an
Indemnified Party,
-17-
<PAGE> 18
the Indemnifying Party shall, in such event, pay for one separate counsel for
the Warrant Holders). If any Indemnified Party employs such separate counsel
it will not enter into any settlement agreement which is not approved by the
Indemnifying Party, such approval not to be unreasonably withheld. If the
Indemnifying Party so assumes the defense thereof (and by so assuming shall be
solely responsible for liabilities relating to such claim or action, and shall
release the Indemnified Party from such liabilities to the extent permitted by
law), it may not agree to any settlement of any such claim or action as the
result of which any remedy or relief, other than monetary damages for which the
Indemnifying Party shall be responsible hereunder, shall be applied to or
against the Indemnified Party, without the prior written consent of the
Indemnified Party. No Indemnifying Party will consent to entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or action. In any action
hereunder as to which the Indemnifying Party has assumed the defense thereof
with counsel satisfactory to the Indemnified Party, the Indemnified Party shall
continue to be entitled to participate in the defense thereof, with counsel of
its own choice, but, except as set forth above, the Indemnifying Party shall
not be obligated hereunder to reimburse the Indemnified Party for the costs
thereof.
(d) Contribution. If the indemnification provided for in
this Section 8 shall for any reason be unavailable to an Indemnified Party in
respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to herein, then each Indemnifying Party shall, in lieu of
indemnifying such Indemnified Party, contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim, damage or liability,
or action in respect thereof, in such proportion as shall be appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party on the one hand or the Indemnified Party on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, but not by
reference to any Indemnified Party's stock ownership in the Company. In no
event, however, shall a Holder of Registrable Securities be required to
contribute in excess of the amount of the net proceeds received by such Holder
in connection with the sale of Registrable Securities in the offering which is
the subject of such loss, claim, damage or liability. The amount paid or
payable by an Indemnified Party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this paragraph
shall be deemed to include, for purposes of this paragraph, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
-18-
<PAGE> 19
(e) Non-Securities Act Claims. Indemnification or, if
appropriate, contribution, similar to that specified in the preceding
provisions of this Section 8 (with appropriate modifications) shall be given by
the Company and each Selling Holder with respect to any required registration
or other qualification of Registrable Securities pursuant to this Agreement
under any federal or state law or regulation or governmental authority other
than the Securities Act.
9. INFORMATION BY HOLDER. Holders including any Registrable
Securities in any registration shall furnish to the Company such information
regarding such Holders as shall be necessary to enable the Company to comply
with the provisions hereof in connection with any registration, qualification
or compliance referred to in this Agreement.
10. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Class A Common,
the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act");
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) Furnish to any Holder forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as
such Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
registration.
11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to Sections 2, 3 and 4 may
be assigned in connection with any transfer or assignment by a Holder of
Registrable Securities provided that: (a) such transfer may otherwise be
effected in accordance with applicable securities laws; (b) such transfer is
effected in compliance with the restrictions on transfer contained in this
Agreement and in any other agreement between the Company and the Holder; and
(c) such assignee or transferee (i) acquires at least 50,000 Warrant Shares or
500,000 shares of other Registrable Securities (as the same may be adjusted for
any stock split, stock dividend, stock combination or other recapitalization),
(ii) acquires all
-19-
<PAGE> 20
Registrable Securities held as of the date of this Agreement by a Holder (other
than a Warrant Holder) (less such number of shares sold by a Holder in
connection with the sale of any Promissory Notes or reserved by a Holder for
delivery upon exercise of any warrants sold with the sale of any Promissory
Notes) who, as of the date of this Agreement, holds less than 500,000 shares of
Registrable Securities, (iii) acquires any number of Registrable Securities in
connection with the sale of any Promissory Notes (either through outright sale
or issuable upon exercise of warrants transferred in connection with such sale)
(a "Promissory Note Purchaser") or (iv) is a general or limited partner or an
Affiliate of the Holder. No transfer or assignment will divest Holder or any
subsequent owner of such rights and powers unless all Registrable Securities
are transferred or assigned.
12. STANDOFF AGREEMENT. Each Holder agrees that, if, in
connection with the Company's initial public offering of the Company's
securities, the Company or the underwriters managing the offering so request,
the Holders shall not sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other than
those included in such registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the Company or the underwriters; provided
that each officer and director of the Company also agrees to such restrictions.
This Section 12 shall be binding on all transferees or assignees of Registrable
Securities, whether or not such persons are entitled to registration rights
pursuant to Section 11.
13. TERMINATION. This Agreement shall terminate, with respect to
each Holder, at such time as all Registrable Securities held by such Holder
constitutes less than two percent (2%) of the voting securities of the Company
(on an as-converted basis); provided however, that (i) with respect to each of
the Management Investors, this Agreement will terminate with respect to each
such Management Investor at the time such Management Investor holds or controls
less than the number of shares of capital stock of the Company held by the
Management Investors upon closing of the Series A Agreement and the Founder
Performance Stock Purchase Agreement dated May 31, 1995 between the Company and
the Management Investor (as adjusted for any stock splits, stock dividends,
recapitalizations and similar transactions), (ii) with respect to a Promissory
Note Purchaser, this Agreement shall terminate with respect to such Promissory
Note Purchaser at the time such Promissory Note Purchaser holds or controls
less than the number of Registrable Securities received by such Purchaser upon
sale of the Promissory Notes, and (iii) with respect to each of the Warrant
Holders, this Agreement will terminate with respect to each such Warrant Holder
at the time such Warrant Holder holds or controls less than 50,000 Warrant
Shares (as adjusted for any stock split, stock dividends, recapitalization and
similar transactions.) The respective indemnities, representations and
warranties of the Purchasers and the Company shall survive such termination.
-20-
<PAGE> 21
14. MISCELLANEOUS.
(a) Governing Law. This Agreement will be governed by
and construed in accordance with the State of New York without given effect to
the conflicts of law principles thereof.
(b) Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
at least a majority of the Registrable Securities, voting as a class; provided,
however, that no amendment which shall adversely affect the rights of Warrants
Holders hereunder shall be effective without the written consent of the holders
of at least a majority of the Warrant Shares. Any amendment or waiver effected
in accordance with this paragraph will be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities and the Company.
(c) Severability. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to
be illegally invalid, unenforceable or void, this Agreement shall continue in
full force and effect without said provision. In such event, the parties shall
negotiate, in good faith, a legal, valid and binding substitute provision which
most nearly effects the intent of the parties in entering into this Agreement.
(d) Notices. All notices and other communications
required or permitted hereunder shall be in writing (or in the form of a telex
or telecopy (confirmed in writing) to be given only during the recipient's
normal business hours unless arrangements have otherwise been made to receive
such notice by telex or telecopy outside of normal business hours) and shall be
mailed by registered or certified mail, postage prepaid, or otherwise delivered
by hand, messenger, or telex or telecopy (as provided above) addressed (a) if
to a Purchaser, at such other address as such Purchaser shall have furnished to
the Company in writing or (b) if to any other holder of any Series A Preferred,
Common Stock or Warrant Shares at such address as such holder shall have
furnished the Company in writing or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
shares who has so furnished an address to the Company or (c) if to the Company,
one copy should be sent to its principal executive offices and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid,
or, if by telex or telecopy pursuant to the above, when received.
-21-
<PAGE> 22
(e) Facsimile Signatures. Any signature page delivered
by a fax machine or telecopy machine shall be binding to the same extent as an
original signature page, with regard to any agreement subject to the terms
hereof or any amendment thereto. Any party who delivers such a signature page
agrees to later deliver an original counterpart to any party which requests it.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument.
(g) Titles, Subtitles and Table of Contents. The titles,
subtitles and table of contents used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
(h) Specific Performance. The company recognizes that
the rights of the Holders under this Agreement are unique and, accordingly, the
Holders shall, in addition to such other remedies as may be available to any of
them at law or in equity, have the right to enforce their rights hereunder by
actions for injunctive relief and specific performance to the extent permitted
by law. The company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate. This
Agreement is not intended to limit or abridge any rights of the Holders that
may exist apart from this Agreement.
(i) Waivers and Further Agreements. Any waiver of any
term or condition of this Agreement or of any breach of any such term or
condition shall not operate as a waiver of any other term or condition or
breach thereof, nor shall any failure to enforce any provision hereof operate
as a waiver of such provision or of any other provision hereof; provided,
however, that no such waiver shall be construed to effect a continuing waiver
of the provision being waived and no such waiver shall constitute a waiver in
any other instance or for any other purpose or impair the right of the party
against whom such waiver is claimed to require full compliance with such
provision in all other instances or for all other purposes, unless such waiver
by its own terms explicitly provides to the contrary. Each of the parties
hereto agrees to execute all such further instruments and documents and to take
all such further action as the other parties may reasonably require in order to
effectuate the terms and purposes of this Agreement.
-22-
<PAGE> 23
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title: Managing General Partner
---------------------------------------------------
Name of Purchaser
/s/
---------------------------------------------------
Signature
President
---------------------------------------------------
Title, if applicable
-23-
<PAGE> 24
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
its Investment General Partner
By: --------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title Managing General Partner
---------------------------------------------
Name of Purchaser
/s/
---------------------------------------------
Signature
President
---------------------------------------------
Title, if applicable
-24-
<PAGE> 25
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE INVESTORS, L.P.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
---------------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title: Managing General Partner
----------------------------------------------
Name of Purchaser
/s/
---------------------------------------------
Signature
President
---------------------------------------------
Title, if applicable
-25-
<PAGE> 26
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC.,
a Delaware corporation
Charles L. Allen
-----------------------------------
Name of Purchaser
By: /s/ Charles L. Allen
--------------------------------
Name: Charles L. Allen
Title: President & CEO
/s/ Charles L. Allen
-----------------------------------
Signature
President & CEO
-----------------------------------
Title, if applicable
-26-
<PAGE> 27
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC.,
a Delaware corporation
By: Roy W. Griffitts, Jr.
--------------------------- ----------------------------
Name: Charles L. Allen Name of Purchaser
Title: President
/s/ Roy W. Griffitts, Jr.
----------------------------
Signature
COO
----------------------------
Title, if applicable
-27-
<PAGE> 28
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC.
a Delaware corporation
By: /s/ Charles L. Allen William A. Brosius
-------------------------------- ----------------------------
Name: Charles L. Allen Name of Purchaser
Title: President
/s/ William A. Brosius
----------------------------
Signature
CFO
----------------------------
Title, if applicable
-28-
<PAGE> 29
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., INTERNATIONALE NEDERLANDEN (U.S.)
a Delaware corporation CAPITAL CORPORATION
------------------------------------
Name of Purchaser
By:
---------------------------
Name
Title: /s/Darren Wells
-----------------------------------
Signature
Darren Wells,
Managing Director
-----------------------------------
Title, if applicable
-29-
<PAGE> 30
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
PURCHASER CLASS OF SECURITY NUMBER OF SHARES
-------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Morgan Stanley Venture Capital Fund II, L.P. Series A preferred 2,651,335
Morgan Stanley Venture Capital Fund II, C.V. Series A Preferred 660,546
Morgan Stanley Venture Investors, L.P. Series A Preferred 688,119
Charles L. Allen Series A Preferred 535,714
Class A Common 200,000
Class A Common * 239,189
Roy W. Griffitts, Jr. Series A Preferred 392,857
Class A Common 107,692
Class A Common * 128,794
William A. Brosius Series A Preferred 71,429
Class A Common 92,308
Class A Common * 110,395
Internationale Nederlanden (U.S.) Capital Corporation Class B Common ** 405,405
</TABLE>
_______________________
* Shares issuable upon exercise of outstanding stock option.
** Shares issuable upon exercise of outstanding warrant.
<PAGE> 1
EXHIBIT 4.3
MHI ACQUISITION, INC.
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT is made as of May 31, 1995 by and among
MHI Acquisition, Inc., a Delaware corporation (the "Company"), and each of the
persons and entities listed on the Schedule of Investors (the "Investors")
attached hereto as Exhibit A.
RECITALS
WHEREAS, as of the Closing Date (as defined below), the Company will
have a total authorized capital stock of 30,000,000 shares, consisting of
20,000,000 shares of Common Stock, 10,000,000 of which will be classified as
Class A Common Stock (the "Class A Common") and 10,000,000 of which will be
classified as Class B Common Stock (the "Class B Common"), and 10,000,000
shares of Preferred Stock, 5,000,000 of which will be classified as Series A
Preferred Stock (the "Series A Preferred");
WHEREAS, the sales of the Series A Preferred and the Class A Common of
the Company to the Investors are conditioned upon certain rights being granted
to the Investors by the Company;
WHEREAS, the parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the shares of Series A Preferred
and Class A Common held by the Investors, and to provide for certain other
rights and obligations with respect to such Shares; and
WHEREAS, the Company wishes to facilitate the sale of Series A
Preferred and Class A Common to the Investors.
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants contained herein, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
SECTION 1
CERTAIN DEFINITIONS
"Affiliate" of any Person shall mean any other Person which, directly
or indirectly, controls, is controlled by or is under common control with such
Person.
"Board" shall mean the Board of Directors of the Company.
<PAGE> 2
"Charter" shall mean the Restated Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware pursuant to the terms of
the Series A Purchase Agreement, as hereafter amended from time to time.
"Class A Common" shall mean the 10,000,000 shares of Class A Common,
par value $.001 per share.
"Class B Common" shall mean the 10,000,000 shares of Class B Common,
par value $.001 per share.
"Closing Date" shall have the meaning set forth in the Series A
Purchase Agreement.
"Common Stock" shall mean the Class A Common and Class B Common.
"Company" shall mean MHI Acquisition, Inc., a Delaware corporation.
"Company Offer" shall have the meaning set forth in Section 4.1.
"Company Offered Securities" shall have the meaning set forth in
Section 4.1.
"Co-Sale Notice" shall have the meaning set forth in Section 2.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exempt Issuances" shall mean (i) the sale or issuance of Voting
Securities in a Public Offering or pursuant to any merger or acquisition by the
Company that is approved by the Board, (ii) Common Stock issued upon conversion
of shares of Series A Preferred sold pursuant to the Series A Purchase
Agreement, (iii) Class B Common issued upon exercise of the Warrants (and
shares of Class A Common issued upon conversion of such Class B Common), (iv)
Common Stock issued upon conversion, or exchange or exercise of any outstanding
securities of the Company, in accordance with the terms thereof, if the Company
complied with the provisions of Section 4 in connection with the original
issuance of such outstanding securities and (iv) the sale or issuance of shares
of Class A Common to officers, directors and employees of, and consultants to
the Company pursuant to stock grants, option plans, purchase plans or other
incentive programs or arrangements approved by the Board, including upon
exercise of options or warrants granted pursuant to any such plan or
arrangement, including shares of Class A Common sold pursuant to the Founder
Performance Stock Purchase Agreements.
"Founder Performance Stock Purchase Agreements" shall mean those
certain Founder Performance Stock Purchase Agreements between the Company and
each of the Founders, each dated as of May 31, 1995.
"Founders" shall mean Charles L. Allen, Roy W. Griffitts, Jr. and
William A. Brosius.
"Incentive Shares" shall have the meaning set forth in Section 5.
"Investors" shall mean each of the persons and entities listed on the
Schedule of Investors
-2-
<PAGE> 3
attached hereto as Exhibit A, and any subsequent party to this Agreement as
contemplated by Section 6.4.
"Morgan Stanley" shall mean Morgan Stanley Venture Capital Fund II,
L.P., Morgan Stanley Venture Capital Fund II, C.V. and/or Morgan Stanley
Venture Investors, L.P.
"MS Divestiture Transaction" shall have the meaning set forth under
the definition of "Shares."
"Note Purchaser" shall have the meaning set forth in Section 6.3(b).
"Note Sale" shall have the meaning set forth in Section 6.3(b).
"Offered Shares" shall have the meaning set forth in Section 2.1.
"Other Investors" shall mean Investors (other than a Selling
Investor).
"Participating Investors" shall have the meaning set forth in Section
2.1(c).
"Permitted Transferee" shall have the meaning set forth in Section
6.3(a).
"Person" shall mean any individual, firm, company, corporation,
unincorporated association, partnership, trust, joint venture or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Proposed Transferee" shall have the meaning set forth in the first
paragraph of Section 2.
"Pro Rata Portion" of an Other Investor shall mean the amount of
Offered Shares multiplied by a fraction, the numerator of which shall equal the
sum of the number of Shares then held by such Other Investor, and the
denominator of which shall equal the aggregate number of Shares held by all
Investors then outstanding minus, in the case of Section 2.1, the number of
Shares held by the Selling Investor.
"Public Offering" shall mean the sale or issuance of Voting Securities
in a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act with a price per share to the
public of at least $3.00 (as adjusted for any recapitalizations, stock
combinations, stock splits, stock dividends and the like) and aggregate
proceeds of at least $10,000,000.
"Purchasing Investor" shall have the meaning set forth in Section 4.5.
"Rule 144" shall mean Rule 144, as promulgated under the Securities
Act.
"Section 4 Acceptance Notice" shall have the meaning set forth in
Section 4.2.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Notice" shall have the meaning set forth in Section 2.1.
-3-
<PAGE> 4
"Selling Investor" shall have the meaning set forth in Section 2.1.
"Series A Preferred" shall mean the 5,000,000 shares of Series A
Preferred, par value $.001 per share.
"Series A Purchase Agreement" shall mean that certain Series A
Preferred Stock Purchase Agreement, dated as of May 31, 1995, by and among the
Company and the other parties named therein.
"Shares" held by any Person shall mean the shares of Series A
Preferred (calculated on an as-converted to Class A Common basis) and the
vested shares of Common Stock held by such Person, held as of the date of this
Agreement or hereafter acquired; provided however, that in the event that,
prior to the Company's initial public offering, Morgan Stanley shall propose to
sell Shares in a transaction (an "MS Divestiture Transaction") which, upon
completion, would result in Morgan Stanley owning in the aggregate less than
40% of the Voting Securities of the Company based upon the capitalization of
the Company as of the date of this Agreement, then all of the shares of Class A
Common issued to each of the Founders pursuant to the Founder Performance Stock
Purchase Agreements (whether vested or unvested) and the shares of Class A
Common issued or issuable upon the exercise of options issued pursuant to the
Stock Option Agreements dated May 31, 1995 between the Company and each of the
Founders (whether vested or unvested) shall be considered vested shares and
included within this definition of Shares for purposes of the rights of first
refusal and co-sale held by the Investors (including the Founders) pursuant to
Sections 2 and 3 hereof with respect to (and only with respect to) the MS
Divestiture Transaction.
"Total Voting Power" shall mean, with respect to the Company on any
date, the total number of votes that may be cast in any election of directors
(without taking into effect cumulative voting) of the Company on such date if
all Voting Securities were present and voted, assuming full conversion,
exchange or exercise of all outstanding convertible Voting Securities, and
rights, warrants, and options to acquire Voting Securities.
"Transfer" shall mean any transfer, sale, assignment, conveyance,
pledge, mortgage, change of legal, record or beneficial ownership, issuance or
other disposal or delivery.
"Voting Securities" shall mean the preferred stock of the Company, the
Common Stock, any other securities of the Company entitled to vote in the
election of directors of the Company, any securities convertible into,
exchangeable for such securities, and any options, warrants or other rights to
purchase such securities.
"Warrants" shall mean the warrants issued to Internationale
Nederlanden (U.S.) Capital Corporation ("ING") pursuant to that certain Warrant
Purchase Agreement dated May 31, 1995 between the Company and ING.
SECTION 2
RIGHT OF FIRST REFUSAL
Before any Shares may be Transferred by a Selling Investor to a third
party (a "Proposed
-4-
<PAGE> 5
Transferee"), who may be an Investor, the Shares shall first be offered to the
Other Investors in the following manner:
2.1 Right of First Refusal.
(a) The Investor who proposes to sell Shares (the
"Selling Investor") shall deliver or mail as provided in Section 7.2 a written
notice (the "Seller Notice") to the Other Investors stating (i) the Selling
Investor's bona fide intention to Transfer Shares, (ii) the name of the
Proposed Transferee, (iii) the number of Shares the Selling Investor desires to
be sold or transferred (the "Offered Shares") and the type (class and series)
of such shares and (iv) the price for which the Selling Investor proposes to
Transfer the Offered Shares. The Other Investors shall thereafter have an
option to purchase the Offered Shares in accordance with the provisions set
forth below.
(b) Each Other Investor will have an option, for fifteen
(15) business days after receiving the Seller Notice, to give written notice to
the Selling Investor and the Company of its election to purchase its Pro Rata
Portion of the Offered Shares. The purchase price at which the Offered Shares
are offered to Other Investors shall be the price specified in the Seller
Notice.
(c) Within five (5) days after the expiration of the
fifteen (15) business day period specified in Section 2.2(b), the Selling
Investor shall give notice to each Other Investor that has elected to purchase
its full Pro Rata Portion (collectively, the "Participating Investors") of the
Other Investors that have elected to purchase less than all (or none) of their
Pro Rata Portion of the Offered Shares. Each Participating Investor shall be
entitled, within five (5) business days after receipt of such notice, to
increase its participation to a number of shares determined by substituting a
number equal to the aggregate Shares held by all Participating Investors for
the denominator in the formula used to determine the respective Pro Rata
Portions; provided, however, that a Participating Investor may allocate his
right to purchase such increased number of shares to another Participating
Investor. In the event the Participating Investors do not elect to purchase
100% of the Offered Shares, the right of first refusal set forth in this
Section 2 with respect to such transaction shall terminate. In the event of
such termination, the Selling Investor shall deliver to the Other Investors
written notice of such termination and of the Other Investors' right of co-sale
with respect to the proposed transaction as set forth in Section 3 below (the
"Co-Sale Notice").
(d) If exercised by the Participating Investors pursuant
hereto, the right to purchase the Offered Shares shall be exercised by written
notice, signed by the Participating Investor, and delivered or mailed to the
Company as provided in Section 7.2. Such notice shall specify the time, place
and date for settlement of such purchase, which shall be held at the Company
within ten (10) days after the expiration of the notice period specified in
Section 2.2(c), or the period specified in Section 2.1(b) if all the Other
Investors have elected to purchase their full Pro Rata Portion of the Offered
Shares.
2.2 Permitted Sales of Refused Offered Shares. Subject to the
limitations imposed by Section 3 hereof, and if the Other Investors have not
executed their rights of first refusal as described herein, the Selling
Investor may then sell such shares to the Proposed Transferee at the price
specified in the Seller Notice or at a higher price, provided that such sale or
transfer is consummated within ninety (90) days of the date of Seller Notice,
and provided further that any such sale is in accordance with all the terms and
conditions hereof and the Proposed Transferee agrees to be bound by all of the
terms and
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<PAGE> 6
conditions hereof. If the Selling Investor fails to consummate the Transfer
within such ninety (90) day period, the purchase rights of the Other Investors
provided hereby shall be deemed to be revived with respect to such shares and
no sale or transfer of Shares shall be effected without first offering the
shares in accordance herewith.
2.3 Continuing Rights. The exercise or non-exercise of the right
to participate hereunder shall not adversely affect an Investor's right of
first refusal with respect to subsequent sales by a Selling Investor pursuant
to this Section 2.
SECTION 3
CO-SALE
3.1 Right to Participate. In the event the rights of first
refusal described in Section 2 are not exercised by the Other Investors in a
proposed sale by a Selling Investor, each Other Investor shall have the right
to participate, to the extent of its Pro Rata Portion, in the sale to the
Proposed Transferee, subject to the terms and conditions set forth in this
Section 3. An Other Investor shall exercise its right by delivering to the
Company and the Selling Investor, within ten (10) days after receipt by the
Other Investor of the Co-Sale Notice, (i) written notice of its intention to
participate in such co-sale, specifying the maximum number of shares such Other
Investor desires to sell to the Proposed Transferee and (ii) one or more
certificate(s) representing the number of Shares (identical or senior in class
to the Offered Shares) which such Other Investor elects to sell hereunder, duly
endorsed for transfer to the Proposed Transferee. In the event of Other
Investor participation in the co-sale described herein, the amount of Offered
Shares which the Selling Investor is entitled to sell on his own behalf
pursuant to Section 2 hereof shall be reduced accordingly, and the Selling
Investor shall include such Other Investor's shares in the sale at the closing
thereof.
3.2 Continuing Rights. The exercise or non-exercise of the right
to participate hereunder shall not adversely affect an Investor's right to
participate in subsequent sales by a Selling Investor pursuant to this Section
3.
SECTION 4
PREEMPTIVE RIGHT ON COMPANY ISSUES
4.1 The Company shall give Investors twenty (20) business days'
prior written notice (the "Company Offer"), delivered or mailed as provided in
Section 7.2, of the Company's intention to sell or issue any Voting Securities
(the "Company Offered Securities"), other than an Exempt Issuance, stating the
material proposed terms of such sale or issuance and each Investor's respective
record ownership of Total Voting Power. Such notice shall include a
representation to each Investor that, to the Company's knowledge, a Person has
made a bona fide offer to consummate such Company Offer and the Company has a
good faith intention to sell such Voting Securities to such Person on the terms
specified. A Company Offer shall constitute an offer by the Company,
irrevocable for twenty (20) business days, to sell or issue all or any portion
of the Company Offered Securities to the Investors on the same terms as
specified in the Company Offer or, if such terms provide for consideration
other than cash, for cash in an amount equal to the fair market value of such
noncash consideration (determined by independent
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<PAGE> 7
appraisal if the parties cannot mutually agree upon such value.)
4.2 Within twenty (20) business days after receipt of a Company
Offer, each Investor shall give an irrevocable written notice to the Company (a
"Section 4 Acceptance Notice") that such Investor has elected to purchase all
or any portion of the Company Offered Securities. If any Investor fails to
give a Section 4 Acceptance Notice by the end of such twenty (20) business day
period, such Investor shall be deemed to have elected not to purchase any of
the Company Offered Securities.
4.3 If the Investors elect to purchase, in the aggregate, either
the total or more than the total amount of Company Offered Securities, the
Company Offered Securities shall be allocated as follows:
(a) If any Investor elects to purchase less than its pro
rata share of the Company Offered Securities (for purposes of this Section 4,
such pro rata share being equal to a fraction the numerator of which is the
percentage ownership of Total Voting Power represented by the Voting Securities
beneficially owned by such Investor and the denominator of which is the
percentage ownership of Total Voting Power represented by the Voting Securities
beneficially owned by all Investors), then such Investor shall be allocated the
amount of Company Offered Securities it elected to purchase and the other
Investors shall be allocated and be deemed to have elected to purchase the
balance of the Company Offered Securities; provided, however, that no such
Investor shall be obligated to purchase an amount of Company Offered Securities
in excess of the amount set forth in its Section 4 Acceptance Notice; and
(b) otherwise, each Investor shall be allocated and be
deemed to have elected to purchase its pro rata share (as calculated pursuant
to Section 4.3(a)) of the Company Offered Securities.
4.4 If the Investors do not elect to purchase all of the Company
Offered Securities, the Company shall have the right, exercisable not later
than one-hundred twenty (120) days after the giving of the Company Offer, to
Issue the Company Offered Securities not purchased by the Investors on terms
and conditions no more favorable than those set forth in the Company Offer;
provided, however, that the purchaser of the Company Offered Securities shall
have agreed in writing to be bound by the terms of this Agreement.
4.5 The closing of any sale or issue of Company Offered Securities
to an Investor pursuant to this Section 4 (a "Purchasing Investor") shall take
place on such date, within thirty (30) days after the date of the Section 4
Acceptance Notice (subject to extension to comply with any applicable law), as
shall be agreed by the Company and the Purchasing Investor. At any such
closing, the Company shall deliver to each Purchasing Investor certificates
representing the Company Offered Securities being Issued, registered in the
name of such Purchasing Investor or its nominee, against payment of the
applicable purchase price by wire transfer of same day funds.
4.6 The rights of each Investor under this Section 4 shall
terminate upon such time as such Investor beneficially owns less than the one
percent (1%) of the Total Voting Power of the Company.
-7-
<PAGE> 8
SECTION 5
MANAGEMENT STOCK PLAN
The Company shall reserve for issuance a total of 951,350 shares of
its Common Stock (the "Incentive Shares") for issuance to employees and
directors of and consultants to the Company under the Company's 1995 Stock
Option Plan, a copy of which is attached hereto as Exhibit B. Options to
purchase 478,378 Incentive Shares shall have been issued on the Closing Date.
SECTION 6
ADDITIONAL PROVISIONS
6.1 Invalid Transfers. Any Transfer of Shares by an Investor
contrary to the provisions of Sections 2 and 3 hereof shall be null and void,
and the transferee shall not be recognized by the Company as the holder or
owner of the Shares Transferred for any purpose (including, without limitation,
voting or dividend rights), unless and until the Selling Investor (or the Other
Investor participating in a co-sale pursuant to Section 3) has satisfied the
requirements of Sections 2 and 3 with respect to such sale. The Selling
Investor (or the Other Investors participating in a co-sale pursuant to Section
3) shall provide the Company and the Other Investors with written evidence that
such requirements have been met or waived prior to consummating any Transfer of
Shares, and no Shares shall be transferred on the books of the Company until
such written evidence thereof has been received by the Company and the Other
Investors.
6.2 Transfers to Competitors. No Investor shall Transfer any
Shares at any time to any Person (other than the Company or any Investor)
engaged (or Affiliated with any Person engaged) in any material respect in any
business similar to that of the Company as of the date hereof or hereafter
except for Transfers of Shares pursuant to non-negotiated open market
transactions in accordance with Rule 144.
6.3 Permitted Transfers.
(a) Intra-Family Transfers. As applicable, an Investor
may Transfer any Shares to the following (a "Permitted Transferee") without
complying with Sections 2 and 3 hereof: (i) to a member of its immediate
family; (ii) to a trust or other entity established by the Investor for the
benefit of the Investor or its immediate family by gift or inheritance; (iii)
pursuant to a distribution to constituent partners; or (iv) to an Affiliate.
No Transfer of Shares shall be effective unless and until the Permitted
Transferee shall have executed such documentation, in form and substance
satisfactory to the Company and the Investors, evidencing agreement by the
Permitted Transferee to be bound by the provisions of this Agreement.
(b) Exempt Transactions. The provisions of Sections 2
and 3 shall not apply to (i) any Transfer of Shares in a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act or to any Transfer of Shares in any merger or sale
approved by the Board if all Investors have the right to participate in such
merger or sale on the same terms or (ii) any Transfer of Shares by Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
-8-
<PAGE> 9
Fund II, C.V. or Morgan Stanley Venture Investors or their Affiliates in
connection with any sale (a "Note Sale") of the Notes to a Person (a "Note
Purchaser") (either pursuant to a direct sale or the reservation of any Shares
for issuance upon exercise of any Warrants transferred to the Note Purchaser)
as referenced in Section 5.10 of the Series A Purchase Agreement.
6.4 Additional Parties. The Parties agree that any Note Purchaser
who receives Shares in connection with a Note Sale (either pursuant to a direct
sale or the reservation of any Shares for issuance upon exercise of any
Warrants transferred to the Note Purchaser in a Note Sale) shall be entitled to
become a party to this Agreement, and shall be defined as an "Investor" for all
purposes of this Agreement, with all attendant rights and obligations thereto,
effective upon the execution of this Agreement by such Note Purchaser
contemporaneously with or promptly following a Note Sale.
6.5 Termination. This Agreement shall terminate upon (i) the
closing of a Public Offering or (ii) the closing of the merger or consolidation
of the Company into, or the sale of all or substantially all of the Company's
assets to, another corporation, unless the stockholders of the Company shall
own more than 50% of the capital stock of such other corporation immediately
after such merger, consolidation or sale.
6.6 Legends.
(a) Legend. Each certificate representing any Shares
shall be endorsed with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RIGHTS AND RESTRICTIONS CONTAINED IN A SERIES A
PREFERRED STOCK PURCHASE AGREEMENT, A STOCKHOLDERS AGREEMENT
AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF MAY 31,
1995, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION.
(b) Legend Removal. The second paragraph of the legend
referred to in Section 6.5(a) shall be removed upon termination of this
Agreement in accordance with the provisions of Section 6.4.
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<PAGE> 10
SECTION 7
MISCELLANEOUS
7.1 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
7.2 Notice. All notices and other communications required or
permitted hereunder shall be in writing (or in the form of a telex or telecopy
to be given only during the recipient's normal business hours unless
arrangements have otherwise been made to receive such notice by telex or
telecopy outside of normal business hours) and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand, messenger, or
telex or telecopy (as provided above) addressed (a) if to an Investor, at such
other address as such Investor shall have furnished to the Company in writing
or (b) if to any other holder of any Shares, at such address as such holder
shall have furnished the Company in writing or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Shares who has so furnished an address to the Company or (c) if
to the Company, one copy shall be sent to its principal executive offices and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Investors.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy- two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid, or, if by telex or telecopy pursuant to the above, when
received.
7.3 Successors and Assigns. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
7.4 Amendments or Waivers. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought; provided, however, that the holders
of a majority of the Shares held by all Investors subject to this Agreement may
waive, discharge, terminate, modify or amend, on behalf of all Investors, any
provision hereof.
7.5 Rules of Construction. Definitions shall apply equally to
both the singular and plural forms of the terms defined, unless otherwise
specified. Definitions shall equally apply to any tenses of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
The headings of sections or other subdivisions have been inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning of or interpretation of such agreement or instrument.
7.6 Facsimile Signatures. Any signature page delivered by a fax
machine or telecopy machine shall be binding to the same extent as an original
signature page, with regard to any agreement subject
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<PAGE> 11
to the terms hereof or any amendment thereto. Any party who delivers such a
signature page agrees to later deliver an original counterpart to any party
which requests it.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument, and each
of which may be executed by less than all of the parties to this Agreement.
7.8 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision. In such event, the parties shall negotiate, in
good faith, a valid, legal and enforceable substitute provision which most
nearly effects the intent of the parties in entering into this Agreement.
7.9 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Delaware.
7.10 Remedies. The parties hereto agree that money damages or
other remedies at law would not be a sufficient or adequate remedy for any
breach or violation of, or a default under, this Agreement by a party and that,
in addition to all other remedies available, the other parties hereto shall be
entitled to an injunction restraining such breach, violation or default or
threatened breach, violation or default by such party and to any other
equitable relief against such party, including without limitation specific
performance.
7.11 Mutual Cooperation. To the extent the exercise of any right
or the performance of any obligation by any Investor would result in a
violation of law, such Investor and the other parties hereto agree to cooperate
in good faith to enable the Investor to take such alternative actions as will
enable the Investor not to be in violation of law and will enable the Investor
or the other parties, as the case may be,
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<PAGE> 12
[Stockholders Agreement]
to obtain the intended benefits (economic or otherwise) contemplated by this
Agreement from the exercise of such right or performance of such obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "INVESTOR"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
------------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title: Managing General Partner
----------------------------------------------
Name of Investor
/s/
----------------------------------------------
Signature
President
----------------------------------------------
Title, if applicable
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<PAGE> 13
[Stockholders Agreement]
to obtain the intended benefits (economic or otherwise) contemplated by this
Agreement from the exercise of such right or performance of such obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "INVESTOR"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its Investment General Partner
----------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title Managing General Partner
-----------------------------------------------
Name of Investor
/s/
-----------------------------------------------
Signature
President
-----------------------------------------------
Title, if applicable
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<PAGE> 14
[Stockholders Agreement]
to obtain the intended benefits (economic or otherwise) contemplated by this
Agreement from the exercise of such right or performance of such obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "INVESTOR"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE INVESTORS, L.P.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
-----------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title: Managing General Partner
-----------------------------------------------
Name of Investor
/s/
-----------------------------------------------
Signature
President
-----------------------------------------------
Title, if applicable
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<PAGE> 15
[Stockholders Agreement]
to obtain the intended benefits (economic or otherwise) contemplated by this
Agreement from the exercise of such right or performance of such obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "INVESTOR"
MHI ACQUISITION, INC.,
a Delaware corporation
Charles L. Allen
---------------------------
Name of Investor
By: /s/ Charles L. Allen
--------------------------------
Name: Charles L. Allen
Title: President & CEO
/s/ Charles L. Allen
---------------------------
Signature
President & CEO
---------------------------
Title, if applicable
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<PAGE> 16
[Stockholders Agreement]
to obtain the intended benefits (economic or otherwise) contemplated by this
Agreement from the exercise of such right or performance of such obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "INVESTOR"
MHI ACQUISITION, INC.,
a Delaware corporation
By: Roy W. Griffitts, Jr.
--------------------------- ----------------------------
Name: Charles L. Allen Name of Investor
Title: President
/s/ Roy W. Griffitts, Jr.
----------------------------
Signature
COO
----------------------------
Title, if applicable
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<PAGE> 17
[Stockholders Agreement]
to obtain the intended benefits (economic or otherwise) contemplated by this
Agreement from the exercise of such right or performance of such obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "INVESTOR"
MHI ACQUISITION, INC.
a Delaware corporation
By: /s/ Charles L. Allen William A. Brosius
-------------------------------- ----------------------------
Name: Charles L. Allen Name of Investor
Title: President
/s/ William A. Brosius
----------------------------
Signature
CFO
----------------------------
Title, if applicable
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<PAGE> 18
[Stockholders Agreement]
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Shares of Series A Shares of
Investor Preferred Stock Common Stock
--------------- ------------------- ----------------
<S> <C> <C>
Morgan Stanley Venture 2,651,335 --
Capital Fund II, L.P.
Morgan Stanley Venture 660,546 --
Capital Fund II, C.V.
Morgan Stanley Venture 688,119 --
Investors, L.P.
Charles L. Allen 535,714 200,000
* 239,189
Roy W. Griffiths, Jr. 392,857 107,692
* 128,794
William A. Brosius 71,429 92,308
* 110,395
</TABLE>
_______________
* Shares issuable upon exercise of outstanding stock option.
<PAGE> 1
EXHIBIT 4.4
- ------------------------------------------------------------------------------
WARRANT PURCHASE AGREEMENT
BETWEEN
MHI ACQUISITION, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
Dated as of May 31, 1995
- ------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Purchase and Sale of Warrants; Closing . . . . . . . . . . . . . . . 10
Section 3. Investment Representations . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Warranties, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7. Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8. Execution of Warrant Certificates . . . . . . . . . . . . . . . . . . 17
Section 9. Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Registration of Transfers and Exchanges . . . . . . . . . . . . . . . 18
Section 11. Warrants; Exercise of Warrants . . . . . . . . . . . . . . . . . . . 20
Section 12. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. Mutilated or Missing Warrant
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 14. Reservation of Warrant Shares . . . . . . . . . . . . . . . . . . . . 21
Section 15. Adjustment of Exercise Price and Number
of Warrant Shares Issuable . . . . . . . . . . . . . . . . . . . . . 22
(a) Adjustment for Change in Capital
Stock of the Company . . . . . . . . . . . . . . . . . . . . . . 22
(b) Adjustment for Stock Issues . . . . . . . . . . . . . . . . . . 23
(c) Adjustment for Convertible
Securities Issues . . . . . . . . . . . . . . . . . . . . . . 24
(d) Adjustment for Right, Option and
Warrant Issues . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Consideration Received . . . . . . . . . . . . . . . . . . . . . 26
(f) Special Adjustments . . . . . . . . . . . . . . . . . . . . . . 27
(g) When No Adjustment Required . . . . . . . . . . . . . . . . . . 28
(h) Determination of Fair Market
Value per Share; Notice of
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Reorganization of the Company . . . . . . . . . . . . . . . . . 30
(j) When Issuance or Payment May be
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Adjustment in Number of Shares . . . . . . . . . . . . . . . . . 31
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 16. Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 17. Notice to Warrant Holders . . . . . . . . . . . . . . . . . . . . . . 32
Section 18. Cash Distributions and Dividends . . . . . . . . . . . . . . . . . . 34
Section 19. Put and Call Rights; First Refusal
Rights; Tag-Along Rights; Take-Along
Rights and Registration Rights . . . . . . . . . . . . . . . . . . 34
Section 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 21. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 22. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 23. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 24. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 25. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 26. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . 38
Section 27. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 28. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 29. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 30. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 31. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 32. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 33. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
Exhibit A Form of Warrant Certificate
Exhibit B Holders of the Company's Stock
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<PAGE> 4
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of May 31, 1995 by and between MHI ACQUISITION, INC., a
Delaware corporation (the "Company"), and INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
RECITALS:
A. Simultaneously herewith, the Purchaser is entering
into a Credit Agreement, dated of even date herewith, by and among MHI
Acquisition Corporation I, a Delaware corporation ("Mergerco"), Milestone
Healthcare, Inc., a Delaware corporation ("Milestone"), the Purchaser and
various other lenders that may become parties thereto (the "Lenders") and the
Purchaser in its capacity as Agent for the Lenders (the "Agent");
B. Immediately subsequent to the initial borrowing by
Mergerco under the Credit Agreement, Mergerco shall be merged with and into
Milestone (the "Merger") with Milestone surviving such Merger and assuming all
of the obligations of Mergerco under the Credit Agreement (Mergerco and
Milestone, collectively, the "Borrower");
C. The Company is the holder of all of the issued and
outstanding capital stock of Mergerco and, upon the effectiveness of the
Merger, shall be the holder of all of the issued and outstanding capital stock
of Milestone, and extensions of credit to the Borrower inure to the direct
benefit of the Company;
D. It is a condition precedent to the extensions of
credit by the Purchaser to the Borrower contemplated by the Credit Agreement
that the Company agree to issue to the Purchaser Warrants initially exercisable
for 405,405 shares of Class B Common Stock, par value $.001 per share, of the
Company; and
E. The Purchaser and the Company desire to set forth in
this Agreement the terms and provisions of the Warrants and the conditions to
the issuance and sale thereof to the Purchaser;
NOW, THEREFORE, in consideration of the premises and the
agreements herein set forth and to induce the Purchaser to proceed with the
transactions contemplated by the Credit Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
<PAGE> 5
SECTION 1. Definitions.
(a) Defined Terms. Capitalized terms appearing herein
and not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement (irrespective of whether the Credit Agreement is in effect
or has been terminated). The following terms (whether or not underscored) when
used in this Agreement, including its preamble and recitals, shall, except
where the context otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and plural forms thereof):
"Acquisition Agreement" means that certain Plan and Agreement
of Reorganization, dated as May 15, 1995, by and among the Sellers, Milestone,
Milestone Healthcare Management, Inc., a Delaware corporation, the Company,
Mergerco and MHI Acquisition Corporation II, a Delaware corporation, as
amended, modified or supplemented to the date hereof.
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power
(a) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person; or
(b) to direct or cause the direction of the management or
policies of such Person whether by contract or otherwise;
provided that the holding by any Lender of any Warrants (or the stock into
which such Warrants are converted) shall not be deemed to constitute such
Lender an Affiliate of the Company or the Borrower hereunder.
"Agent" is defined in Recital A.
"Agreement" means this Warrant Purchase Agreement as in effect
on the date hereof and as hereafter amended, supplemented, restated or
otherwise modified.
"Approval" means each and every approval, consent, filing and
registration by or with any federal, state or other regulatory authority
(domestic or foreign) necessary to authorize or permit the execution, delivery
or performance of this Agreement or any other Warrant Document, or for the
validity or enforceability thereof.
"Authorized Officer" means, relative to the Borrower or the
Company, as the case may be, those of the Borrower's or the Company's officers
whose signatures and incumbency shall have been
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<PAGE> 6
certified to the Agent and the Lenders pursuant to Section 4.1.1 of the Credit
Agreement.
"Borrower" is defined in Recital B.
"Business Day" means any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or required to be
closed in New York, New York.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof and backed by
the full faith and credit of the United States of America, or issued by any
state or political subdivision or public instrumentality thereof, (i) which
has a remaining maturity at the time of purchase of not more than one (1) year
or (ii) which is subject to a repurchase agreement with any Lender or any
Eligible Lending Institution exercisable within one (1) year from the time of
purchase so long as such direct obligation remains in the possession of the
Borrower or in the possession of any Lender and (iii) which, in the case of
obligations of any state or political subdivision or public instrumentality
thereof, is rated AA or better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at the time of
purchase of not more than one (1) year, issued by any Lender or by any Eligible
Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation, having a
remaining maturity at the time of purchase of not more than one (1) year;
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least $100,000,000 which
invest only in obligations described above and which shares are rated by
Moody's Investors Service, Inc. or Standard & Poor's Corporation in one of the
two highest rating categories assigned by such agencies for obligations of such
nature; and
(e) any Investments permitted by Borrower's investment
policy, as amended from time to time, provided such investment policy (and any
such amendment thereto) has been approved by the Required Lenders.
"Class A Common Stock" means the Class A Common Stock, par
value $.001 per share, of the Company.
"Class B Common Stock" means the Class B Common Stock, par
value $.001 per share, of the Company.
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<PAGE> 7
"Closing" means the closing of the sale and purchase of the
Warrants as contemplated hereby.
"Closing Date" means the date of the Closing.
"Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other capital stock of the
Company, however designated, that has the right (subject to any prior rights of
any class or series of preferred stock) to participate in any distribution of
the assets upon voluntary or involuntary liquidation, dissolution or winding up
of the Company or in the earnings of the Company without limit as to per share
amount, and shall include, without limitation, the presently authorized
20,000,000 shares of Common Stock, of which 10,000,000 shares have been
designated Class A Common Stock and of which 10,000,000 shares have been
designated Class B Common Stock. "Common Stock" shall not include preferred or
special stock.
"Company" means MHI Acquisition, Inc., a Delaware corporation.
"Convertible Securities" is defined in Section 15.
"Credit Agreement" means the Credit Agreement, dated of even
date herewith, by and among Mergerco, Milestone, the Purchaser and various
other Lenders that may become parties thereto and the Purchaser as Agent for
the Lenders, as in effect on the date hereof and as hereafter amended,
supplemented, restated or otherwise modified.
"Eligible Investors" means those Persons designated on Exhibit
B as the "Eligible Investors."
"Eligible Lending Institution" means a financial institution
having a branch or office in the United States and having capital and surplus
and undivided profits aggregating at least $100,000,000 and rated Prime-1 or
better by Moody's Investor Service, Inc. or A-1 or better by Standard & Poor's
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended or otherwise modified from time to time.
"Exercise Price" means $.60 per Warrant Share, as adjusted as herein provided.
"Fair Market Value per Share" means the fair market value of
a share of Stock, subject to the provisions of Section 15(h), as determined in
good faith by the board of directors of the Company.
"Fiscal Year" means, the accounting period of the Company
commencing on the Closing Date and ending on August 31, 1995 and each twelve
month accounting period ending on August 31 thereafter; references to a Fiscal
Year with a number
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<PAGE> 8
corresponding to any calendar year (e.g., the "1996 Fiscal Year") refer to the
Fiscal Year ending on August 31 in such calendar year.
"Founder Performance Stock Purchase Agreements" means those
certain Founder Performance Stock Purchase Agreements, each made as of the date
hereof between the Company and an Eligible Investor, as in effect on the date
hereof.
"Fully Diluted", when used with reference to outstanding
Stock, means all Stock which would be outstanding assuming the exercise of all
rights, warrants and options to purchase Stock or securities convertible into
or exchangeable for Stock and the conversion and exchange of all securities
which are convertible into or exchangeable for Stock.
"Fully Vested" means, with respect to any shares of Stock at
any time, (i) Stock that at such time is issued and outstanding and is not
subject to the repurchase option in favor of the Company pursuant to the
Founder Performance Stock Purchase Agreements or (ii) Stock that at such time
is subject to issuance pursuant to an option to purchase such Stock granted
pursuant to the Management Incentive Plan, which option is immediately
exercisable upon payment of the exercise price and no other conditions exist to
such exercise that at such time have not been fully satisfied.
"Funded Indebtedness" means (i) the indebtedness under the
Credit Agreement, and (ii) all other indebtedness of the Company and its
Subsidiaries which matures more than one year from the date of its creation or
matures within one year from such date but is renewable or extendable, at the
option of the Company or any of its Subsidiaries, to a date more than one year
from such date or arises under an agreement which obligates the lender or
lenders to extend credit during a period of more than one year from such date.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, state, federal or
foreign boards, commissions and other bodies relating to gaming and lotteries.
"Holders" means, collectively, Purchaser and any subsequent
registered holders, from time to time, of Warrant Securities.
"Indemnified Liabilities" is defined in Section 22.
"Indemnified Parties" is defined in Section 22.
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<PAGE> 9
"Lender" is defined in Recital A.
"Lien" means any mortgage, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, lien (statutory or other), adverse
claim or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Loans" means, as the context may require, any Term Loan or Revolving Loan.
"Management Incentive Plan" means the 1995 Stock Option Plan
of the Company as in effect on the date hereof, granting to Eligible Investors
the Original Management Options on the Closing Date and providing for the grant
to key employees of the Company or any of its Subsidiaries from time to time
after the Closing Date of options to purchase shares of Common Stock that do
not exceed, in the aggregate, more than 7% of the Fully Diluted shares of Stock
of the Company.
"Merger" is defined in Recital B.
"Mergerco" is defined in Recital A.
"Milestone" is defined in Recital A.
"Minimum Price" is defined in Section 15.
"Morgan Stanley Fund" means any of (a) Morgan Stanley Venture
Capital Fund II, L.P., (b) Morgan Stanley Venture Capital Fund II, C.V., or (c)
Morgan Stanley Venture Investors, L.P.
"Morgan Stanley Letter Agreement" means the Letter Agreement
dated the date hereof among each of the Morgan Stanley Funds, the Loan Parties
(as such term is defined in the Credit Agreement), the Purchaser, the Agent and
the Lenders.
"Obligations" means all obligations of the Borrower with
respect to the repayment or performance of any obligations (monetary or
otherwise) of the Borrower arising under or in connection with the Credit
Agreement, the "Notes" or the other "Loan Documents" (as such terms are defined
in the Credit Agreement) and the Warrant Documents.
"Option Securities" is defined in Section 15.
"Organic Document" means, relative to any Person, its articles
or certificate of incorporation or certificate of limited partnership, its
by-laws, partnership agreement or other organizational documents, and all
stockholders agreements, voting
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<PAGE> 10
trusts and similar arrangements applicable to any of its stock or partnership
interests, in each case, as amended.
"Original Management Options" means options to purchase up to
7.1% of the Fully Diluted Stock of the Holding Company, granted to the Eligible
Investors on the date hereof pursuant to the Management Incentive Plan.
"Person" means any natural person, corporation, firm,
association, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Preferred Stock" means the Preferred Stock, par value $.001
per share, of the Company, of which 10,000,000 shares are presently authorized
(5,000,000 of which are designated Series A Preferred Stock).
"Public Company" means a company (i) which is subject to the
reporting requirements of Section 15(d) of the Exchange Act, or (ii) any of
whose securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act.
"Put and Call Agreement" means the Put and Call Agreement,
dated of even date herewith, among the Company, Mergerco, Milestone and the
Purchaser, as in effect on the date hereof and as hereafter amended,
supplemented, restated or otherwise modified.
"Qualified Sale" means the sale by the stockholders of the
Company in a single arms-length transaction of 100% of the capital stock of the
Company (exclusive of Warrant Shares) or the sale by the Company in a single
arms- length transaction of 100% of the capital stock of the Borrower, in
either case, to a Person not an Affiliate of the Company; the merger or
consolidation of the Company or the Borrower or any acquisition of the Company
or the Borrower by means of a share exchange, in either case, in a single
arms-length transaction with or into any other Person not an Affiliate of the
Company; the sale by the Company in a single arms-length transaction of all or
substantially all of the assets of the Company to a Person not an Affiliate of
the Company and the subsequent distribution of the proceeds of such sale to the
holders of the capital stock of the Company, after payment of or provision for
the liabilities of the Company; or the sale by the Borrower in a single
arms-length transaction of all or substantially all of the assets of the
Borrower to a Person not an Affiliate of the Company; provided, however, that
in each such case (i) the transaction shall have been approved by the board of
directors of the Company or the Borrower, as the case may be, (ii) within five
(5) days of such approval by the Board of Directors of the Company, the Company
shall have given the Holders a written notice of the proposed transaction and
the Fair Market Value per Share of the consideration to be received by the
shareholders of the Company in respect of such transaction and (iii) the
Company and the Required Holders shall have agreed that
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<PAGE> 11
such transaction is fair to all stockholders of the Company from a financial
point of view or the Company shall have delivered to the Holders the opinion of
an investment banking firm of recognized national standing that is not an
affiliate of the Company or of any Morgan Stanley Fund, which firm has been
selected by the board of directors of the Company, such selection to be subject
to the approval of the Required Holders, to the effect that the transaction is
fair to all of the stockholders of the Company from a financial point of view.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated of even date herewith, between the Company and the
"Purchasers" identified on Exhibit A attached thereto, as in effect on the date
hereof and as hereafter amended, supplemented, restated or otherwise modified.
"Required Holders" means Holders holding at least 66-2/3% of
the Warrant Securities outstanding (treating all Warrants as fully exercised
for the Warrant Shares to which Holders would be entitled upon exercise of such
Warrants) or, if any matter affects the interest of less than all of the
Holders, then Holders holding at least 66-2/3% of the Warrant Securities so
affected, as the context may require.
"Revolving Loan" means, relative to any Lender, any Loan made
by such Lender to the Borrower pursuant to Section 2.1.2 of the Credit
Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Securities Legend" is defined in Section 10.
"Sellers" means, collectively, Healthtrust - The Hospital
Company, Inc., a Delaware corporation, and Coralstone Management, Inc., a
Delaware corporation.
"Stock" means any capital stock of the Company, including,
without limitation, the Preferred Stock and the Common Stock.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated of even date herewith, by and among the Company, the Morgan Stanley Funds
and the Eligible Investors, as in effect on the date hereof.
"Subsidiary" of any corporation means any other corporation
51% or more of the outstanding shares of capital stock of which having ordinary
voting power for the election of directors is owned directly or indirectly by
such corporation, and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Company.
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<PAGE> 12
"Substitute Securities" is defined in Section 15.
"Term Loan" means, relative to any Lender, the loan made by
such Lender on the Closing Date to the Borrower pursuant to Section 2.1.1 of
the Credit Agreement.
"Transfer Agent" is defined in Section 14.
"Warrant Certificates" means the certificates evidencing the
Warrants in the form of Exhibit A.
"Warrant Documents" means, collectively, this Agreement, the
Warrants, the Put and Call Agreement, the Registration Rights Agreement, the
Morgan Stanley Letter Agreement and any other document, instrument or agreement
executed or delivered in connection with any of the foregoing to which the
Company is a party, but excluding the Credit Agreement and the other Loan
Documents (as defined in the Credit Agreement, other than the Morgan Stanley
Letter Agreement, which shall constitute both a Warrant Document and a Loan
Document).
"Warrant Securities" means, collectively, the Warrants and
Warrant Shares.
"Warrant Shares" means the securities which a Holder may
acquire upon exercise of a Warrant, together with any other securities which
such Holder may acquire on account of any such securities, including, without
limitation, as the result of the shares of Class B Common Stock being converted
into shares of Class A Common Stock and/or any dividend or other distribution
on Common Stock, any split-up of such Common Stock, or in accordance with a
recapitalization, merger, consolidation, share exchange, reorganization or
other transaction or series of related transactions in which shares of Common
Stock are changed into or exchanged for securities of another corporation, or
the exercise of any preemptive right (or the exercise or conversion of any
security which such Holder may acquire in connection with the exercise of any
preemptive right) with respect to any such Common Stock.
"Warrants" means the warrants referred to in Recital D as
evidenced by the Warrant Certificates, together with any warrants issued in
substitution or replacement therefor.
(b) Cross-References. Unless otherwise specified,
references in this Agreement to any Article or Section are references to such
Article or Section of this Agreement, and unless otherwise specified,
references in any Article, Section, or definition to any clause are references
to such clause of such Section, Article or definition.
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<PAGE> 13
SECTION 2. Purchase and Sale of Warrants; Closing.
(a) Subject to the funding of the Term Loans and the initial
Revolving Loans under the Credit Agreement, the Company hereby agrees to sell
to the Purchaser and, subject to the provisions of Section 4, the Purchaser
hereby agrees to purchase from the Company, Warrants to purchase 405,405 shares
of Class B Common Stock, for a purchase price of $1.00 and other good and
valuable consideration, all of which shall be deemed to have been received by
the Company upon the funding of the Term Loans and the initial Revolving Loans
under the Credit Agreement.
(b) The sale and purchase of the Warrants shall take
place at the Closing at the offices of King & Spalding, 120 West 45th Street,
New York, New York 10030-4003, at 10:00 a.m. on May 31, 1995, or such other
place and time as may be agreed upon by the Purchaser and the Company. At the
Closing, the Company will deliver to the Purchaser Warrant Certificates in the
form of Exhibit A attached hereto evidencing the Warrants to be purchased by
the Purchaser (in such denomination or denominations as the Purchaser may
request and registered in its name or the name of its nominee), dated the
Closing Date.
SECTION 3. Investment Representations. Purchaser represents
and warrants that it is purchasing the Warrants for its own account, for
investment purposes and not with a view to the distribution thereof; provided,
however, that the foregoing representation shall not be construed as imposing
any limitation on the Purchaser's right to transfer any of the Warrants that is
not otherwise expressly set forth in the Warrant Documents or required under
applicable law. Each Holder agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any
of the Warrant Securities (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of the Warrant Securities), except in compliance with
the Securities Act. Each Holder agrees that it will not transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Warrant
Securities if any such disposition would cause the Company to be required to
register any Warrant Securities pursuant to Section 12(g) of the Exchange Act.
SECTION 4. Conditions Precedent. The obligation of Purchaser
to purchase the Warrants on the Closing Date pursuant to Section 2 hereof shall
be subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 4, except as the Purchaser shall otherwise
consent:
(a) the satisfaction of all of the conditions precedent
set forth in Article IV of the Credit Agreement;
(b) the funding of the Term Loans and the initial
Revolving Loans under the Credit Agreement;
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<PAGE> 14
(c) Purchaser's receipt of Warrant Certificates
registered in Purchaser's name (or in the name of a nominee of Purchaser)
evidencing the Warrants;
(d) Purchaser's receipt of the Put and Call Agreement
with respect to the Warrants, in form and substance satisfactory to Purchaser,
duly executed and delivered by the Company and the Borrower and dated the
Closing Date;
(e) Purchaser's receipt of the Registration Rights
Agreement with respect to the Warrants, in form and substance satisfactory to
Purchaser, duly executed and delivered by the Company and dated the Closing
Date;
(f) Purchaser's receipt of the Morgan Stanley Letter
Agreement, in form and substance satisfactory to Purchaser, duly executed and
delivered by the parties thereto and dated the Closing Date.
(g) Purchaser's receipt of a copy of the Company's
certificate of incorporation, including provisions reasonably satisfactory to
the Purchaser relating to the Company's capital structure, certified as of a
recent date by the Secretary of State of Delaware;
(h) Purchaser's receipt of a certificate of the secretary
or an assistant secretary of the Company, together with true and correct copies
of the resolutions of the Board of Directors and the stockholders of the
Company authorizing or ratifying the execution, delivery and performance of
this Agreement and the other Warrant Documents, authorizing the amendment to
the Company's certificate of incorporation so that it contains the provisions
referred to in Section 4(g) and authorizing the creation and issuance of the
Warrants and the Warrant Shares; and setting forth the names of the Authorized
Officers of the Company executing this Agreement and the other Warrant
Documents, together with a sample of the true signature of each such Authorized
Officer;
(i) Purchaser's receipt of certified copies of all
documents evidencing any other necessary corporate action, consents and
governmental approvals or filings (if any) with respect to this Agreement and
the other Warrant Documents;
(j) Purchaser's receipt of opinions, each dated the
Closing Date, from each of Wilson Sonsini Goodrich & Rosati, P.C. and Akin,
Gump, Strauss, Hauer & Feld, counsel to the Company, in form and substance
satisfactory to Purchaser and its counsel, and covering such matters as the
Purchaser may reasonably request;
(k) Purchaser's receipt of a certificate from an
Authorized Officer of Borrower to the effect that attached thereto is a true
and correct copy of the Management Incentive Plan; and
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<PAGE> 15
(l) All proceedings taken in connection with the
transactions contemplated by this Agreement and the other Warrant Documents
shall be satisfactory in form and substance to Purchaser and its counsel, and
Purchaser and its counsel shall have received copies (executed or certified as
may be appropriate) of all documents, instruments and agreements which
Purchaser or its counsel may request in connection with the consummation of
such transactions.
SECTION 5. Warranties, etc. In order to induce Purchaser to
enter into this Agreement, to engage in the transactions contemplated herein
and in the other Warrant Documents and to purchase the Warrants hereunder, the
Company represents and warrants unto Purchaser as set forth in this Section 5,
each and all of which representations and warranties shall survive the
execution and delivery of this Agreement and the Closing hereunder:
(a) Credit Agreement Warranties. Each of the
representations and warranties of the Borrower set forth in the Credit
Agreement and each of the representations and warranties of the Company set
forth in the Holding Company Guaranty is true and correct in all material
respects as of the date of this Agreement and will be true and correct in all
material respects as of the Closing Date.
(b) Power, Authority, etc. The Company has full power
and authority to enter into and perform its obligations under this Agreement
and each of the other Warrant Documents.
(c) Due Authorization. The execution and delivery by the
Company of this Agreement and each of the other Warrant Documents, the
performance by the Company of its obligations hereunder and thereunder and the
issuance of the Warrants hereunder by the Company have been duly authorized by
all necessary corporate action, do not require any Approval (except those
Approvals already obtained), do not and will not conflict with, result in any
violation of, or constitute any default under, any provision of any Organic
Document of the Company or any Subsidiary, any agreement or instrument to which
the Company or any of it's subsidiaries is a party or by which it or any of its
property is bound, or any law or governmental regulation or court decree or
order and will not result in or require the creation or imposition of any Lien
on any of the Company's or any Subsidiary's properties pursuant to the
provisions of any such agreement or instrument. The execution and delivery by
the Borrower of the Put and Call Agreement, and the performance by the Borrower
of its obligations thereunder have been duly authorized by all necessary
corporate action, and do not require any Approval (except those Approvals
already obtained).
(d) Validity, etc. This Agreement is, and each of the
other Warrant Documents will on the execution and delivery thereof constitute,
the legal, valid and binding obligations of the
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<PAGE> 16
Company enforceable in accordance with their respective terms, and the Put and
Call Agreement will on the execution and delivery thereof constitute the legal,
valid and binding obligation of the Borrower enforceable in accordance with its
terms, in each case subject to (i) the effect of any applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally;
and (ii) the effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(e) Capitalization and Ownership of the Company. The
authorized capital stock of the Company consists of 10,000,000 shares of Class
A Common Stock, 400,000 of which will be outstanding on the Closing Date;
10,000,000 shares of Class B Common Stock, none of which will be outstanding on
the Closing Date; and 10,000,000 shares of Preferred Stock, 5,000,000 of which
will be outstanding on the Closing Date. The record and beneficial ownership
of the outstanding capital stock of the Company, as of the Closing Date, is set
forth in Exhibit B attached hereto. All such outstanding shares are duly
authorized, validly issued, fully paid and nonassessable, and are not, and will
not have been, issued in violation of any preemptive rights. Except as set
forth in Exhibit B attached hereto and in the Management Incentive Plan, no
issued, no authorized but unissued and no treasury shares of capital stock of
the Company are subject to any preemptive right, option, warrant, right of
conversion or purchase or any similar right. Except as set forth in the
Organic Documents of the Company, the Put and Call Agreement and the
Stockholders' Agreement, there are no agreements or understandings with respect
to the voting, sale or transfer of any shares of stock of the Company to which
the Company or any of its Affiliates is a party.
(f) Authorization and Issuance of Warrants. The issuance
of the Warrants has been duly authorized and, upon delivery to Purchaser of the
Warrant Certificates therefor in accordance with the terms hereof, the Warrants
will have been validly issued and fully paid and nonassessable, free and clear
of all Liens and preemptive rights. The issuance of the shares of Class B
Common Stock subject to the Warrants has been duly authorized and, when issued
upon exercise of the Warrants, such shares will have been validly issued and
will be fully paid and nonassessable. The issuance of the shares of Class A
Common Stock issuable upon conversion of the Class B Common Stock has been duly
authorized and, when issued upon conversion of the Class B Common Stock, such
shares will have been validly issued and will be fully paid and nonassessable.
405,405 shares of Class B Common Stock have been duly reserved for issuance
upon the exercise of the Warrants and 405,405 shares of Class A Common Stock
have been duly reserved for issuance upon the conversion of the Class B Common
Stock. Except as set forth in the Registration Rights Agreement, no Person has
the right to demand or any other right to cause the Company to file any
registration statement under the Securities Act relating
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<PAGE> 17
to any securities of the Company or any right to participate in the any such
registration.
(g) Securities Laws. In reliance on the investment
representations contained in Section 3, the offer, issuance, sale and delivery
of the Warrants to the Purchaser, as provided in this Agreement, and the
issuance and delivery of Class B Common Stock upon the exercise of the Warrants
by the Purchaser and the issuance and delivery of Class A Common Stock to the
Purchaser upon the conversion of the Class B Common Stock, are and will be
exempt from the registration requirements of the Securities Act and all
applicable state securities laws, as such laws are currently in effect.
(h) No Integration of Issue. Neither the Company nor any
Person authorized or employed by the Company as agent, broker or otherwise in
connection with the offering of the Warrants has offered the Warrants for sale
to, or solicited any offers to buy the Warrants from, or otherwise approached
or negotiated or communicated in respect thereof with, anyone other than
Purchaser. Neither the Company nor any Person acting on behalf of the Company
will sell or offer any class of securities to, or solicit any offers to buy any
class of securities from, or otherwise approach, negotiate or communicate in
respect thereof with, any Person so as to require the registration of the
Warrants under the Securities Act or any applicable state securities laws.
SECTION 6. Covenants. The Company agrees with each Holder
that, until the termination of this Agreement pursuant to Section 24 hereof,
the Company will perform the obligations set forth in this Section 6:
(a) Financial and Business Information. For so long as
the Company is not a Public Company, the Company will furnish, or will cause to
be furnished, to each Holder copies of the following financial statements,
reports and information:
(i) promptly when available and in any event
within ninety (90) days after the close of each Fiscal Year, a
consolidated and consolidating balance sheet at the close of
such Fiscal Year, and related consolidated and consolidating
statements of operations, retained earnings, and cash flows
for such Fiscal Year, of the Company and its Subsidiaries
(with comparable information at the close of and for the prior
Fiscal Year), certified (in the case of consolidated
statements) without qualification by one of the "Big Six"
accounting firms or other independent public accountants
reasonably satisfactory to the Required Holders, together with
management's discussion and analysis of financial condition
and results of operation of the Company and its Subsidiaries
generally similar in scope to that which would be required in
an annual
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<PAGE> 18
report on Form 10-K filed under the Exchange Act for such
Fiscal Year;
(ii) promptly when available and in any event
within forty-five (45) days after the close of each Fiscal
Quarter of each Fiscal Year, consolidated and consolidating
balance sheets at the close of such quarter, and consolidated
and consolidating statements of operations, retained earnings,
and cash flows for such quarter and for the period commencing
at the close of the previous Fiscal Year and ending with the
close of such Fiscal Quarter, of the Company and its
Subsidiaries (with comparable information at the close of and
for the corresponding Fiscal Quarter of the prior Fiscal Year
and for the corresponding portion of such prior Fiscal Year),
certified by the principal accounting or financial Authorized
Officer of the Company, together with management's discussion
and analysis of the financial condition and results of
operations of the Company and its Subsidiaries generally
similar in scope to that which would be required in a
quarterly report on Form 10-Q filed under the Exchange Act for
such calendar quarter; and
(iii) promptly upon the sending or filing
thereof, copies of all reports that the Company sends to its
security holders generally, and copies of all reports and
registration statements that the Company or any of its
Subsidiaries files with the SEC or any national securities
exchange.
(b) Public Company Information. From and after such time
as the Company shall become a Public Company:
(i) Filings. The Company will file with the SEC
on or before the required date all regular or periodic reports
required pursuant to the Exchange Act and deliver to each
Holder, promptly upon its becoming available, one copy of each
report, notice or proxy statement sent by the Company to its
stockholders generally, and of each regular or periodic report
filed pursuant to the Exchange Act and any registration
statement, prospectus or written communication (other than
transmittal letters) pursuant to the Securities Act filed by
the Company with (i) the SEC or (ii) any national securities
exchange; and
(ii) Rule 144. The Company will make publicly
available information concerning the Company sufficient to
allow any Holder to dispose of all or a portion of the Warrant
Securities pursuant to Rule 144 (or any successor provision)
promulgated by the SEC under the Securities Act.
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<PAGE> 19
(c) Maintenance of Corporate Existences, etc. Except for
a Qualified Sale, the Company will cause to be done at all times all things
necessary to maintain and preserve the corporate existences of the Company and
the Borrower.
(d) Maintenance of Books and Records. The Company will,
and will cause each Subsidiary to, keep books and records reflecting all of its
business affairs and transactions in accordance with GAAP.
(e) Inconsistent Agreements. The Company will not, and
will not permit any Subsidiary to, enter into any agreement containing any
provision which would be violated or breached by the issuance of the Warrants
or the Warrant Shares or by the performance by the Company or any Subsidiary of
its obligations under this Agreement or under any other Warrant Documents.
(f) Organic Documents. So long as any Warrant Securities
are outstanding, the Company's certificate of incorporation shall contain the
provisions regarding the Class A Common Stock and Class B Common Stock set
forth in its Organic Documents as constituted on the date hereof. The Company
shall not permit to occur any amendment, alteration or modification to its
Organic Documents, as constituted on the date hereof, the effect of which, in
Purchaser's or the Required Holders' judgment, would be to alter, impair or
adversely affect either the rights and benefits of Purchaser or the Holders or
the duties and obligations of the Company under this Agreement and the other
Warrant Documents.
(g) Stockholders' Agreement. The Company shall not permit
to occur any amendment, alteration or modification to the Stockholders'
Agreement the effect of which, in Purchaser's or the Required Holders'
reasonable judgment, would be to impair or adversely affect in any respect
either the rights and benefits of Purchaser or the Holders or the duties and
obligations of the Company under this Agreement and the other Warrant
Documents.
(h) Transactions with Affiliates. The Company will not,
and will not permit any Subsidiary to, enter into, or cause, suffer or permit
to exist:
(i) any arrangement or contract with any of its
Affiliates of a nature customarily entered into by Persons which are
Affiliates of each other (including management or similar contracts or
arrangements relating to the allocation of revenues, expenses or
otherwise) requiring any payments to be made by the Company or any of
its Subsidiaries to any Affiliate, other than (i) any arrangement
solely among the Company and its wholly- owned Subsidiaries, and (ii)
transactions provided for in the Loan Documents; and
(ii) any other transaction, arrangement or contract with
any of its Affiliates which is on terms which are less
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<PAGE> 20
favorable than are obtainable in a transaction from any Person which
is not one of its Affiliates.
(i) Issuance of Additional Rights, Options and Warrants.
The Company will not issue any rights, options or warrants to subscribe for or
purchase or otherwise acquire Stock or Convertible Securities (as defined in
Section 15(c)), whether or not the right to exercise such rights, options or
warrants or to convert or exchange such Convertible Securities is immediately
exercisable or is conditioned upon the passage of time, an occurrence or non-
occurrence of some other event, or both, except that the Company may issue the
Original Management Options and the Additional Management Options.
SECTION 7. Warrant Certificates. The Warrant Certificates to
be delivered pursuant to this Agreement shall be in registered form only and
shall be in the form set forth as Exhibit A attached hereto.
SECTION 8. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board or its President or a Vice President and by its Secretary or an Assistant
Secretary under its corporate seal. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the Chairman of the
Board, President, Vice President, Secretary or Assistant Secretary and may be
printed or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be delivered or disposed of such person shall have ceased to
hold such office. The seal of the Company may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Warrant Certificates.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate although at the date of the execution
of this Agreement such person was not such officer.
SECTION 9. Registration. The Company shall number and
register the Warrant Certificates in a register as they are issued. The
Company may deem and treat the registered holder(s) of the Warrant Certificates
as the absolute owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon
-17-
<PAGE> 21
made by anyone) for all purposes and shall not be affected by any notice to the
contrary.
SECTION 10. Registration of Transfers and Exchanges. The
Company shall from time to time register the transfer of any outstanding
Warrant Certificates in a Warrant register to be maintained by the Company upon
surrender of such Warrant Certificates accompanied by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company, duly
executed by the registered Holder or Holders thereof or by the duly appointed
legal representative thereof or by a duly authorized attorney; provided,
however, that prior to effecting such transfer, the transferee shall agree (in
a form reasonably satisfactory to the Company) to be bound by the terms of this
Agreement and the Put and Call Agreement. Upon any such registration of
transfer, a new Warrant Certificate shall be issued to the transferee(s) and
the surrendered Warrant Certificate shall be canceled and disposed of by the
Company. Each Holder agrees that it will not consummate a transfer of the
Warrants purchased by it hereunder if such transfer would result in the
Warrants being held of record by more than four (4) separate Persons. The
Company agrees that it will make the Warrant register available for inspection
by the Holders during normal business hours at its office and that the Holders
may rely on the Warrant register for purposes of complying with the preceding
sentence.
The Warrants shall be transferable in whole or in part and, in
the event that a Warrant Certificate is transferred in respect of fewer than
all the Warrants evidenced by the Warrant Certificate, a new Warrant
Certificate evidencing the remaining Warrant or Warrants will be issued and
delivered pursuant to the provisions of this Section 10 and of Section 8.
If such transfer of Warrants is not made pursuant to an
effective registration statement under the Securities Act, the Holder will, if
reasonably requested by the Company, deliver to the Company an opinion of
counsel, which may be counsel to the Holder but which must be reasonably
satisfactory to the Company, reasonably satisfactory in form, scope and
substance to the Company, that the Warrants may be sold without registration
under the Securities Act, as well as:
(1) an investment covenant reasonably
satisfactory to the Company signed by the proposed transferee (except that no
such covenant will be required in connection with a transfer effected in
accordance with Rule 144A under the Securities Act);
(2) an agreement by such transferee to the
impression of the restrictive legends set forth below on the Warrant
Certificate.
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<PAGE> 22
The Holders agree that each Warrant Certificate and each
certificate representing Warrant Shares will bear the following legend (the
"Securities Legend"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION, OR
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE
HOLDER) AS TO AN EXEMPTION, FROM THE REGISTRATION
PROVISIONS OF SAID ACT OR LAWS."
Notwithstanding the foregoing provisions of this Section 10, the restrictions
upon the transferability of the Warrant Certificates and the Securities Legend
requirement set forth above in this Section 10 shall terminate as to any of the
Warrant Securities (i) when and so long as such Warrant Security shall have
been effectively registered under the Securities Act and disposed of pursuant
thereto or (ii) when the Company shall have received an opinion of counsel
reasonably satisfactory to it that such Securities Legend is not required in
order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section 10 shall terminate as to any Warrant Security, as
hereinabove provided, the Holder thereof shall be entitled to receive from the
Company, at the expense of the Company, a new Warrant Certificate or
certificate for Warrant Shares bearing the following legend in place of the
Securities Legend set forth above:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE TERMINATED
ON ______________, 19__, AND ARE OF NO FURTHER FORCE
AND EFFECT."
The Holders further agree that each Warrant Certificate and
each certificate representing Warrant Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A WARRANT PURCHASE AGREEMENT,
DATED AS OF MAY 31, 1995, BETWEEN MHI ACQUISITION,
INC. (THE "COMPANY") AND INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION ("ING"), A PUT AND CALL
AGREEMENT, DATED AS OF MAY 31, 1995, AMONG THE
COMPANY, MHI ACQUISITION CORPORATION I, MILESTONE
HEALTHCARE, INC. AND ING AND A REGISTRATION RIGHTS
AGREEMENT, DATED AS
-19-
<PAGE> 23
OF MAY 31, 1995, AMONG THE COMPANY AND THE PURCHASERS
IDENTIFIED IN EXHIBIT A ATTACHED THERETO, COPIES OF
EACH OF WHICH ARE ON FILE AT THE MAIN OFFICE OF THE
COMPANY. ANY SALE OR TRANSFER OF THE SECURITIES
EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS
OF THOSE AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH
SECURITIES IN VIOLATION OF SAID AGREEMENTS SHALL BE
INVALID."
Warrant Certificates may be exchanged at the option of the
Holder(s) thereof when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants, including, without
limitation, upon an adjustment in the Exercise Price or in the number of
Warrant Shares purchasable upon exercise of the Warrants. Warrant Certificates
surrendered for exchange shall be canceled and disposed of by the Company.
SECTION 11. Warrants; Exercise of Warrants. Subject to the
terms of this Agreement, each Holder shall have the right, which may be
exercised at any time or from time to time prior to May 31, 2005, to receive
from the Company the number of fully paid and nonassessable Warrant Shares
which such Holder may at the time be entitled to receive on exercise of all or
any part of the Warrants and payment of the Exercise Price then in effect for
such Warrant Shares.
A Warrant may be exercised upon surrender to the Company at
its office designated for such purpose (the address of which is set forth in
Section 20) of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase attached thereto properly
completed and signed, upon payment to the Company of the Exercise Price for the
number of Warrant Shares in respect of which such Warrants are then exercised.
Payment of the aggregate Exercise Price shall be made in cash or by check
payable to the order of the Company.
Upon such surrender of Warrant Certificates and payment of the
Exercise Price, the Company shall issue and cause to be delivered with all
reasonable dispatch (and in any event within five (5) Business Days of such
surrender and payment) to or upon the written order of the Holder, and in the
name of the Holder or the Holder's nominee, a certificate or certificates for
the number of full Warrant Shares issuable upon the exercise of such Warrants
together with such other property (including cash) and securities as may then
be deliverable upon such exercise, including cash for fractional Warrant Shares
as provided in Section 16. Such certificate or certificates shall be deemed to
have been issued and the Person so named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the
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<PAGE> 24
surrender of such Warrant Certificates and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the
Holders thereof, either in full or from time to time in part, and, in the event
that a Warrant Certificate is exercised in respect of fewer than all of the
Warrant Shares issuable pursuant to such Warrant Certificate at any time prior
to the date of expiration of the Warrants, a new Warrant Certificate evidencing
the remaining Warrant or Warrants will be issued and delivered pursuant to the
provisions of this Section 11 and of Section 8.
All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled and disposed of by the Company. The Company shall keep
copies of this Agreement and any notices received hereunder available for
inspection during normal business hours at its office. The Company will
furnish, at its expense, copies of this Agreement and all such notices, upon
request, to any Holder of any Warrant Certificates.
SECTION 12. Payment of Taxes. The Company will pay all stamp
and transfer taxes in connection with the issuance, sale and delivery of the
Warrants hereunder, as well as all such taxes attributable to the initial
issuance of Warrant Shares upon the exercise of Warrants and payment of the
Exercise Price and upon the issuance of shares of Class A Common Stock upon the
conversion of shares of Class B Common Stock. The Company will not, however,
be required to pay any tax or other similar charges imposed in connection with
any transfer of any Warrant Securities. Nothing herein shall be construed as
requiring the Company to pay any taxes imposed in respect of income realized by
any Holder upon the purchase, transfer or exercise of Warrants or upon
conversion of shares of Class B Common Stock.
SECTION 13. Mutilated or Missing Warrant Certificates. In
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company shall issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants.
SECTION 14. Reservation of Warrant Shares. The Company will
at all times reserve and keep available, free from preemptive or similar
rights, out of the aggregate of its authorized but unissued capital stock or
its authorized and issued capital stock held in its treasury, for the purpose
of enabling it to satisfy any obligation to issue Warrant Shares upon exercise
of Warrants, (i) the maximum number of shares of each class of capital stock
constituting a part of the Warrant Shares which may then be deliverable upon
the exercise of all outstanding Warrants and (ii) the maximum number of shares
of each class of capital stock of the Company which may then be delivered upon
the conversion into Class A Common Stock of the Company of all issued Warrant
Shares. The
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<PAGE> 25
Company shall cause all shares of Class A Common Stock into which shares of
Class B Common Stock issuable upon exercise of the Warrants are convertible to
be (x) listed (or to be listed subject to notice of issuance) on each
securities exchange on which shares of Class A Common Stock are listed, or (y)
admitted for trading in any inter-dealer quotation system on which shares of
Class A Common Stock are traded.
The Company or, if appointed, the transfer agent for shares of
each class of capital stock of the Company (the "Transfer Agent") and every
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent and with every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of the rights
of purchase represented by the Warrants or of the rights of conversion of the
Warrant Shares. The Company will furnish such Transfer Agent a copy of all
notices of adjustments, and certificates related thereto, transmitted to each
Holder pursuant to Section 17.
Before taking any action which would cause an adjustment
pursuant to Section 15 to reduce the Exercise Price below the then par value
(if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
SECTION 15. Adjustment of Exercise Price and Number of
Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares
issuable upon the exercise of each Warrant are subject to adjustment from time
to time upon the occurrence of any of the events enumerated in this Section 15.
(a) Adjustment for Change in Capital Stock of the
Company:
If the Company:
(i) pays a dividend or makes a distribution on
any class of its Stock in shares of any class of its Stock;
(ii) subdivides its outstanding shares of any
class of Stock into a greater number of shares;
(iii) combines its outstanding shares of
any class of Stock into a smaller number of shares; or
(iv) issues by reclassification of any class of
its Stock any shares of its Stock;
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<PAGE> 26
then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which it would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Warrant upon exercise of
such Warrant may receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company shall determine in the good
faith exercise of its reasonable business judgment the allocation of the
adjusted Exercise Price between the classes of capital stock. After such
allocation, the exercise privilege and the Exercise Price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those in this Section 15.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Stock Issues
If the Company issues shares of Stock for a consideration per
share less than the Fair Market Value per Share on the date the Company fixes
the offering price of such additional shares, the Exercise Price shall be
adjusted in accordance with the following formula:
P
---
E' = E x O + M
-----
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Fully Vested Stock
outstanding immediately prior to the issuance
of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the Fair Market Value per Share on the date
the Company fixes the offering price of such
additional shares.
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<PAGE> 27
A = the number of shares of Fully Vested Stock
outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
The provisions of this subsection (b) do not apply (i) to of
the transactions described in subsection (a) or (ii) for which an adjustment
has been made pursuant to the provisions of subsections (c) or (d) of this
Section 15.
(c) Adjustment for Convertible Securities Issues
If the Company issues any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Stock, either immediately or upon the occurrence of a specified date or a
specified event ("Convertible Securities"), other than shares of Class B Common
Stock issued pursuant to the Warrants and Convertible Securities for which an
adjustment has been made pursuant to the provisions of subsection (d) of this
Section 15, whether or not the right to convert or exchange thereunder is
immediately exercisable or is conditioned upon the passage of time, the
occurrence or non-occurrence of some other event, or both, for a consideration
per share of Stock initially deliverable upon conversion or exchange of such
Convertible Securities less than the Fair Market Value per Share on the date of
issuance of such Convertible Securities, the Exercise Price shall be adjusted
in accordance with this formula:
P
-
E' = E x O + M
-----
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Fully Vested Stock
outstanding immediately prior to the issuance
of such Convertible Securities.
P = the aggregate consideration received for the
issuance of such Convertible Securities.
M = the Fair Market Value per Share on the date
of issuance of such Convertible Securities.
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<PAGE> 28
D = the maximum number of shares of Fully Vested
Stock deliverable upon exercise, conversion
or in exchange of such Convertible Securities
at the Minimum Price.
The term "Minimum Price" means the lowest price at which the Convertible
Securities can be converted into or exchanged for Stock, regardless of whether
that is the initial rate or is conditioned upon the passage of time, the
occurrence or non-occurrence of some other event, or both.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Stock deliverable upon conversion or exchange of
such Convertible Securities has not been issued when such Convertible
Securities are no longer outstanding, then the Exercise Price shall promptly be
readjusted to the Exercise Price which would then be in effect had the
adjustment upon the issuance of such Convertible Securities been made on the
basis of the actual number of shares of Stock issued upon conversion or
exchange of such Convertible Securities.
(d) Adjustment for Right, Option and Warrant Issues
If the Company issues any rights, options or warrants to
subscribe for or purchase or otherwise acquire Stock or Convertible Securities,
whether or not the right to exercise such rights, options or warrants or to
convert or exchange such Convertible Securities is immediately exercisable or
is conditioned upon the passage of time, the occurrence or non-occurrence of
some other event, or both (the "Option Securities"), for a consideration per
share of Stock initially deliverable upon exercise of such Option Securities or
conversion or exchange of such Convertible Securities less than the Fair Market
Value per Share on the date of issuance of such Option Securities, the Exercise
Price shall be adjusted in accordance with this formula:
P
-
E' = E x O + M
-----
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Fully Vested Stock
outstanding immediately prior to the issuance
of such Option Securities.
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<PAGE> 29
P = the aggregate consideration received for the
issuance of such Option Securities.
M = the Fair Market Value per Share on the date
of issuance of such Option Securities.
D = the maximum number of shares of Fully Vested
Stock deliverable upon exercise, conversion
or in exchange of such Option Securities at
the Minimum Price.
The term "Minimum Price" means the lowest price at which the Option Securities
may be exercised (directly or through the conversion or exchange of Convertible
Securities which may be acquired upon exercise of the Option Securities) to
purchase or otherwise acquire Stock, regardless of whether that is the initial
price or is conditioned upon the passage of time, the occurrence or
non-occurrence of some other event, or both.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Stock and/or Convertible Securities deliverable
upon exercise of such Option Securities or upon conversion or exchange of such
Option Securities has not been issued when such Option Securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such Option Securities been made on the basis of the actual number
of shares of Stock issued upon such exercise, conversion or exchange of such
Option Securities.
(e) Consideration Received
For purposes of any computation respecting consideration
received pursuant to any subsection of this Section 15, the following shall
apply:
(i) in the case of the issuance of shares of
Stock for cash, the consideration received shall be the amount
of cash received by the Company therefor, without deduction
therefrom of any reasonable expenses incurred by the Company
in connection therewith or any reasonable underwriters'
discounts, fees and commissions paid or allowed by the Company
in connection therewith.
(ii) in the case of the issuance of shares of
Stock for a consideration consisting in whole or in part of
other than cash, the consideration other than cash shall be
deemed to be the fair market value thereof as determined by
the Board of Directors of the Company in the good faith
exercise of its business judgment, without deduction therefrom
of any reasonable expenses
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incurred by the Company in connection therewith. In any
circumstances in which the fair market value of any such
consideration is to be determined pursuant to this paragraph
(ii), the Company shall give to the Holders (or, if such
determination affects less than all of the Holders, to the
Holders so affected) written notice of the proposed fair
market value, as determined in good faith by the Board of
Directors of the Company. If, within thirty (30) days after
the date such notice is given, the Company and such Holders
agree upon the fair market value then the fair market value
for purposes of this paragraph (ii) shall be as so agreed. If
such Holders and the Company do not agree upon such fair
market value within such 30-day period, then the Required
Holders and the Company shall appoint a recognized investment
banking firm of national reputation, reasonably acceptable to
the Required Holders and the Company. If the Company and the
Required Holders cannot agree on the appointment of a mutually
acceptable investment banking firm, or if the firm so
appointed declines or fails to serve, then the Required
Holders and the Company shall each choose one such investment
banking firm and the respective firms so chosen shall appoint
another recognized investment banking firm of national
reputation. The investment banking firm so selected shall
appraise the fair market value for the purposes of this
paragraph (ii), and such investment banking firm shall make
such appraisal (which shall be in the form of a written report
signed by such investment banking firm) and, for the purposes
of determining the fair market value pursuant to this
paragraph (ii), such appraised fair market value determined as
herein provided shall be final and conclusive on the Company
and the Holders. All costs of appraisal shall be borne by the
Company.
(iii) in the case of the issuance of
Convertible Securities or securities issuable upon the
exercise of Option Securities, the aggregate consideration
received therefor shall be deemed to be the consideration
received by the Company for the issuance of such Convertible
Securities, plus the consideration, if any, received by the
Company for the issuance of such Option Securities, plus the
additional minimum consideration, if any, to be received by
the Company upon the conversion, exchange or exercise thereof
(the consideration in each case to be determined in the same
manner as provided in clauses (i) and (ii) of this subsection
(e)).
(f) Special Adjustments
(i) If the purchase price provided for in any
Option Securities, the additional consideration, if any, payable
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upon the conversion or exchange of any Convertible Securities or the rate at
which any Convertible Securities are convertible into or exchangeable for Stock
shall change, the Exercise Price or number of Warrant Shares purchasable upon
the exercise of the Warrants in effect at the time of such event shall
forthwith be readjusted. The Exercise Price or number of Warrant Shares
purchasable upon the exercise of the Warrants shall be adjusted to those
amounts which would have been in effect at such time had such Option Securities
or Convertible Securities outstanding at such time initially been granted,
issued or sold and the Exercise Price or number of Warrant Shares purchasable
upon the exercise of the Warrants initially adjusted as provided in the
applicable subsection of this Section 15, whichever was applicable, except that
the minimum amount of additional consideration payable and the total maximum
number of shares issuable shall be determined after giving effect to such event
(and any prior event or events).
(ii) If (A) any shares of Stock were included in the
number of shares of Fully Vested Stock pursuant to clause (ii) of the
definition of such term in Section 1 of this Agreement, (B) such number of
shares of Fully Vested Stock was used in any formula under this Section 15 in
connection with an adjustment in the Exercise Price and number of Warrant
Shares purchasable upon exercise of the Warrants, and (C) such shares of Stock
have not been issued at the time of the expiration or termination of such
option, then (I) the Exercise Price and number of Warrant Shares purchasable
upon exercise of the Warrants shall promptly be readjusted to the Exercise
Price and number of Warrant Shares purchasable upon exercise of the Warrants
that would have been in effect if all adjustments heretofore made pursuant to
this Section 15 had been made as if such shares of Stock were not included in
such number of shares of Fully Vested Stock, and (II) with respect to any
Warrants exercised prior to the date of any readjustment pursuant to this
Section 15(f)(ii), the Company shall issue to each Holder that exercised any
such Warrants that number of Warrant Shares equal to the excess, if any, of (x)
the number of Warrant Shares that would have been issued to such Holder if the
Exercise Price and number of Warrant Shares purchasable upon exercise of the
Warrants in effect on the date any such Warrants were exercised by such Holder
had been adjusted as contemplated in clause (I) above over (y) the number of
Warrant Shares actually issued to such Holder pursuant to the exercise of any
such Warrants. The Company agrees to take such further action, and to execute
such further instruments and documents as the Holders shall deem reasonably
necessary in order to effectuate the intent and purpose of this Section
15(f)(ii).
(g) When No Adjustment Required
No adjustment need be made for a change in the par value or
absence of par value of any Stock.
No adjustment in the Exercise Price need be made if the
adjustment would require an increase or decrease of less than
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.001% in the Exercise Price. Any adjustments that are not made but deferred
shall be carried forward and taken into account in any subsequent adjustment.
Notwithstanding any other provisions of this Agreement, the
provisions of this Section 15 shall not apply to, and no adjustment in the
Exercise Price need be made as a result of, the issuance of shares of Common
Stock, Convertible Securities or Option Securities (i) in any bona fide,
underwritten public offering or (ii) pursuant to the Management Incentive Plan.
(h) Determination of Fair Market Value per Share; Notice
of Adjustment
Prior to issuing any shares of Stock, any Convertible
Securities or any Option Securities, the Company shall cause the Board of
Directors of the Company to determine in good faith the Fair Market Value per
Share, as of the date on which the Company fixes the offering price of such
shares or as of the date of issuance of such Convertible Securities or Option
Securities, as the case may be.
Within five (5) days of such determination by the Board of
Directors of the Company, the Company shall give the Holders written notice of
the proposed Fair Market Value per Share. If within twenty (20) days after the
date such notice is given, the Company and such Holders agree upon the Fair
Market Value per Share, then the Fair Market Value per Share shall be as so
agreed. If, within such 20-day period, the Company and the Required Holders do
not agree upon such Fair Market Value per Share, then the Required Holders and
the Company shall appoint a recognized investment banking firm of national
reputation, reasonably acceptable to the Required Holders and the Company. If
the Company and the Required Holders cannot agree on the appointment of a
mutually acceptable investment banking firm, or if the firm so appointed
declines or fails to serve, then the Required Holders and the Company shall
each choose one such investment banking firm and the respective firms so chosen
shall appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall appraise the value
of the Company for the purposes of determining the Fair Market Value per Share,
and such investment banking firm shall make such appraisal (which shall be in
the form of a written report signed by such investment banking firm) and, for
the purposes of determining the Fair Market Value per Share, such appraised
value of the Company determined as herein provided shall be final and
conclusive on the Company and all affected Holders. All costs of appraisals
shall be borne by the Company.
Whenever the Exercise Price is adjusted or the Company takes
any action that would require (i) any adjustment in (A) the Exercise Price or
(B) the number and type of securities or other property constituting Warrant
Shares purchasable upon exercise of the Warrants or (ii) the execution and
delivery of a supplemental
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<PAGE> 33
Warrant Agreement, the Company shall provide the notices required by Section
17.
(i) Reorganization of the Company
Except in the event of the consummation of a Qualified Sale in
which the Warrants and Warrant Shares of all of the Holders are purchased in
accordance with Section 5(c) of the Put and Call Agreement: (a) in the event of
any capital reorganization, recapitalization or reclassification of the capital
stock of the Company, or consolidation, merger or amalgamation of the Company
with another entity, any acquisition of capital stock of the Company by means
of a share exchange, or the sale, lease, transfer, conveyance or other
disposition of all or substantially all of its assets to another entity, then,
as a condition of such reorganization, recapitalization, reclassification,
consolidation, merger, amalgamation, share exchange or sale, lease, transfer,
conveyance or other disposition, lawful and adequate provision shall be made
whereby the Holders of the Warrant Certificates shall thereafter have the right
to purchase and receive, on the basis and upon the terms and conditions
specified in this Agreement and in lieu of the Warrant Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by the Warrants, (i) such shares of stock, securities, cash or
property as may be issued or payable with respect to or in exchange for a
number of outstanding Warrant Shares equal to the number of Warrant Shares
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by the Warrant Certificates had such reorganization,
recapitalization, reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other disposition not taken
place, and (ii) if such consolidation, merger, amalgamation, share exchange,
sale, lease, transfer, conveyance or other disposition is with any Person (or
any Affiliate of such Person) who shall have made a purchase, tender or
exchange offer which was accepted by the holders of not less than twenty
percent (20%) of the outstanding shares of Stock, the Holders of the Warrants
shall have been given a reasonable opportunity (and, in no event, less than 30
days) to elect to receive, either (x) the stock, securities, cash or property
it would have received pursuant to clause (i) immediately preceding or (y) the
stock, securities, cash or property issued to previous holders of the Stock in
accordance with such offer, or the equivalent thereof; (b) in any such case
appropriate provision shall be made with respect to the rights and interests of
the Holders of the Warrants to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Exercise Price and of the
number and type of securities purchasable upon the exercise of the Warrants)
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities, cash or property thereafter deliverable upon the exercise
of the Warrants; and (c) the Company shall not effect any such consolidation,
merger, amalgamation, share exchange or sale, lease, transfer, conveyance or
other disposition unless
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<PAGE> 34
prior to or simultaneously with the consummation thereof the successor entity
(if other than the Company) resulting from such consolidation, merger or
amalgamation, share exchange or the entity purchasing or otherwise acquiring
such assets or shares (i) shall assume by a supplemental Warrant Agreement,
satisfactory in form, scope and substance to the Required Holders (which shall
be mailed or delivered to the registered Holders of the Warrants at the last
address of such Holders appearing on the books of the Company) the obligation
to deliver to such Holders such shares of stock, securities, cash or property
as, in accordance with the foregoing provisions, such Holders may be entitled
to purchase (the "Substitute Securities") and (ii) shall assume all of the
obligations of the Company and the Borrower set forth in the Put and Call
Agreement and the Registration Rights Agreement. Following such assumption
such obligations shall apply to the Substitute Securities rather than to the
Warrants and the Warrant Shares. The foregoing provisions of this paragraph
shall similarly apply to successive reorganizations, recapitalizations,
reclassifications, consolidations, mergers, amalgamations, share exchanges,
sales, leases, transfers, conveyances or other dispositions.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an Affiliate of the
formed, surviving, transferee or lessee entity, such issuer shall join the
supplemental Warrant Agreement.
(j) When Issuance or Payment May Be Deferred
In any case in which this Section 15 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the Holder of any Warrant exercised after such record date
the Warrant Shares issuable upon such exercise over and above the Warrant
Shares issuable upon such exercise on the basis of the Exercise Price prior to
such adjustment and (ii) paying to such Holder any amount in cash in lieu of a
fractional share pursuant to Section 16; provided, however, that the Company
shall deliver to such Holder a bill or other appropriate instrument evidencing
such Holder's right to receive such additional Warrant Shares and cash upon the
occurrence of the event requiring such adjustment.
(k) Adjustment in Number of Shares
Upon each adjustment of the Exercise Price pursuant to this
Section 15, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted Exercise Price that number of Warrant Shares (calculated to the
nearest hundredth) obtained from the following formula:
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<PAGE> 35
N'= N x E
-
E'
where:
N' = the adjusted number of Warrant Shares
issuable upon exercise of a Warrant by
payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously
issuable upon exercise of a Warrant by
payment of the Exercise Price prior to
adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
Anything in this subsection (k) or elsewhere in this Agreement to the contrary
notwithstanding, if, because of any limitation set forth in the second
paragraph of subsection (g), no adjustment in the Exercise Price is made, the
provisions of this subsection (k) shall nevertheless be given effect so as to
increase or decrease the adjusted number of Warrant Shares as though E' in the
above formula had actually been adjusted.
SECTION 16. Fractional Interests. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same Holder, the number of full Warrant Shares which shall be issuable
upon exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of the Warrant Shares would, except for the provisions of this Section
16, be issuable on the exercise of any Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the Fair Market Value per
Share on the day immediately preceding the date the Warrant is presented for
exercise, multiplied by such fraction.
SECTION 17. Notice to Warrant Holders. Upon any
adjustment of the Exercise Price or number of Warrant Shares purchasable upon
exercise of the Warrants pursuant to Section 15, and as otherwise required by
Section 15, the Company shall promptly thereafter (i) upon the request of the
Required Holders, cause to be filed with the Company a certificate of the
independent certified public accountants for the Company setting forth the
Exercise Price and the number and type of securities or other property
constituting Warrant Shares after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and, in the case of an adjustment pursuant to Section
15(i), setting forth the number and type of securities or other property
constituting Warrant Shares (or portion thereof) issuable, after such
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<PAGE> 36
adjustment in the Exercise Price or number of Warrant Shares purchasable upon
exercise of the Warrants, upon exercise of a Warrant and payment of the
adjusted Exercise Price, and (ii) cause to be given to each of the Holders of
the Warrant Certificates written notice of such adjustments, together with a
copy of such certificate. Where appropriate, such notice may be given in
advance and included as a part of the notice required to be given under the
other provisions of this Section 17.
In the event:
(a) the Company shall authorize the issuance to holders
(although not necessarily to all such holders) of shares of Stock or rights,
options or warrants to subscribe for or purchase or otherwise acquire shares of
Stock or of any other securities or property (including securities of any other
issuer) or of any other subscription rights, options or warrants; or
(b) the Company shall authorize the payment of any
dividend or distribution to holders of shares of Stock of cash, Stock or other
securities or property (including securities of any other issuer) of the
Company; or
(c) of any capital reorganization, reclassification or
recapitalization of the capital stock of the Company, or any amalgamation,
consolidation or merger to which the Company is a party, or any acquisition of
capital stock of the Company through a share exchange, or of the sale, lease,
conveyance, transfer or other disposition of the properties and assets of the
Company substantially as an entirety, or a purchase, tender or exchange offer
for shares of Common Stock or other securities constituting part of the Warrant
Shares (whether by the Company or some other party), other than a Qualified
Sale in which the Warrants and Warrant Shares of all of the Holders are
purchased in accordance with Section 5(b) of the Put and Call Agreement; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company proposes to take any action which would
require an adjustment of the Exercise Price or number of Warrant Shares
purchasable upon exercise of the Warrants pursuant to Section 15;
then the Company shall cause to be given to each of the Holders, at least 20
days prior to the applicable record date hereinafter specified (or promptly in
the case of events for which there is no record date), a written notice stating
(as applicable) (i) the date as of which the holders of record of shares of
Stock entitled to receive any such rights, options, warrants or dividends or
distribution are to be determined, (ii) the date on which any such
reclassification, recapitalization or reorganization, consolidation, merger,
amalgamation, share exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or
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<PAGE> 37
winding up is expected to become effective or be consummated, or (iii) the
initial expiration date set forth in any purchase, tender or exchange offer for
shares of Stock, and the date as of which it is expected that holders of record
of shares of Stock or other securities constituting a part of the Warrant
Shares (or securities into which the Warrant Shares may be converted) shall be
entitled to exchange such shares or securities for securities or other
property, if any, deliverable upon such reclassification, recapitalization,
reorganization, consolidation, merger, amalgamation, share exchange, sale,
lease, conveyance, transfer, disposition, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 17 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, reorganization, recapitalization, reclassification,
consolidation, merger, amalgamation, share exchange, sale, lease, conveyance,
transfer, disposition, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the
right to vote or to consent as stockholders in respect of the meetings of
stockholders or the election of members of the Board of Directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 18. Cash Distributions and Dividends. If the
Company pays a dividend or makes a distribution to the holders of its Stock of
any securities (other than Stock) or property (including cash and securities of
other companies) of the Company, or any rights, options or warrants to purchase
securities (other than Stock) or property (including securities of other
companies) of the Company, then, simultaneously with the payment of such
dividend or the making of such distribution, and as a condition precedent to
its right to do so, it will pay or distribute to the Holders of Warrant
Certificates an amount of property (including without limitation cash) and/or
securities (including without limitation securities of other companies) of the
Company as would have been received by such Holders had they exercised all of
the Warrants represented by the Warrant Certificates immediately prior to the
record date (or other applicable date) used for determining stockholders of the
Company entitled to receive such dividend or distribution. Anything in
subsection (d) of Section 15 to the contrary notwithstanding, no adjustment to
the Exercise Price shall be made for any distribution of Convertible Securities
of the Company to the Holders pursuant to the provisions of this Section 18.
SECTION 19. Put and Call Rights; First Refusal Rights;
Tag-Along Rights; Take-Along Rights; and Registration Rights. The Warrant
Securities are subject to and entitled to the benefit of certain put and call
rights, first refusal rights, tag-along rights, take-along rights and
registration rights, as more fully set forth in the Put and Call Agreement and
the Registration
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<PAGE> 38
Rights Agreement, each of which is incorporated herein by reference.
SECTION 20. Notices. All notices, consents, approvals,
agreements and other communications provided hereunder shall be in writing or
by telex or telecopy and shall be sufficiently given to the Purchaser, the
Holders and the Company if addressed or delivered to them at the following
addresses:
If to the Purchaser: ING
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Telecopier No.: (404) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr., Esq .
Telecopier No.: (404) 572-5100
If to any other Holder: At its last known address appearing on the books of
the Company maintained for such purpose
If to the Company: MHI Acquisition, Inc.
Suite 600
2501 Cedar Springs Road
Dallas, Texas 75201
Attention: Charles L. Allen
Telecopier No.: (214) 871-3399
or at such other address as any party may designate to any other party by
written notice.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received
if deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when transmission is verified, if telecopied; and on the next Business
Day, if timely delivered to an air courier guaranteeing overnight delivery.
SECTION 21. Costs and Expenses. The Company agrees to
pay all reasonable expenses of the Purchaser for the negotiation, preparation,
execution, and delivery of this Agreement and each other Warrant Document, and
any amendments,
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<PAGE> 39
waivers, consents, supplements, or other modifications to this Agreement or any
other Warrant Document as may from time to time hereafter be required
(including the reasonable fees and expenses of counsel retained by the
Purchaser from time to time in connection therewith), whether or not the
transactions contemplated hereby are consummated, and to pay all reasonable
expenses of the Purchaser (including reasonable fees and expenses of counsel to
the Purchaser) incurred in connection with the consideration of legal questions
relevant hereto and thereto. The Company also agrees to reimburse the
Purchaser and each Holder upon demand for all reasonable expenses (including
reasonable attorneys' fees and expenses) incurred by the Purchaser or such
Holder in enforcing the obligations of the Company or the Borrower under this
Agreement or any other Warrant Document or in connection with any amendment,
waiver, consent, supplement or other modification to this Agreement or any
Warrant Document.
SECTION 22. Indemnification. In consideration of the
transactions contemplated by this Agreement and the other Warrant Documents,
the Company hereby agrees to indemnify, exonerate and hold the Purchaser and
each Holder, each of their respective successors and assigns, each of the
respective officers, directors, employees, attorneys and agents of the
Purchaser and each Holder and each of their respective successors and assigns
(collectively, the "Indemnified Parties") free and harmless from and against
any and all actions, causes of action, suits, losses, costs, liabilities,
damages and expenses (irrespective of whether such Indemnified Party is a party
to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by the Indemnified Parties or any of them or asserted or awarded
against the Indemnified Parties or any of them as a result of, or arising out
of, or relating to:
(a) any transaction contemplated by this Agreement or any
other Warrant Document;
(b) the making of any claim by any investment banking
firm, broker or third party that it is entitled to compensation from any
Indemnified Party in connection with this Agreement;
(c) any claim, investigation, litigation, or proceeding
made or commenced by a third party related to this Agreement or any other
Warrant Documents, whether or not the Indemnified Party or any other
Indemnified Party is party thereto;
(d) the breach by the Company or the Borrower of any
representation or warranty set forth in this Agreement or in any other Warrant
Document, subject to the limitation described below; or
(e) the failure of the Company or the Borrower to comply
with all terms, conditions, and covenants set forth in this Agreement or in any
other Warrant Document;
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<PAGE> 40
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct as determined by a final and
nonappealable decision of a court of competent jurisdiction. Notwithstanding
the foregoing, the Purchaser, its successors and assigns, and each of its
officers, directors, employees and agents shall have the right to
indemnification and exoneration and to be held harmless to the full extent
provided herein for Indemnified Liabilities resulting from, or arising out of,
or relating to subparagraph (d) above, but such right shall not be available to
any other Holder, its successor or assigns, or its officers, directors,
employees or agents for Indemnified Liabilities resulting from, or arising out
of, or relating to a breach by the Company of the representations and
warranties contained in Sections 5(a), 5(g) and 5(h).
If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The foregoing indemnity
shall become effective immediately upon the execution and delivery hereof and
shall remain operative and in full force and effect notwithstanding the
consummation of the transactions contemplated hereunder, the issuance or
exercise of the Warrants hereunder, the termination of this Agreement pursuant
to Section 24, the invalidity or unenforceability of any term or provision of
this Agreement or any other Warrant Document, or any investigation made by or
on behalf of any Holder or the Purchaser.
Promptly after receipt by an Indemnified Party of notice of
the commencement of any action (including any governmental investigation or
inquiry), such Indemnified Party will, if such Indemnified Party intends to
make a claim in respect thereof against the Company, give written notice to the
Company of the commencement thereof, but the omission so to notify the Company
shall not relieve the Company from any of its obligations hereunder. In case
any such action is brought against any Indemnified Party and it notifies the
Company of the commencement thereof, the Company shall be entitled to
participate in and to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and
after notice from the Company to such Indemnified Party, the Company shall not
be responsible for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof. The company will not
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation.
SECTION 23. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company
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<PAGE> 41
or the Holders shall bind and inure to the benefit of their respective
successors and assigns, including those by operation of law, merger,
consolidation or as otherwise provided in Section 15(i).
SECTION 24. Termination. Except as otherwise provided
herein, this Agreement shall terminate when (a) all Warrants have expired
unexercised in accordance with their terms or all Warrant Securities have been
purchased pursuant to the Put and Call Agreement, and (b) all obligations of
the Company and the Borrower (or any successor to either of them) shall have
been satisfied in full and all contingencies in respect thereof shall no longer
exist, including, without limitation, the obligations set forth in Sections
15(i) and 15(f)(ii).
SECTION 25. Governing Law. THIS AGREEMENT AND THE
WARRANTS SHALL BE GOVERNED BY THOSE PROVISIONS OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE AND ARTICLE 8 OF THE DELAWARE UNIFORM COMMERCIAL CODE
WHICH ARE NECESSARILY APPLICABLE TO SECURITIES ISSUED BY A DELAWARE CORPORATION
AND OTHERWISE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE
OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE.
SECTION 26. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company and
the Holders any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Company
and the Holders.
SECTION 27. Counterparts. This Agreement may be executed
in any number of counterparts and each such counterpart shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument.
SECTION 28. Amendments; Waiver. No provision of this
Agreement may be amended or waived except by an instrument in writing signed by
the party sought to be bound; provided, however, that any amendment requested
or waiver sought from the Holders of any provision of this Agreement which
affects Holders generally may be given by the Required Holders and any waiver
so given shall be binding on all Holders; provided further, that the provisions
of Section 11 with respect to the type of securities for which the Warrants are
exercisable may not be changed without the consent of each Holder affected
thereby. No failure or delay by any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall a waiver of a particular
right or remedy on one occasion be deemed a waiver of any other right or remedy
or a waiver of the same right or remedy on any subsequent occasion.
SECTION 29. Waiver of Jury Trial. THE PURCHASER, EACH
HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN
-38-
<PAGE> 42
RESPECT OF ANY LITIGATION BASED HEREON, ON THE WARRANTS OR ON ANY OF THE OTHER
WARRANT DOCUMENTS, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT, THE WARRANTS OR ANY OF THE OTHER WARRANT DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE PURCHASER, ANY HOLDER OR THE COMPANY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PURCHASER'S ENTERING INTO THIS AGREEMENT.
SECTION 30. Jurisdiction. The Company hereby agrees that
any legal action or proceeding against it with respect to this Agreement, the
Warrants or any of the other Warrant Documents may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York as any Holder may elect, and, by execution and delivery
hereof, it accepts and consents for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts and
agrees that such jurisdiction shall be exclusive, unless waived by the Required
Holders in writing, with respect to any action or proceeding brought by it
against such Holders. The Company hereby irrevocably designates, appoints and
empowers CT Corporation System whose present address is 1633 Broadway, New
York, New York 10019, as its authorized agent to receive, for and on its behalf
and its property, service of process in the State of New York when and as legal
actions or proceedings may be brought in the courts of the State of New York or
of the United States of America sitting in New York, and such service of
process shall be deemed complete upon the date of delivery thereof to such
agent, or upon the earliest of any other date permitted by applicable law. It
is understood that a copy of said process served on such agent will be
forwarded to the Company as soon as practicable, at its address set forth
herein, but its failure to receive such copy shall not affect in any way the
service of said process on said agent as the agent of the Company. The Company
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of the copies thereof by
certified mail, return receipt requested, postage prepaid, to it at its address
set forth herein, such service to become effective upon the earlier of (i) the
date 10 calendar days after such mailing and (ii) any earlier date permitted by
applicable law. The Company agrees that it will at all times continuously
maintain an agent to receive service of process in the State of New York on
behalf of itself and its properties and in the event that, for any reason, the
agent named above or its successor shall no longer serve as its agent to
receive service of process in the State of New York on its behalf, it shall
promptly appoint a successor so to serve and shall advise the Holders thereof.
The Company agrees that Sections 5-1401 and 5-1402 of the General Obligations
Law of the State of New York shall apply to this Agreement and each of the
other Warrant Documents and waives any right to stay or to dismiss any action
or proceeding brought before said courts on the basis of forum non conveniens.
Nothing herein shall affect the right of any Holder to bring proceedings
against the Company in the courts of any
-39-
<PAGE> 43
other jurisdiction or to serve process in any other manner permitted by
applicable law.
SECTION 31. Specific Performance. The Company recognizes
that the rights of the Holders under this Agreement and the other Warrant
Documents are unique and, accordingly, the Holders shall, in addition to such
other remedies as may be available to any of them at law or in equity, have the
right to enforce their rights hereunder and thereunder by actions for
injunctive relief and specific performance to the extent permitted by law. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
or any of the other Warrant Documents and hereby agrees to waive in any action
for specific performance the defense that a remedy at law would be adequate.
This Agreement is not intended to limit or abridge any rights of the Holders
which may exist apart from this Agreement.
SECTION 32. Confidentiality. The Holders shall hold all
non-public, proprietary or confidential information (which has been identified
as such by the Company) obtained pursuant to the requirements of this Agreement
in accordance with their customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices; provided, however, that each Holder may make disclosure of any such
information to its examiners, Affiliates, outside auditors, counsel,
consultants, appraisers and other professional advisors in connection with this
Agreement or as reasonably required by any proposed transferee in connection
with the contemplated transfer of any Warrant Securities (but only if the
proposed transferee agrees to be bound by the terms of this Section 32) or as
required or requested by an Governmental Authority or representative thereof or
in connection with the enforcement hereof or of any Warrant Document or related
document or pursuant to legal process. In no event shall any Holder be
obligated or required to return any materials furnished to it by the Company.
SECTION 33. Entire Agreement. The parties hereto agree
that this Agreement, the Put and Call Agreement, the Registration Rights
Agreement, the Morgan Stanley Letter Agreement, and the Credit Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
them as to such subject matter; and there are no restrictions, agreements,
arrangements, oral or written, between any or all of the parties relating to
the subject matter hereof which are not fully expressed or referred to herein
or therein.
-40-
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
MHI ACQUISITION, INC.
By:/s/ William A. Brosius
-----------------------------------
Name:
Title:
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:/s/ William A. Brosius
-----------------------------------
Name:
Title:
-41-
<PAGE> 45
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SAID
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION, OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE HOLDER)
AS TO AN EXEMPTION, FROM THE REGISTRATION PROVISIONS OF SAID ACT OR LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A
WARRANT PURCHASE AGREEMENT, DATED AS OF MAY 31, 1995, BETWEEN MHI ACQUISITION,
INC. ("THE COMPANY") AND INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
("ING"), A PUT AND CALL AGREEMENT, DATED AS OF MAY 31, 1995, AMONG THE COMPANY,
MHI ACQUISITION CORPORATION I, MILESTONE HEALTHCARE, INC. AND ING AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 31, 1995, AMONG THE COMPANY AND
THE PURCHASERS IDENTIFIED IN EXHIBIT A ATTACHED THERETO, COPIES OF EACH OF
WHICH ARE ON FILE AT THE MAIN OFFICE OF THE COMPANY. ANY SALE OR TRANSFER OF
THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF THOSE
AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH SECURITIES IN VIOLATION OF SAID
AGREEMENTS SHALL BE INVALID.
405,405 Warrants
Warrant Certificate
MHI ACQUISITION, INC.
This Warrant Certificate certifies that INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION ("ING"), or registered assigns, is the registered
holder of the number of Warrants (the "Warrants") set forth above to purchase
shares of Class B Common Stock, par value $.001 per share (the "Class B Common
Stock"), of MHI ACQUISITION, INC., a Delaware corporation (the "Company").
Each Warrant entitles the holder (i) upon exercise to receive from the Company
one fully paid and nonassessable share of Class B Common Stock (a "Warrant
Share") at the initial exercise price (the "Exercise Price") of $0.60, payable
in lawful money of the United States of America, and (ii) upon the occurrence
of the events described in Section 15(f)(ii) of the Warrant Agreement (as
defined below), to receive from the Company such additional Warrant Shares (or
fraction thereof) as contemplated under such Section, upon surrender of this
Warrant Certificate and payment of the Exercise Price, if applicable, at the
office of the Company designated for such purpose, subject to the conditions
set forth herein and in the Warrant Agreement referenced below. The Exercise
Price and number and type of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the
-42-
<PAGE> 46
occurrence of certain events, as set forth in the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Purchase Agreement dated as of May 31, 1995 (the "Warrant Agreement"),
duly executed and delivered by the Company and ING, which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, obligations and duties
hereunder of the Company and the holders of the Warrants (the words "holders"
or "holder" meaning the registered holders or registered holder). A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company.
The holder of Warrants evidenced by this Warrant Certificate may
exercise such Warrants under and pursuant to the terms and conditions of the
Warrant Agreement by surrendering this Warrant Certificate, with the form of
election to purchase attached hereto (and by this reference made a part hereof)
properly completed and executed, together with payment of the Exercise Price in
cash at the office of the Company designated for such purpose. In the event
that any exercise of Warrants evidenced hereby shall be for less than the total
number of Warrants evidenced hereby, there shall be issued by the Company to
the holder hereof or his or its registered assignee a new Warrant Certificate
evidencing the number of Warrants not exercised. In the event that, at the
time of any exercise of Warrants evidenced hereby, (i) there has been an
adjustment to the Exercise Price and number of Warrant Shares issuable upon the
exercise of each Warrant pursuant to the Warrant Agreement as described in the
following paragraph and (ii) any of the options referred to in Section
15(f)(ii) of the Warrant Agreement are outstanding, the Company shall issue to
the holder hereof or his or its registered assignee a new Warrant Certificate
evidencing the right to receive additional Warrant Shares pursuant to such
Section.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Warrant Shares issuable upon
the exercise of each Warrant shall be adjusted. No fractional shares of
Warrant Shares will be issued upon the exercise of any Warrant, but the Company
will pay the cash value thereof determined as provided in the Warrant
Agreement.
The Holders of the Warrants are entitled to certain registration
rights as set forth in a Registration Rights Agreement dated as of May 31,
1995, among the Company and the purchasers identified in Exhibit A attached
thereto (the "Registration Rights Agreement"). By acceptance of this Warrant
-43-
<PAGE> 47
Certificate, the Holder hereof agrees that upon exercise of any or all of the
Warrants evidenced hereby, such Holder will be bound by the Registration Rights
Agreement. A copy of the Registration Rights Agreement may be obtained by the
holder hereof upon written request to the Company.
The Warrants are subject to that certain Put and Call Agreement, dated
as of May 31, 1995, by and among the Company, MHI Acquisition Corporation I,
Milestone Healthcare, Inc. and ING (the "Put and Call Agreement"), pursuant to
which the holder hereof possesses certain rights to put the Warrants to the
Borrower (the "Put Rights"), the Company possesses certain rights to call the
Warrants from each holder, the holder hereof has been granted certain rights to
participate in a sale of the Common Stock of the Company by certain
shareholders of the Company (and certain of their successors and assigns) and
the Company has been granted certain rights of first refusal with respect to
the Warrants and certain rights to require the holder hereof to participate in
certain sales of the Common Stock of the Company, all at the times specified
in, and pursuant to the terms and conditions set forth in, the Put and Call
Agreement. By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Put and Call Agreement to the same extent as the initial
purchaser of the Warrants. A copy of the Put and Call Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, for another Warrant Certificate
or Warrant Certificates of like tenor evidencing in the aggregate a like number
of Warrants.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing made hereon) for the purpose of any exercise hereof,
of any distribution to the holder(s) hereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company (other than the right to receive dividends and
distributions as set forth in Section 18 of the Warrant Agreement).
-44-
<PAGE> 48
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its duly authorized officer and has caused its corporate seal to
be affixed hereunto or imprinted hereon.
Dated: May 31, 1995
MHI ACQUISITION, INC.
By:
-----------------------------------
Name:
Title:
FORM OF ELECTION TO PURCHASE
[To Be Executed Upon Exercise of Warrant]
The undersigned holder hereby represents that he or it is the registered holder
of this Warrant Certificate, and hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive ____________ shares
of Class B Common Stock, par value $.001 per share, of MHI ACQUISITION INC.
(the "Company") and herewith tenders payment for such shares to the order of
the Company in the amount of $___________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in
the name of the undersigned or his/its nominee hereinafter set forth, and
further that such certificate be delivered to the undersigned at the address
hereinafter set forth or to such other person or entity as is hereinafter set
forth. If said number of shares is less than all of the shares of Class B
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of the undersigned or his/its nominee hereinafter set forth, and
further that such Warrant Certificate be delivered to the undersigned at the
address hereinafter set forth or to such other person or entity as is
hereinafter set forth.
Certificate to be registered as follows:
Name: Internationale Nederlanden (U.S.) Capital Corporation
Address: 135 East 57th Street
New York, New York 10022
Attn: Chief Credit Officer
-45-
<PAGE> 49
Certificate to be delivered as follows:
Name: Internationale Nederlanden (U.S.) Capital Corporation
Address: 135 East 57th Street
New York, New York 10022
Attn: Chief Credit Officer
Date:
----------------------- ------------------------------------------
(Signature must conform in all respects to
the name of the holder as specified on
the fact of the Warrant Certificate,
unless Form of Assignment has been
executed)
-46-
<PAGE> 50
FORM OF ASSIGNMENT
[To be executed upon Transfer of Warrant]
FOR VALUE RECEIVED, the undersigned registered holder of the
enclosed Warrant Certificate hereby sells, assigns and transfers unto
________________________________________ the right represented by such Warrant
Certificate to purchase _____________ shares of Class B Common Stock of MHI
ACQUISITION, INC. to which such Warrant Certificate relates, and appoints
_________________________________________________ Attorney to make such
transfer on the books of MHI ACQUISITION, INC. maintained for such purpose,
with full power of substitution in the premises.
Date:
--------------------- ---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
-47-
<PAGE> 51
EXHIBIT B
HOLDERS OF THE COMPANY'S STOCK
<TABLE>
<CAPTION>
Record Owner Class of Stock No. of Shares
-------------- -------------
<S> <C> <C>
Morgan Stanley Venture Series A
Capital Fund II, L.P. Preferred Stock 2,651,335
Morgan Stanley Venture Series A
Capital Fund II, C.V. Preferred Stock 660,546
Morgan Stanley Venture Series A
Investors, L.P. Preferred Stock 688,119
Charles L. Allen Series A
Preferred Stock 535,714
Class A Common
Stock 200,000
Roy W. Griffitts, Jr. Series A
Preferred Stock 392,857
Class A Common
Stock 107,692
William A. Brosius Series A
Preferred Stock 71,429
Class A Common
Stock 92,308
</TABLE>
-48-
<PAGE> 1
EXHIBIT 4.5
THE SECURITIES REPRESENTEDBY THIS CERTIFICATE HAVE NOTBEEN REGISTERED UNDER THE
SECURITIES ACTOF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SAID
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION, OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE HOLDER)
AS TO AN EXEMPTION, FROM THE REGISTRATION PROVISIONS OF SAID ACT OR LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A
WARRANT PURCHASE AGREEMENT, DATED AS OF MAY 31, 1995, BETWEEN MHI ACQUISITION,
INC. ("THE COMPANY") AND INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
("ING"), A PUT AND CALL AGREEMENT, DATED AS OF MAY 31, 1995, AMONG THE COMPANY,
MHI ACQUISITION CORPORATION I, MILESTONE HEALTHCARE, INC. AND ING AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 31, 1995, AMONG THE COMPANY AND
THE PURCHASERS IDENTIFIED IN EXHIBIT A ATTACHED THERETO, COPIES OF EACH OF
WHICH ARE ON FILE AT THE MAIN OFFICE OF THE COMPANY. ANY SALE OR TRANSFER OF
THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF THOSE
AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH SECURITIES IN VIOLATION OF SAID
AGREEMENTS SHALL BE INVALID.
405,405 Warrants
Warrant Certificate
MHI ACQUISITION, INC.
This Warrant Certificate certifies that INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION ("ING"), or registered assigns, is the registered
holder of the number of Warrants (the "Warrants") set forth above to purchase
shares of Class B Common Stock, par value $.001 per share (the "Class B Common
Stock"), of MHI ACQUISITION, INC., a Delaware corporation (the "Company").
Each Warrant entitles the holder (i) upon exercise to receive from the Company
one fully paid and nonassessable share of Class B Common Stock (a "Warrant
Share") at the initial exercise price (the "Exercise Price") of $0.60, payable
in lawful money of the United States of America, and (ii) upon the occurrence
of the events described in Section 15(f)(ii) of the Warrant Agreement (as
defined below), to receive from the Company such additional Warrant Shares (or
fraction thereof) as contemplated under such Section, upon surrender of this
Warrant Certificate and payment of the Exercise Price, if applicable, at the
office of the Company designated for such purpose, subject to the conditions
set forth herein and in the Warrant Agreement referenced below. The Exercise
Price and number and type of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events, as
set forth in the Warrant Agreement.
<PAGE> 2
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Purchase Agreement dated as of May 31, 1995 (the "Warrant Agreement"),
duly executed and delivered by the Company and ING, which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, obligations and duties
hereunder of the Company and the holders of the Warrants (the words "holders"
or "holder" meaning the registered holders or registered holder). A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company.
The holder of Warrants evidenced by this Warrant Certificate may
exercise such Warrants under and pursuant to the terms and conditions of the
Warrant Agreement by surrendering this Warrant Certificate, with the form of
election to purchase attached hereto (and by this reference made a part hereof)
properly completed and executed, together with payment of the Exercise Price in
cash at the office of the Company designated for such purpose. In the event
that any exercise of Warrants evidenced hereby shall be for less than the total
number of Warrants evidenced hereby, there shall be issued by the Company to
the holder hereof or his or its registered assignee a new Warrant Certificate
evidencing the number of Warrants not exercised. In the event that, at the
time of any exercise of Warrants evidenced hereby, (i) there has been an
adjustment to the Exercise Price and number of Warrant Shares issuable upon the
exercise of each Warrant pursuant to the Warrant Agreement as described in the
following paragraph and (ii) any of the options referred to in Section
15(f)(ii) of the Warrant Agreement are outstanding, the Company shall issue to
the holder hereof or his or its registered assignee a new Warrant Certificate
evidencing the right to receive additional Warrant Shares pursuant to such
Section.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Warrant Shares issuable upon
the exercise of each Warrant shall be adjusted. No fractional shares of
Warrant Shares will be issued upon the exercise of any Warrant, but the Company
will pay the cash value thereof determined as provided in the Warrant
Agreement.
The Holders of the Warrants are entitled to certain registration
rights as set forth in a Registration Rights Agreement dated as of May 31,
1995, among the Company and the purchasers identified in Exhibit A attached
thereto (the
2
<PAGE> 3
"Registration Rights Agreement"). By acceptance of this Warrant Certificate,
the Holder hereof agrees that upon exercise of any or all of the Warrants
evidenced hereby, such Holder will be bound by the Registration Rights
Agreement. A copy of the Registration Rights Agreement may be obtained by the
holder hereof upon written request to the Company.
The Warrants are subject to that certain Put and Call Agreement, dated
as of May 31, 1995, by and among the Company, MHI Acquisition Corporation I,
Milestone Healthcare, Inc. and ING (the "Put and Call Agreement"), pursuant to
which the holder hereof possesses certain rights to put the Warrants to the
Borrower (the "Put Rights"), the Company possesses certain rights to call the
Warrants from each holder, the holder hereof has been granted certain rights to
participate in a sale of the Common Stock of the Company by certain
shareholders of the Company (and certain of their successors and assigns) and
the Company has been granted certain rights of first refusal with respect to
the Warrants and certain rights to require the holder hereof to participate in
certain sales of the Common Stock of the Company, all at the times specified
in, and pursuant to the terms and conditions set forth in, the Put and Call
Agreement. By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Put and Call Agreement to the same extent as the initial
purchaser of the Warrants. A copy of the Put and Call Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, for another Warrant Certificate
or Warrant Certificates of like tenor evidencing in the aggregate a like number
of Warrants.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing made hereon) for the purpose of any exercise hereof,
of any distribution to the holder(s) hereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company (other than the right to receive dividends and
distributions as set forth in Section 18 of the Warrant Agreement).
3
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its duly authorized officer and has caused its corporate seal to
be affixed hereunto or imprinted hereon.
Dated: May 31, 1995
MHI ACQUISITION, INC.
By:/s/ William A. Brosius
---------------------------------
Name:
Title:
4
<PAGE> 5
FORM OF ELECTION TO PURCHASE
[To Be Executed Upon Exercise of Warrant]
The undersigned holder hereby represents that he or it is the registered holder
of this Warrant Certificate, and hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive ____________ shares
of Class B Common Stock, par value $.001 per share, of MHI ACQUISITION INC.
(the "Company") and herewith tenders payment for such shares to the order of
the Company in the amount of $___________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in
the name of the undersigned or his/its nominee hereinafter set forth, and
further that such certificate be delivered to the undersigned at the address
hereinafter set forth or to such other person or entity as is hereinafter set
forth. If said number of shares is less than all of the shares of Class B
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of the undersigned or his/its nominee hereinafter set forth, and
further that such Warrant Certificate be delivered to the undersigned at the
address hereinafter set forth or to such other person or entity as is
hereinafter set forth.
Certificate to be registered as follows:
Name: Internationale Nederlanden (U.S.) Capital
Corporation
Address: 135 East 57th Street
New York, New York 10022
Attn: Chief Credit Officer
Certificate to be delivered as follows:
Name: Internationale Nederlanden (U.S.) Capital
Corporation
Address: 135 East 57th Street
New York, New York 10022
Attn: Chief Credit Officer
Date:
--------------------- ---------------------------------------
(Signature must conform in all
respects to the name of the holder as
specified on the fact of the Warrant
Certificate, unless Form of Assignment
has been executed)
<PAGE> 6
FORM OF ASSIGNMENT
[To be executed upon Transfer of Warrant]
FOR VALUE RECEIVED, the undersigned registered holder of the
enclosed Warrant Certificate hereby sells, assigns and transfers unto
________________________________________ the right represented by such Warrant
Certificate to purchase _____________ shares of Class B Common Stock of MHI
ACQUISITION, INC. to which such Warrant Certificate relates, and appoints
__________________________________________________ Attorney to make such
transfer on the books of MHI ACQUISITION, INC. maintained for such purpose,
with full power of substitution in the premises.
Date:
------------------- ----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT
AMONG
MHI ACQUISITION, INC.,
MHI ACQUISITION CORPORATION I
(to be merged with and into
Milestone Healthcare, Inc.
with Milestone Healthcare, Inc.
as the surviving corporation),
MILESTONE HEALTHCARE, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
Dated as of May 31, 1995
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Put and Call Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Restrictions on Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. Right of First Refusal;
Tag-Along Rights; Take-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Limitation on Put and Call Rights of Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9. Waivers and Further Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 15. Gender; Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 17. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 18. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 19. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 20. Effectiveness of Execution and
Delivery by Milestone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24
</TABLE>
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<PAGE> 3
PUT AND CALL AGREEMENT
THIS PUT AND CALL AGREEMENT (this "Agreement") is made and
entered into as of May 31, 1995, by and among MHI ACQUISITION, INC., a Delaware
corporation (the "Company"), MHI ACQUISITION CORPORATION I, a Delaware
corporation ("Mergerco"), Milestone Healthcare, Inc., a Delaware corporation
("Milestone") and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation (the "Purchaser").
W I T N E S S E T H:
RECITALS:
A. Simultaneously herewith, the Purchaser is entering
into a Credit Agreement, dated of even date herewith, by and among Mergerco,
Milestone, the Purchaser and various other lenders that may become parties
thereto (the "Lenders") and the Purchaser in its capacity as Agent for the
Lenders (the "Agent");
B. Immediately subsequent to the initial borrowing by
Mergerco under the Credit Agreement, Mergerco shall be merged with and into
Milestone (the "Merger") with Milestone surviving such Merger and assuming all
of the obligations of Mergerco under the Credit Agreement (Mergerco and
Milestone, collectively, the "Borrower");
C. The Company is the holder of all of the issued and
outstanding capital stock of Mergerco and, upon the effectiveness of the
Merger, shall be the holder of all of the issued and outstanding capital stock
of Milestone, and extensions of credit to the Borrower inure to the direct
benefit of the Company;
D. It is a condition precedent to the extensions of
credit by the Purchaser to the Borrower contemplated by the Credit Agreement
that the Company agree to issue to the Purchaser Warrants initially exercisable
for 405,405 shares of Class B Common Stock, par value $.001 per share, of the
Company; and
E. The Purchaser is willing to extend credit to the
Borrower pursuant to the Credit Agreement and to purchase the Warrants pursuant
to the Warrant Agreement provided that it receives the assurances set forth in
this Agreement; and
F. The Company, the Borrower and the Purchaser desire to
set forth certain understandings with respect to the Warrants.
<PAGE> 4
NOW, THEREFORE, in consideration of the recitals, the
consummation by the Purchaser of the transactions contemplated by the Warrant
Agreement and the Credit Agreement and the mutual covenants hereinafter set
forth, the parties, intending to be legally bound, hereby agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Acceptance Notice" is defined in Section 5(a).
"Additional Put Event" means any of the following: (a) any
representation or warranty of the Company hereunder or under any other Warrant
Document or in any other writing furnished by or on behalf of the Company to
any Holder for the purposes of or in connection with this Agreement or any
other Warrant Document is or shall be incorrect when made in any material
respect (other than the representation and warranty set forth in Section 5(a)
of the Warrant Agreement); (b) the Company shall default in the due performance
and observance of any of its obligations under Section 6 of the Warrant
Agreement and such default shall continue unremedied for a period of ten (10)
days after a notice thereof shall have been given to the Company by any Holder
(or if such default is not reasonably susceptible to cure within ten (10) days,
such longer period as is reasonably needed to effect such cure, but in no event
longer than thirty (30) days from the date notice is given, so long as the
Company promptly commences and diligently pursues such cure); (c) a merger or
consolidation of the Company or the Borrower with or into any other Person or
any acquisition of the Company or the Borrower by means of a share exchange
(other than a merger in which the Company is the surviving corporation provided
such merger does not result in a Change of Control and other than a Qualified
Sale with respect to which the Holders sell Warrant Securities pursuant to
Section 5(c)); (d) the consummation of a public offering of Stock of the
Company other than a Qualified Public Offering; and (e) a Change of Control
(other than a Qualified Sale with respect to which the Holders sell Warrant
Securities pursuant to Section 5(c)).
"Affiliate" is defined in the Warrant Agreement.
"Agent" is defined in Recital A.
"Agreement" means this Put and Call Agreement as originally in
effect on the date hereof and as thereafter amended, supplemented, amended and
restated, or otherwise modified.
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<PAGE> 5
"Borrower" is defined in Recital B.
"Business Day" is defined in the Warrant Agreement.
"Call Notice" is the written notice to each Holder specifying
the number and type of Warrant Securities with respect to which the Call Right
is being exercised.
"Call Right" is the Company's right to purchase from the
Holders all, but not less than all, of the Warrant Securities then owned by the
Holders.
"Cash Equivalent Investment" is defined in the Warrant
Agreement.
"Change of Control" means (a) the failure of the Company to
own 100% of the issued and outstanding Stock of the Borrower, (b) the failure
of the Morgan Stanley Funds and the Eligible Investors to have the power to
elect at least a majority of the Company's Board of Directors, or (c) the
failure of any of the Morgan Stanley Funds holding any Stock of the Company to
be managed by Morgan Stanley & Co. Incorporated or one of its wholly-owned
Affiliates.
"Common Stock" is defined in the Warrant Agreement.
"Closing" means each closing of the purchase and sale of any
Warrant Securities pursuant to Section 2.
"Closing Date" means the date on which a Closing occurs.
"Contract Value per Share" means the value determined in
accordance with paragraphs (i) through (iv) below and shall equal the highest
number yielded by such determination:
(i) If the Common Stock is traded on a national
securities exchange or quoted in a national inter- dealer quotation system, the
Contract Value per Share determined pursuant to this paragraph (i) shall be an
amount equal to the average of the Quoted Prices for the Common Stock for the
thirty (30) consecutive trading days commencing forty- five (45) trading days
before the date of determination or, if the Common Stock has not been publicly
traded for forty- five (45) trading days, the higher of (a) such average for
each of the trading days ending fifteen (15) trading days before the date of
determination or (b) the initial public offering price of the Common Stock
without deduction for any expenses of the transaction, except for underwriters'
discounts, fees and commissions. The "Quoted Price" of the Common Stock for
each day is the last reported sales price of the Common Stock on such day as
reported by NASDAQ or, if the Common Stock is listed on a national securities
exchange, the last reported sales
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<PAGE> 6
price of the Common Stock on such exchange (which shall be for consolidated
trading if applicable to such exchange) on such day, or if neither is so
reported or listed, the average of the last reported bid and asked prices of
the Common Stock on such day.
(ii) The Contract Value per Share determined pursuant to
this paragraph (ii) shall be the quotient of (A) the fair market value of the
Company and its Subsidiaries taken as a whole on the date of determination,
taking into account all the factors relevant thereto, including, without
limitation, the maximum price that could be obtained from an arm's-length sale
of (1) all or substantially all of the assets of the Company and the
Subsidiaries subject to or after satisfaction of all liabilities of the Company
and the Subsidiaries, excluding any tax or other liability incurred in
connection with such sale or (2) all of the Stock of the Company, whether by
stock sale, merger, consolidation or otherwise, divided by (B) the sum of (1)
the number of Fully Vested shares of Stock on the date of determination, plus
(2) the number of Warrant Shares purchasable and receivable upon exercise of
the rights represented by the Warrant Certificates as of the date of
determination. In no event shall the Contract Value per Share determined
pursuant to this paragraph (ii) be reduced or discounted on the basis that any
securities to be valued on the basis of such Contract Value per Share may
represent the right to acquire a minority interest in the Company or may not be
freely transferable under federal or state securities laws, or for any other
reason. In any circumstances in which the Contract Value per Share is to be
determined pursuant to this paragraph (ii), the Company shall give to the
Holders (or, if such determination affects less than all of the Holders, to the
Holders so affected) written notice of the proposed Contract Value per Share,
as determined in good faith by the Board of Directors of the Company. If,
within thirty (30) days after the date such notice is given, the Company and
the Required Holders agree upon the Contract Value per Share then the Contract
Value per Share for purposes of this paragraph (ii) shall be as so agreed. If
the Required Holders and the Company do not agree upon such Contract Value per
Share within such 30-day period, then the Required Holders and the Company
shall appoint a recognized investment banking firm of national reputation,
reasonably acceptable to the Required Holders and the Company. If the Company
and the Required Holders cannot agree on the appointment of a mutually
acceptable investment banking firm, or if the firm so appointed declines or
fails to serve, then the Required Holders and the Company shall each choose one
such investment banking firm and the respective firms so chosen shall appoint
another recognized investment banking firm of national reputation. The
investment banking firm so selected shall appraise the value of the Company for
the purposes of this paragraph (ii), and such investment banking firm shall
make such appraisal (which shall be in the form of a written report signed by
such investment banking firm) and, for the purposes of
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<PAGE> 7
determining the Contract Value per Share pursuant to this paragraph (ii), such
appraised value of the Company determined as herein provided shall be final and
conclusive on the Company and the Holders. All costs of appraisal shall be
borne by the Company.
(iii) The Contract Value per Share determined pursuant to
this paragraph (iii) shall equal the quotient of (A)(1) the total consolidated
assets of the Company and its Subsidiaries minus (2) the total consolidated
liabilities of the Company and its Subsidiaries, determined in accordance with
GAAP on a consolidated basis as of the last day of the fiscal month ending
immediately prior to the date of determination divided by (B) the sum of (1)
the number of Fully Vested shares of Stock on the date of determination, plus
(2) the number of Warrant Shares purchasable and receivable upon exercise of
the rights represented by the Warrant Certificates as of the date of
determination.
(iv) The Contract Value per Share determined pursuant to
this paragraph (iv) shall equal the quotient of (A) eight (8.0) times EBITDA,
minus (1) the outstanding principal amount of Funded Indebtedness as of the
last day of the fiscal month ending immediately prior to the date of
determination, plus (2) the cash and Cash Equivalent Investments on the balance
sheet of the Company as of the last day of the fiscal month ending immediately
prior to the date of determination, all determined in accordance with GAAP
divided by (B) the sum of (1) the number of Fully Vested shares of Stock on the
date of determination, plus (2) the number of Warrant Shares purchasable and
receivable upon exercise of the rights represented by the Warrant Certificates
as of the date of determination.
"Credit Agreement" means the Credit Agreement, dated of even
date herewith, by and among the Purchaser, various lenders signatory thereto
and the Borrower, as originally in effect on the date hereof and as thereafter
amended, supplemented, amended and restated, or otherwise modified.
"EBITDA" means the net income of the Company and its
Subsidiaries, reported on a consolidated basis for the twelve-month period
immediately preceding the month of the date of determination, adjusted by
adding thereto the amount of all interest expense, depreciation, amortization
of intangible assets and other non-cash charges (to the extent deducted in
computing net income for such period) and taxes incurred, if any, that were
deducted in computing net income for such period, and excluding the effect of
the accretion of the right to put Warrant Securities pursuant to this
Agreement, the accrued and unpaid dividends on Preferred Stock and any original
issue discount on the issuance of the Warrants, all determined in accordance
with GAAP; provided, however, that for purposes hereof all determinations of
EBITDA
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<PAGE> 8
shall be made in accordance with GAAP as in effect on the Closing Date.
"Eligible Investors" is defined in the Warrant Agreement.
"Exercise Notice" is defined in Section 2(a).
"Exercise Price" is defined in the Warrant Agreement.
"Fair Market Value per Share" means the fair market value of
a share of Stock, as determined in good faith by the board of directors of the
Company; provided, however, that if within thirty (30) days after receipt by
the Holders of written notice from the Company of the fair market value per
share of Stock, as so determined in good faith by the Board of Directors of the
Company, the Required Holders deliver to the Company a written request that
Fair Market Value per Share be determined by an investment banking firm, then
the Fair Market Value per Share shall not be less than the fair market value of
a share of Stock (or the lowest value in a range of values) determined by an
investment banking firm of recognized national standing, which firm has been
selected by the board of directors of the Company (such selection to be subject
to the prior approval of the Required Holders), in a written appraisal
delivered to the Holders.
"Fully Diluted" is defined in the Warrant Agreement.
"Fully Vested" is defined in the Warrant Agreement.
"Fundamental Transaction" means the sale by the stockholders
of the Company in one or more transactions of a majority of the capital stock
of the Company; the sale by the Company in one or more transactions of a
majority of the capital stock of the Borrower; the merger or consolidation of
the Company or the Borrower with or into any other Person or any acquisition of
the Company or the Borrower by means of a share exchange, except for the merger
of the Company with and into the Borrower or of the Borrower with and into the
Company provided that the surviving corporation agrees to assume all
obligations of the constituent corporations pursuant to the Warrant Documents;
or the sale by the Company or the Borrower in one or more transactions of all
or substantially all of the assets of the Company or the Borrower.
"Funded Indebtedness" is defined in the Warrant Agreement.
"GAAP" is defined in the Warrant Agreement.
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<PAGE> 9
"Holders" is defined in the Warrant Agreement.
"Legally Available Funds" means, with respect to any purchase
of Warrant Securities pursuant to Section 2, the amount of funds of the
Borrower legally available therefor under the Delaware General Corporation Law,
as amended, or any succeeding law.
"Lenders" is defined in Recital A.
"Loans" is defined in the Warrant Agreement.
"Merger" is defined in Recital B.
"Mergerco" is defined in Recital A.
"Morgan Stanley Fund" is defined in the Warrant Agreement.
"Morgan Stanley Letter Agreement" is defined in the Warrant
Agreement.
"Offer" is defined in Section 5(a).
"Offer Notice" is defined in Section 5(a).
"Partially Available Funds" is defined in Section 4(e).
"Person" is defined in the Warrant Agreement.
"Preferred Stock" is defined in the Warrant Agreement.
"Prospective Acquiror" is defined in Section 5(c).
"Prospective Purchaser" is defined in Section 5(a).
"Purchase Price" is the amount payable to each Holder for such
Holder's Warrant Securities, as calculated in accordance with Section 2(a) or
2(b) as the case may be.
"Put Notice" is the written notice to the Borrower specifying
the number and type of Warrant Securities with respect to which the Put Right
is being exercised.
"Put Right" is the right of each Holder to require that the
Borrower purchase all or any portion of the Warrant Securities then owned by
such Holder.
"Qualified Public Offering" means the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act, covering the
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<PAGE> 10
offer and sale for the account of the Company to the public of not less than
1,500,000 shares of Common Stock (appropriately adjusted for any
recapitalizations, stock combinations, stock splits, stock dividends and the
like) for an aggregate offering price to the public of not less than
$15,000,000.
"Qualified Sale" is defined in the Warrant Agreement.
"Required Lenders" means, as the context may require at any
time, Lenders having, in the aggregate, 66- 2/3% or more of the Revolving Loan
Commitment, the Revolving Loans and the Term Loans, the capitalized terms used
in this definition having the meanings provided in the Credit Agreement.
"Required Holders" is defined in the Warrant Agreement.
"Restriction on Purchase" exists if, at the time of a Closing,
(i) the purchase of such Warrant Securities would result in a default under or
a breach of any Restrictive Provision (assuming that the covenants applicable
to the Borrower at the end of the quarter in which such purchase is to occur
were applicable on the date of such purchase), or (ii) the Borrower would not
have sufficient Legally Available Funds to pay the Purchase Price for the
Warrant Securities.
"Restrictive Provision" means any of the financial covenants
contained in Section 6.2.4 or the negative covenant contained in Section 6.2.8
of the Credit Agreement, or the covenants contained in Section 5.2.4 of the
Holding Company Guaranty, in each case as the same may be amended from time to
time.
"Sale Notice" is defined in Section 5(c).
"SEC" is defined in the Warrant Agreement.
"Securities Act" is defined in the Warrant Agreement.
"Selling Holder" is defined in Section 5(a).
"Stock" is defined in the Warrant Agreement.
"Subsidiaries" is defined in the Warrant Agreement.
"Warrant Agreement" means the Warrant Purchase Agreement,
dated of even date herewith, between the Purchaser and the Company, as
originally in effect on the date hereof and as thereafter amended,
supplemented, amended and restated, or otherwise modified.
"Warrant Documents" is defined in the Warrant Agreement.
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<PAGE> 11
"Warrant Securities" is defined in the Warrant Agreement.
"Warrant Shares" is defined in the Warrant Agreement.
"Warrants" is defined in the Warrant Agreement.
(b) Cross-References. Unless otherwise specified, references
in this Agreement to any Article or Section are references to such Article or
Section of this Agreement, and unless otherwise specified, references in any
Article, Section, or definition to any clause are references to such clause of
such Section, Article or definition.
SECTION 2. Put and Call Rights.
(a) Put by Holders.
At any time and from time to time on or after (i) the fifth
(5th) anniversary of the date hereof, (ii) the date on which any of the Morgan
Stanley Funds sells any Stock for a price in excess of $1.00 per share (as such
price may be appropriately adjusted for any stock combinations, stock splits,
stock dividends, recapitalizations and the like), or (iii) the occurrence of an
Additional Put Event, the Put Right shall be exercisable by each of the
Holders. The Put Right shall be exercised by the delivery of a Put Notice.
After receipt of a Put Notice from any Holder, the Borrower
will promptly (and in any event within ten (10) days) give written notice (the
"Exercise Notice") to each of the other Holders of Warrant Securities that a
Put Right has been exercised. Each Holder will have the right to participate
in the Put Right and require the Borrower to repurchase all or any portion of
such Holder's Warrant Securities by delivering written notice to the Borrower
within ten (10) days following receipt of the Exercise Notice. All such
notices delivered by such other Holders will be deemed to have been delivered
as of the date of the initial Put Notice and taken together will be deemed to
be one exercise of the Put Right. The Holders may require the Borrower to
repurchase Warrant Securities pursuant to an exercise of the Put Right only if
such right has been exercised (by the initiating Holder and such other Holders
that responded to the Exercise Notice) with respect to at least 20% of the
Warrant Securities outstanding on the date hereof; provided, however, that if
less than 20% of the Warrant Securities outstanding on the date hereof remain
outstanding, the Holders of the remaining outstanding Warrant Securities may
require the Borrower to repurchase all such remaining outstanding Warrant
Securities pursuant to an exercise of the Put Right.
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<PAGE> 12
Upon the exercise by a Holder of the Put Right, the Purchase
Price payable to such Holder by the Borrower for such Holder's Warrants
Securities shall be as follows:
(i) in the case of Warrants, an amount determined by
subtracting (A) the aggregate Exercise Price for such Warrants then in effect
under the Warrant Agreement from (B) the product of (1) the Contract Value per
Share, as determined pursuant to Section 2(c), multiplied by (2) the number of
Warrant Shares that may be acquired by such Holder upon exercise of such
Holder's Warrants with respect to which the Put Right is being exercised;
(ii) in the case of Warrant Shares, an amount equal to the
product of (A) the Contract Value per Share, as determined pursuant to Section
2(c), multiplied by (B) the number of Warrant Shares of such Holder with
respect to which the Put Right is being exercised.
(b) Call by the Company.
At any time on or after June 30, 2000, the Call Right shall be
exercisable by the Company. The Call Right shall be exercised by the delivery
of a Call Notice.
Upon the exercise of the Call Right, the Purchase Price
payable to each Holder by the Company for such Holder's Warrant Securities
shall be as follows:
(i) in the case of Warrants, an amount determined by
subtracting (i) the aggregate Exercise Price for such Warrants then in effect
under the Warrant Agreement from (ii) the product of (A) the Contract Value per
Share, as determined pursuant to Section 2(c), multiplied by (B) the number of
Warrant Shares that may be acquired by such Holder upon exercise of such
Holder's Warrants;
(ii) in the case of Warrant Shares, an amount equal to the
product of (A) the Contract Value per Share, as determined pursuant to Section
2(c), multiplied by (B) the number of Warrant Shares held by such Holder;
provided, however, that for purposes of calculating Contract Value per Share
for this Section 2(b), the amounts determined pursuant to clauses (i), (ii) and
(iii) of the definition of "Contract Value per Share" shall each be multiplied
by 1.1 and the multiple of EBITDA used in clause (iv) of the definition of
"Contract Value per Share" shall be 8.8 rather than 8.0.
(c) Determination of the Contract Value per Share.
Promptly upon the receipt of a Put Notice or delivery of a Call Notice pursuant
to Section 2(a) or Section 2(b), the Company shall
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<PAGE> 13
cause the Contract Value per Share to be determined, and shall give written
notice of the determination thereof to each Holder, promptly upon the
determination thereof and in any event within thirty (30) days following the
Borrower's receipt of the Put Notice or the Company's delivery of the Call
Notice, as the case may be.
(d) Termination of Rights Upon Sale to the Public.
Notwithstanding anything to the contrary set forth herein, all rights of the
Holders pursuant to Section 2(a) and of the Company pursuant to Section 2(b)
shall terminate (i) as to any Holder (including an underwriter) acquiring
Warrant Securities pursuant to a registration statement declared effective by
the SEC under the Securities Act covering the offer and sale of such securities
in a bona fide public offering or pursuant to Rule 144 promulgated under the
Securities Act, and (ii) as to all Holders upon the consummation of a Qualified
Public Offering.
(e) Subsequent Public Offering or Fundamental
Transaction. In the event that the Company exercises its Call Right and:
(i) at any time prior to the date of the Closing of such
repurchase or within twelve (12) months thereafter either of the
following occurs: (A) the Company closes an initial public offering
of its Stock, or (B) a Fundamental Transaction is consummated; and
(ii) the "proceeds" to the Company or its stockholders, as
the case may be, of such initial public offering or Fundamental
Transaction, when adjusted as set forth in Section 2(f) below to
reflect a value per share of Stock, exceeds the price per share of
Stock determined in accordance with Section 2(b), and paid to the
Holder of Warrant Securities upon any such repurchase,
then, in such event, the Company shall, forthwith upon the consummation of such
initial public offering or Fundamental Transaction, as the case may be, pay to
the Holder of Warrant Securities, as an additional portion of the Purchase
Price, an amount equal to the "equalizing amount" calculated as set forth in
Section 2(f) below.
(f) Certain Computations. For the purposes of Section
2(e) hereof, (i) the "proceeds" of any public offering or Fundamental
Transaction shall be determined without deduction for any expenses of the
transaction other than underwriters' discounts, fees and commissions in the
case of a public offering (but excluding the value of warrants, options and
other rights granted or sold to such underwriters); (ii) if such proceeds are
not received by the Company in a public offering of Stock or by
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<PAGE> 14
the stockholders of the Company in connection with the sale of Stock, then the
price per share of Stock deemed to be received for the purposes hereof shall be
computed (A) if such transaction involves a sale of assets of the Company or of
the Borrower, on the assumption that all assets of the Company remaining after
the payment of or provision for the liabilities of the Company (including
liabilities for income taxes) would be distributed by the Company to the
holders of shares of Stock in full redemption thereof; and (B) if such
transaction involves a merger, consolidation or share exchange for a
consideration other than cash, on the basis set forth in Section 15(e)(ii) of
the Warrant Agreement; and (iii) the "equalizing amount" shall be equal to the
product of (A) the difference of the price per share of Stock realized by the
Company or its stockholders in a public offering or a Fundamental Transaction,
as the case may be, minus the Purchase Price per share otherwise paid or
payable to the Holder of Warrant Securities pursuant to Section 3, multiplied
by (B) the number of shares of Warrant Securities repurchased by the Company
pursuant to Section 2(b).
(g) Survival of Rights. Subject to the provisions of
Section 2(d), the provisions of this Section 2 shall apply until the
termination of this Agreement pursuant to Section 17 to any person who acquires
in any manner any Warrant Securities from any Holder, and it shall be a
condition to any Holder's right to sell, transfer or otherwise dispose of any
Warrant Securities that such Holder shall have caused the purchaser of such
Warrant Securities to execute and deliver to the Company an agreement from such
person agreeing to abide by the terms of this Section 2.
(h) Increase in Contract Value per Share. If (i) any
shares of Stock were included in the number of Fully Vested shares of Stock
pursuant to clause (ii) of the definition of such term in the Warrant
Agreement, (ii) such number of Fully Vested shares of Stock was used in the
calculation of the Contract Value per Share pursuant to Section 2(c) in
connection with the exercise of a Put Right or Call Right, and (iii) such
shares of Stock have not been issued at the time of the expiration or
termination of the option or options referred to in clause (ii) of such
definition of Fully Vested, then (A) the Contract Value per Share shall
promptly be recalculated to determine the Contract Value per Share that would
have been in effect if the Contract Value per Share had been calculated as if
such shares of Stock were not included in such number of Fully Vested shares of
Stock, and (B) with respect to any Warrant Securities repurchased by the
Company or the Borrower in connection with the exercise of a Put Right or Call
Right prior to the date of any recalculation of the Contract Value per Share
pursuant to this Section 2(h), the Company shall, promptly (and in any event
within five (5) Business Days of the expiration or termination of such option
or options) following such recalculation, pay to each Holder of such
repurchased Warrant
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<PAGE> 15
Securities, as an additional portion of the Purchase Price, an amount equal to
the product of (x) the excess, if any, of the Contract Value per Share as
recalculated pursuant to this Section 2(h) minus the Purchase Price per share
paid to such Holders in connection with the exercise of such Put Right or Call
Right, multiplied by (y) the number of shares of such repurchased Warrant
Securities. The Company agrees to take such further action, and to execute
such further instruments and documents as the Holders shall deem reasonably
necessary in order to effectuate the intent and purpose of this Section 2(h).
SECTION 3. Closing.
(a) Each Closing of the purchase and sale of any Warrant
Securities pursuant to Section 2 shall take place on a Closing Date which is
the later of (i) if a determination of the Contract Value per Share by
appraisal is required, ten (10) days after such determination, but in no event
later than forty-five (45) days after the giving of the Put Notice or Call
Notice, as the case may be, and (ii) if no determination of the Contract Value
per Share by appraisal is required, thirty (30) days after the giving of the
Put Notice or Call Notice, as the case may be. Payment of the Purchase Price
shall be due and payable in full on the Closing Date. The Closing shall take
place at 10:00 a.m. on the Closing Date at such location in Atlanta, Georgia,
or New York, New York, as the Required Holders may reasonably determine and
notify the Company or in such other location as may be agreed to by the Company
and the Required Holders.
(b) The Purchase Price shall be paid in full at each
Closing, by wire transfer of immediately available federal funds, and the
Warrant Securities to be repurchased at such Closing shall be duly endorsed for
transfer. Such Warrant Securities shall be free and clear of all liens and
encumbrances of any kind, nature and description, other than applicable
restrictions under federal and state securities laws. The Company will pay all
stamp and transfer taxes in connection with the repurchase of the Warrant
Securities hereunder.
SECTION 4. Restrictions on Purchase.
(a) The Company covenants and agrees that, other than the
Restrictive Provisions, it shall not, and shall not permit the Borrower to,
without the prior written consent of the Required Holders, enter into or agree
to become subject to any term, condition, provision or agreement that would
restrict in any way the performance of the Borrower's or the Company's
obligations under this Agreement or the availability of Legally Available Funds
with which to perform such obligations.
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<PAGE> 16
(b) Anything in this Agreement to the contrary
notwithstanding, the Borrower shall not be required to purchase Warrant
Securities under Section 2(a) and the Company shall not be permitted to
purchase Warrant Securities under Section 2(b) if, at the time of Closing,
there exists any Restrictions on Purchase.
(c) Upon receipt of a Put Notice, if the Borrower
believes that, at the time of Closing, its obligations under Section 2(a)
hereof would be subject to Restrictions on Purchase, then the Borrower shall
promptly use all reasonable efforts (excluding the payment of waiver, consent
or similar transactional fees, but including reasonable documentation costs and
other similar expenses) (i) to cause the Required Lenders to waive compliance
with any such Restrictive Provisions and/or to amend the Restrictive Provisions
so as to permit the purchase of the Warrant Securities pursuant to this
Agreement; and (ii) to cause such Legally Available Funds to become available
in any manner permitted or contemplated by Sections 154 and 244 of the Delaware
General Corporation Law as amended, or any comparable provision of any
succeeding law.
(d) If, notwithstanding the Borrower's reasonable efforts
pursuant to Section 4(c), the Borrower is unable to fulfill its obligations
under Section 2(a) because of the existence of one or more Restrictions on
Purchase, the Borrower shall give prompt written notice thereof to each Holder
exercising Put Rights, specifying in reasonable detail the nature thereof and
the extent, if any, to which the Borrower would be able to fulfill its
obligation to pay the Purchase Price within the Restrictions on Purchase.
(e) If any Restrictions on Purchase exist on the proposed
Closing Date, then at the sole and independent election of each such Holder,
and pursuant to written notice given by any such Holder to the Borrower: (i)
such Holder's Put Right shall remain exercised and the Closing shall be
deferred until not more than five Business Days after all such Restrictions on
Purchase cease to exist; provided, however, that, as and to the extent that
such Restrictions on Purchase cease to exist, the Borrower shall promptly make
partial payments of the Purchase Price to such Holder, in which case there
shall be a series of such Closings, each of which shall take place not more
than five Business Days after such Restrictions on Purchase have ceased to
exist to an extent that would permit such partial payments of the Purchase
Price in increments of not less than $100,000 ("Partially Available Funds"); or
(ii) the exercise of such Holder's Put Right shall be rescinded and such Holder
shall reserve its right to exercise the Put Right at any subsequent time.
(f) In the event that any Holders make the election
provided in clause (i) of Section 4(e), the Borrower shall
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<PAGE> 17
purchase from such selling Holders that number of Warrant Securities as may be
purchased at the Purchase Price using that portion of Partially Available Funds
for such purchase as equals the product of (a) all Partially Available Funds,
and (b) the ratio of (i) the Warrant Securities originally proposed to be sold
by such Holders electing to sell and not electing to rescind pursuant to clause
(ii) of Section 4(e), to (ii) all outstanding Warrant Securities (treating all
Warrants as fully exercised for the Warrant Shares to which the Holders would
be entitled upon exercise of such Warrants). Such purchase shall be made from
each selling Holder pro rata based on the ratio of (i) the number of Warrant
Securities originally proposed to be sold by such Holder to (ii) the total
number of Warrant Securities originally proposed to be sold by all Holders.
(g) None of the provisions of this Section 4 shall be
construed to limit any other right or remedy under applicable law which any
Holder may have as a result of the failure by the Borrower or the Company to
purchase Warrant Securities as herein provided.
SECTION 5. Right of First Refusal; Tag-Along Rights;
Take-Along Rights.
(a) Right of First Refusal. If at any time any Holder
(the "Selling Holder") shall determine to sell, transfer or otherwise dispose
of any or all of the Warrant Securities then held by the Selling Holder to any
third party other than (i) any other Holder, (ii) any Lender or Affiliate of
any Lender, (iii) the Company or the Borrower, or (iv) in connection with a
registration of securities of the Company to which Sections 2, 3 or 4 of the
Registration Rights Agreement applies (such third party being hereinafter
referred to as a "Prospective Purchaser"), the Selling Holder shall first give
written notice (the "Offer Notice") to the Company specifying the number and
type of Warrant Securities proposed to be sold or transferred and the name of
the Prospective Purchaser and setting forth in reasonable detail the price and
other terms and conditions upon which the Selling Holder proposes to sell such
Warrant Securities. The Offer Notice shall offer to sell (the "Offer") all
such Warrant Securities to the Company on the same terms and conditions
(including price) as are being offered to the Prospective Purchaser. In the
event that all or any part of the consideration shall consist of other than
cash, the price shall mean the fair market value of such consideration. The
Company shall have thirty (30) days from the date of receipt of the Offer
Notice to give written notice of its intention to accept or reject the Offer.
Failure to respond within such 30-day period shall be deemed notice of
rejection. In the event that the Company notifies the Selling Holder of its
intention to accept such Offer (the "Acceptance Notice"), then the Acceptance
Notice, taken in conjunction with the Offer Notice, shall constitute a
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<PAGE> 18
valid and legally binding purchase and sale agreement, and payment in cash for
such Warrant Securities shall be made by the Company within fifteen (15) days
following the receipt by the Selling Holder of the Acceptance Notice. In the
event that the Company rejects or is deemed to reject the Offer, the Selling
Holder shall be free to proceed to sell, transfer or otherwise dispose of such
Warrant Securities to the Prospective Purchaser on the terms and conditions set
forth in the Offer Notice. In the event the Selling Holder fails to complete
the proposed sale, transfer or other disposition within ninety (90) days after
the Company has rejected or was deemed to have rejected the Offer, such Warrant
Securities shall again be subject to the provisions of this Section 5(a).
(b) Tag-Along Rights. If at any time (i) any Morgan
Stanley Fund shall determine to sell, transfer or otherwise dispose of any or
all of the Stock (including, without limitation, the granting of any option or
right to purchase such Stock) then held by such Morgan Stanley Fund (a "Morgan
Stanley Disposition") other than any such sale, transfer or other disposition
(A) to any Affiliate of such Morgan Stanley Fund, (B) in connection with a
registration of securities of the Company to which Section 2 of the
Registration Rights Agreement applies or (C) to the extent such sale, transfer
or other disposition constitutes a "Permitted Transfer" under the Morgan
Stanley Letter Agreement, provided, however, that the rights granted to the
Holders pursuant to this Section 5(b) shall continue to apply to the Stock
sold, transferred or otherwise disposed of pursuant to clause (A) of this
clause (i) following such sale, transfer or other disposition, and provided
further that the transferees of such Stock shall have agreed in writing to be
bound by the provisions of this Section 5(b); or (ii) the Company or any Morgan
Stanley Fund shall determine to enter into any transaction or series of
transactions that would result in a Change of Control, other than a Qualified
Sale with respect to which the Holders sell Warrant Securities pursuant to
Section 5(c) (a "Change of Control Transaction") (any third party proposing to
acquire such Stock from such Morgan Stanley Fund or to enter into such
transaction or transactions with the Company or such Morgan Stanley Fund being
hereinafter referred to as a "Prospective Purchaser"), either such Morgan
Stanley Fund or the Company, and in either case any Prospective Purchaser,
shall first give written notice (the "Offer Notice") to all of the Holders,
specifying the name and address of the Prospective Purchaser and the number of
shares, if any, of Stock proposed to be sold, transferred or otherwise disposed
of by such Morgan Stanley Fund or the Company, as applicable, and setting forth
in reasonable detail the price, structure and other terms and conditions of the
Morgan Stanley Disposition or Change of Control Transaction, as applicable.
The Offer Notice shall represent the offer from the Prospective Purchaser (in
the case of a Morgan Stanley Disposition) or from the Company (in the case of
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<PAGE> 19
a Change of Control Transaction) to each of the Holders of the right to sell
(the "Offer") to the Prospective Purchaser or the Company, as the case may be,
as a condition to the consummation of the proposed transaction described in the
Offer Notice, all the Warrant Securities then owned by each Holder to the
Prospective Purchaser or the Company, as the case may be, and, in the case of a
Morgan Stanley Disposition, on the same terms and conditions (including price
and form of consideration) as are being offered by the Prospective Purchaser to
such Morgan Stanley Fund or, in the case of a Change of Control Transaction, at
the Fair Market Value per Share, determined as of the date of the Offer Notice
(it being agreed that in the case of any Change of Control Transaction
involving the issuance of shares of Stock for cash, such Fair Market Value per
Share shall be deemed to equal the amount of cash received by the Company
therefor). Each Holder shall have thirty (30) days from the date of receipt of
the Offer Notice to give written notice of its intention to accept or reject
the Offer. Failure to respond within such thirty-day period shall be deemed
notice of rejection. In the event that any Holder gives written notice to such
Morgan Stanley Fund or the Company, as the case may be, and the Prospective
Purchaser of its intention to accept such Offer (the "Acceptance Notice"), then
the Acceptance Notice, taken in conjunction with the Offer Notice, shall
constitute a valid and legally binding agreement, and each of the Holders so
giving an Acceptance Notice shall be entitled to sell to the Proposed
Purchaser, contemporaneously with the consummation of the Morgan Stanley
Disposition or the Change of Control Transaction, all of the Warrant Securities
specified in the Acceptance Notice at the price per share and upon all other
terms and conditions specified in the Offer Notice. In the event that all of
the Holders reject or are deemed to have rejected the offer represented by the
Offer Notice, such Morgan Stanley Fund (or Funds) or the Company, as
applicable, shall be free to proceed to consummate such Morgan Stanley
Disposition or Change of Control Transaction, as applicable, on the terms and
conditions set forth in the Offer Notice, provided that such sale is not
otherwise prohibited by any agreement between the Company and the Purchaser.
In the event such Morgan Stanley Fund (or Funds) or the Company, as applicable,
fails to complete the proposed sale, transfer or other disposition within
ninety (90) days after the Holder or Holders rejected or were deemed to have
rejected the Offer, such shares of Stock shall again be subject to the
provisions of this Section 5(b).
(c) Take-Along Rights. If at any time the Company, the
Borrower or the stockholders of the Company shall determine to consummate or be
subject to a Qualified Sale, the Company and the third party with whom such
Qualified Sale is to be consummated (such third party being hereinafter
referred to as the "Prospective Acquiror") shall first give written notice (the
"Sale Notice") to all of the Holders, specifying the name of the Prospective
Acquiror and setting forth in reasonable detail the
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<PAGE> 20
price and all other terms and conditions upon which the Company, the Borrower
or the stockholders of the Company propose to consummate or be subject to the
Qualified Sale. The Sale Notice shall be delivered promptly after the
execution of any agreement for a Qualified Sale and in any case at least twenty
(20) days prior to the proposed date of the consummation of the Qualified Sale.
As a condition to the consummation of the proposed Qualified
Sale described in the Sale Notice, each Holder shall be obligated to sell to
the Prospective Acquiror, and the Prospective Acquiror will purchase from each
Holder, all the Warrant Securities then owned by each Holder for either of the
forms of consideration described below, as the Holder shall elect by notice to
the Company delivered within 15 days from the date of receipt of the Sale
Notice (the failure of any Holder to provide such notice being deemed its
election to receive the form of consideration described in the following clause
(i)): (i) such shares of stock, securities or other assets (including cash)
(as are offered in such Qualified Sale) as may be issued or payable with
respect to or in exchange for a number of outstanding Warrant Shares equal to
(A) the number of Warrant Shares held by such Holder plus (B) the number of
Warrant Shares immediately theretofore purchasable and receivable upon the
exercise of the Warrants held by such Holder had such Qualified Sale not taken
place (less the number of Warrant Shares representing in fair market value the
aggregate Exercise Price for such Warrants then in effect under the Warrant
Agreement); or (ii) an amount in cash equal to the fair market value of such
shares of stock, securities or assets otherwise receivable pursuant to clause
(i) above determined in accordance with the provisions of Section 15(e)(ii) of
the Warrant Agreement, provided, however, that such Holder shall not be
entitled to elect to receive the form of consideration described in this clause
(ii) if (A) the stock or securities to be issued or paid with respect to or in
exchange for Warrant Shares pursuant to clause (i) above are (I) publicly
traded on a national securities exchange or on the Nasdaq Stock Market, with a
market capitalization of not less than $75 million and an average weekly
trading volume for the four (4) full calendar weeks preceding the closing date
of such Qualified Sale of not less than 500,000 shares or one percent (1%) of
the shares of such stock or securities outstanding and (II) are registered
under the Securities Act and listed (or will be listed subject to notice of
issuance) on each securities exchange on which shares of such stock or
securities are listed, and are otherwise free of any restrictions on transfer
(other than a restriction on transfer for a period of time (not to exceed 180
days) following the closing date of such Qualified Sale), or (B) the Holders
have received from the independent public accountants for the Company a written
opinion stating that such Holder's election to receive the form of
consideration described in this clause (ii) would cause such
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<PAGE> 21
Qualified Sale to fail to be accounted for as a "pooling of interests" in
accordance with GAAP and the rules, regulations and policies of the SEC (unless
such failure also is attributable to the effect of any agreement or obligation
to pay any other party involved in such Qualified Sale a form of consideration
other than the shares of stock, securities or other assets issued or payable in
connection with such Qualified Sale and such agreement or obligation arises
from (I) an agreement entered into by the Company and such other party
subsequent to the date of this Agreement or (II) an agreement entered into by
any other party to such Qualified Sale in connection with or in contemplation
of such Qualified Sale), and the Company and the Borrower shall have agreed in
writing that the Put Right and the Call Right shall thereafter be exercisable
at any time and from time to time after the six (6) month period and seven (7)
month period, respectively, following the closing date of such Qualified Sale,
or if the Company and the Borrower shall not survive such Qualified Sale, the
successor entity under such Qualified Sale shall have expressly assumed the
obligations of the Company and the Borrower set forth in this Agreement and
such successor shall expressly acknowledge that the Put Right and the Call
Right shall thereafter be exercisable at any time and from time to time after
the six (6) month period and seven (7) month period, respectively, following
the closing date of such Qualified Sale.
The Holders of Warrant Certificates will not be required to
exercise such Warrants in connection with the Qualified Sale. Notwithstanding
anything to the contrary in this Section 5(c), no Holder shall be required to
sell Warrant Securities if the fair market value per share receivable by such
Holder in respect of such Qualified Sale, determined in accordance with the
provisions of Section 15(e)(ii) of the Warrant Agreement, is less than the
product of (A) the number of then outstanding Warrant Securities held by such
Holder multiplied by (B) three (3) times the Exercise Price then in effect
under the Warrant Agreement, unless (x) the consideration received by such
Holder is in the form described in clause (ii) of the immediately preceding
paragraph or (y) such Holder may elect to receive such form of consideration
but elects to receive consideration in the form described in clause (i) of the
immediately preceding paragraph.
(d) Survival of Rights. The provisions of this Section 5
shall apply until the termination of this Agreement pursuant to Section 17 to
any person who acquires in any manner any Warrant Securities from any Holder or
any Preferred Stock from any Morgan Stanley Fund, and it shall be a condition
to any Holder's right to sell, transfer or otherwise dispose of any Warrant
Securities that such Holder shall have caused the purchaser of such Warrant
Securities to execute and deliver to the Company an agreement from such person
agreeing to abide by the terms of this Section 5.
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<PAGE> 22
(e) Termination of Rights Upon Sale to the Public.
Notwithstanding anything to the contrary set forth herein, all rights of the
Company pursuant to Sections 5(a), 5(b) and 5(c), and all rights of the Holders
pursuant to Section 5(b), shall terminate as to any Person (including an
underwriter) acquiring any Warrant Securities from any Holder pursuant to a
registration statement declared effective by the SEC under the Securities Act,
covering the offer and sale of Warrant Securities or Common Stock in a bona
fide public offering.
SECTION 6. Limitation on Put and Call Rights of Others.
Each of the Company and the Borrower covenants and agrees that, so long as any
Holder holds any Warrant Securities in respect of which any Put Rights provided
for in Section 2 have not terminated, neither the Company nor the Borrower
shall, directly or indirectly, grant to any person or agree to or otherwise
become obligated in respect of (a) any rights to require the Company or the
Borrower to purchase securities of the Company or the Borrower upon the demand
of any Person, or (b) rights in the nature or substantially in the nature of
those set forth in Section 2(b) of this Agreement; in each case, without the
prior written consent of the Required Holders or unless such rights are
expressly subject and subordinated to the Put Rights of the Holders pursuant to
Section 2(a) hereof or otherwise on terms reasonably satisfactory to the
Required Holders. Each of the Company and the Borrower represents and warrants
that it has not previously entered into any agreement granting any such rights
to any Person.
SECTION 7. Notices. All notices, consents, approvals,
agreements and other communications provided hereunder shall be in writing or
by telex or telecopy and shall be sufficiently given to the Purchaser, the
Holders and the Company if addressed or delivered to them at the following
addresses:
If to the Purchaser: Internationale Nederlanden
(U.S.) Capital Corporation
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: Internationale Nederlanden
(U.S.) Capital Corporation
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Telecopier No.: (404) 951-1005
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<PAGE> 23
and to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr., Esq.
Telecopier No.: (404) 572-5100
If to any other Holder: At its last known address appearing
on the books of the Company
maintained for such purpose
If to the Company
or the Borrower: MHI Acquisition, Inc.
Suite 600
2501 Cedar Springs Road
Dallas, Texas 75201
Attention: Charles L. Allen
Telecopier No.: (214) 871-3393
or at such other address as any party may designate to any other party by
written notice.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
received if deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when transmission is verified, if telecopied; and on the next
Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 8. Entire Agreement. The parties hereto agree
that this Agreement and the agreements specifically referred to in Section 33
of the Warrant Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings between them as to such subject matter; and there are no
restrictions, agreements, arrangements, oral or written, between any or all of
the parties relating to the subject matter hereof which are not fully expressed
or referred to herein or therein.
SECTION 9. Waivers and Further Agreements. Any waiver
of any term or condition of this Agreement or of any breach of any term or
condition of this Agreement shall not operate as a waiver of any other term or
condition or any other breach of such term or condition, nor shall any failure
to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof; provided, however, that no such written waiver unless
it by its own terms explicitly provides to the contrary, shall be construed to
effect a continuing waiver of the provision being waived and no such waiver in
any instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all
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<PAGE> 24
other instances or, for all other purposes, to require full compliance with
such provision. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as the other
parties may reasonably require in order to effectuate the terms and purposes of
this Agreement.
SECTION 10. Amendments. This Agreement may not be
amended nor shall any waiver, change, modification, consent or discharge be
effected except by an instrument in writing executed by or on behalf of the
party or parties against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought; provided, however, that any
waiver sought from the Holders of any provision of this Agreement which affects
the Holders generally, and any action required to be taken by the Holders as a
group pursuant to this Agreement, shall be given or taken by the Required
Holders, and any such waiver or action so given or taken shall be binding on
all Holders. No failure or delay by any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, and a waiver of a
particular right or remedy on one occasion shall not be deemed a waiver of any
other right or remedy or a waiver of the same right or remedy on any subsequent
occasion.
SECTION 11. Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, legal representatives, successors and permitted
assigns, including, without limitation, any Holders, from time to time, of the
Warrant Securities.
SECTION 12. Severability. If any provision of this
Agreement shall be held or deemed to be, or shall in fact be, invalid,
inoperative or unenforceable as applied to any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because
of the conflict of any provision with any constitution, statute, rule or public
policy, or for any other reason, such circumstances shall not have the effect
of rendering the provision or provisions in question, invalid, inoperative or
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to the extent that such other provisions are not
themselves actually in conflict with such constitution, statute, rule or public
policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or unenforceable provision
had never been contained herein and such provision reformed so that it would be
valid, operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case.
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<PAGE> 25
SECTION 13. Counterparts. This Agreement may be executed
in two or more counterparts (each of which need not be executed by each of the
parties), each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument, and in pleading or proving any
provision of this Agreement, it shall not be necessary to produce more than one
of such counterparts.
SECTION 14. Section Headings. The headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
SECTION 15. Gender; Usage. Whenever used herein the
singular number shall include the plural, the plural shall include the
singular, and the use of any gender shall include all genders. 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.
SECTION 16. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS (OTHER THAN
THE LAW GOVERNING CONFLICT OF LAW MATTERS) OF THE STATE OF NEW YORK.
SECTION 17. Termination. This Agreement shall terminate
when (a) all Warrants have expired unexercised in accordance with their terms
or all Warrant Securities have been purchased pursuant to Sections 2 or 5
hereof, and (b) all obligations of the Company, the Borrower and the Morgan
Stanley Funds (which obligations are assumed by the Morgan Stanley Funds
pursuant to the Morgan Stanley Letter Agreement) under this Agreement shall
have been satisfied in full and all contingencies in respect thereof shall no
longer exist, including, without limitation, the obligations of the Company and
the Borrower (or any successor to either of them) under Sections 2(e) or 2(h)
or under the circumstances described in clause (B) of the proviso set forth in
the second paragraph of Section 5(c).
SECTION 18. Expenses. The Company and the Borrower shall
be obligated to pay to the Holders, on demand, all reasonable costs and
expenses (including, without limitation, court costs and reasonable attorneys'
fees and expenses and interest to the extent permitted by applicable law on
overdue amounts) paid or incurred in collecting any sums due from, or enforcing
any other obligations of, the Company or the Borrower, respectively.
SECTION 19. Specific Performance. The Company, the
Borrower, and each Holder recognize that the rights of each of the other
parties under this Agreement are unique and, accordingly, each party to this
Agreement shall, in addition to such other
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<PAGE> 26
remedies as may be available to any of them at law or in equity, have the right
to enforce their rights hereunder by actions for injunctive relief and specific
performance to the extent permitted by law. The Company, the Borrower, and
each Holder agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate. This Agreement is not
intended to limit or abridge any rights of the parties which may exist apart
from this Agreement.
SECTION 20. Effectiveness of Execution and Delivery by
Milestone. This Agreement shall be deemed executed and delivered by Milestone
upon the effectiveness of the Merger, and the execution and delivery by
Milestone of this Agreement shall not be a condition to the execution, delivery
or effectiveness of this Agreement as between the Company, Mergerco and the
Purchaser.
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
MHI ACQUISITION, INC.
By:/s/ William A. Brosius
----------------------------------
Name:
Title:
MHI ACQUISITION CORPORATION I
By:/s/ William A. Brosius
----------------------------------
Name:
Title:
MILESTONE HEALTHCARE, INC.
By:/s/ William A. Brosius
----------------------------------
Name:
Title:
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:/s/
----------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.7
FORM OF
MHI ACQUISITION, INC.
FOUNDER PERFORMANCE STOCK PURCHASE AGREEMENT
This Agreement is made as of the 31st day of May 1995, by and between
MHI ACQUISITION, INC., a Delaware corporation (the "Company"), and
_____________________ (the "Founder").
In consideration of the mutual covenants and representations herein
set forth, the Company and the Founder agree as follows:
1. Purchase and Sale of the Stock. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to sell to the Founder
and the Founder hereby agrees to purchase from the Company on the Closing (as
defined herein) _____________ shares of the Company's Class A Common Stock (the
"Shares"), at a price of $0.60 per share (the "Purchase Price"), for an
aggregate purchase price of $________________. The terms of this Agreement
shall not apply to any shares of capital stock of the Company held by the
Founder except for the Shares (and shares of stock issued upon conversion of
the Shares).
2. Closing. The closing of the purchase and sale of the Shares
hereunder shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati,
650 Page Mill Road, Palo Alto, California at 7:00 a.m., local time, on May 31,
1995 (the "Closing") or at such other time and place as shall be mutually
agreed upon between the Company and the Founder. At the Closing, the Founder
shall deliver to the Company either cash or a check (or any combination
thereof), in the amount of the Purchase Price and the Company shall issue, as
promptly thereafter as practicable, a certificate, registered in the name of
the Founder. As a condition to closing, (a) the Series A Preferred Stock
Purchase Agreement, dated as of May 31, 1995, by and among the Company and the
purchasers named therein shall have been executed and delivered by the Company,
shall be in full force and effect and all conditions to closing thereunder
shall have been satisfied or waived, (b) the Registration Rights Agreement,
dated as of May 31, 1995, shall have been executed and delivered by the Company
and the other parties named therein and shall be in full force and effect and
(c) the Stockholders Agreement, dated as of May 31, 1995, shall have been
executed and delivered by the Company and the other parties named therein and
shall be in full force and effect.
3. Repurchase Option.
(a) In the event the Founder's continuous status as an
employee of or consultant to the Company (including a parent or subsidiary of
the Company) terminates for any or no reason, including resignation,
involuntary termination, death or disability (collectively, a "Termination"),
the Company shall have an irrevocable right, for a period of ninety (90) days
following the date of such Termination (as reasonably fixed and determined by
the Company) (the "Termination Date"), to repurchase any or all of the
Unreleased Shares (as defined in Section 4 hereof), at a price of $0.60 per
share (subject to adjustment as set forth in Section 9 hereof) (the "Repurchase
Price"). In addition, in the event there has been no Termination as of
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<PAGE> 2
August 31, 1999 (the "Ending Date"), the Company shall have an irrevocable
right, for a period ending ten (10) days following the completion of the audit
of the Company's financial statements for the year ended August 31, 1999 (but
in no event shall the period extend beyond ninety (90) days following the
Ending Date) to purchase any or all of the Unreleased Shares, at the Repurchase
Price. The rights of the Company to repurchase Unreleased Shares as set forth
in this Section 3 is referred to herein as the "Repurchase Option."
The Repurchase Option shall be exercised by the Company
(subject to Sections 3(b) and 3(c) below) within ninety (90) days following the
Termination Date or Ending Date in accordance with Section 3(a) by delivering
or mailing to the Founder or the Founder's executor (i) written notice in the
manner provided in Section 12 hereof and (ii) a check in the amount of the
aggregate Repurchase Price. Upon delivery of such notice and the payment of
the aggregate Repurchase Price, as described above, the Company shall become
the legal and beneficial owner of the Shares being repurchased and all rights
and interest therein or relating thereto, and the Company shall have the right
to retain and transfer to its own name the number of Shares being repurchased
by the Company.
(b) In the event the Company desires to exercise the
Repurchase Option within ninety (90) days of a Termination Date or ninety (90)
days of an Ending Date as described in Section 3(a) (the "Exercise Period"),
but is precluded by law from exercising the Repurchase Option because the
Company at such time does not have sufficient legally available funds to make
the purchase under the Delaware General Corporation Law, or any similar or
succeeding law (a "Legal Restriction"), the Exercise Period in such event shall
be extended until such time as the Company has sufficient legally available
funds under law to make the purchase. In such event the Company shall deliver
to the Founder written notice prior to the expiration of the Exercise Period of
its desire to exercise the Repurchase Option and a description in reasonable
detail of the Legal Restriction. The Repurchase Option shall be exercised by
the Company (subject to Section 3(d)) in whole or in part from time to time
promptly but in no event more than fifteen (15) days after the Company has
sufficient legally available funds to do so (in accordance with the delivery
procedures described in the second paragraph of Section 3(a)).
(c) In the event the Company is unable to purchase all or
a portion of the Unreleased Shares (such Unreleased Shares are hereinafter
defined as the "Restricted Shares") due to (i) a Legal Restriction or (ii)
restrictions set forth in Section 6.28 of the Credit Agreement dated as of May
31, 1995, by and among MHI Acquisition Corporation I, a Delaware corporation,
the lenders named therein and Internationale Nederlander (U.S.) Capital
Corporation as agent, then Morgan Stanley Venture Capital Fund II, L.P., Morgan
Stanley Venture Capital Fund II, C.V. and/or Morgan Stanley Venture Investors
L.P. and/or their affiliates (collectively "Morgan Stanley"), Morgan Stanley
shall have the right to purchase the Restricted Shares within the Exercise
Period. The Repurchase Option may be exercised by
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<PAGE> 3
Morgan Stanley in such event within the Exercise Period by delivering or
mailing to the Founder or the Founder's executor (i) written notice in the
manner provided in Section 12 hereof and (iv) a check in the amount of the
aggregate Repurchase Price. Upon delivery of such notice and the payment of
the aggregate Repurchase Price, as described above, Morgan Stanley shall become
the beneficial owner of the Shares being repurchased and all rights and
interests therein or relating thereto, and Morgan Stanley shall have the right
to direct the Company to transfer to Morgan Stanley in its own name the number
of Shares being purchased by Morgan Stanley.
(d) Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the
Company, from removing or otherwise terminating the Founder's status as an
employee of or consultant to the Company, subject to the provisions of any
applicable employment agreement.
4. Release of the Stock From Repurchase Option.
(a) The Shares subject to this Agreement shall be
released from the Repurchase Option on the earlier to occur of (i) ninety (90)
days after a Termination or (ii) ninety (90) days after the Ending Date. In
addition, the Shares subject to this Agreement shall be released from the
Repurchase Option at earlier dates upon the satisfaction of certain conditions
as set forth on Exhibit A hereto.
(b) Any shares of the Stock which have not yet been
released from the Company's Repurchase Option are referred to herein as the
"Unreleased Shares."
5. Representations of Founder. In connection with the Founder's
purchase of the Shares, the Founder hereby represents and warrants to the
Company as follows:
(a) Investment Intent; Capacity to Protect Interests.
The Founder is purchasing the Shares solely for his own account and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act of 1933 ("the Securities Act"). The Founder also represents
that the entire legal and beneficial interest of the Shares is being purchased,
and will be held for the Founder's account only and neither in whole or in part
for any other person. The Founder either has a pre-existing business or
personal relationship with the Company or one or more of its officers,
directors or controlling persons or, by reason of the Founder's business or
financial experience or the business or financial experience of the Founder's
financial advisors who are unaffiliated with and who are not compensated by the
Company or any affiliate or selling agent of the Company, directly or
indirectly, could be reasonably assumed to have the capacity to evaluate the
merits and risks of an investment in the Company and to protect the Founder's
own interests in connection with this transaction.
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<PAGE> 4
(b) Resident. The Founder's principal residence is as
set forth on the signature page hereof.
(c) Information Concerning the Company. The Founder has
heretofore discussed the Company and its plans, operations and financial
condition with the Company's officers, knows that the Company is a highly
speculative business and has heretofore received all such information as the
Founder has deemed necessary and appropriate to enable the Founder to evaluate
the financial risk inherent in making an investment in the Shares, and the
Founder has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
(d) Economic Risk. The Founder realizes that the
purchase of the Shares will be a highly speculative investment and involves a
high degree of risk, and the Founder is able, without impairing his financial
condition, to hold the Shares for an indefinite period of time and to suffer a
complete loss on his investment.
(e) Restricted Securities. The Founder understands and
acknowledges that:
(i) The Shares have not been registered under the
Securities Act, and the Shares must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available (such as Rule 144 or the resale provisions of Rule 701 under the
Securities Act) and the Company is under no obligation to register the Shares;
(ii) The stock certificate representing the Shares
will be stamped with the legends specified in Section 8 hereof; and
(iii) The Company will make a notation in its
records of the aforementioned restrictions on transfer and legends.
(f) Disposition under the Securities Act. The Founder
understands that the Shares are restricted securities within the meaning of
Rule 144 promulgated under the Securities Act; that the exemption from
registration under Rule 144 will not be available in any event for at least two
years from the date of purchase and payment of the Shares (unless Rule 701
promulgated under the Securities Act is available), and even then will not be
available unless (i) a public trading market then exists for the Common Stock
of the Company, (ii) adequate information concerning the Company is then
available to the public and (iii) other terms and conditions of Rule 144 are
complied with; and that any sale of the Shares may be made only in limited
amounts in accordance with such terms and conditions. The Founder further
understands that the resale provisions of Rule 701, if available, will not
apply until ninety (90) days after the Company becomes subject to the reporting
obligations under the Securities Exchange Act of 1934. There can be no
assurance that the requirements of Rule 144 or Rule 701 will be met or that the
Shares will ever be saleable.
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<PAGE> 5
(g) Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Founder further agrees that
he shall in no event make any disposition of all or any portion of the Shares
unless and until:
(i) (A) There is then in effect a Registration
Statement under the Securities Act covering such proposed disposition, and such
disposition is made in accordance with said Registration Statement; (B) the
resale provisions of Rule 701 or Rule 144 are available in the opinion of
counsel to the Company; or (C)(1) the Founder shall have notified the Company
of the proposed disposition and (2) the Founder shall have furnished the
Company at the reasonable request of the Company, with an opinion of the
Founder's counsel to the effect that such disposition will not require
registration of such Shares under the Securities Act; and,
(ii) The Shares proposed to be transferred shall
no longer be subject to the Repurchase Option set forth in Section 3 hereof.
(h) Section 83(b) Election. The Founder understands that
Section 83 of the Internal Revenue Code of 1986 (the "Code") taxes as ordinary
income the difference, if any, between the amount paid for the Shares and the
fair market value of the Shares as of the date any restrictions on the Shares
lapse. In this context, "restriction" means the right of the Company to buy
back the Shares pursuant to the Repurchase Option. The Founder understands
that he may elect to be taxed at the time the Shares are purchased rather than
when and as the Repurchase Option expires by filing an election under Section
83(b) of the Code with the Internal Revenue Service within thirty (30) days
after the date of purchase. Even if the fair market value of the Shares equals
the amount paid for the Shares, the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit B hereto. The Founder understands that failure to make this filing
timely will result in the recognition of ordinary income by the Founder, as the
Repurchase Option lapses, on the difference between the purchase price and the
fair market value of the Shares at the time such restrictions lapse.
THE FOUNDER ACKNOWLEDGES THAT IT IS THE FOUNDER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE FOUNDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE FOUNDER'S BEHALF.
6. Rights as Stockholder. Subject to the terms and conditions of
this Agreement, the Founder shall have all of the rights of a stockholder of
the Company with respect to the Shares from and after the date that the Founder
delivers full payment for the Shares until such time as the Founder disposes of
the Shares or the Company and/or its assignee(s) (or Morgan Stanley) exercises
the Repurchase Option hereunder. Upon such exercise, the Founder shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and the Founder shall
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<PAGE> 6
forthwith cause the certificate(s) evidencing the Shares so purchased to be
surrendered to the Company for transfer or cancellation.
7. Escrow. As security for the faithful performance of this
Agreement, the Founder agrees, immediately upon receipt of the certificate(s)
evidencing the Shares, to deliver such certificate(s), together with a stock
power in the form of Exhibit C attached hereto, executed by the Founder and by
the Founder's spouse, if any (with the date and number of Shares left blank),
to the Secretary of the Company or its designee ("Escrow Agent"); said
documents are to be held by the Escrow Agent pursuant to the Joint Escrow
Instructions of the Company and the Founder set forth in Exhibit D attached
hereto and incorporated by this reference, which instructions shall also be
delivered to the Escrow Agent after the Closing.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. The Founder understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required by state or
federal securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RIGHTS AND RESTRICTIONS CONTAINED IN A STOCKHOLDERS
AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS
OF MAY 31, 1995, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION."
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF REPURCHASE HELD BY THE ISSUER OR ITS ASSIGNEE(S),
AS SET FORTH IN THE FOUNDER PERFORMANCE STOCK PURCHASE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THIS
STOCK, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE
OF THE ISSUER. SUCH TRANSFER RESTRICTIONS ARE BINDING ON
TRANSFEREES OF THE STOCK.
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(b) Stop-Transfer Notices. The Founder agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.
9. Adjustment for Stock Split. All references to the number of
Shares, the Purchase Price and the Repurchase Price of the Shares in this
Agreement shall be appropriately adjusted to reflect any stock split, stock
dividend or other change in the Shares which may be made by the Company after
the date of this Agreement.
10. Successors and Assigns. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon the Founder and his heirs, executors, administrators,
successors and assigns.
11. Governing Law; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware,
excluding that body of law pertaining to conflicts of law. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
12. Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and
shall be addressed (i) if to the Founder, at the Founder's address as set forth
beneath his signature to this Agreement, and (ii) if to the Company, at the
address of its principal corporate offices (attention: Secretary), or at such
other address as a party may designate by ten days' advance written notice to
the other party pursuant to the provisions above.
13. Further Instruments. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
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14. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes in its entirety all prior undertakings
and agreements of the Company and the Founder with respect to the subject
matter hereof.
15. Third Party Beneficiaries. The parties agree that Morgan
Stanley shall be a third party beneficiary to this Agreement.
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<PAGE> 9
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
THE COMPANY:
MHI ACQUISITION, INC.,
a Delaware corporation
By:
-------------------------------
Its:
------------------------------
Address:
-------
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 75201
THE FOUNDER:
-----------------------------------
(signature)
Address:
-------
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 75201
(FOUNDER PERFORMANCE STOCK PURCHASE AGREEMENT SIGNATURE PAGE - _______________)
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EXHIBIT A
Vesting Schedule
1. Performance Based Vesting. The Founder's shares (the
"Shares") of Class A Common Stock of the Company, subject to rights of
repurchase (the "Repurchase Option") pursuant to that certain Founders
Performance Stock Purchase Agreement dated May 31, 1995 to which this vesting
schedule is attached as Exhibit A, shall vest and be released from the
Repurchase Option upon the achievement of certain performance criteria in
accordance with the following schedule.
<TABLE>
<CAPTION>
====================================================================================================================================
Fiscal Year Ended August 31,
====================================================================================================================================
1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Target $3.5 MM $5.5 MM $7.5 MM $9.0 MM $10.5 MM
EBDITA(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Vesting(2) 12.5% 25.0% 25.0% 25.0% 12.5%
- ------------------------------------------------------------------------------------------------------------------------------------
% Target 100% 100% 100% 100% 100% 100%
Achieved 90% 90% 90% 95% 95% 95%
80% 50% 90% 90% 90%
70% 80% 80% 80%
- ------------------------------------------------------------------------------------------------------------------------------------
-Shares Earned-
====================================================================================================================================
</TABLE>
- ----------------------------------------------------
(1) EBDITA means, for any period, without duplication, the sum of the
following for the Company for such period determined in accordance
with generally accepted accounting principles: (a) consolidated net
income of the Company, plus (b) consolidated interest expense, plus
(c) taxes to the extent deducted in determining consolidated net
income, plus (d) depreciation, amortization expense, and other
non-cash items to to the extent deducted in determining consolidated
net income, plus (e) any extraordinary items or non-recurring events
reducing consolidated net income. To the extent that the Company
exceeds the EBDITA Target for any given fiscal year, the excess amount
can be carried forward toward meeting the following year's target. In
the event that the Company sell any corporate subsidiary or division
of the Company during any year set forth above, the Target EBDITA for
that year and all subsequent years shall be reduced by the amount of
the projected earnings attributable to such subsidiary or division for
the year of the sale and all subsequent years.
(2) Percentage of shares released from Repurchase Option.
<PAGE> 11
Examples
If EBDITA for the fiscal year ended August 31, 1996 is $6.0 million,
Founder will vest 25% of his Shares (with a $500,000 carryforward to be applied
to EBDITA for the following year). If EBDITA for such year is between
$4,950,000 and $5,499,999, Founder will vest 22.5% (25% x 90%) of his Shares.
If EBDITA for such fiscal year is between $4,400,000 and $4,949,999, Founder
will vest 12.5% (25% x 50%) of his Shares. If EBDITA for such year is
$4,399,999 or less, Founder will not vest as to any of his Shares for such
year.
2. Additional Vesting Provisions. Notwithstanding the foregoing
performance based vesting schedule set forth in Section 1 above, the Founder's
Shares shall vest and be released from the Repurchase Option in full in
accordance with the following provisions:
(i) Founder's Shares shall vest in full on the date
Morgan Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
Fund II, C.V. and Morgan Stanley Venture Investors, L.P., or affiliates of such
funds, prior o the Company's initial public offering, shall own in the
aggregate less than 50% of the outstanding voting securities of the Company
based on the capitalization of the Company as of the date of this Agreement
(this Section 2(i) shall terminate upon the Closing of the Company's initial
public offering); and
(ii) In the event of a merger of the Company with or into
another corporation, or the sale of all or substantially all of the assets of
the Company, or any other corporate reorganization in which consolidation,
merger, sale of assets or reorganization the stockholders immediately prior to
such transaction will not hold (by virtue of the securities issued in such
transaction) at least fifty (50%) of the voting power of the surviving,
continuing or purchasing entity, the Founder's Shares shall vest in full upon
the closing of such a transaction.
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EXHIBIT 4.8
MHI ACQUISITION, INC.
================================================================================
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
May 31, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 1 - AUTHORIZATION AND SALE OF PREFERRED STOCK . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Series A Preferred . . . . . . . . . . . . . . . . . 1
SECTION 2 - CLOSING DATES; DELIVERY . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 2
3.1 Organization and Standing; Charter and Bylaws . . . . . . . . 2
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Authorization; No Breach . . . . . . . . . . . . . . . . . . 3
3.6 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . 4
3.7 Conduct of Business; Liabilities . . . . . . . . . . . . . . 4
3.8 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . 4
3.9 Compliance with Other Instruments, None Burdensome, etc . . . 4
3.10 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . 4
3.11 Registration Rights . . . . . . . . . . . . . . . . . . . . . 4
3.12 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.13 ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . 5
3.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS . . . . . . . 5
4.1 Economic Risk . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Execution, Delivery and Performance . . . . . . . . . . . . . 5
4.4 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 No Public Market . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Access to Data . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . 6
4.8 Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 5 - CONDITIONS TO CLOSING OF PURCHASERS . . . . . . . . . . . . . . 7
5.1 Representations and Warranties Correct . . . . . . . . . . . 7
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . 7
5.4 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.7 Opinion of Company's Counsel . . . . . . . . . . . . . . . . 7
5.8 Fulfillment of Conditions to the Reorganization Agreement . . 7
5.9 Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . 8
5.10 Note Purchase Agreement . . . . . . . . . . . . . . . . . . . 8
5.11 Registrations Rights Agreement. . . . . . . . . . . . . . . . 8
5.12 Stockholders Agreement . . . . . . . . . . . . . . . . . . . 8
5.13 Good Standing Certificates . . . . . . . . . . . . . . . . . 8
5.14 Secretary's Certificate . . . . . . . . . . . . . . . . . . . 8
5.16 Employment Agreements . . . . . . . . . . . . . . . . . . . . 8
5.17 Governmental Authorizations, etc. . . . . . . . . . . . . . . 9
SECTION 6 - CONDITIONS TO CLOSING OF COMPANY . . . . . . . . . . . . . . . 9
6.1 Representations . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Stockholders Agreement; Registration Rights Agreement . . . . 9
6.5 Governmental Authorizations, etc. . . . . . . . . . . . . . . 9
SECTION 7 - AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASERS . . . . 10
7.1 Financial Statements and Other Information . . . . . . . . . 10
7.2 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Compliance with the Charter, Bylaws, Stockholders
Agreement and Registration Rights Agreement . . . . . . . . . 12
7.4 Confidential Treatment of Information . . . . . . . . . . . . 12
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 8 - RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . 12
8.1 Restrictions on Transferability . . . . . . . . . . . . . . . 12
8.2 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . 12
8.3 Notice of Proposed Transfers . . . . . . . . . . . . . . . . 13
SECTION 9 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . 14
9.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . 14
9.5 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . 14
9.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . 15
9.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 15
9.10 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . 16
9.11 Facsimile Signatures . . . . . . . . . . . . . . . . . . . . 16
9.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 16
9.13 Waiver of Conflict . . . . . . . . . . . . . . . . . . . . . 16
EXHIBITS
A - Schedule of Purchasers
B - Restated Certificate of Incorporation of MHI Acquisition, Inc.
C - Schedule of Exceptions
D - Registration Rights Agreement
E - Stockholders Agreement
F - Form of Wilson Sonsini Goodrich & Rosati, P.C. Legal Opinion
G - Form of Founder Performance Stock Purchase Agreement
H - Form of Employment Agreement
</TABLE>
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<PAGE> 5
MHI ACQUISITION, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of May 31, 1995 by and among MHI Acquisition,
Inc., a Delaware corporation (the "Company"), and each of the persons and
entities listed on the Schedule of Purchasers attached hereto as Exhibit A
(each a "Purchaser" and, collectively, the "Purchasers").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company will authorize the sale and issuance
of up to 5,000,000 shares (the "Shares") of its Series A Preferred (as defined
in Section 3.4 below), having the rights, privileges and preferences as set
forth in the Restated Certificate of Incorporation (the "Charter") in the form
attached to this Agreement as Exhibit B.
1.2 SALE OF SERIES A PREFERRED. Subject to the terms and conditions
hereof, the Company will severally issue and sell to Purchasers, and Purchasers
will severally buy from the Company, the number of shares of Series A Preferred
for the aggregate purchase price set forth opposite such Purchaser's name on
the Schedule of Purchasers at a purchase price of $1.00 per share. The
Company's agreements with each of the Purchasers are separate agreements, and
the sales of the Series A Preferred to each of the Purchasers are separate
sales.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder shall be held at the offices of Wilson Sonsini Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California at 7:00 a.m., local time, on May 31, 1995
(the "Closing") or at such other time and place as shall be mutually agreed
upon between the Company and the Purchasers (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser a certificate or certificates, registered in such Purchaser's name
representing the number of shares of Series A Preferred set forth opposite such
Purchaser's name on the Schedule of Purchasers, against payment of the purchase
price therefor, by (i) check payable to the Company or wire transfer per the
Company's instructions or (ii) by cancellation of outstanding indebtedness.
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<PAGE> 6
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit C attached hereto, the Company represents
and warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING; CHARTER AND BYLAWS. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, and to carry on its
business as presently conducted and as proposed to be conducted. The Company
is qualified to do business as a foreign corporation in each jurisdiction where
failure to be so qualified would have a material adverse effect on the
Company's business as presently conducted and as currently proposed to be
conducted. The Company has furnished to Purchasers copies of its Charter and
Bylaws, as amended to date. Said copies are true, correct and complete and
contain all amendments through the date hereof.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power and authority to execute and deliver the
Reorganization Agreement (as defined in Section 3.3 hereof), the Credit
Agreement (as defined in Section 5.9 hereof), the Note Purchase Agreement (and
the Notes to be issued thereunder) (as defined in Section 5.10), the
Registration Rights Agreement (as defined in Section 5.11 hereof), the
Stockholders Agreement (as defined in Section 5.12 hereof), the Founder
Performance Stock Purchase Agreements (as defined in Section 5.15 hereof) and
the Employment Agreements (as defined in Section 5.16 hereof) (collectively,
the "Other Agreements") and this Agreement, to sell and issue the Shares
hereunder, to issue the Common Stock issuable upon conversion of the Shares and
to carry out and perform its obligations under the terms of this Agreement and
the Other Agreements. The Subsidiaries (as defined in Section 3.3 hereof) will
have at the Closing Date all requisite power and authority to execute and
deliver the Reorganization Agreement and this Agreement, and to carry out and
perform their obligations under the terms of the Reorganization Agreement and
this Agreement.
3.3 SUBSIDIARIES. The Company has two subsidiaries, (a) MHI
Acquisition Corporation I ("Mergerco I"), a Delaware corporation formed solely
for the purpose of merging with and into Milestone Healthcare, Inc.
("Milestone") pursuant to that certain Plan and Agreement of Reorganization
among the Company, Healthtrust, Inc. - The Hospital Company, Coralstone
Management, Inc., Milestone, Milestone Healthcare Management, Inc., ("Milestone
Management"), Mergerco I and MHI Acquisition Corporation II ("Mergerco II")
(the "Reorganization Agreement") and (b) Mergerco II, a Delaware corporation
formed solely for the purpose of merging with and into Milestone Management
pursuant to the Reorganization Agreement, and the Company does not otherwise
own or control, directly or indirectly, any equity interest in any corporation,
association or business entity. Mergerco I and Mergerco II are hereinafter
referred to collectively as the "Subsidiaries."
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<PAGE> 7
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Charter, consist of (i) 20,000,000
shares of Common Stock, $0.01 par value (the "Common Stock"), of which
10,000,000 shares have been designated "Class A Common Stock" (the "Class A
Common") and 10,000,000 shares have been designated "Class B Common Stock" (the
"Class B Common") and (ii) 10,000,000 shares of Preferred Stock, $0.01 par
value, 5,000,000 shares of which have been designated "Series A Preferred." No
shares of capital stock of the Company are or will be issued or outstanding
prior to the Closing Date. The Company has reserved (i) 5,000,000 shares of
Class A Common for issuance upon conversion of the Shares, (ii) 400,000 shares
of Class A Common to be sold to Charles L. Allen, Roy W. Griffitts, Jr. and
William A. Brosius (collectively, the "Founders") pursuant to the Founder
Performance Stock Purchase Agreements, (iii) an aggregate of 951,350 shares of
Class A Common, for issuance to employees of and consultants to the Company
pursuant to the Company's 1995 Stock Option Plan, of which 478,378 shares will
be subject to issuance upon exercise of options which shall have been granted
as of Closing Date, and (iv) 405,405 shares of Class B Common issuable to
Internationale Nederlanden (U.S.) Capital Corporation ("ING") upon exercise of
a warrant dated May 31, 1995. The Common Stock and Series A Preferred shall
have the rights, preferences, privileges and restrictions set forth in the
Charter. Except as set forth above, there are no options, warrants or other
rights to purchase any of the Company's authorized and unissued capital stock.
3.5 AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement and the Other Agreements and the consummation of
all transactions contemplated hereby or thereby, including but not limited to
the offering, sale and issuance of the Shares pursuant to this Agreement and
the filing of the Charter have been duly authorized by all required actions of
the Company. This Agreement and the Other Agreements constitute valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except as the indemnification provisions of Section 8 of the
Registration Rights Agreement may be limited by principles of public policy,
and subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The execution and delivery by
the Company of this Agreement and the Other Agreements, and the consummation of
the transactions contemplated hereby and thereby, including but not limited to
the sale and issuance of the Shares pursuant to this Agreement and the filing
of the Charter with the Secretary of State of Delaware do not and will not
(with or without due notice, lapse of time, or both) (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or the Subsidiaries' capital stock or
assets, except for such liens as may arise pursuant to the Loan Agreement, (iv)
give any third party the right to accelerate any obligation under, (v) result
in a violation of or (vi) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body (other than in connection with certain state and federal
securities laws) pursuant to, the Charter or Bylaws of the Company or the
Subsidiaries, or any law, statute, rule, regulation, instrument, order,
judgment or decree to which the Company, the Subsidiaries or any of their
respective properties is subject, or any Other Agreement or any other material
agreement or instrument to which the Company or any of the Subsidiaries is a
party or any of their respective properties is subject.
-3-
<PAGE> 8
3.6 OWNERSHIP OF SHARES. Upon issuance and delivery of the Shares to
each Purchaser pursuant to this Agreement against payment of the consideration
therefor, such Shares will be validly issued, fully paid and nonassessable,
free and clear of all liens, charges and encumbrances, other than (A)
restrictions on transfer set forth herein or in the Stockholders Agreement, the
Company's Bylaws or the Charter and (B) any liens, charges or encumbrances
created by such Purchaser. The delivery of the Shares to each Purchaser at the
Closing will transfer good, absolute and valid title to, and beneficial
ownership of, such shares other than the encumbrances, liens and claims
described in clauses (A) and (B) of the preceding sentence. The issuance and
sale of the Shares pursuant hereto will not give rise to any preemptive rights
or rights of first refusal and will not violate any laws to which the Company
or any of its assets are subject.
3.7 CONDUCT OF BUSINESS; LIABILITIES. As of the Closing Date, the
Company has not conducted any business, incurred any expenses, obligations or
liabilities (whether accrued, absolute, continent, unliquidated or otherwise,
and whether due or to become due) or entered into any contracts or agreements
(other than expenses incidental to its incorporation or in connection with the
transactions contemplated hereby and under the Other Agreements).
3.8 BROKERS OR FINDERS. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any provision of its Charter or Bylaws, or in
any material respect of any term or provision of any Other Agreement, and to
the best of its knowledge is not in violation of any order, statute, rule or
regulation applicable to the Company where such violation would materially and
adversely affect the Company.
3.10 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any reasonable basis therefor or threat thereof).
3.11 REGISTRATION RIGHTS. Except as set forth in the Registration
Rights Agreement, the Company is not under any contractual obligation to
register (as defined in Section 1 of the Registration Rights Agreement) any of
its securities or any of its securities which may hereafter be issued.
3.12 OFFERING. Subject to the accuracy of the Purchasers'
representations in Section 4 hereof, the offer, sale and issuance of the Shares
to be issued in conformity with the terms of this Agreement, and the issuance
of the Common Stock to be issued upon conversion of the Shares, constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
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<PAGE> 9
3.13 ERISA MATTERS. The Company will, following consummation of the
transaction contemplated hereby and by the Other Agreements, be an "operating
company" as defined under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
3.14 DISCLOSURE. Neither this Agreement nor any of the schedules or
other attachments hereto, taken as a whole, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Shares as follows:
4.1 ECONOMIC RISK. It understands that the purchase of the Series A
Preferred hereunder is a speculative investment which involves a high degree of
risk of loss of Purchaser's investment therein. It is able to bear the
economic risk of its investment in the Series A Preferred for an indefinite
period of time, including the risk of a complete loss of such Purchaser's
investment in such securities. It acknowledges that such Series A Preferred
has not been registered under the Securities Act and, therefore, cannot be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available and that there are substantial restrictions on
the transferability of such shares under the Stockholders Agreement.
4.2 INVESTMENT. It is acquiring the Series A Preferred and the
underlying Common Stock for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Series A Preferred to be
purchased and the underlying Common Stock have not been, and will not be,
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of such Purchaser's representations as expressed herein.
4.3 EXECUTION, DELIVERY AND PERFORMANCE. It has full right, power
and authority to execute and deliver this Agreement and the Other Agreements to
which such Purchaser is a party and to perform Purchaser's obligations
hereunder and thereunder. At or before the Closing hereunder, Purchaser will
execute and deliver to the Company the Other Agreements to which it is a party,
and the Purchaser acknowledges and agrees that the Shares purchased will be
subject to the terms and provisions of the Other Agreements. This Agreement
and the Other Agreements to which the Purchaser is a party, when so executed
and delivered by the Purchaser, will constitute valid and binding obligations
of the Purchaser, enforceable in accordance with their respective terms, except
as the indemnification provisions of Section 8 of the Registration Rights
Agreement may be limited by principles of public policy, and subject to laws of
general application relating to bankruptcy,
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<PAGE> 10
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. No consent,
approval, authorization, order, filing, registration or qualification of or
with any court, governmental authority or third person is required to be
obtained by Purchaser in connection with the execution and delivery of this
Agreement or the Other Agreements to which Purchaser is a party or the
performance of Purchaser's obligations hereunder or thereunder.
4.4 RULE 144. It acknowledges that the Series A Preferred and the
underlying Common Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act ("Rule 144") which permit limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than two years after a party
has purchased and paid for the security to be sold, the sale being effected
through a "broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three month period not
exceeding specified limitations.
4.5 NO PUBLIC MARKET. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
4.6 ACCESS TO DATA. It acknowledges that it has had a full
opportunity to ask questions and receive answers concerning the terms and
conditions of the offering of the Shares and has had full access to such other
information concerning the Company as it has requested.
4.7 BROKERS OR FINDERS. Except as set forth on Exhibit C hereto, the
Company has not incurred and will not incur, directly or indirectly, as a
result of any action taken by such Purchaser, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. It relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents. It understands that it (and not the Company) shall be responsible for
any of its own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
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<PAGE> 11
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The Purchasers' obligations to purchase the Shares at the Closing are
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date with the same force and effect as
if made on such date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying as to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.4 CHARTER. The Charter shall have been filed with the Delaware
Secretary of State.
5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares and the
Common Stock issuable upon conversion thereof.
5.6 DIRECTORS. The initial Boards of Directors of the Company and
each of the Subsidiaries shall consist of three members (with two vacancies on
each Board) and be comprised as follows:
<TABLE>
<S> <C>
Name of Director Type of Nominee
----------------------------- ---------------------------------
Charles L. Allen Class A Common Stock
Guy L. de Chazal Series A Preferred Stock
Scott L. Halsted Series A Preferred Stock
</TABLE>
5.7 OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received
from Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to the
Company, an opinion addressed to the Purchasers, dated the Closing Date, in
substantially the form attached hereto as Exhibit F.
5.8 FULFILLMENT OF CONDITIONS TO THE REORGANIZATION AGREEMENT. The
Reorganization Agreement shall be in full force and effect, and all of the
conditions specified in the Reorganization
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<PAGE> 12
Agreement shall have been fulfilled on or before the Closing Date, except for
such conditions (if any) as shall have been waived in accordance with the
Reorganization Agreement.
5.9 CREDIT AGREEMENT. The Credit Agreement, dated as of May 31, 1995
(the "Credit Agreement"), by and among Mergerco I, the lenders named therein
and ING, as agent (the "Agent") shall have been executed and delivered by the
parties thereto and shall be in full force and effect.
5.10 NOTE PURCHASE AGREEMENT. The Note Purchase Agreement, dated as
of May 31, 1995 (the "Note Purchase Agreement") by and among the Company and
the purchasers set forth on the signature pages thereto, and the Notes thereto
executed and delivered by the Company in accordance with the terms of the Note
Purchase Agreement, shall have been executed and delivered by such parties and
shall be in full force and effect as of the Closing.
5.11 REGISTRATIONS RIGHTS AGREEMENT. A Registration Rights Agreement
substantially in the form of Exhibit D (the "Registration Rights Agreement")
shall have been executed and delivered by the Company and the Purchasers (as
defined therein) and shall be in full force and effect as of the Closing.
5.12 STOCKHOLDERS AGREEMENT. A Stockholders Agreement substantially
in the form of Exhibit E (the "Stockholders Agreement") shall have been
executed and delivered by the Company, the Purchasers and the other parties
therein, and shall be in full force and effect as of the Closing.
5.13 GOOD STANDING CERTIFICATES. The Company shall have delivered to
the Purchasers a Certificate dated as of a recent date issued by the Secretary
of State of the State of Delaware to the effect that the Company is legally
existing and in good standing.
5.14 SECRETARY'S CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate executed by the Secretary of the Company dated as of
the Closing, certifying the following matters: (a) resolutions adopted by the
transactions contemplated by this Agreement; (b) Charter of the Company; (c)
Bylaws of the Company; (d) incumbency of officers of the Company; and (e) such
other matters as the Purchasers may reasonably request.
5.15 FOUNDER PERFORMANCE STOCK PURCHASE AGREEMENTS. Founder
Performance Stock Purchase Agreements substantially in the form attached hereto
as Exhibit G (the "Founder Performance Stock Purchase Agreements") shall have
been executed and delivered by the Company and each of the Founders, and shall
be in full force and effect as of the Closing.
5.16 EMPLOYMENT AGREEMENTS. Employment agreements substantially in
the form attached hereto as Exhibit H the ("Employment Agreements") shall have
been executed and delivered by the Company to each of the Founders and shall be
in full force and effect as of the Closing.
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<PAGE> 13
5.17 GOVERNMENTAL AUTHORIZATIONS, ETC. All material governmental
authorizations, consents, approvals, exemptions, or other actions required to
consummate the transactions contemplated by the Reorganization Agreement, to
issue or purchase the Shares pursuant to this Agreement and for the conduct of
the business of the Company, following the Closing, shall have been obtained
and shall be in full force and effect unless the failure to obtain such
authorizations, consents, approvals, exemptions or other actions would not have
a material adverse effect on the business, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole, after giving
effect to the transactions contemplated by the Reorganization Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing is,
at the option of the Company, subject to the fulfillment as of the Closing Date
of the following conditions with the same force and effect as if made on such
date:
6.1 REPRESENTATIONS. The representations made by the Purchasers in
Section 4 hereof shall be true and correct in all material respects as of the
Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the and the Common
Stock issuable upon conversion thereof.
6.3 CHARTER. The Charter shall have been filed with the Delaware
Secretary of State.
6.4 STOCKHOLDERS AGREEMENT; REGISTRATION RIGHTS AGREEMENT. The
Purchasers shall have executed and delivered the Stockholders Agreement and the
Registration Rights Agreement, and each shall be in full force and effect as of
the Closing.
6.5 GOVERNMENTAL AUTHORIZATIONS, ETC. All material governmental
authorizations, consents, approvals, exemptions, or other actions required to
consummate the transactions contemplated by the Reorganization Agreement, to
issue or purchase the Shares pursuant to this Agreement and for the conduct of
the business of the Company following the Closing, shall have been obtained and
shall be in full force and effect unless the failure to obtain such
authorizations, consents, approvals, exemptions or other actions would not have
a material adverse effect on the business, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole, after giving
effect to the transactions contemplated by the Reorganization Agreement.
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<PAGE> 14
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASERS
7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Subject to the provisions of Section 7.1(c), the Company
will deliver to each Purchaser:
(i) as soon as practicable, and in any event
within thirty (30) days after the end of each calendar month of each
fiscal year (other than the last month of each fiscal quarter of the
Company and the Subsidiaries), unaudited consolidated statements of
income and cash flow of the Company and its subsidiaries for such
monthly period and for the period from the beginning of the fiscal
year to the end of such monthly period, and consolidated balance
sheets of the Company and its subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the annual
budgets, and to the corresponding period in the preceding fiscal year,
and all such statements will be prepared in accordance with generally
accepted accounting principles, consistently applied;
(ii) within ninety (90) days after the end of each
fiscal year, consolidated statements of income and cash flow of the
Company and its subsidiaries for such fiscal year, and consolidated
balance sheets of the Company and its subsidiaries as of the end of
such fiscal year, setting forth in each case comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance
with generally accepted accounting principles, consistently applied,
and accompanied by (with respect to the consolidated portions of such
statements) an opinion of an independent accounting firm of recognized
national standing and (B) a copy of such firm's annual management
letter to the board of directors;
(iii) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's and its subsidiaries' operations
and financial affairs given to the Company and its subsidiaries by
their independent accountants (and not otherwise contained in other
materials provided hereunder);
(iv) at least thirty (30) days prior to the
beginning of each fiscal year, an annual budget for the Company and
its subsidiaries for such fiscal year (displaying anticipated
statements of income, changes in financial position and balance
sheets), and promptly upon preparation thereof any other significant
budgets which the Company and its subsidiaries prepare and any
revisions of such annual or other budgets;
(v) promptly (but in any event within five (5)
business days) after the receipt of notice of any default under the
Credit Agreement, the Notes issued pursuant to the Note Purchase
Agreement or any similar agreement involving material indebtedness for
-10-
<PAGE> 15
borrowed money, a certificate specifying the nature and period of
existence thereof and what actions the Company and its subsidiaries
have taken and propose to take with respect thereto;
(vi) within ten (10) days after transmission
thereof, copies of all financial statements, proxy statements, reports
and any other generally written communications which the Company and
its subsidiaries send to their stockholders and copies of all
registration statements and all regular, special or periodic reports
which it files, or any of its officers or directors file with respect
to the Company or its subsidiaries, with the Securities and Exchange
Commission (the "Commission") or with any securities exchange on which
any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company
or its subsidiaries to the public concerning material developments in
the Company's or its subsidiaries' businesses; and
(vii) with reasonable promptness, such other
information and financial data concerning the Company and its
subsidiaries as any Purchaser may reasonably request (and a request
for copies of financial statements and other reports delivered by the
Company or any of its subsidiaries to any lender under the Loan
Agreement will be deemed reasonable).
(b) The provisions of this Section 7.1 (other than
Section 7.1(a)(vi) and (vii)) will not be effective at any time that the
Company (x) is subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act") and continues to comply with
such requirements and (y) promptly provides to each Purchaser all reports and
other materials filed by the Company or its subsidiaries with the Commission
pursuant to the periodic reporting requirements of the Exchange Act.
(c) Notwithstanding the foregoing, so long as any
obligations remain outstanding under the Credit Agreement, the Company shall
deliver to each Purchaser, concurrently with the delivery thereof to the agent
of the lenders under the Credit Agreement, copies of all information and
certificates furnished to the agent of the lenders pursuant to Section 6.1.1 of
the Credit Agreement, and during such period, the Company shall not be required
to deliver any of the items otherwise required by Sections 7.1(a)(i) through
7.1(v) hereof, so long as any obligations remain outstanding under the Credit
Agreement and Section 6.1.1 thereof requires the Company to deliver information
substantially similar to the information required hereby.
7.2 INSPECTION RIGHTS. The Company will permit any representative
designated by a Purchaser upon reasonable notice and during normal business
hours, to visit and inspect any of the properties of the Company and its
subsidiaries, examine the corporate and financial records of the Company and
its subsidiaries and make copies thereof or extracts therefrom, and discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
the directors, officers, key employees and independent accountants of the
Company or its subsidiaries.
-11-
<PAGE> 16
7.3 COMPLIANCE WITH THE CHARTER, BYLAWS, STOCKHOLDERS AGREEMENT
AND REGISTRATION RIGHTS AGREEMENT. The Company will perform and observe all of
its obligations to the holders of the Series A Preferred and the Common Stock
set forth in the Charter, the Bylaws and the Stockholders Agreement, and all of
its obligations to holders of Registrable Securities (as defined in the
Registration Rights Agreement) set forth in the Registration Rights Agreement.
7.4 CONFIDENTIAL TREATMENT OF INFORMATION. Each Purchaser agrees
to use its best efforts to maintain the confidentiality of all nonpublic
information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided, that (a) each
Purchaser may, to the extent required by law, disclose such information in
connection with the sale or transfer of any Series A Preferred or Common Stock
if such Purchaser's transferee agrees in writing to be bound by the provisions
hereof and (b) each Purchaser may disclose such information (i) at the request
of any applicable regulatory authority or in connection with an examination of
the Company or any of its subsidiaries by any such authority, (ii) pursuant to
subpoena or other court process, (iii) when required to do so in accordance
with the provisions of any applicable law, (iv) at the express direction of any
other agency of the United States or any subdivision thereof or of any other
jurisdiction in which the Company conducts its business or (v) to the Company's
independent auditors and other professional advisors provided such persons
acknowledge and agree to be bound by the Purchaser's confidentiality
obligations hereunder.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT
8.1 RESTRICTIONS ON TRANSFERABILITY. The Series A Preferred and
the Class A Common issued or issuable upon conversion thereof (and the Class B
Common issued or issuable upon conversion of such Class A Common) (such Class A
Common and Class B Common are referred to collectively hereinafter as the
"Conversion Shares") are "Restricted Securities" and shall not be sold,
assigned, transferred or pledged except upon the conditions specified in this
Section 8, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Purchaser will cause any proposed
purchaser, assignee, transferee, or pledgee of the Series A Preferred or such
Conversion Shares held by such Purchaser to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 8.
8.2 RESTRICTIVE LEGEND. Each certificate representing (i) the
Series A Preferred, (ii) the Conversion Shares, and (iii) any other securities
issued in respect of the Series A Preferred or the Conversion Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Rule 144) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
-12-
<PAGE> 17
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RIGHTS AND RESTRICTIONS CONTAINED IN A SERIES A
PREFERRED STOCK PURCHASE AGREEMENT, A STOCKHOLDERS AGREEMENT
AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF MAY 31,
1995, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION."
Each Purchaser consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Series A
Preferred or the Conversion Shares in order to implement the restrictions on
transfer established in this Section 8.
8.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 8.3. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) a transfer not involving a change in beneficial ownership or (ii) in
transactions involving the distribution without consideration of Restricted
Securities by any of the Purchasers to any of its partners, or retired
partners, or to the estate of any of its partners or retired partners), unless
there is in effect a registration statement under the Securities Act covering
the proposed transfer, the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall,
be accompanied, at such holder's expense, by either (i) an unqualified written
opinion of legal counsel, who shall be and whose legal opinion shall be
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, where-upon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made pursuant to Rule
144, the appropriate restrictive legend set forth in Section 8.2 above, except
that such certificate shall not bear such restrictive legend if in the opinion
of counsel for such
-13-
<PAGE> 18
holder and the Company such legend is not required in order to establish
compliance with any provision of the Securities Act.
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES
HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF
THE STATE OF DELAWARE.
9.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Purchasers and
the closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors and assigns of such parties whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as the
purchaser or holder of Series A Preferred (or the Conversion Shares issued upon
conversion thereof) are also for the benefit of and enforceable by any
subsequent holder of Series A Preferred (or the Conversion Shares issued upon
conversion thereof).
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought; provided, however, that holders of a majority of the Series A Preferred
(or the Conversion Shares issued upon conversion thereof) may, with the
Company's prior written consent, waive, modify or amend, on behalf of all such
holders, any provisions hereof.
9.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing (or in the form of a telex or
telecopy (confirmed in writing) to be given only during the recipient's normal
business hours unless arrangements have otherwise been made to receive such
notice by telex or telecopy outside of normal business hours) and shall be
mailed by registered or certified mail, postage prepaid, or otherwise delivered
by hand, messenger, or telex or telecopy (as provided above) addressed (a) if
to a Purchaser, at such other address as such Purchaser shall have furnished to
the Company in writing or (b) if to any other holder of any
-14-
<PAGE> 19
Series A Preferred or Conversion Shares issued upon conversion thereof, at such
address as such holder shall have furnished the Company in writing or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such Shares who has so furnished an address to
the Company or (c) if to the Company, one copy should be sent to its principal
executive offices and addressed to the attention of the Corporate Secretary, or
at such other address as the Company shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid,
or, if by telex or telecopy pursuant to the above, when received.
9.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any holder
of any breach or default under this Agreement, or any waiver on the part of any
holder of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
9.7 EXPENSES. The Company will pay, or reimburse the Purchasers
and hold them harmless against liability for the payment of, all stamp and
other taxes which may be payable in respect to the execution and delivery of
this Agreement or the issuance, delivery and acquisition of any shares of
Series A Preferred (or Conversion Shares issued upon conversion thereof)
hereunder.
9.8 REMEDIES. The holders of Series A Preferred will have all of
the rights and remedies set forth in this Agreement and the Charter, as the
case may be, all of the rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
and remedies which such holders have under any law. Any Purchaser having any
rights under any provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
9.9 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, invalid, unenforceable or void, this Agreement shall continue in full
force and effect without said provision. In such event, the parties shall
negotiate, in good faith, a legal, valid and enforceable substitute provision
which most nearly effects the intent of the parties in entering into this
Agreement.
-15-
<PAGE> 20
9.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
9.11 FACSIMILE SIGNATURES. Any signature page delivered by a fax
machine or telecopy machine shall be binding to the same extent as an original
signature page, with regard to any agreement subject to the terms hereof or any
amendment thereto. Any party who delivers such a signature page agrees to
later deliver an original counterpart to any party which requests it.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
9.13 WAIVER OF CONFLICT. Each party to the Agreement that has been
or continues to be represented by Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation hereby acknowledges that Rule 3-310 of the Rules of
Professional Conduct promulgated by the State Bar of California requires an
attorney to avoid representations in which the attorney has or had a
relationship with another party interested in the representations in which the
attorney has or had a relationship with another party interested in the
representation without the informed written consent of all parties affected.
By executing this Agreement, each such party gives its informed written consent
to the representation of the Company by Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, in connection with this Agreement and the
transactions contemplated hereby.
-16-
<PAGE> 21
[PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
-------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title: Managing General Partner
------------------------------------------------
Name of Purchaser
/s/
------------------------------------------------
Signature
President
------------------------------------------------
Title, if applicable
-17-
<PAGE> 22
[PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
--------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title Managing General Partner
------------------------------------------------
Name of Purchaser
/s/
------------------------------------------------
Signature
President
------------------------------------------------
Title, if applicable
-18-
<PAGE> 23
[PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC., MORGAN STANLEY VENTURE INVESTORS, L.P.
a Delaware corporation
By: Morgan Stanley Venture Partners II, L.P.
By: its General Partner
--------------------
Name: By: Morgan Stanley Venture Capital II, Inc.
Title: Managing General Partner
-----------------------------------------------
Name of Purchaser
/s/
-----------------------------------------------
Signature
President
-----------------------------------------------
Title, if applicable
-19-
<PAGE> 24
[PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC.,
a Delaware corporation
By: /s/ Charles L. Allen Charles L. Allen
-------------------------------- ---------------------------------
Name: Charles L. Allen Name of Purchaser
Title: President & CEO
/s/ Charles L. Allen
---------------------------------
Signature
President & CEO
---------------------------------
Title, if applicable
-20-
<PAGE> 25
[PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC.,
a Delaware corporation
By: Roy W. Griffitts, Jr.
--------------------------- ---------------------------------
Name: Charles L. Allen Name of Purchaser
Title: President
/s/ Roy W. Griffitts, Jr.
---------------------------------
Signature
Chief Operating Officer
---------------------------------
Title, if applicable
-21-
<PAGE> 26
[PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" "PURCHASER"
MHI ACQUISITION, INC.,
a Delaware corporation
By: /s/ Charles L. Allen William A. Brosius
-------------------------------- ---------------------------------
Name: Charles L. Allen Name of Purchaser
Title: President
/s/ William A. Brosius
---------------------------------
Signautre
Chief Financial Officer
---------------------------------
Title, if applicable
-22-
<PAGE> 27
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
SHARES OF SERIES A
PURCHASER PREFERRED PURCHASE PRICE
-------------------------------------------- ------------------ --------------
<S> <C> <C>
Morgan Stanley Venture
Capital Fund II, L.P. 2,651,335 $2,651,335
Morgan Stanley Venture
Capital Fund II, C.V. 660,546 660,546
Morgan Stanley Venture
Investors, L.P. 688,119 688,119
Charles L. Allen 535,714 535,714
Roy W. Griffitts, Jr. 392,857 392,857
William A. Brosius 71,429 71,429
--------- ----------
TOTAL 5,000,000 $5,000,000
</TABLE>
<PAGE> 1
Exhibit 4.9
MORGAN STANLEY LETTER AGREEMENT
May 31, 1995
Internationale Nederlanden (U.S.)
Capital Corporation
135 East 57th Street
New York, New York 10022
The Lenders from time to time parties
to the Credit Agreement referenced below
The Holders from time to time of Warrant
Securities (as such term is defined in the
Warrant Agreement referenced below)
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of May 31,
1995 (as the same may be amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among MHI Acquisition Corporation I, a
Delaware corporation ("Mergerco I"), Milestone Healthcare, Inc., a Delaware
corporation ("Milestone"), the lenders that are, or may from time to time
become, parties thereto (the "Lenders") and Internationale Nederlanden (U.S.)
Capital Corporation ("ING"), in its capacity as agent for the Lenders (in such
capacity, the "Agent"). Reference also is made to the Warrant Purchase
Agreement, dated as of May 31, 1995 (the "Warrant Agreement") between ING and
MHI Acquisition, Inc., a Delaware corporation (the "Holding Company").
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Credit Agreement.
In order to induce ING to enter into the Credit Agreement and
to extend credit pursuant thereto, each of Morgan Stanley Venture Capital Fund
II, L.P., Morgan Stanley Venture Capital Fund II, C.V. and Morgan Stanley
Venture Investors, L.P. (each a "Morgan Stanley Fund" or collectively the
"Morgan Stanley Funds"), together with each of the Holding Company, the
Borrower, its Subsidiaries and Milestone Management, hereby agrees that the
sale, transfer or other disposition by any Morgan Stanley Fund of any shares of
Stock of the Holding Company or the granting by any Morgan Stanley Fund of any
option or other right in respect thereof, shall constitute an Event of Default
under this letter agreement and, consequently, shall constitute an "Event of
<PAGE> 2
Internationale Nederlanden (U.S.)
Capital Corporation
The Lenders
The Holders
May 31, 1995
Page 2
Default" under a Loan Document as provided in Section 7.1.3 of the Credit
Agreement, unless such sale, transfer or other disposition, or such option or
right constitutes a Permitted Transfer. As used in this letter agreement,
"Permitted Transfer" means the sale or transfer by the Morgan Stanley Funds of
options to purchase, collectively, up to 1,000,000 shares of Stock of the
Holding Company (in the aggregate for all Morgan Stanley Funds, such number of
shares to be appropriately adjusted for any stock combinations, stock splits,
stock dividends, recapitalizations and the like), to any Person that purchases
Subordinated Indebtedness from the Morgan Stanely Funds, provided that such
sale or transfer, or the granting of such options, is made in connection with
and as an inducement for the purchase by such Person from the Morgan Stanley
Funds of such Subordinated Indebtedness.
In order to further induce ING to enter into the Credit
Agreement and to extend credit pursuant thereto, each of the Morgan Stanley
Funds hereby acknowledges all provisions in the Warrant Documents applicable to
it (including, without limitation, the provisions of Section 5(b) of the Put
and Call Agreement), assumes all obligations of the Morgan Stanley Funds set
forth in such provisions, and acknowledges and agrees that any holder of
Warrant Securities (as such term is defined in the Warrant Agreement) may
enforce such provisions against the Morgan Stanley Funds as if such Morgan
Stanley Funds were signatories to the Warrant Documents.
THIS LETTER AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT
SITTING IN NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS LETTER AGREEMENT, AND EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK STATE OR FEDERAL COURT. EACH PARTY TO THIS LETTER AGREEMENT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
This letter agreement shall be deemed executed and delivered
by Milestone, Milestone Management and each of the subsidiaries of Milestone,
immediately upon effectiveness of the Merger and the Milestone Merger, and the
execution and delivery by Milestone, Milestone Management, and each of the
Subsidiaries of
<PAGE> 3
Internationale Nederlanden (U.S.)
Capital Corporation
The Lenders
The Holders
May 31, 1995
Page 3
Milestone, shall not be a condition to the execution, delivery and
effectiveness of this letter agreement as between the Morgan Stanley Funds, the
Holding Company, Mergerco I, Mergerco II, the Lenders, the Agent and the
Holders of Warrant Securities (as such term is defined in the Warrant
Agreement).
This letter agreement is the Morgan Stanley Letter Agreement
referenced in the Credit Agreement and the Warrant Documents.
Sincerely yours,
MORGAN STANLEY VENTURE CAPITAL
FUND II, L.P.
By: Morgan Stanley Venture Partners II,
L.P.
General Partner
By: Morgan Stanley Venture Capital II, Inc.
General Partner
By:/s/Debra Abramovitz
------------------------------------
Name: Debra Abramovit
Title: Vice President
MORGAN STANLEY VENTURE CAPITAL
FUND II, C.V.
By: Morgan Stanley Venture Partners II,
L.P.
Its Investment General Partner
By: Morgan Stanley Venture Capital II,
Inc.
Managing General Partner
By:/s/Debra Abramovitz
------------------------------------
Name: Debra Abramovitz
Title: Vice President
<PAGE> 4
Internationale Nederlanden (U.S.)
Capital Corporation
The Lenders
The Holders
May 31, 1995
Page 4
MORGAN STANLEY VENTURE INVESTORS, L.P.
By: Morgan Stanley Venture Partners II,
L.P.
General Partner
By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner
By:/s/Debra Abramovitz
-------------------------------------
Name: Debra Abramavitz
Title: Vice President
MHI ACQUISITION, INC.
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
MHI ACQUISITION CORPORATION I
(to be merged with and into
Milestone Healthcare, Inc.)
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
MILESTONE HEALTHCARE, INC.
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
<PAGE> 5
Internationale Nederlanden (U.S.)
Capital Corporation
The Lenders
The Holders
May 31, 1995
Page 5
MILESTONE HEALTHCARE MANAGEMENT, INC.
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
TRUCARE HEALTH SYSTEMS, INC.
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
TRUCARE REHABILITATION SYSTEMS, INC.
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
TRUCARE PHYSICAL THERAPY SERVICES, INC.
By:/s/William A. Brosius
-------------------------------------
Name:
Title:
Acknowledged and agreed:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent,
as the sole Lender under the
Credit Agreement and as the sole
Holder of Warrant Securities
By: /s/
-----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.10
MILESTONE HEALTHCARE, INC.
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as
amended, and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means a Committee appointed by the Board
of Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means MileStone Healthcare, Inc., a
Delaware corporation.
(g) "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting or advisory services
and is compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company
registers any class of any equity security pursuant to the Exchange Act, the
term Consultant shall thereafter not include directors who are not compensated
for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant"
means that the employment or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as
an Employee or Consultant shall not be considered interrupted in the case of
(i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive Stock Options, no
such leave may exceed 90 days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.
<PAGE> 2
(i) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(j) "Employee" means any person, including Officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(l) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or approved for quotation on a national market system, including
without limitation the Nasdaq National Market, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported) or quotation as quoted on such exchange or system for the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination, or;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(m) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the
Plan.
(q) "Optioned Stock" means the Common Stock subject to an
Option.
(r) "Optionee" means an Employee or Consultant who
receives an Option.
(s) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1996 Stock Option Plan.
-2-
<PAGE> 3
(u) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(v) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 699,242 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued
under the Plan shall not be returned to the Plan and shall not become available
for future distribution under the Plan, except that if unvested Shares are
repurchased by the Company at their original purchase price, and the original
purchaser of such Shares did not receive any benefits of ownership of such
Shares, such Shares shall become available for future grant under the Plan.
For purposes of the preceding sentence, voting rights shall not be considered a
benefit of Share ownership.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any,
upon which the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the
Company becomes Subject to the Exchange Act.
(i) Administration with Respect to Directors and
Officers. With respect to grants of Options to Employees who are also Officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with the rules under Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3")
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans
-3-
<PAGE> 4
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made.
(ii) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director Officers and Employees who are neither directors nor
Officers.
(iii) Administration With Respect to
Consultants and Other Employees. With respect to grants of Options to
Employees or Consultants who are neither directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a committee designated
by the Board, which committee shall be constituted in such a manner as to
satisfy the legal requirements relating to the administration of incentive
stock option plans, if any, of Texas corporate and securities laws, of the
Code, and of any applicable stock exchange (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the
provisions of the Plan and, in the case of a Committee, the specific duties
delegated by the Board to such Committee, and subject to the approval of any
relevant authorities, including the approval, if required, of any stock
exchange upon which the Common Stock is listed, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to
whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions of any
award granted hereunder. Such terms and conditions may include, but are not
limited to, the exercise price, the time or times when Options may be
exercised, any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the Shares relating
thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 9(f) instead of
Common Stock;
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<PAGE> 5
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if
otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value:
(i) of Shares subject to an Optionee's Incentive
Stock Options granted by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship
at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company, as described in Section 17 of the Plan. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that the term shall be no
more than ten (10) years from the date of grant thereof. However, in the case
of an Incentive Stock Option granted to an Optionee who, at the time the Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
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<PAGE> 6
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option,
the per share exercise price shall be determined by the Administrator.
(b) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option have been owned by the Optionee for
more than six months on the date of surrender and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected
to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly
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<PAGE> 7
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship.
In the event of termination of an Optionee's Continuous Status as an Employee
or Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the date
three (3) months and one day from the date of such change of status) or from
Consultant to Employee), such Optionee may, but only within such period of time
as is determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination. To the extent that Optionee
was not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination
of an Optionee's consulting relationship or Continuous Status as an Employee as
a result of his or her Disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or
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<PAGE> 8
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) Sale or Merger. Except as otherwise specified in
individual option agreements, in the event of a merger of the Company with or
into another corporation, the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a Parent or Subsidiary of
such successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately
-8-
<PAGE> 9
prior to the merger, the consideration (whether stock, cash, or other
securities or property) received in the merger by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon
the exercise of the Option for each Share of Optioned Stock subject to the
Option to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders
of Common Stock in the merger. Notwithstanding the foregoing, the Board or its
committee may determine in its discretion any additional vesting or
acceleration terms in the context of a consolidation, merger, sale of assets or
reorganization of the Company as it deems appropriate with respect to grants to
individual optionees pursuant to this Plan.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law
or regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted,
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such
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<PAGE> 10
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
16. Agreements. Options shall be evidenced by written agreements
in such form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twelve (12)
months before or after the date the Plan is adopted. Such shareholder approval
shall be obtained in the degree and manner required under applicable state and
federal law and the rules of any stock exchange upon which the Common Stock is
listed.
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<PAGE> 11
EXHIBIT E
MILESTONE HEALTHCARE, INC.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPINION GRANT
[Optionee's Name and Address]
- --------------------
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number
-------------------------------
Date of Grant
-------------------------------
Vesting Commencement Date
-------------------------------
Exercise Price per Share $
------------------------------
Total Number of Shares Granted
-------------------------------
Total Exercise Price $
------------------------------
Type of Option: Incentive Stock Option
-----
Nonstatutory Stock Option
-----
Term/Expiration Date:
-------------------------------
<PAGE> 12
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
1. Performance Based Vesting. The Optionee's options to purchase
Common Stock of the Company shall vest and become exercisable upon the
achievement of certain performance criteria in accordance with the following
schedule.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended May 31,
- --------------------------------------------------------------------------------
1996 1997 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Target $5.5 MM $7.5 MM $9.0 MM $10.5 MM
EBDITA(1)
- --------------------------------------------------------------------------------
Vesting(2) 25.0% 25.0% 25.0% 12.5%
- --------------------------------------------------------------------------------
% Target 100% 100% 100% 100% 100%
Achieved 90% 90% 95% 95% 95%
80% 50% 90% 90% 90%
70% 80% 80% 80%
- --------------------------------------------------------------------------------
-Shares Earned-
- --------------------------------------------------------------------------------
</TABLE>
- ------------------
(1) EBDITA means, for any period, without duplication, the sum of the
following for the Company for such period determined in accordance
with generally accepted accounting principles: (a) consolidated net
income of the Company, plus (b) consolidated interest expense, plus
(c) taxes to the extent deducted in determining consolidated net
income, plus (d) depreciation, amortization expense, and other
non-cash items to the extent deducted in determining consolidated net
income, plus (e) any extraordinary items or non-recurring events
reducing consolidated net income. To the extent that the Company
exceeds the EBDITA Target for any given fiscal year, the excess amount
can be carried forward toward meeting the following year's target. In
the event that the Company sells any corporate subsidiary or division
of the Company during any year set forth above, the Target EBDITA for
that year and all subsequent years shall be reduced by the amount of
the projected earnings attributable to such subsidiary or division for
the year of the sale and all subsequent years.
(2) Percentage of shares released from Repurchase Option.
Examples
If EBDITA for the fiscal year ended May 31, 1996 is $6.0 million,
Founder will
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<PAGE> 13
vest 25% of his Shares (with a $500,000 carryforward to be applied to EBDITA
for the following year). If EBDITA for such year is between $4,950,000 and
$5,499,999, Founder will vest 22.5% (25% x 90%) of his Shares. If EBDITA for
such fiscal year is between $4,400,000 and $4,949,999, Founder will vest 12.5%
(25% x 50%) of his Shares. If EBDITA for such year is $4,399,999 or less,
Founder will not vest as to any of his Shares for such year.
2. Additional Vesting Provisions. Notwithstanding the foregoing
performance based vesting schedule set forth in Section 1 above, the optionee's
options shall vest and become exercisable in full in accordance with the
following provisions:
(i) If the optionee is employed by the Company on the
date five (5) years after the Vesting Commencement Date (the "Five Year Date"),
the optionee's options shall vest in full on the Five Year Date; and
(ii) Optionee's options shall vest in full in connection
with a Change in Control (as defined in Section 12 of Part II of this Stock
Option Agreement).
Termination Period:
This Option may be exercised for thirty (30) days after termination of
your employment or consulting relationship, or such longer period as may be
applicable upon death or Disability of Optionee as provided in Sections 7 and 8
of the Agreement. In the event of the Optionee's change in status from Employee
to Consultant or Consultant to Employee, this Option Agreement shall remain in
effect. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. MileStone Healthcare, Inc., a Delaware
corporation (the "Company"), hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase the total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions of the 1996
Stock Option Plan (the "Plan") adopted by the Company, which is incorporated
herein by reference. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, disability or other
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<PAGE> 14
termination of the employment or consulting relationship, this Option shall be
exercisable in accordance with the applicable provisions of the Plan and this
Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit 1) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may
be required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such Issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
2.
4. Method of Payment. Payment of the Exercise Price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
(d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the Exercise Price.
5. Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G.") as promulgated by the Federal Reserve Board.
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<PAGE> 15
6. Termination of Relationship. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the
Notice of Grant. To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, or if Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of
Section 6 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
Disability, Optionee may, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination.
8. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option
at the date of death.
9. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options shall apply to this Option.
11. Tax Consequences. Set forth below is a brief summary as of
the date of this Option of some of the federal tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price will be treated as an adjustment
to the alternative minimum tax for federal tax purposes and may subject the
Optionee to the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. There may be a regular
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the
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<PAGE> 16
Exercise Price. If Optionee is an Employee or a former Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal
to a percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and state income tax purposes.
In the case of an ISO, if Shares transferred pursuant to the Option are held
for at least one year after exercise and are disposed of at least two years
after the Date of Grant, any gain realized on disposition of the Shares will
also be treated as long-term capital gain for federal income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to
the extent of the difference between the Exercise Price and the lesser of (1)
the Fair Market Value of the Shares on the date of exercise, or (2) the sale
price of the Shares.
(d) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
12. Sale or Merger. Subject to the following paragraph, in the
event of a merger of the Company with or into another corporation, the Option
shall be assumed or an equivalent option shall be substituted by such successor
corporation or a Parent or Subsidiary of such successor corporation. If, in
such event, the Option is not assumed or substituted, the Option shall
terminate as of the date of the closing of the merger. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger, the
option confers the right to purchase, for each Share of Optionee Stock subject
to the Option immediately prior to the merger, the consideration (whether
stock, cash, or other securities or property) received in the merger by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option for each Share
of Optioned Stock subject to the Option to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
Notwithstanding the above, in the event of a merger of the Company
with or into another corporation, or the sale of all or substantially all of
the assets of the Company, or any other corporate reorganization, in which
consolidation, merger, sale of assets or reorganization the stockholders of the
Company immediately prior to such transaction will not hold (by virtue of the
securities issued in such transaction) at least fifty percent (50%) of
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<PAGE> 17
the voting power of the surviving, continuing or purchasing entity (a "Change
in Control"), the Board shall provide for the Optionee to have the right to
exercise such Option as to all of the Optionee Stock, including Shares as to
which such Option would not otherwise be exercisable. The Board shall notify
the Optionee at least fifteen (15) days prior to a Change in Control, which
notification shall include a statement as to whether or not such option shall
be assumed or substituted.
13. Entire Agreement: Governing Law. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by Texas law
except for that body of law pertaining to conflict of laws.
MILESTONE HEALTHCARE, INC.
a Delaware corporation
By:
------------------------------
-7-
<PAGE> 18
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated:
---------------------------- --------------------------------
Optionee
Residence Address:
--------------------------------
--------------------------------
--------------------------------
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<PAGE> 19
EXHIBIT 1
1996 STOCK OPTION PLAN
EXERCISE NOTICE
MileStone Healthcare, Inc.
2501 Cedar Springs Road
Suite 600 LB 15
Dallas, Texas 75201
Attention: Secretary
1. Exercise of Option. Effective as of today, ____________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase ___ shares of the Common Stock (the "Shares") of MileStone Healthcare,
Inc. (the "Company") under and pursuant to the 1996 Stock Option Plan, as
amended (the "Plan") and the [ ] Incentive/[ ] Nonstatutory Stock Option
Agreement dated __________, 19_ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a stockholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have
no further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the Company for
transfer or cancellation.
4. Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with
any tax consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
<PAGE> 20
5. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by the Company or
by state or federal securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RIGHTS AND RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREEMENT AND A
REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF MAY 31, 1995, COPIES
OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
6. Successors and Assigns. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
7. Interpretation. Any dispute regarding the interpretation of
this Agreement , shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such
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<PAGE> 21
dispute at its next regular meeting. The resolution of such a dispute by the
Board or committee shall be final and binding on the Company and on Optionee.
8. Governing Law: Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
9. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified mail, with postage and
fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.
10. Further Instruments. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
11. Delivery of Payment. Optionee herewith delivers to the
Company the full Exercise Price for the Shares.
12. Entire Agreement. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Option Agreement and the Investment Representation Statement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Purchaser with respect to the subject matter hereof, and may not be
modified adversely to the Purchaser's interest except by means of a writing
signed by the Company and Purchaser.
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<PAGE> 22
Submitted by: Accepted by:
OPTIONEE: MILESTONE HEALTHCARE, INC.
By:
-----------------------------------
Its:
----------------------------------
- ------------------------------------
(Signature)
Address: Address:
- ------- -------
2501 Cedar Springs Road
- ------------------------------------ Suite 600 LB 15
Dallas, Texas 75201
- ------------------------------------
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<PAGE> 23
EXHIBIT 2
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : MILESTONE HEALTHCARE, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things the bona fide
nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequent registered under the Securities
Act or an exemption may from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the Securities. Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, and any other legend
required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will
be exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701 may be resold, subject to the satisfaction
<PAGE> 24
of certain of the conditions specified by Rule 144, including: (1) the resale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, (3) the amount of
Securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (4) the timely filing of a Form 144,
if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the Securities Act, Optionee
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a
registration statement of the Company filed under the Securities Act; provided,
however, that such restriction shall only apply to the first registration
statement of the Company to become effective under the Securities Act which
include securities to be sold on behalf of the Company to the public in an
under written public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
Signature of Optionee:
-----------------------------------
Date: 19
-----------------------, ----
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<PAGE> 1
EXHIBIT 4.11
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RIGHTS
AND RESTRICTIONS CONTAINED IN A SERIES A PREFERRED STOCK PURCHASE AGREEMENT, A
STOCKHOLDERS AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF
MAY 31, 1995, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
FORM OF WARRANT
--------------------------------------
and
--------------------------------------
WARRANT TO PURCHASE ______________ SHARES
OF SERIES A PREFERRED STOCK
OF MHI ACQUISITION, INC.
THIS CERTIFIES THAT, for value received, Investor is entitled to
purchase __________ shares of the fully paid and nonassessable Series A
Preferred Stock (as adjusted pursuant to Section 3 hereof, the "Shares") of MHI
Acquisition, Inc., a Delaware corporation with its principal executive office
at 2501 Cedar Springs Road, Suite 600, LB15, Dallas, Texas 75201 (the
"Company"), at the price of $1.00 per Share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 3
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, (a)
the term "Series Preferred" shall mean ___________ shares of the Series A
Preferred Stock owned by the Seller, or any stock, other securities, money and
property receivable into or for which such Series A Preferred Stock may
hereafter be converted or exchanged as the case may be, as provided for in the
Company's Restated Certificate of Incorporation, a copy of which is annexed
hereto as Exhibit B, or as provided in Sections 3(a), 3(b) or 3(c) hereof, and
(b) the term "Date of Grant" shall mean the Date of Grant listed on the
signature page hereof.
1. Term. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through the earlier of (i) 5:00 p.m., New York City time, on
November 30, 2000 and (ii) upon the closing of an Initial Public Offering of
the Company's Common Stock effected pursuant to a Registration Statement on
Form S-1 (or its successor) filed under
<PAGE> 2
the Securities Act of 1933, as amended (the "Act") covering the offer and sale
of Class A Common Stock for the account of the Company to the public at a price
per share (prior to underwriting commissions and offering expenses) of not less
than $3.00 per share (appropriately adjusted for any recapitalizations, stock
combinations, stock splits, stock dividends and the like) and an aggregate
offering price to the public of not less than $10,000,000 (a "Qualified IPO").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the address of Seller set forth below or to
such other address as may be designated by Seller to Investor pursuant to
Section 10 hereof and by the payment to Seller by certified or bank check, or
by wire transfer to an account designated by Seller (a "Wire Transfer") of an
amount equal to the then applicable Warrant Price multiplied by the number of
Shares then being purchased, or (b) exercise of the right provided for in
Section 8 hereof. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
fifteen (15) days after such exercise and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised
shall also be issued to the holder hereof as soon as possible and in any event
within such fifteen-day period.
3. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time in accordance
with the Company's Restated Articles of Incorporation as provided for therein.
In addition, the number and kinds of securities purchasable upon the exercise
of this Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the occurrence of certain events as follows:
(a) Reclassification or Merger. In case of any
reclassification or change of securities of the class transferable upon
exercise of this Warrant (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination as provided for in the Company's Restated Articles
of Incorporation), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities transferable upon exercise
of this Warrant), or in case of any sale of all or substantially all of the
assets of the Company, Seller, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver to the holder of this Warrant a
new Warrant (in form and substance satisfactory to the holder of this Warrant),
so that the holder of this Warrant shall have the right to receive, at a total
purchase price not to exceed that payable upon exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Series Preferred
theretofore transferable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property received or receivable
upon such reclassification, change or merger by a holder of the number of
shares of Series Preferred then purchasable under this Warrant. Such new
Warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3.
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<PAGE> 3
(b) Subdivision or Combination of Shares. If the Company
at any time while this Warrant remains outstanding and unexpired shall
subdivide (by stock split, stock dividend or otherwise) or combine (by
reclassification, reverse stock split or otherwise) its outstanding shares of
Series Preferred, the Warrant Price shall be proportionately decreased in the
case of a subdivision or increased in the case of a combination, effective at
the close of business on the date the subdivision or combination becomes
effective.
(c) Stock Dividends and Other Distributions. If the
Company at any time while this Warrant is outstanding and unexpired shall (i)
pay a dividend with respect to the Series Preferred payable in Series
Preferred, or (ii) make any other distribution with respect to the Series
Preferred (except any distribution specifically provided for in Sections 3(a)
and 3(b)), then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Series Preferred
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Series Preferred
outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment
in the Warrant Price as provided for in Section 3(a), 3(b) or 3(c) hereof, the
number of shares of Series Preferred purchasable hereunder shall be adjusted,
to the nearest whole share, to the product obtained by multiplying the number
of Shares purchasable immediately prior to such adjustment in the Warrant Price
by a fraction, the numerator of which shall be the Warrant Price immediately
prior to such adjustment and the denominator of which shall be the Warrant
Price immediately thereafter.
4. Notice of Adjustments. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to Section 3
(a), 3(b) or 3(c) hereof, the Seller shall promptly notify the holders hereof
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Warrant
Price and the number of Shares purchasable hereunder after giving effect to
such adjustment, and shall cause copies of such notification to be given
pursuant to Section 10 hereof, by first class mail, postage prepaid to the
holder of this Warrant. In addition, whenever the conversion price or
conversion ratio of the Series Preferred shall be adjusted, Seller shall
promptly notify the holder in reasonable detail, of the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the conversion price or ratio of the Series Preferred after
giving effect to such adjustment, and shall cause copies of such notification
to be given pursuant to Section 10 hereof, by first class mail, postage prepaid
to the holder of this Warrant.
5. Fractional Shares. No fractional shares of Series Preferred
will be transferred in connection with any exercise hereunder, but in lieu of
such fractional shares, Seller shall make a cash payment therefor based on the
fair market value of the Series Preferred on the date of exercise as reasonably
determined in good faith by it.
-3-
<PAGE> 4
6. Compliance with Act; Disposition of Warrant or Shares of Series
Preferred.
(a) Compliance with Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be transferred to it upon exercise hereof and any Common Stock issued upon
conversion thereof, are being acquired for investment and that such holder will
not offer, sell or otherwise dispose of this Warrant, or any shares of Series
Preferred to be transferred upon exercise hereof or any Common Stock issued
upon conversion thereof, except under circumstances which will not result in a
violation of the Act or any applicable state securities laws. Upon exercise of
this Warrant, unless the Shares being acquired are registered under the Act and
any applicable state securities laws or an exemption from such registration is
available, the holder hereof shall confirm in writing to Seller and to the
Company that the shares of Series Preferred so purchased (and any shares of
Common Stock issued upon conversion thereof) are being acquired for investment
and not with a view toward distribution or resale in violation of the Act and
shall confirm such other matters related thereto as may be reasonably requested
by the Seller or the Company. This Warrant and all shares of Series Preferred
transferred upon exercise of this Warrant and all shares of Common Stock issued
upon conversion thereof (unless registered under the Act and any applicable
state securities laws or saleable without restriction as to volume under Rule
144 promulgated under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RIGHTS
AND RESTRICTIONS CONTAINED IN A SERIES A PREFERRED STOCK PURCHASE AGREEMENT, A
STOCKHOLDERS AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF
MAY 31, 1995, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
Said legend (or portions thereof, as applicable) shall be removed by
the Company, upon the request of a holder, at such time as the restrictions on
the transfer of the applicable security shall have terminated. In addition, in
connection with the issuance of this Warrant, the holder hereof specifically
represents to the Seller by acceptance of this Warrant as follows:
(1) Holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant.
Holder is acquiring this Warrant for its own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof in violation of the Act.
-4-
<PAGE> 5
(2) Holder understands that neither this Warrant nor the shares to
be received hereunder have been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the holder's investment intent as expressed herein.
(3) Holder further understands that this Warrant and the Shares to
be received hereunder must be held indefinitely unless subsequently registered
under the Act and qualified under any applicable state securities laws, or
unless exemptions from registration and qualification are otherwise available.
Each holder is aware of the provisions of Rule 144, promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to
any offer, sale or other disposition of this Warrant or any shares of Series
Preferred acquired pursuant to the exercise of this Warrant prior to
registration of such Warrant or shares, each holder hereof agrees to give
written notice to the Seller and the Company prior thereto, describing briefly
the manner thereof, together with a written opinion of such holder's counsel,
or other evidence, if reasonably requested by the Seller or the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal
or state securities law then in effect) of this Warrant or such shares of
Series Preferred and indicating whether or not under the Act certificates for
this Warrant or such shares of Series Preferred to be sold or otherwise
disposed of require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with such law. Unless the Seller
and the Company, within fifteen (15) days after receipt of the written notice,
shall each notify a holder that a determination has been made pursuant to this
Section 6(b) that the opinion of counsel for the holder or other evidence is
not reasonably satisfactory to the Seller or the Company, such holder may sell
or otherwise dispose of this Warrant or such shares of Series Preferred, all in
accordance with the terms of the notice delivered to the Seller and the
Company. Notwithstanding the foregoing, this Warrant or such shares of Series
Preferred may, as to such federal laws, be offered, sold or otherwise disposed
of in accordance with Rule 144 or 144A under the Act, provided that the Seller
and the Company shall have been furnished with such information as the Seller
and the Company may reasonably request to provide a reasonable assurance that
the provisions of Rule 144 or 144A have been satisfied. Each certificate
representing this Warrant or the shares of Series Preferred thus transferred
(except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The
Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Applicability of Restrictions. Neither any
restrictions of any legend described in this Warrant nor the requirements of
Section 6(b) above shall apply to any transfer of, or grant of a security
interest in, this Warrant (or the Series Preferred) or any part hereof (i) to a
partner of the holder if the holder is a partnership, (ii) to a partnership of
which the holder is a partner, or (iii) to any affiliate of the holder, or (iv)
to any Additional Permitted Assignee, as such term is defined in that certain
agreement, dated as of April 30, 1996 among the holder, the holders of certain
other Warrants issued by the Seller, and the Company; provided, however, in any
such transfer, if applicable, the transferee shall on the Seller's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto.
-5-
<PAGE> 6
(d) The rights of the holder of this Warrant in respect
of any disposition of Warrants or Shares as set forth in paragraphs a) and b)
above, shall be subject to the MHI Acquisition, Inc. Stockholders' Agreement
and to the Series A Preferred Stock Purchase Agreement, both dated May 31, 1995
and in particular, to the respective provisions relating to the transfer of
securities of the Company set forth therein. In the event of any conflict
between such Stockholders' Agreement or such Series A Preferred Stock Purchase
Agreement and the provisions of paragraphs a) and b) above, the Stockholders'
Agreement or the Series A Stock Purchase Agreement as the case may be, shall
prevail.
7. Rights as Shareholders; Information. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Series Preferred or any other securities of the Company which may
at any time be transferable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Warrant Shares purchasable upon the exercise hereof
shall have been transferred, as provided herein.
8. Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without
limiting the rights of the holder under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion hereof (the
"Conversion Right") into shares of Series Preferred as provided in this Section
8 at any time or from time to time during the term of this Warrant. Upon
exercise of the Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the Sellers shall
deliver to the holder (without payment by the holder of any exercise price or
any cash or other consideration) (X) that number of shares of fully paid and
nonassessable Series Preferred equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the
aggregate fair market value of the Converted Warrant Shares transferable upon
exercise of this Warrant (or the specified portion hereof) on the Conversion
Date (as herein defined) by (Y) the fair market value of one share of Series
Preferred on the Conversion Date (as herein defined).
Expressed as a formula, such conversion (assuming the Series Preferred
has been automatically converted into Common Stock) shall be computed as
follows:
-6-
<PAGE> 7
X = B - A
--------
Y
Where: X = the number of shares of Series Preferred that may
be transferred to holder
Y = the fair market value of one share of
Series Preferred
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair market
value x Converted Warrant Shares)
No fractional shares shall be transferable upon exercise of the
Conversion Right, and, if the number of shares to be transferred determined in
accordance with the foregoing formula is other than a whole number, the Seller
shall pay to the holder an amount in cash equal to the fair market value of the
resulting fractional share on the Conversion Date (as hereinafter defined).
For purposes of Section 8 of this Warrant, shares transferred pursuant to the
Conversion Right shall be treated as if they were transferred upon the exercise
of this Warrant.
(b) Method of Exercise. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal
office of Seller together with a written statement specifying that the holder
thereby intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
Section 8(a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by Seller of
this Warrant together with the aforesaid written statement, or on such later
date as is specified therein (the "Conversion Date"), and, at the election of
the holder hereof, may be made contingent upon the closing of the sale of the
Company's Common Stock to the public in a public offering pursuant to a
Registration Statement under the Act (a "Public Offering") the merger of the
Company with another corporation or the sale of all or substantially all of the
assets of the Company, as the case may be. Certificates for the shares
transferred upon exercise of the Conversion Right and, if applicable, a new
warrant evidencing the balance of the shares remaining subject to this Warrant,
shall be issued as of the Conversion Date and shall be delivered to the holder
within thirty (30) days following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of
this Section 8, "fair market value" of a share of Series Preferred as of a
particular conversion date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in
connection with and contingent up- on a Public Offering, and if the Company's
Registration Statement relating to such Public Offering
-7-
<PAGE> 8
("Registration Statement") has been declared effective by the SEC, then the
initial "Price to Public" specified in the final prospectus with respect to
such offering.
(ii) If the Conversion Right is not exercised in
connection with a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market
value of the Series Preferred shall be deemed to be the average of the
closing prices of the Series Preferred on such exchange over the
fifteen (15) day period ending five (5) business days prior to the
Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Series Preferred
multiplied by the number of shares of Series Preferred into which each
share of Series Preferred is then convertible;
(B) If traded over-the-counter, the fair market value of
the Series Preferred shall be deemed to be the average of the closing
bid prices of the Series Preferred over the fifteen (15) day period
ending five (5) business days prior to the Determination Date; and
(C) If there is no public market for the Series
Preferred, then fair market value shall be determined by mutual
agreement of the holder of this Warrant and the Seller, provided
however, that failing any such agreement Purchaser shall remain
entitled to exercise this Warrant by payment of the exercise price in
the manner provided in Section 2 above and Purchaser shall be entitled
to cause such exercise to be deemed to have occurred as of the
Determination Date.
9. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is sought.
10. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Seller shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address or to the Seller at the
respective addresses indicated therefor on the signature page of this Warrant.
11. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
12. Governing Law. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of New York.
13. Remedies. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holder
hereof (in the case of a breach by the Seller), or the Seller (in the case of a
breach by the holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited
to, an action for damages as a result of any
-8-
<PAGE> 9
such breach and/or an action for specific performance of any such covenant or
agreement contained in this Warrant.
14. Severability. The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
15. Entire Agreement; Modification. This Warrant constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and undertakings of the parties, whether oral or written, with respect to such
subject matter.
-9-
<PAGE> 10
---------------------------------
By
------------------------------
Title
---------------------------
Address:
------------------------
------------------------
Grant in favor of:
-------------------
Date of Grant: April 30 , 1996
Number of Series Preferred subject to Warrant:
---------
-10-
<PAGE> 11
WARRANT
EXHIBIT A
NOTICE OF EXERCISE
To: Seller
1. The undersigned hereby:
[ ] elects to purchase ____ shares of Series A Preferred
Stock of MHI Acquisition, Inc., pursuant to the terms
of the attached Warrant, and tenders herewith payment
of the purchase price of such shares in full, or
[ ] elects to exercise its net issuance rights pursuant
to Section 8 of the attached Warrant with respect to
___ shares of Series A Preferred Stock.
2. Please deliver or arrange for transfer of the shares and the
delivery of a certificate or certificates representing said shares in the name
of the undersigned or in such other name or names as are specified below:
------------------------------------------
(Name)
------------------------------------------
------------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws. The undersigned
re-affirms the continued accuracy of the undersigned's representation and
warranties set forth in Sections 3(b) and 3(c) of the Note Purchase and Sale
Agreement dated as of April 30, 1996 and of Section 6 of the Warrant which is
being exercised hereby.
--------------------------------------
(Signature)
- ----------------------------------
(Date)
<PAGE> 12
WARRANT
EXHIBIT A-1
NOTICE OF EXERCISE
To: Seller
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S______, filed ______________________________,
19____, the undersigned hereby:
[ ] elects to purchase ____ shares of Series A Preferred
Stock of the Company (or such lesser number of shares
as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached
Warrant, or
[ ] elects to exercise its net issuance rights pursuant
to Section 8 of the attached Warrant with respect to
___ shares of Series A Preferred Stock.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such ____________ shares.
The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities law. The undersigned
re-affirms the continued accuracy of the undersigned's representation and
warranties set forth in Sections 3(b) and 3(c) of the Note Purchase and Sale
Agreement dated as of April 30, 1996 and of Section 6 of the Warrant which is
being exercised hereby.
--------------------------------------
(Signature)
- ----------------------------------
(Date)
<PAGE> 1
EXHIBIT 4.12
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of July 26 , 1996
("Merger Agreement"), between MileStone Healthcare, Inc., a Delaware
corporation ("MileStone" or the "Surviving Corporation"), and MHI Acquisition,
Inc., a Delaware corporation ("MHI"; MileStone and MHI being hereinafter
collectively referred to as the "Constituent Corporations").
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
covenants and agreements contained herein, the Constituent Corporations hereby
agree as follows.
ARTICLE I
THE MERGER
1.1 MERGER OF MHI WITH AND INTO MILESTONE.
(a) Agreement to Merge MHI with and into MileStone.
Subject to the terms of this Merger Agreement, MHI shall be merged with and
into MileStone (the "Merger").
(b) Effective Time of the Merger. The Merger shall
become effective at such time (the "Effective Time of the Merger") as a
Certificate of Merger effecting the merger of MHI into MileStone is filed with
the Secretary of State of the State of Delaware pursuant to Section 252 of the
Delaware General Corporation Law.
(c) Surviving Corporation. At the Effective Time of the
Merger, MHI shall be merged into MileStone and the separate corporate existence
of MHI shall thereupon cease. MileStone shall be the surviving corporation in
the Merger and the separate corporate existence of MileStone, with all of its
purposes, objects, rights, privileges, powers, immunities and franchises, shall
continue unaffected and unimpaired by the Merger.
1.2 EFFECT OF THE MERGER; ADDITIONAL ACTIONS.
(a) Effects. The Merger shall have the effects set forth
in Section 259 of the Delaware General Corporation Law. In addition, at the
Effective Time of the Merger, MileStone shall thenceforth be responsible and
liable for all the liabilities and obligations of MHI and all debts,
liabilities and duties of MHI shall attach to MileStone, and may be enforced
against it to the same extent as if said debts, liabilities and duties had been
incurred or contracted by it.
(b) Additional Actions. If, at any time after the
Effective Time of the Merger, the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable (i) to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either Constituent
Corporation acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger or (ii) to otherwise carry out the
purposes of this Merger Agreement, each Constituent Corporation and its
officers and directors shall be deemed to have granted to the Surviving
Corporation an
<PAGE> 2
irrevocable power of attorney to execute and deliver all such deeds, bills of
sale, assignments and assurances and to take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation and otherwise to carry out the purposes of this
Merger Agreement; and the officers and directors of the Surviving Corporation
are fully authorized in the name of each Constituent Corporation or otherwise
to take any and all such actions.
ARTICLE II
THE CONSTITUENT CORPORATIONS
2.1 ORGANIZATION OF MILESTONE.
(a) Incorporation. MileStone was incorporated under the
laws of the State of Delaware on March 6, 1991.
(b) Authorized Stock. MileStone is authorized to issue
an aggregate of 100,000 shares of Common Stock, $.01 par value per share
("MileStone Common Stock").
(c) Outstanding Stock. On the date hereof, 100,000
shares of MileStone Common Stock were outstanding, all of which are held by
MHI.
2.2 ORGANIZATION OF MHI.
(a) Incorporation. MHI was incorporated under the laws
of the State of Delaware on February 8, 1995.
(b) Authorized Stock. MHI is authorized to issue an
aggregate of 30,000,000 shares, consisting of 20,000,000 shares of common
stock, par value $.001 per share (the "Common Stock"), 10,000,000 of which is
designated Class A Common Stock (the "Class A Common") and 10,000,000 of which
is designated Class B Common Stock (the "Class B Common") and 10,000,000 shares
of preferred stock, par value $.001 per share (the "Preferred Stock"),
5,000,000 of which is designated Series A Preferred Stock (the "Series A
Preferred"). The Common Stock and Preferred Stock are collectively referred to
herein as "MHI Stock."
2
<PAGE> 3
(c) Outstanding Stock. On the date hereof, 5,413,799
shares of MHI Stock are outstanding, all of which are held by the following in
the amounts indicated:
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
Charles L. Allen 200,000 Class A Common
535,714 Series A Preferred
Roy W. Griffitts, Jr. 107,692 Class A Common
392,857 Series A Preferred
William A. Brosius 106,107 Class A Common
71,429 Series A Preferred
Morgan Stanley Venture Capital Fund II, L.P. 2,651,335 Series A Preferred
Morgan Stanley Venture Capital Fund II, C.V. 660,546 Series A Preferred
Morgan Stanley Venture Investors, L.P. 688,119 Series A Preferred
Internationale Nederlanden (U.S.)
Capital Corporation 405,405 Class B Common*
</TABLE>
* Issuable upon exercise of a warrant dated May 31, 1995.
The foregoing individuals and entities are collectively referred to herein as
the "MHI Stockholders."
2.3 MILESTONE STOCKHOLDER APPROVAL. MHI, the sole stockholder of
MileStone, as the holder of the number of shares of Milestone that would be
necessary to authorize or take such action at a stockholder meeting, duly
approved and adopted this Merger Agreement without a meeting by written consent
given by it on July ___, 1996, in accordance with the provisions of Section 251
of the Delaware General Corporation Law.
2.4 MHI STOCKHOLDER APPROVAL. The MHI Stockholders, as the
holders of the number of shares of MHI that would be necessary to authorize or
take such action at a stockholders meeting, duly approved and adopted this
Merger Agreement without a meeting by written consent give by it on July ___,
1996, in accordance with the provisions of Section 251 of the Delaware General
Corporation Law.
ARTICLE III
CERTIFICATE OF INCORPORATION, BYLAWS AND
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. The
Certificate of Incorporation of MHI in effect immediately prior to the
Effective Time of the Merger shall be the Certificate of Incorporation of the
Surviving Corporation unless and until amended as provided by law and such
Certificate of Incorporation.
3.2 BYLAWS OF SURVIVING CORPORATION. The Bylaws of MHI in effect
immediately prior to the Effective Time of the Merger shall be the Bylaws of
the Surviving Corporation
3
<PAGE> 4
unless and until amended or repealed as provided by applicable law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
3.3 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers
and directors of MileStone immediately prior to the Effective Time of the
Merger shall be the officers and directors of Surviving Corporation, until
their successors are duly appointed and qualified.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
As of the Effective Time of the Merger, by virtue of the Merger and
without any action on the part of MileStone, MHI or the MHI Stockholders, all
shares of MileStone Common Stock shall be cancelled and each share of MHI Stock
issued and outstanding immediately prior to the Effective Time of the Merger
shall become 0.735 shares of the same respective type, class or series of the
capital stock of the Surviving Corporation.
ARTICLE V
TERMINATION
5.1 TERMINATION BY MUTUAL AGREEMENT. Notwithstanding the approval
of this Merger Agreement by the sole stockholder of MileStone and the MHI
Stockholders, this Merger Agreement may be terminated at any time prior to the
Effective Time of the Merger by the mutual written consent of MileStone and
MHI.
5.2 EFFECTS OF TERMINATION. In the event of the termination of
this Merger Agreement, this Merger Agreement shall forthwith become void and
there shall be no liability on the part of either MileStone or MHI or their
respective officers or directors.
ARTICLE VI
GENERAL PROVISIONS
6.1 AMENDMENT. This Merger Agreement may be amended by the
parties hereto any time before or after approval hereof by the sole stockholder
of MileStone and the MHI Stockholders but, after such approval, no amendment
shall be made which by law requires the further approval of such stockholders
without obtaining such approval. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
6.2 COUNTERPARTS. This Merger Agreement may be executed in one or
more counterparts and when so executed, each counterpart shall be deemed to be
an original, and said counterparts together shall constitute one and the same
instrument.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Merger
Agreement as of the date first written above.
MHI ACQUISITION, INC.
By: /s/ William A. Brosius
-----------------------------------
Name: William A. Brosius
Title: Secretary
MILESTONE HEALTHCARE, INC.
By: /s/ William A. Brosius
-----------------------------------
Name: William A. Brosius
Title: Secretary
5
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EXHIBIT 10.1
EXECUTION COPY
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U.S. $15,000,000
CREDIT AGREEMENT
DATED AS OF MAY 31, 1995
AMONG
MHI ACQUISITION CORPORATION I
(to be merged with and into Milestone Healthcare, Inc.
with Milestone Healthcare, Inc. as the surviving corporation)
AS THE BORROWER,
VARIOUS LENDERS
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION,
AS THE AGENT FOR THE LENDERS
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.4. Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 2. COMMITMENTS
2.1. Term Loan and Revolving Loan Commitment . . . . . . . . . . . . . . . . . . . . 32
2.1.1. Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.1.2. Revolving Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.1.3. Agent and Lenders Not Required to Extend Credit under
Revolving Credit Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.2. Changes in Advance Ratios; Establishment of Reserves . . . . . . . . . . . . . 33
2.2.1. Advance Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.2.2. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.3. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.4. Increased Costs; Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 3. LOANS AND NOTES
3.1. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.2. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.3. Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3.2 Prepayment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3.3. Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.3.4. Revolving Loans on Borrower's Behalf . . . . . . . . . . . . . . . . . . . . . 40
3.4. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.4.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.4.2. Continuation and Conversion Elections . . . . . . . . . . . . . . . . . . . . . 41
3.4.3. Post-Default Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.4.4. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.4.5. Rate Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.4.6. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.4.7. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.4.8. Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.4.9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.6. Payments, Interest Rate Computations, Other Computations, etc. . . . . . . . . 45
3.7. Proration of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.8. Set off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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ARTICLE 4. CONDITIONS TO LOANS
4.1. Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.1.1. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.1.2. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.1.3. Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.1.4. Capital Contribution, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.1.5. Release of Liens on Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.1.6. No Contest, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.1.7. Certificate as to Completed Conditions, Warranties,
No Default, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.1.8. Documents Relating to Equity Investments in Holding
Company, Subordinated Indebtedness, Management Incentive
Plan, Founder Performance Stock Purchase Agreements,
and Stockholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.1.9. Compliance with Requirements of Law . . . . . . . . . . . . . . . . . . . . . . 50
4.1.10. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.1.11. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.1.12. Holding Company Guaranty and Subsidiary Guaranty . . . . . . . . . . . . . . . 50
4.1.13. Security Documents and Perfection . . . . . . . . . . . . . . . . . . . . . . . 50
4.1.14. Employment Agreements; Compensation . . . . . . . . . . . . . . . . . . . . . . 51
4.1.15. Pension and Welfare Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 51
4.1.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.1.17. Key Man Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.1.18. Warrant Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.1.19. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.1.20. Solvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.1.21. Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.1.22. Management Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.1.23. Stockholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.1.24. Other Documents, Certificates, Etc. . . . . . . . . . . . . . . . . . . . . . . 53
4.2. All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.2.1. Compliance with Warranties, No Default, etc. . . . . . . . . . . . . . . . . . 53
4.2.2. Borrowing Request, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.2.3. Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2.4. Margin Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2.5. Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2.6. Change in Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 5. WARRANTIES, ETC.
5 Warranties, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.1. Organization, Power, Authority, etc. . . . . . . . . . . . . . . . . . . . . . 55
5.2. Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.3. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.4. Financial Information; Solvency . . . . . . . . . . . . . . . . . . . . . . . . 56
5.5. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.6. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.7. Litigation; Legislation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.8. Regulations, G, T, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.9. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
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5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.12. Labor Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.13. Ownership of Properties; Collateral . . . . . . . . . . . . . . . . . . . . . . 61
5.14. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.15. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.17. Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.19. No Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.20. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.21. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.22. Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.23. Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.24. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.25. Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.26. Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.27. Medicare, Medicaid, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 6. COVENANTS
6.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.1.1. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.1.2. Maintenance of Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . 67
6.1.3. Foreign Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.1.4. Payment of Taxes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.1.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.1.6. Notice of Default, Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . 68
6.1.7. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.1.8. Maintenance of Properties, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 70
6.1.9. Maintenance of Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . 70
6.1.10. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.1.11. Environmental Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1.12. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1.13. Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1.14. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1.15. Merger of Milestone Management into Milestone . . . . . . . . . . . . . . . . . 71
6.1.16. Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.2.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.2.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.2.5. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.2.6. Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.2.7. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
6.2.8. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.2.9. Take or Pay Contracts; Sale/Leasebacks . . . . . . . . . . . . . . . . . . . . 79
6.2.10. Consolidation, Merger, Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . 80
6.2.11. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6.2.12. Modification of Organic Documents, etc. . . . . . . . . . . . . . . . . . . . . 81
6.2.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.2.14. Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.2.15. Limitations on Issuance of Stock . . . . . . . . . . . . . . . . . . . . . . . 82
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6.2.16. Change in Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.2.17. Change in Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.2.18. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.2.19. Modification of Certain Documents . . . . . . . . . . . . . . . . . . . . . . . 82
6.2.20. Prohibition on Voluntary Prepayments of Subordinated
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.2.21. Limitation on Restrictions on Subsidiary Dividends . . . . . . . . . . . . . . 83
ARTICLE 7. EVENTS OF DEFAULT
7.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.2. Non-Performance of Certain Covenants . . . . . . . . . . . . . . . . . . . . . 84
7.1.3. Defaults Under Other Loan Documents; Non-Performance of
Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.1.4. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.1.5. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.1.6. Default on Other Indebtedness, etc. . . . . . . . . . . . . . . . . . . . . . . 85
7.1.7. Failure of Valid, Perfected Security Interest . . . . . . . . . . . . . . . . . 85
7.1.8. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.1.9. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.1.10. Loss of Permits, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.1.11. Warrant Documents, Subordinated Debt Documents, Etc. . . . . . . . . . . . . . 87
7.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . 87
ARTICLE 8. THE AGENT
8.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.5. Loans by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE 9. MISCELLANEOUS
9.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
9.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
9.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
9.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.8. Counterparts, Effectiveness, etc. . . . . . . . . . . . . . . . . . . . . . . . 95
9.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 95
9.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
9.11. Sale and Transfers, Participations, etc. . . . . . . . . . . . . . . . . . . . 96
9.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.13. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
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9.14. Change in Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . 99
9.15. Waiver of Jury Trial, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.16. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.17 Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.18 Effectiveness of Execution and Delivery by Milestone . . . . . . . . . . . . . 101
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SCHEDULES AND EXHIBITS
Schedule 1 - Disclosure Schedule
Exhibit A-1 - Revolving Note
Exhibit A-2 - Term Note
Exhibit B - Borrowing Base Certificate
Exhibit C - Borrowing Request
Exhibit D - Compliance Certificate
Exhibit E - Continuation/Conversion Notice
Exhibit F - Transfer Supplement
Exhibit G - Assumption Agreement
Exhibit H - Joinder for Interest Rate Contract Counterparty
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 31, 1995, among MHI ACQUISITION
CORPORATION I, a Delaware corporation ("Mergerco I"), Milestone Healthcare,
Inc., a Delaware corporation ("Milestone"), various lenders as are, or may
become, parties hereto (individually a "Lender" and, collectively, the
"Lenders"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation, as Agent for the Lenders.
W I T N E S S E T H:
RECITALS.
A. Pursuant to a Plan and Agreement of Reorganization,
dated as of May 31, 1995, by and among Healthtrust, Inc. - The Hospital
Company, a Delaware corporation, Coralstone Management, Inc., a Delaware
corporation, Milestone, Milestone Healthcare Management, Inc., a Delaware
corporation ("Milestone Management"), MHI Acquisition, Inc., a Delaware
corporation (the "Holding Company"), Mergerco I and MHI Acquisition Corporation
II, a Delaware corporation ("Mergerco II"), the Holding Company has agreed to
acquire Milestone, its Subsidiaries and Milestone Management;
B. In order to effect the Acquisition, Mergerco I will
be merged with and into Milestone, with Milestone surviving such merger and
becoming a wholly-owned Subsidiary of the Holding Company, and Mergerco II
will be merged with and into Milestone Management with Milestone Management
surviving such merger and becoming a wholly-owned Subsidiary of the Holding
Company; immediately thereafter Milestone Management will be merged with and
into Milestone, with Milestone surviving such merger as a wholly-owned
Subsidiary of the Holding Company;
C. Mergerco I desires to obtain from the Lenders (a) a
Revolving Loan Commitment in an aggregate amount of up to Five Million Dollars
($5,000,000), pursuant to which Revolving Loans will be made to the Borrower
from time to time prior to the Revolving Loan Commitment Termination Date and
(b) a Term Loan in an aggregate amount of Ten Million Dollars ($10,000,000)
having a final maturity on May 31, 2000;
D. The Lenders are willing, on the terms and conditions
hereinafter set forth (including, without limitation, Articles 2 and 4), to
extend such Revolving Loan Commitment and to make such Term Loan; and
E. The Revolving Loans and the Term Loan, will be used
in the manner described in Section 3.9 below;
<PAGE> 8
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Defined Terms. The following terms (whether
or not underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms thereof):
"Account" means any "account" (as such term is defined in
Section 9-106 of the UCC) of the Borrower or its Subsidiaries arising from the
sale or lease of goods or providing of services in the ordinary course of
business.
"Account Debtor" means any Person who is or may become
obligated to the Borrower or its Subsidiaries under, with respect to, or on
account of, an Account.
"Accreditation" means certification by the Joint Commission
for Accreditation of Health Care Organizations that a facility or business
fully complies with the standards for the operation of such facility or
business.
"Acquisition" means the acquisition by the Holding Company
from the Sellers of the Milestone Companies in exchange for the payment of the
Purchase Price pursuant to the terms and conditions of the Acquisition
Agreement, including, without limitation, the Merger and the Milestone
Management Merger.
"Acquisition Agreement" means that certain Plan and Agreement
of Reorganization, dated as of May 31, 1995, by and among the Sellers,
Milestone, Milestone Management, the Holding Company, Mergerco I and Mergerco
II, as amended, modified or supplemented to the date hereof.
"Additional Management Options" means options to purchase
Stock of the Holding Company granted after the Closing Date to an Eligible
Investor or other key employee of the Holding Company or any of its
Subsidiaries, provided such Stock shall not exceed in the aggregate seven
percent (7%) of the Fully Diluted Stock of the Holding Company.
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power
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<PAGE> 9
(a) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person; or
(b) to direct or cause the direction of the management or
policies of such Person whether by contract or otherwise;
provided that the holding by any Lender of any Warrants (or the Stock into
which such Warrants are converted) shall not be deemed to constitute such
Lender an Affiliate of the Borrower hereunder. Notwithstanding the forgoing,
Morgan Stanley and the Eligible Investors shall be "Affiliates" of the Holding
Company, the Borrower and its Subsidiaries.
"Agent" means ING as agent for the Lenders pursuant hereto, or
such other Person as shall have subsequently been appointed as the successor
agent pursuant to Section 8.4.
"Agreement" means, on any date, this Credit Agreement as
originally in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in
effect.
"Applicable Lending Office" means, with respect to any Lender,
the branch or office of such Lender at which Loans of a certain type are
maintained.
"Approval" means each and every approval, consent, filing and
registration by or with any federal, state or other regulatory authority
(domestic or foreign) necessary to authorize or permit the execution, delivery
or performance of this Agreement, the Notes or any other Loan Document, for the
granting of any security contemplated hereby or thereby, for the validity or
enforceability hereof or thereof, or for the consummation of the transaction
contemplated by the Loan Documents and the Warrant Documents, including,
without limitation, the Acquisition.
"Assumption Agreement" means the Assumption Agreement, dated
as of the Closing Date, executed and delivered by Milestone in favor of the
Agent and the Lenders in the form of Exhibit G attached hereto.
"Authorized Officer" means, relative to any Loan Party those
officers of such Loan Party whose signatures, incumbency and authority shall
have been certified to the Agent and the Lenders pursuant to Section 4.1.1.
"Base Rate Loans" means Loans, or portions thereof, interest
rates on which are determined on the basis of the ING Alternate Base Rate.
"Borrower" means (a) at all times prior to the effective time
of the Merger, Mergerco I, and (b) at all times on and after the effective time
of the Merger, Milestone; provided, however,
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<PAGE> 10
that for purposes of Article 5 of this Agreement references to the Borrower
shall mean (i) at all times prior to the effective time of the Merger and the
Milestone Management Merger, each of Mergerco I, Mergerco II, Milestone and
Milestone Management, (ii) at all times from and after the effective time of
the Merger and the Milestone Management Merger until the effective time of the
merger required under Section 6.1.15, each of Milestone and Milestone
Management, and (iii) from and after the merger required under Section 6.1.15,
Milestone.
"Borrower Pledge Agreement" means the Stock and Notes Pledge
Agreement, dated as of the date hereof, pursuant to which the Borrower will
pledge to the Agent, for itself and the ratable benefit of the Lenders, all of
the issued and outstanding stock of its Subsidiaries and all Subsidiary Notes
issued to it by its Subsidiaries, as security for the Obligations.
"Borrowing" means the Loans or portions thereof of the same
type and, in the case of Eurodollar Loans, having the same Interest Period, in
each case made, converted or continued by the Lenders on the same Business Day
pursuant to the same Borrowing Request or Continuation/Conversion Notice in
accordance with Sections 3.1 or 3.4.2.
"Borrowing Base" means an amount equal to: (a) eighty percent
(80%) of Eligible Accounts, as the percentage set forth in this clause (a) may
be increased or decreased pursuant to Section 2.2.1 hereof, minus (b) reserves
established from time to time pursuant to Section 2.2.2 hereof.
"Borrowing Base Certificate" means a certificate of the chief
executive, accounting or financial Authorized Officer of the Borrower in the
form of Exhibit B attached hereto.
"Borrowing Request" means a loan request and certificate duly
executed by an Authorized Officer of the Borrower in the form of Exhibit C
attached hereto.
"Business Day" means:
(a) any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in New
York, New York or Dallas, Texas; and
(b) relative to the making, continuing, prepaying or
repaying of any Eurodollar Loans, any day on which dealings in Dollars are
carried on in the London interbank market.
"Capitalized Lease Liabilities" means all monetary obligations
of the Borrower and its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, are or would be classified as capitalized
leases.
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<PAGE> 11
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof and backed by
the full faith and credit of the United States of America, or issued by any
state or political subdivision or public instrumentality thereof, (i) which
has a remaining maturity at the time of purchase of not more than one (1) year
or (ii) which is subject to a repurchase agreement with any Lender or any
Eligible Lending Institution exercisable within one (1) year from the time of
purchase so long as such direct obligation remains in the possession of the
Borrower or in the possession of any Lender and (iii) which, in the case of
obligations of any state or political subdivision or public instrumentality
thereof, is rated AA or better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at the time of
purchase of not more than one (1) year, issued by any Lender or by any Eligible
Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation, having a
remaining maturity at the time of purchase of not more than one (1) year;
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least $100,000,000 which
invest only in obligations described above and which shares are rated by
Moody's Investors Service, Inc. or Standard & Poor's Corporation in one of the
two highest rating categories assigned by such agencies for obligations of such
nature; and
(e) any Investments permitted by Borrower's investment
policy, as amended from time to time, provided such investment policy (and any
such amendment thereto) has been approved by the Required Lenders.
"Cash Flow" means, for any period, an amount equal to (without
duplication) the consolidated Net Income of the Borrower and its Subsidiaries,
plus depreciation, amortization of intangible assets and other non-cash charges
of the Borrower and its Subsidiaries, minus non-cash credits and revenues, plus
decreases in the Borrower's and its Subsidiaries' working capital (excluding
changes in cash, Cash Equivalent Investments and current maturities of
Indebtedness), minus increases in the Borrower's and its Subsidiaries' working
capital (excluding changes in cash, Cash Equivalent Investments and current
maturities of Indebtedness).
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniform Services, a program of medical benefits covering retirees and
dependents of a member or a former member of the
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<PAGE> 12
Uniform Services, provided, financed and supervised by the United States
Department of Defense and established by 10 U.S.C. Sections 1071 et seq.
"Change in Control" means (a) the failure of the Holding
Company to own 100% of the issued and outstanding Stock of the Borrower, (b)
the failure of Morgan Stanley and the Eligible Investors to own at least 81.4%
of the issued and outstanding Stock of the Holding Company, other than as a
result of the repurchase of Stock of the Holding Company from the Eligible
Investors pursuant to the Founder Performance Stock Purchase Agreements or the
issuance of Stock of the Holding Company upon exercise of any Additional
Management Options or Warrants, (c) the failure of the Eligible Investors to
own at least 25.9% of the issued and outstanding Stock of the Holding Company,
other than as a result of the repurchase of Stock of the Holding Company
pursuant to the Founder Performance Stock Purchase Agreements or the issuance
of Stock of the Holding Company upon exercise of any Additional Management
Options or Warrants, (d) the failure of Morgan Stanley to own at least 55.5% of
the issued and outstanding Stock of the Holding Company, other than as a result
of the issuance of Stock of the Holding Company upon exercise of any Original
Management Options, Additional Management Options or Warrants, (e) the failure
of Morgan Stanley to own at least 41.8% of the Fully Diluted Stock of the
Holding Company (without taking into account Fully Diluted Stock issuable upon
exercise of any Additional Management Options), (f) the failure of Morgan
Stanley to have the power to elect at least 40% of the Holding Company's board
of directors and to jointly designate, voting as a class together with the
Eligible Investors, at least an additional 20% of the Holding Company's board
of directors, or (g) the failure of any of the registered investment companies
comprising Morgan Stanley to be managed by Morgan Stanley & Co. Incorporated or
one of its wholly-owned Affiliates.
"Charges" means all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) (a)
taxes at the time due and payable and (b) levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the Borrower's and its Subsidiaries' employees, payroll,
income or gross receipts, (iv) the Borrower's and its Subsidiaries' ownership
or use of their assets, or (v) any other aspect of the Borrower's and its
Subsidiaries' business.
"Closing Date" means the date of the initial Borrowing
hereunder.
"Collateral" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by the Borrower or any
Subsidiary in and upon which a Lien is granted to the Agent, for its benefit
and the ratable benefit of the Lenders, under any of the Loan Documents.
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<PAGE> 13
"Commitment" means, collectively, the Lenders' Revolving Loan
Commitments.
"Commitment Letter" means the Commitment Letter dated April
20, 1995 among the Holding Company, Morgan Stanley and ING.
"Commonly Controlled Entity" means an entity or trade or
business, whether or not incorporated, which is from time to time a member of a
controlled group or a group under common control with the Borrower within the
meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the IRC or Section
4001(a)(14) of ERISA.
"Compliance Certificate" means a certificate duly executed by
the chief executive, accounting or financial Authorized Officer of the Borrower
in the form of Exhibit D attached hereto, together with such changes as the
Required Lenders may from time to time reasonably request through the Agent for
purposes of monitoring the Borrower's compliance herewith.
"Consolidated Capital Expenditures" means, for any period,
without duplication, the sum of:
(a) to the extent capitalized pursuant to Borrower's
capitalization policy as in effect on the Closing Date, the gross dollar amount
of additions and capital repairs during such period to property, plant,
equipment and other fixed assets of the Borrower and its Subsidiaries,
including those additions and capital repairs made in the ordinary course of
business,
plus
(b) the aggregate amount of Capitalized Lease Liabilities
incurred during such period by the Borrower and its Subsidiaries.
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate duly executed by the chief
executive, accounting or financial Authorized Officer of the Borrower in the
form of Exhibit E attached hereto.
"Contract" means an agreement or agreements pursuant to or
under which an Account Debtor shall be obligated to pay for services rendered
or merchandise sold to patients of any Person from time to time, or for
services performed under any Management Contract or under any Medicare Provider
Agreement or Medicaid Provider Agreement.
"Contractual Obligation" means, relative to any Person, any
provision of any security issued by such Person or of any Instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound, excluding, in the case of the Holding Company, the Borrower
and any Subsidiary, the Loan Documents and the Warrant Documents.
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<PAGE> 14
"Default" means any Event of Default or any condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto as Schedule 1, as it may be amended, supplemented or otherwise modified
from time to time by the Borrower with the consent of the Required Lenders as
provided in Section 4.2.2.
"Dollar" and the sign "$" mean lawful money of the United
States.
"EBITDA" means, for any period, an amount equal to Net Income
plus (to the extent deducted in determining Net Income) interest expense,
provisions for income taxes, depreciation, amortization of intangible assets
and other non-cash charges, minus (to the extent included in determining Net
Income) non-cash credits and revenues, in each case for the Borrower and its
Subsidiaries on a consolidated basis.
"Eligible Accounts" means the net outstanding balance, less
all finance charges, late fees and other fees which are unearned, of all
Government Accounts, Insurance Accounts and Management Accounts of the Borrower
and its Subsidiaries, provided that no Account shall be deemed eligible if:
(a) any representation or warranty contained in this
Agreement, the Security Agreement or any of the other Loan Documents applicable
either to Accounts in general or to any such specific Account has been breached
in any material respect with respect to such Account;
(b) fifty percent (50%) or more of the outstanding
Accounts from the Account Debtor are ineligible;
(c) the Account Debtor has (i) become insolvent or
generally failed to pay, or admitted in writing its inability to pay, debts as
they become due, (ii) applied for, consented to, or acquiesced in, the
appointment of a trustee, receiver, sequestrator or other custodian for such
Account Debtor or any property thereof or made a general assignment for the
benefit of creditors, (iii) in the absence of such application, consent or
acquiescence, permitted or suffered to exist the appointment of a trustee,
receiver, sequestrator or other custodian for such Account Debtor or for a
substantial part of its property, or (iv) permitted or suffered to exist the
commencement of any bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law or any dissolution,
winding up or liquidation proceeding in respect of such Account Debtor;
(d) such Account is billed on other than standard terms
of payment;
-8-
<PAGE> 15
(e) as of any date on or after September 1, 1996, such
Account has remained unpaid for a period exceeding (i) 120 days after the due
date of the invoice issued with respect thereto if the Account is an Insurance
Account or (ii) 180 days after the due date of the invoice issued with respect
thereto if the Account is a Government Account;
(f) the sale represented by such Account is to an Account
Debtor outside the United States, unless the payment of such Account is backed
by a letter of credit denominated in Dollars issued or confirmed by a United
States bank or a foreign bank with an office located in the United States, in
each case acceptable to the Agent and on terms acceptable to the Agent, and the
Agent has received an assignment of the Borrower's or its Subsidiary's rights
under such letter of credit or acceptance or has been irrevocably designated
the payee of such letter of credit or acceptance;
(g) the Account Debtor is an Affiliate or employee of the
Borrower;
(h) the Account is subject to any set-off by the Account
Debtor, in which event such Account will be deemed ineligible to the extent of
such set-off;
(i) the Account is denominated in other than Dollars or
is payable outside the United States;
(j) collection of such Account is insecure for any reason
or there is a reasonable probability that such Account may not be paid provided
that no such Account shall be excluded unless the Agent shall have given to the
Borrower not less than thirty (30) days prior written notice;
(k) the Account is subject to a material claim or dispute
by the Account Debtor;
(l) the Account is subject to any Lien whatsoever, other
than Liens in favor of the Agent, for its benefit and the ratable benefit of
the Lenders;
(m) the Account is not evidenced by an invoice or other
writing in form reasonably acceptable to the Agent;
(n) the Account is evidenced by chattel paper or an
instrument unless such chattel paper or instrument is pledged to the Agent as
security pursuant to the Borrower Pledge Agreement or the Subsidiary Pledge
Agreement;
(o) the Account or Accounts (other than Accounts the
Account Debtor of which is Medicare) represent, individually or when aggregated
with all other outstanding Accounts of the same Account Debtor, more than ten
percent (10%) of the net outstanding
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<PAGE> 16
balance of all Eligible Accounts of the Borrower or its Subsidiary then
outstanding;
(p) the Account or Accounts exceed any credit limit
established by the Borrower or its Subsidiary (which limit shall be reasonably
satisfactory to the Agent) for the Account Debtor based on the Borrower's
customary credit considerations, in which case such Account or Accounts will be
deemed ineligible to the extent of such excess;
(q) the Borrower or its Subsidiary, in order to be
entitled to collect such Account (or, if such Account is evidenced by multiple
invoices, the amount of such Account evidenced by any such invoice), is
required to perform any additional service for, or perform or incur any
additional obligation to, the Account Debtor in respect of such Account (or
amount so invoiced);
(r) the Account is an account of the United States
government or any agency or instrumentality of the United States, unless the
Borrower or its Subsidiary has complied with the requirements of the Federal
Assignment of Claims Act (31 U.S.C. 3727), or the Account is an account of any
state government or agency thereof unless the Borrower or its Subsidiary has
complied with any state assignment of claims or similar laws relative to the
assignment of such Account to and the right to receive payment thereof by, the
Agent, for its benefit and the ratable benefit of the Lenders;
(s) the Borrower or its Subsidiary, as the case may be,
has not submitted all necessary documentation or supplied all necessary
information to the Account Debtor for payment of such Account or has not
fulfilled all other obligations in respect thereof, including verification of
the eligibility of the Account for payment by such Account Debtor;
(t) if the Account is an Insurance Account or a
Government Account, the Account was not created through the provision of
medically necessary services or merchandise supplied by the Borrower or its
Subsidiary in the ordinary course of business or the prices charged for such
services or merchandise were not usual, customary and reasonable in the
Borrower's or the Subsidiary's community for such services or merchandise;
(u) there are procedures or investigations pending or
threatened by or before any Governmental Authority (i) asserting the invalidity
of such Account or the underlying contract related thereto, or (ii) seeking any
determination or ruling that might materially and adversely affect the validity
or enforceability of such Account or the Contract related thereto;
(v) the Account or the Contract related thereto
contravenes in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and
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<PAGE> 17
regulations relating to usury, consumer protection, truth-in-lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) or any party related to such Contract is in
violation of any such law, rule or regulation in any material respect;
(x) the Account Debtor is located in the State of
Minnesota, the State of New Jersey or any other state imposing conditions on
the right of a foreign (out-of-state) creditor to collect accounts receivable
from Account Debtors located in such state, and the Borrower has not satisfied
such conditions for the then current year;
(y) the Account has not been adjusted to reflect
reimbursement policies of the Account Debtor with respect thereto including,
without limitation, any capitation arrangement, fee schedule, discount formula,
cost-based reimbursement, or other adjustment or limitation to the usual
charges;
(z) the related Contract is not, or was not at the time
of the services giving rise to the Account, in full force and effect, such
Contract does not constitute the legal, valid and binding obligation of the
Account Debtor enforceable against such Account Debtor in accordance with its
terms, or such Account was not created in accordance with the requirements of
the Contract or applicable Requirements of Law, including, without limitation,
compliance with any restrictions on fees or charges; or
(aa) the Account constitutes a "Current Account," "Future
Account" or "Backup Account" (as such terms are defined in Schedule 3.5 of the
Acquisition Agreement).
The determination by the Agent that any Account shall be deemed ineligible by
virtue of its being described by one of such categories shall not be deemed to
indicate that such Account may not also be deemed ineligible by virtue of being
described by any other such category or to preclude the Agent from
reclassifying such Account into such other category, should the Account cease
to be described by the first such category.
"Eligible Investors" means those individuals listed in Item 1
("Investors") of the Disclosure Schedule.
"Eligible Lending Institution" means a financial institution
having a branch or office in the United States and having capital and surplus
and undivided profits aggregating at least $100,000,000 and rated Prime-1 or
better by Moody's Investors Service, Inc. or A-1 or better by Standard & Poor's
Corporation.
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"Environment" means soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Environmental Laws" means all federal, state, local and
foreign laws or regulations, codes, common law, consent agreements, orders,
decrees, judgments or injunctions issued, promulgated, approved or entered
thereunder relating to pollution or protection of the Environment, natural
resource or occupational health and safety.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigation and feasibility studies), fines,
penalties, settlement costs, sanctions and interest incurred as a result of any
claim or demand, by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, any
Environmental Law, permit, order, variance or agreement with a Governmental
Authority or other Person, arising from or related to the administration of any
Environmental Law or arising from environmental, health or safety conditions or
a release or threatened release resulting from the past, present or future
operations of the Borrower or its Subsidiaries or affecting any of their
properties, or any release or threatened release for which the Borrower or any
of its Subsidiaries is otherwise responsible under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with
the regulation thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Estimated Purchase Price" means the "Estimated Purchase
Price" as that term is defined in the Acquisition Agreement.
"Eurodollar Base Rate" means, with respect to any Borrowing of
Eurodollar Loans for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) which appears on Telerate
Page 3750 for Dollar deposits comparable to the amount of such Borrowing in the
London interbank market as of 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two (2) Business Days prior to the first day of such
Interest Period having a term comparable to such Interest Period. If such
Telerate Page is unavailable, the "Eurodollar Base Rate" shall mean with
respect to any Borrowing of Eurodollar Loans for any Interest Period therefor,
the arithmetic average (rounded upwards, if necessary, to the nearest 1/16 of
1%) of the rates per annum which appear on the Reuters Screen LIBO Page, or if
such Reuters Screen LIBO Page is unavailable, the "Eurodollar Base Rate" shall
mean with respect to
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<PAGE> 19
any Borrowing of Eurodollar Loans for any Interest Period therefor, the
arithmetic average (rounded upwards, in necessary, to the nearest 1/16 of 1%)
of the rates per annum for Dollar deposits comparable to the amount of such
Borrowing offered to each of the Reference Lenders in the London interbank
market as of 11:00 a.m. London time (or as soon thereafter as practicable) on
the date two (2) Business Days prior to the first day of such Interest Period
of Dollar deposits having a term comparable to such Interest Period.
"Eurodollar Loans" means Loans or portions thereof interest
rates on which are determined on the basis of the Eurodollar Rate.
"Eurodollar Rate" means, with respect to any Borrowing of
Eurodollar Loans for any Interest Period therefor, the rate per annum (rounded
upward, if necessary, to the nearest 1/16 of 1%) determined by the Agent to be
equal to (i) the Eurodollar Base Rate for such Borrowing for such Interest
Period divided by (ii) 1 minus the Reserve Requirement. The Eurodollar Rate
for any Interest Period will be determined initially by the Agent on the basis
of the Reserve Requirement in effect on the date two (2) Business Days prior to
the commencement of such Interest Period and, from time to time thereafter
during such Interest Period, such Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement during such Interest Period.
"Event of Default" means any of the events set forth in
Section 7.1.
"Excess Cash Flow" means, for any Fiscal Year, the excess of:
(a) Cash Flow for such Fiscal Year,
minus
(b) the sum of (i) the lesser of the amount of
Consolidated Capital Expenditures permitted during such Fiscal Year pursuant to
Section 6.2.5 and actual Consolidated Capital Expenditures (excluding any
Indebtedness arising in connection with the incurrence of Capitalized Lease
Liabilities) during such Fiscal Year, plus (ii) repayments of the Term Loan
during such Fiscal Year pursuant to clause (c) of Section 3.3.1, plus (iii) the
amount of accrued interest on the Subordinated Indebtedness that is paid in
cash by the Holding Company during such Fiscal Year.
"Facility Fee Letter" means that certain letter agreement
dated as of the date hereof between ING and the Borrower.
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<PAGE> 20
"Fair Saleable Value Balance Sheet" means a hypothetical
balance sheet of the Borrower, prepared by the Borrower based on the Pro Forma
Balance Sheet, setting forth (a) the assets of the Borrower (restated at the
fair saleable value thereof based upon such evidence of the fair saleable value
thereof as the Borrower shall reasonably deem pertinent), (b) the liabilities
of the Borrower (including all liabilities and obligations of the Borrower,
fixed or contingent, direct or indirect, disputed or undisputed, and whether or
not required to be reflected on a balance sheet prepared in accordance with
GAAP), and (c) the excess of such assets over such liabilities. The amount of
attributed contingent liabilities shall be discounted to reflect the likelihood
that such liabilities shall become payable.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York; or
(b) if such rate is not so published for any day which is
a Business Day, the arithmetic average of the quotations for such transactions
received by the Agent, in its sole discretion, either from (i) three federal
funds brokers of recognized standing selected by the Agent in its sole
discretion or (ii) the Reference Lenders.
"Financing Statements" means the financing statements under
the Uniform Commercial Codes of the applicable jurisdictions, filed with
respect to the Security Documents pursuant to clause (d) of Section 4.1.13.
"Fiscal Quarter" means any quarter of a Fiscal Year, other
than the quarter ending May 31, 1995.
"Fiscal Year" means, subject to Sections 6.2.17 and 9.14, the
accounting period of the Borrower commencing on the Closing Date and ending on
August 31, 1995 and each twelve month accounting period ending on August 31
thereafter; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., the "1996 Fiscal Year") refer to the Fiscal Year ending on
August 31 in such calendar year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio
of (a) an amount equal to EBITDA to (b) Borrower's Fixed Charges during such
period.
"Fixed Charges" means, for any period, the sum of (a) Senior
Interest Expense during such period, plus (b) repayments of the Term Loan
pursuant to clause (c) of
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Section 3.3.1, minus (c) decreases in the Borrower's and its Subsidiaries'
working capital (excluding changes in cash, Cash Equivalent Investments and
current maturities of Indebtedness), plus increases in Borrower's and its
Subsidiaries' working capital (excluding changes in cash, Cash Equivalent
Investments and current maturities of Indebtedness).
"Founder Performance Stock Purchase Agreements" means the
Founder Performance Stock Purchase Agreements made as of the date hereof, each
between the Holding Company and an Eligible Investor, as the same may be
amended or modified from time to time in accordance with this Agreement.
"Foreign Lender" means any Lender organized under the laws of
a jurisdiction outside the United States.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System (or any successor).
"Fully Diluted" means, when used with reference to Stock of
the Holding Company, all issued and outstanding Stock of the Holding Company
and all such Stock which would be outstanding assuming (a) the exercise of all
rights, warrants and options to purchase Stock of the Holding Company or
securities convertible into or exchangeable for Stock of the Holding Company,
(b) the conversion and exchange of all outstanding securities (or securities
deemed outstanding pursuant to the preceding clause (a)) which are convertible
into or exchangeable for such Stock of the Holding Company, and (c) the
granting of all Additional Management Options that may be granted pursuant to
the Management Incentive Plan and the exercise of all such Additional
Management Options.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States.
"Government Account" means an Account the Account Debtor of
which is (a) Medicare, (b) Medicaid, or (c) CHAMPUS.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"HCFA" means the Health Care Financing Administration, an
agency of the United States Department of Health and Human Services charged
with administering and regulating, inter alia, certain aspects of Medicaid and
Medicare.
"Health Facility License" means a license issued by a state
health agency or similar agency or body certifying that the facility or
business has been inspected and found to comply with applicable Requirements of
Law for operating such health facility or business.
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<PAGE> 22
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Agreement or any other Loan Document refer to this Agreement
or such other Loan Document, as the case may be, as a whole and not to any
particular Section, clause or provision of this Agreement or such other Loan
Document.
"Holding Company" means MHI Acquisition, Inc., a Delaware
corporation.
"Holding Company Documents" means, collectively, the Holding
Company Guaranty, the Holding Company Pledge Agreement, and each other
Instrument executed and delivered by the Holding Company in connection with the
Holding Company Guaranty, the Holding Company Pledge Agreement or any other
Loan Document.
"Holding Company Guaranty" means the Guaranty of all of the
Obligations, dated as of the date hereof, made by the Holding Company in favor
of the Agent and the Lenders.
"Holding Company Pledge Agreement" means the Stock Pledge
Agreement, dated as of the date hereof, pursuant to which the Holding Company
will pledge to the Agent, for its benefit and the ratable benefit of the
Lenders, all of the issued and outstanding Stock of the Borrower, as security
for its obligations under the Holding Company Guaranty.
"including" means including without limiting the generality of
any description preceding such term.
"Indebtedness" of any Person means, without duplication,
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing extensions of
credit) and all obligations evidenced by bonds, debentures, notes or other
similar instruments on which interest charges are customarily paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person (to
the extent required by GAAP to be included on the balance sheet of such
Person);
(d) whether or not so included as liabilities in
accordance with GAAP;
(i) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts
payable for other than borrowed money arising in the ordinary course
of business) and indebtedness secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or
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<PAGE> 23
other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; and
(ii) all Guarantee Liabilities made by such Person in
respect of which the obligation being guaranteed constitutes
Indebtedness under clause (a), (b), (c) or (d)(i), above, or clause
(e) below; and
(e) net obligations under Interest Rate Contracts.
"Indemnified Liabilities" means any and all actions, causes of
action, suits, losses, costs, liabilities, damages and expenses incurred by or
asserted or awarded against any Lender Party and against which the Borrower has
indemnified the Lender Parties as provided in Section 9.4.
"ING" means Internationale Nederlanden (U.S.) Capital
Corporation.
"ING Alternate Base Rate" means a fluctuating rate of interest
per annum equal to the higher of:
(a) the arithmetic average of rates of interest announced
by each of the Reference Lenders from time to time at such Reference Lender's
principal New York City office as its prime (or base) rate for U.S. domestic
commercial loans; and
(b) the Federal Funds Rate from time to time in effect
plus 1/2 of 1% (0.50%).
Changes in the rate of interest on the Base Rate Loans shall take effect on the
date of each change in the ING Alternate Base Rate. The Agent shall give
notice promptly to the Borrower and the Lenders of changes in the ING Alternate
Base Rate.
"Insolvency" or "Insolvent" means, at any particular time, a
Multiemployer Pension Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Instrument" means any contract, agreement, letter of credit,
indenture, mortgage, deed, certificate of title, document or writing (whether
by formal agreement, letter or otherwise) under which any obligation is
evidenced, assumed or undertaken, any Lien (or right or interest therein) is
granted or perfected, or any property (or right or interest therein) is
conveyed.
"Insurance Account" means an Account the Account Debtor of
which is an insurance company or third party payor (other than Medicare,
Medicaid or CHAMPUS), other than an insurance company or third party payor
which the Agent has determined in the reasonable exercise of its credit
judgment is not acceptable and has notified Borrower of such determination.
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"Intellectual Property" means, collectively, (a) patents,
patent rights and patent applications, copyrights and copyright applications,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, applications for registration of trademarks, trade names
and service marks, fictitious names registrations and trademark, trade name and
servicemark registrations, including, without limitation, the name "Milestone
Healthcare", and all derivations thereof, and (b) patent licenses, trademark
licenses, copyright licenses and other licenses to use any of the items
described in clause (a), or any other items necessary to conduct or operate the
business of the Milestone Companies as conducted by the Sellers.
"Interest Coverage Ratio" means, for any period, the ratio of
(a) EBITDA for such period to (b) Senior Interest Expense during such period.
"Interest Period" means, relative to any Eurodollar Loans
comprising part of the same Borrowing, the period beginning on (and including)
the date on which such Eurodollar Loans are made or continued as, or converted
into, Eurodollar Loans pursuant to Section 3.1 or Section 3.4.2 and ending on
(but excluding) the date which numerically corresponds to such date one, two,
three or six months thereafter (or, if such month has no numerically
corresponding date, on the last Business Day of such month), in either case as
the Borrower may select in its relevant notice pursuant to Section 3.1 or
Section 3.4.2; provided, however, that:
(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have expiration dates
occurring on more than three (3) different dates with respect to the Term Loan
and two (2) different dates with respect to the Revolving Loans;
(b) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall end
on the Business Day next preceding such numerically corresponding date);
(c) in the case of Interest Periods for Revolving Loans,
no such Interest Period may end later than the date set forth in clause (a) of
the definition of "Revolving Loan Commitment Termination Date"; and
(d) in the case of Interest Periods for the Term Loan, no
such Interest Period may end later than (i) the Stated Maturity Date of the
Term Loan, or (ii) the date of any principal repayment with respect to the Term
Loan as set forth in clause (c) of Section 3.3.1, if on such date the Borrower
otherwise would be required to repay any portion of any Borrowing prior to the
end of the Interest Period relative to such Borrowing.
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<PAGE> 25
"Interest Rate Contract" means any interest rate cap
agreement, interest rate collar agreement, interest rate swap agreement or
other agreement or arrangement designed to protect against fluctuations in
interest rates.
"Interest Rate Contract Counterparty" means any counterparty
to an Interest Rate Contract which the Borrower is required to enter into
pursuant to Section 6.1.13.
"Internal Revenue Service" means the Internal Revenue Service
of the United States of America.
"Investment" means, relative to any Person:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business);
(b) any ownership or similar interest held by such Person
in any other Person; and
(c) the purchase of any debt or equity securities or
instruments issued by any other Person (including, without limitation, Stock,
notes, debentures, drafts and acceptances, trust certificates, partnership
interests or units or membership interests in limited liability companies).
The amount of any Investment of the nature referred to in clause (a) or (b)
shall be the original principal or capital amount thereof less all returns of
principal or equity thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the transfer or exchange
of property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such property.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of the IRC also refer to any successor sections.
"Lender" means (a) any of the various lenders as are, or may
become, parties hereto, and (b) each Interest Rate Contract Counterparty that
has agreed to be bound by all of the terms and conditions applicable to a
Lender under this Agreement and the other Loan Documents (other than the
obligation to make Loans) pursuant to a joinder agreement in the form of
Exhibit H attached hereto, duly executed by such Interest Rate Contract
Counterparty and delivered to the Agent.
"Lender Parties" means, collectively, the Agent and each
Lender, and each of their respective successors and assigns, and each of the
respective officers, directors, employees, attorneys
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and agents of the Agent and each Lender and of each of their respective
successors and assigns, indemnified by the Borrower as provided in Section 9.4.
"Lien" means any mortgage, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, lien (statutory or other), adverse
claim or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any
financing statement under the UCC or comparable law of any jurisdiction).
"Loan" means, as the context may require, the Term Loan or
the Revolving Loans.
"Loan Documents" means, collectively, this Agreement, the
Notes, each Security Document, the Facility Fee Letter, the Holding Company
Documents, the Subsidiary Guaranty, the Morgan Stanley Letter Agreement, each
Borrowing Request, any Interest Rate Contract entered into by the Borrower with
a Lender, and each other Instrument (other than the Warrant Documents, except
for the Morgan Stanley Letter Agreement, which shall constitute both a Loan
Document and a Warrant Document) executed and delivered by the Holding Company,
the Borrower or any Subsidiary, as of the date hereof or at any time
thereafter, in connection with the transactions contemplated by this Agreement,
in each case, as amended, modified or supplemented from time to time.
"Loan Party" means any of the Holding Company, Mergerco I,
Mergerco II, Milestone, its Subsidiaries, Milestone Management, and any
Affiliate of any of them which is a party to any of the Loan Documents (other
than Morgan Stanley).
"Loss" means any loss, damage, destruction, theft, or seizure
of, or any other casualty with respect to, or any condemnation of, any property
or asset of any Person in an amount in excess of $100,000 individually or
$250,000 in the aggregate for any Fiscal Year; and the "amount" of any Loss
means (i) if such asset or property is repaired or replaced, the greater of (A)
the cost to repair or replace the property or asset that was the subject of
such Loss and (B) the amount of insurance proceeds or condemnation awards
payable as a result of such Loss, and (ii) if such asset or property is not
repaired or replaced, the amount of insurance proceeds or condemnation awards
payable as a result of such loss.
"Management Account" means an Account arising from the
performance of services pursuant to a Management Contract.
"Management Contracts" means contracts and agreements for the
provision of physical therapy, occupational therapy, speech therapy, speech
pathology, skilled nursing, cardiac
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outpatient, comprehensive outpatient rehabilitation, inpatient rehabilitation,
transitional care, geropsych and related services, and consulting services in
connection with the foregoing, in each case to hospitals, nursing homes or
other licensed healthcare facilities.
"Management Incentive Plan" means the 1995 Stock Option Plan
of the Holding Company granting to the Eligible Investors the Original
Management Options on the Closing Date and providing for the grant to key
employees of the Holding Company or any of its Subsidiaries from time to time
after the Closing Date of options to purchase common Stock of the Company that
do not exceed, in the aggregate, more than seven percent (7%) of the Fully
Diluted shares of Stock of the Holding Company.
"Material Adverse Change" means a material adverse change in
(a) the condition (financial or otherwise), operations, performance, business,
properties or prospects of, (i) to and including the Closing Date, Milestone,
and, (ii) from and after the Closing Date, the Borrower and its Subsidiaries
taken as a whole; or (b) the rights and remedies of the Lenders or the Agent
under the Loan Documents; or (c) the ability of the Borrower to repay the
Obligations or of the Borrower or any Subsidiary to perform their respective
obligations under the Loan Documents; or (d) the legality, validity or
enforceability of any Loan Document; or (e) the Liens granted the Agent
pursuant to the Security Documents.
"Maturity" means relative to any Loan or portion thereof, the
earlier of such Loan's Stated Maturity Date or such other date when such Loan
or portion thereof shall be or become due and payable in accordance with the
terms of this Agreement, whether by required repayment, prepayment, declaration
or otherwise.
"Medicaid" means the medical assistance program established by
Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and any
statutes succeeding thereto.
"Medicaid Certification" means certification of a facility or
business by HCFA or a state agency or entity under contract with HCFA that the
facility or business fully complies with all the conditions of participation
set forth in Medicaid Regulations.
"Medicaid Provider Agreement" means an agreement entered into
between a federal or state agency or other such entity administering Medicaid
and a health care provider under which the health care provider agrees to
provide services or merchandise for Medicaid patients in accordance with the
terms of both the agreement and Medicaid Regulations.
"Medicaid Regulations" means, collectively, (a) all federal
statutes (whether set forth in Title XIX of the Social
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Security Act or elsewhere) affecting Medicaid and all federal rules and
regulations promulgated pursuant to or in connection with such statutes; (b)
all state statutes and plans for medical assistance enacted in connection with
such federal statutes, rules and regulations; and (c) all rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Authorities promulgated pursuant to or in connection with any of
the foregoing (whether or not having the force of law) in each case as may be
amended, supplemented or otherwise modified from time to time.
"Medicare" means the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 U.S.C
Sections 1395 et seq.) and any statutes succeeding thereto.
"Medicare Certification" means certification of a facility or
business by HCFA or a state agency or entity under contract with HCFA that the
facility or business fully complies with all the conditions of participation
set forth in the Medicare Regulations.
"Medicare Provider Agreement" means an agreement entered into
between a state agency or other such entity administering the Medicare program
and a health care provider under which the health care provider agrees to
provide services or merchandise for Medicare patients in accordance with the
terms of both the agreement and the Medicare Regulations.
"Medicare Regulations" means, collectively, (a) all federal
statutes (whether set forth in Title XVIII of the Social Security Act or
elsewhere) affecting Medicare and all federal rules and regulations promulgated
pursuant to or in connection with such statutes; and (b) all rules,
regulations, manuals, orders and administrative, reimbursement and other
guidelines of all Governmental Authorities promulgated pursuant to or in
connection with the foregoing (whether or not having the force of law), as each
may be amended, supplemented or otherwise modified from time to time.
"Merger" means the merger of Mergerco I with and into
Milestone with Milestone surviving such merger and becoming a wholly-owned
Subsidiary of the Holding Company.
"Mergerco I" means MHI Acquisition Corporation I, a Delaware
corporation.
"Mergerco II" means MHI Acquisition Corporation II, a
Delaware corporation.
"Milestone" means Milestone Healthcare, Inc., a Delaware
corporation.
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"Milestone Companies" means, collectively, Milestone, its
Subsidiaries and Milestone Management.
"Milestone Management" means Milestone Healthcare Management,
Inc., a Delaware corporation.
"Milestone Management Merger" means the merger of Mergerco II
with and into Milestone Management with Milestone Management surviving such
merger and becoming a wholly-owned Subsidiary of the Holding Company.
"Monthly Payment Date" means the last day of each calendar
month or, if such day is not a Business Day, the immediately preceding Business
Day.
"Morgan Stanley" means, collectively, (a) Morgan Stanley
Venture Capital Fund II, L.P., (b) Morgan Stanley Venture Capital Fund II,
C.V., and (c) Morgan Stanley Venture Investors, L.P.
"Morgan Stanley Letter Agreement" means the Letter Agreement,
dated May 31, 1995, among the Borrower, Morgan Stanley, the Agent and the
Lenders.
"Multiemployer Pension Plan" means a Multiemployer Plan which
is subject to Subtitle E of Title IV of ERISA.
"Multiemployer Plan" means a Plan which is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
"Net Disposition Proceeds" means, with respect to any
disposition of the assets of the Holding Company, the Borrower or any
Subsidiary (including, without limitation, the disposition by the Holding
Company or the Borrower of any Stock of any Subsidiaries), the excess of:
(a) the gross cash proceeds received by the Holding
Company, the Borrower or any Subsidiary from such disposition
minus
(b) the sum of (i) all reasonable out-of-pocket fees and
expenses incurred in connection therewith, provided, however, that any such
fees and expenses shall include those paid or payable to Affiliates of the
Holding Company only to the extent such fees and expenses are reasonable and
approved in advance by the Agent plus (ii) all taxes paid or payable in
connection with such sale.
"Net Income" means, as to any Person, for any period, the net
income (or loss) of such Person for such period, determined in accordance with
GAAP, but excluding extraordinary gains or losses for such period; provided,
however, that in determining the Net Income of the Borrower for any period the
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effect of the accretion of the right to put the Warrants pursuant to the Put
and Call Agreement shall be excluded.
"Net Securities Proceeds" means, with respect to the issuance
or sale by the Holding Company, the Borrower or any Subsidiary of any of its
Stock pursuant to a Public Offering or of any subordinated debt (other than
Permitted Additional Subordinated Indebtedness), the excess of:
(a) the gross cash proceeds received by the Holding
Company, the Borrower or any Subsidiary from such issuance and sale
minus
(b) all reasonable out-of-pocket fees and expenses
incurred in connection with such issuance and sale, provided, however, that any
such fees and expenses shall include those paid or payable to Affiliates of the
Holding Company only to the extent such fees and expenses are reasonable and
approved in advance by the Agent.
"Note" means, as the context may require, any Term Note or
any Revolving Note.
"Notes" means, collectively, all of the Term Notes and all of
the Revolving Notes.
"Obligations" means all obligations of the Borrower with
respect to the repayment or performance of any obligations (monetary or
otherwise) of the Borrower arising under or in connection with this Agreement,
the Notes and the other Loan Documents.
"Organic Document" means, relative to any Person, its articles
or certificate of incorporation or certificate of limited partnership or
organization, its bylaws, partnership or operating agreement or other
organizational documents, and all stockholders agreements, voting trusts and
similar arrangements applicable to any of its Stock or partnership interests or
other ownership interests.
"Original Management Options" means options to purchase up to
7.1% of the Fully Diluted Stock of the Holding Company, granted to the Eligible
Investors on the Closing Date pursuant to the Management Incentive Plan.
"Participant" means the banks or other entities that purchase
participating interests in any Loan, Note, Revolving Loan Commitment or other
interest hereunder, as provided in clause (a) of Section 9.11.
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"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means any Plan which is subject to the
provisions of Title IV of ERISA, or to the provisions of Section 302 of ERISA
or Section 412 of the IRC.
"Percentage" means, as the context requires, either (a) the
Revolving Percentage, (b) the Term Percentage or (c) both.
"Permitted Additional Subordinated Indebtedness" means
subordinated indebtedness issued by the Holding Company to Morgan Stanley or
Eligible Investors having terms and conditions satisfactory to the Required
Lenders with such terms and conditions to include, without limitation, (a)
principal amount not to exceed the gross cash proceeds of such indebtedness to
the Holding Company plus that portion of any original issue discount
representing accreted interest, (b) no maturity or principal amortization
earlier than ninety-one (91) days after the Stated Maturity Date, (c) interest
payable only at maturity or in kind, (d) no covenants or restrictions on the
Holding Company (other than payment of principal and interest), and (e)
subordination provisions, standstill periods and payment blockage provisions
acceptable to the Required Lenders.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, government, governmental agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" shall mean, at a particular time, any employee benefit
plan (within the meaning of Section 3(3) of ERISA), which is covered by ERISA
and in respect of which the Borrower, a Subsidiary or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Post-Closing Payment" means the payment, if any, required to
be made by the Borrower to the Sellers after the Closing Date pursuant to
Section 3.5(i) of the Acquisition Agreement, as a result of the final
determination of the Purchase Price pursuant to Section 3.4 of the Acquisition
Agreement.
"Post-Closing Payment Date" means the earlier of (i) the date
on which the Post-Closing Payment is due pursuant to the terms of the
Acquisition Agreement, and (ii) the date on which the Post-Closing Payment is
made by the Borrower.
"Post-Default Rate" means (a) in the case of each Loan, the
sum of the rate per annum otherwise applicable to such Loan from time to time
plus two percent (2%) per annum and (b) in the case of all other Obligations,
the ING Alternate Base Rate plus two percent (2%) per annum.
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"Prepayment Fee" means the fee payable by the Borrower to the
Lenders prior to or concurrently with any prepayment as required under Section
3.3.2.
"Pro Forma Balance Sheet" means the pro forma balance sheet of
the Borrower as of the Closing Date, prepared by the Borrower based on the
financial statements described in clauses (i) and (ii) of Section 5.4 and after
giving effect to the consummation of the transactions contemplated by the
Acquisition Agreement and the consummation of the transactions contemplated
hereby, including the making of the Loans and the issuance of the Warrants on
the Closing Date.
"Projections" means the projected balance sheets and
statements of operations and changes in cash flows of the Borrower for the
Fiscal Years 1995-2000 inclusive, dated May 30, 1995, prepared by the Borrower
on a monthly basis for the 1996 Fiscal Year, on a quarterly basis for the 1997
and 1998 Fiscal Years, and on an annual basis for the 1999 and 2000 Fiscal
Years, together with supporting details and a statement of underlying
assumptions, which have been delivered to the Lenders prior to the Closing
Date.
"Public Offering" means the consummation of an offering of
equity securities of the Borrower or the Holding Company (whether by the
Borrower or the Holding Company or their security holders) pursuant to a
registration statement which has been declared effective under the Securities
Act of 1933 (as the same may be amended from time to time), including, without
limitation in connection with a merger or consolidation with, or the
acquisition of the assets or business of, any other Person.
"Purchase Money Indebtedness" means Indebtedness incurred to
finance part or all of (but not more than) the purchase price of equipment in
which neither the Borrower nor any of its Subsidiaries had at any time prior to
such purchase an interest.
"Purchase Price" means "Purchase Price" as that term is
defined in the Acquisition Agreement.
"Purchasing Lender" means any Person purchasing all or any
part of the rights and obligations under this Agreement and the Notes of any
Lender pursuant to a Transfer Supplement in accordance with Section 9.11.
"Put and Call Agreement" means that certain Put and Call
Agreement, dated as of the date hereof, among the Holding Company, the Borrower
and ING, together with all amendments and modifications thereto.
"Quarterly Payment Date" means the last day of each May,
August, November and February, or, if such day is not a Business Day, the
immediately preceding Business Day.
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"Reference Lenders" means, collectively, The Chase Manhattan
Bank, N.A., Citibank, N.A. and Morgan Guaranty Trust Company of New York.
"Register" means the register for the recordation of the names
and addresses of the Lenders and the Revolving Loan Commitment of, and the
principal amounts of the Loans owing to, each Lender from time to time, as
provided in clause (c) of Section 9.11.
"Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of the date hereof, between the Holding
Company, Morgan Stanley, the Eligible Investors and ING in its capacity as
holder of the Warrants, together with all amendments and modifications thereto.
"Regulatory Change" means, as to any or all of the Lenders or
the Agent, any change (including, without limitation, any change in the
interpretation) occurring after the Closing Date in any (or the adoption after
such date of any new):
(a) United States federal or state law or foreign law
applicable to the Agent or such Lender; or
(b) regulation, interpretation, directive, guideline or
request (whether or not having the force of law) applicable to the Agent or
such Lender of any court or Governmental Authority charged with the
interpretation or administration of any law referred to in clause (a) or of any
central bank or fiscal, monetary or other authority having jurisdiction over
the Agent or such Lender.
"Reorganization" means with respect to any Multiemployer
Pension Plan, the condition that such plan is in reorganization within the
meaning of such term as used in Section 4241 of ERISA.
"Reportable Event" means (i) a reportable event described in
Section 4043 of ERISA and regulations thereunder (other than any Reportable
Event described in Section 4043(b)(2) or (7)), (ii) a withdrawal by a
"substantial employer" (within the meaning of Section 4001(a)(2) of ERISA) from
a Single Employer Plan to which more than one employer contributes, as referred
to in Section 4063(b) of ERISA, or (iii) a cessation of operations at a
facility causing more than twenty percent (20%) of participants under a Single
Employer Plan to be separated from employment, as referred to in Section
4062(e) of ERISA.
"Required Lenders" means, as the context may require at any
time, Lenders having, in the aggregate, 66-2/3% or more of the Revolving Loan
Commitment, the Revolving Loans and the Term Loan.
"Requirements of Law" means, as to any Person, the Organic
Documents of such Person, and all federal, state and local laws, rules,
regulations, orders, decrees or other determinations
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<PAGE> 34
of an arbitrator, court or other Governmental Authority, including, without
limitation, all disclosure and other requirements of ERISA, the requirements of
Environmental Laws and Environmental Permits, the requirements of OSHA, 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.
"Reserve Requirement" means, relative to any Interest Period
for any Eurodollar Loans, from time to time during such Interest Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal
and other reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of or including "Eurodollar Liabilities", as currently
defined under Regulation D of the F.R.S. Board, having a term approximately
equal or comparable to such Interest Period.
"Responsible Officer" means the Chief Executive Officer, the
Chief Financial Officer and the Controller of the Borrower.
"Revolving Loan" means, relative to any Lender, any Loan made
by such Lender to the Borrower pursuant to Section 2.1.2.
"Revolving Loan Availability" means, on any date, the excess
of (a) the lesser of (i) the Revolving Loan Commitment Amount or (ii) the
Borrowing Base minus (b) the then aggregate principal amount of all outstanding
Revolving Loans.
"Revolving Loan Commitment" means the collective commitments
of the Lenders to make Revolving Loans pursuant to Section 2.1.2.
"Revolving Loan Commitment Amount" means $5,000,000.
"Revolving Loan Commitment Termination Date" means the
earliest of:
(a) the Stated Maturity Date;
(b) immediately and without further action upon the
occurrence of any Event of Default described in Section 7.1.4;
(c) immediately when any other Event of Default shall
have occurred and be continuing and either:
(i) the Revolving Loans or the Term Loan shall be
declared to be due and payable pursuant to Section 7.3; or
(ii) in the absence of such declaration, the
Agent, acting at the direction of the Required Lenders, shall give
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notice to the Borrower that the Revolving Loan Commitment has been
terminated; and
(d) immediately upon the occurrence of a Change in Control.
"Revolving Note" means a promissory note of the Borrower dated
the date hereof and substantially in the form of Exhibit A-1 attached hereto,
and shall also refer to all other promissory notes accepted from time to time
in substitution therefor or renewal thereof.
"Revolving Percentage" of any Lender means, at any time, in
respect of the Revolving Loan Commitment and the Revolving Loans, the
percentage set forth opposite such Lender's signature hereto under the caption
"Percentage," as the same may be adjusted pursuant to Section 9.11.
"Security Agreement" means the Security Agreement, dated as of
the date hereof, made by Mergerco I, Milestone, its Subsidiaries, Mergerco II
and Milestone Management in favor of the Agent, for its benefit and the ratable
benefit of the Lenders.
"Security Documents" means, collectively, the Security
Agreement, the Trademark Assignment, the assignments of "key-man" life
insurance described in clause (e) of Section 4.1.13 and of the Interest Rate
Contracts described in Section 6.1.14, the Borrower Pledge Agreement, the
Subsidiary Pledge Agreement, the Holding Company Pledge Agreement, the
Assignment of Rights under Acquisition Agreement described in clause (b) of
Section 4.1.13, and each other Instrument at any time delivered in connection
with this Agreement to secure the Obligations.
"Sellers" means, collectively, Healthtrust - The Hospital
Company, Inc., a Delaware corporation, and Coralstone Management, Inc., a
Delaware corporation.
"Senior Debt Service Coverage Ratio" means, for any period,
the ratio of (a) an amount equal to EBITDA for such period, to (b) Senior
Interest Expense during such period plus repayments of the Term Loan pursuant
to clause (c) of Section 3.3.1.
"Senior Interest Expense" means, for any period, the
Borrower's consolidated interest expense accrued during such period in respect
of all Indebtedness of the Borrower and its Subsidiaries.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Solvent" means, with respect to any Person on a particular
date, that on such date (i) the fair value of the assets of such Person (both
at fair valuation and at present fair
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<PAGE> 36
saleable value) is, on the date of determination, greater than the total amount
of liabilities, including, without limitation, contingent and unliquidated
liabilities, of such Person, (ii) such Person is able to pay all liabilities of
such Person as they mature, and (iii) such Person does not have unreasonably
small capital with which to carry on its business. In computing the amount of
contingent or unliquidated liabilities at any time, such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Stated Maturity Date" means May 31, 2000.
"Stock" means all shares of capital stock of or in a
corporation, whether voting or non-voting, and including, without limitation,
common stock and preferred stock.
"Stockholders" means, collectively, Morgan Stanley and the
Eligible Investors.
"Stockholders' Agreement" means that certain Stockholders'
Agreement, dated as of the date hereof, between the Stockholders and the
Holding Company, together with all amendments and modifications thereto.
"Subordinated Debt Documents" means, collectively, (a) the
Note Purchase Agreement, dated as of the date hereof, among the Holding Company
and the purchasers party thereto, and (b) the $9,000,000 aggregate principal
amount of Senior Subordinated Notes Due 2000 issued by the Holding Company to
Morgan Stanley pursuant to such Note Purchase Agreement.
"Subordinated Indebtedness" means the Indebtedness of the
Holding Company in the principal amount of not more than $9,000,000 evidenced
by the Subordinated Debt Documents.
"Subsidiary" of any corporation means any other corporation
greater than 50% of the outstanding shares of Stock of which having ordinary
voting power for the election of directors is owned directly or indirectly by
such corporation, and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Borrower.
"Subsidiary Guaranty" means the Guaranty of all the
Obligations, dated as of the date hereof, made by the Borrower's Subsidiaries,
Mergerco II and Milestone Management, jointly and severally, in favor of the
Agent and the Lenders.
"Subsidiary Note" means a promissory note made by a Subsidiary
payable to the Borrower and meeting the requirements of Section 6.2.7(e).
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"Subsidiary Pledge Agreement" means the Stock Pledge
Agreement, dated as of the date hereof, pursuant to which Trucare will pledge
to the Agent, for its benefit and the ratable benefit of the Lenders, all of
the issued and outstanding Stock of its Subsidiaries, as security for its
obligations under the Subsidiary Guaranty.
"Taxes" means all taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Lender and the Agent, taxes imposed on its net income and
franchise taxes imposed on it.
"Term Loan" means, collectively, the Loans, in an aggregate
principal amount of $10,000,000, made by the Term Loan Lenders on the Closing
Date to the Borrower pursuant to clause (a) of Section 2.1.1.
"Term Loan Note" means a promissory note of the Borrower dated
the date hereof and substantially in the form of Exhibit A-2 attached hereto,
and shall also refer to all other promissory notes accepted from time to time
in substitution therefor or renewal thereof.
"Term Percentage" of any Lender means, at any time, in respect
of the Term Loan, the percentage set forth opposite such Lender's signature
hereto under the caption "Percentage," as the same may be adjusted pursuant to
Section 9.11.
"Trademark Assignment" means the Collateral Assignment and
Security Agreement (Trademarks), dated as of the date hereof, made by the
Borrower in favor of the Agent, for its benefit and the ratable benefit of the
Lenders.
"Transfer Supplement" means a Commitment Transfer Supplement,
substantially in the form of Exhibit G, executed pursuant to Section 9.11.
"Trucare" shall mean Trucare Health Systems, Inc., a Texas
corporation.
"type" means, relative to any Borrowing or Loan, the portion
thereof being maintained as a Base Rate Loan or a Eurodollar Rate Loan.
"UCC" means the Uniform Commercial Code of the State of New
York, as in effect from time to time.
"United States" or "U.S." means the United States of America,
its 50 States and the District of Columbia.
"Warrants" means the warrants issued on the Closing Date
pursuant to the Warrant Agreement, substantially in the form of Exhibit A to
the Warrant Agreement.
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"Warrant Agreement" means that certain Warrant Purchase
Agreement, dated as of the date hereof, between the Holding Company and ING,
together with all amendments and modifications thereto.
"Warrant Documents" means, collectively, the Registration
Rights Agreement, the Warrants, the Warrant Agreement, the Put and Call
Agreement and the Morgan Stanley Letter Agreement.
"written" or "in writing" means any form of written
communication or a communication by means of telex, telecopier device,
telegraph or cable.
SECTION 1.2. Use of Defined Terms. Unless otherwise
defined or the context otherwise requires, terms for which meanings are
provided in this Agreement shall have such meanings when used in the Disclosure
Schedule and each Note, Borrowing Base Certificate, Borrowing Request,
Compliance Certificate, Continuation/Conversion Notice, notice and other
communication delivered from time to time in connection with this Agreement or
any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise
specified, references in this Agreement and in each other Loan Document to any
Article or Section are references to such Article or Section of this Agreement
or such other Loan Document, as the case may be, and unless otherwise
specified, references in any Article, Section, or definition to any clause are
references to such clause of such Section, Article or definition.
SECTION 1.4. Accounting and Financial Determinations.
Unless otherwise specified, all accounting terms used herein or in any other
Loan Document shall be interpreted, all accounting determinations and
computations hereunder or thereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with GAAP.
ARTICLE 2.
COMMITMENTS
SECTION 2.1. Term Loan and Revolving Loan Commitment.
Subject to the terms and conditions of this Agreement (including Article 4),
each Lender severally and for itself alone agrees to make its Term Percentage
of the Term Loan and to provide its Revolving Percentage of the Revolving Loan
Commitment described in this Section 2.1.
SECTION 2.1.1. Term Loan. On the Closing Date, each Lender
will make a single Term Loan to the Borrower equal to its Term Percentage of
$10,000,000.
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SECTION 2.1.2. Revolving Loan Commitment. Each Lender will
from time to time on any Business Day occurring during the period commencing on
the Closing Date and continuing to (but not including) the Revolving Loan
Commitment Termination Date, make Revolving Loans to the Borrower equal to its
Revolving Percentage of the aggregate amount of any Borrowing of Revolving
Loans requested by the Borrower to be made on such Business Day in accordance
with Section 3.1.
SECTION 2.1.3. Agent and Lenders Not Required to Extend
Credit under Revolving Credit Commitment. No Lender shall be required to make
any Revolving Loan, if after giving effect thereto:
(a) the then aggregate outstanding principal amount of
all Revolving Loans would exceed the lesser of the Revolving Loan Commitment
Amount or the Borrowing Base; or
(b) the then aggregate outstanding principal amount of
such Lender's Revolving Loans would exceed its Revolving Percentage of the
lesser of the Revolving Loan Commitment Amount or the Borrowing Base.
Subject to the terms hereof, the Borrower may from time to time borrow, prepay
and reborrow Revolving Loans, in all cases pursuant to the Revolving Loan
Commitment.
SECTION 2.2. Changes in Advance Ratios; Establishment of
Reserves.
SECTION 2.2.1. Advance Ratios. The Borrower acknowledges
that the advance ratios against Eligible Accounts provided for in the
definition of "Borrowing Base" in Section 1.1 have been established based upon
the Agent's determination of the loan value of the Borrower's Eligible Accounts
as of the date of this Agreement. Upon the occurrence and during the
continuance of an Event of Default, based on the Agent's customary credit
considerations, decrease the advance ratios against Eligible Accounts, and any
such decrease shall become effective immediately upon the Agent's giving notice
thereof to the Borrower, and shall remain in effect for so long as such Event
of Default continues. Nothing herein shall create any obligation on the part
of the Agent or the Lenders to make Loans after the occurrence and during the
continuation of an Event of Default.
SECTION 2.2.2. Reserves. The Agent shall have the right to
establish, in such amounts, and with respect to such matters, as the Agent,
based on the Agent's customary credit considerations, shall deem necessary or
appropriate, reserves with respect to (i) Charges and Liens; (ii) Environmental
Liabilities and Costs, (iii) sums as to which the Agent and the Lenders are
permitted to make Revolving Loans on the Borrower's behalf under Section 3.3.4
of this Agreement; (iv) by thirty (30) days prior written notice by the Agent
to the Borrower, such other matters,
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events, conditions or contingencies as to which the Agent, based on the Agent's
customary credit considerations, reasonably determines reserves should be
established from time to time hereunder.
SECTION 2.3. Commitment Fee. The Borrower agrees to pay
to the Agent for the account of each Lender, a nonrefundable fee for the period
from the Closing Date to and including the Revolving Loan Commitment
Termination Date, equal to such Lender's Revolving Percentage of 3/8 of 1%
(0.375%) per annum on the difference between (A) the Revolving Loan Commitment
Amount and (B) the average daily aggregate outstanding principal amount of all
Revolving Loans. The fee described in this Section 2.3 shall be calculated on
a daily basis and shall be payable by the Borrower in arrears on each Monthly
Payment Date and on the Revolving Loan Commitment Termination Date.
SECTION 2.4. Increased Costs; Capital Adequacy. (a) The
Borrower shall pay to each Lender from time to time on demand such amounts as
such Lender may determine to be reasonably necessary to compensate it or its
holding company for any costs which such Lender determines are attributable to
its making or maintaining Loans, or maintaining Commitments hereunder or its
obligation to make any such Loans hereunder, or any reduction in any amount
receivable by such Lender hereunder in respect of any such Loans, Commitments
or obligation, resulting from any Regulatory Change which: (i) changes the
basis of taxation of any amounts payable to such Lender under this Agreement in
respect of any of such Loans or Commitments (other than taxes imposed on the
overall net income of such Lender or of its Applicable Lending Office); or (ii)
imposes or modifies any reserve, special deposit, deposit insurance or
assessment, minimum capital, capital ratio or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender or any holding company of such bank (including,
without limitation, a request or requirement which affects the manner in which
any Lender or the holding company of any thereof allocates capital resources to
commitments, including the Commitments and obligations of such Lender
hereunder). Subject to the provisions of clause (d) below, each Lender will
notify the Borrower of any event occurring after the date of this Agreement
which will entitle such Lender to compensation pursuant to this clause (a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.
(b) Without limiting the effect of the foregoing
provisions of this Section 2.4 (but without duplication), the Borrower shall
pay to each Lender from time to time upon demand by such Lender such amounts as
the Lender may determine to be reasonably necessary to compensate such Lender
for any costs which it determines are attributable to the maintenance by it or
its holding company, pursuant to any law or regulation of any jurisdiction or
any interpretation, directive or request (whether or not having the force of
law) of any court or governmental or
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monetary authority, whether in effect on the date of this Agreement or
thereafter, of capital in respect of its Loans its obligation to make the Loans
hereunder (such compensation to include, without limitation, an amount equal to
any reduction in return on assets or equity of such Lender or its holding
company to a level below that which it could have achieved but for such law,
regulation, interpretation, directive or request). Subject to the provisions
of clause (d) below, the Lender will notify the Borrower with a copy to the
Agent) if it is entitled to compensation pursuant to this clause (b) as
promptly as practicable after it determines to request such compensation.
(c) Each notice delivered by any Lender pursuant to this
Section 2.4 shall contain a statement of such Lender as to any such additional
amount or amounts (including calculations thereof in reasonable detail) which
shall, in the absence of manifest error, be conclusive of the matters stated
therein and be binding upon the Borrower. In determining such amount, any
Lender may use any method of averaging and attribution that it in good faith
shall deem applicable.
(d) Notwithstanding anything in this Section 2.4 to the
contrary, to the extent that notice is given by any Lender to the Borrower of
any additional amount owing to such Lender under this Section 2.4 more than 180
days after the occurrence of the event giving rise to such obligation, such
Lender shall not be entitled to compensation under this Section 2.4 for any
amounts incurred or accruing prior to 180 days prior to the giving of such
notice to Borrower. Without prejudice to the survival of any other agreement
of the Borrower hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in this Section 2.4, subject to the
limitations set forth in this clause (d), shall survive the payment in full of
principal, interest and other amounts payable hereunder and under the Notes and
the other Loan Documents.
(e) Upon the receipt by the Borrower from any Lender (an
"Affected Lender") of a claim for compensation pursuant to this Section 2.4 or
Section 3.5, the Borrower may (i) request that the Affected Lender use its
reasonable efforts to obtain a replacement bank, financial institution or other
lender satisfactory to the Borrower to acquire and assume all or part of such
Affected Lender's Loans and its Revolving Loan Commitment (a "Replacement
Lender"), (ii) request one or more of the Lenders to acquire all or part of
such Affected Lender's Loans and Revolving Loan Commitment (provided that no
such other Lender shall have any obligation to so acquire or assume all or any
part of such Affected Lender's Loans and Revolving Loan Commitment), or (iii)
designate a Replacement Lender reasonably satisfactory to the Agent. Any such
designation of a Replacement Lender under clauses (i) or (iii) shall be subject
to the prior written consent of the Agent, which consent shall not be
unreasonably withheld.
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ARTICLE 3.
LOANS AND NOTES
SECTION 3.1. Borrowing Procedure. By delivering a
Borrowing Request to the Agent at the Agent's Atlanta Office on or before
11:00 a.m., New York City time, on a Business Day, the Borrower may (a)
request, on not less than one (1) Business Day's advance notice in the case of
Base Rate Loans and not less than three (3) Business Days' advance notice in
the case of Eurodollar Loans, that the Term Loan be made on the Closing Date;
and (b) from time to time request, on not less than one (1) nor more than three
(3) Business Days' notice, in the case of Base Rate Loans, and not less than
three (3) nor more than five (5) Business Days' notice in the case of
Eurodollar Loans, that a Borrowing of Revolving Loans be made on the Business
Day specified in such Borrowing Request. Borrowings of Base Rate Loans shall
be in a minimum aggregate amount equal to $250,000 and in integral multiples of
$50,000 or, if less, the amount of the Revolving Loan Availability immediately
prior to such Borrowing. Borrowings of Eurodollar Loans shall be in a minimum
aggregate amount of $500,000 and in integral multiples of $100,000. The Term
Loan shall be made on the Closing Date, and each Revolving Loan shall be made
on the Business Day specified in the Borrowing Request therefor (including the
initial Revolving Loans to be made on the Closing Date). On such Business Day,
each Lender shall, on or before 2:00 p.m., New York City time, deposit same day
funds with the Agent in an amount equal to such Lender's Percentage of the
requested Borrowing, such deposit to be made to such account as the Agent shall
specify from time to time by notice to the Lenders. The proceeds of all
Borrowings shall be made available to the Borrower by wire transfer of such
proceeds to such transferees, or to such accounts of the Borrower, as the
Borrower shall have specified in the Borrowing Request therefor; provided,
however, that in each case the Agent shall be required to make available to the
Borrower the proceeds of any Borrowing only to the extent received by it in
same day funds from the Lenders. No Lender's obligation to make any Loan shall
be affected by any other Lender's failure to make any Loan.
SECTION 3.2. Notes. All Loans made by each Lender shall
be evidenced:
(a) in the case of such Lender's Term Percentage of the
Term Loan, by a Term Note payable to the order of such Lender in a principal
amount equal to such Lender's Term Percentage of Term Loan; and
(b) in the case of such Lender's Revolving Loans, by a
Revolving Note payable to the order of such Lender in a principal amount equal
to such Lender's Revolving Percentage of the Revolving Loan Commitment Amount.
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The Borrower hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on a grid schedule attached to such Lender's
Revolving Note (or on a continuation of any such grid attached to any Revolving
Note and made a part thereof), which notations shall evidence, inter alia, the
date and outstanding principal amount of the Revolving Loans evidenced thereby.
The notations on any such grid (and on any such continuation) indicating the
outstanding principal amount of such Lender's Revolving Loans shall be
presumptive evidence of the principal amount thereof owing and unpaid, but the
failure to record any such amount on any such grid (or on any such
continuation) shall not limit or otherwise affect the obligations of the
Borrower hereunder or under such Note to make payments of principal of or
interest on such Loans when due.
SECTION 3.3. Principal Payments. Repayments and
prepayments of principal of the Loans shall be made in accordance with this
Section 3.3.
SECTION 3.3.1. Repayments and Prepayments. The Borrower
will make payment in full of all unpaid principal of each Loan at its Stated
Maturity Date (or such earlier date as such Loan may become or be declared due
and payable pursuant to Article 7). Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal amount
of any Loans; provided, however, that (i) as to partial prepayments of the Term
Loan, all such voluntary prepayments shall require at least three (3) Business
Days prior notice to the Agent, (ii) as to the Revolving Loans and the Term
Loan, all such voluntary prepayments shall be in a minimum amount of $50,000
(subject to the Borrower's right to prepay in full the entire unpaid principal
amount of the Term Loan or Revolving Loans, as the case may be), (iii) as to
the voluntary prepayment in full of the Term Loan and the termination of the
Revolving Loan Commitment, such prepayment shall require at least five (5)
Business Days prior written notice to the Agent (provided however that in the
event the prepayment is being made in connection with the Public Offering of
the securities of the Borrower or the Holding Company, the notices required to
be given prior to such voluntary prepayment shall be as follows: (A) the
Borrower shall give the written notice to the Agent within one (1) Business Day
following the filing of the preliminary prospectus or similar statement in
connection with such securities offering which notice shall provide the Agent
with the Borrower's estimate of the date of prepayment, and (B) the Borrower
shall give an additional written notice to the Agent on the day which such
securities offering becomes effective which notice shall provide the Agent with
the date of prepayment (provided that such date shall not be less than one (1)
Business Day after the date of the notice provided in this clause (B)), and
(iv) the Borrower pays to the Lenders any Prepayment Fee required to be paid
pursuant to Section 3.3.2;
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(b) shall, on any Business Day on which the aggregate
outstanding principal amount of all Revolving Loans exceeds the lesser of the
Borrowing Base and the Revolving Loan Commitment Amount, make a mandatory
prepayment of the outstanding principal amount of Revolving Loans in an amount
equal to such excess amount;
(c) shall, on each Quarterly Payment Date, commencing on
August 31, 1995, make a scheduled payment of the outstanding principal amount,
if any, of the Term Loan equal to the amount shown below opposite each such
Quarterly Payment Date:
<TABLE>
<CAPTION>
Quarterly
Quarterly Payment Dates Occur- Principal
ring During the Period from: Payment
------------------------------ ----------------
<S> <C>
Closing Date through May 31, 1996 $ 250,000
June 1, 1996 through May 31, 1997 375,000
June 1, 1997 through May 31, 1998 500,000
June 1, 1998 through May 31, 1999 625,000
June 1, 1999 through May 31, 2000 750,000
</TABLE>
(d) shall, concurrently with the receipt by the Holding
Company, the Borrower or any Subsidiary of any Net Disposition Proceeds other
than from dispositions of assets permitted under Section 6.2.11, make a
mandatory prepayment of the outstanding principal amount, if any, of the Term
Loan, in an aggregate amount equal to such Net Disposition Proceeds; provided
that this clause (d) of Section 3.3.1 shall not in any event be deemed a
consent by the Required Lenders to any disposition by the Holding Company, the
Borrower or any Subsidiary which is otherwise prohibited by the terms of this
Agreement or of any of the other Loan Documents;
(e) shall, concurrently with the receipt by the Holding
Company, the Borrower or any Subsidiary of any Net Securities Proceeds, make a
mandatory prepayment of the outstanding principal amount, if any, of the Term
Loan, in an aggregate amount equal to such Net Securities Proceeds; provided
that this clause (e) of Section 3.3.1 shall not in any event be deemed a
consent by the Required Lenders to any issuance of Stock or subordinated debt
by the Holding Company, the Borrower or any Subsidiary which is otherwise
prohibited by the terms of this Agreement or of any of the other Loan
Documents;
(f) shall, concurrently with the delivery of financial
information pursuant to clause (a)(i) of Section 6.1.1 with respect to each
Fiscal Year commencing with the 1995 Fiscal Year (but in no event later than
November 30 of the succeeding Fiscal Year), make a mandatory prepayment of the
outstanding principal amount, if any, of the Term Loan in an amount equal to
75% of Excess Cash Flow with respect to such Fiscal Year;
(g) shall, concurrently with receipt by the Borrower or
any Subsidiary or the Agent of any condemnation awards with
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respect to any Loss, make a mandatory prepayment of the Loans in an amount
equal to such condemnation awards;
(h) shall, within 180 days after receipt by the Borrower
or any Subsidiary or the Agent of any insurance proceeds with respect to any
Loss resulting from a casualty, make a mandatory prepayment of the Loans in an
amount by which such insurance proceeds exceed the actual cost incurred by the
Borrower or such Subsidiary to repair or replace the property or asset which
was the subject of the Loss or deemed Loss giving rise to such insurance
proceeds;
(i) shall, within 180 days after receipt by the Borrower
or any Subsidiary or the Agent of any insurance proceeds with respect to any
Loss resulting from a liability, make a mandatory prepayment of the Loans in an
amount by which such insurance proceeds exceed the amount of the liability to
be satisfied with such proceeds (to the extent such liability is so satisfied);
(j) shall, unless the Required Lenders shall have
otherwise agreed, concurrently with the receipt by the Borrower of any proceeds
of the life insurance policies described in clause (c) of Section 6.1.5, make a
mandatory prepayment of the Loans in an amount equal to the amount of such
insurance proceeds;
(k) shall, concurrently with the receipt by the Borrower
of any (i) reduction to the Purchase Price occurring after the Closing Date
with respect to the Acquisition, payable by the Sellers to the Borrower
pursuant to Section 3.5(ii) of the Acquisition Agreement, or (ii) any indemnity
payable by the Sellers to the Borrower pursuant to the Acquisition Agreement or
otherwise, make a mandatory prepayment in an aggregate amount equal to the
amount so received (excluding the portion of such amount representing interest
and excluding the portion of any such amount used to satisfy a liability of the
Borrower or is in respect of a liability of the Borrower previously satisfied)
by the Borrower, which prepayment shall be applied first to outstanding
Revolving Loans (provided that the aggregate amount of all such prepayments
applied to Revolving Loans shall not exceed the aggregate amount of Revolving
Loans made on the Closing Date plus the costs and expenses incurred by the
Borrower in connection with the Acquisition, set forth in Item 2 ("Transaction
Costs") of the Disclosure Schedule, and not paid on the Closing Date) and,
thereafter, to the Term Loan; and
(l) shall prepay the entire outstanding principal amount
of the Loans together with accrued and unpaid interest and all of the
outstanding Obligations hereunder upon the occurrence of a Change in Control.
SECTION 3.3.2. Prepayment Fee. Upon any prepayment of the
Term Loan or the Revolving Loans on or prior to May 31, 1997, whether in full
or in part, in each case utilizing the proceeds of
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borrowed funds or the issuance of debt securities (other than proceeds of
Indebtedness permitted under clause (d) of Section 6.2.2), the Borrower shall
be required to pay to the Lenders prior to or concurrently with such prepayment
a Prepayment Fee in an amount equal to (i) if such prepayment occurs on or
prior to May 31, 1996, two percent (2%) of the amount of the Loans outstanding
prior to such prepayment, and (ii) if such prepayment occurs after May 31, 1996
but on or prior to May 31, 1997, one percent (1%) of the amount of the Loans
outstanding prior to such prepayment. Any Prepayment Fee shall be paid by the
Borrower to the Lenders as liquidated damages for the loss of the bargain and
shall not constitute a penalty.
SECTION 3.3.3. Application. Each prepayment or repayment of
principal which is applied to the Term Loan, other than scheduled installments
under clause (c) of Section 3.3.1, shall be applied pro rata to the scheduled
installments due on the Term Loan under clause (c) of Section 3.3.1.
SECTION 3.3.4. Revolving Loans on Borrower's Behalf. The
Lenders are authorized to, and at their option may, make Revolving Loans on
behalf of the Borrower for payment of all fees, expenses, charges, costs,
principal and interest owed by the Borrower to the Lenders or the Agent under
this Agreement and the other Loan Documents. Such Revolving Loans shall be
made when and as the Borrower fails promptly to pay same, and all such
Revolving Loans shall constitute Revolving Loans made to the Borrower and
shall be secured by all of the Collateral.
SECTION 3.4. Interest. Interest on the outstanding
principal amount of the Loans and other outstanding Obligations shall accrue
and be payable in accordance with this Section 3.4.
SECTION 3.4.1. Rates. Subject to Section 3.4.3, Borrowings
shall accrue interest at the following rates per annum, at the election of the
Borrower pursuant to an appropriately delivered Borrowing Request or
Continuation/Conversion Notice:
(a) in the case of a Borrowing of Revolving Loans:
(i) during such periods as such Loan or portion thereof
is a Base Rate Loan, the ING Alternate Base Rate (as in effect from
time to time) plus 0.50%, and
(ii) during such periods as such Loan or portion thereof
is a Eurodollar Loan, for each Interest Period relating thereto, the
Eurodollar Rate for such Borrowing and Interest Period plus 2.25%;
(b) in the case of a Borrowing comprising the Term Loan:
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(i) during such periods as such Borrowing is a Base Rate
Loan, the ING Alternate Base Rate (as in effect from time to time)
plus 1.00%, and
(ii) during such periods as such Borrowing is a Eurodollar
Loan, for each Interest Period relating thereto, the Eurodollar Rate
for such Borrowing and Interest Period plus 2.50%.
SECTION 3.4.2. Continuation and Conversion Elections. By
delivering a Continuation/Conversion Notice to the Agent on or before 11:00
a.m., New York City time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three (3) nor more than five (5) Business
Days' notice, that all or any portion in an aggregate minimum amount of
$500,000 and an integral multiple of $100,000 of Revolving Loans or the Term
Loan be, in the case of Base Rate Loans, converted to Eurodollar Loans or
continued as Eurodollar Loans; provided, however, that:
(a) each such continuation or conversion shall be pro
rata among the applicable outstanding Term Percentages of the Term Loan or
Revolving Percentages of Revolving Loans, as the case may be, of all Lenders;
and
(b) no portion of the outstanding principal amount of any
Loan may be continued as, or converted into, a Eurodollar Loan when any Default
has occurred and is continuing.
The Agent shall give prompt telephonic notice to each Lender of the interest
rate determined pursuant to this Section 3.4.2 with respect to such Loans.
Absent delivery of a Continuation/Conversion Notice with respect to any
Eurodollar Loan at least three (3) Business Days before the last day of the
then current Interest Period with respect thereto, such Eurodollar Loan shall,
on such last day, automatically convert to a Base Rate Loan.
SECTION 3.4.3. Post-Default Rates. From and after the
occurrence of an Event of Default and during the continuance thereof, the
Borrower shall pay interest (after as well as before judgment) on the
outstanding principal amount of all Loans and other Obligations at a rate per
annum equal to the Post-Default Rate applicable to such Loans and Obligations.
SECTION 3.4.4. Payment Dates. Accrued interest on the Loans
shall be payable, without duplication:
(a) on Maturity;
(b) with respect to any portion of any Loan prepaid or
repaid pursuant to Section 3.3.1, on the date of such prepayment or repayment
is due as provided in Section 3.3.1 and, in the case of a voluntary prepayment,
on the date set forth in any notice required for such prepayment;
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(c) with respect to Base Rate Loans, on each Monthly
Payment Date, commencing with the first such day following the Closing Date;
(d) with respect to Eurodollar Loans, on the last day of
each applicable Interest Period (and if such Interest Period shall exceed three
months, also on the numerically corresponding day of the third calendar month
after the commencement of such Interest Period);
(e) with respect to any Base Rate Loans converted into
Eurodollar Loans on a day which is not a Monthly Payment Date, on the date of
such conversion; and
(f) on the date of acceleration of such Loan pursuant to
Section 7.2 or 7.3.
Interest accruing at any Post-Default Rate and, to the extent permitted by
applicable law, interest on overdue amounts (including overdue interest), shall
be payable upon demand.
SECTION 3.4.5. Rate Determinations. All determinations by
the Agent of the rate of interest applicable to any Loan shall be conclusive in
the absence of manifest error.
SECTION 3.4.6. Limitation on Types of Loans. Anything
herein to the contrary notwithstanding, if on or prior to the determination of
any Eurodollar Rate for any Interest Period:
(a) the Agent determines in good faith, which
determination shall be conclusive, that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate" are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Eurodollar Loans as provided
herein; or
(b) the Required Lenders determine in good faith, which
determination shall be conclusive, and notify the Agent that the relevant rates
of interest referred to in the definition of "Eurodollar Rate" upon the basis
of which the rate of interest for Eurodollar Loans for such Interest Period is
to be determined are not likely to cover adequately the cost to such Lenders of
making or maintaining Eurodollar Loans for such Interest Period;
then the Agent shall give the Borrower and each Lender prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans, to continue Eurodollar Loans or
to convert Base Rate Loans into Eurodollar Loans, and the Borrower shall, on
the last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Loans or such Loans shall be converted
into Base Rate Loans in accordance with Section 3.4.2 hereof.
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SECTION 3.4.7. Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes unlawful for any
Lender or its Applicable Lending Office to honor its obligation to make or
maintain Eurodollar Loans hereunder, then such Lender shall promptly notify the
Borrower thereof (with a copy to the Agent) and such Lender's obligation to
make or continue, or to convert Base Rate Loans into, Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 3.4.8 hereof shall be
applicable). If requested by the Borrower, any such Lender shall use
reasonable efforts to designate another Applicable Lending Office, provided
that such designation would not, in the discretion of such Lender exercised in
good faith, be materially disadvantageous to such Lender or in any manner
contrary to such Lender's policy.
SECTION 3.4.8. Treatment of Affected Loans. If the
obligation of any Lender to make Eurodollar Loans or continue, or to convert
Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to Sections
3.4.6 or 3.4.7 hereof, such Lender's Eurodollar Loans shall be automatically
converted into Base Rate Loans on the last day(s) of the then current Interest
Period(s) for Eurodollar Loans (or, in the case of a conversion required by
Sections 3.4.6 or 3.4.7 hereof, on such earlier date as such Lender may specify
to the Borrower with a copy to the Agent) and, unless and until such Lender
gives notice as provided below that the circumstances specified in Sections
3.4.6 or 3.4.7 hereof which gave rise to such conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans
have been so converted, all payments and prepayments of principal which would
otherwise be applied to such Lender's Eurodollar Loans shall be applied instead
to its Base Rate Loans; and
(b) all Loans which would otherwise be made or continued
by such Lender as Eurodollar Loans shall be made or continued instead as Base
Rate Loans and all Base Rate Loans of such Lender which would otherwise be
converted into Eurodollar Loans shall remain as Base Rate Loans.
Promptly after the circumstances specified in Sections 3.4.6 or 3.4.7 hereof
which gave rise to the conversion of such Lender's Eurodollar Loans pursuant to
this Section 3.4.8 no longer exist, such Lender shall give the Agent and the
Borrower notice thereof.
SECTION 3.4.9. Compensation. The Borrower shall pay to the
Agent for the account of each Lender, upon the request of such Lender through
the Agent, such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost or expense which
such Lender determines is attributable to:
(a) any payment, prepayment or conversion of a Eurodollar
Loan made by such Lender for any reason (including,
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without limitation, the acceleration of the Loans pursuant to Article 7 hereof)
on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any of the conditions precedent
specified in Article 4 hereof to be satisfied) to borrow a Eurodollar Loan from
such Lender on the date for such borrowing specified in the Borrowing Request
given pursuant to Section 3.1 hereof.
SECTION 3.5. Taxes. (a) Any and all payments by the
Borrower hereunder or under the Notes or any other Loan Document shall be made,
in accordance with this Section 3.5, free and clear of and without deduction
for any and all present or future Taxes. If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder or
under any Note to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.5), such Lender or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law;
(b) In addition, the Borrower agrees to pay any present
or future stamp or documentary taxes or intangibles taxes or any other excise
or property taxes, transfer taxes, charges or similar levies which arise from
any payment made hereunder or under the Notes or from the execution, delivery
or registration of, or otherwise with respect to this Agreement, the Notes, or
any other Loan Document;
(c) The Borrower will indemnify each Lender and the Agent
for the full amount of the taxes, charges and levies described in clauses (a)
and (b) of this Section 3.5 (including, without limitation, any such taxes,
charges and levies imposed by any jurisdiction on amounts payable under this
Section 3.5) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such taxes, charges and levies were
correctly or legally asserted. Payment under this clause (c) shall be made
within 30 days from the date such Lender or the Agent (as the case may be)
makes written demand therefor;
(d) Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its address referred to in
Section 9.2, the original or a certified copy of any receipt received by the
Borrower evidencing payment thereof;
(e) On or prior to the Closing Date and on or prior to
the first Business Day of each calendar year thereafter, each
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Foreign Lender shall provide the Agent and the Borrower with two properly
executed original Forms 4224 and 1001 (or any successor form) prescribed by the
Internal Revenue Service or other documents satisfactory to the Borrower and
the Agent, and properly executed Internal Revenue Service Forms W-8 or W-9, as
the case may be, certifying (i) as to such Foreign Lenders's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to such Foreign Lender hereunder and under
the Notes or (ii) that all payments to be made to such Foreign Lender hereunder
and under the Notes are subject to such taxes at a rate reduced to zero by an
applicable tax treaty. Each Foreign Lender agrees to provide the Agent and the
Borrower with new forms prescribed by the Internal Revenue Service upon the
expiration or obsolescence of any previously delivered form, or after the
occurrence of any event requiring a change in the most recent forms delivered
by it to the Agent and the Borrower;
(f) In the event that the Agent or any Lender receives a
refund of any taxes paid on its behalf by the Borrower in accordance with this
Section 3.5, the Agent or such Lenders, as the case may be, shall pay such
refund to the Borrower; and
(g) Without prejudice to the survival of any other
agreement hereunder, the agreements and obligations contained in this Section
3.5 shall survive the payment in full of principal and interest hereunder and
under the Notes.
SECTION 3.6. Payments, Interest Rate Computations, Other
Computations, etc. All payments by the Borrower pursuant to this Agreement,
the Notes or any other Loan Document, in respect of principal or interest on
the Term Notes, shall be made by the Borrower to the Agent for the account of
the Lenders, pro rata according to their respective unpaid principal amounts of
the Term Notes and, in respect of principal or interest on the Revolving Notes,
shall be made by the Borrower to the Agent for the account of the Lenders, pro
rata according to their respective unpaid principal amounts of the Revolving
Notes. The payment of the commitment fee referred to in Section 2.3 shall be
made by the Borrower to the Agent for the account of the Lenders entitled
thereto pro rata according to their respective Revolving Percentages. All
other amounts payable to the Agent or any Lender under this Agreement or any
other Loan Document (except under Section 2.4) shall be paid to the Agent for
the account of the Person entitled thereto. All such payments required to be
made to the Agent shall be made, without setoff, deduction or counterclaim, not
later than 2:00 p.m., New York City time, on the date due, in immediately
available funds, to such account as the Agent shall specify from time to time
by notice to the Borrower. Funds received after that time shall be deemed to
have been received by the Agent on the next following Business Day. The Agent
shall promptly remit in the type of funds received to each Lender notified to
the Agent its share, if any, of such payments received by the Agent for the
account of such Lender or holder.
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All interest and fees shall be computed on the basis of the actual number of
days (including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of 360
days (365 days in the case of interest computed on the basis of the ING
Alternate Base Rate). Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall be made on the
immediately preceding Business Day.
SECTION 3.7. Proration of Payments. If any Lender shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of principal of or interest on
any Loan or other Obligations in excess of such Lender's or holder's pro rata
share of payments then or therewith obtained thereon by all Lenders, such
Lender which has received in excess of its pro rata share shall purchase from
the other Lenders such participations in such Notes or other Obligations held
by them as shall be necessary to cause such purchaser to share the excess
payment or other recovery ratably with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 3.7 may, to the fullest extent permitted by
law, exercise all its rights of payment (including pursuant to Section 3.8)
with respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.7 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.7 to share in the benefits of any recovery on such secured claim.
SECTION 3.8. Setoff. In addition to and not in limitation
of any rights of any Lender under applicable law, each Lender shall, upon the
occurrence and during the continuance of any Event of Default, have the right
to appropriate and apply to the payment of the Obligations owing to it (whether
or not then due), and (as security for such Obligations) the Borrower hereby
grants to each Lender, a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter
maintained with such Lender; provided, however, that any such appropriation and
application shall be subject to the provisions of Section 3.8.
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SECTION 3.9. Use of Proceeds.
(a) The Borrower shall use the proceeds of the Term Loan
and Revolving Loans made on the Closing Date (i) to pay the Estimated Purchase
Price, and (ii) to pay costs and expenses arising in connection with the
transactions contemplated hereby which are set forth in Item 2 ("Transaction
Costs") of the Disclosure Schedule (subject to the Agent's approval of such
costs and expenses), all as more specifically described in Item 3 ("Sources and
Uses") of the Disclosure Schedule.
(b) The Borrower shall use the proceeds of the Revolving
Loans made after the Closing Date for its continuing working capital needs.
(c) No part of the proceeds of any Loans shall be used
for any purpose which violates Regulations G, T, U or X of the F.R.S. Board.
ARTICLE 4.
CONDITIONS TO LOANS
SECTION 4.1. Initial Loans. The obligations of the
Lenders to fund the initial Borrowings of Loans on the Closing Date, shall be
subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 4.1, except as the Required Lenders shall
otherwise consent.
SECTION 4.1.1. Resolutions, etc. The Agent shall have
received:
(a) a certificate, dated the date hereof, with
counterparts for each Lender, of the Secretary or an assistant secretary of
each Loan Party as to:
(i) resolutions of its Board of Directors, then in full
force and effect authorizing the execution, delivery and performance
of the Loan Documents to which such Loan Party is a party and the
related transactions contemplated thereby, and
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to the Loan Documents to which
it is party, upon which certificate each Lender may conclusively rely
until it shall have received further certificates of the Secretary or
an assistant secretary of such Loan Party cancelling or amending such
prior certificates;
(b) copies of the Organic Documents of each Loan Party
certified by, in the case of the charters, the appropriate Governmental
Authority of the State of such Loan Party's
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incorporation and, in the case of its other Organic Documents, such Loan
Party's Secretary or assistant secretary, which documents shall be satisfactory
to the Agent;
(c) a so-called "good standing" certificate with respect
to each Loan Party from the appropriate Governmental Authority of the State of
its incorporation;
(d) evidence of qualification of each Loan Party to do
business in each other jurisdiction in which the failure to so qualify could
reasonably result in a Material Adverse Change; and
(e) such other documents (certified if requested) as the
Agent or the Required Lenders may reasonably request, with respect to this
Agreement, the Notes, any other Loan Document, the transactions contemplated
hereby and thereby, or any Organic Document, Contractual Obligation of the
Borrower, the Holding Company or the Subsidiaries, or Approval.
SECTION 4.1.2. Notes. The Agent shall have received for the
account of each Lender, such Lender's Notes, in each case duly executed and
delivered pursuant to clauses (a) and (b) of Section 3.2.
SECTION 4.1.3. Borrowing Base Certificate. The Agent shall
have received a Borrowing Base Certificate dated as of the Closing Date from
the chief financial Authorized Officer of the Borrower.
SECTION 4.1.4. Capital Contribution, etc. Morgan Stanley
and the Eligible Investors shall have contributed to the capital of the Holding
Company, in exchange for all of the issued and outstanding shares of Stock
(other than the Warrants and the Original Management Options) of the Holding
Company, the amount of $5,240,000, of which $4,000,000 shall have been
contributed by Morgan Stanley and of which $1,000,000 shall have been
contributed by the Eligible Investors in exchange for preferred Stock of the
Holding Company having relative rights and preferences satisfactory to the
Required Lenders, and of which $240,000 shall have been contributed by the
Eligible Investors in exchange for common Stock of the Holding Company; the
Holding Company shall have issued not less than $9,000,000 in principal amount
of Subordinated Indebtedness pursuant to the Subordinated Debt Documents; the
Holding Company shall have contributed to the capital of Mergerco I, in
exchange for all of the issued and outstanding shares of Stock of Mergerco I,
the amount of $14,140,000 and shall have contributed to the capital of Mergerco
II, in exchange for all of the issued and outstanding shares of Stock of
Mergerco II, the amount of $100,000; and 74.07% of the issued and outstanding
Stock of the Holding Company shall have been issued to Morgan Stanley and
25.93% of the issued and outstanding Stock of the Holding Company shall have
been issued to Eligible Investors.
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SECTION 4.1.5. Release of Liens on Assets. All Indebtedness
of the Milestone Companies described in Item 5 ("Indebtedness to be
Refinanced") of the Disclosure Schedule shall have been repaid in full and all
holders of such Indebtedness shall have acknowledged such repayment, released
Borrower and its Subsidiaries from any liability in respect of such
Indebtedness, and released all Liens on the assets securing such Indebtedness
pursuant to UCC-3 termination statements and other Instruments as shall be
suitable or appropriate in connection therewith.
SECTION 4.1.6. No Contest, etc. On the Closing Date, no
litigation, arbitration, governmental investigation, injunction, proceeding or
inquiry shall be pending or, to the knowledge of the Borrower, threatened
which:
(a) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, the transactions
contemplated by or in connection with the Acquisition Agreement, the Warrant
Documents, this Agreement or any Loan Document; or
(b) would, in the reasonable opinion of the Agent or the
Required Lenders, be materially adverse to any of the parties hereto with
respect to the transactions contemplated hereby;
No litigation set forth in Item 5 ("Litigation") of the Disclosure Schedule in
the reasonable opinion of the Agent, could reasonably result in a Material
Adverse Change or give rise to any liability on the part of the Agent or any
Lender in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.
SECTION 4.1.7. Certificate as to Completed Conditions,
Warranties, No Default, etc. The Agent shall have received a certificate,
dated the Closing Date, with counterparts for each Lender, of the chief
financial Authorized Officer of the Borrower, to the effect that:
(a) all conditions precedent set forth in this Section
4.1 have been satisfied;
(b) all representations and warranties set forth in
Article 5 are true and correct in all material respects;
(c) all representations and warranties set forth in the
Loan Documents are true and correct in all material respects; and
(d) no Default has occurred and is continuing.
SECTION 4.1.8. Documents Relating to Equity Investments in
Holding Company, Subordinated Indebtedness, Management Incentive Plan, Founder
Performance Stock Purchase Agreements, and Stockholders' Agreement. The terms
and conditions of (a) each of the stock subscription agreements pursuant to
which the Stock of
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the Holding Company was issued to the Eligible Investors and Morgan Stanley,
(b) the Subordinated Debt Documents, (c) the Management Incentive Plan and
Founder Performance Stock Purchase Agreements and (d) the Stockholders'
Agreement, shall in each case be satisfactory in all respects to the Agent, and
the Agent shall have received copies of each of the foregoing documents
certified as true and correct by an Authorized Officer of the Borrower or the
Holding Company.
SECTION 4.1.9. Compliance with Requirements of Law. The
Agent shall have received evidence satisfactory to it that the Borrower is in
compliance in all material respects with all other Requirements of Law and has
obtained and maintains in full force and effect (a) all licenses, permits and
approvals issued by Governmental Authorities necessary to carry on its business
(except where the failure to have any such license, permit or approval could
not reasonably result in a Material Adverse Change), and (b) all Approvals.
SECTION 4.1.10. Opinions of Counsel. The Agent shall have
received opinion letters, dated the Closing Date and addressed to the Agent and
all Lenders, from
(a) Wilson, Sonsini, Goodrich & Rosati, P.C., counsel to
the Holding Company and its Subsidiaries, in form and substance satisfactory to
the Agent, and covering such matters as the Agent may reasonably request,
including, without limitation, the Acquisition; and
(b) Akin, Gump, Strauss, Hauer & Feld, counsel to the
Holding Company and its Subsidiaries in the State of Texas covering such
matters as the Agent may reasonably request.
SECTION 4.1.11. Closing Fees, Expenses, etc. The Agent shall
have received, for its own account, the facility fee payable pursuant to the
Facility Fee Letter and all costs and expenses which have been invoiced and are
payable upon the initial Borrowing pursuant to Section 9.3.
SECTION 4.1.12. Holding Company Guaranty and Subsidiary
Guaranty. The Agent shall have received the Holding Company Guaranty and the
Subsidiary Guaranty, duly executed by Authorized Officers of the Loan Parties
that are a party thereto.
SECTION 4.1.13. Security Documents and Perfection. The Agent
shall have received:
(a) The Security Agreement, duly executed by an
Authorized Officer of Mergerco I, Milestone, each of its Subsidiaries, Mergerco
II and Milestone Management;
(b) A satisfactory collateral assignment to the Agent,
for its benefit and the ratable benefit of the Lenders, of the Borrower's
rights under the Acquisition Agreement and all other
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documents executed or delivered by the Sellers pursuant to the Acquisition
Agreement, duly consented to by the Sellers;
(c) The Holding Company Pledge Agreement, the Borrower
Pledge Agreement and the Subsidiary Pledge Agreement, duly executed by the
chief executive Authorized Officers of the Holding Company, the Borrower and
Trucare, as the case may be;
(d) Evidence of all filings of the Financing Statements
with respect to the Security Agreement and other Security Documents; searches
or other evidence as to the absence of any perfected security interests or
Liens (except those previously disclosed to and consented to by the Lenders and
those to be released in accordance with Section 4.1.5); and evidence that all
other actions (including all actions necessary such that the Trademark
Assignment is acceptable for filing in the United States Patent and Trademark
Office and the payment of all documentary, intangibles, filing and recording
taxes and fees) with respect to the Liens created by the Security Documents
have been taken as are necessary or appropriate to perfect such Liens;
(e) A satisfactory assignment to the Agent, for its
benefit and the ratable benefit of the Lenders, of $3,000,000 face amount of
each of the insurance policies described in Section 4.1.17 (with respect to
which the insurer shall have executed and delivered to the Agent a written
consent); and
(f) All (i) stock certificates and undated stock powers
duly executed in blank relating thereto with respect to the pledged securities
under the Holding Company Pledge Agreement, the Borrower Pledge Agreement and
the Subsidiary Pledge Agreement, which pledged securities shall constitute all
outstanding Stock of the Borrower and the Subsidiaries and (ii) Subsidiary
Notes duly endorsed in blank pledged under the Borrower Pledge Agreement.
SECTION 4.1.14. Employment Agreements; Compensation. The
Agent shall have received copies of all employment agreements to which the
Borrower is a party, and the Agent shall be satisfied in all respects with the
levels of compensation (including, without limitation, fees, wages, salaries,
deferred payment arrangements, stock options, incentive plans and pension or
employee benefit contributions) paid to key members of management.
SECTION 4.1.15. Pension and Welfare Liabilities. The Agent
shall have received, with counterparts for each of the Lenders (i) the most
recent actuarial valuation report, if any, for each Single Employer Plan, if
any, and a copy of Schedule B to the Annual Report on Form 5500 of the Internal
Revenue Service, if any, for each Single Employer Plan, if any, most recently
filed with the Internal Revenue Service, and (ii) a report prepared by the
Borrower in form and substance satisfactory to the Agent and each Lender
detailing any liabilities of the Borrower and each Subsidiary and Commonly
Controlled Entity for post-retirement benefits under Plans which are welfare
benefit plans.
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SECTION 4.1.16. Insurance. The Agent shall have received
evidence satisfactory to it that the insurance maintained by the Borrower and
its Subsidiaries is issued by an insurance company with a Best's rating of "A"
or better and a financial size category of not less than XII, is in amounts
satisfactory to the Agent, under policies naming the Agent as loss payee (in
the case of casualty insurance policies) and as additional insured (in the case
of liability policies), and otherwise complies with the requirements of this
Agreement and the Security Documents.
SECTION 4.1.17. Key Man Insurance. The Borrower shall have
purchased "key-man" life insurance policies in the total amount of $3,000,000
on the life of Charles L. Allen.
SECTION 4.1.18. Warrant Documents. The Warrant Agreement,
Put and Call Agreement and Registration Rights Agreement shall have been duly
executed by each of the parties thereto, and the Warrants shall have been
delivered to ING (registered in such name(s) as ING may direct).
SECTION 4.1.19. Financial Information, etc. The Agent shall
have received for each Lender, the historical financial statements referred to
in Section 5.4, the Pro Forma Balance Sheet, the Fair Saleable Value Balance
Sheet and the Projections.
SECTION 4.1.20. Solvency, etc. The Fair Saleable Value
Balance Sheet shall show that the assets of the Borrower are at least
$12,000,000 greater than the liabilities of the Borrower (including all
liabilities and obligations of the Borrower, fixed or contingent, direct or
indirect, disputed or undisputed, and whether or not required to be reflected
on a balance sheet prepared in accordance with GAAP, except to the extent noted
thereon); and the Agent shall have received, with counterparts for each Lender,
a certificate of the chief financial Authorized Officer of the Borrower dated
the Closing Date, giving effect to the consummation of the transactions
contemplated by this Agreement, the Acquisition Agreement and the Warrant
Documents to occur on the Closing Date, and stating that, upon the occurrence
of such transactions (including, without limitation, the consummation of the
Acquisition, the making of Revolving Loans and the Term Loan and the issuance
of the Warrants), the Borrower will be Solvent.
SECTION 4.1.21. Acquisition. The Acquisition Agreement shall
remain in full force and effect and shall not have been amended, modified or
supplemented without the Required Lenders' prior written consent; all
conditions precedent to the consummation by the Borrower of the transactions
contemplated by the Acquisition Agreement shall have been fully satisfied or,
with the prior written consent of the Required Lenders, waived; the Borrower
shall have delivered to the Agent evidence satisfactory to the Agent that the
Acquisition shall be consummated simultaneously with the initial Borrowings,
substantially in
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accordance with the terms of the Acquisition Agreement; and the Borrower shall
have delivered to the Agent each of the following:
(a) resolutions of the boards of directors and, to the
extent required, the stockholders of the Holding Company, Mergerco I, Mergerco
II, Milestone, Milestone Management, and the Sellers, each certified by the
Secretary or an assistant secretary of the Holding Company, Mergerco I,
Mergerco II, Milestone, Milestone Management, and the Sellers, respectively, to
be duly adopted and in full force and effect on the Closing Date, authorizing
the execution, delivery and performance of the Acquisition Agreement;
(b) certified copies of all documents evidencing any
other necessary corporate action, consents and governmental approvals with
respect to the consummation of the transactions contemplated by the Acquisition
Agreement; and
(c) a certificate from the chief financial Authorized
Officer of Borrower to the effect that attached thereto are true and correct
copies of the Acquisition Agreement and each of the material documents,
instruments and agreements executed and delivered pursuant to the Acquisition
Agreement and making such statements of fact concerning the Acquisition and the
other transactions consummated pursuant to such agreements as the Agent shall
request.
SECTION 4.1.22. Management Contracts. The Agent shall have
received a certificate from an Authorized Officer of the Borrower to the effect
that attached thereto are true and correct copies of all Management Contracts
in effect on the Closing Date and making such statements of fact concerning the
Management Contracts as the Agent shall request.
SECTION 4.1.23. Stockholders' Agreement. The Agent shall
have received a certificate from an Authorized Officer of the Holding Company
to the effect that attached thereto are true and correct copies of the
Stockholders' Agreement and making such statements of fact concerning the
Stockholders' Agreement as the Agent shall request.
SECTION 4.1.24. Other Documents, Certificates, Etc. The
Agent shall have received such other documents, certificates, opinions of
counsel or other materials as it reasonably requests from any Loan Party.
SECTION 4.2. All Loans. Without duplication of any
conditions precedent required to be satisfied pursuant to Section 4.1, the
obligations of the Lenders to make any Loans, shall be subject to the
satisfaction of each of the additional conditions precedent set forth in this
Section 4.2.
SECTION 4.2.1. Compliance with Warranties, No Default, etc.
The representations and warranties set forth in Article 5
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shall have been true and correct in all material respects as of the date
initially made, and both before and after giving effect to the making of any
such Loan,
(a) such representations and warranties (excluding,
however, Section 5.7) shall be true and correct in all material respects with
the same effect as if then made;
(b) all representations and warranties set forth in the
Security Documents shall be true and correct in all material respects with the
same effect as if then made;
(c) no litigation, arbitration or governmental
investigation or proceeding, which is likely to succeed in the reasonable
opinion of the Required Lenders and which, if successful, could result in a
Material Adverse Change shall be pending or, to the knowledge of the Borrower,
threatened against the Borrower or any Subsidiary which was not disclosed
pursuant to Section 5.7;
(d) no material adverse development shall have occurred
in any such litigation, arbitration or governmental investigation or proceeding
so disclosed pursuant to Section 5.7 which renders such litigation, arbitration
or governmental investigation or proceeding likely to succeed in the reasonable
opinion of the Required Lenders and, if successful, could result in a Material
Adverse Change; and
(e) no Default shall have occurred and be continuing.
SECTION 4.2.2. Borrowing Request, etc. The Agent shall have
received a duly completed Borrowing Request in the case of a Borrowing of
Loans. The delivery of any such Borrowing Request, and the acceptance by the
Borrower of the proceeds of any such Loan, shall constitute a representation
and warranty by the Borrower that on the date of such request for a Loan, and
before and after giving effect to the making of such Loan and the application
of any proceeds of such Loan, all statements set forth in Section 4.2.1 are
true and correct. In the event that, in connection with the delivery of any
such Borrowing Request the Borrower is required to amend any Item of the
Disclosure Schedule in order that the statement set forth in clause (a) or (b)
of Section 4.2.1 shall be true and correct, the Borrower shall deliver to the
Agent at least three (3) Business Days prior to the date of the Borrowing
requested or to be requested, a request that such Item of the Disclosure
Schedule be amended, and the Agent shall promptly forward such request to the
Lenders. To the extent that the Required Lenders agree to such requested
amendment or otherwise agree to make any Loans after receipt of such request,
the representations and warranties proposed to be amended by such amendment to
the Disclosure Schedule will be deemed amended for purposes of this Agreement.
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SECTION 4.2.3. Satisfactory Legal Form. All documents
executed or submitted by or on behalf of the Borrower or any Subsidiary shall
be satisfactory in form and substance to the Agent and its counsel; the Agent
and its counsel shall have received all information, and such counterpart
originals or such certified or other copies of such Instruments, as the Agent
or its counsel may reasonably request; and all legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to counsel to
the Agent.
SECTION 4.2.4. Margin Regulations. The making of such Loan
and the use of the proceeds thereof shall not violate Regulations G, T, U and X
of the F.R.S. Board.
SECTION 4.2.5. Adverse Change. In the reasonable judgment
of the Agent and the Required Lenders, no Material Adverse Change shall have
occurred since the Closing Date.
SECTION 4.2.6. Change in Law. On the date of such Loan, no
change shall have occurred in applicable law, or in applicable regulations
thereunder or in interpretations thereof by any court or Governmental Authority
which, in the opinion of any Lender, would make it illegal for such Lender to
make the Loan required to be made on such date.
ARTICLE 5.
WARRANTIES, ETC.
SECTION 5. Warranties, etc. In order to induce the
Lenders and the Agent to enter into this Agreement, to engage in the
transactions contemplated herein and in the other Loan Documents and to make
the Loans, the Borrower represents and warrants to the Agent and each Lender as
set forth in this Article 5. Each and all of the representations and
warranties set forth in this Article 5 shall be true and correct, assuming and
after giving effect to the consummation of the Acquisition and the consummation
of the other transactions contemplated by this Agreement, the Loan Documents
and the Warrant Documents.
SECTION 5.1. Organization, Power, Authority, etc. Each of
the Borrower and its Subsidiaries (i) is a corporation validly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the failure to so qualify
could reasonably result in a Material Adverse Change, and (iii) has full power
and authority, and, except as set forth in Item 6 ("Governmental Licenses") of
the Disclosure Schedule, holds all governmental licenses, permits,
registrations and other approvals required under all Requirements of Law, to
own and hold under lease its property and to conduct its business as conducted
prior to the Closing Date and as contemplated to be conducted subsequent to the
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consummation of the Acquisition, including, without limitation, all
Accreditations, Medicaid Certifications, Medicare Certifications, and Health
Facility Licenses. The Borrower has full power and authority to enter into and
perform its Obligations under this Agreement, the Notes and each other Loan
Document executed or to be executed by it and to obtain Loans hereunder.
SECTION 5.2. Due Authorization. The execution and
delivery by the Borrower of this Agreement, the Notes and each other Loan
Document executed or to be executed by it, and the incurrence and performance
by the Borrower of the Obligations have been duly authorized by all necessary
corporate action, do not require any Approval (except those Approvals already
obtained), do not and will not conflict with, result in any violation of, or
constitute any default under, any provision of any Organic Document or
Contractual Obligation of any Loan Party or any law or governmental regulation
or court decree or order, and will not result in or require the creation or
imposition of any Lien on any Loan Party's properties pursuant to the
provisions of any Contractual Obligation of any Loan Party.
SECTION 5.3. Validity, etc. This Agreement is, and the
Notes and each other Loan Document executed by the Borrower will upon the due
execution and delivery thereof constitute, the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms subject to the effect of any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, and the
effect of general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
SECTION 5.4. Financial Information; Solvency.
(a) Except as disclosed in Item 7 ("Exceptions to GAAP")
of the Disclosure Schedule, all balance sheets, all statements of operations,
stockholders' equity and cash flows, and all other financial information of the
Borrower which have been or shall hereafter be furnished by or on behalf of the
Borrower to each Lender and the Agent for the purposes of or in connection with
this Agreement or any transaction contemplated hereby, including:
(i) the consolidated audited balance sheets of Trucare as
of May 31, 1992, September 30, 1993 and July 31, 1994, and the related
consolidated statements of income and cash flows for each of the three
(3) fiscal years of Trucare ending May 31, 1992, September 30, 1993
and July 31, 1994, together with the opinion thereon of Baird, Kurtz &
Dobson;
(ii) the unaudited consolidated balance sheets of
Milestone and Milestone Management as of September 30, 1992, September
30, 1993 and August 31, 1994, and the related consolidated statements
of income for each of the three (3) fiscal years of Milestone and
Milestone Management ending
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September 30, 1992, September 30, 1993 and August 31, 1994, together
with the reports of the chief financial officer of Milestone and
Milestone Management, respectively, in form and substance satisfactory
to the Agent;
(iii) the unaudited consolidated balance sheets of
Milestone and Milestone Management as of April 30, 1995 and the
related consolidated statements of income and cash flows for the
Fiscal Year to date period ending April 30, 1995;
(iv) the Pro Forma Balance Sheet; and
(v) the Projections;
have been prepared in accordance with GAAP consistently applied (except to the
extent items in the Pro Forma Balance Sheet and the Projections are based upon
estimates) throughout the periods involved and present fairly in all material
respects the matters reflected therein subject, in the case of unaudited
statements, to changes resulting from normal year-end audit adjustments and
except as to the absence of footnotes. As of the date hereof, neither Mergerco
I, Mergerco II, nor any of the Milestone Companies has material contingent
liabilities or material liabilities for taxes, long-term leases or unusual
forward or long-term commitments which are not reflected in the financial
statements described in clauses (i), (ii) and (iii).
(b) Giving effect to the consummation of the transactions
contemplated by the Acquisition Agreement, the consummation of the transactions
contemplated by this Agreement and the other Loan Documents (including the
making of Loans), and the consummation of the transactions contemplated by the
Warrant Documents, the Borrower is Solvent.
SECTION 5.5. Material Adverse Change. Since August 31,
1994, there has been no material adverse change in the condition (financial or
otherwise), operations, performance, business, properties or prospects of the
Borrower and its Subsidiaries, taken as a whole, or in any industry in which
the Borrower or any of its Subsidiaries is engaged in any material respect.
SECTION 5.6. Absence of Default. Neither the Borrower nor
any Subsidiary is in default in the payment of (or in the performance of any
obligation applicable to) any Indebtedness, or is in material default under any
regulation of any Governmental Agency or court decree or order, or is in
default under any Requirements of Law which default could reasonably result in
a Material Adverse Change.
SECTION 5.7. Litigation, Legislation, etc. Except as
disclosed in Item 5 ("Litigation") of the Disclosure Schedule, there is no
pending or, to the knowledge of the Borrower, threatened litigation,
arbitration or governmental investigation,
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proceeding or inquiry which, if adversely determined, could reasonably result
in a Material Adverse Change; and none of the proceedings set forth in such
Item 5 seeks to amend, modify or enjoin the transactions contemplated hereby
or, if adversely determined, could reasonably result in a Material Adverse
Change. There is no legislation, governmental regulation or judicial decision
that could reasonably result in a Material Adverse Change.
SECTION 5.8. Regulations G, T, U and X. Neither the
Borrower nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying Margin Stock (as defined in F.R.S. Board Regulation G or U), and no
assets of the Borrower or any Subsidiary consist of Margin Stock. The Loans
hereunder will not be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation G, T, U or X.
SECTION 5.9. Government Regulation. Neither the Borrower
nor any Subsidiary is an "investment company" within the meaning of the
Investment Holding Company Act of 1940, as amended, or a "holding company," or
a "subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or
subject to regulation under the Federal Power Act, the Interstate Commerce Act
or any other federal or state law limiting its ability to incur Indebtedness or
to execute, deliver or perform the Loan Documents to which it is party.
SECTION 5.10. Taxes. Each of the Borrower and its present
or past Subsidiaries has filed all tax returns and reports required by law to
have been filed by it and has paid all taxes and Charges thereby shown to be
owing, except any such taxes or Charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.
SECTION 5.11. Pension and Welfare Plans. Except as
disclosed in Item 8 ("Benefit Plans") of the Disclosure Schedule, (a) neither
the Borrower nor any Subsidiary or Commonly Controlled Entity has assumed any
material liability under (i) any employee benefit plan, fund, program,
arrangement, agreement or commitment disclosed in Schedule 5.17(a) of the
Acquisition Agreement, or (ii) any other employee benefit plan, fund, program,
arrangement, agreement or commitment maintained by or on behalf of or
contributed to by or on behalf of any entity or trade or business which,
together with any of such corporations, is treated as a single employer under
Sections 414(b), (c), (m) or (o) of the IRC. Neither the Borrower nor any
Subsidiary or Commonly Controlled Entity shall be subject (directly or
indirectly) to any material liability, tax or penalty whatsoever to any person
whomsoever with respect to any employee benefit plan, fund,
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program, arrangement, agreement or commitment described in clause (i) or (ii)
of the immediately preceding sentence.
(b) No Reportable Event which could reasonably result in
a Material Adverse Change has occurred during the six-year period prior to the
date on which this representation is made or deemed made with respect to any
Single Employer Plan. The Borrower, each Commonly Controlled Entity, each
Subsidiary, each Plan, and each trust maintained pursuant to any such Plan have
complied in all material respects with the applicable provisions of ERISA, the
IRC, and any other applicable laws. Except as disclosed in Item 8 ("Benefit
Plans") of the Disclosure Schedule, the present value of all "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under each
Single Employer Plan maintained by the Borrower, any Subsidiary or any Commonly
Controlled Entity (based on those assumptions that would be used in a
termination of each such Plan) did not, as of the last annual valuation date
for which an actuarial valuation report has been done, exceed the value of the
assets of such Plan as of such date. Except as disclosed in such Item 8,
neither the Borrower nor any Commonly Controlled Entity or Subsidiary has
incurred any liability to the PBGC or to any other Person under Section 4062,
4063 or Section 4064 of ERISA on account of the termination of, or its
withdrawal from, a Single Employer Plan, and no Lien has been imposed on the
assets of the Borrower or any Commonly Controlled Entity or Subsidiary under
Section 4068 of ERISA. To the knowledge of the Borrower and any Commonly
Controlled Entities and Subsidiaries, there does not exist any event or
condition which would permit the institution of proceedings to terminate any
Single Employer Plan pursuant to Section 4042 of ERISA. Except as disclosed in
Item 8 of the Disclosure Schedule, no "accumulated funding deficiency" (as
defined in Section 302 of ERISA or Section 412 of IRC), whether or not waived,
exists with respect to any Pension Plan. The Borrower and each Commonly
Controlled Entity and Subsidiary have timely made in full each quarterly
installment payment to any Pension Plan required under Section 302(e) of ERISA
or Section 412(m) of the IRC and have also made full and timely payment of any
other costs or expenses related to such a Plan. The Borrower and all Commonly
Controlled Entities and Subsidiaries have made full and timely payment of all
contributions to Multiemployer Plans required under ERISA, the IRC or
applicable collective bargaining agreements. Neither the Borrower nor any
Commonly Controlled Entity or Subsidiary has had a complete or partial
withdrawal from any Multiemployer Pension Plan and the liability to which the
Borrower or any Commonly Controlled Entity or Subsidiary would become subject
under ERISA if the Borrower or any such Commonly Controlled Entity or
Subsidiary were to withdraw completely from all Multiemployer Pension Plans as
of the valuation date most closely preceding the date hereof is not in excess
of $100,000. No such Multiemployer Pension Plan has been terminated or is in
Reorganization or Insolvent, nor, to the knowledge of the Borrower and any
Commonly Controlled Entities and Subsidiaries, is any such Multiemployer
Pension Plan likely to be terminated or to become in Reorganization or
Insolvent. To the
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knowledge of the Borrower and any Commonly Controlled Entities and
Subsidiaries, no "accumulated funding deficiency" (as defined in Section 302 of
ERISA or Section 412 of the IRC), whether or not waived, exists with respect to
any Multiemployer Plan. The present value (determined using assumptions which
are reasonable in respect of the benefits provided and the employees
participating) of the aggregate liability of the Borrower and each Subsidiary
and Commonly Controlled Entity for post-retirement benefits to be provided to
their current and former employees under Plans which are welfare benefit plans
(as defined in Section 3(1) of ERISA) is not in excess of $100,000. No written
notice of liability has been received with respect to the Borrower, any of its
Subsidiaries, the Holding Company, or any Plan for any "prohibited transaction"
(within the meaning of Section 4975 of the IRC or Section 406 of ERISA), nor
has any such prohibited transaction resulting in material liability to the
Borrower, any of its Subsidiaries or the Holding Company occurred. Neither the
Borrower nor any Subsidiary or Commonly Controlled Entity will, as a result of
consummating the transactions contemplated by this Agreement (pursuant to the
provisions of the Agreement, by operation of law or otherwise) (i) have
incurred or become liable for any tax assessed by the Internal Revenue Service
for any alleged violations of Section 4975 of the IRC or any civil penalty
imposed by the Department of Labor for any alleged violations of Section 406 of
ERISA, (ii) have caused or permitted to occur any "prohibited transaction"
within the meaning of such Section 4975 of the IRC or Section 406 of ERISA with
respect to any Plan for which no exemption is available or (iii) have incurred
any liability to the PBGC (other than ordinary and usual PBGC premium
liability) or any liability for complete or partial withdrawal to any
Multiemployer Plan. Neither the Holding Company, the Borrower nor any
Subsidiary is subject (directly or indirectly) to, and no facts exist which
could subject the Holding Company, the Borrower or any Subsidiary (directly or
indirectly) to, any other liability, penalty, tax or lien whatsoever, which
could reasonably result in a Material Adverse Change and which is directly or
indirectly related to any Plan, including, but not limited to, liability for
any damages or penalties arising under Title I or Title IV of ERISA, liability
for any tax or penalty resulting from a loss of deduction under Section 404 or
419 of the IRC, any tax or penalty under chapter 43 of the IRC, or any taxes or
penalties under any other applicable law, but excluding any liability to make
contributions or pay premiums to or under an ongoing Plan before the last due
date on which such contributions or premiums could be paid or made without
penalty or to pay benefits when due in accordance with Plan terms.
SECTION 5.12. Labor Controversies. Except as disclosed in
Item 9 ("Labor Controversies") of the Disclosure Schedule, there are no labor
controversies pending or, to the best knowledge of the Borrower, threatened,
relating to the Borrower or any Subsidiary. There is (i) no unfair labor
practice complaint pending against the Borrower, or any of its Subsidiaries or,
to the best knowledge of the Borrower, threatened against any of
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them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower, threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage is pending against the Borrower or
any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries and (iii) no union
representation question existing with respect to the employees of the Borrower
or any of its Subsidiaries. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all collective bargaining agreements
to which it is subject.
SECTION 5.13. Ownership of Properties; Collateral. (a)
Each of the Borrower and its Subsidiaries shall own good title to all of its
material personal properties and assets of any nature whatsoever, free and
clear of all Liens except as permitted pursuant to Section 6.2.3.
(b) The provisions of the Security Agreement are
effective to create in favor of the Agent for the benefit of the Agent and the
Lenders, a legal, valid and enforceable security interest in all right, title
and interest of the Loan Parties in the Collateral described therein, and, upon
the filing of the Financing Statements and any required filing in the United
States Patent and Trademark Office pursuant to Section 4.1.13, the Security
Documents will create a fully perfected first Lien on, and the security
interest in, all right, title and interest of the Loan Parties in all of the
Collateral described therein, to the extent that a security interest therein
can be perfected by such a filing, subject to no other Liens other than Liens
permitted by Section 6.2.3.
SECTION 5.14. Intellectual Property. Each of the Borrower
and its Subsidiaries owns or licenses all such Intellectual Property, and has
obtained assignments of all licenses and other rights, as the Borrower
considers necessary for or as are otherwise material to the conduct of the
business of the Borrower and its Subsidiaries as now conducted without,
individually or in the aggregate, any infringement upon rights of other Persons
which could reasonably result in a Material Adverse Change. All Intellectual
Property owned or licensed from third Persons described in this Section 5.14 is
set forth in Item 10 ("Intellectual Property") of the Disclosure Schedule.
SECTION 5.15. Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on behalf of the
Borrower in writing to the Agent or any Lender for purposes of or in connection
with this Agreement or any transaction contemplated hereby is true and accurate
in every material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Agreement by the
Agent or such Lender and such information is not incomplete by omitting to
state any material fact necessary to
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make such information not misleading. Neither this Agreement nor any document
or statement furnished to the Agent or any of the Lenders by or on behalf of
the Borrower contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not materially misleading. The Agent and the Lenders recognize that
the Projections are not to be viewed as facts and that actual results during
the period or periods covered by the Projections may differ from the projected
or forecasted results.
SECTION 5.16. Insurance. All policies of insurance in
effect of any kind or nature owned by or issued to the Borrower and its
Subsidiaries, including policies of life, fire, theft, product liability,
public liability, property damage, other casualty, employee fidelity, workers'
compensation, property and liability insurance, (a) as of the Closing Date are
listed in Item 11 ("Insurance") of the Disclosure Schedule, (b) are, together
with all policies of employee health and welfare and title insurance, in full
force and effect, (c) comply in all respects with the applicable requirements
set forth herein and in the Security Documents and (d) are of a nature and
provide such coverage as is customarily carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower and its Subsidiaries operate. Neither the Borrower nor any of its
Subsidiaries provides any of its insurance through self-insurance except as
disclosed in Item 11 of the Disclosure Schedule.
SECTION 5.17. Certain Indebtedness. Item 12
("Indebtedness") of the Disclosure Schedule specifies all Indebtedness of the
Borrower and its Subsidiaries as of the Closing Date which (a) is for borrowed
money, or (b) is not incurred in the ordinary course of the business of the
Borrower or any Subsidiary in a manner and to the extent consistent with past
practice, or (c) is material to the financial condition, operations,
businesses, properties or prospects of the Borrower or any Subsidiary.
SECTION 5.18. Environmental Matters. Except as disclosed
in Item 13 ("Environmental Matters") of the Disclosure Schedule to the best of
the Borrower's knowledge, the Borrower and each of its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws, and
there are no conditions or circumstances associated with the currently or
previously owned, operated, used or leased properties or current or past
operations of the Borrower or any Subsidiary which may give rise to
Environmental Liabilities and Costs which could reasonably result in a Material
Adverse Change or which may give rise to any Environmental Lien.
SECTION 5.19. No Burdensome Agreements. Neither the
Borrower nor any Subsidiary is a party to or has assumed any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to
any charter or other
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corporate restriction that could reasonably result in a Material Adverse
Change.
SECTION 5.20. Consents. Except as disclosed in Item 14
("Consents") of the Disclosure Schedule the Borrower and its Subsidiaries have
all material permits and governmental consents and approvals necessary under
Requirements of Law or, in the reasonable business judgment of the Borrower,
deemed advisable under Requirements of Law, in connection with the transactions
contemplated hereby and the ongoing business and operations of the Borrower and
its Subsidiaries.
SECTION 5.21. Contracts. Set forth in Item 15
("Contracts") of the Disclosure Schedule is an accurate and complete list of
all material Contractual Obligations of the Borrower and its Subsidiaries.
Each such material Contractual Obligation is in full force and effect in
accordance with the terms thereof. There are no material defaults by the
Borrower or any Subsidiary or, to the Borrower's knowledge after due inquiry,
any other default in existence under any such material Contractual Obligations,
in each case that could reasonably result in a Material Adverse Change.
SECTION 5.22. Employment Agreements. Set forth in Item 16
("Employment Contracts") of the Disclosure Schedule is a complete and accurate
list of each employment agreement to which the Borrower or any Subsidiary is a
party, or by which it is bound.
SECTION 5.23. Condition of Property. All of the assets and
properties owned by, leased to or used by the Borrower and its Subsidiaries
material to the conduct of their business are in adequate operating condition
and repair, ordinary wear and tear excepted, and are free and clear of known
defects except for defects which do not substantially interfere with the use
thereof in the conduct of normal operations.
SECTION 5.24. Subsidiaries. Item 17 ("Subsidiaries") of
the Disclosure Schedule sets forth all Subsidiaries of the Borrower as of the
Closing Date.
SECTION 5.25. Acquisition Agreement. The closing of the
transactions contemplated by the Acquisition Agreement shall occur on the
Closing Date simultaneously with the making of the initial Borrowings, and
Borrower has not waived or in any way amended, without the prior written
consent of the Agent, any condition to the obligations to consummate the
Acquisition. A true and complete copy of the Acquisition Agreement (including
all exhibits, schedules and amendments thereto) has been delivered to the
Agent. Borrower is not in default under the Acquisition Agreement or under any
instrument or document to be delivered in connection therewith. The
representations and warranties made in the Acquisition Agreement by Borrower,
the Sellers and the other Persons which are parties thereto are true and
correct in all
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material respects on and as of the Closing Date as though made on and as of
such date.
SECTION 5.26. Trade Relations. Except as disclosed in Item
18 ("Termination of Material Contracts") of the Disclosure Schedule, as of the
Closing Date, there exists no actual or, to the best of Borrower's knowledge,
threatened termination, cancellation or limitation of, or any modification or
change in, the business relationship of the Borrower with any customer or group
of customers of the Borrower.
SECTION 5.27. Medicare, Medicaid, Etc. (a) Except as set
forth in Item 19 ("Healthcare Certification") of the Disclosure Schedule, (i)
each Health Facility License, Medicaid Certification, Medicare Certification,
Medicaid Provider Agreement and Medicare Provider Agreement of the Borrower and
its Subsidiaries is in full force and effect and has not been amended or
otherwise modified, rescinded, revoked or assigned; (ii) the Borrower and its
Subsidiaries are in compliance with the requirements of Medicaid, Medicare and
CHAMPUS; (iii) no condition exists or event has occurred which, in itself or
with the giving of notice or lapse of time or both, would result in the
suspension, revocation, impairment, forfeiture, non-renewal of any such Health
Facility License, Medicaid Certification, Medicare Certification, Medicaid
Provider Agreement and Medicare Provider Agreement applicable to the Borrower
or its Subsidiaries, or such party's participation in any Medicaid, Medicare or
CHAMPUS, and there is no claim that any such participation or Contract is not
in full force and effect.
(b) The Medicaid and Medicare cost reports of the
Borrower and its Subsidiaries for all cost reporting periods ending on or
before September 30, 1992 have been examined and audited by (A) as to Medicaid,
the state agency, or other HCFA-designated agents or agents of such state
agency, charged with such responsibility or (B) as to Medicare, the Medicare
intermediary or other HCFA-designated agents charged with such responsibility.
ARTICLE 6.
COVENANTS
SECTION 6.1. Affirmative Covenants. The Borrower agrees
with each Lender that until the Revolving Loan Commitment has terminated and
all Obligations (other than Obligations that expressly survive the termination
of this Agreement pursuant to Section 9.5) have been paid and performed in
full, the Borrower will perform the Obligations set forth in this Section 6.1.
SECTION 6.1.1. Financial Information, etc. The Borrower
will furnish, or will cause to be furnished, to each Lender and to the Agent
copies of its financial statements, reports and information:
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(a) (i) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a consolidated
and consolidating balance sheet at the close of such Fiscal Year, and
related consolidated and consolidating statements of operations,
retained earnings, and cash flows for such Fiscal Year, of Borrower
and its Subsidiaries (with comparable information at the close of and
for the prior Fiscal Year), certified (in the case of consolidated
statements) without qualification by one of the "Big 6" accounting
firms or other independent public accountants reasonably satisfactory
to the Agent, together with a report containing a description of
projected business prospects (including capital expenditures) and
management's discussion and analysis of financial condition and
results of operation of Borrower and its Subsidiaries;
(ii) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a letter report
of such independent public accountants at the close of such Fiscal
Year to the effect that it has reviewed the provisions of this
Agreement and the most recent Compliance Certificate being furnished
pursuant to clause (a)(iii) and is not aware of any miscalculation in
such Compliance Certificate relating to the financial tests set forth
in Section 6.2.4 or relating to the calculation of Excess Cash Flow,
except such miscalculation or default, if any, as may be disclosed in
such statement; and
(iii) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a Compliance
Certificate calculated as of the computation date at the close of such
Fiscal Year; and
(b) promptly when available and in any event within
thirty (30) days after the close of each calendar month of each Fiscal Year:
(i) consolidated and consolidating balance sheets at the
close of such month, and consolidated and consolidating statements of
operations, retained earnings, and cash flows for such month and for
the period commencing at the close of the previous Fiscal Year and
ending with the close of such month, of Borrower and Subsidiaries
(with comparable information at the close of and for the corresponding
month of the prior Fiscal Year and for the corresponding portion of
such prior Fiscal Year), certified by the principal accounting or
chief financial Authorized Officer of the Borrower, together with a
description of projected business prospects (including capital
expenditures) and a brief report containing management's discussion
and analysis of the financial condition and results of operations of
the Borrower and its Subsidiaries (including a discussion and analysis
of any changes compared to prior results);
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(ii) updates to the business plan described in clause (e)
hereof for the remaining term of Borrower's then current Fiscal Year;
and
(c) within thirty (30) days after the close of each
Fiscal Quarter, a Compliance Certificate calculated as of the computation date
at the close of such month;
(d) promptly upon receipt thereof, copies of all detailed
financial and management reports submitted to Borrower by its independent
public accountants in connection with each annual or interim audit made by such
independent public accountants of the books of Borrower or any Subsidiary;
(e) within ten (10) days prior to the end of each Fiscal
Year of the Borrower, a business plan of the Borrower and its Subsidiaries, in
form, scope and detail reasonably satisfactory to the Required Lenders, for the
twelve (12) months following the end of such Fiscal Year, including
consolidated and consolidating operating budgets prepared on a monthly basis
for such Fiscal Year, which budgets shall include estimated capital
expenditures and other costs to be incurred by the Borrower and its
Subsidiaries, on a consolidated and consolidating basis, during the applicable
Fiscal Year, in each case, with accompanying detail, together with a report
containing management's discussion and analysis of the projected financial
condition and results of operations of the Borrower and its Subsidiaries;
(f) promptly after approved by the Borrower's or Holding
Company's Board of Directors, any updates or revisions to any business plan
described in the preceding clause (e), in addition to those described in clause
(b)(ii) above;
(g) (i) on or before the last Business Day of each
calendar month, a Borrowing Base Certificate as of the last day of the
preceding calendar month and (ii) following a request by the Agent, within one
(1) Business Day, a Borrowing Base Certificate as of the day of such request;
(h) promptly upon the sending or filing thereof, copies
of all reports that the Holding Company or Borrower sends to its security
holders generally, and copies of all reports and registration statements that
the Holding Company or Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange;
(i) within ninety (90) days after the Closing Date, an
audited balance sheet of the Borrower as at the Closing Date, certified without
qualification by Ernst & Young, and in form and scope reasonably satisfactory
to the Required Lenders;
(j) together with the audited balance sheet referenced in
clause (i) above, a calculation of any "Excess Receivables" (as such term is
defined in Schedule 3.5 of the Acquisition Agreement)
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and a listing of all additional "Future Receivables" (as such term is defined
in Schedule 3.5 of the Acquisition Agreement) to be assigned to the Sellers as
a result of such Excess Receivables, specifying the amounts, applicable
Management Contracts and periods for such Future Receivables;
(k) such other information with respect to the financial
condition, business, property, assets, revenues and operations of the Borrower
and any Subsidiary as the Agent or the Required Lenders may from time to time
reasonably request.
SECTION 6.1.2. Maintenance of Corporate Existence, etc.
Except as permitted by Section 6.2.10, the Borrower will cause to be done at
all times all things necessary to maintain and preserve the corporate
existences of the Borrower and each Subsidiary.
SECTION 6.1.3. Foreign Qualification. The Borrower will,
and will cause each Subsidiary to, cause to be done at all times all things
necessary to be duly qualified to do business and be in good standing as a
foreign corporation in each jurisdiction where the failure to so qualify could
reasonably result in a Material Adverse Change. The Borrower will cause each
of its agents, if any, to be duly qualified to do business in, and at all times
comply with all applicable Requirements of Law of each jurisdiction where the
failure to so qualify or comply could reasonably result in a Material Adverse
Change. The Borrower shall use its best efforts to cause all lobbyists with
whom Borrower has entered into agreements at all times to be appropriately
registered in, and to otherwise comply with all Requirements of Law of each
jurisdiction where the failure to be so registered or to so comply could result
in a Material Adverse Change.
SECTION 6.1.4. Payment of Taxes, etc. The Borrower will,
and will cause each Subsidiary to, pay and discharge, as the same become due
and payable, (a) all Charges against it or on any of its property, as well as
claims of any kind which, if unpaid, might become a Lien upon any one of its
properties, and (b) all lawful claims for labor, materials, supplies, services
or otherwise before any thereof become a default; provided, however, that the
foregoing shall not require the Borrower or any Subsidiary to pay or discharge
any such Charge or claim so long as it shall be diligently contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves in accordance with GAAP with respect
thereto.
SECTION 6.1.5. Insurance. In addition to any insurance
required to be maintained pursuant to any other Loan Document, the Borrower
will, and (with respect to the insurance described in clauses (a) and (b)
below) will cause each Subsidiary to, maintain or cause to be maintained with
insurance companies with a Best's rating of "A" or better:
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(a) insurance with respect to its properties and business
against such casualties, contingencies and liabilities (including, without
limitation, business interruption insurance) and of such types and in such
amounts as is acceptable to the Agent and the Lenders and will furnish to the
Agent, annually at the policy renewal date, a certificate of an Authorized
Officer setting forth the nature and extent of all insurance maintained by the
Borrower and its Subsidiaries in accordance with this Section;
(b) stop loss insurance indemnifying the Borrower and its
Subsidiaries, collectively, for claims made under its employee health insurance
plans in excess of $75,000 for any one employee and for claims made under its
employee health insurance plans during any plan year for all employees in
excess of an amount equal to the product of $250 multiplied by the aggregate
number of employees of the Borrower and its Subsidiaries during such plan year;
(c) the "key-man" life insurance policies referred to in
Section 4.1.17, which policies shall at all times have a minimum face value of
not less than $3,000,000 in the aggregate.
Each such policy shall be issued by an insurance company with a Best's rating
of "A" or better and a financial size category of not less than XII, shall be
in effect on the Closing Date and the premiums for each such policy shall be
paid as such premiums shall come due. All policies of casualty insurance shall
contain an endorsement, in the form submitted to the Borrower by the Agent,
showing loss payable to the Agent, for its benefit and the ratable benefit of
the Lenders, as their interests may appear. All policies of liability
insurance, including, without limitation, all primary and umbrella liability
policies and over-redemption insurance policies (errors and omissions), shall
name the Agent, for its benefit and the ratable benefit of the Lenders, as
additional insureds. The Borrower shall retain all the incidents of ownership
of the insurance maintained pursuant to this Section 6.1.5, but shall not
borrow upon or otherwise impair its right to receive the proceeds of such
insurance, other than customary financing of annual premiums. So long as no
Event of Default has occurred and is continuing, the Borrower and its
Subsidiaries shall have the right to use the proceeds of casualty insurance to
repair or replace damaged or destroyed property and shall have the right to use
the proceeds of business interruption insurance for its ongoing business needs.
SECTION 6.1.6. Notice of Default, Litigation, etc. Upon a
Responsible Officer learning thereof, the Borrower will give prompt written
notice (with a description in reasonable detail) to the Agent of:
(a) the occurrence of any Default;
(b) the occurrence of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed
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in writing by the Borrower to the Lenders which has been instituted or, to the
knowledge of the Borrower, is threatened against, the Borrower or any
Subsidiary or to which any of its properties, assets or revenues is subject
which, if adversely determined, could reasonably result in a Material Adverse
Change;
(c) any material development which shall occur in any
litigation, arbitration or governmental investigation or proceeding previously
disclosed by the Borrower to the Lenders pursuant to Section 5.7 which renders
such litigation, arbitration or governmental investigation likely to succeed
and, if successful, could result in a Material Adverse Change;
(d) the occurrence of any other circumstance which could
reasonably result in a Material Adverse Change;
(e) the occurrence of any Loss; and
(f) (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Single Employer Plan, or any withdrawal
from, or the termination, Reorganization or Insolvency of any Multiemployer
Pension Plan, (ii) the institution of proceedings or the taking of any other
action by the PBGC or the Borrower or any Commonly Controlled Entity or
Subsidiary or any Multiemployer Pension Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency of, any Single Employer
Plan or Multiemployer Pension Plan, or the receipt of notice by the Borrower or
any Commonly Controlled Entity or Subsidiary that the institution of any such
proceedings or the taking of any such action is under consideration or
anticipated, (iii) the institution of any proceedings or other action by the
Internal Revenue Service or the Department of Labor with respect to the minimum
funding requirements of any Pension Plan, or the receipt of notice by the
Borrower or any Commonly Controlled Entity or Subsidiary that the institution
of any such proceedings or the taking of any such action is under consideration
or anticipated, (iv) the occurrence or expected occurrence of any event which
could result in the incurrence of unpredictable contingent event benefits under
Section 302 of ERISA or Section 412 of the IRC with respect to any Pension
Plan, (v) any event or condition which could increase the liability of the
Borrower or any Commonly Controlled Entity or Subsidiary with respect to
post-retirement welfare benefits under any Plan, or (vi) the occurrence of any
other event or condition with respect to any Plan which could subject the
Holding Company, the Borrower or any Subsidiary (directly or indirectly) to any
tax, penalty or liability under Title I or Title IV of ERISA, Section 404 or
419 and Chapter 43 of the IRC, or any other applicable laws, and in each case
in clauses (i) through (vi) above, such event or condition, together with all
other events or conditions, if any, could subject the Holding Company, the
Borrower or any Subsidiary (directly or indirectly) to any tax, fine, penalty,
or other liabilities in amounts which in the aggregate could reasonably result
in a Material Adverse Change. The Borrower will deliver to each of the Lenders
a true
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and complete copy of each annual report (Form 5500) of each Plan (other than a
Multi-Employer Plan) required to be filed with the Internal Revenue Service,
promptly after the filing thereof; and
(g) the condemnation or threat of condemnation with
respect to any property used or necessary in the conduct of the businesses of
the Borrower or any of its Subsidiaries.
SECTION 6.1.7. Books and Records. The Borrower will, and
will cause each Subsidiary to, keep books and records reflecting all of its
business affairs and transactions in accordance with GAAP and permit the Agent
and each Lender or any of their respective representatives, at reasonable times
and reasonable intervals upon reasonable notice, to visit all of its offices,
to discuss its financial matters with its officers and independent public
accountants and to examine (and, at the expense of the Borrower, photocopy
extracts from) any of its books or other corporate records. The Borrower shall
pay any fees of its independent public accountants incurred in connection with
the Agent's or any Lender's exercise of its rights pursuant to this Section
6.1.7. On or prior to the Closing Date the Borrower will deliver a letter to
its independent public accountants authorizing such public accountants to
discuss the Borrower's financial matters with the Agent and each Lender or any
of their respective representatives whether or not a representative of the
Borrower is present.
SECTION 6.1.8. Maintenance of Properties, Etc. The Borrower
will: (a) maintain and preserve, and cause each of its Subsidiaries to maintain
and preserve, all of its properties (real and personal and including all
intangible assets), except obsolete properties, which are used or necessary in
the conduct of its business in good working order and condition, ordinary wear
and tear excepted, except that this clause (a) shall not apply to any
circumstance where noncompliance, together with all other noncompliances, could
not reasonably result in a Material Adverse Change; and (b) to the extent
Borrower deems advisable in its reasonable business judgment, forthwith repair
or replace, at its own expense, any such property or asset that suffers a Loss.
SECTION 6.1.9. Maintenance of Licenses and Permits. The
Borrower will maintain and preserve, and will cause each of its Subsidiaries to
maintain and preserve, all Intellectual Property, rights, permits, licenses,
approvals and privileges issued under or arising under any Requirements of Law,
except that this Section 6.1.9 shall not apply to any circumstance where
noncompliance, together with all other noncompliances, could not reasonably
result in a Material Adverse Change.
SECTION 6.1.10. Employee Plans. The Borrower will at all
times comply in all material respects with the provisions of ERISA and the IRC
which are applicable to any of the Plans, and cause each of its Subsidiaries so
to do.
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SECTION 6.1.11. Environmental Management. The Borrower will
adopt and maintain prudent solid and hazardous waste management and disposal
practices, including at a minimum such practices as are required or dictated
from time to time by current and future Environmental Laws and Environmental
Permits.
SECTION 6.1.12. Compliance with Laws. The Borrower will, and
will cause each Subsidiary to, comply with all applicable Requirements of Law;
provided, however, that this Section 6.1.12 shall not apply to any circumstance
of noncompliance that together with all other noncompliances could not
reasonably result in a Material Adverse Change.
SECTION 6.1.13. Interest Rate Protection. Within 180 days
after the Closing Date, the Borrower shall obtain and thereafter maintain in
full force and effect, from ING, or from an Eligible Lending Institution, one
or more Interest Rate Contracts, protecting the Borrower against increases in
the Eurodollar Rate for an aggregate notional amount equal to 50% of the
principal amount of the Term Loan made on the Closing Date, for a term of three
(3) years. ING shall make available to the Borrower various proposals for
Interest Rate Contracts. Should the Borrower obtain any proposal for Interest
Rate Contracts from a source other than ING, the Borrower agrees that ING shall
have a right to provide such Interest Rate Contracts on the same terms as those
set forth in such proposal. The Borrower will collaterally assign such
Interest Rate Contracts to the Agent, for its benefit and the ratable benefit
of the Lenders, pursuant to documentation acceptable to the Agent, and the
Borrower may secure any net obligations of the Borrower under any such Interest
Rate Contracts on a pari passu basis with the Obligations.
SECTION 6.1.14. Real Estate. If the Borrower shall acquire a
fee or leasehold interest in real estate which the Agent reasonably designates
as material to the Borrower at any time prior to the date on which all
Commitments have terminated and all Obligations under this Agreement have been
paid in full, the Borrower will execute a first priority mortgage, deed of
trust or deed to secure debt or leasehold mortgage, leasehold deed of trust or
leasehold deed to secure debt, as appropriate, in form and substance reasonably
satisfactory to the Agent, in favor of the Agent, for its benefit and the
ratable benefit of the Lenders, and shall use its reasonable efforts to deliver
to the Agent such title insurance policies, surveys and landlords' estoppel
agreements with respect thereto as the Agent shall request.
SECTION 6.1.15. Merger of Milestone Management into
Milestone. On the Closing Date, Milestone Management shall merge with and into
Milestone, with Milestone being the surviving corporation and remaining a
wholly- owned Subsidiary of the Holding Company, pursuant to a certificate of
merger duly filed with the Secretary of State of Delaware.
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SECTION 6.1.16. Assumption Agreement. On the Closing Date,
Milestone shall deliver to the Agent the Assumption Agreement, duly executed by
an Authorized Officer of Milestone.
SECTION 6.2. Negative Covenants. The Borrower agrees with
each Lender that until all Commitments have terminated and all Obligations
(other than Obligations that expressly survive the termination of this
Agreement pursuant to Section 9.5) have been paid and performed in full, the
Borrower will perform the Obligations set forth in this Section 6.2.
SECTION 6.2.1. Business Activities. The Borrower will not,
and will not permit any Subsidiary to, engage in any business activity, except
those in which the Borrower is engaged on the Closing Date and such activities
as may be incidental or related thereto.
SECTION 6.2.2. Indebtedness. The Borrower will not, and
will not permit any Subsidiary to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness other than:
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) Indebtedness in respect of the Interest Rate
Contracts required pursuant to Section 6.1.14 to the extent such do not
constitute Obligations;
(c) obligations that constitute Indebtedness solely by
virtue of being secured by Liens permitted under Section 6.2.3;
(d) the Borrower's obligations to make the Post-Closing
Payment, if any, provided such Post-Closing Payment is made when due;
(e) Indebtedness in respect of liabilities resulting from
(i) endorsements of negotiable instruments in the ordinary course of business;
and (ii) surety bonds and other bonds issued for the Borrower's account in the
ordinary course of business;
(f) Indebtedness existing on the Closing Date and set
forth in Item 20 ("Existing Indebtedness") of the Disclosure Schedule;
(g) Indebtedness of any Subsidiary owing to the Borrower
or of the Borrower owing to any Subsidiary of the Borrower, provided that such
Indebtedness is evidenced by a demand promissory note that is pledged to the
Agent, for its benefit and the benefit of the Lenders, as security for the
Obligations pursuant to the Borrower Pledge Agreement, or as security for the
obligations of such Subsidiary under the Subsidiary Guaranty pursuant to the
Subsidiary Pledge Agreement;
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(h) Capitalized Lease Liabilities provided that (i) the
aggregate amount thereof which in accordance with GAAP is attributable to
principal, together with the aggregate outstanding principal amount of all
Purchase Money Indebtedness of the Borrower and its Subsidiaries, does not
exceed $1,000,000 at any one time outstanding, (ii) payments under each
capitalized lease giving rise to such Capitalized Lease Liabilities shall be
made in equal periodic installments, (iii) the term of each capitalized lease
giving rise to such Capitalized Lease Liabilities shall not be less than three
years and (iv) such Capitalized Lease Liabilities are permitted under Section
6.2.5;
(i) Purchase Money Indebtedness provided that (i) the
amount of such Indebtedness, together with the amount of any outstanding
Capitalized Lease Liabilities of the Borrower and its Subsidiaries that in
accordance with GAAP are attributable to principal, does not exceed $1,000,000
at any one time outstanding, (ii) such Indebtedness provides for the payment of
principal in equal periodic installments, (iii) each issue of such Purchase
Money Indebtedness shall have a maturity date that is not earlier than three
years from the date of incurrence, and (iv) the purchase of the equipment
financed by such Purchase Money Indebtedness is permitted under Section 6.2.5;
(j) Indebtedness representing the obligation of the
Borrower to assign to the Sellers from time to time certain Accounts as
provided in Section 3.5 and Schedule 3.5 of the Acquisition Agreement; and
(k) extensions, refinancings, replacements and renewals
of any of the foregoing items described in clauses (a) through (i) above,
provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon the Borrower or
its Subsidiaries, as the case may be.
SECTION 6.2.3. Liens. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens in favor of the Agent or the Lenders granted
pursuant to any Loan Document;
(b) Liens identified in Item 21 ("Permitted Liens") of
the Disclosure Schedule evidencing rights of lessors in leased equipment and/or
purchase money liens on specific items of equipment;
(c) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable with penalty
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
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(d) Liens of carriers, warehousemen, mechanics, and
materialmen incurred in the ordinary course of business for sums not overdue or
being contested in good faith by appropriate proceedings (which proceedings
have the effect of preventing the forfeiture or sale of the asset subject to
such Lien) and for which adequate reserves shall have been set aside on its
books;
(e) Liens (other than Liens arising under ERISA or
Section 412(n) of the Code) incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms
of governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds;
(f) judgment Liens with respect to judgments to the
extent such judgments do not constitute an Event of Default described in
Section 7.1.9;
(g) Liens which arise by operation of law under Article 2
of the UCC in favor of unpaid sellers of goods, or liens in items or any
accompanying documents or proceeds of either arising by operation of law under
Article 4 of the UCC in favor of a collecting bank;
(h) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and other restrictions,
charges or encumbrances (whether or not recorded) affecting the use of
property, which do not materially detract from the value of such property or
impair the use thereof;
(i) Liens upon any equipment acquired by the Borrower or
any of its Subsidiaries after the Closing Date to secure Indebtedness permitted
under clause (i) of Section 6.2.2 or arising by virtue of a capital lease
permitted under clause (h) of Section 6.2.2;
(j) Leases and subleases granted to others in the
ordinary course of business not interfering in any material respect with any
business of the Borrower or any of its Subsidiaries;
(k) Liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with arrangements
entered into with banks in the ordinary course of business;
(l) Liens securing financed annual insurance premiums so
long as such Liens are confined solely to the proceeds of the insurance
purchased with such premiums; and
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(m) extensions, renewals or replacements of any Lien
referred to in paragraphs (a) through (h) and (j) through (l) above, provided
that the principal amount of the obligation secured thereby is not increased
and that any such extension, renewal or replacement is limited to the property
originally encumbered thereby.
SECTION 6.2.4. Financial Condition. The Borrower hereby
covenants and agrees as set forth below:
(a) Fixed Charge Coverage Ratio. The Borrower, with
respect to the twelve-month period ending on the last day of any Fiscal Quarter
will not permit its Fixed Charge Coverage Ratio to be less than the ratio set
forth opposite such Fiscal Quarter (for each Fiscal Quarter ending prior to May
31, 1996, such ratio to be calculated as provided in clause (f) of this Section
6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Ratio
--------------------- ------
<S> <C>
August 1995 0.8
November 1995 0.8
February 1996 1.0
May 1996 1.1
August 1996 1.3
November 1996 1.3
February 1997 1.4
May 1997, and each Fiscal Quarter thereafter 1.5
</TABLE>
(b) Senior Debt Service Coverage Ratio. The Borrower,
with respect to the twelve-month period ending on the last day of any Fiscal
Quarter will not permit its Senior Debt Service Coverage Ratio to be less than
the ratio set forth opposite such Fiscal Quarter (for each Fiscal Quarter
ending prior to May 31, 1996, to be calculated as provided in clause (f) of
this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Ratio
--------------------- -------
<S> <C>
August 1995 1.4
November 1995 1.7
February 1996 1.8
May 1996 1.9
August 1996 2.1
November 1996 2.1
February 1997 2.1
May 1997, and each Fiscal Quarter thereafter 2.2
</TABLE>
(c) Interest Coverage Ratio. The Borrower, with respect
to the twelve-month period ending on the last day of any Fiscal Quarter will
not permit its Interest Coverage Ratio to be less than the ratio set forth
below opposite such Fiscal Quarter (for each Fiscal Quarter ending prior to May
31, 1996,
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such ratio to be calculated as provided in clause (f) of this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Ratio
--------------------- -------
<S> <C>
August 1995 2.5
November 1995 3.0
February 1996 3.2
May 1996 3.5
August 1996 4.1
November 1996 4.5
February 1997 4.7
May 1997, and each Fiscal Quarter thereafter 5.4
</TABLE>
(d) Leverage Ratio. The Borrower will not permit the
ratio of the aggregate amount of Indebtedness of the Borrower and its
Subsidiaries then outstanding as of the last day of any Fiscal Quarter to
EBITDA of the Borrower and its Subsidiaries for the twelve-month period ending
on the last day of such Fiscal Quarter to be greater than the ratio set forth
opposite such Fiscal Quarter (for each Fiscal Quarter ending prior to May 31,
1996, such ratio to be calculated as provided in clause (f) of this Section
6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Ratio
--------------------- -------
<S> <C>
August 1995 4.6
November 1995 3.9
February 1996 3.6
May 1996 3.3
August 1996 2.8
November 1996 2.8
February 1997 2.5
May 1997, and each Fiscal Quarter thereafter 2.2
</TABLE>
(e) EBITDA. The Borrower, with respect to the
twelve-month period ending on the last day of any Fiscal Quarter will not
permit EBITDA of the Borrower and its Subsidiaries for the twelve-month period
ending on the last day of such Fiscal Quarter to be less than the amount set
forth opposite such Fiscal Quarter (for each Fiscal Quarter ending prior to May
31, 1996, such amount to be calculated as provided in clause (f) of this
Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Amount
--------------------- ---------------
<S> <C>
August 1995 $ 802,000
November 1995 $ 1,876,000
February 1996 $ 2,998,000
May 1996 $ 4,291,000
August 1996 $ 4,879,000
November 1996 $ 4,879,000
February 1997 $ 5,173,000
May 1997, and each Fiscal Quarter thereafter $ 5,629,000
</TABLE>
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<PAGE> 83
(f) Calculations for Stub Periods. Notwithstanding any
thing contained herein to the contrary, for any period ending prior to May 31,
1996, calculation of all items relating to income or expense (including,
without limitation, EBITDA, Senior Interest Expense, repayments of the Term
Loan pursuant to clause (c) of Section 3.3.l and increases or decreases in
working capital) shall be made for the period commencing on May 31, 1995 and
ending on the date of determination.
SECTION 6.2.5. Capital Expenditures. The Borrower will not,
and will not permit any Subsidiary to make or commit to make Consolidated
Capital Expenditures, except that, during any Fiscal Year, the Borrower and its
Subsidiaries may make Consolidated Capital Expenditures (including the amount
of Capitalized Lease Liabilities incurred during such Fiscal Year that in
accordance with GAAP is attributable to principal) which in the aggregate do
not exceed the amount set forth below opposite such Fiscal Year (in the case of
the 1995 Fiscal Year, for the period commencing on the Closing Date to the end
of such Fiscal Year):
<TABLE>
<CAPTION>
Fiscal Year: Amount
----------- ----------------
<S> <C>
1995 $ 250,000
1996 $ 275,000
1997 $ 375,000
1998 $ 450,000
1999 $ 450,000
2000 $ 450,000;
</TABLE>
provided, however, that during any Fiscal Year, Consolidated Capital
Expenditures of the Borrower and its Subsidiaries paid in cash (i.e. not
financed by the incurrence of Capitalized Lease Liabilities or Purchase Money
Indebtedness) shall not exceed in the aggregate the amount the set forth below
opposite such Fiscal Year (in the case of the 1995 Fiscal Year, for the period
commencing on the Closing Date to the end of such Fiscal Year):
<TABLE>
<CAPTION>
Fiscal Year: Amount
----------- ----------------
<S> <C>
1995 $ 75,000
1996 $ 200,000
1997 $ 200,000
1998 $ 200,000
1999 $ 200,000
2000 $ 200,000;
</TABLE>
provided further, however, that expenditures from insurance proceeds received
upon the occurrence of a Loss which are made to replace or repair damaged or
destroyed assets will not be included in the foregoing calculation.
SECTION 6.2.6. Lease Obligations. The Borrower will not,
and will not permit any Subsidiary to, create or suffer to
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exist any obligation for the payment of rent for any property under any
operating lease or agreement to lease having a term of one year or more, except
for (a) leases in existence on the Closing Date and described in Item 22
("Leases") of the Disclosure Schedule, and (b) any lease of real property
entered into by the Borrower or any Subsidiary after the Closing Date in the
ordinary course of business; provided, however, that no such lease shall
subject the Borrower or any Subsidiary to Environmental Liabilities and Costs
and that the aggregate amount of payments due from the Borrower and its
Subsidiaries for all leases referred to in this Section 6.2.6, during the
Fiscal Years set forth below, is less than the amount set forth below opposite
such Fiscal Year (in the case of the 1995 Fiscal Year, for the period
commencing on the Closing Date to the end of such Fiscal Year):
<TABLE>
<CAPTION>
Fiscal Year: Amount
----------- ----------------
<S> <C>
1995 $ 200,000
1996 635,000
1997 730,000
1998 850,000
1999 965,000
2000 1,100,000
</TABLE>
SECTION 6.2.7. Investments. The Borrower will not, and will
not permit any Subsidiary to, make, incur, assume or suffer to exist any
Investment in any other Person except:
(a) Cash Equivalent Investments;
(b) deposits for utilities, security deposits under
leases and similar prepaid expenses; and
(c) Accounts arising in the ordinary course of business;
(d) Investments existing on the Closing Date and
disclosed in Item 23 ("Existing Investments") of the Disclosure Schedule;
(e) Investments by the Borrower in its Subsidiaries to
the extent such Investments are evidenced by demand promissory notes in
principal amounts equal to the amount of such Investments, payable to the
Borrower and pledged by the Borrower in favor of the Agent pursuant to the
Borrower Pledge Agreement;
(f) Investments by Subsidiaries of the Borrower in the
Borrower to the extent such Investments are evidenced by demand promissory
notes in principal amounts equal to the amount of such Investments, payable to
such Subsidiaries and pledged by such Subsidiaries in favor of the Agent
pursuant to the Subsidiary Pledge Agreement;
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<PAGE> 85
(g) Investments (including debt obligations) received in
connection with a bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business, provided that if such
Investments are evidenced by promissory notes or other instruments, such are
pledged to the Agent, for its benefit and the benefit of the Lenders, pursuant
to the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as the
case may be;
(h) Investments arising under Interest Rate Contracts;
(i) Investments consisting of deposit accounts of the
Borrower and its Subsidiaries maintained in the ordinary course of business;
and
(j) Investments accepted in connection with any
disposition permitted under Section 6.2.11.
SECTION 6.2.8. Restricted Payments, etc. The Borrower will
not declare, pay or make any dividend or distribution (in cash, property or
obligations) on any shares of any class of Stock (now or hereafter outstanding)
of the Borrower or on any warrants, options or other rights in respect of any
class of Stock (now or hereafter outstanding) of the Borrower or apply, or
permit any Subsidiary to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of any shares of any
class of Stock (now or hereafter outstanding), of the Holding Company, the
Borrower or any Subsidiary, or make any deposit for any of the foregoing,
except (a) cash dividends to the Holding Company for the purpose of funding the
repurchase of Stock of the Holding Company owned by employees or officers of
the Holding Company or the Borrower whose employment has terminated or the
repurchase of Stock from Eligible Investors pursuant to the Founder Performance
Stock Purchase Agreements, provided that such dividends shall not exceed in the
aggregate, for the period commencing from the Closing Date to the date of
determination, $100,000; (b) cash dividends to the Holding Company for the
payment by the Holding Company of federal and state income tax liability in
respect of the net income of the Borrower and its Subsidiaries; and (c) cash
dividends to the Holding Company for the payment of cash interest required to
be paid pursuant to the Subordinated Debt Documents.
SECTION 6.2.9. Take or Pay Contracts; Sale/Leasebacks.
(a) The Borrower will not, and will not permit any
Subsidiary to, enter into or be a party to any arrangement for the purchase of
materials, supplies, other property or services if such arrangement by its
express terms requires that payment be made by the Borrower or such Subsidiary
regardless of whether or not such materials, supplies, other properties or
services are delivered or furnished to it; and
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<PAGE> 86
(b) The Borrower will not enter into, or permit any
Subsidiary to enter into, any arrangement with any Person providing for the
leasing by the Borrower or one or more Subsidiaries of any property or assets,
which property or assets has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person.
SECTION 6.2.10. Consolidation, Merger, Subsidiaries, etc.
(a) The Borrower will not, and will not permit any
Subsidiary to, liquidate or dissolve, consolidate with, or merge into or with,
any other corporation, or purchase or otherwise acquire all or substantially
all of the assets or any Person (or of any division thereof), except that (i)
any such Subsidiary may liquidate or dissolve voluntarily into, and may merge
with and into, the Borrower or any other wholly-owned Subsidiary (so long as
the Borrower or such wholly-owned Subsidiary is the surviving corporation),
(ii) Mergerco I and Milestone may consummate the Merger, (iii) Mergerco II and
Milestone Management may consummate the Milestone Management Merger, and (iv)
Milestone and Milestone Management may consummate the merger required under
Section 6.1.15; and
(b) The Borrower will not, and will not permit any
Subsidiary to, create any Subsidiary or transfer any assets to any Subsidiary.
SECTION 6.2.11. Asset Dispositions, etc. The Borrower will
not, and will not permit any Subsidiary to, sell, transfer, lease or otherwise
dispose of, or grant options, warrants or other rights with respect to, any of
its assets (including accounts receivable and capital stock of Subsidiaries) to
any Person, unless:
(a) such disposition is made in the ordinary course of
business and consists of inventories;
(b) the Borrower shall have given fifteen (15) Business
Days' prior notice to the Agent of any proposed asset disposition, and shall
have described, in reasonable detail, the asset proposed to be disposed of, the
material terms of such sale, the sales price and the anticipated effect of such
disposition upon the cash-generating abilities of the Borrower, and the
Required Lenders shall have consented in writing to such disposition;
(c) such disposition constitutes a disposition of
obsolete or retired assets not used in the business of the Borrower and its
Subsidiaries;
(d) the disposition is in the ordinary course of business
and the net book value of the asset to be disposed of does not exceed $250,000,
and together with the net book value of all other assets disposed of by the
Borrower or any Subsidiary
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<PAGE> 87
pursuant to this clause (d) at any time during the then current Fiscal Year of
the Borrower does not exceed 5% of the consolidated net worth of the Borrower
and its Subsidiaries, and cash is received therefor (except to the extent the
Required Lenders may specifically consent in writing that other consideration
may be received for any portion thereof); or
(e) such disposition constitutes the assignment of a
"Current Receivable", "Future Receivable" or "Backup Receivable" (as such terms
are defined in Schedule 3.5 of the Acquisition Agreement), provided that, in
the case of the assignment of any such Future Receivable or Backup Receivable
not specifically identified in Scheduled 3.5 of the Acquisition Agreement, (i)
if such Future Receivable or Backup Receivable was not included in the
calculation of the Borrowing Base in the Borrowing Base Certificate then most
recently delivered to the Agent, the Borrower shall have given the Agent at
least one Business Days prior written notice to the Agent of such assignment,
and (ii) if such Future Receivable or Backup Receivable was included in the
calculation of the Borrowing Base in the Borrowing Base Certificate then most
recently delivered to the Agent, the Borrower shall have given the Agent at
least thirty (30) days prior written notice of such assignment, in each case
(A) identifying such Future Receivable or Backup Receivable by Management
Contract, amount and period for which such Future Receivable or Backup
Receivable was or is to be earned, and (B) in the case of any such Backup
Receivable, specifying the amount of the relevant "Shortfall" (as such term is
defined in Schedule 3.5 of the Acquisition Agreement) giving rise to the
obligation to assign such Backup Receivable and identifying the Account that
gave rise to such Shortfall.
SECTION 6.2.12. Modification of Organic Documents, etc. The
Borrower will not consent to any amendment, supplement or other modification of
any of the terms or provisions contained in, or applicable to, the Certificate
of Incorporation or the By-Laws of the Borrower, except for any amendment,
supplement or other modification which does not adversely affect the Borrower's
ability to pay or perform the Obligations.
SECTION 6.2.13. Transactions with Affiliates. The Borrower
will not, and will not permit any Subsidiary to, enter into, or cause, suffer
or permit to exist:
(a) any arrangement or contract with any of its
Affiliates of a nature customarily entered into by Persons which are Affiliates
of each other (including management or similar contracts or arrangements
relating to the allocation of revenues, expenses or otherwise) requiring any
payments to be made by the Borrower or any Subsidiaries to any Affiliate, other
than (i) an arrangement with the Holding Company with respect to taxes on the
consolidated taxable income of the Holding Company which is arm's-length, fair
and equitable to the Borrower or such Subsidiary, (ii) the payment by the
Borrower to the Eligible
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<PAGE> 88
Investors on the Closing Date of origination fees in the aggregate amount of
$105,000, and (iii) the transactions provided for in the Loan Documents; and
(b) any other transaction, arrangement or contract with
any of its other Affiliates which is on terms which are less favorable than are
obtainable from any Person which is not one of its Affiliates.
SECTION 6.2.14. Inconsistent Agreements. The Borrower will
not, and will not permit any Subsidiary to, enter into any material agreement
containing any provision which would be violated or breached in any material
respect by any Loan or by the performance by the Borrower or any Subsidiary of
its obligations hereunder or under any Loan Document.
SECTION 6.2.15. Limitations on Issuance of Stock. The
Borrower will not, nor permit any Subsidiary to, issue, sell or otherwise
dispose of any shares of any of its Stock, any warrants, options or rights
thereto or any securities convertible into Stock of the Borrower or such
Subsidiary, except that any Subsidiary of the Borrower may issue or sell shares
of its Stock to the Borrower.
SECTION 6.2.16. Change in Accounting Method. The Borrower
will not, and will not permit any Subsidiary to, make any change in accounting
treatment and reporting practices except as required by GAAP.
SECTION 6.2.17. Change in Fiscal Year End. The Borrower will
not change its Fiscal Year end without the Required Lenders' prior written
consent, which consent will not be unreasonably withheld but will not be given
with respect to more than one such change during the term of this Agreement.
SECTION 6.2.18. Compliance with ERISA. The Borrower shall
not, and shall not permit any Subsidiary to take, or fail to take, any action
with respect to a Plan, including, but not limited to, establishing, amending,
or terminating or withdrawing from any Plan, without first obtaining the
Agent's written approval, where such action or failure to act could result in
any liabilities under the IRC, ERISA, or any other applicable law which
individually or in the aggregate could reasonably result in a Material Adverse
Change.
SECTION 6.2.19. Modification of Certain Documents. The
Borrower shall not permit the Holding Company to:
(a) amend or otherwise modify any of the terms of the
Subordinated Debt Documents, or
(b) amend or otherwise modify any of the terms of the
Management Incentive Plan or the Founder Performance Stock Purchase Agreements
if such amendment or modification would
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<PAGE> 89
adversely affect any of the Agents' or the Lenders' interest, rights or
remedies under the Loan Documents or the ability of the Borrower to pay and
perform the Obligations, including, without limitation, any amendment or
modification that would increase the number of shares of Stock that may be
issued pursuant to the Management Incentive Plan to an amount that is in excess
of 14.1% of the Fully Diluted Stock of the Holding Company, or
(c) amend or otherwise modify any of the terms of any
Management Contract or the Stockholders' Agreement, if such amendment or
modification would not adversely affect any of the Agent's or Lenders'
interests, rights or remedies under the Loan Documents or the ability of the
Borrower to pay and perform the Obligations or the ability of the Holding
Company to perform its obligations under the Holding Company Documents.
SECTION 6.2.20. Prohibition on Voluntary Prepayments of
Subordinated Indebtedness. The Borrower will not, and will not permit any of
its Subsidiaries to, make any voluntary or optional payment or prepayment on,
or redemption or acquisition for value of (including, without limitation, the
making of any sinking fund payments with respect to any trustee) any
Subordinated Indebtedness or any Additional Permitted Subordinated
Indebtedness.
SECTION 6.2.21. Limitation on Restrictions on Subsidiary
Dividends. Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any such Subsidiary
to (a) pay dividends or make other distributions on its Stock or other
interests or participations in profits owned by Borrower or any Subsidiary of
Borrower or pay any Indebtedness owed to Borrower or any Subsidiary of
Borrower, (b) make loans or advances to Borrower or any Subsidiary of Borrower
or (c) transfer any of its property or assets to Borrower or any Subsidiary of
Borrower, except for such encumbrances and restrictions existing under or by
reason of this Agreement and the other Loan Documents.
ARTICLE 7.
EVENTS OF DEFAULT
SECTION 7.1. Events of Default. The term "Event of
Default" shall mean any of the events set forth in this Section 7.1.
SECTION 7.1.1. Non-Payment of Obligations. The Borrower
shall default:
(a) in the payment or prepayment when due of any
principal of any Loan;
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(b) in the payment when due of the interest payable in
respect of any Loan, the commitment fee provided for in Section 2.3 hereof or
any other Obligations and such default shall continue unremedied for a period
of five days.
SECTION 7.1.2. Non-Performance of Certain Covenants. The
Borrower shall default in the due performance and observance of any of its
obligations under Section 6.1 and such default shall continue unremedied for a
period of 10 days after notice thereof shall have been given to the Borrower by
the Agent (or if such default is not reasonably susceptible to cure within 10
days, such longer period as is reasonably needed to effect such cure, but in no
event longer than 30 days from the date notice is given, so long as the
Borrower promptly commences and diligently pursues such cure), or shall default
in the due performance or observation of any of its obligations under Section
6.2.
SECTION 7.1.3. Defaults Under Other Loan Documents;
Non-Performance of Other Obligations. Any "Event of Default" shall occur under
the Holding Company Documents or the other Loan Documents; or the Holding
Company, the Borrower or any Subsidiary shall default in the due performance
and observance of any other obligation, covenant or agreement contained herein
or in any other Loan Document and such default shall continue unremedied for a
period of ten (10) days after notice thereof shall have been given to the
Borrower by the Agent (or if such default is not reasonably susceptible to cure
within ten (10) days, such longer period as is reasonably needed to effect such
cure, but in no event longer than thirty (30) days from the date notice is
given, so long as the Borrower promptly commences and diligently pursues such
cure).
SECTION 7.1.4. Bankruptcy, Insolvency, etc. The Holding
Company, the Borrower or any Subsidiary shall:
(a) become insolvent or generally fail to pay, or admit
in writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian for the
Holding Company, the Borrower or any Subsidiary or any property of any thereof,
or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Holding Company, the Borrower or any
Subsidiary or for a substantial part of the property of any thereof, and such
trustee, receiver, sequestrator or other custodian shall not be discharged
within sixty (60) days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any
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<PAGE> 91
dissolution, winding up or liquidation proceeding, in respect of the Holding
Company, the Borrower or any Subsidiary, and, if such case or proceeding is not
commenced by the Holding Company, the Borrower or such Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Holding Company, the
Borrower or such Subsidiary or shall result in the entry of an order for relief
or shall remain for sixty (60) days undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 7.1.5. Breach of Warranty. Any representation or
warranty of the Holding Company or the Borrower hereunder or in any other Loan
Document or in any other writing furnished by or on behalf of the Holding
Company or the Borrower to the Agent or any Lender for the purposes of or in
connection with this Agreement or any such Loan Document is or shall be
incorrect when made in any material respect.
SECTION 7.1.6. Default on Other Indebtedness, etc. (a) Any
Indebtedness of the Borrower or any Subsidiary in an aggregate principal amount
exceeding $250,000 (i) shall be duly declared to be or shall become due and
payable prior to the stated maturity thereof, or (ii) shall not be paid as and
when the same becomes due and payable including any applicable grace period; or
(b) there shall occur and be continuing any event which constitutes an event of
default under any Instrument relating to any Indebtedness of the Borrower or
any Subsidiary in an aggregate principal amount exceeding $250,000, the effect
of which is to permit the holder or holders of such Indebtedness, or a trustee,
agent or other representative on behalf of such holder or holders, to cause
such Indebtedness to become due prior to its stated maturity.
SECTION 7.1.7. Failure of Valid, Perfected Security
Interest. The security interest or Lien in the Collateral and all proceeds
thereof, securing the Obligations shall cease to be valid or perfected at any
time after the Closing Date (other than as a result of the Agent's failure to
make any required filing to the extent the necessity of such filing was
disclosed to the Agent in any opinion of counsel to the Borrower).
SECTION 7.1.8. Employee Plans. Any of the following events
shall occur with respect to any Plan: (i) any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan and such "prohibited transaction" could reasonably
result in a Material Adverse Change, (ii) any "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA) not disclosed
in Item 8 ("Benefit Plans") of the Disclosure Schedule, whether or not waived,
shall exist with respect to any Single Employer Plan, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
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Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) a notice of intent to terminate any Single Employer Plan for
purposes of Title IV of ERISA is issued by the plan administrator thereof
without the prior written consent of the Required Lenders, or the PBGC shall
commence proceedings to terminate any Single Employer Plan, (v) the Borrower or
any Commonly Controlled Entity or Subsidiary shall, or in the reasonable
opinion of the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency, Reorganization or termination of, a
Multiemployer Plan, (vi) the Borrower or any Commonly Controlled Entity or
Subsidiary shall fail to make any quarterly installment payment to a Pension
Plan required under Section 302(e) of ERISA or Section 412(m) of the Code,
(vii) the Borrower or any Commonly Controlled Entity or Subsidiary shall fail
to make any contribution to a Multiemployer Plan which is required under ERISA,
the Code or applicable collective bargaining agreements, or (viii) any other
event or condition shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (viii) above, such event or condition, together
with all other such events or conditions, if any, could subject the Holding
Company, the Borrower or any Subsidiary (directly or indirectly) to any tax,
penalty or other liabilities under Title I or Title IV of ERISA, Section 404 or
419 and Chapter 43 of the IRC or any other applicable law which in the
aggregate could reasonably result in a Material Adverse Change.
SECTION 7.1.9. Judgments. A final judgment which, with
other such outstanding final judgments against the Borrower and its
Subsidiaries (in each case to the extent not covered by insurance), exceeds an
aggregate of $250,000, shall be entered against the Borrower or any of its
Subsidiaries and, within 30 days after entry thereof, such judgment shall not
have been discharged or execution thereof stayed pending appeal, or, within 30
days after the expiration of any such stay, such judgment shall not have been
discharged or stayed.
SECTION 7.1.10. Loss of Permits, Etc. The expiration, loss,
termination, cancellation, revocation, forfeiture, suspension, diminution,
impairment of or failure to renew any Intellectual Property, right, permit,
license or approval which could reasonably result in a Material Adverse Change;
or the entry of any order of a court enjoining, restraining or otherwise
preventing the Borrower or any Subsidiary from conducting all or any material
part of its business affairs; or the cessation of business or dissolution of
the Borrower.
SECTION 7.1.11. Warrant Documents, Subordinated Debt
Documents, Etc. The Holding Company or the Borrower (a) shall fail to perform,
keep or observe any term or provision of, or a default or other event shall
occur or exist under, the Warrant Documents that constitutes an "Additional Put
Event" as such term
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is defined in the Put and Call Agreement, or (b) an "Event of Default" or other
event occurs or exists that permits any holder of any Subordinated Indebtedness
to declare such Subordinated Indebtedness due and payable prior to its stated
or fixed maturity or otherwise results in such Subordinated Indebtedness
becoming due and payable prior to its stated or fixed maturity.
SECTION 7.2. Action if Bankruptcy. If any Event of
Default described in Section 7.1.4 shall occur, the outstanding principal
amount of all outstanding Loans and all other Obligations shall automatically
be and become immediately due and payable, without notice or demand.
SECTION 7.3. Action if Other Event of Default. If any
Event of Default (other than any Event of Default described in Section 7.1.4)
shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Agent may, and upon the direction of the Required Lenders,
shall upon notice or demand, declare all or any portion of the outstanding
principal amount of the Loans to be due and payable and any or all other
Obligations to be due and payable, whereupon the full unpaid amount of such
Loans and any and all other Obligations which shall be so declared due and
payable shall be and become immediately due and payable, without further
notice, demand, or presentment, and to the extent paid by the Borrower shall
constitute a prepayment under this Agreement.
ARTICLE 8.
THE AGENT
SECTION 8.1. Actions. Each Lender and the holder of each
Note authorize the Agent to act on behalf of such Lender or holder under this
Agreement and any other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agent
(with respect to which the Agent agrees that it will, subject to the last two
sentences of this Section 8.1, comply, except as otherwise advised by counsel),
to exercise such powers hereunder and thereunder as are specifically delegated
to or required of the Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender agrees (which
agreement shall survive any termination of this Agreement) to indemnify the
Agent, pro rata according to such Lender's Percentage, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may at any time be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement, the Notes, or any other
Loan Document, including the reimbursement of the Agent for all out-of-pocket
expenses (including attorneys' fees) incurred by the Agent hereunder or in
connection herewith or in enforcing the Obligations of the Borrower under this
Agreement
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or any other Loan Document, in all cases as to which the Agent is not
reimbursed by the Borrower; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
determined by a court of competent jurisdiction in a final proceeding to have
resulted solely from the Agent's gross negligence or wilful misconduct. The
Agent shall not be required to take any action hereunder or under any other
Loan Document, or to prosecute or defend any suit in respect of this Agreement
or any other Loan Document, unless it is indemnified to its satisfaction by the
Lenders against loss, costs, liability and expense. If any indemnity in favor
of the Agent shall become impaired, it may call for additional indemnity and
cease to do the acts indemnified against until such additional indemnity is
given.
SECTION 8.2. Funding Reliance, etc. Unless the Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York City time, on the day prior to a Borrowing that such Lender
will not make available the amount which would constitute its Percentage of
such Borrowing on the date specified therefor, the Agent may assume that such
Lender has made such amount available to the Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount; provided,
however, that the Agent shall have no obligation to do so. If such amount is
made available by such Lender to the Agent on a date after the date of such
Borrowing, such Lender shall pay to the Agent on demand interest on such amount
at the Federal Funds Rate for the number of days from and including the date of
such Borrowing to the date on which such amount becomes immediately available
to the Agent, together with such other compensatory amounts as may be required
to be paid by such Lender to the Agent pursuant to the Rules for Interbank
Compensation of the Council on International Banking or the Clearinghouse
Compensation Committee, as the case may be, as in effect from time to time. A
statement of the Agent submitted to any Lender with respect to any amounts
owing under this Section 8.2 shall be conclusive, in the absence of manifest
error. If such amount is not in fact made available to the Agent by such
Lender within three Business Days after the date of such Borrowing, the Agent
shall be entitled to recover such amount, with interest thereon at the rate per
annum then applicable to the Loans comprising such Borrowing, within five
Business Days after demand, from the Borrower.
SECTION 8.3. Exculpation. Neither the Agent nor any of
its directors, officers, employees or agents shall be liable to any Lender for
any action taken or omitted to be taken by it under this Agreement, the Notes,
or any Loan Document, or in connection herewith or therewith, except for its
own wilful misconduct or gross negligence. The Agent shall not be responsible
to any Lender for any recitals, statements, representations or warranties
herein or in any certificate or other document delivered in connection herewith
or for the authorization, execution,
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effectiveness, genuineness, validity, enforceability, perfection,
collectibility, or sufficiency of any of the Loan Documents, the financial
condition of the Borrower or any Subsidiary or the condition or value of any of
the Collateral, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of any
of the Loan Documents, the financial condition of the Borrower or any
Subsidiary or the existence or possible existence of any Default. The Agent
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which it believes
to be genuine and to have been presented by a proper Person.
SECTION 8.4. Successor. The Agent may resign as such at
any time upon at least thirty (30) days' prior notice to the Borrower and all
Lenders, such resignation not to be effective until a successor Agent is in
place. If the Agent at any time shall resign, the Required Lenders may appoint
another Lender as a successor Agent which shall thereupon become the Agent
hereunder. 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 notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be one of the
Lenders or a financial institution reasonably acceptable to the Borrower
organized under the laws of the United States and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents.
SECTION 8.5. Loans by the Agent. The Agent shall have the
same rights and powers with respect to (a) the Loans made by it or any of its
Affiliates and (b) the Notes held by it or any of its Affiliates, as any Lender
and may exercise the same as if it were not the Agent.
SECTION 8.6. Credit Decisions. Each Lender acknowledges
that it has, independently of the Agent and each other Lender, and based on
such financial information and such other documents, information and
investigations as it has deemed appropriate, made its own credit decision to
extend its Commitments, to make the Loans. Each Lender also acknowledges that
it will, independently of the Agent and each other Lender, and based on such
other documents, information and investigations as it shall deem appropriate at
any time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document.
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SECTION 8.7. Copies, etc. The Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Agent by the Borrower pursuant to the terms of this Agreement.
The Agent will distribute to each Lender each Instrument received for its
account and copies of all other communications received by the Agent from the
Borrower for distribution to the Lenders by the Agent in accordance with the
terms of this Agreement. Notwithstanding anything herein contained to the
contrary, all notices to and communications with the Borrower under this
Agreement and the other Loan Documents shall be effected by the Lenders through
the Agent.
ARTICLE 9.
MISCELLANEOUS
SECTION 9.1. Waivers, Amendments, etc. (a) The provisions
of this Agreement and of each Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver:
(i) which would modify any requirement hereunder that any
particular action be taken by all the Lenders or by the Required
Lenders shall be effective unless consented to by each Lender;
(ii) which would modify this Section 9.1, change the
definition of "Required Lenders," increase the Revolving Loan
Commitment Amount or change any Percentage for any Lender, reduce any
fees payable to the Lenders described in Article 2 and Article 3,
extend the Revolving Loan Commitment Termination Date or subject any
Lender to any additional obligations shall be made without the consent
of each Lender;
(iii) which would extend the due date for, or reduce the
amount of, any payment or prepayment of principal of or interest on
any Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of the holder of the Note
evidencing such Loan; or
(iv) which would affect adversely the interests, rights,
compensation or obligations of the Agent qua the Agent shall be made
without consent of the Agent.
(a) No failure or delay on the part of the Agent, any
Lender or the holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Borrower in any case shall entitle it to any
notice
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or demand in similar or other circumstances. No waiver or approval by the
Agent, any Lender, or the holder of any Note under this Agreement or any other
Loan Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
(b) Neither any Lender nor the Agent shall be under any
obligation to marshal any assets in favor of the Borrower or any other party or
against or in payment of any or all of the Obligations. Recourse for security
shall not be required at any time. To the extent that the Borrower makes a
payment or payments to the Agent or the Lenders, or the Agent or the Lenders
enforce their security interests or exercise their rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently for any reason invalidated, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
SECTION 9.2. Notices. All notices hereunder shall be in
writing or by telex or telecopy and shall be sufficiently given to the Agent,
the Lenders or the Borrower if addressed or delivered to them at the following
addresses:
If to the Agent: ING
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Telecopier No.: (404) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr. Esq.
Telecopier No.: (404) 572-5100
If to any other Lender: At its address set forth beneath its name on
the signature pages hereof
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If to the Borrower: Milestone Healthcare, Inc.
Suite 600
2501 Cedar Springs Road
Dallas, Texas 75201
Attention: Charles L. Allen
Telecopier No.: (214) 871-3399
or at such other address as any party may designate to any other party by
written notice. All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
received if deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when transmission is verified, if telecopied; and on the next
Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 9.3. Costs and Expenses. The Borrower agrees to
pay all reasonable out-of-pocket expenses of the Agent for the negotiation,
preparation, execution, and delivery of this Agreement and each other Loan
Document, including schedules and exhibits, and any amendments, waivers,
consents, supplements or other modifications to this Agreement or any other
Loan Document as may from time to time hereafter be required (including the
reasonable fees and expenses of counsel for the Agent, or of any consultants or
other experts retained by the Agent from time to time in connection therewith)
whether or not the transactions contemplated hereby are consummated, and to pay
all reasonable expenses of the Agent (including reasonable fees and expenses of
counsel to the Agent, or of any consultants or other experts retained by the
Agent) incurred in connection with the preparation and review of the form of
any Instrument relevant to this Agreement, the Notes or any other Loan Document
and the consideration of legal questions relevant hereto and thereto or to any
restructuring or "work-out" of any Obligations. The Borrower also agrees to
pay and hold the Agent and the Lenders harmless from any stamp, documentary,
intangibles, transfer or similar taxes or charges, and all recording or filing
fees with respect to the Loan Documents or any payments to be made thereunder
and all title insurance premiums, surveyors costs and valuation fees, and to
reimburse the Agent and each Lender upon demand for all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and expenses)
incurred by the Agent or such Lender in enforcing the Obligations of the
Borrower or any Subsidiary under this Agreement or any other Loan Document or
related Document or in connection with any restructuring or "work-out" of any
Obligations.
SECTION 9.4. Indemnification. In consideration of the
execution and delivery of this Agreement by the Agent and each Lender, the
making of the Term Loan and the extension of the Revolving Loan Commitment, the
Borrower hereby indemnifies, exonerates and holds the Agent and each Lender,
each of their respective successors and assigns, each of the respective
officers, directors, employees, attorneys and agents of the Agent
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and each Lender and each of their respective successors and assigns
(collectively, the "Lender Parties") free and harmless from and against any and
all actions, causes of action, suits, losses, costs, liabilities (including,
but not limited to, Environmental Liabilities and Costs), damages and expenses
(irrespective of whether such Lender Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Lender Parties
or any of them or asserted or awarded against the Lender Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan, including,
without limitation, the Acquisition;
(b) the use of any of the proceeds of the Loans by the
Borrower for any other purpose;
(c) the syndication of this Agreement (other than claims
resulting from a Lender Party breaching an agreement with another Lender
Party);
(d) the making of any claim by any investment banking
firm, broker or third party that it is entitled to compensation from the Agent
or any Lender in connection with this Agreement (other than investment banking
firms and brokers retained by the Agent or any Lender);
(e) the entering into and performance of this Agreement
and any other Loan Document by any of the Lender Parties (other than the breach
by such Lender Party of this Agreement);
(f) any investigation, litigation, or proceeding related
to any of the Loan Documents or any proposed acquisition by the Borrower of all
or any portion of the stock or assets of any Person, whether or not the Agent
or such Lender is party thereto;
(g) the existence of any contaminant, in, under, on or
otherwise affecting any property owned, used, operated, or leased by Borrower
or any Subsidiary in the past, present, or future or any surrounding areas
affected by such property, regardless of whether the existence of the
contaminant is related to the past, present, or future operations of the
Borrower and its Subsidiaries, or their predecessors in interest or any other
Person; any Environmental Liabilities and Costs related to any property owned,
used, operated, or leased by Borrower or any Subsidiary in the past, present,
or future; any Environmental Liabilities and Costs related to the past,
present, or future operations of the Borrower or any Subsidiaries; any alleged
violations of any Environmental Law related to any property owned, used,
operated, or leased by Borrower or any Subsidiary in the past, present, or
future; any alleged violations of any
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Environmental Law related to the past, present, or future operations of the
Borrower or any Subsidiaries; the performance of any remedial action that is
related to any property owned, used, operated, or leased by Borrower or any
Subsidiaries in the past, present, or future; the performance of any remedial
action that is related to the past, present, or future operations of the
Borrower or any Subsidiaries; and the imposition of any Lien on any property
affected by this Agreement or any of the other Loan Documents arising from any
Environmental Liabilities or Costs;
(h) the breach in any material respect by Borrower of any
representation or warranty set forth in this Agreement, any Loan Document or
any Warrant Document;
(i) the failure of Borrower to comply in any material
respect with any term, condition, or covenant set forth in this Agreement, any
Loan Document or any Warrant Document; or
(j) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not the Agent or any Lender (or
any of their respective officers, directors, employees or agents) is a party
thereto;
except for any such Indemnified Liabilities arising for the account of a
particular Lender Party by reason of the relevant Lender Party's bad faith,
gross negligence or wilful misconduct as determined by a final and
nonappealable decision of a court of competent jurisdiction. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The foregoing indemnity shall become effective immediately
upon the execution and delivery hereof and shall remain operative and in full
force and effect notwithstanding the consummation of the transactions
contemplated hereunder, the repayment of any of the Loans made hereunder, the
invalidity or unenforceability of any term or provision of this Agreement or
any other Loan Document, or any investigation made by or on behalf of any
Lender or the Agent.
SECTION 9.5. Survival. The obligations of the Borrower
under Sections 2.4, 3.5, 9.3 and 9.4, and the obligations of the Lenders under
Section 8.1, shall in each case survive any termination of this Agreement. The
representations and warranties made by the Borrower in this Agreement, the
Notes and in each other Loan Document (including those not required to be made
or repeated after the Closing Date) shall survive the execution and deliver of
this Agreement, the Notes and each such other Loan Document.
SECTION 9.6. Severability. Any provision of this
Agreement, the Notes or any other Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
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unenforceability without invalidating the remaining provisions of this
Agreement, the Notes or such other Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 9.7. Headings. The various headings of this
Agreement, the Notes and of each other Loan Document are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement, the Notes or such other Loan Document or any provisions hereof or
thereof.
SECTION 9.8. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be executed by the Borrower and the Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Borrower and each Lender.
SECTION 9.9. Governing Law; Entire Agreement. (a) THIS
AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH PARTY AGREES THAT
THE LOANS CONSTITUTE A "QUALIFIED TRANSACTION" WITHIN THE MEANING OF TEX. BUS.
& COM. CODE Section 35.51 AND THAT THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS BEAR A REASONABLE RELATION TO THE STATE
OF NEW YORK. This Agreement, the Notes and the other Loan Documents constitute
the entire understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements, written or oral, with respect
thereto including, without limitation, the Commitment Letter.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATED DOCUMENT, AND EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE BORROWER
AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING BROUGHT BY IT AGAINST THE AGENT OR ANY LENDER. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING.
(c) The Borrower hereby irrevocably designates, appoints
and empowers CT Corporation System, whose present address is 1633 Broadway, New
York, New York 10019, as its authorized agent to receive, for and on its behalf
and its property, service of process in the State of New York when and as such
legal actions
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or proceedings may be brought in the courts of the State of New York or of the
United States of America sitting in New York, and such service of process shall
be deemed complete upon the date of delivery thereof to such agent whether or
not such agent gives notice thereof to the Borrower, or upon the earliest of
any other date permitted by applicable law. The Borrower shall furnish the
consent of CT Corporation System so to act to the Agent on or prior to the
Closing Date. It is understood that a copy of said process served on such
agent will as soon as practicable be forwarded to the Borrower, at its address
set forth below, but its failure to receive such copy shall not affect in any
way the service of said process on said agent as the agent of the Borrower.
The Borrower irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of the
copies thereof by certified mail, return receipt requested, postage prepaid, to
it at its address set forth herein, such service to become effective upon the
earlier of (i) the date 10 calendar days after such mailing or (ii) any earlier
date permitted by applicable law. The Borrower agrees that it will at all
times continuously maintain an agent to receive service of process in the State
of New York on behalf of itself and its properties and in the event that, for
any reason, the agent named above or its successor shall no longer serve as its
agent to receive service of process in the State of New York on its behalf, it
shall promptly appoint a successor so to serve and shall advise the Agent and
the Lenders thereof (and shall furnish to the Agent the consent of any
successor agent so to act). Nothing in this Section 9.9 shall affect the right
of the Agent or any Lender to bring proceedings against the Borrower in the
courts of any other jurisdiction or to serve process in any other manner
permitted by applicable law.
SECTION 9.10. Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Borrower may not
assign or transfer its rights or obligations hereunder without the prior
written consent of all Lenders; and the rights of sale, assignment and transfer
of the Lenders are subject to Section 9.11.
SECTION 9.11. Sale and Transfers, Participations, etc. (a)
Any Lender may, in the ordinary course of its commercial banking or lending
business and in accordance with applicable law, at any time sell to one or more
Participants participating interests in any Loan owing to such Lender, any Note
held by such Lender, the Revolving Loan Commitment of such Lender, or any other
interest of such Lender hereunder. In the event of any such sale by a Lender
of participating interests to a Participant, such Lender's obligations under
this Agreement shall remain unchanged and such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Note for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such
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Lender's rights and obligations under this Agreement and the other Loan
Documents. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement or any Note, provided that
such right of setoff shall be subject to the approval of the Required Lenders
and to the obligations of such Participant to share with the Lenders, and the
Lenders agree to share with such Participant, as provided in Section 3.8 as if
the Participant were a Lender hereunder. The Borrower also agrees that each
Participant shall be entitled to the benefits of (i) Section 9.4 and (ii)
Sections 2.4 and 3.6, with respect to its participation in the Commitments and
the Loans outstanding from time to time; provided, that no Participant shall be
entitled to receive any greater amount pursuant to the Sections referred to in
clause (ii) than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(b) With the consent of the Agent and the consent of the
Borrower (which consent shall not be unreasonably withheld or delayed), any
Lender may, in the ordinary course of its commercial banking or lending
business and in accordance with applicable law, at any time sell to any
Purchasing Lender all or any part in a minimum amount of $2,500,000, of its
rights and obligations under this Agreement and the Notes pursuant to a
Transfer Supplement, executed by such Purchasing Lender, such transferor
Lender, the Agent and the Borrower. Upon (i) such execution of such Transfer
Supplement, and (ii) delivery of a fully executed copy thereof to the Borrower,
such Purchasing Lender shall for all purpose be a Lender party to this
Agreement and shall have all the rights and obligations of a Lender under this
Agreement, to the same extent as if it were an original party hereto with a
Percentage of the Revolving Loan Commitment Amount, and the Term Loan set forth
in such Transfer Supplement, and no further consent or action by the Borrower,
the Lenders or the Agent shall be required. Such Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Lender and the resulting adjustment
of Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Notes. Upon the consummation of any transfer to a Purchasing
Lender pursuant to this paragraph (b), the transferor Lender, the Agent and the
Borrower shall make appropriate arrangements so that, if required, replacement
Notes are issued to such transferor Lender and new Notes to the Purchasing
Lender in the amount equal to their respective Revolving Loan Commitments and
outstanding Loans, as appropriately adjusted pursuant to such Transfer
Supplement.
-97-
<PAGE> 104
(c) The Agent shall maintain at its address referred to
herein a copy of each Transfer Supplement delivered to it and the Register for
the recordation of the names and addresses of the Lenders and the Revolving
Loan Commitment of, and principal amount of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loans recorded therein for all purposes of this Agreement. The Register shall
be available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a Transfer Supplement executed by
a transferor Lender, the Agent and a Purchasing Lender together with payment by
such Purchasing Lender to the Agent, for the account of the Agent and not for
the account of the Lenders, of a registration and processing fee of $2,500, and
the Notes subject to such Transfer Supplement, the Agent shall (i) accept such
Transfer Supplement, (ii) record the information therein in the Register and
(iii) give prompt notice of such acceptance and recordation to the Lenders and
the Borrower.
(e) If, pursuant to this Section 9.11, any interest in
this Agreement or any Note is transferred to any Participant or Purchasing
Lender which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Participant or Purchasing Lender, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Lender (for the benefit of the
transferor Lender, the Agent and the Borrower) that under applicable law and
treaties no taxes will be required to be withheld by the Agent, the Borrower or
the transferor Lender with respect to any payments to be made to such
Participant or Purchasing Lender in respect of the Loans or Commitments, (ii)
to furnish to the transferor Lender, the Agent and the Borrower two properly
executed original Internal Revenue Service Forms 4224 or 1001 (or any successor
forms) and properly executed Internal Revenue Service Forms W-8 and W-9, as the
case may be, (wherein such Participant or Purchasing Lender claims entitlement
to complete exemption from the United States federal withholding tax on all
interest payments hereunder and all fees payable under Section 2.3) and (iii)
to agree (for the benefit of the transferor Lender, the Agent and the Borrower)
to provide the transferor Lender, the Agent and the Borrower new Internal
Revenue Service Forms 4224 or 1001 upon the expiration or obsolescence of any
previously delivered form or after the occurrence of any event requiring a
change in the most recent forms delivered by it to the Transferor Lender, the
Agent and the Borrower, and comparable statements in accordance with applicable
United States laws and regulations and amendments duly executed and completed
by such Participant or Purchasing Lender, and to comply from time to time with
all applicable United States laws and regulations with regard to such
withholding tax exemption.
-98-
<PAGE> 105
(f) Notwithstanding anything to the contrary set forth in
this Section 9.11, (i) any Lender may sell to any of its Affiliates all or any
part of its rights and obligations under this Agreement and the Notes, and (ii)
upon the occurrence and during the continuance of an Event of Default, any
Lender may sell to any Purchasing Lender all or any part of its rights and
obligations under this Agreement and the Notes, in either case notwithstanding
that the Borrower does not consent to such sale, provided such Lender has
obtained the consent of the Agent and otherwise meets the requirements of this
Section 9.11.
SECTION 9.12. Other Transactions. Nothing contained herein
shall preclude the Agent or any other Lender from engaging in any transaction,
in addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 9.13. Confidentiality. The Lenders and the Agent
shall hold all non-public, proprietary or confidential information (which has
been identified as such by the Borrower) obtained pursuant to the requirements
of this Agreement in accordance with their customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices; however, the Lenders and the Agent may make disclosure of
any such information to its examiners, Affiliates, outside auditors, counsel,
consultants, appraisers and other professional advisors in connection with this
Agreement or as reasonably required by any proposed syndicate member or any
proposed transferee or participant in connection with the contemplated transfer
of any Note or participation therein or as required or requested by any
Governmental Authority or representative thereof or in connection with the
enforcement hereof or of any Loan Document or related document or pursuant to
legal process; provided, however, that any such proposed syndicate member or
proposed transferee or participant shall have agreed in writing for the
Borrower's benefit to be bound by the terms of this Section 9.13. In no event
shall any Lender or the Agent be obligated or required to return any materials
furnished to it by the Borrower.
SECTION 9.14. Change in Accounting Principles.
(a) If any changes in accounting principles from those
used in the preparation of the financial statements referred to in clause
(a)(i) of Section 5.4 hereafter occur as a result of the promulgation of rules,
regulations, pronouncements or opinions by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) result in a change in the method of
calculation of financial covenants, standards or terms found in this Agreement;
or
-99-
<PAGE> 106
(b) there is any change in the Borrower's Fiscal Year
with the Required Lenders' prior written consent pursuant to Section 6.2.17
hereof;
the parties hereto agree to enter into negotiations in order to amend such
financial covenants, standards or terms so as to equitably reflect such changes
with the desired result that the evaluations of the Borrower's financial
condition shall be the same after such changes as if such changes had not been
made; provided, however, that, until the parties hereto have reached a
definitive agreement on such amendments the Borrower shall not change its
Fiscal Year and the Borrower's financial condition and operations shall
continue to be evaluated on the same principles as those used in the
preparation of the financial statements referred to in clause (a)(i) of Section
5.4.
SECTION 9.15. Waiver of Jury Trial, Etc. THE AGENT, THE
LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE
NOTES OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH LENDERS,
OR THE BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND
SUCH LENDERS ENTERING INTO THIS AGREEMENT.
SECTION 9.16. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof shall have any liability with respect to,
and THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON, ANY CLAIM
FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
SUFFERED BY THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED
HEREIN, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH.
SECTION 9.17. Usury Savings Clause. Notwithstanding
anything to the contrary in this Agreement or any other Loan Document or
Warrant Document, if at any time any rate of interest accruing on any
Obligation, when aggregated with all amounts payable by the Borrower or any
other Loan Party under any of the Loan Documents or Warrant Documents that are
deemed or construed to be interest accrued or accruing on such Obligation under
applicable law, exceeds the highest rate of interest permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable to such Lender with respect to such Obligation (each a "Maximum
Lawful Rate"), then in such event and so long as the Maximum Lawful Rate would
be so exceeded, such rate of interest shall be reduced to the Maximum Lawful
Rate; provided that if at any time thereafter such rate of interest accruing on
Obligations held by such Lender is less than the Maximum Lawful Rate, the
Borrower shall continue to pay interest to such Lender at the Maximum Lawful
Rate until such time as the total interest received by such Lender in respect
of the
-100-
<PAGE> 107
Obligations held by it is equal to the total interest which such Lender would
have received had interest on all Obligations held by such Lender (but for the
operation of this Section 9.17) accrued at the rate otherwise applicable under
this Agreement and the other Loan Documents. Thereafter, interest payable to
such Lender in respect of the Obligations held by it shall accrue at the
applicable rate set forth in this Agreement or other Loan Documents unless and
until such rate again exceeds the Maximum Lawful Rate, in which event this
Section 9.17 shall again apply. In no event, shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount which such Lender
could lawfully have received had interest been calculated for the full term of
this Agreement at the Maximum Lawful Rate. In the event that the Maximum
Lawful Rate is calculated pursuant to this Section 9.17, (a) if required by
applicable law, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made, and (b) if permitted by applicable law, the Borrower and
such Lender shall (i) characterize any non-principal payment as an expense, fee
or premium rather than as interest, (ii) exclude voluntary prepayments and the
effect thereof, and (iii) amortize, prorate, allocate and spread in equal or
unequal parts the total amount of interest throughout the entire contemplated
term of the Loans so that interest for the entire term of the Loans shall not
exceed the Maximum Lawful Rate. In the event that a court of competent
jurisdiction, notwithstanding the provisions of this Section 9.17 shall make a
final determination that any Lender has received interest in excess of the
Maximum Lawful Rate, such Lender shall, to the extent permitted by applicable
law, promptly apply such excess, first to any interest due and outstanding
under this Agreement and the other Loan Documents, second to any principal due
and payable under this Agreement and the Notes, third to the remaining
principal amount of the Notes and fourth to other unpaid Obligations held by
such Lender, and thereafter shall refund any excess to the Borrower or as a
court of competent jurisdiction may otherwise order. In the event and to the
extent that a court of competent jurisdiction determines, notwithstanding the
provisions of Section 9.9, that the laws of the State of Texas apply for
purposes of determining the Maximum Lawful Rate, then pursuant to Article
15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as
amended, the Borrower agrees that such Chapter 15 shall not govern or in any
manner apply to the Obligations.
SECTION 9.18. Effectiveness of Execution and Delivery by
Milestone. This Agreement and the other Loan Documents to which Borrower is a
party shall be deemed executed and delivered by Milestone upon the consummation
of the Merger, and the execution and delivery by Milestone of this Agreement
shall not be a condition to the execution, delivery and effectiveness of this
Agreement as between Mergerco I, the Lenders and the Agent.
-101-
<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MHI ACQUISITION CORPORATION I
By: /s/ William A. Brosius
---------------------------------
Name: William A. Brosius
Title: Chief Financial Office
MILESTONE HEALTHCARE, INC.
By: /s/ William A. Brosius
---------------------------------
Name: William A. Brosius
Title: Chief Financial Office
Percentage
- ----------
100% - Revolving INTERNATIONALE NEDERLANDEN (U.S.)
100% - Term CAPITAL CORPORATION, AS AGENT AND AS
LENDER
By: /s/
---------------------------------
Name:
Title:
-102-
<PAGE> 1
EXHIBIT 10.2
REVOLVING NOTE
$5,000,000.00 May 31, 1995
FOR VALUE RECEIVED, the undersigned, MHI ACQUISITION CORPORATION I, a
Delaware corporation (to be merged with and into Milestone Healthcare, Inc.)
(the "Borrower"), promises to pay to the order of INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, a Delaware corporation (the "Lender"), at the times
provided in the Credit Agreement referenced hereinafter, the principal sum of
FIVE MILLION AND NO/100'S DOLLARS ($5,000,000.00) or, if less, the outstanding
principal amount of all Revolving Loans made by the Lender from time to time
pursuant to that certain Credit Agreement, dated as of May 31, 1995 (together
with all amendments and other modifications, if any, from time to time
hereafter made thereto, the "Credit Agreement"; capitalized terms used herein
and not defined herein shall have the meaning ascribed to them in the Credit
Agreement), among the Borrower, Milestone Healthcare, Inc., a Delaware
corporation, Internationale Nederlanden (U.S.) Capital Corporation, as Agent,
and the various lenders (including the Lender) as are, or may from time to time
become, parties thereto. The unpaid principal amount of this Note is subject
to mandatory prepayment from time to time as provided in Section 3.3.1 of the
Credit Agreement. Notations indicating Revolving Loans made by the Lender
pursuant to the Credit Agreement and all payments on account of the principal
thereof may be endorsed by the holder hereof on the grid schedule attached to
this Note, as provided in the Credit Agreement.
The unpaid principal amount of this Note from time to time shall bear
interest as provided in Section 3.4 of the Credit Agreement. All payments of
principal of and interest on this Note shall be payable in lawful currency of
the United States of America to the account designated by the Agent (and as to
which the Agent has notified the Borrower) in immediately available funds.
This Note is a Revolving Note referenced in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the
terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be or may automatically
become immediately due and payable.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
<PAGE> 2
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind with respect to
this Note. All amounts owing hereunder are payable by the Borrower without
relief from any valuation or appraisal laws.
MHI ACQUISITION CORPORATION I
(to be merged with and into
Milestone Healthcare, Inc.)
By:/s/ William A. Brosius
--------------------------
Name:
Title:
Upon the merger of MHI Acquisition
Corporation I with and into the
undersigned, the undersigned acknowledges
and agrees that it shall have assumed all
obligations of MHI Acquisition
Corporation I under this Revolving Note as
if the undersigned was a direct signatory
of this Revolving Note.
MILESTONE HEALTHCARE, INC.
By: /s/ William A. Brosius
----------------------
Name:
Title:
-2-
<PAGE> 3
Schedule to Revolving Note
SCHEDULE OF REVOLVING LOANS AND REPAYMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF AMOUNT OF OUTSTANDING PERSON MAKING
DATE REVOLVING LOAN REPAYMENT BALANCE NOTATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
-3-
<PAGE> 1
EXHIBIT 10.3
TERM NOTE
$10,000,000.00 May 31, 1995
FOR VALUE RECEIVED, the undersigned, MHI ACQUISITION CORPORATION I, a
Delaware corporation (to be merged with and into Milestone Healthcare, Inc.)
(the "Borrower"), promises to pay to the order of INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, a Delaware corporation (the "Lender"), at the times
provided in the Credit Agreement referenced hereinafter, the principal sum of
TEN MILLION AND NO/100'S DOLLARS ($10,000,000.00) or, if less, the outstanding
principal amount of the Term Loan made by the Lender pursuant to the Credit
Agreement, dated as of May 31, 1995 (together with all amendments and other
modifications, if any, from time to time hereafter made thereto, the "Credit
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Credit Agreement), among the Borrower,
Milestone Healthcare, Inc., a Delaware corporation, Internationale Nederlanden
(U.S.) Capital Corporation, as Agent, and the various lenders (including the
Lender) as are, or may from time to time become, parties thereto. The unpaid
principal amount of this Note is subject to mandatory prepayment from time to
time as provided in Section 3.3.1 of that certain Credit Agreement. Notations
indicating the Term Loan made by the Lender pursuant to the Credit Agreement
and all payments on account of the principal thereof may be endorsed by the
holder hereof on the grid schedule attached to this Note, as provided in the
Credit Agreement.
The unpaid principal amount of this Note from time to time shall bear
interest as provided in Section 3.4 of the Credit Agreement. All payments of
principal of and interest on this Note shall be payable in lawful currency of
the United States of America to the account designated by the Agent (as to
which the Agent has notified the Borrower) in immediately available funds.
This Note is a Term Note referenced in, and evidences Indebtedness
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be or may automatically become
immediately due and payable.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
<PAGE> 2
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind with respect to
this Note. All amounts owing hereunder are payable by the Borrower without
relief from any valuation or appraisal laws.
MHI ACQUISITION CORPORATION I
(to be merged with and into
Milestone Healthcare, Inc.
By:/s/ William A. Brosius
------------------------------------------
Name:
Title:
Upon the merger of MHI Acquisition
Corporation I with and into the
undersigned, the undersigned acknowledges
and agrees that it shall have assumed all
obligations of MHI Acquisition
Corporation I under this Term Note as
if the undersigned was a direct signatory
of this Term Note.
MILESTONE HEALTHCARE, INC.
By:/s/ William A. Brosius
-----------------------------------
Name:
Title:
-2-
<PAGE> 3
SCHEDULE TO TERM NOTE
Schedule of Term Loans and Repayments
<TABLE>
<CAPTION>
PERSON
AMOUNT OF AMOUNT OF OUTSTANDING MAKING
DATE TERM LOAN REPAYMENT BALANCE NOTATION
---- --------- --------- -------------- --------
<S> <C> <C> <C> <C>
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- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
-3-
<PAGE> 1
EXHIBIT 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of May
31, 1995 among MHI ACQUISITION CORPORATION I, a Delaware corporation ("Mergerco
I"), MHI ACQUISITION CORPORATION II, a Delaware corporation ("Mergerco II"),
MILESTONE HEALTHCARE, INC., a Delaware corporation ("Milestone"), MILESTONE
HEALTH CARE MANAGEMENT, INC., a Delaware corporation ("Milestone Management"),
TRUCARE HEALTH SYSTEMS, INC., a Texas corporation ("Trucare"), TRUCARE
REHABILITATION SERVICES, INC., a Texas corporation ("Trucare Rehabilitation"),
and TRUCARE PHYSICAL THERAPY SERVICES, INC., a Texas corporation ("Trucare
Physical"; Mergerco I, Mergerco II, Milestone, Milestone Management, Trucare,
Trucare Rehabilitation and Trucare Physical are hereinafter referred to
individually as a "Grantor" and collectively as the "Grantors"), and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation
("ING"), as Agent (in such capacity, the "Agent") for itself and the other
lenders (ING and such other lenders, collectively, the "Lenders") as are, or
may become, parties to the Credit Agreement (as defined below).
W I T N E S S E T H:
RECITALS.
A. Pursuant to a Credit Agreement, dated as of even date
herewith (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Mergerco I, Milestone, the Lenders and the Agent,
the Lenders will extend a Term Loan and Revolving Loans to Mergerco I, all as
more specifically described in the Credit Agreement; and
B. Immediately subsequent to the initial borrowing by
Mergerco I under the Credit Agreement, Mergerco I shall be merged with and into
Milestone (the "Merger") with Milestone surviving such Merger, assuming all of
the obligations of Mergerco I under the Credit Agreement, and thereafter
becoming the Borrower under the Credit Agreement (Mergerco I and Milestone,
collectively, the "Borrower"); and
C. Pursuant to a Subsidiary Guaranty, dated as of even
date herewith (together with all amendments and other modifications, if any,
from time to time hereafter made thereto "Subsidiary Guaranty"), by Milestone
Management, Mergerco II, Trucare, Trucare Rehabilitation and Trucare Physical
in favor of the Agent and the Lenders, Milestone Management, Mergerco II,
Trucare, Trucare Rehabilitation and Trucare Physical have guaranteed, jointly
and severally, all of the Obligations of the Borrower under the Credit
Agreement subject to the terms of the Subsidiary Guaranty; and
<PAGE> 2
D. In order to induce the Lenders and the Agent to enter
into the Credit Agreement, and as a condition to the making of the Loans
thereunder, each of the Grantors has agreed to grant a continuing security
interest in and to the "Collateral" (as hereinafter defined) to secure the
"Secured Obligations" (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein, when used in this Agreement including its preamble
and Recitals, shall have the respective meanings provided for in the Credit
Agreement. The following additional terms (whether or not underscored), when
used in this Agreement, shall have the following meanings:
"Accounts" means all "accounts" (as defined in the UCC), now
or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights, and, in any event, shall mean and
include, without limitation, (a) all accounts receivable, contract rights, book
debts, notes, drafts and other obligations or indebtedness owing to such Person
arising from the sale or lease of goods or other property by it or the
performance of services by it (including, without limitation, any such
obligation which might be characterized as an account, contract right or
general intangible under the Uniform Commercial Code in effect in any
jurisdiction), (b) all of such Person's rights in, to and under all purchase
orders for goods, services or other property, and all of such Person's rights
to any goods, services or other property represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and rights to stoppage in transit), (c) all
monies due to or to become due to such Person under all contracts for the sale,
lease or exchange of goods or other property or the performance of services by
it (whether or not yet earned by performance on the part of such Person)
including, without limitation, all fees and other monies due to such Person
under a Management Contract, and (d) all collateral security and guarantees of
any kind given by such Person with respect to any of the foregoing, in each
case whether now in existence or hereafter arising or acquired.
"Accounts Aging Report" means a detailed aged trial balance of
all Accounts existing as of a specified date, specifying the names, addresses,
face value and dates of invoices of each Account Debtor obligated on any
Accounts so listed.
-2-
<PAGE> 3
"Collateral" means, collectively:
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Equipment;
(v) Instruments;
(vi) General Intangibles;
(vii) the Collateral Account, all cash deposited
therein from time to time, the investments made pursuant to Section 6
and other monies and property of any kind of any Grantor in the
possession or under the control of the Agent or any Lender;
(viii) All other goods and personal property of any
Grantor, whether tangible or intangible;
(ix) All books and records of any Grantor pertaining
to any of the Collateral (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records); and
(x) All products and Proceeds of all or any of the
Collateral described in clauses (i) through (ix) hereof.
"Collateral Account" means any cash collateral account
established by a Grantor for the benefit and in the name and under the
exclusive dominion and control of the Agent, pursuant to Section 6.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now or hereafter
owned or acquired by a Person or in which a Person now or hereafter has or
acquires rights.
"Equipment" means all "equipment" (as defined in the UCC), now
or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires rights, and, in any event, shall mean and include,
without limitation, all machinery, equipment, furnishings, fixtures, vehicles
and computers and other electronic data processing and other office equipment
and any and all additions, substitutions and replacements of any of the
foregoing, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
-3-
<PAGE> 4
"General Intangibles" means all "general intangibles" (as
defined in the UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires any rights, and, in any event, shall
mean and include, without limitation, all obligations or indebtedness owing to
a Person (other than Accounts) from whatever source arising, including, without
limitation, rights to indemnification (including, without limitation, rights to
indemnification under the Acquisition Agreement) and all other rights arising
under the Acquisition Agreement, and all rights, title and interest which a
Person may now or hereafter have in or under all contracts (in addition to
contracts described in the definition of Accounts), causes of action,
franchises, tax refund claims, customer lists, Intellectual Property, license
royalties, goodwill, trade secrets, proprietary or confidential information,
data bases, business records, data, skill, expertise, experience, processes,
models, drawings, materials and records, permits and licenses, and all other
intangible property of every kind and nature.
"Instruments" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC), including, without
limitation, instruments, chattel paper and letters of credit evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights.
"Intellectual Property" means, collectively, (a) all systems
software and applications software, including, but not limited to, source code,
object code, screen displays and formats, program structure, sequence and
organization, and audiovisual elements, all formulas, processes, ideas and
know-how embodied in any of the foregoing, and all documentation and program
materials, user manuals, operations manuals, flowcharts, programer's notes,
outlines and specifications created in connection with any of the forgoing,
whether or not patentable or copyrightable, (b) concepts, discoveries,
improvements and ideas, (c) patents, patent rights and patent applications,
copyrights and copyright applications, Trademarks, including, without
limitation, the name "Milestone Healthcare" and all derivations thereof, and
(d) patent licenses, Trademark Licenses, copyright licenses and other licenses
to use any of the items described in the foregoing clauses (a), (b), (c) and
(d) or any other items of a Person necessary for the conduct of its business.
"Inventory" means all "inventory" (as defined in the UCC), now
or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights, wherever located, and, in any event,
shall mean and include, without
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limitation, all raw materials, inventory and other materials and supplies,
work-in-process, finished goods, and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Perfection Certificate" means a certificate dated as of even
date herewith, setting forth the corporate names, chief executive office or
principal places of business in each State and other current locations of the
Persons and such other information as the Agent deems reasonably pertinent to
the perfection of security interests, completed and supplemented with the
schedules and attachments contemplated thereby to the satisfaction of the
Agent, and duly executed by the chief executive and chief financial Authorized
Officer of each of the Persons.
"Permitted Liens" means the Security Interests and the Liens
on the Collateral permitted to be created, to be assumed or to exist pursuant
to Section 6.2.3 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other profits,
rentals or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or realization
upon, Collateral, including, without limitation all claims of a Person against
third parties for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of insurance in respect
of, any Collateral, and any condemnation or requisition payments with respect
to any Collateral and the following types of property acquired with cash
proceeds: Accounts, Inventory, General Intangibles, Documents, Instruments and
Equipment.
"Secured Obligations" means (a) with respect to the Borrower,
the Obligations, including, without limitation (i) all principal of and
interest (including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower) on any Loan under,
any Note issued pursuant to, and any other amount due from the Borrower under,
the Credit Agreement, and (ii) all amounts payable by the Borrower to an
Interest Rate Contract Counterparty that is a Lender pursuant to the terms of
the Credit Agreement, and (iii) all other obligations (monetary or otherwise)
to be performed by the Borrower under the Credit Agreement or any other Loan
Document; (b) with respect to any Grantor that is a party to the Subsidiary
Guaranty, all amounts payable and all obligations (monetary or otherwise) to be
performed by such Grantor under the Subsidiary Guaranty; and (c) amounts
payable and all renewals or extensions of any of the foregoing.
"Security Interests" means the security interests granted
pursuant to Section 3, as well as all other security interests created or
assigned as additional security for the Secured Obligations pursuant to the
provisions of this Agreement.
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"Trademark License" means any written agreement now or
hereafter in existence granting to a Person any right to use any Trademark,
including, without limitation, the agreements described in Schedule I to the
Trademark Assignment.
"Trademarks" means all of the following: (i) all trademarks,
trade names, corporate names, company names, business names, fictitious
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, whether now existing or
hereafter adopted or acquired, all registrations and recordings thereof, (ii)
all applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof,
including, without limitation, those described in Schedule I to the Trademark
Assignment, and (iii) all reissues, extensions or renewals thereof.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, "UCC" means
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
SECTION 2. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a) Such Grantor has good and marketable title to all of
its Collateral, free and clear of any Liens other than the Permitted Liens.
(b) Other than financing statements or other similar or
equivalent documents or instruments with respect to Permitted Liens, to such
Grantor's knowledge, no financing statement, mortgage, security agreement or
similar or equivalent document or instrument covering all or any part of the
Collateral is on file or of record in any jurisdiction. No Collateral is in
the possession of a Person (other than the Grantor) asserting any claim thereto
or security interest therein, except that the Agent or its designee may have
possession of Collateral as contemplated hereby.
(c) All of the information set forth in the Perfection
Certificate is true and correct as of the date hereof.
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(d) (i) UCC financing statements in appropriate
form having been filed in the offices specified in the Perfection
Certificate, the Security Interests constitute valid and perfected
security interests in the Collateral, prior to all other Liens and
rights of others therein except for the Permitted Liens, to the extent
that a security interest therein may be perfected by filing pursuant
to the UCC.
(ii) When the Trademark Assignment is filed
with the United States Patent and Trademark Office, the Security
Interests shall constitute valid and perfected security interests in
all right, title and interest of the Grantor in all Trademarks of such
Grantor, prior to all other Liens and rights of others therein except
for the Permitted Liens, to the extent that a security interest in
such Trademarks may be perfected by a filing in such office.
(e) The Inventory and Equipment are insured in accordance
with the requirements hereof and of the Credit Agreement.
SECTION 3. The Security Interests.
(a) In order to secure the full and punctual payment and
performance of its Secured Obligations in accordance with the terms thereof,
each Grantor hereby grants to the Agent for its benefit and the ratable benefit
of the Lenders a continuing security interest in and to all of the Collateral
now or hereafter owned or acquired by such Grantor or in which such Grantor now
has or hereafter has or acquires any rights, and wherever located.
(b) The Security Interests are granted as security only
and shall not subject the Agent or any Lender to, or transfer to the Agent or
any Lender, or in any way affect or modify, any obligation or liability of the
Grantor with respect to any of the Collateral or any transaction in connection
therewith.
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) No Grantor will change the location of its
chief executive office or principal place of business in any state
unless it shall have given the Agent thirty (30) days prior notice
thereof, executed and delivered to the Agent all financing statements
and financing statement amendments which the Agent may request in
connection therewith and delivered an opinion of counsel with respect
thereto in accordance with Section 4(a)(viii). No Grantor shall
change the locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location described in the
Perfection Certificate unless the Grantor shall have given the Agent
thirty (30) days prior notice of such change of location, executed and
delivered to the Agent all financing statements and financing
statement amendments which
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the Agent may request in connection therewith and, if requested by the
Agent, delivered an opinion of counsel with respect thereto in
accordance with Section 4(a)(viii), provided, however, that the
Grantor may keep Inventory at, or in transit to, any location
described in the Perfection Certificate. No Grantor shall in any
event change the location of any Collateral if such change would cause
the Security Interests in such Collateral to lapse or cease to be
perfected.
(ii) No Grantor will change its name, identity or
corporate structure in any manner unless it shall have given the Agent
thirty (30) days prior notice thereof, executed and delivered to the
Agent all financing statements and financing statement amendments
which the Agent may request in connection therewith, and, upon request
from the Agent, delivered an opinion of counsel with respect thereto
in accordance with Section 4(a)(viii).
(iii) The Grant will, from time to time, at its
expense, execute, deliver, file and record any statement, assignment,
instrument, document, agreement or other paper and take any other
action (including, without limitation, any filings with the United
States Patent and Trademark Office [Copyright or Patent filings and
any filings of financing or continuation statements under the UCC)
that from time to time may be necessary, or that the Agent may
reasonably request, in order to create, preserve, upgrade in rank (to
the extent required hereby), perfect, confirm or validate the Security
Interests or to enable the Agent and the Lenders to obtain the full
benefits of this Agreement, or to enable the Agent to exercise and
enforce any of its rights, powers and remedies hereunder with respect
to any of the Collateral. To the extent permitted by law, each
Grantor hereby authorizes the Agent to execute and file financing
statements, financing statement amendments or continuation statements
without the Grantor's signature appearing thereon. Each Grantor
agrees that a carbon, photographic, photostatic or other reproduction
of this Agreement or of a financing statement is sufficient as a
financing statement. The Grantors shall, jointly and severally, pay
the costs of, or incidental to, any recording or filing of any
financing statements, financing statement amendments or continuation
statements concerning the Collateral.
(iv) If any Collateral exceeding in value $10,000
in the aggregate is at any time in the possession or control of any
warehouseman, bailee (other than a carrier transporting Inventory to a
purchaser in the ordinary course of business) or any of the Grantors'
agents or processors, the Grantors shall notify in writing such
warehouseman, bailee, agent or processor of the Security Interests
created hereby, shall obtain such warehouseman's, bailee's, agent's
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or processor's agreement in writing to hold all such Collateral for
the Agent's account subject to the Agent's instructions, and shall
cause such warehousemen, bailee, agent or processor to issue and
deliver to the Agent warehouse receipts, bills of lading or any
similar documents relating to such Collateral in the Agent's name and
in form and substance acceptable to the Agent.
(v) The Grantors will immediately deliver and
pledge each Instrument to the Agent, appropriately endorsed to the
Agent, provided that so long as no Event of Default shall have
occurred and be continuing, the Grantors may retain for collection in
the ordinary course any Instruments (other than checks and drafts
constituting payments in respect of Accounts if the provisions of
Section 6(b) shall be applicable) received by it in the ordinary
course of business and the Agent shall, promptly upon request of the
Grantors, make appropriate arrangements for making any other
Instrument pledged by the Grantor available to it for purposes of
presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate to the Agent, against trust
receipt or like document).
(vi) No Grantor will (A) sell, transfer, lease,
exchange, assign or otherwise dispose of, or grant any option, warrant
or other right with respect to, any Collateral except that, subject to
the rights of the Agent and the Lenders hereunder if an Event of
Default shall have occurred and be continuing, the Grantors may
dispose of assets if such disposition is permitted by Section 6.2.11
of the Credit Agreement, whereupon, in the case of such a disposition,
sale or exchange, the Security Interests created hereby in such item
(but not in any Proceeds arising from such disposition, sale or
exchange) shall cease immediately without any further action on the
part of the Agent; or (B) create, incur or suffer to exist any Lien
with respect to any Collateral, except for the Permitted Liens.
(vii) The Grantors will, promptly upon request,
provide to the Agent all information and evidence it may reasonably
request concerning the Collateral, and in particular the Accounts, to
enable the Agent to enforce the provisions of this Agreement.
(viii) Prior to each date on which any Grantor
proposes to take any action contemplated by Section 4(a)(i) or Section
4(a)(ii), upon request of the Required Lenders such Grantor shall, at
its cost and expense, cause to be delivered to the Agent and the
Lenders an opinion of counsel, satisfactory to the Agent, to the
effect that all financing statements and amendments or supplements
thereto, continuation statements and other documents required to be
recorded or filed in order to perfect and protect the Security
Interests and priority thereof against all creditors
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<PAGE> 10
of and purchasers from such Grantor have been filed in each filing
office necessary for such purposes and that all filing fees and taxes,
if any, payable in connection with such filings have been paid in
full.
(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable
efforts consistent with prudent business practice to cause to be
collected from its Account Debtors, as and when due (or in the
ordinary course of business), any and all amounts owing under or on
account of each Account (including, without limitation, Accounts which
are delinquent, such Accounts to be collected in accordance with
lawful collection procedures) and apply forthwith upon receipt thereof
all such amounts as are so collected to the outstanding balance of
such Account, except that, unless an Event of Default has occurred and
is continuing, the Grantors may allow, as adjustments to amounts owing
under its Accounts, extensions or renewals of the time or times of
payment, settlements for less than the total unpaid balance (which the
Grantors find appropriate in accordance with sound business judgment)
and refunds or credits due as a result of returned or damaged
merchandise, in each case in accordance with the Grantors' ordinary
course of business consistent with its and the Sellers' historical
collection practices. The costs and expenses (including, without
limitation, attorney's fees) of collection of Accounts incurred by the
Grantors or the Agent, shall be borne by the Grantors jointly and
severally.
(ii) Upon the occurrence and during the
continuance of any Event of Default, upon request of the Agent, each
Grantor will promptly notify (and each Grantor hereby authorizes the
Agent so to notify) each Account Debtor in respect of any Account or
Instrument that such Collateral has been assigned to the Agent
hereunder, and that any payments due or to become due in respect of
such Collateral are to be made directly to the Agent or its designee.
(iii) In all material respects, each Grantor
will perform and comply with all of its obligations in respect of
Accounts, Instruments and General Intangibles except where the failure
to so perform and comply is deemed by such Grantor to be in its best
business interest.
(iv) The Agent may rely on all statements and
representations made by any Grantor on or with respect to any
Borrowing Base Certificate and Accounts Aging Report in determining
which Accounts listed on such Borrowing Base Certificate and Accounts
Aging Report are Eligible Accounts. Unless otherwise indicated in
writing by the Grantors, each Borrowing Base Certificate and Accounts
Aging Report delivered by the Grantors to the Agent shall constitute a
representation by the Grantors with respect to the Accounts listed
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thereon that: (A) such Accounts are genuine, are in all respects what
they purport to be, are not evidenced by a judgment and are only
evidenced by one, if any, executed original instrument, agreement,
contract, or document, which has been delivered to the Agent and by
invoices issued in respect thereof; (B) such Accounts represent
undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto; (C)
except as set forth in clause (D) below, the amounts of the face value
shown, and any invoices and statements delivered to the Agent with
respect to any Account are actually and absolutely owing to the
Grantors and are not contingent for any reason; (D) to the best of the
Grantors' knowledge, there are no setoffs, counterclaims or disputes
existing or asserted with respect to such Accounts, and the Grantors
have not made any agreement with any Account Debtor thereunder for any
deduction therefrom, except for discounts, rebates or allowances by
the Grantors in the ordinary course of their business for prompt
payments or as otherwise permitted by Section 4(b)(i) hereof, all of
which discounts, rebates or allowances are reflected in the
calculation of the face value of each respective invoice related
thereto or have been disclosed by the Grantors to the Agent in
writing; (E) to the best of the Grantors' knowledge, there are no
facts, events, or occurrences which in any way impair in any material
respect the validity or enforceability of any such Account or tend to
reduce the amount payable thereunder from the amount of the invoice
face value shown on any Accounts Aging Report, and on all contracts,
invoices and statements delivered to the Agent with respect thereto;
(F) the Grantors have no knowledge that any Account Debtor under any
such Account (x) did not have the capacity to contract at the time any
contract or other document giving rise to the Account was executed and
(y) is not Solvent; (G) the goods, if any, giving rise to such
Accounts are not, and were not at the time of the sale thereof,
subject to any lien, claim, encumbrance or security interest, except
those of the Agent and those removed, terminated or assigned to the
Agent on or prior to the date hereof; (H) the Grantors have no
knowledge of any fact or circumstance which would impair in any
material respect the validity or collectibility of any such Account;
(I) to the best of the Grantors' knowledge, there are no proceedings
or actions which are threatened or pending against any Account Debtor
under such Accounts which could reasonably result in any material
adverse change in such Account Debtor's financial condition; (J) no
security interest in such Accounts has been granted to a Person other
than that granted to the Agent pursuant hereto; and (K) each invoice
or other evidence of payment obligation furnished to Account Debtors
with respect to such Accounts is issued in a Grantor's corporate name.
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(c) Inventory, Etc. The Grantors shall notify the Agent
immediately of any additional location where Inventory is stored which is not
listed in the Perfection Certificate.
(d) Equipment, Etc. The Grantors shall, (i) on or prior
to the Closing Date, in the case of Equipment now owned and (ii) within ten
(10) days after acquiring any other Equipment, deliver to the Agent any and all
certificates of title, and applications therefor, if any, of such Equipment and
shall cause the Agent to be named as lienholder on any such certificate of
title and applications. The Grantors shall promptly inform the Agent of any
material additions to or deletions from the Equipment and shall not permit any
such items to become a fixture to real estate or an accession to other personal
property.
(e) Patents, Trademarks, Etc. The Grantors shall notify
the Agent immediately (i) of its acquisition after the Closing Date of any
patent, patent license, Trademark or Trademark License and (ii) if it knows, or
has reason to know, that any application or registration relating to any patent
or Trademark owned by or licensed to the Grantors is reasonably likely to
become abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination
or development in, any proceeding in the United States Patent and Trademark
Office or any court) regarding any Grantor's ownership of any patent or
Trademark, its right to register the same, or to keep and maintain the same.
In the event that any patent, patent license, Trademark or Trademark License is
infringed, misappropriated or diluted by a third party, the Grantors shall
notify the Agent promptly after they learn thereof and shall, unless the
Grantors shall reasonably determine that any such action would be of immaterial
economic value, promptly sue for infringement, misappropriation or dilution and
to recover any and all damages for such infringement, misappropriation or
dilution, and take such other actions as the Grantors shall reasonably deem
appropriate under the circumstances to protect such patent, patent license,
Trademark or Trademark License. In no event shall the Grantors, either
themselves or through any agent, employee or licensee, file an application for
the registration of any patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless not less than thirty (30) days prior
thereto it informs the Agent, and, upon issuance of such patent or Trademark,
executes and delivers any and all agreements, instruments, documents and papers
the Agent may reasonably request to evidence the Security Interests in such
patent or Trademark and the goodwill and general intangibles of the Grantors
relating thereto or represented thereby. Each Grantor hereby constitutes the
Agent its attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power, being coupled with an interest, shall be irrevocable
until the Commitments have terminated and the Secured Obligations are paid in
full.
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SECTION 5. Reporting and Recordkeeping. Each Grantor covenants and
agrees with the Agent and the Lenders that from and after the date of this
Agreement and until the Commitments have terminated, and all Secured
Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Such Grantor will
keep and maintain at its own cost and expense records of the Collateral,
complete in all material respects, including, without limitation, a record of
all payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral. Such Grantor will mark its books
and records pertaining to the Collateral to evidence this Agreement and the
Security Interests. All Chattel Paper will be marked with the following
legend: "This writing and the obligations evidenced or secured hereby are
subject to the security interest of Internationale Nederlanden (U.S.) Capital
Corporation, as Agent". For the Agent's and the Lenders' further security,
such Grantor agrees that the Agent and the Lenders shall have a security
interest in all of the Grantor's books and records pertaining to the Collateral
and, upon the occurrence and during the continuation of any Default or Event of
Default, the Grantor shall deliver and turn over any such books and records to
the Agent or to its representatives at any time on demand of the Agent. Prior
to the occurrence of a Default or an Event of Default and upon reasonable
notice from the Agent, such Grantor shall permit any representative of the
Agent, at reasonable times and reasonable intervals upon one Business Day's
notice, to inspect such books and records and will provide photocopies thereof
to the Agent.
(b) Special Provisions Regarding Maintenance of Records
and Reporting Re: Accounts, Inventory and Equipment.
(i) Such Grantor shall keep complete and
accurate records of its Accounts and, concurrently with the delivery
of each Borrowing Base Certificate as provided in the Credit
Agreement, within thirty (30) days after the close of each Fiscal
Month, shall deliver to the Agent an Accounts Aging Report as of the
last day of such Fiscal Month; in each case together with invoice
registers and copies, prior to the occurrence of an Event of Default,
and the originals, after the occurrence of an Event of Default, of
such invoices, shipping receipts, orders and other documents relating
to the creation of the Accounts listed on such Accounts Aging Report
as the Agent shall reasonably request. In addition, at the request of
the Agent, such Grantor shall deliver to the Agent the original copy
of all documents, including, without limitation, repayment histories,
present status reports, relating to the Accounts so scheduled and such
other matters and information relating to the status of then existing
Accounts as the Agent shall reasonably request.
(ii) In the event any amounts due and owing in
excess of $50,000 individually or $100,000 in the aggregate are in
dispute between any Account Debtor and such Grantor,
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such Grantor shall provide the Agent with written notice thereof
promptly after such Grantor's learning thereof explaining in detail
the reason for the dispute, all claims related thereto and the amount
in controversy.
(iii) Such Grantor shall, consistent with
customary and prudent business practices, keep correct and accurate
records, itemizing and describing the kind, type, location, quality
and quantity of Inventory, and the withdrawals therefrom and additions
thereto, and shall furnish to the Agent, upon request, (A) a current
Schedule of Inventory, and (B) a current summary of all changes in the
location of and the Persons in possession of any of the Inventory.
(iv) If any Account Debtor returns or rejects
any Inventory generating an Account on which the Account Debtor is
obligated in excess of $50,000 for any individual Account Debtor or in
excess of $100,000 in the aggregate for all Account Debtors, such
Grantor shall notify the Agent of the same immediately, specifying the
reason for such return or rejection and the location and condition of
the returned Inventory.
(v) Such Grantor shall maintain itemized
records, accurate in all material respects, itemizing and describing
the kind, type, quality, quantity and book value of its Equipment and
shall furnish the Agent with a current schedule containing the
foregoing information on the Closing Date, and on an annual basis
after the Closing Date, and more often if requested by the Agent after
the occurrence and during the continuation of an Event of Default.
(vi) Such Grantor will promptly upon, but in no
event later than five (5) Business Days after:
(A) Such Grantor's learning thereof, inform
the Agent, in writing, of any material delay in the Grantor's
performance of any of its material obligations to any Account
Debtor and of any assertion of any material claims, offsets or
counterclaims by any Account Debtor and of any allowances,
credits and/or other monies granted by such Grantor to any
Account Debtor, in each case involving amounts in excess of
$50,000 for any single Account or Account Debtor or in excess
of $100,000 in the aggregate for all Accounts and Account
Debtors;
(B) such Grantor's receipt or learning
thereof, furnish to and inform the Agent of all material
adverse information relating to the financial condition of any
Account Debtor with respect to Accounts exceeding $50,000
individually or $100,000 in the aggregate;
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(C) such Grantor's learning thereof, inform
the Agent in writing in the event any Eligible Accounts having
an aggregate value of $50,000 or more, in either case, became
ineligible and of the reasons for such ineligibility.
(vii) Such Grantor will promptly notify the
Agent in writing if any Account, the face value of which exceeds
$10,000, arises out of a contract with the United States of America,
or any department, agency, subdivision or instrumentality thereof, or
of any state (or department, agency, subdivision or instrumentality
thereof) where such state has a state assignment of claims act or
other law comparable to the Federal Assignment of Claims Act, and will
take any action required or requested by the Agent to give notice of
the Agent's security interest in such Accounts under the provisions of
the Federal Assignment of Claims Act or any comparable law or act
enacted by any state or local governmental authority; and
(viii) Such Grantor at its expense will
cause independent public accountants reasonably satisfactory to the
Agent to prepare and deliver to the Agent at any time and from time to
time promptly upon the Agent's request (such request to be made only
once in any twelve-month period unless the Agent has a reasonable
basis to make such request more frequently), the following reports:
(A) a reconciliation of all of its Accounts, (B) an aging of all of
its Accounts, (C) trial balances, and (D) a test verification of such
Accounts.
(c) Further Identification of Collateral. Such Grantor
will if so requested by the Agent furnish to the Agent, as often as the Agent
reasonably requests, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request, all in reasonable detail.
(d) Notices. In addition to the notices required by
Section 5(b) hereof, such Grantor will advise the Agent promptly, in reasonable
detail, (i) of any material Lien or claim made or asserted against any of the
Collateral, (ii) of any material adverse change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
validity, perfection or priority of the Security Interests.
SECTION 6. Collateral Account.
(a) Each Grantor hereby establishes with the Agent a
Collateral Account in the name and under the exclusive dominion and control of
the Agent, into which there shall be deposited from time to time the cash
proceeds of the Collateral required to be
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delivered to the Agent pursuant to subsection (b) of this Section 6 or any
other provision of this Agreement. Any income received by the Agent with
respect to the balance from time to time standing to the credit of the
Collateral Account, including any interest or capital gains on investments of
amounts on deposit in the Collateral Account, shall remain, or be deposited, in
the Collateral Account. All right, title and interest in and to the cash
amounts on deposit from time to time in the Collateral Account together with
any investments from time to time made pursuant to subsection (d) of this
Section 6 shall vest in the Agent, shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided.
(b) Upon the occurrence and during the continuation of an
Event of Default or a Material Adverse Change, if requested by the Agent, each
Grantor shall instruct all Account Debtors and other Persons obligated in
respect of (i) all Government Accounts to make all payments in respect of such
Accounts to one or more banks in any state in the United States (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the exclusive dominion and control of such banks) under a Lockbox
Letter in a form satisfactory to the Agent duly executed by such Grantor,
pursuant to which such Grantor shall have instructed such banks (and such banks
shall have agreed) to remit all proceeds of such payments for deposit into the
Collateral Account, and (ii) all Accounts that are not Government Accounts to
make all payments in respect of the Accounts either (A) directly to the Agent
(by instructing that such payments be remitted to a post office box which shall
be in the name and under the exclusive dominion and control of the Agent) or
(B) to one or more banks in any state in the United States (by instructing that
such payments be remitted to a post office box which shall be in the name and
under the exclusive dominion and control of such bank) under a Lockbox Letter
in a form satisfactory to the Agent, duly executed by such Grantor and such
bank, pursuant to which such Grantor shall have irrevocably instructed such
other bank (and such other bank shall have agreed) to remit all proceeds of
such payments directly to the Agent for deposit into the Collateral Account or
as the Agent may otherwise instruct such bank; and thereafter if the proceeds
of any Collateral shall be received by any Grantor, such Grantor will promptly
deposit such proceeds into the Collateral Account and until so deposited, all
such proceeds shall be held in trust by such Grantor for and as the property of
the Agent and the Lenders and shall not be commingled with any other funds or
property of such Grantor. At any time after the occurrence and during the
continuance of an Event of Default, the Agent may itself so instruct such
Grantor's Account Debtors. All such payments made to the Agent shall be
deposited in the Collateral Account. Notwithstanding anything to the contrary
set forth herein, all arrangements made pursuant to
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<PAGE> 17
clause (i) of this Section 6(b) shall comply with Medicare Carriers Manual
Section 3060.11, as revised by Trans. No. 1445 (February 1993) and Medicare
Intermediary Manual Section 3488.2, as revised by Trans. No. 1590 (February
1993), and any other laws and regulations applicable to Government Accounts.
(c) Provided no Event of Default has occurred and is
continuing, (i) the balance from time to time standing to the credit of the
Collateral Account shall be distributed to the Grantors upon the order of the
Grantor, and (ii) if immediately available cash on deposit in the Collateral
Account is not sufficient to make any such distribution to the Grantors, the
Agent shall liquidate as promptly as practicable such investments made with
amounts deposited in the Collateral Account as the Grantors may direct and,
notwithstanding any other provision of this Section 6, such distribution shall
not be made until such liquidation has taken place.
(d) Amounts on deposit in the Collateral Account shall be
invested and re-invested from time to time in such Cash Equivalent Investments
as the Grantors shall determine, which investments shall be held in the name
and be under the control of the Agent; provided that, if an Event of Default
has occurred and is continuing, the Agent may and, if instructed by the
Required Lenders, shall liquidate any such investments and apply or cause to be
applied the proceeds thereof to the payment of the Secured Obligations in the
manner specified in Section 10; and provided further that (i) each such
investment shall mature within thirty (30) days after it is acquired by the
Agent and (ii) in order to provide the Agent, for its benefit and the benefit
of the Lenders, with a perfected security interest therein, each such
investment shall be either:
(i) evidenced by negotiable certificates or
instruments, or if non-negotiable then issued in the name of the
Agent, which (together with any appropriate instruments of transfer)
are delivered to, and held by, the Agent or an agent thereof (which
shall not be the Grantor or any of its Affiliates) in the State of New
York; or
(ii) in book-entry form and issued by the United
States and subject to pledge under applicable state law and Treasury
regulations and as to which (in the opinion of counsel to the Agent)
appropriate measures shall have been taken for perfection of the
Security Interests.
SECTION 7. General Authority. Each Grantor hereby irrevocably appoints
the Agent its true and lawful attorney, with full power of substitution, in the
name of the Grantor, the Agent, the Lenders or otherwise, for the sole use and
benefit of the Agent and the Lenders, but at the Grantor's expense, to
exercise, at any time from time to time all or any of the following powers:
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<PAGE> 18
(i) to file the financing statements,
financing statement amendments and continuation statements referred to
in Section 4(a)(iii),
(ii) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due with
respect to any Collateral or by virtue thereof,
(iii) to settle, compromise, compound, prosecute
or defend any action or proceeding with respect to any Collateral,
(iv) to sell, transfer, assign or otherwise
deal in or with the Collateral or the proceeds or avails thereof, as
fully and effectually as if the Agent were the absolute owner thereof,
and
(v) to extend the time of payment of any or
all thereof and to make any allowance and other adjustments with
reference to the Collateral;
provided that the Agent shall not take any of the actions described in this
Section 7 except those described in clause (i) above unless an Event of Default
shall have occurred and be continuing.
SECTION 8. Remedies upon Event of Default.
(a) If any Event of Default has occurred and is
continuing, the Agent may exercise on behalf of the Lenders all rights of a
secured party under the UCC (whether or not in effect in the jurisdiction where
such rights are exercised) and, in addition, the Agent may (i) withdraw all
cash, if any, in the Collateral Account and investments made with amounts on
deposit in the Collateral Account, and apply such monies, investments and other
cash, if any, then held by it as Collateral as specified in Section 10 and (ii)
sell the Collateral or any part thereof at public or private sale, for cash,
upon credit or for future delivery, and at such price or prices as the Agent
may deem satisfactory. The Agent shall give the Grantor not less than ten
days' prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Grantor agrees that any such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC (to
the extent such Section is applicable).
The Agent or any Lender may be the purchaser of any or all of the Collateral so
sold at any public sale (or, if the Collateral is of a type customarily sold in
a recognized market or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under applicable law, at
any
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<PAGE> 19
private sale) and thereafter hold the same, absolutely, free from any right or
claim of whatsoever kind. The Grantors will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely, free from any claim or right of any kind,
including any equity or right of redemption of the Grantors. To the extent
permitted by law, each Grantor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale shall (1) in
case of a public sale, state the time and place fixed for such sale, and (2) in
the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot as
an entirety or in separate parcels, as the Agent may determine. The Agent
shall not be obligated to make any such sale pursuant to any such notice. The
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time
and place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Agent until the selling price is paid by the purchaser thereof,
but the Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice. The Agent,
instead of exercising the power of sale herein conferred upon it, may proceed
by a suit or suits at law or in equity to foreclose the Security Interests and
sell the Collateral, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction. The Grantors shall remain liable,
jointly and severally, for any deficiency.
(b) For the purpose of enforcing any and all rights and
remedies under this Agreement, the Agent may (i) require the Grantors to, and
the Grantors agree that they will, at their expense and upon the request of the
Agent, forthwith assemble all or any part of the Collateral as directed by the
Agent and make it available at a place designated by the Agent which is, in the
Agent's opinion, reasonably convenient to the Agent and the Grantors, whether
at the premises of a Grantor or otherwise, (ii) to the extent permitted by
applicable law, enter, with or without process of law and without breach of the
peace, any premise where any of the Collateral is or may be located and,
without charge or liability to the Agent, seize and remove such Collateral from
such premises, (iii) have access to and use the Grantors' books and records
relating to the Collateral and (iv) prior to the disposition of the Collateral,
store or transfer such Collateral
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<PAGE> 20
without charge in or by means of any storage or transportation facility owned
or leased by the Grantors, process, repair or recondition such Collateral or
otherwise prepare it for disposition in any manner and to the extent the Agent
deems appropriate and, in connection with such preparation and disposition, use
without charge any trademark, trade name, copyright, patent or technical
process used by the Grantors.
(c) Without limiting the generality of the foregoing, if
any Event of Default has occurred and is continuing:
(i) the Agent may license, or sublicense,
whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Agent shall in its sole
discretion determine;
(ii) the Agent may (without assuming any
obligations or liability thereunder), at any time and from time to
time, enforce (and shall have the exclusive right to enforce) against
any licensee or sublicensee all rights and remedies of the Grantors
in, to and under any patent licenses or Trademark Licenses and take or
refrain from taking any action under any thereof, and each Grantor
hereby releases the Agent and each of the Lenders from, and agrees to
hold the Agent and each of the Lenders free and harmless from and
against any claims arising out of, any lawful action so taken or
omitted to be taken with respect thereto; and
(iii) upon request by the Agent, the
Grantors will execute and deliver to the Agent powers of attorney, in
form and substance satisfactory to the Agent, for the implementation
of any lease, assignment, license, sublicense, grant of option, sale
or other disposition of a patent or Trademark. In the event of any
such disposition pursuant to this Section, the Grantors shall supply
their know-how and expertise relating to the manufacture and sale of
the products bearing Trademarks or the products or services made or
rendered in connection with patents, and its customer lists and other
records relating to such patents or Trademarks and to the distribution
of said products, to the Agent.
SECTION 9. Limitation on Duty of Agent in Respect of Collateral. Beyond
reasonable care in the custody thereof, the Agent shall have no duty as to any
Collateral in its possession or control or in the possession or control of any
agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Agent shall
be deemed to have exercised reasonable care in the custody of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property, and
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<PAGE> 21
the Agent shall not be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by the Agent in good faith.
SECTION 10. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral of any Grantor shall be
applied by the Agent in the following order of priorities:
first, to payment of the reasonable out-of-pocket expenses
of such sale or other realization, including reasonable compensation
to agents and counsel for the Agent, and all reasonable out-of-pocket
expenses, liabilities and advances incurred or made by the Agent in
connection therewith, and any other unreimbursed expenses for which
the Agent or any Lender is to be reimbursed pursuant to Section 9.3 of
the Credit Agreement, or Section 13 hereof or any corresponding
provision of any of the other Loan Documents;
second, to the ratable payment of accrued but unpaid
interest (including post-petition interest) and fees constituting
Secured Obligations of such Guarantor;
third, to the ratable payment of unpaid principal of the
Secured Obligations of such Guarantor;
fourth, to the ratable payment of all other Secured
Obligations of such Guarantor, until all such Secured Obligations
shall have been paid in full; and
finally, to payment to such Grantor or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a ratable
basis, in any combination thereof.
SECTION 11. Concerning the Agent. The provisions of Article 8 of the
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the parties to the Credit Agreement in such
respect. In furtherance and not in derogation of the rights, privileges and
immunities of the Agent therein set forth:
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<PAGE> 22
(a) The Agent is authorized to take all such action as is
provided to be taken by it as Agent hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein, the
Agent may request instructions from the Lenders and shall act or refrain from
acting in accordance with written instructions from the Required Lenders or, in
the absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests, whether impaired by
operation of law or by reason of any action or omission to act on its part.
The Agent shall have no duty to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the Grantors.
SECTION 12. Appointment of Co-Agents. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Agent may appoint
another bank or trust company or one or more other Persons, either to act as
co-agent or co-agents, jointly with the Agent, or to act as separate agent or
agents on behalf of the Agent and the Lenders with such power and authority as
may be necessary for the effectual operation of the provisions hereof and
specified in the instrument of appointment (which may, in the discretion of the
Agent, include provisions for the protection of such co-agent or separate agent
similar to the provisions of Section 11).
SECTION 13. Expenses. In the event that any Grantor fails to comply
with the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the value of any Collateral or the validity, perfection,
rank or value of the Security Interests are thereby diminished or potentially
diminished or put at risk, the Agent if requested by the Required Lenders may,
but shall not be required to, effect such compliance on behalf of the Grantor,
and the Grantors shall reimburse the Agent, jointly and severally, for the
reasonable costs thereof on demand. All reasonable insurance expenses and all
reasonable expenses of protecting, storing, warehousing, appraising, insuring,
handling, maintaining and shipping the Collateral, any and all excise, stamp,
intangibles, transfer, property, sales, and use taxes imposed by any state,
federal, or local authority or any other Governmental Authority on any of the
Collateral, or in respect of periodic appraisals and inspections of the
Collateral to the extent the same may be requested by the Required Lenders from
time to time, or in respect of the sale or other disposition thereof, shall be
borne and paid by the Grantors; and if the Grantors fail promptly to pay any
portion thereof when due, the Agent or any Lender may, at its option, but shall
not be required to, pay the same and charge the Grantors' accounts therefor,
and the Grantors agree to reimburse the Agent or such Lender therefor on
demand.
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<PAGE> 23
All sums so paid or incurred by the Agent or any Lender for any of the
foregoing and any and all other sums for which the Grantors may become liable
hereunder and all reasonable costs and expenses (including reasonable
attorneys' fees, legal expenses and court costs) reasonably incurred by the
Agent or any Lender in enforcing or protecting the Security Interests or any of
their rights or remedies thereon shall be payable by the Grantors on demand and
shall bear interest (after as well as before judgment) until paid at the rate
set forth in Section 3.4.3 of the Credit Agreement and shall be additional
Secured Obligations hereunder.
SECTION 14. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination of
the Commitments, the Security Interests shall terminate and all rights to the
Collateral shall revert to the Grantors. At any time and from time to time
prior to such termination of the Security Interests, the Agent may release any
of the Collateral with the prior written consent of the Required Lenders;
provided, however, that the Security Interest of the Agent in any Collateral
constituting an asset of which the Grantors may dispose under Section 6.2.11 of
the Credit Agreement shall automatically terminate and be released upon such
disposition by the Grantors without the necessity of any further action or
consent by the Agent or any Lender. Upon any such termination of the Security
Interests or release of Collateral, the Agent will, at the expense of the
Grantors, execute and deliver to the Grantors such documents as the Grantors
shall reasonably request, including but not limited to a UCC-3 termination
statement, to evidence the termination of the Security Interests or the release
of such Collateral, as the case may be.
SECTION 15. Notices. All notices hereunder shall be in writing or by
telex or telecopy and shall be sufficiently given to the Agent, the Lenders or
the Grantors if addressed or delivered to them at, in the case of the Borrower,
the Agent and the Lenders, their respective addresses and telecopier numbers
specified in Section 9.2 of the Credit Agreement and, in the case of the
Grantors that are Subsidiaries of the Borrower, care of the Borrower at the
address specified for the Borrower in Section 9.2 of the Credit Agreement (in
each case with copies addressed as provided in Section 9.2 of the Credit
Agreement), or at such other address as any party may designate to any other
party by written notice. All such notices and communications shall be deemed
to have been duly given: at the time delivered by hand, if personally
delivered; when received if deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when transmission is verified, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
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<PAGE> 24
SECTION 16. Waivers, Non-Exclusive Remedies. No failure on the part of
the Agent to exercise, and no delay in exercising and no course of dealing with
respect to, any right under the Credit Agreement, this Agreement or any other
Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent or any Lender of any right under the Credit
Agreement, this Agreement or any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The rights in
this Agreement, the Credit Agreement and the other Loan Documents are
cumulative and are not exclusive of any other remedies provided by law. This
Agreement is a Loan Document executed pursuant to the Credit Agreement.
SECTION 17. Successors and Assigns. This Agreement is for the benefit
of the Agent and the Lenders and their successors and assigns, and in the event
of an assignment of all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be binding on the
Grantors and their successors and assigns; provided that the Grantors may not
assign any of their rights or obligations hereunder without the prior written
consent of the Agent and the Lenders.
SECTION 18. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Grantors and the Agent with the consent of the
Required Lenders.
SECTION 19. New York Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT PERFECTION (AND THE EFFECT OF PERFECTION AND NONPERFECTION) AND
CERTAIN REMEDIES MAY BE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK.
SECTION 20. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Agent and
the Lenders in order to carry out the intentions of the parties hereto as
nearly as may be possible; and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
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<PAGE> 25
SECTION 21. Effectiveness of Execution and Delivery by Certain Parties.
This Agreement shall be deemed executed and delivered by Milestone, Milestone
Management, Trucare, Trucare Rehabilitation and Trucare Physical immediately
upon effectiveness of the Merger, and the execution and delivery by such
parties of this Agreement shall not be a condition to the execution, delivery
or effectiveness of this Agreement as between Mergerco I, Mergerco II and the
Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
MHI ACQUISITION CORPORATION I
By: /s/ William A. Brosius
-----------------------------------------
Name:
Title:
MHI ACQUISITION CORPORATION II
By: /s/ William A. Brosius
-----------------------------------------
Name:
Title:
MILESTONE HEALTHCARE, INC.
By: /s/ William A. Brosius
-----------------------------------------
Name:
Title:
MILESTONE HEALTHCARE MANAGEMENT, INC.
By: /s/ William A. Brosius
-----------------------------------------
Name:
Title:
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<PAGE> 26
TRUCARE HEALTH SYSTEMS, INC.
By: /s/ William A. Brosius
----------------------------------------
Name:
Title:
TRUCARE REHABILITATION SERVICES, INC.
By: /s/ William A. Brosius
----------------------------------------
Name:
Title:
TRUCARE PHYSICAL THERAPY SERVICES, INC.
By: /s/ William A. Brosius
----------------------------------------
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent
By: /s/
----------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.5
STOCK AND NOTES PLEDGE AGREEMENT
THIS STOCK AND NOTES PLEDGE AGREEMENT (this "Agreement"),
dated as of May 31, 1995, between MHI ACQUISITION CORPORATION I, a Delaware
corporation ("Mergerco I"), Milestone Healthcare, Inc., a Delaware corporation
("Milestone"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation ("ING"), as Agent (in such capacity, the "Agent") for
itself and the other lenders (ING and such other lenders, collectively, the
"Lenders") as are, or may become, parties to the Credit Agreement (as defined
below).
W I T N E S S E T H:
RECITALS.
A. Mergerco I, Milestone, the Lenders and the Agent have entered
into a Credit Agreement, dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
pursuant to which the Lenders have agreed to make a Term Loan and make
available Revolving Loans to Mergerco I, all as more specifically set forth in
the Credit Agreement; and
B. Immediately subsequent to the initial borrowing by Mergerco I
under the Credit Agreement, Mergerco I shall be merged with and into Milestone
(the "Merger") with Milestone surviving such Merger, assuming all of the
obligations of Mergerco I under the Credit Agreement, and thereafter becoming
the Borrower under the Credit Agreement (Mergerco I and Milestone,
collectively, the "Borrower"); and
C. The Borrower is the owner of one hundred percent (100%) of the
issued and outstanding stock of Trucare Health Systems, Inc., a Texas
corporation ("Trucare"); and
D. The Borrower may from time to time make advances to Trucare
and/or Trucare's subsidiaries, Trucare Rehabilitation, Inc., a Texas
corporation ("Trucare Rehabilitation"), and Trucare Physical Therapy Services,
Inc., a Texas corporation ("Trucare Physical"; Trucare, Trucare Rehabilitation
and Trucare Physical, collectively, the "Subsidiaries"), using proceeds of the
Loans or other capital available to the Borrower thereby creating indebtedness
from the Subsidiaries to the Borrower, which indebtedness shall be evidenced by
promissory notes made by each of Subsidiaries payable to the order of the
Borrower, each in the amount of Ten Million Dollars ($10,000,000) (as amended,
supplemented or otherwise modified from time to time, the "Subsidiary Notes");
and
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged by it, and in order to induce the Lenders to make
Loans to the Borrower pursuant to the Credit Agreement, the Borrower agrees
with the Agent, for the ratable benefit of the Agent and the Lenders, as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Certain Terms. Terms defined in the Credit
Agreement and not otherwise defined herein, when used in this Agreement
including its preamble and recitals, shall have the respective meanings
provided in the Credit Agreement. In addition, the following terms (whether or
not underscored) when used in this Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Collateral" means, collectively, (a) the Initial Pledged
Shares; (b) all Pledged Shares issued from time to time; (c) the Pledged Notes;
(d) all other Pledged Property, whether now or hereafter delivered to the Agent
in connection with this Agreement; and (e) all proceeds of any of the
foregoing.
"Default" means any Event of Default or any condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Distributions" mean all stock dividends, liquidating
dividends, shares of stock resulting from stock splits, reclassifications,
warrants, options, non-cash dividends and other distributions (whether similar
or dissimilar to the foregoing) on or with respect to any Pledged Shares or
other shares of capital stock constituting Collateral, but shall not mean
Dividends.
"Dividends" means cash dividends and cash distributions with
respect to any Pledged Shares made out of capital surplus.
"Event of Default" means any event described in Section 5.1.
"Initial Pledged Shares" means the capital stock of Trucare
more particularly described in Attachment 1 hereto.
"Pledged Notes" means the Subsidiary Notes more particularly
described in Attachment 2 hereto, as amended and supplemented from time to
time.
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<PAGE> 3
"Pledged Property" means (a) all Pledged Shares and all
Dividends, Distributions, securities, cash, instruments, interest payments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares,
and (b) the Pledged Notes and the instruments evidencing the Pledged Notes, and
all interest, cash, instruments or other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such Pledged Notes.
"Pledged Shares" means the Initial Pledged Shares and all
other shares of capital stock of Trucare, if any, which are delivered by the
Borrower to the Agent as Pledged Property hereunder.
"ratable" or "ratably" means, in the context of a distribution
of Collateral or a distribution of proceeds of any of the Collateral, an
allocation of such Collateral or proceeds among the Lenders pro rata in
accordance with their respective portion of the aggregate dollar amount of the
Secured Obligations to which the distribution is being applied.
"Secured Obligations" means, collectively, the obligations of
the Borrower under the Credit Agreement and the "Obligations" (as that term is
defined in the Credit Agreement).
"U.C.C." means the Uniform Commercial Code as in effect in the
State of New York.
SECTION 1.2. Credit Agreement Definitions,
Cross-References, Etc. Capitalized terms used herein (including the preamble
and recitals hereof) shall have the meanings assigned to them in the Credit
Agreement, unless the context otherwise requires or unless otherwise defined
herein. References in this Agreement, the Credit Agreement, the Subsidiary
Guaranty or any other Loan Document to this "Agreement" or the "Borrower Pledge
Agreement" shall mean this Agreement, including all amendments, modifications
and supplements and any exhibits or schedules to any of the foregoing, and
shall refer to this Agreement as the same may be in effect at the time such
reference becomes operative. References in this Agreement to any Section,
unless otherwise specified, are references to such Section of this Agreement,
and references in such Section to any clause, unless otherwise specified, are
references to such clause of such Section.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Agreement, including its preamble and recitals,
with such meanings.
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<PAGE> 4
ARTICLE 2
PLEDGE
SECTION 2.1. Grant of Security Interest. The Borrower
hereby pledges, assigns, charges, mortgages, delivers and transfers to the
Agent, for its benefit and the ratable benefit of the Lenders, and hereby
grants to the Agent, for its benefit and the ratable benefit of the Lenders, a
continuing security interest in and to, all of the Collateral.
SECTION 2.2. Security for Secured Obligations. This
Agreement and the Collateral secure the payment in full and performance of all
Secured Obligations.
SECTION 2.3. Delivery of Pledged Property; Registration of
Pledge, Transfer, Etc. All certificates and instruments representing or
evidencing any Collateral, including all Pledged Shares and Pledged Notes,
shall be delivered to and held by or on behalf of the Agent pursuant hereto,
shall be in suitable form for transfer by delivery, and shall be accompanied by
all necessary instruments of transfer or assignment, duly executed in blank
and, if the Agent shall so request, with signatures guaranteed by a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company having an
office or correspondent in the United States. Upon an Event of Default, the
Agent shall have the right, at any time without notice to the Borrower, to
transfer to, or to register in the name of the Agent or any of its nominees,
any or all of the Pledged Shares and any or all of the Pledged Notes, subject
only to the revocable rights of the Borrower specified in Section 4.6. In
addition, the Agent shall have the right at any time to exchange certificates
or instruments representing or evidencing any Pledged Shares for certificates
or instruments of smaller or larger denominations to be issued in the same name
as the shares being exchanged.
SECTION 2.4. Dividends on Pledged Shares. In the event
that any Dividend is to be paid on any Pledged Share at a time when no Default
or Event of Default has occurred and is continuing or would result therefrom
and such Dividend is otherwise permitted by the Credit Agreement, such Dividend
may be paid by Trucare (following notice to the Agent) directly to the
Borrower.
SECTION 2.5. No Duty to Agent. The powers conferred on
the Agent hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Beyond
reasonable care in the custody of any Col-lateral in its possession and the
accounting for moneys actually received by it hereunder, the Agent shall have
no duty as to any Collateral or as to the taking of any necessary steps to
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<PAGE> 5
preserve rights against prior parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
the Agent shall not be liable or responsible for any loss or damage to any of
the Collateral, or from any diminution in the value thereof, by reason of the
act or omission of any carrier, forwarding agency, or other agent selected by
the Agent in good faith.
SECTION 2.6. Continuing Security Interest; Transfer of
Secured Obligation. This Agreement shall:
(a) create a continuing security interest in the
Collateral;
(b) remain in full force and effect until the later of
the Revolving Loan Commitment Termination Date, the payment in full
and performance of all Secured Obligations (other than those Secured
Obligations that are contingent and expressly survive the termination
of the Credit Agreement as provided in Section 9.5 therein) or the
termination of the Credit Agreement;
(c) be binding upon the Borrower, its administrators,
successors and assigns, provided that the Borrower may not assign any
of its rights or obligations hereunder without the prior written
consent of the Agent; and
(d) inure to the benefit of the Agent and the Lenders and
their respective successors, transferees and assigns.
Without limiting the foregoing, any Lender may assign or otherwise transfer any
Note, Loan or other Secured Obligation, held by it to any other Person, in
accordance with the terms of the Credit Agreement, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted
herein, in the other Loan Documents or otherwise. Upon the occurrence of the
last event described in subsection 2.6(b) above, the security interest granted
herein shall terminate and all rights to the Collateral shall revert to the
Borrower. Upon any such termination, the Agent will, at the Borrower's
expense, deliver all certificates and instruments representing or evidencing
all Pledged Shares and all Pledged Notes, together with all other Collateral
held by the Agent hereunder, and execute and deliver to the Borrower, at the
Borrower's expense, such documents as the Borrower shall reasonably request to
evidence such termination.
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<PAGE> 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, Etc. The Borrower hereby makes
and restates each representation and warranty set forth in Article V of the
Credit Agreement unto the Agent and each Lender that as at the date of each
pledge hereunder (including each pledge of Pledged Shares and each pledge of
Pledged Notes) by the Borrower to the Agent of any Collateral and further
represents and warrants as follows:
(a) The Borrower is and will be at all times the legal
and beneficial owner of, and has and will have at all times good and
marketable title to (and has and will at all times have full right and
authority to pledge and assign) all Collateral, free and clear of all
Liens or other charges or encumbrances, except the Lien granted
pursuant hereto in favor of the Agent.
(b) The delivery of the Collateral (including the
delivery of the Initial Pledged Shares and the Pledged Notes) to the
Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations, and no filing or other action is
necessary to perfect or protect such security interest, except that
the filing of a financing statement, the taking of possession or some
other action may be required under Section 9-306 of the U.C.C. to
perfect a security interest in certain proceeds of the Collateral that
does not constitute Pledged Notes, Pledged Shares or other securities
or Instruments.
(c) All of the Pledged Shares have been duly authorized
and validly issued, and are fully paid, and nonassessable.
(d) The Initial Pledged Shares constitute and at all
times thereafter the Pledged Shares will constitute, 100% of all of
the issued and outstanding shares of Stock of the Borrower.
(e) The Pledged Notes evidence the amount of outstanding
indebtedness for money borrowed of the respective obligors thereof
indicated on Attachment 2 hereto.
(f) No authorization, approval, or other action by and no
notice to or filing with, any Governmental Authority is or will be
required either:
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<PAGE> 7
(i) for the pledge by the Borrower of any
Collateral pursuant to this Agreement or for the execution,
delivery, or performance of this Agreement by the Borrower, or
(ii) for the exercise by the Agent of the voting
or other rights provided for in this Agreement, or (except,
with respect to any Pledged Shares, as may be required in
connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally) the
remedies in respect of the Collateral pursuant to this
Agreement.
ARTICLE 4
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, Etc.
The Borrower will not sell, assign, transfer, pledge or encumber in any other
manner the Collateral (except in favor of the Agent hereunder). The Borrower
will warrant and defend the right, title and security interest herein granted
to the Agent in and to the Collateral (and all right, title and interest
represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Borrower agrees that at any time, and from time to time, at
the expense of the Borrower, the Borrower will promptly execute and deliver all
further Instruments, and take all further action, that may be necessary, or
that the Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.
SECTION 4.2. Issuance of Stock, Etc. The Borrower will
not, subsequent to the date of this Agreement, without the prior written
consent of the Required Lenders, cause or permit Trucare to issue or grant any
warrants, stock options of any nature or other instruments convertible into
shares of any class of Stock or issue any additional shares of Stock or sell or
transfer any treasury Stock except in accordance with the terms and conditions
of the Credit Agreement.
SECTION 4.3. Taxes. The Borrower will pay all taxes,
assessments and charges levied, assessed or imposed upon the Collateral before
the same become delinquent or become Liens upon any of the Collateral except
where the same may be contested in good faith by appropriate proceedings and as
to which adequate reserves have been provided.
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<PAGE> 8
SECTION 4.4. Stock Powers, Etc. The Borrower agrees that
all Pledged Shares (and all other shares of Stock constituting Collateral)
delivered by the Borrower pursuant to this Agreement will be accompanied by all
necessary instruments of transfer or assignment, duly executed in blank and, if
the Agent shall so request, with signatures guaranteed by a member of a
national securities exchange or the National Association of Securities Dealers,
Inc. or by a commercial bank or trust company having an office or correspondent
in the United States. The Borrower will, from time to time upon the request of
the Agent, promptly deliver to the Agent such stock powers, instruments and
similar documents, satisfactory in form and substance to the Agent, with
respect to the Collateral as the Agent may reasonably request and will, from
time to time upon the request of the Agent after the occurrence of any Default,
promptly transfer any Pledged Shares or other shares of Stock constituting
Collateral into the name of the Agent or any nominee designated by the Agent.
SECTION 4.5. Continuous Pledge. Subject to Section 2.4,
the Borrower will, at all times, keep pledged to the Agent pursuant hereto all
Pledged Shares, all Dividends and Distributions with respect thereto, all
Pledged Notes and all other Collateral.
SECTION 4.6. Voting Rights; Dividends, Etc. The Borrower
agrees to deliver all Distributions at any time received by it to the Agent to
be held as Collateral hereunder and, in addition, to deliver (properly endorsed
where required hereby or requested by the Agent) to the Agent:
(a) after any Default or an Event of Default shall have
occurred and be continuing or if any Default or Event of Default shall
occur as a result thereof, promptly upon receipt thereof by the
Borrower and without any request therefor by the Agent, all Dividends
(except for Dividends to the Borrower for the payment of federal and
state income tax liability in respect to the net income of the Person
declaring such Dividend), all of which shall be held by the Agent as
additional Collateral for use in accordance with Section 5.5; and
(b) after any Event of Default shall have occurred and be
continuing, promptly upon request of the Agent, such proxies and other
documents as may be necessary to allow the Agent to exercise the
voting power with respect to any share of Stock constituting
Collateral;
provided, however, that unless an Event of Default shall have occurred and be
continuing or result therefrom and the Borrower shall have received notice from
the Agent that it shall no longer be entitled to do so, the Borrower shall be
entitled to exercise, in its reasonable judgment, but in a manner not
inconsistent with
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<PAGE> 9
the terms of the Credit Agreement or any other Loan Document (including this
Agreement) the voting powers and all other incidental rights of ownership with
respect to any Pledged Shares or other shares of Stock constituting Collateral
(subject to the Borrower's obligation to deliver to the Agent such Pledged
Shares and other shares in pledge hereunder); provided, further however, that
unless a Default or an Event of Default shall have occurred and be continuing
or result therefrom, the Borrower shall be entitled to the receipt of all
Dividends in accordance with Section 2.4 to the extent such Dividends were
permitted to be paid pursuant to the Credit Agreement.
All Dividends, Distributions, cash payments and proceeds which may at any time
and from time to time be held by the Borrower but which the Borrower is then
obligated to deliver to the Agent, shall, until delivery to the Agent, be held
by the Borrower separate and apart from its other property in trust for the
Agent. The Agent agrees that unless an Event of Default shall have occurred
and be continuing, the Agent shall, upon the written request of the Borrower,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Borrower which are necessary to allow the Borrower
to exercise voting power with respect to any share of Stock (including Pledged
Shares) constituting Collateral; provided, however, that no vote shall be cast,
or consent, waiver or ratification given, or action taken by the Borrower that
would impair in any material respect any Collateral or be inconsistent with or
violate any provision of the Credit Agreement or any other Loan Document
(including this Agreement).
SECTION 4.7. Additional Information. The Borrower will
furnish to the Agent and the Lenders written notice of the occurrence of any
event which would make any representation contained in Article 3 untrue at such
time.
ARTICLE 5
EVENTS OF DEFAULT; REMEDIES
SECTION 5.1. Events of Default. Each of the following
shall constitute an "Event of Default" hereunder:
(a) if there shall occur any Event of Default
under the Credit Agreement;
(b) if any of the Collateral shall be attached or
levied upon or seized in any legal proceeding, or held by
virtue of any Lien or distress; or
(c) if any representation or warranty of the
Borrower set forth herein or in the Credit Agreement shall be
untrue
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<PAGE> 10
in any material respect or if the Borrower shall default in
the due performance and observance of any covenant contained
herein and such default shall continue unremedied for a period
of ten (10) days after notice thereof shall have been given to
the Borrower by the Agent.
SECTION 5.2. Actions upon Event of Default. In addition
to its rights and remedies provided hereunder, whenever an Event of Default
shall have occurred and be continuing, the Agent shall have all rights and
remedies of a secured party upon default under the U.C.C. or other applicable
law. Any notification required by law of any intended disposition by the Agent
of any of the Collateral shall be deemed reasonably and properly given if given
at least ten (10) days before such disposition. Without limitation of the
above, the Agent may, or upon direction of the Required Lenders, shall,
whenever an Event of Default shall have occurred and be continuing, without
prior notice to the Borrower, take all or any of the following actions:
(a) transfer all or any part of the Collateral into the
name of the Agent or its nominee, without disclosing that such
Collateral is subject to the Lien hereunder;
(b) notify the parties of the obligation on any of the
Collateral to make payment to the Agent of any amount due or to become
due thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature of
any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Borrower's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the
Borrower) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or any of
the Collateral.
SECTION 5.3. Attorney-in-Fact. The Borrower hereby
irrevocably appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Borrower, the Agent, the Lenders or otherwise,
for the sole use and benefit of the Agent and the Lenders, but at the
Borrower's expense, upon the occurrence and during the continuation of an Event
of Default to take any action and to execute any Instrument which the Agent may
deem reasonably necessary or advisable to accomplish the purposes of this
Agreement.
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<PAGE> 11
SECTION 5.4. Private Sales. (a) The Borrower recognizes
that the Agent may be unable, after the occurrence and during the continuance
of any Event of Default, to effect a public sale of any or all the Pledged
Shares by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities law or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers that will be obligated to agree, among
other things, to acquire such securities for their own account for investment
and not with a view to the distribution or resale thereof. The Borrower
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall
be under no obligation to delay sale of any of the Pledged Shares for the
period of time necessary to permit Trucare to register such securities for
public sale under the Securities Act, or under applicable state securities law,
even if Trucare would agree to do so.
(b) The Borrower further agrees to use its best efforts,
after the occurrence and during the continuance of an Event of Default, to do
or cause to be done all such acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Shares pursuant to this Section 5.4
valid and binding and in compliance with any and all other applicable
Requirements of Law.
SECTION 5.5. Application of Proceeds. All cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Agent, be held by the Agent as additional collateral security for, or then
or at any time thereafter be applied (after payment of any amounts payable to
the Agent pursuant to Section 9.3 of the Credit Agreement and Section 5.6 of
this Agreement) in whole or in part by the Agent against, all or any part of
the Secured Obligations in the following order:
(a) first, ratably, to the unpaid interest
(including post-petition interest) accrued and then due or
owing on the Secured Obligations and to the aggregate amount
of fees described in Section 2.3 of the Credit Agreement which
have accrued and are unpaid;
(b) second, ratably, among holders of the Notes,
on account of all principal of any Secured Obligations then
due or owing; and
(c) third, to any other Secured Obligations then
due or owing.
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<PAGE> 12
Any surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all the Secured Obligations, termination of the Commitments
shall be paid over to the Borrower or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 5.6. Indemnity and Expenses. The Borrower hereby
indemnifies and holds harmless the Agent and the Lenders from and against any
and all claims, losses, and liabilities growing out of or resulting from this
Agreement (including enforcement of this Agreement), except claims, losses, or
liabilities resulting from the Agent's gross negligence or willful misconduct.
Upon demand, the Borrower will pay, or cause to be paid, to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Agent may
incur in connection with:
(a) the administration of this Agreement;
(b) the custody, preservation, use, or operation
of, or the sale of, collection from, or other realization
upon, any of the Collateral;
(c) the exercise or enforcement of any of the
rights of the Agent hereunder and any action taken by the
Agent under Section 6.4; and
(d) the failure by the Borrower to perform or
observe any of the provisions hereof.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1. Loan Document. This Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including Article 9 thereof.
SECTION 6.2. Amendments, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departures by the Borrower
herefrom shall in any event be effective unless the same shall be in writing,
signed by the Agent and consented to in writing by the Required Lenders, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it is given.
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<PAGE> 13
SECTION 6.3. Obligations Not Affected. The obligations of the
Borrower under this Agreement shall remain in full force and effect without
regard to, and shall not be impaired or affected by:
(a) any amendment or modification or addition or
supplement to the Credit Agreement, any Note, any other Loan Document,
any Instrument delivered in connection therewith or any assignment or
transfer thereof;
(b) any exercise, non-exercise or waiver by the Agent or
any Lender of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty or collateral provided
pursuant to, this Agreement, the Credit Agreement, or any other Loan
Document;
(c) any waiver, consent, extension, indulgence or other
action or inaction in respect of this Agreement, the Credit Agreement
or any other Loan Document or any assignment or transfer of any
thereof; or
(d) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like, of
the Borrower, the Holding Company or any other Person, whether or not
the Borrower shall have notice or knowledge of any of the foregoing.
SECTION 6.4. Protection of Collateral. The Agent may from
time to time, at its option, perform any act which the Borrower agrees
hereunder to perform and which the Borrower shall fail to perform after being
requested in writing to so perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default) and the Agent may from time to time take any other action which the
Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 6.5. Addresses for Notices. All notices and other
communications provided for hereunder to any party hereto shall be given in the
manner provided in Section 9.2 of the Credit Agreement.
SECTION 6.6. Governing Law; Jurisdiction. (a) THIS
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (AND THE BORROWER AGREES THAT SUCH
JURISDICTION WILL BE EXCLUSIVE WITH
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<PAGE> 14
RESPECT TO CLAIMS BROUGHT BY THE BORROWER AGAINST THE AGENT OR ANY LENDER), AND
EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT.
EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING.
(c) The Borrower hereby irrevocably designates, appoints
and empowers CT Corporation System, whose present address is 1633 Broadway, New
York, New York 10019, as its authorized agent to receive, for and on its behalf
and on behalf of its property, service of process in the State of New York when
and as such legal actions or proceedings may be brought in the courts of the
State of New York or of the United States of America sitting in the Southern
District of New York, and such service of process shall be deemed complete upon
the date of delivery thereof to such agent whether or not such agent gives
notice thereof to the Borrower, or upon the earliest of any other date
permitted by applicable law. It is understood that a copy of said process
served on such agent will as soon as practicable be forwarded to the Borrower,
at the address set forth below, but the Borrower's failure to receive such copy
shall not affect in any way the service of said process on said agent as the
agent of the Borrower. The Borrower irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of the copies thereof by certified mail, return
receipt requested, postage prepaid, to the Borrower at its address set forth
below, such service to become effective upon the earlier of (i) the date 10
calendar days after such mailing or (ii) any earlier date permitted by
applicable law. The Borrower agrees that it will at all times continuously
maintain an agent to receive service of process in the State of New York on
behalf of the Borrower and its properties and in the event that, for any
reason, the agent named above or its successor shall no longer serve as its
agent to receive service of process in the State of New York on its behalf, it
shall promptly appoint a successor so to serve and shall advise the Agent and
the Lenders thereof (and shall furnish to the Agent the consent of any
successor agent so to act). Nothing in this Section 6.6 shall affect the right
of the Agent or any Lender to bring proceedings against the Borrower in the
courts of any other jurisdiction or to serve process in any other manner
permitted by applicable law.
SECTION 6.7. Waiver of Jury Trial, Etc. THE AGENT, THE
LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH LENDERS, OR THE
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<PAGE> 15
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND SUCH
LENDERS ENTERING INTO THE CREDIT AGREEMENT.
SECTION 6.8. Waiver of Subrogation. The Borrower hereby
irrevocably waives any and all rights it may have against its Subsidiaries or
their respective assets (by subrogation or otherwise) by reason of any amounts
received hereunder by the Agent or the Lenders and agrees that such rights will
not be exercised.
SECTION 6.9. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof, shall have any liability with respect
to, and THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON, ANY
CLAIM FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
SUFFERED BY THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH.
SECTION 6.10. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be executed by the Borrower and the Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Borrower and each Lender.
SECTION 6.11. Effectiveness of Execution and Delivery by
Certain Parties. This Agreement shall be deemed executed and delivered by
Milestone immediately upon effectiveness of the Merger, and the execution and
delivery by such party of this Agreement shall not be a condition to the
execution, delivery or effectiveness of this Agreement as between Mergerco I
and the Agent.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
MHI ACQUISITION CORPORATION I
(to be merged with and into
Milestone Healthcare, Inc.)
By: /s/William A. Brosius
-------------------------------
Name:
Title:
MILESTONE HEALTHCARE, INC.
By: /s/William A. Brosius
-------------------------------
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S)
CAPITAL CORPORATION
By: /s/
-------------------------------
Name:
Title:
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<PAGE> 17
ATTACHMENT 1
(to the Stock and Notes
Pledge Agreement)
INITIAL PLEDGED SHARES
<TABLE>
<CAPTION>
Class of Number of Certificate
Issuer Capital Stock Shares Number(s)
------ ------------- ---------- -----------
<S> <C> <C> <C>
Trucare Health Common 1 19
Systems, Inc.
Trucare Health Nonvoting .25 6
Systems, Inc. Convertible
Preferred Stock
Trucare Health Common 3,024,910 18
Systems, Inc.
Trucare Health Preferred 210,000 5
Systems, Inc.
Trucare Health Preferred 273,113.75 4
Systems, Inc.
Trucare Health Preferred 273,113.75 3
Systems, Inc.
</TABLE>
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<PAGE> 18
ATTACHMENT 2
(to the Stock and Notes
Pledge Agreement)
PLEDGED NOTES
<TABLE>
<CAPTION>
Maker Date Principal Amount
----- ---- ----------------
<S> <C> <C>
Trucare Health May 31, 1995 $10,000,000
Systems, Inc.
</TABLE>
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<PAGE> 1
EXHIBIT 10.6
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Agreement"), dated as of June 1,
1995, between MILESTONE HEALTHCARE, INC., a Delaware corporation (the
"Company"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, as agent
(the "Agent") for the Lenders (as defined below):
W I T N E S S E T H:
RECITALS.
A. Pursuant to a Credit Agreement, dated as of May 31, 1995
(together with all amendments and other modifications, if any, from time to
time hereinafter made thereto, the "Credit Agreement"), among MHI Acquisition
Corporation I, a Delaware corporation ("Mergerco I"), the Company, the various
lenders (the "Lenders") as are, or may become, parties thereto and the Agent,
the Lenders have made the Term Loan and Revolving Loans and have extended
Commitments to make additional Revolving Loans to Mergerco I;
B. Immediately after the initial Borrowing under the Credit
Agreement, Mergerco I will be merged with and into the Company, with the
Company as the surviving corporation (the "Merger");
C. Under the terms of the Credit Agreement upon consummation of
the Merger, the Company is required to execute and deliver this Agreement; and
D. The Company has duly authorized the execution, delivery, and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Company, and in order to induce the Lenders
to make Loans to the Company pursuant to the Credit Agreement, the Company
agrees with the Agent for the benefit of all Lenders as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such meanings to be equally applicable to
the singular and plural forms thereof):
"Agent" is defined in the preamble.
"Agreement" is defined in the preamble.
<PAGE> 2
"Company" is defined in the preamble.
"Credit Agreement" is defined in Recital A.
"Lenders" is defined in Recital A.
"Merger" is defined in Recital B.
"Mergerco I" is defined in Recital A.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms for which meanings are
provided in the Credit Agreement are used in this Agreement, and its preamble
and recitals, with such meanings.
ARTICLE 2.
ASSUMPTION
SECTION 2.1. Assumption. The Company hereby confirms,
acknowledges, represents, warrants, covenants and agrees, for the benefit of
the Lenders and the Agent, that, immediately upon the effectiveness of the
Merger, and without any further action by any Person:
(a) The Company assumes (by operation of law and pursuant
to this Agreement) each and every covenant, agreement, term, condition,
obligation, appointment, duty and liability of Mergerco I, as the case
may be, and, by virtue of the foregoing, accepts and assumes all
liability of Mergerco I, as the case may be, related to any
representation and warranty made by Mergerco I or the Company under or
in connection with the Credit Agreement or any such Loan Document and
all such representations and warranties shall be deemed to have been
confirmed and restated as of the effective time of the Merger; and
(b) The Company shall be the "Borrower" referred to in
the Credit Agreement and shall perform and observe all the covenants,
agreements, terms, conditions, obligations, appointments, duties and
liabilities of the "Borrower" under the Credit Agreement and each other
Loan Document executed by Mergerco I, all as if the Company was the
direct, actual and original signatory thereto.
ARTICLE 3.
MISCELLANEOUS
SECTION 3.1. Loan Document. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
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SECTION 3.2. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to the
benefit of, and be enforceable by, the Agent and the Lenders and their
respective successors and assigns.
SECTION 3.3. GOVERNING LAW.
(A) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(B) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATED DOCUMENT, AND EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE COMPANY
AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING BROUGHT BY IT AGAINST THE AGENT OR ANY LENDER. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING.
(C) The Company hereby irrevocably designates, appoints
and empowers CT Corporation System, whose present address is 1633 Broadway, New
York, New York 10019, as its authorized agent to receive, for and on its behalf
and its property, service of process in the State of New York when and as such
legal actions or proceedings may be brought in the courts of the State of New
York or of the United States of America sitting in New York, and such service
of process shall be deemed complete upon the date of delivery thereof to such
agent whether or not such agent gives notice thereof to the Company, or upon
the earliest of any other date permitted by applicable law. The Company shall
furnish the consent of CT Corporation System so to act to the Agent on or prior
to the Closing Date. It is understood that a copy of said process served on
such agent will as soon as practicable be forwarded to the Company, at its
address set forth below, but its failure to receive such copy shall not affect
in any way the service of said process on said agent as the agent of the
Company. The Company irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
the copies thereof by certified mail, return receipt requested, postage
prepaid, to it at its address set forth herein, such service to become
effective upon the earlier of (i) the date 10 calendar days after such mailing
or (ii) any earlier date permitted by applicable law. The Company agrees that
it will at all times continuously maintain an agent to receive service of
process in the State of New York on behalf of itself and its properties and in
the event that, for any reason, the agent named above or its successor shall no
longer serve as its agent to receive service of process in the State of New
York on its behalf,
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<PAGE> 4
it shall promptly appoint a successor so to serve and shall advise the Agent
and the Lenders thereof (and shall furnish to the Agent the consent of any
successor agent so to act). Nothing in this Section 3.3 shall affect the right
of the Agent or any Lender to bring proceedings against the Company in the
courts of any other jurisdiction or to serve process in any other manner
permitted by applicable law.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered by its duly authorized officers on the day and year
first above written.
MILESTONE HEALTHCARE, INC.
By:/s/William A. Brosius
--------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED TO:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent
By:/s/
-------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.7
GUARANTY
THIS GUARANTY, dated as of May 31, 1995, made by MHI
ACQUISITION, INC., a Delaware corporation (the "Holding Company"), in favor of
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation
("ING"), the other lenders (ING and such other lenders, collectively, the
"Lenders") now or hereafter parties to the "Credit Agreement" referenced
hereinafter, and ING as Agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H:
RECITALS.
A. MHI Acquisition Corporation I, a Delaware corporation
("Mergerco I"), Milestone Healthcare, Inc., a Delaware corporation
("Milestone"), the Lenders and the Agent have entered into a Credit Agreement,
dated as of even date herewith (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the Lenders have
agreed to make a Term Loan and make available Revolving Loans to Mergerco I,
all as more specifically set forth in the Credit Agreement; and
B. Immediately subsequent to the initial borrowing by
Mergerco I under the Credit Agreement, Mergerco I shall be merged with and into
Milestone (the "Merger") with Milestone surviving such Merger, assuming all of
the obligations of Mergerco I under the Credit Agreement, and thereafter
becoming the Borrower under the Credit Agreement (Mergerco I and Milestone,
collectively, the "Borrower"); and
C. The Holding Company is the owner of one hundred
percent (100%) of the issued and outstanding capital stock of Mergerco I and,
upon consummation of the Merger, shall be the owner of one hundred percent
(100%) of the issued and outstanding capital stock of Milestone, and all
extensions of credit to the Borrower will inure to the benefit of the Holding
Company, directly or indirectly; and
D. In connection with the making of the Loans under the
Credit Agreement, and as a condition precedent thereto, the Agent and the
Lenders are requiring that the Holding Company execute and deliver this
Guaranty;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce the Lenders to provide the Loans
to the Borrower pursuant to the Credit Agreement, the Holding Company agrees as
follows:
<PAGE> 2
SECTION 1. Definitions, Cross-References, Etc.
Capitalized terms used herein (including the preamble and recitals hereof)
shall have the meanings assigned to them in the Credit Agreement, unless the
context otherwise requires or unless otherwise defined herein. References in
this Guaranty, the Credit Agreement, the Holding Company Pledge Agreement or
any other Loan Document to the "Guaranty" or the "Holding Company Guaranty"
shall mean this Guaranty, including all amendments, modifications and
supplements and any exhibits or schedules to any of the foregoing, and shall
refer to this Guaranty as the same may be in effect at the time such reference
becomes operative. References in this Guaranty to any Section, unless
otherwise specified, are references to such Section of this Guaranty, and
references in any Section to any clause, unless otherwise specified, are
references to such clause of such Section.
SECTION 2. The Guaranty. The guaranty of the Holding
Company hereunder is as set forth in this Section 2.
SECTION 2.1. Guaranty of Obligations of Borrower. The
Holding Company hereby unconditionally guarantees to the Agent and the Lenders,
and their successors, endorsees, transferees and assigns, the prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
(a) the Obligations including, without limitation (i) all principal of and
interest (including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower) on any Loan made
under, and any Note issued pursuant to, the Credit Agreement, (ii) all amounts
owing to an Interest Rate Contract Counterparty that is a Lender pursuant to
the terms of the Credit Agreement, and (iii) all other amounts payable and all
obligations to be performed by the Borrower under the Credit Agreement or any
other Loan Document and (b) any renewals or extensions of any of the foregoing
(collectively, the "Guaranteed Obligations"). The Holding Company agrees that
this Guaranty is a guaranty of payment and performance and not of collection,
and that its obligations under this Guaranty shall be primary, absolute and
unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in, the Credit
Agreement or any other Loan Document or any other agreement, document
or instrument to which the Borrower and/or the Holding Company is or
are or may become a party;
(b) the absence of any action to enforce the
Credit Agreement or any other Loan Document or the waiver or consent
by the Agent or any Lender with respect to any of the provisions of
any Loan Document;
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<PAGE> 3
(c) the existence, value or condition of, or
failure to perfect its Lien against, any security for the Obligations
or any action, or the absence of any action, by the Agent or any
Lender in respect of such Lien or security (including, without
limitation, the release of any such security); or
(d) any other action or circumstances which
might otherwise constitute a legal or equitable discharge or defense
of a surety or guarantor;
it being agreed by the Holding Company that its obligations under this Guaranty
shall not be discharged until the payment and performance, in full, of the
Obligations (other than those Secured Obligations that are contingent and
expressly survive the termination of the Credit Agreement as provided in
Section 9.5 therein). The Holding Company shall be regarded, and shall be in
the same position, as principal debtor with respect to the Obligations. The
Holding Company expressly waives all rights it may now or in the future have
under any statute, or at common law, or at law or in equity, or otherwise, to
compel the Agent or any Lender to proceed in respect of the Obligations against
the Borrower or any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against the Holding Company. The Holding Company further expressly
waives and agrees not to assert or take advantage of any defense based upon the
failure of the Agent or any Lender to commence an action in respect of the
Obligations against the Borrower, the Holding Company or any other party or any
security for the payment and performance of the Obligations. The Holding
Company agrees that any notice or directive given at any time to the Agent or
any Lender which is inconsistent with the waivers in the preceding two
sentences shall be null and void and may be ignored by the Agent or such
Lender, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless the Agent and the Required Lenders have specifically agreed otherwise in
writing. The foregoing waivers are of the essence of the transaction
contemplated by the Loan Documents and, but for this Guaranty and such waivers,
the Lenders would decline to make the Loans under the Credit Agreement.
SECTION 2.2. Demand by the Agent and Lenders. In
addition to the terms of the guaranty set forth in Section 2.1, and in no
manner imposing any limitation on such terms, if the then outstanding principal
amount of the Obligations under the Credit Agreement (together with all accrued
interest thereon) is declared to be immediately due and payable (or
automatically becomes immediately due and payable as provided in the Credit
Agreement),
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<PAGE> 4
then, the Holding Company shall pay to the holder or holders of the Obligations
the entire outstanding Obligations due and owing to such holder or holders.
Payment by the Holding Company shall be made to the Agent, to be credited and
applied upon the Obligations, in immediately available federal funds to an
account designated by the Agent or at the address set forth herein for the
giving of notice to the Agent or at any other address that may be specified in
writing from time to time by the Agent. The Agent will, upon any such payment
to the Agent, promptly thereafter cause to be distributed like funds ratably to
each Lender based on the respective principal amount of Obligations held by
such Lender.
SECTION 2.3. Enforcement of Guaranty. In no event shall
the Agent or any Lender have any obligation (although they are entitled, at
their option) to proceed against the Borrower or any other person or any real
or personal property pledged to secure the Obligations before proceeding
against the Holding Company, and the Agent or any Lender may proceed, prior or
subsequent to, or simultaneously with, the enforcement of the Agent or any
Lender's rights hereunder, to exercise any right or remedy which it may have
against any property, real or personal, as a result of any Lien it may have as
security for all or any portion of the Obligations.
SECTION 2.4. Waivers. In addition to the waivers
contained in Section 2.1, the Holding Company waives, and agrees that it shall
not at any time insist upon, plead or in any manner whatever claim or take the
benefit or advantage of, any appraisal, valuation, stay, extension, marshalling
of assets or redemption laws, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the
performance by the Holding Company of its obligations under, or the enforcement
by the Agent or the Lenders of, this Guaranty. The Holding Company further
hereby waives diligence, presentment and demand (whether for non-payment or
protest or of acceptance, maturity, extension of time, change in nature or form
of the Obligations, acceptance of further security, release of further
security, composition or agreement arrived at as to the amount of, or the terms
of, the Obligations, notice of adverse change in Borrower's financial condition
or any other fact which might materially increase the risk to the Holding
Company) with respect to any of the Obligations or all other demands whatsoever
and waives the benefit of all provisions of law which are or might be in
conflict with the terms of this Guaranty. The Holding Company represents,
warrants and agrees that its obligations under this Guaranty are not and shall
not be subject to any counterclaims, offsets or defenses of any kind against
the Agent, the Lenders or the Borrower now existing or which may arise in the
future.
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<PAGE> 5
SECTION 2.5. Benefits of Guaranty. The provisions of
this Guaranty are for the benefit of the Agent, the Lenders and their
respective permitted successors, transferees, endorsees and assigns, and
nothing herein contained shall impair, as between the Borrower, the Agent and
the Lenders, the obligations of the Borrower under the Loan Documents. In the
event all or any part of the Obligations are transferred, endorsed or assigned
by the Agent or any Lender to any Person or Persons, any reference to the
"Agent" or "Lenders" herein shall be deemed to refer equally to such Person or
Persons.
SECTION 2.6. Modification of Loans, etc. If the Agent
or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Holding Company:
(a) change or extend the manner, place or terms
of payment of, or renew or alter all or any portion of, the
Obligations;
(b) take any action under or in respect of the
Loan Documents in the exercise of any remedy, power or privilege
contained therein or available to it at law, equity or otherwise, or
waive or refrain from exercising any such remedies, powers or
privileges;
(c) amend or modify, in any manner whatsoever,
the Loan Documents;
(d) extend or waive the time for any of the
Holding Company's, Borrower's or other Person's performance of, or
compliance with, any term, covenant or agreement on its part to be
performed or observed under the Loan Documents, or waive such
performance or compliance or consent to a failure of, or departure
from, such performance or compliance;
(e) take and hold security or collateral for
the payment of the Obligations or sell, exchange, release, dispose of,
or otherwise deal with, any property pledged, mortgaged or conveyed,
or in which the Agent or the Lenders have been granted a Lien, to
secure any indebtedness of the Borrower, the Holding Company or any
other guarantor of the Obligations to the Agent or the Lenders;
(f) release anyone who may be liable in any
manner for the payment of any amounts owed by the Borrower, the
Holding Company or any other guarantor of the Obligations to the Agent
or any Lender;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which
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<PAGE> 6
claims of other creditors of the Borrower, the Holding Company or any
other guarantor of the Obligations are subordinated to the claims of
the Agent or any Lender; or
(h) apply any sums by whomever paid or however
realized to any amounts owing by the Borrower, the Holding Company or
any other guarantor of the Obligations to the Agent or any Lender in
such manner as the Agent or any Lender shall determine in its
discretion;
then neither the Agent nor any Lender shall incur any liability to the Holding
Company as a result thereof, and no such action shall impair or release the
obligations of the Holding Company under this Guaranty.
SECTION 2.7. Reinstatement. This Guaranty shall remain
in full force and effect and continue to be effective in the event any petition
is filed by or against the Holding Company or the Borrower for liquidation or
reorganization, in the event the Holding Company or the Borrower becomes
insolvent or makes an assignment for the benefit of creditors or in the event a
receiver or trustee is appointed for all or any significant part of the Holding
Company's or the Borrower's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by the Agent or
any Lender, whether as a "voidable preference", "fraudulent conveyance" or
otherwise, all as though such payment or performance had not been made. In the
event that any payment of the Obligations, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations or part thereof so rescinded
shall be reinstated, and the Obligations shall be deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
SECTION 2.8. Subrogation. Upon the making by the
Holding Company of any payment hereunder for the account of the Borrower, the
Holding Company shall be subrogated to the rights of the payee against the
Borrower; provided that the Holding Company shall not enforce any right or
receive any payment by way of subrogation until all of the Guaranteed
Obligations have been paid and performed in full and the Revolving Loan
Commitment has been terminated. If any amount shall be paid to the Holding
Company on account of such subrogation rights, such amounts shall be held in
trust for the benefit of the Agent and the Lenders and shall be forthwith paid
to the Agent to be credited and applied upon the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Credit
Agreement or to be held by the Agent as collateral security for any Guaranteed
Obligations existing.
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<PAGE> 7
SECTION 2.9. Election of Remedies, Etc. Any election of
remedies which results in the denial or impairment of the right of the Agent or
any Lender to seek a deficiency judgment against Borrower shall not impair the
Holding Company's obligation to pay the full amount of the Obligations. In the
event the Agent or any Lender shall bid at any foreclosure or trustee's sale or
at any private sale permitted by law or the Loan Documents, the Agent or such
Lender may bid all or less than the amount of the Obligations and the amount of
such bid need not be paid by the Agent or such Lender but shall be credited
against the Obligations. The amount of the successful bid at any such sale,
whether the Agent or any Lender or any other party is the successful bidder,
shall be conclusively deemed to be the fair market value of the collateral and
the difference between such bid amount and the remaining balance of the
Obligations shall be conclusively deemed to be the amount of the Obligations
guaranteed under this Guaranty, notwithstanding that any present or future law
or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which the Agent or any Lender might otherwise be entitled
but for such bidding at any such sale.
SECTION 2.10. Continuing Guaranty. The Holding Company
agrees that this Guaranty is a continuing guaranty and shall remain in full
force and effect until the payment and performance in full of the Obligations.
SECTION 3. Deliveries. In a form satisfactory to the
Agent, the Holding Company shall deliver to the Agent, concurrently with the
execution of this Guaranty and the Credit Agreement, such of the Loan Documents
and other Instruments, certificates and documents as are required to be
delivered by the Holding Company to the Agent under the Credit Agreement.
SECTION 4. Representations and Warranties. To induce
the Lenders to make the Loans under the Credit Agreement, the Holding Company
makes the following representations and warranties to the Agent and the
Lenders, each and all of which shall survive the execution and delivery of this
Guaranty:
SECTION 4.1. Organization, Power, Authority, etc. The
Holding Company is a corporation validly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the failure to so qualify could reasonably result in a
Material Adverse Effect or could impair Holding Company's ability to perform
its obligations under this Guaranty, the Holding Company Pledge Agreement, the
other Loan Documents to which it is a party, or the Warrant Documents, and has
full power and authority and holds all material governmental licenses, permits
and other approvals, if any, required under all Requirements of Law to own and
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<PAGE> 8
hold under lease its property and to conduct its business as currently
conducted by it. The Holding Company has full power and authority to enter
into and perform its obligations under this Guaranty and each other Loan
Document executed or to be executed by it.
SECTION 4.2. Due Authorization. The execution and
delivery by the Holding Company of this Guaranty, the Holding Company Pledge
Agreement and any other Loan Document executed or to be executed by it, the
performance by the Holding Company of its obligations hereunder and thereunder
have been duly authorized by all necessary corporate action, do not require any
Approval (except those Approvals already obtained), do not and will not
conflict with, result in any violation of, or constitute any default under, any
provision of any Organic Document or of any security issued by the Holding
Company or of any Instrument to which the Holding Company or the Borrower is a
party or of any law or governmental regulation or court decree or order and
will not result in or require the creation or imposition of any Lien on any of
the Holding Company's or the Borrower's properties.
SECTION 4.3. Validity, etc. This Guaranty is, and each
other Loan Document executed by the Holding Company will upon the due execution
and delivery thereof constitute, the legal, valid and binding obligation of the
Holding Company, enforceable in accordance with its terms subject to the effect
of (a) any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally; and (b) the effect of general
principles of equity (regardless of whether considered in a proceeding in
equity or at law).
SECTION 4.4. Subsidiaries. On the date hereof, (a) the
Holding Company has no Subsidiaries other than the Borrower, MHI Acquisition
Corporation II, a Delaware corporation ("Mergerco II") and the Subsidiaries of
the Borrower disclosed in Item 17 of the Disclosure Schedule to the Credit
Agreement and (b) the Holding Company does not conduct any business other than
the holding of shares of Stock of the Borrower.
SECTION 4.5. Financial Information. All balance sheets,
all statements of operations, stockholders' equity and cash flows, and all
other financial information of the Holding Company and its Subsidiaries, which
have been or shall hereafter be furnished by or on behalf of the Holding
Company to the Lenders and the Agent have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except as disclosed
therein and except for the absence of footnotes with respect to the unaudited
financial statements) and present fairly in all material respects the financial
condition of the Holding Company and its Subsidiaries as at the dates thereof
and reflect all material contingent liabilities and material liabilities for
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taxes, long-term leases and unusual forward and long-term commitments, subject,
in the case of unaudited statements, to changes resulting from normal year-end
audit adjustments.
SECTION 4.6. Litigation. There is no pending or, to the
knowledge of the Holding Company, threatened litigation, arbitration or
governmental investigation, proceeding or inquiry against the Holding Company
or any of its Subsidiaries, or to which any of their respective properties,
assets or revenues are subject, that could reasonably result in (i) a material
adverse change in the condition (financial or otherwise), operations, business,
properties or prospects of the Holding Company and its Subsidiaries, taken as a
whole, or (ii) a Material Adverse Change.
SECTION 4.7. Taxes. The Holding Company has filed all
tax returns and reports required by law to have been filed by it and has paid
all taxes and governmental charges thereby shown to be owing, except any such
taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
SECTION 5. Covenants.
SECTION 5.1. Affirmative Covenants. The Holding Company
agrees with the Agent and each Lender that, until the Commitments have
terminated and all Obligations have been paid and performed in full, the
Holding Company will perform the obligations set forth in this Section 5.1.
SECTION 5.1.1. Financial Information, etc. The Holding
Company will furnish, or will cause to be furnished, to each Lender and to the
Agent copies of its financial statements, reports and information:
(a) promptly when available and in any event
within ninety (90) days after the close of each Fiscal Year, a
consolidated and consolidating balance sheet at the close of such
Fiscal Year, and related consolidated and consolidating statements of
operations, retained earnings, and cash flows for such Fiscal Year, of
Holding Company and its Subsidiaries (except with respect to the first
Fiscal Year, with comparable information at the close of and for the
prior Fiscal Year), certified (in the case of consolidated statements)
without qualification by one of the "Big 6" accounting firms or other
independent public accountants reasonably satisfactory to the Agent,
together with a report containing a description of projected business
prospects (including capital expenditures) and a management's
discussion and analysis of financial condition and results of
operation of Holding Company and its Subsidiaries;
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(b) promptly when available and in any event
within thirty (30) days after the close of each calendar month of each
Fiscal Year, consolidated and consolidating balance sheets at the
close of such month, and consolidated and consolidating statements of
operations, retained earnings, and cash flows for such month and for
the period commencing at the close of the previous Fiscal Year and
ending with the close of such month, of Holding Company and its
Subsidiaries (with comparable information at the close of and for the
corresponding month of the prior Fiscal Year and for the corresponding
portion of such prior Fiscal Year), certified by the principal
accounting or financial Authorized Officer of the Holding Company,
together with a description of projected business prospects (including
capital expenditures) and a brief report containing management's
discussion and analysis of the financial condition and result of
operations of the Holding Company and its Subsidiaries;
(c) promptly upon receipt thereof, copies of
all detailed financial and management reports submitted to the Holding
Company by its independent public accountants in connection with each
annual or interim audit made by such independent public accountants of
the books of the Holding Company or any of its Subsidiaries;
(d) promptly upon the sending or filing
thereof, copies of all reports that the Holding Company sends to its
security holders generally, and copies of all reports and registration
statements that the Holding Company or any of its Subsidiaries files
with the Securities and Exchange Commission or any national securities
exchange; and
(e) such other information with respect to the
financial condition, business, property, assets, revenues and
operations of the Holding Company and its Subsidiaries as the Agent or
the Required Lenders may from time to time reasonably request.
SECTION 5.1.2. Maintenance of Corporate Existence, etc.
The Holding Company will cause to be done at all times all things necessary to
maintain and preserve the corporate existences of the Holding Company and each
Subsidiary of the Holding Company except as required by Section 6.1.15 of the
Credit Agreement.
SECTION 5.1.3. Foreign Qualification. The Holding Company
will, and will cause each of its Subsidiaries to, cause to be done at all times
all things necessary to be duly qualified to do business and be in good
standing as a foreign corporation in each jurisdiction where the failure to so
qualify could reasonably result in a Material Adverse Change or could impair
the ability of the Holding Company to perform its obligations under this
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Guaranty, the Holding Company Pledge Agreement or any other Loan Documents to
which it is a party.
SECTION 5.1.4. Payment of Taxes, etc. The Holding Company
will, and will cause each of its Subsidiaries to, pay and discharge, as the
same become due and payable, (a) all federal, state, local and foreign taxes,
assessments, fees and other governmental charges or levies against it or on any
of its property, as well as claims of any kind which, if unpaid, might become a
Lien upon any one of its properties; provided, however, that the foregoing
shall not require the Holding Company or any Subsidiary of the Holding Company
to pay or discharge any such tax, assessment, fee, charge, levy or Lien so long
as it shall be diligently contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate reserves
with respect thereto, in accordance with GAAP.
SECTION 5.1.5. Books and Records. The Holding Company
will, and will cause each Subsidiary of the Holding Company to, keep books and
records reflecting all of its business affairs and transactions in accordance
with GAAP and permit the Agent and each Lender or any of their respective
representatives, at reasonable times and reasonable intervals upon one (1)
Business Day's notice, to visit all of its offices, to discuss its financial
matters with its officers and independent public accountants (and hereby
authorizes such independent public accountants to discuss its financial matters
with the Agent and each Lender or its representatives whether or not any
representative of the Holding Company is present) and to examine (and, at the
expense of the Holding Company, photocopy extracts from) any of its books or
other corporate records. The Holding Company shall pay any fees of its
independent public accountants incurred in connection with the Agent's or any
Lender's exercise of its rights pursuant to this Section 5.1.5. On or prior to
the Closing Date, the Holding Company will deliver a letter to its independent
public accountants authorizing such public accountants to discuss the Holding
Company's financial matters with the Agent and each Lender or any of their
respective representatives whether or not a representative of the Holding
Company is present.
SECTION 5.1.6. Maintenance of Properties, Etc. The
Holding Company will: (a) maintain and preserve all of its properties (real and
personal and including all intangible assets), except obsolete properties,
which are used or necessary in the conduct of its business in good working
order and condition, ordinary wear and tear excepted, except that this Section
5.1.6 shall not apply to any circumstance where non-compliance, together with
all other non-compliances, could not reasonably result in a Material Adverse
Change or materially impair the ability of the Holding Company to perform its
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obligations under this Guaranty, the Holding Company Pledge Agreement or any
other Loan Document to which it is a party.
SECTION 5.1.7. Maintenance of Licenses and Permits. The
Holding Company will maintain and preserve, and will cause each of its
Subsidiaries to maintain and preserve, all Intellectual Property, rights,
permits, licenses, approvals and privileges issued under or arising under
Requirements of Law, necessary for or used in the conduct of its business,
except that this Section 5.1.7 shall not apply to any circumstance where
non-compliance, together with all other non-compliances, could not reasonably
result in a Material Adverse Change or materially impair the ability of the
Holding Company to perform its obligations under this the Guaranty, the Holding
Company Pledge Agreement or any other Loan Document to which it is a party.
SECTION 5.1.8. Compliance with Laws. The Holding Company
will, and will cause each of its Subsidiaries to, comply with all applicable
Requirements of Law, and shall not, and shall not permit any Subsidiary to, (a)
use any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) make any direct or
indirect unlawful payments to foreign or domestic government officials or
employees from corporate funds, (c) violate any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (d) establish or maintain any
unlawful or unrecorded fund or corporate monies or other assets, (e) make any
false or fictitious entry on the books of the Holding Company or any Subsidiary
of the Holding Company, (f) make any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment of any nature, (g) make any material favor
or gift which is not deductible for income tax purposes, provided, however,
that this Section 5.1.8 shall not apply to any circumstance of noncompliance
that together with all other non-compliances could not reasonably result in a
Material Adverse Change.
SECTION 5.2. Negative Covenants. The Holding Company
agrees with the Agent and each Lender that until the Commitments have
terminated and all Obligations have been paid and performed in full, the
Holding Company will perform the obligations set forth in this Section 5.2.
SECTION 5.2.1. Indebtedness. The Holding Company will not
create, incur, assume or suffer to exist or otherwise become or be liable in
respect of any Indebtedness other than:
(a) this Guaranty and any other Indebtedness
evidenced by a Loan Document; and
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(b) obligations that constitute Indebtedness
solely by virtue of being secured by Liens permitted under clause (b)
of Section 5.2.2; and
(c) the Subordinated Indebtedness and any
Permitted Additional Subordinated Indebtedness.
SECTION 5.2.2. Liens. The Holding Company will not
create, incur, assume or suffer to exist any Lien upon any of its property,
revenues or assets, whether now owned or hereafter acquired, except:
(a) Liens in favor of the Agent and the Lenders
granted pursuant to the Holding Company Pledge Agreement and any other
Loan Document;
(b) Liens for taxes, assessments or other
governmental charges or levies not at the time delinquent or
thereafter payable with penalty or being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books; and
(c) Liens which constitute rights of set-off of
a customary nature or bankers' liens with respect to amounts on
deposit, whether arising by operation of law or by contract, in
connection with arrangements entered into with banks in the ordinary
course of business.
SECTION 5.2.3. Investments. The Holding Company will not
make, incur, assume or suffer to exist any Investment in any Person other than
the Borrower and Mergerco II.
SECTION 5.2.4. Restricted Payments, Voluntary Payments of
Subordinated Indebtedness, etc. The Holding Company will not (a) declare, pay
or make any dividend or distribution (in cash, property or obligations) on any
shares of any class of Stock (now or hereafter outstanding), of the Holding
Company or on any warrants, options or other rights with respect to any shares
of any class of Stock (now or hereafter outstanding), of the Holding Company or
apply, or permit any of its any Subsidiaries to apply, any of its funds,
property or assets to the purchase, redemption, sinking fund or other
retirement of any shares of any class of Stock (now or hereafter outstanding)
of the Holding Company or any Subsidiary, or (b) make any voluntary or optional
payment or prepayment on, or redemption or acquisition for value of, any
Subordinated Indebtedness except as expressly provided in the Subordinated Debt
Documents or pay any cash interest in respect of any Permitted Additional
Subordinated Indebtedness, or (c) pay any cash interest in respect of any
Subordinated Indebtedness or Permitted Additional Subordinated Indebtedness,
except that:
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(a) the Borrower may comply with its
obligations arising from the exercise of any put right under the
Warrant Documents; and
(b) the Holding Company may redeem or purchase
its Stock owned by (i) employees or officers of the Holding Company or
the Borrower whose employment has terminated or (ii) Eligible
Investors pursuant to the Founder Performance Stock Purchase
Agreements, provided that such redemptions and purchases do not exceed
in the aggregate $100,000 for the period commencing from the Closing
Date to the date of determination (provided that the Holding Company
makes capital contributions to the Borrower with the proceeds of any
such Stock subsequently reissued or sold).
SECTION 5.2.5. Consolidation, Merger, etc. The Holding
Company will not, and will not permit any of its Subsidiaries to, liquidate or
dissolve, consolidate with, or merge into or with, any other corporation, or
purchase or otherwise acquire all or substantially all of the assets of any
Person (or of any division thereof) except any such Subsidiary, other than
Borrower, may liquidate or dissolve voluntarily into, and may merge with and
into, the Holding Company or any other wholly-owned Subsidiary (so long as the
Holding Company or such wholly-owned Subsidiary is the surviving corporation).
The Holding Company will not, and will not permit any of its Subsidiaries to,
create any Subsidiary.
SECTION 5.2.6. Asset Dispositions, etc. The Holding
Company will not, and will not permit any of its Subsidiaries to, sell,
transfer, lease or otherwise dispose of, or grant options, or other rights with
respect to, all or any substantial portion of its assets except, in the case of
Borrower and its Subsidiaries, to the extent otherwise permitted under Section
6.2.11 of the Credit Agreement.
SECTION 5.2.7. Modification of Organic Documents, etc.
The Holding Company will not consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or applicable to,
the Certificate of Incorporation or the By-laws of the Holding Company, except
for any amendment, supplement or other modification which does not adversely
affect the Holding Company's ability to pay or perform its obligations
hereunder or under any other Loan Document.
SECTION 5.2.8. Transactions with Affiliates. The Holding
Company will not, and will not permit any Subsidiary to, enter into, or cause,
suffer or permit to exist:
(a) any arrangement or contract with any of its
Affiliates of a nature customarily entered into by Persons which are
Affiliates of each other (including management or
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similar contracts or arrangements relating to the allocation of
revenues, expenses or otherwise) requiring any payments to be made by
the Holding Company or any of its Subsidiaries to any Affiliate, other
than (i) transactions between the Holding Company and its Subsidiaries
and (ii) transactions provided for in the Loan Documents;
(b) any other transaction, arrangement or
contract with any of its Affiliates which is on terms which are less
favorable than are obtainable from, any Person which is not one of its
Affiliates.
SECTION 5.2.9. Inconsistent Agreements. The Holding
Company will not, and will not permit any Subsidiary to, enter into any
agreement containing any provision which would be violated or breached in any
material respect by the performance by the Holding Company of its obligations
under this Guaranty, the Holding Company Pledge Agreement or any other Loan
Documents to which it is a party.
SECTION 5.2.10. Limitations on Issuance of Stock;
Contributions to the Borrower. The Holding Company will not, and will not
permit any Subsidiary to, issue, sell or otherwise dispose of any shares of any
of its Stock, any option or rights related thereto or any securities
convertible into Stock of the Holding Company or such Subsidiary, except that
the Holding Company may issue (a) the Warrants pursuant to the Warrant
Documents, (b) Stock to Morgan Stanley and the Eligible Investors as provided
in Section 4.1.1 of the Credit Agreement, (c) Stock to an Eligible Investor
upon the exercise of Original Management Options pursuant to the terms of the
Management Incentive Plan, and (d) Stock to an Eligible Investor or a key
employee of the Holding Company or of the Borrower upon exercise of any
Additional Management Options pursuant to the terms of the Management Incentive
Plan. Without limitation to the foregoing sentence, if at any time the Holding
Company issues, sells or otherwise disposes of any shares of its Stock, or any
rights related thereto or any securities convertible into its Stock, the
Holding Company shall contribute the proceeds (after underwriting commissions
and discounts and reasonable fees and expenses related to issuance) of such
issuance, sale or disposition to the capital of the Borrower.
SECTION 5.2.11. Change in Accounting Method. The Holding
Company will not, and will not permit any Subsidiary to, make any change in
accounting treatment and reporting practices which were used in the preparation
of the initial financial statements delivered pursuant to Section 4.5, except
as required by GAAP.
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SECTION 5.2.12. Conduct of Business. The Holding Company
will not conduct any business other than the holding of shares of Stock of the
Borrower.
SECTION 5.2.13. Stockholders' Agreement. The Holding
Company will not modify, amend, supplement or terminate the Stockholders'
Agreement or acquiesce in any modification, amendment or termination thereof or
supplement thereto except for amendments, modifications or supplements which
would not adversely affect any of the Agent's or the Lenders' interests, rights
or remedies under the Loan Documents or the ability of the Holding Company to
pay or perform its obligations hereunder or under any other Loan Document.
SECTION 5.2.14. Subordinated Debt Documents. The Holding
Company will not amend, supplement or otherwise modify any of the Subordinated
Debt Documents or acquiesce in any such amendment or modification thereof or
supplement thereto.
SECTION 6. Permitted Assignment by the Agent and the
Lenders. The Agent and the Lenders may freely assign their rights and delegate
their duties under this Guaranty in accordance with the terms of Section 9.11
of the Credit Agreement, and no such assignment or delegation shall diminish
the Holding Company's obligations hereunder.
SECTION 7. Further Assurances. The Holding Company
agrees, upon the written request of the Agent or any Lender, to execute and
deliver to the Agent or any Lender, from time to time, any additional
instruments or documents reasonably considered necessary by the Agent or such
Lender to cause this Guaranty to be, become or remain valid and effective in
accordance with its terms.
SECTION 8. Payments Free and Clear of Taxes. Any and
all payments required to be made by the Holding Company hereunder shall be made
free and clear of, and without deduction for, any and all present and future
Taxes. The Holding Company will indemnify each Lender and the Agent for the
full amount of Taxes (including, without limitation, any such Taxes imposed by
any jurisdiction on amounts payable under this Section 8) paid by such Lender
or the Agent (as the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally asserted. Payment under this Section
8 will be made within five (5) days from the date such Lender or the Agent (as
the case may be) makes written demand therefor. Within 30 days after the date
of any payment of Taxes, the Holding Company will furnish to the Agent, at its
address referred to in Section 9.4, the original or a certified copy of any
receipt received by the Holding Company evidencing payment thereof.
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SECTION 9. Miscellaneous.
SECTION 9.1. Entire Agreement; Amendments. This
Guaranty, together with the other Loan Documents, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements relating to a guaranty of the Obligations,
including without limitation, the loans, advances and other obligations under
the Loan Documents, and may not be amended or supplemented except by a writing
signed by the Holding Company and the Agent, as provided in Section 9.1 of the
Credit Agreement.
SECTION 9.2. Headings. The headings in this Guaranty
are for convenience of reference only and are not part of the substance of this
Guaranty.
SECTION 9.3. Severability. In the event that any one or
more of the provisions contained in this Guaranty shall be determined to be
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision or provisions in every other
respect and the remaining provisions of this Guaranty shall not be in any way
impaired.
SECTION 9.4. Notices. All notices hereunder shall be in
writing or by telex or telecopy and shall be sufficiently given to the Agent,
the Lenders or the Holding Company if addressed or delivered to them at, in the
case of the Agent and the Lenders, their respective addresses and telecopier
numbers specified in Section 9.2 of the Credit Agreement and, in the case of
the Holding Company, care of the Borrower at the address specified for the
Borrower in Section 9.2 of the Credit Agreement (in each case with copies
addressed as provided in Section 9.2 of the Credit Agreement), or at such other
address as any party may designate to any other party by written notice. All
such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; when received if deposited
in the mail, postage prepaid, if mailed; when answered back, if telexed; when
transmission is verified, if telecopied; and on the next Business Day, if
timely delivered to an air courier guaranteeing overnight delivery.
SECTION 9.5. Binding Effect. This Guaranty shall bind
the Holding Company and shall inure to the benefit of the Agent and the Lenders
and their respective successors and assigns. The Holding Company may not
assign this Guaranty or delegate any of its duties hereunder.
SECTION 9.6. Non-Waiver. The failure of the Agent or
any Lender to enforce any right or remedy hereunder, or promptly to enforce any
such right or remedy, shall not constitute a waiver
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thereof, nor give rise to any estoppel against the Agent or any Lender, nor
excuse the Holding Company from its obligations hereunder. Any waiver of any
such right or remedy by the Lenders must be in writing and signed by the Agent,
as provided in Section 9.1 of the Credit Agreement.
SECTION 9.7. Termination. This Guaranty shall terminate
and be of no further force or effect on the date when the Obligations have been
indefeasibly paid in full, all Commitments have terminated, and the Credit
Agreement has terminated (other than any Obligations that are contingent and
expressly survive the termination of the Credit Agreement as provided in
Section 9.5 therein).
SECTION 9.8. Governing Law; Entire Agreement.
(a) THIS GUARANTY SHALL BE DEEMED TO BE MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Guaranty and the
other Loan Documents constitute the entire understanding among the parties
thereto with respect to the subject matter thereof and supersede any prior
agreements, written or oral, with respect thereto.
(b) THE HOLDING COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, AND HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE HOLDING
COMPANY AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH RESPECT TO ANY
SUCH ACTION OR PROCEEDING BROUGHT BY IT AGAINST THE AGENT OR ANY LENDER. THE
HOLDING COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING.
(c) The Holding Company hereby irrevocably designates,
appoints and empowers CT Corporation System, whose present address is 1633
Broadway, New York, New York 10019, as its authorized agent to receive, for and
on its behalf and its property, service of process in the State of New York
when and as such legal actions or proceedings may be brought in the courts of
the State of New York or of the United States of America sitting in New York,
and such service of process shall be deemed complete upon the date of delivery
thereof to such agent whether or not such agent gives notice thereof to the
Holding Company, or upon the earliest of any other date permitted by applicable
law. It is understood that a copy of said process served on such agent will as
soon as practicable be forwarded to the Holding Company, at its address set
forth in Section 9.4, but its failure to receive such copy shall not affect in
any way the service of said process on said
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agent as the agent of the Holding Company. The Holding Company irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of the copies thereof by certified
mail, return receipt requested, postage prepaid, to it at its address set forth
in Section 9.4, such service to become effective upon the earlier of (i) the
date ten (10) calendar days after such mailing or (ii) any earlier date
permitted by applicable law. The Holding Company agrees that it will at all
times continuously maintain an agent to receive service of process in the State
of New York on behalf of itself and its properties and in the event that, for
any reason, the agent named above or its successor shall no longer serve as its
agent to receive service of process in the State of New York on its behalf, it
shall promptly appoint a successor so to serve and shall advise the Agent and
the Lenders thereof (and shall furnish to the Agent the consent of any
successor agent so to act). Nothing in this Section 9.8 shall affect the right
of the Agent or any Lender to bring proceedings against the Holding Company in
the courts of any other jurisdiction or to serve process in any other manner
permitted by applicable law.
SECTION 9.9. Expenses. The Holding Company agrees that
it will reimburse the Agent and the Lenders for all reasonable expenses
(including reasonable attorneys fees and expenses) incurred by the Agent or any
Lender in connection with the obligations of Holding Company to the Agent and
the Lenders under this Guaranty and any other Loan Documents and all reasonable
expenses (including reasonable attorneys fees and expenses) incurred by the
Agent or any Lender in connection with the enforcement of this Guaranty.
SECTION 9.10. Indemnity. The Holding Company agrees to
indemnify the Agent and the Lenders and hold them harmless against any
documentary taxes, withholding taxes, assessments or charges made by any
governmental authority by reason of the execution, delivery and performance of
this Guaranty.
SECTION 9.11. Waiver of Jury Trial, Etc. THE HOLDING
COMPANY AND, BY THEIR ACCEPTANCE OF THIS GUARANTY, THE LENDERS AND THE AGENT,
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN),
OR ACTIONS OF THE AGENT, THE LENDERS, THE HOLDING COMPANY OR THE BORROWER.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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SECTION 9.12. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof shall have any liability with respect to,
and THE HOLDING COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON, ANY
CLAIM FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
SUFFERED BY THE HOLDING COMPANY IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS, THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION HEREWITH OR THEREWITH.
SECTION 9.13. Counterparts, Effectiveness, etc. This
Guaranty may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Holding Company and the Agent and be deemed to
be an original and all of which shall constitute together but one and the same
Guaranty. This Guaranty shall become effective when counterparts hereof
executed on behalf of the Holding Company and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Holding Company and each
Lender.
IN WITNESS WHEREOF, the Holding Company has caused this
Guaranty to be executed as of the day and year first above written.
MHI ACQUISITION, INC.
By: /s/ William A. Brosius
----------------------
Name:
Title:
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EXHIBIT 10.8
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of May 31,
1995, between MHI ACQUISITION, INC., a Delaware corporation (the "Holding
Company") owning 100% of the issued and outstanding Stock of MHI ACQUISITION
CORPORATION I, a Delaware corporation ("Mergerco I") and, upon the consummation
of a merger (the "Merger") of Mergerco I with and into Milestone Healthcare,
Inc., a Delaware corporation ("Milestone"), owning 100% of the issued and
outstanding Stock of Milestone (Mergerco I and Milestone, collectively, the
"Borrower"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation ("ING"), as Agent (in such capacity, the "Agent") for
itself and the other lenders (ING and such other lenders, collectively, the
"Lenders") as are, or may from time to time become, parties to the Credit
Agreement (as defined below).
W I T N E S S E T H:
RECITALS.
A. Mergerco I, Milestone, the Lenders and the Agent have
entered into a Credit Agreement, dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
pursuant to which the Lenders have agreed to make a Term Loan and make
available Revolving Loans to Mergerco I, all as more specifically set forth in
the Credit Agreement; and
B. Immediately subsequent to the initial borrowing by
Mergerco I under the Credit Agreement, the Merger shall take place, with
Milestone also assuming all of the obligations of Mergerco I under the Credit
Agreement, and thereafter becoming the Borrower under the Credit Agreement; and
C. The Holding Company is the owner of one hundred
percent (100%) of the issued and outstanding stock of Mergerco I and, upon the
consummation of the Merger, will be the owner of 100% of the issued and
outstanding Stock of Milestone, and all extensions of credit to the Borrower
will inure to the benefit of the Holding Company, directly or indirectly; and
D. It is a condition precedent to the making of the
Loans under the Credit Agreement that the Holding Company execute and deliver a
Guaranty (the "Holding Company Guaranty") pursuant to which the Holding Company
shall guaranty payment and performance of the Obligations of the Borrower to
the Agent and the Lenders and that the Holding Company secure its obligations
under the Holding Company Guaranty by granting to the Agent, for its benefit
<PAGE> 2
and the ratable benefit of the Lenders, a continuing security interest in all
of the Collateral (as defined below) pursuant to this Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged by it, and in order to induce the Lenders to make
Loans to the Borrower pursuant to the Credit Agreement, the Holding Company
agrees with the Agent, for the ratable benefit of the Agent and the Lenders, as
follows:
ARTICLE ARTICLE 1
DEFINITIONS
SECTION 1.1. Certain Terms. In addition to the terms
defined in the preamble and recital paragraphs hereof, the following terms
(whether or not underscored) when used in this Agreement, including its
preamble and recitals, shall have the following meanings (such definitions to
be equally applicable to the singular and plural forms thereof):
"Borrower" means, collectively, Mergerco I and Milestone.
"Collateral" means, collectively, (a) the Initial Pledged
Shares; (b) all other Pledged Shares issued from time to time; (c) all other
Pledged Property, whether now or hereafter delivered to the Agent in connection
with this Agreement; and (d) all proceeds of any of the foregoing.
"Default" means any Event of Default or any condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Distributions" mean all stock dividends, liquidating
dividends, shares of stock resulting from stock splits, reclassifications,
warrants, options, non-cash dividends and other distributions (whether similar
or dissimilar to the foregoing) on or with respect to any Pledged Shares or
other shares of capital stock constituting Collateral, but shall not mean
Dividends.
"Dividends" means cash dividends and cash distributions with
respect to any Pledged Shares made out of capital surplus.
"Event of Default" means any event described in Section 5.1.
"Initial Pledged Shares" means the capital stock of Mergerco I
and Mergerco II as evidenced by the share certificates more particularly
described in Part A of Attachment 1 hereto which capital stock shall, upon
consummation of the Merger, become all
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of the issued and outstanding shares of capital stock of Milestone and
Milestone Management, respectively, and shall be evidenced by a replacement
share certificate more particularly described in Part B of Attachment 1 hereto.
"Merger" means the merger of Mergerco I with and into
Milestone with Milestone as the surviving corporation.
"Pledged Property" means all Pledged Shares and all Dividends,
Distributions, securities, cash, instruments, interest payments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares.
"Pledged Shares" means the Initial Pledged Shares and all
other shares of capital stock, if any, which are delivered by the Holding
Company to the Agent as Pledged Property hereunder.
"ratable" or "ratably" means, in the context of a distribution
of Collateral or a distribution of proceeds of any of the Collateral, an
allocation of such Collateral or proceeds among the Lenders pro rata in
accordance with their respective portion of the aggregate dollar amount of the
Secured Obligations to which the distribution is being applied.
"Secured Obligations" means, collectively, the obligations of
the Holding Company under the Holding Company Guaranty.
"U.C.C." means the Uniform Commercial Code as in effect in the
State of New York.
SECTION 1.2. Credit Agreement Definitions,
Cross-References, Etc. Capitalized terms used herein (including the preamble
and recitals hereof) shall have the meanings assigned to them in the Credit
Agreement, unless the context otherwise requires or unless otherwise defined
herein. References in this Agreement, the Credit Agreement, the Holding
Company Guaranty or any other Loan Document to this "Agreement" or the "Holding
Company Pledge Agreement" shall mean this Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to this Agreement as the same may be in effect at
the time such reference becomes operative. References in this Agreement to any
Section, unless otherwise specified, are references to such Section of this
Agreement, and references in such Section to any clause, unless otherwise
specified, are references to such clause of such Section.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Agreement, including its preamble and recitals,
with such meanings.
ARTICLE 2
PLEDGE
SECTION 2.1. Grant of Security Interest. The Holding
Company hereby pledges, assigns, charges, mortgages, delivers and transfers to
the Agent, for its benefit and the ratable benefit of the Lenders, and hereby
grants to the Agent, for its benefit and the ratable benefit of the Lenders, a
continuing security interest in and to, all of the Collateral.
SECTION 2.2. Security for Secured Obligations. This
Agreement and the Collateral secure the payment in full and performance of all
Secured Obligations.
SECTION 2.3. Delivery of Pledged Property; Registration of
Pledge, Transfer, Etc. All certificates and instruments representing or
evidencing any Collateral, including all Pledged Shares, shall be delivered to
and held by or on behalf of the Agent pursuant hereto, shall be in suitable
form for transfer by delivery, and shall be accompanied by all necessary
instruments of transfer or assignment, duly executed in blank and, if the Agent
shall so request, with signatures guaranteed by a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc. or by a commercial bank or trust company having an office or correspondent
in the United States. Upon an Event of Default, the Agent shall have the
right, at any time without notice to the Holding Company, to transfer to, or to
register in the name of the Agent or any of its nominees, any or all of the
Pledged Shares, subject only to the revocable rights of the Holding Company
specified in Section 4.6. In addition, the Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing any
Pledged Shares for certificates or instruments of smaller or larger
denominations to be issued in the same name as the shares being exchanged.
SECTION 2.4. Dividends on Pledged Shares. In the event
that any Dividend is to be paid on any Pledged Share at a time when no Default
or Event of Default has occurred and is continuing or would result therefrom
and such Dividend is otherwise permitted by the Credit Agreement, such Dividend
may be paid by the Borrower directly to the Holding Company.
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SECTION 2.5. No Duty to Agent. The powers conferred on
the Agent hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Beyond
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Agent shall have
no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
the Agent shall not be liable or responsible for any loss or damage to any of
the Collateral, or from any diminution in the value thereof, by reason of the
act or omission of any carrier, forwarding agency, or other agent selected by
the Agent in good faith.
SECTION 2.6. Continuing Security Interest; Transfer of
Secured Obligation. This Agreement shall:
(a) create a continuing security interest in the
Collateral;
(b) remain in full force and effect until the later of
the Revolving Loan Commitment Termination Date, the payment in full
and performance of all Secured Obligations (other than those Secured
Obligations that are contingent and expressly survive the termination
of the Credit Agreement as provided in Section 9.5 therein) or the
termination of the Credit Agreement;
(c) be binding upon the Holding Company, its
administrators, successors and assigns, provided that the Holding
Company may not assign any of its rights or obligations hereunder
without the prior written consent of the Agent; and
(d) inure to the benefit of the Agent and the Lenders and
their respective successors, transferees and assigns.
Without limiting the foregoing, any Lender may assign or otherwise transfer any
Note, Loan or other Secured Obligation, held by it to any other Person, in
accordance with the terms of the Credit Agreement, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted
herein. Upon the occurrence of the last event described in subsection 2.6(b)
above, the security interest granted herein shall terminate and all rights to
the Collateral shall revert to the Holding Company. Upon any such termination,
the Agent will, at the Holding Company's expense, deliver all certificates and
instruments representing or evidencing all Pledged Shares, together with all
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other Collateral held by the Agent hereunder, and execute and deliver to the
Holding Company, at the Holding Company's expense, such documents as the
Holding Company shall reasonably request to evidence such termination.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, Etc. The Holding Company
represents and warrants unto the Agent and each Lender that as at the date of
each pledge hereunder (including each pledge of Pledged Shares) by the Holding
Company to the Agent of any Collateral:
(a) The Holding Company has full power and authority to
enter into and perform the Holding Company's obligations under this
Agreement and to pledge the Collateral hereunder.
(b) The execution, delivery and performance of this
Agreement by the Holding Company, and the pledge of the Collateral
hereunder do not and will not conflict with, result in any violation
of, or constitute any default under, any provision of any Instrument
to which the Holding Company is party or any law or government
regulation or court decree or order and will not result in or require
the creation or imposition of any Lien on any of the Holding Company's
properties pursuant to the provisions of any such Instrument. This
Agreement is the legal, valid and binding obligation of the Holding
Company, enforceable in accordance with its terms subject to the
effect of (i) any applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally; and (ii) general principles of
equity (regardless of whether considered in a proceeding in equity or
at law).
(c) All balance sheets, all statements of operations,
stockholders' equity and cash flows, and all other financial
information of the Holding Company and its Subsidiaries, which have
been or shall hereafter be furnished by or on behalf of the Holding
Company to the Lenders and the Agent have been prepared in accordance
with GAAP consistently applied throughout the periods involved (except
as disclosed therein and except for the absence of footnotes with
respect to the unaudited financial statements) and present fairly in
all material respects the financial condition of the Holding Company
and its Subsidiaries as at the dates thereof and reflect all material
contingent liabilities and material liabilities for taxes, long-term
leases and unusual forward and long-term commitments, subject, in the
case of unaudited statements, to changes resulting from normal
year-end audit adjustments.
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(d) The Holding Company is and at all times will be the
legal and beneficial owner of, and has and will have at all times good
and marketable title to (and has and will at all times have full right
and authority to pledge and assign) all Collateral, free and clear of
all Liens or other charges or encumbrances, except the Lien granted
pursuant hereto in favor of the Agent.
(e) The delivery of the Collateral (including the
delivery of the Initial Pledged Shares) to the Agent is effective to
create a valid, perfected, first priority security interest in such
Collateral and all proceeds thereof, securing the Secured Obligations,
and no filing or other action is necessary to perfect or protect such
security interest, except that the filing of a financing statement,
the taking of possession or some other action may be required under
Section 9-306 of the U.C.C. to perfect a security interest in certain
proceeds of the Collateral that do not constitute Pledged Shares or
other instruments (as such term is defined in Article 9 of the
U.C.C.).
(f) All of the Pledged Shares have been duly authorized
and validly issued, and are fully paid, and nonassessable.
(g) Prior to the effectiveness of the Merger, the Initial
Pledged Shares constitute 100% of all of the issued and outstanding
shares of Stock of Mergerco I, and upon effectiveness of the Merger,
the Initial Pledged Shares shall constitute 100% of all of the issued
and outstanding shares of Stock of Milestone. Thereafter, the Pledged
Shares will constitute at all times 100% of all issued and outstanding
shares of Stock of Milestone.
(h) No authorization, approval, or other action by and no
notice to or filing with, any Governmental Authority is or will be
required either:
(i) for the pledge by the Holding Company of any
Collateral pursuant to this Agreement or for the execution,
delivery, or performance of this Agreement by the Holding
Company, or
(ii) for the exercise by the Agent of the voting
or other rights provided for in this Agreement, or (except,
with respect to any Pledged Shares, as may be required in
connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally) the
remedies in respect of the Collateral pursuant to this
Agreement.
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ARTICLE 4
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, Etc.
The Holding Company will not sell, assign, transfer, pledge or encumber in any
other manner the Collateral (except in favor of the Agent hereunder). The
Holding Company will warrant and defend the right, title and security interest
herein granted to the Agent in and to the Collateral (and all right, title and
interest represented by the Collateral) against the claims and demands of all
Persons whomsoever. The Holding Company agrees that at any time, and from time
to time, at the expense of the Holding Company, the Holding Company will
promptly execute and deliver all further Instruments, and take all further
action, that may be necessary, or that the Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Issuance of Stock, Etc. The Holding Company
will not, subsequent to the date of this Agreement, without the prior written
consent of the Required Lenders, cause or permit the Borrower to issue or grant
any warrants, stock options of any nature or other instruments convertible into
shares of any class of Stock or issue any additional shares of Stock or sell or
transfer any treasury Stock.
SECTION 4.3. Taxes. The Holding Company will pay all
taxes, assessments and charges levied, assessed or imposed upon the Collateral
before the same become delinquent or become Liens upon any of the Collateral
except where the same may be contested in good faith by appropriate proceedings
and as to which adequate reserves have been provided.
SECTION 4.4. Stock Powers, Etc. The Holding Company
agrees that all Pledged Shares (and all other shares of Stock constituting
Collateral) delivered by the Holding Company pursuant to this Agreement will be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank and, if the Agent shall so request, with signatures
guaranteed by a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States. The
Holding Company will, from time to time upon the request of the Agent, promptly
deliver to the Agent such stock powers, instruments and similar documents,
satisfactory in form and substance to the Agent, with respect to the Collateral
as the Agent may reasonably request and will, from time to time upon the
request of the Agent after the occurrence of any Default, promptly
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transfer any Pledged Shares or other shares of Stock constituting Collateral
into the name of the Agent or any nominee designated by the Agent.
SECTION 4.5. Continuous Pledge. The Holding Company will,
at all times, keep pledged to the Agent pursuant hereto all Pledged Shares, all
Dividends and Distributions with respect thereto, and all other Collateral.
SECTION 4.6. Voting Rights; Dividends, Etc. The Holding
Company agrees to deliver all Distributions at any time received by it to the
Agent to be held as Collateral hereunder and, in addition, to deliver (properly
endorsed where required hereby or requested by the Agent) to the Agent:
(a) after any Default or an Event of Default shall have
occurred and be continuing or if any Default or Event of Default shall
occur as a result thereof, promptly upon receipt thereof by the
Holding Company and without any request therefor by the Agent, all
Dividends (except for Dividends to the Holding Company for the payment
of federal and state income tax liability in respect to the net income
of the Person declaring such Dividend), all of which shall be held by
the Agent as additional Collateral for use in accordance with Section
5.5; and
(b) after any Event of Default shall have occurred and be
continuing, promptly upon request of the Agent, such proxies and other
documents as may be necessary to allow the Agent to exercise the
voting power with respect to any share of Stock constituting
Collateral;
provided, however, that unless an Event of Default shall have occurred and be
continuing or result therefrom and the Holding Company shall have received
notice from the Agent that it shall no longer be entitled to do so, the Holding
Company shall be entitled to exercise, in its reasonable judgment, but in a
manner not inconsistent with the terms of the Credit Agreement or any other
Loan Document (including this Agreement) the voting powers and all other
incidental rights of ownership with respect to any Pledged Shares or other
shares of Stock constituting Collateral (subject to the Holding Company's
obligation to deliver to the Agent such Pledged Shares and other shares in
pledge hereunder); provided, further however, that unless a Default or an Event
of Default shall have occurred and be continuing or result therefrom, the
Holding Company shall be entitled to the receipt of all Dividends in accordance
with Section 2.4 to the extent such Dividends were permitted to be paid
pursuant to the Credit Agreement.
All Dividends, Distributions, cash payments and proceeds which at any time and
from time to time may be held by the Holding Company but which the Holding
Company is then obligated to deliver to the
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Agent, shall, until delivery to the Agent, be held by the Holding Company
separate and apart from its other property in trust for the Agent. The Agent
agrees that unless an Event of Default shall have occurred and be continuing,
the Agent shall, upon the written request of the Holding Company, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Holding Company which are necessary to allow the Holding
Company to exercise voting power with respect to any share of Stock (including
Pledged Shares) constituting Collateral; provided, however, that no vote shall
be cast, or consent, waiver or ratification given, or action taken by the
Holding Company that would impair in any material respect any Collateral or be
inconsistent with or violate any provision of the Credit Agreement or any other
Loan Document (including this Agreement) or the Warrant Documents.
SECTION 4.7. Additional Information. The Holding Company
will furnish to the Agent and the Lenders written notice of the occurrence of
any event which would make any representation contained in Article 3 untrue at
such time.
ARTICLE 5
EVENTS OF DEFAULT; REMEDIES
SECTION 5.1. Events of Default. Each of the following
shall constitute an "Event of Default" hereunder:
(a) if there shall occur any Event of Default under the
Credit Agreement;
(b) if any of the Collateral shall be attached or levied
upon or seized in any legal proceeding, or held by virtue of any Lien
or distress; or
(c) if any representation or warranty of the Holding
Company set forth herein or in the Holding Company Guaranty shall be
untrue in any material respect or if the Holding Company shall default
in the due performance and observance of any covenant contained herein
and such default shall continue unremedied for a period of ten (10)
days after notice thereof shall have been given to the Holding Company
by the Agent.
SECTION 5.2. Actions upon Event of Default. In addition
to its rights and remedies provided hereunder, whenever an Event of Default
shall have occurred and be continuing, the Agent shall have all rights and
remedies of a secured party upon default under the U.C.C. or other applicable
law. Any notification required by law of any intended disposition by the Agent
of any of the Collateral shall be deemed reasonably and
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properly given if given at least ten (10) days before such disposition.
Without limitation of the above, the Agent may, whenever an Event of Default
shall have occurred and be continuing, without prior notice to the Holding
Company, take all or any of the following actions:
(a) transfer all or any part of the Collateral into the
name of the Agent or its nominee, without disclosing that such
Collateral is subject to the Lien hereunder;
(b) notify the parties of the obligation on any of the
Collateral to make payment to the Agent of any amount due or to become
due thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature of
any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Holding Company's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the Holding
Company) endorsements, assignments, stock powers and other instruments
of conveyance or transfer with respect to all or any of the
Collateral.
SECTION 5.3. Attorney-in-Fact. The Holding Company hereby
irrevocably appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Holding Company, the Agent, the Lenders or
otherwise, for the sole use and benefit of the Agent and the Lenders, but at
the Holding Company's expense, upon the occurrence and during the continuation
of an Event of Default to take any action and to execute any instrument which
the Agent may deem reasonably necessary or advisable to accomplish the purposes
of this Agreement.
SECTION 5.4. Private Sales. (a) The Holding Company
recognizes that the Agent may be unable, after the occurrence and during the
continuance of any Event of Default, to effect a public sale of any or all the
Pledged Shares by reason of certain prohibitions contained in the Securities
Act of 1933, as amended (the "Securities Act") and applicable state securities
law or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers that will be obligated to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Holding Company acknowledges
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and agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Agent shall be under no
obligation to delay sale of any of the Pledged Shares for the period of time
necessary to permit the Borrower to register such securities for public sale
under the Securities Act or under applicable state securities law, even if the
Borrower would agree to do so.
(b) The Holding Company further agrees to use its best
efforts, after the occurrence and during the continuance of an Event of
Default, to do or cause to be done all such acts as may be necessary to make
such sale or sales of all or any portion of the Pledged Shares pursuant to this
Section 5.4 valid and binding and in compliance with any and all other
applicable Requirements of Law.
SECTION 5.5. Application of Proceeds. All cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may be applied (after
payment of any amounts payable to the Agent pursuant to Section 9.3 of the
Credit Agreement and Section 5.6 of this Agreement) in whole or in part by the
Agent against, all or any part of the Secured Obligations in the following
order:
(a) first, ratably, to the unpaid interest (including
post-petition interest) accrued and then due or owing on the Secured
Obligations and to the aggregate amount of fees described in Section
2.3 of the Credit Agreement which have accrued and are unpaid;
(b) second, ratably, among holders of the Notes, on
account of all principal of any Secured Obligations then due or owing;
and
(c) third, to any other Secured Obligations then due or
owing.
Any surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all the Secured Obligations shall be paid over to the
Holding Company or to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 5.6. Indemnity and Expenses. The Holding Company
hereby indemnifies and holds harmless the Agent and the Lenders from and
against any and all claims, losses, and liabilities growing out of or resulting
from this Agreement (including enforcement of this Agreement), except claims,
losses, or liabilities resulting from the Agent's gross negligence or willful
misconduct. Upon demand, the Holding Company will pay, or cause to be paid, to
the Agent the amount of any and all
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reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Agent may incur in connection
with:
(a) the administration of this Agreement;
(b) the custody, preservation, use, or operation of, or
the sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of
the Agent hereunder and any action taken by the Agent under Section
6.4; and
(d) the failure by the Holding Company to perform or
observe any of the provisions hereof.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1. Loan Document. This Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including Article 9 thereof.
SECTION 6.2. Amendments, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departures by the Holding
Company herefrom shall in any event be effective unless the same shall be in
writing, signed by the Agent (with the consent of the Required Lenders), and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it is given.
SECTION 6.3. Obligations Not Affected. The obligations of
the Holding Company under this Agreement shall remain in full force and effect
without regard to, and shall not be impaired or affected by:
(a) any amendment or modification or addition or
supplement to the Credit Agreement, any Note, any other Loan Document,
any Instrument delivered in connection therewith or any assignment or
transfer thereof;
(b) any exercise, non-exercise or waiver by the Agent or
any Lender of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty or collateral provided
pursuant to, this Agreement, the Credit Agreement, or any other Loan
Document;
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(c) any waiver, consent, extension, indulgence or other
action or inaction in respect of this Agreement, the Credit Agreement
or any other Loan Document or any assignment or transfer of any
thereof; or
(d) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like, of
the Borrower, the Holding Company or any other Person, whether or not
the Holding Company shall have notice or knowledge of any of the
foregoing.
SECTION 6.4. Protection of Collateral. The Agent may from
time to time, at its option, perform any act which the Holding Company agrees
hereunder to perform and which the Holding Company shall fail to perform after
being requested in writing to so perform (it being understood that no such
request need be given after the occurrence and during the continuance of an
Event of Default) and the Agent may from time to time take any other action
which the Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 6.5. Addresses for Notices. All notices and other
communications provided for hereunder to any party hereto shall be given in the
manner provided in Section 9.4 of the Holding Company Guaranty.
SECTION 6.6. Governing Law; Jurisdiction. (a) THIS
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (AND THE HOLDING COMPANY AGREES THAT SUCH
JURISDICTION WILL BE EXCLUSIVE WITH RESPECT TO CLAIMS BROUGHT BY THE HOLDING
COMPANY AGAINST THE AGENT OR ANY LENDER), AND EACH HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING.
(c) The Holding Company hereby irrevocably designates,
appoints and empowers CT Corporation System, whose present address is 1633
Broadway, New York, New York 10019, as its authorized agent to receive, for and
on its behalf and on behalf of its property, service of process in the State of
New York when and as such legal actions or proceedings may be brought in the
courts of the State of New York or of the United States of America sitting in
the Southern District of New York, and such service of process
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shall be deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to the Holding Company, or upon
the earliest of any other date permitted by applicable law. It is understood
that a copy of said process served on such agent will as soon as practicable be
forwarded to the Holding Company, at the address set forth below, but the
Holding Company's failure to receive such copy shall not affect in any way the
service of said process on said agent as the agent of the Holding Company. The
Holding Company irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
the copies thereof by certified mail, return receipt requested, postage
prepaid, to the Holding Company at its address set forth below, such service to
become effective upon the earlier of (i) the date 10 calendar days after such
mailing or (ii) any earlier date permitted by applicable law. The Holding
Company agrees that it will at all times continuously maintain an agent to
receive service of process in the State of New York on behalf of the Holding
Company and its properties and in the event that, for any reason, the agent
named above or its successor shall no longer serve as its agent to receive
service of process in the State of New York on its behalf, it shall promptly
appoint a successor so to serve and shall advise the Agent and the Lenders
thereof (and shall furnish to the Agent the consent of any successor agent so
to act). Nothing in this Section 6.6 shall affect the right of the Agent or
any Lender to bring proceedings against the Holding Company in the courts of
any other jurisdiction or to serve process in any other manner permitted by
applicable law.
SECTION 6.7. Waiver of Jury Trial, Etc. THE AGENT, THE
LENDERS AND THE HOLDING COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH
LENDERS, OR THE HOLDING COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE AGENT AND SUCH LENDERS ENTERING INTO THE CREDIT AGREEMENT.
SECTION 6.8. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof, shall have any liability with respect
to, and THE HOLDING COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON,
ANY CLAIM FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL
DAMAGES SUFFERED BY THE HOLDING COMPANY IN CONNECTION WITH, ARISING OUT OF, OR
IN ANY WAY RELATED TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH.
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SECTION 6.9. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be executed by the Holding Company and the Agent and be deemed
to be an original and all of which shall constitute together but one and the
same agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Holding Company and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Holding Company and each
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
MHI ACQUISITION, INC.
By: /s/ William A. Brosius
------------------------------
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S)
CAPITAL CORPORATION
By:
/s/
-------------------------------
Name:
Title:
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<PAGE> 17
ATTACHMENT 1
(to the Pledge Agreement)
A.
PLEDGED SHARES OF MERGERCO I
<TABLE>
<CAPTION>
Class of Number of Certificate
Issuer Capital Stock Shares Number(s)
------ ------------- --------- -----------
<S> <C> <C> <C>
MHI Acquisition Common 1,000 [1]
Corporation I
MHI Acquisition
Corporation II Common 1,000 [1]
</TABLE>
B.
PLEDGED SHARES OF MILESTONE
---------------------------
<TABLE>
<CAPTION>
Class of Number of Certificate
Issuer Capital Stock Shares Number(s)
------ ------------- --------- -----------
<S> <C> <C>
Milestone Common 1,000 [____]
Healthcare,
Inc.
Milestone Common 1,000 [____]
Healthcare
Management,
Inc.
</TABLE>
-17-
<PAGE> 18
ACKNOWLEDGMENT AND CONSENT
Each of MHI Acquisition Corporation I and Milestone
Healthcare, Inc. hereby acknowledges receipt of a copy of the foregoing Pledge
Agreement and agrees to be bound thereby and to comply with the terms thereof
insofar as such terms are applicable to it.
MHI ACQUISITION CORPORATION I
By: /s/ William A. Brosius
----------------------
Name:
Title:
MILESTONE HEALTHCARE, INC.
By: /s/ William A. Brosius
----------------------
Name:
Title:
-18-
<PAGE> 1
EXHIBIT 10.9
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY, dated as of May 31, 1995, made by
MHI ACQUISITION CORPORATION II, a Delaware corporation ("Mergerco II"),
MILESTONE HEALTHCARE MANAGEMENT, INC., a Delaware corporation ("Milestone
Management"), TRUCARE HEALTH SYSTEMS, INC., a Delaware corporation ("Trucare"),
TRUCARE REHABILITATION SERVICES, INC., a Texas corporation ("Trucare
Rehabilitation"), and TRUCARE PHYSICAL THERAPY SERVICES, INC., a Texas
corporation ("Trucare Physical"; Mergerco II, Milestone Management, Trucare,
Trucare Rehabilitation and Trucare Physical are hereinafter referred to
individually as a "Guarantor" and, collectively, as the "Guarantors"), in favor
of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation ("ING"), the other lenders (ING and such other lenders,
collectively, the "Lenders") now or hereafter parties to the Credit Agreement
(as defined below), and ING as Agent (in such capacity, the "Agent") for such
Lenders.
W I T N E S S E T H:
RECITALS.
A. MHI Acquisition Corporation I, a Delaware corporation
("Mergerco I"), Milestone Healthcare, Inc., a Delaware corporation
("Milestone"), the Lenders and the Agent have entered into a Credit Agreement,
dated as of even date herewith (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the Lenders have
agreed to make a Term Loan and make available Revolving Loans to Mergerco I,
all as more specifically set forth in the Credit Agreement; and
B. Immediately subsequent to the initial borrowing by
Mergerco I under the Credit Agreement, Mergerco I shall be merged with and into
Milestone (the "Merger") with Milestone surviving such Merger, assuming all of
the obligations of Mergerco I under the Credit Agreement, and thereafter
becoming the Borrower under the Credit Agreement (Mergerco I and Milestone,
collectively, the "Borrower"); and
C. Immediately subsequent to the initial borrowing under
the Credit Agreement, Mergerco II shall be merged with and into Milestone
Management (the "Milestone Management Merger") with Milestone Management as the
surviving corporation; and
D. Mergerco I and Mergerco II are both wholly owned
subsidiaries of MHI Acquisition, Inc., a Delaware corporation (the "Holding
Company"), and following the Merger and the Milestone Management Merger the
Holding Company will own one hundred percent (100%) of the issued and
outstanding stock of Milestone and Milestone Management; and
<PAGE> 2
E. The Borrower is the owner of one hundred percent
(100%) of the issued and outstanding stock of Trucare, and Trucare is the owner
of one hundred percent (100%) of the issued and outstanding stock of Trucare
Rehabilitation and Trucare Physical; and
F. The Term Loan and the Revolving Loans (collectively,
the "Loans") will be made for the purpose of, among other things, paying the
Merger consideration and funding the ongoing working capital needs of the
Borrower; and
G. Each of the Guarantors will obtain benefits, directly
or indirectly, from the Loans; and
H. In connection with the making of the Loans under the
Credit Agreement, and as a condition precedent thereto, the Agent and the
Lenders are requiring that the Guarantors execute and deliver this Subsidiary
Guaranty;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce the Lenders to provide the Loans
to the Borrower pursuant to the Credit Agreement, the Guarantors agrees as
follows:
SECTION 1. Definitions, Cross-References, Etc.
Capitalized terms used herein (including the preamble and recitals
hereof) shall have the meanings assigned to them in the Credit Agreement,
unless the context otherwise requires or unless otherwise defined herein.
References in this Subsidiary Guaranty, the Credit Agreement or any other Loan
Document to the "Subsidiary Guaranty" shall mean this Subsidiary Guaranty,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Subsidiary Guaranty
as the same may be in effect at the time such reference becomes operative.
References in this Subsidiary Guaranty to any Section, unless otherwise
specified, are references to such Section of this Subsidiary Guaranty, and
references in any Section to any clause, unless otherwise specified, are
references to such clause of such Section.
SECTION 2. The Guaranty. The guaranty of the Guarantors
hereunder is as set forth in this Section 2.
SECTION 2.1. Guaranty of Obligations of Borrower. Each of
the Guarantors hereby unconditionally, jointly and severally, guarantees to the
Agent and the Lenders, and their successors, endorsees, transferees and
assigns, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of (a) the Obligations including, without limitation
(i) all principal of and interest (including, without limitation, any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Borrower) on
any Loan made under, and any Note issued pursuant to, the Credit Agreement,
(ii) all amounts
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<PAGE> 3
owing to an Interest Rate Contract Counterparty that is a Lender pursuant to
the terms of the Credit Agreement, and (iii) all other amounts payable and all
obligations to be performed by the Borrower under the Credit Agreement or any
other Loan Document and (b) any renewals or extensions of any of the foregoing
(collectively, the "Guaranteed Obligations"). Each of the Guarantors agrees
that this Subsidiary Guaranty is a guaranty of payment and performance and not
of collection, and that its obligations under this Subsidiary Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in, the
Credit Agreement or any other Loan Document or any other
agreement, document or instrument to which the Borrower and/or
any of the Guarantors is or are or may become a party;
(b) the absence of any action to enforce
the Credit Agreement or any other Loan Document or the waiver
or consent by the Agent or any Lender with respect to any of
the provisions of any Loan Document;
(c) the existence, value or condition of,
or failure to perfect its Lien against, any security for the
Obligations or any action, or the absence of any action, by
the Agent or any Lender in respect of such Lien or security
(including, without limitation, the release of any such
security); or
(d) any other action or circumstances which
might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor;
it being agreed by each of the Guarantors that its obligations under this
Subsidiary Guaranty shall not be discharged until the payment and performance,
in full, of the Obligations (other than any Obligations that are contingent and
expressly survive the termination of the Credit Agreement as provided in
Section 9.5 therein). Each of the Guarantors shall be regarded, and shall be
in the same position, as principal debtor with respect to the Obligations.
Each of the Guarantors expressly waives all rights it may now or in the future
have under any statute, or at common law, or at law or in equity, or otherwise,
to compel the Agent or any Lender to proceed in respect of the Obligations
against the Borrower or any other party or against any security for the payment
and performance of the Obligations before proceeding against, or as a condition
to proceeding against such Guarantor. Each of the Guarantors further expressly
waives and agrees not to assert or take advantage of any defense based upon the
failure of the Agent or any Lender to commence an action in respect of the
Obligations against the Borrower, any of the Guarantors or any other party or
any security for the payment and performance of the Obligations. Each of the
Guarantors agrees that any notice or directive given at any time to the Agent
or any Lender which is
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<PAGE> 4
inconsistent with the waivers in the preceding two sentences shall be null and
void and may be ignored by the Agent or such Lender, and, in addition, may not
be pleaded or introduced as evidence in any litigation relating to this
Subsidiary Guaranty for the reason that such pleading or introduction would be
at variance with the written terms of this Subsidiary Guaranty, unless the
Agent and the Required Lenders have specifically agreed otherwise in writing.
The foregoing waivers are of the essence of the transaction contemplated by the
Loan Documents and, but for this Subsidiary Guaranty and such waivers, the
Lenders would decline to make the Loans under the Credit Agreement.
SECTION 2.2. Demand by the Agent and Lenders. In addition
to the terms of the guaranty set forth in Section 2.1, and in no manner
imposing any limitation on such terms, if the then outstanding principal amount
of the Obligations under the Credit Agreement (together with all accrued
interest thereon) is declared to be immediately due and payable (or
automatically becomes immediately due and payable as provided in the Credit
Agreement), then, each of the Guarantors, jointly and severally, shall pay to
the holder or holders of the Obligations the entire outstanding Obligations due
and owing to such holder or holders. Payment by any of the Guarantors shall be
made to the Agent, to be credited and applied upon the Obligations, in
immediately available federal funds to an account designated by the Agent or at
the address set forth herein for the giving of notice to the Agent or at any
other address that may be specified in writing from time to time by the Agent.
The Agent will, upon any such payment to the Agent, promptly thereafter cause
to be distributed like funds ratably to each Lender based on the respective
principal amount of Obligations held by such Lender.
SECTION 2.3. Enforcement of Guaranty. In no event shall the
Agent or any Lender have any obligation (although it is entitled, at its
option) to proceed against the Borrower or any other Person or any real or
personal property pledged to secure the Obligations before proceeding against
any of the Guarantors, and the Agent or any Lender may proceed, prior or
subsequent to, or simultaneously with, the enforcement of the Agent or any
Lender's rights hereunder, to exercise any right or remedy which it may have
against any property, real or personal, as a result of any Lien it may have as
security for all or any portion of the Obligations.
SECTION 2.4. Waivers. In addition to the waivers contained
in Section 2.1, each of the Guarantors waives, and agrees that it shall not at
any time insist upon, plead or in any manner whatever claim or take the benefit
or advantage of, any appraisal, valuation, stay, extension, marshalling of
assets or redemption laws, or exemption, whether now or at any time hereafter
in force, which may delay, prevent or otherwise affect the performance by such
Guarantor of its obligations under, or the enforcement by the Agent or the
Lenders of, this Subsidiary Guaranty. Each of the Guarantors further hereby
waives diligence,
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<PAGE> 5
presentment and demand (whether for non-payment or protest or of acceptance,
maturity, extension of time, change in nature or form of the Obligations,
acceptance of further security, release of further security, composition or
agreement arrived at as to the amount of, or the terms of, the Obligations,
notice of adverse change in Borrower's financial condition or any other fact
which might materially increase the risk to any of the Guarantors) with respect
to any of the Obligations or all other demands whatsoever and waives the
benefit of all provisions of law which are or might be in conflict with the
terms of this Subsidiary Guaranty. Each of the Guarantors represents, warrants
and agrees that its obligations under this Subsidiary Guaranty are not and
shall not be subject to any counterclaims, offsets or defenses of any kind
against the Agent, the Lenders, the Borrower, or any other Guarantor now
existing or which may arise in the future.
SECTION 2.5. Benefits of Guaranty. The provisions of this
Subsidiary Guaranty are for the benefit of the Agent, the Lenders and their
respective successors, transferees, endorsees and assigns, and nothing herein
contained shall impair, as between the Borrower, the Agent and the Lenders, the
obligations of the Borrower under the Loan Documents. In the event all or any
part of the Obligations are transferred, endorsed or assigned by the Agent or
any Lender to any Person or Persons, any reference to the "Agent" or "Lenders"
herein shall be deemed to refer equally to such Person or Persons.
SECTION 2.6. Modification of Loans, etc. If the Agent or the
Lenders shall at any time or from time to time, with or without the consent of,
or notice to, any of the Guarantors:
(a) change or extend the manner, place or
terms of payment of, or renew or alter all or any portion
of, the Obligations;
(b) take any action under or in respect of
the Loan Documents in the exercise of any remedy, power or
privilege contained therein or available to it at law, equity
or otherwise, or waive or refrain from exercising any such
remedies, powers or privileges;
(c) amend or modify, in any manner
whatsoever, the Loan Documents;
(d) extend or waive the time for any of the
Guarantors', Borrower's or other Person's performance of, or
compliance with, any term, covenant or agreement on its part
to be performed or observed under the Loan Documents, or waive
such performance or compliance or consent to a failure of, or
departure from, such performance or compliance;
(e) take and hold security or collateral
for the payment of the Obligations or sell, exchange,
release, dispose of, or otherwise deal with, any property
pledged,
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<PAGE> 6
mortgaged or conveyed, or in which the Agent or the Lenders
have been granted a Lien, to secure any indebtedness of the
Borrower, any of the Guarantors or any other guarantor of the
Obligations, to the Agent or the Lenders;
(f) release anyone who may be liable in
any manner for the payment of any amounts owed by the
Borrower, any of the Guarantors or any other guarantor of the
Obligations, to the Agent or any Lender;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which
claims of other creditors of the Borrower, any of the
Guarantors or any other guarantor of the Obligations, are
subordinated to the claims of the Agent or any Lender; or
(h) apply any sums by whomever paid or
however realized to any amounts owing by the Borrower, any
of the Guarantors or any other guarantor of the Obligations,
to the Agent or any Lender in such manner as the Agent or any
Lender shall determine in its discretion;
then neither the Agent nor any Lender shall incur any liability to any of the
Guarantors as a result thereof, and no such action shall impair or release the
obligations of any of the Guarantors under this Subsidiary Guaranty.
SECTION 2.7. Reinstatement. This Subsidiary Guaranty shall
remain in full force and effect and continue to be effective in the event any
petition is filed by or against any of the Guarantors or the Borrower for
liquidation or reorganization, in the event any of the Guarantors or the
Borrower becomes insolvent or makes an assignment for the benefit of creditors
or in the event a receiver or trustee is appointed for all or any significant
part of any of the Guarantors' or the Borrower's assets, and shall continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by the Agent or any Lender, whether as a "voidable preference", "fraudulent
conveyance" or otherwise, all as though such payment or performance had not
been made. In the event that any payment of the Obligations, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations or part
thereof so rescinded shall be reinstated, and the Obligations shall be deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
SECTION 2.8. Subrogation and Contribution.
(a) Upon the making by any of the Guarantors of any
payment hereunder for the account of the Borrower, such Guarantor shall be
subrogated to the rights of the payee against the Borrower; provided that such
Guarantor shall not enforce any right
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<PAGE> 7
or receive any payment by way of subrogation until all of the Guaranteed
Obligations have been paid and performed in full and the Revolving Loan
Commitment has been terminated. If any amount shall be paid to such Guarantor
on account of such subrogation rights, such amounts shall be held in trust for
the benefit of the Agent and the Lenders and shall be forthwith paid to the
Agent to be credited and applied upon the Guaranteed Obligations, whether
matured or unmatured, in accordance with the terms of the Credit Agreement or
to be held by the Agent as collateral security for any Guaranteed Obligations
existing.
(b) In the event any Guarantor (a "Funding Guarantor")
shall make any payment under this Subsidiary Guaranty or shall suffer any loss
as a result of any realization upon any of its assets pursuant to any Loan
Document, each other Guarantor (each, a "Contributing Guarantor") shall
contribute to such Funding Guarantor an amount equal to such Contributing
Guarantor's "Pro Rata Share" of such payment made, or loss suffered, by such
Funding Guarantor. For the purposes hereof, each Contributing Guarantor's Pro
Rata Share with respect to any such payment or loss by a Funding Guarantor
shall be determined as of the date on which such payment or loss was made or
suffered by reference to the ratio of (i) such Contributing Guarantor's maximum
obligation hereunder as provided in Section 5 (such Guarantor's "Maximum
Obligation") as of such date (without giving effect to any right to receive, or
obligation to make, any contribution hereunder) to (ii) the aggregate Maximum
Obligations of all Guarantors (including such Funding Guarantor) as of such
date (without giving effect to any right to receive, or obligation to make, any
contribution hereunder). Nothing in this Section 2.8(b) shall affect each
Guarantor's several liability for the entire amount of the Guaranteed
Obligations (up to such Guarantor's Maximum Obligation). Each Guarantor
covenants and agrees that its right to receive any contribution hereunder from
a Contributing Guarantor shall be subordinate and junior in right of payment to
all the Guaranteed Obligations and all guarantees thereof.
SECTION 2.9. Election of Remedies, Etc. Any election of
remedies which results in the denial or impairment of the right of the Agent or
any Lender to seek a deficiency judgment against Borrower shall not impair any
Guarantor's obligations to pay the full amount of the Obligations. In the
event the Agent or any Lender shall bid at any foreclosure or trustee's sale or
at any private sale permitted by law or the Loan Documents, the Agent or such
Lender may bid all or less than the amount of the Obligations and the amount of
such bid need not be paid by the Agent or such Lender but shall be credited
against the Obligations. The amount of the successful bid at any such sale,
whether the Agent or any Lender or any other party is the successful bidder,
shall be conclusively deemed to be the fair market value of the collateral and
the difference between such bid amount and the remaining balance of the
Obligations shall be conclusively deemed to be the amount of the Obligations
guaranteed under this Subsidiary Guaranty, notwithstanding that any present or
future law or court
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<PAGE> 8
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which the Agent or any Lender might otherwise be entitled but for such
bidding at any such sale.
SECTION 2.10. Continuing Guaranty. Each of the Guarantors
agrees that this Subsidiary Guaranty is a continuing guaranty and shall remain
in full force and effect until the payment and performance in full of the
Obligations.
SECTION 3. Deliveries. In a form satisfactory to the
Agent, each of the Guarantors shall deliver to the Agent, concurrently with the
execution of this Subsidiary Guaranty and the Credit Agreement, such of the
Loan Documents and other Instruments, certificates and documents as are
required to be delivered by each of the Guarantors to the Agent under the
Credit Agreement.
SECTION 4. Representations and Warranties. To induce the
Lenders to make the Loans under the Credit Agreement, each of the Guarantors
makes the following representations and warranties to the Agent and the
Lenders, each and all of which shall survive the execution and delivery of this
Subsidiary Guaranty:
SECTION 4.1. Organization, Power, Authority, etc. Such
Guarantor is a corporation validly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the failure to so qualify could reasonably result in a
Material Adverse Effect or could impair such Guarantor's ability to perform its
obligations under this Subsidiary Guaranty and the other Loan Documents to
which it is a party, and has full power and authority and holds all material
governmental licenses, permits and other approvals, if any, required under all
Requirements of Law to own and hold under lease its property and to conduct its
business as currently conducted by it. Such Guarantor has full power and
authority to enter into and perform its obligations under this Subsidiary
Guaranty and each other Loan Document executed or to be executed by it.
SECTION 4.2. Due Authorization. The execution and delivery
by such Guarantor of this Subsidiary Guaranty and any other Loan Document
executed or to be executed by it, the performance by such Guarantor of its
obligations hereunder and thereunder have been duly authorized by all necessary
corporate action, do not require any Approval (except those Approvals already
obtained), do not and will not conflict with, result in any violation of, or
constitute any default under, any provision of any Organic Document or of any
security issued by such Guarantor or of any Instrument to which such Guarantor
or the Borrower is a party or of any law or governmental regulation or court
decree or order and will not result in or require the creation or imposition of
any Lien on any of the Guarantor's or the Borrower's properties.
-8-
<PAGE> 9
SECTION 4.3. Validity, etc. This Subsidiary Guaranty is,
and each other Loan Document executed by the Guarantors will upon the due
execution and delivery thereof constitutes, the legal, valid and binding
obligation of the Guarantors, enforceable in accordance with its terms subject
to the effect of (a) any applicable bankruptcy, insolvency, moratorium or
similar laws affecting creditors' rights generally; and (b) the effect of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
SECTION 5. Savings Clause. (a) It is the intent of each
Guarantor, the Agent and the Lenders that such Guarantor's maximum obligations
hereunder (all of such Guarantor's obligations hereunder, collectively, the
"Subject Obligations") shall be in, but not in excess of:
(i) in a case or proceeding commenced by
or against any Guarantor under the Bankruptcy Code on or
within one year from the date on which any of the Subject
Obligations are incurred, the maximum amount which would not
otherwise cause the Subject Obligations (or any other
obligations of Guarantor to the Agent and Lenders) to be
avoidable or unenforceable against 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 any Guarantor under the Bankruptcy Code subsequent
to one year from the date on which any of the Subject
Obligations are incurred, the maximum amount which would not
otherwise cause the Subject Obligations (or any other
obligations of Guarantor to the Agent and Lenders) to be
avoidable or unenforceable against 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 any 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 or any state fraudulent transfer or
fraudulent conveyance act or statute applied in any such case
or proceeding), the maximum amount which would not otherwise
cause the Subject Obligations (or any other obligations of
such Guarantor to the Agent and Lenders) to be avoidable or
unenforceable against such Guarantor under such law, statute
or regulation.
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<PAGE> 10
The substantive laws under which the possible avoidance or unenforceability of
the Subject Obligations (or any other obligations of a Guarantor to the Agent
and the Lenders) 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 5(a), but
only to the extent that the Subject Obligations of a Guarantor would
otherwise be subject to avoidance under the Avoidance Provisions if
such Guarantor is not deemed to have received valuable consideration,
fair value or reasonably equivalent value for the Subject Obligations,
and if the Subject Obligations would render such Guarantor insolvent,
leave such Guarantor with an unreasonably small capital to conduct its
business or cause such 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 Subject
Obligations are deemed to have been incurred under the Avoidance
Provisions, then the maximum Subject Obligations shall be reduced to
that amount which, after giving effect thereto, would not cause the
Subject Obligations (or any other obligations of such Guarantor to the
Agent and Lenders), as so reduced, to be subject to avoidance under
the Avoidance Provisions. This Section 5(b) is intended solely to
preserve the rights of the Agent and the Lenders hereunder to the
maximum extent that would not cause the Subject Obligations to be
subject to avoidance under the Avoidance Provisions, and no Guarantor
or any other Person shall have any right or claim under this Section
5(b) as against the Agent and the Lenders that would not otherwise be
available to such Person under the Avoidance Provisions.
SECTION 6. Permitted Assignment by the Agent and the
Lenders. The Agent and the Lenders may freely assign their rights and delegate
their duties under this Subsidiary Guaranty in accordance with the terms of
Section 9.11 of the Credit Agreement, and no such assignment or delegation
shall diminish the Guarantors' obligations hereunder.
SECTION 7. Further Assurances. Each of the Guarantors
agrees, upon the written request of the Agent or any Lender, to execute and
deliver to the Agent or any Lender, from time to time, any additional
instruments or documents reasonably considered necessary by the Agent or such
Lender to cause this Subsidiary Guaranty to be, become or remain valid and
effective in accordance with its terms.
SECTION 8. Payments Free and Clear of Taxes. Any and all
payments required to be made by the Guarantors hereunder shall be made free and
clear of, and without deduction for, any and all present and future Taxes.
Each of the Guarantors will, jointly and severally, indemnify each Lender and
the Agent for the full amount of Taxes (including, without limitation, any such
Taxes imposed by any jurisdiction on amounts payable under this Section 8) paid
by such Lender or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising
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<PAGE> 11
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally asserted. Payment under this Section 8 will be made within five (5)
days from the date such Lender or the Agent (as the case may be) makes written
demand therefor. Within 30 days after the date of any payment of Taxes, the
Guarantors will furnish to the Agent, at its address referred to in Section
9.4, the original or a certified copy of any receipt received by the Guarantors
evidencing payment thereof.
SECTION 9. Miscellaneous.
SECTION 9.1. Entire Agreement; Amendments. This Subsidiary
Guaranty, together with the other Loan Documents, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements relating to a guaranty of the Obligations,
including without limitation, the loans, advances and other obligations under
the Loan Documents, and may not be amended or supplemented except by a writing
signed by the Guarantors and the Agent, as provided in Section 9.1 of the
Credit Agreement.
SECTION 9.2. Headings. The headings in this Subsidiary
Guaranty are for convenience of reference only and are not part of the
substance of this Subsidiary Guaranty.
SECTION 9.3. Severability. In the event that any one or
more of the provisions contained in this Subsidiary Guaranty shall be
determined to be invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision or
provisions in every other respect and the remaining provisions of this
Subsidiary Guaranty shall not be in any way impaired.
SECTION 9.4. Notices. All notices hereunder shall be in
writing or by telex or telecopy and shall be sufficiently given to the Agent,
the Lenders or the Guarantors if addressed or delivered to them at, in the case
of the Agent and the Lenders, their respective addresses and telecopier numbers
specified in Section 9.2 of the Credit Agreement and, in the case of the
Guarantors, care of the Borrower at the address specified for the Borrower in
Section 9.2 of the Credit Agreement (in each case with copies addressed as
provided in Section 9.2 of the Credit Agreement), or at such other address as
any party may designate to any other party by written notice. All such notices
and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; when received if deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when
transmission is verified, if telecopied; and on the next Business Day, if
timely delivered to an air courier guaranteeing overnight delivery.
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<PAGE> 12
SECTION 9.5. Binding Effect. This Subsidiary Guaranty shall
bind the Guarantors and shall inure to the benefit of the Agent and the Lenders
and their respective successors and assigns. None of the Guarantors may assign
this Subsidiary Guaranty or delegate any of its duties hereunder.
SECTION 9.6. Non-Waiver. The failure of the Agent or any
Lender to enforce any right or remedy hereunder, or promptly to enforce any
such right or remedy, shall not constitute a waiver thereof, nor give rise to
any estoppel against the Agent or any Lender, nor excuse any of the Guarantors
from its obligations hereunder. Any waiver of any such right or remedy by the
Lenders must be in writing and signed by the Agent, as provided in Section 9.1
of the Credit Agreement.
SECTION 9.7. Termination. This Subsidiary Guaranty shall
terminate and be of no further force or effect on the date when the Obligations
(other than any Obligations that are contingent and expressly survive the
termination of the Credit Agreement as provided in Section 9.5 therein) have
been indefeasibly paid in full, all Commitments have terminated, and the Credit
Agreement has terminated.
SECTION 9.8. Governing Law; Entire Agreement.
(a) THIS SUBSIDIARY GUARANTY SHALL BE DEEMED TO BE MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This
Subsidiary Guaranty and the other Loan Documents constitute the entire
understanding among the parties thereto with respect to the subject matter
thereof and supersede any prior agreements, written or oral, with respect
thereto.
(b) EACH OF THE GUARANTORS HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSIDIARY
GUARANTY, AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT. EACH OF THE GUARANTORS AGREES THAT SUCH JURISDICTION SHALL BE
EXCLUSIVE WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING BROUGHT BY IT AGAINST
THE AGENT OR ANY LENDER. EACH OF THE GUARANTORS HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
(c) Each of the Guarantors hereby irrevocably designates,
appoints and empowers CT Corporation System, whose present address is 1633
Broadway, New York, New York 10019, as its authorized agent to receive, for and
on its behalf and its property, service of process in the State of New York
when and as such legal actions or proceedings may be brought in the courts of
the State of New York or of the United States of America sitting in New York,
and such service of process shall be deemed complete upon the date of delivery
thereof to such agent whether or not
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<PAGE> 13
such agent gives notice thereof to the Guarantors, or upon the earliest of any
other date permitted by applicable law. It is understood that a copy of said
process served on such agent will as soon as practicable be forwarded to each
of the Guarantors, at its address set forth in Section 9.4, but its failure to
receive such copy shall not affect in any way the service of said process on
said agent as the agent of the Guarantors. Each of the Guarantors irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of the copies thereof by certified
mail, return receipt requested, postage prepaid, to it at its address set forth
in Section 9.4, such service to become effective upon the earlier of (i) the
date ten (10) calendar days after such mailing or (ii) any earlier date
permitted by applicable law. Each of the Guarantors agrees that it will at all
times continuously maintain an agent to receive service of process in the State
of New York on behalf of itself and its properties and in the event that, for
any reason, the agent named above or its successor shall no longer serve as its
agent to receive service of process in the State of New York on its behalf, it
shall promptly appoint a successor so to serve and shall advise the Agent and
the Lenders thereof (and shall furnish to the Agent the consent of any
successor agent so to act). Nothing in this Section 9.8 shall affect the right
of the Agent or any Lender to bring proceedings against any of the Guarantors
in the courts of any other jurisdiction or to serve process in any other manner
permitted by applicable law.
SECTION 9.9. Expenses. Each of the Guarantors agrees,
jointly and severally, that it will reimburse the Agent and the Lenders for all
reasonable expenses (including reasonable attorneys fees and expenses) incurred
by the Agent or any Lender in connection with the obligations of the Guarantors
to the Agent and the Lenders under this Subsidiary Guaranty and any other Loan
Documents and all reasonable expenses (including reasonable attorneys fees and
expenses) incurred by the Agent or any Lender in connection with the
enforcement of this Subsidiary Guaranty.
SECTION 9.10. Indemnity. Each of the Guarantors agrees,
jointly and severally, to indemnify the Agent and the Lenders and hold them
harmless against any documentary taxes, withholding taxes (subject to
compliance with Section 3.5 of the Credit Agreement), assessments or charges
made by any governmental authority by reason of the execution, delivery and
performance of this Subsidiary Guaranty.
SECTION 9.11. Waiver of Jury Trial, Etc. EACH OF THE
GUARANTORS AND, BY ITS ACCEPTANCE OF THIS SUBSIDIARY GUARANTY, EACH OF THE
LENDERS AND THE AGENT, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS SUBSIDIARY
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS
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<PAGE> 14
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, THE LENDERS, THE
GUARANTORS OR THE BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS ENTERING INTO THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 9.12. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof shall have any liability with respect to,
and EACH OF THE GUARANTORS HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON,
ANY CLAIM FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL
DAMAGES SUFFERED BY ANY OF THE GUARANTORS IN CONNECTION WITH, ARISING OUT OF,
OR IN ANY WAY RELATED TO THIS SUBSIDIARY GUARANTY AND THE OTHER LOAN DOCUMENTS,
THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION HEREWITH OR THEREWITH.
SECTION 9.13. Counterparts, Effectiveness, etc. This
Subsidiary Guaranty may be executed by the parties hereto in several
counterparts, each of which shall be executed by the Guarantors and the Agent
and be deemed to be an original and all of which shall constitute together but
one and the same Guaranty. This Subsidiary Guaranty shall become effective
when counterparts hereof executed on behalf of the Guarantors and each Lender
(or notice thereof satisfactory to the Agent) shall have been received by the
Agent and notice thereof shall have been given by the Agent to the Guarantors
and each Lender.
SECTION 9.14. Effectiveness of Execution and Delivery by
Certain Parties. This Agreement shall be deemed executed and delivered by
Milestone Management, Trucare, Trucare Rehabilitation and Trucare Physical
immediately upon effectiveness of the Merger, and the execution and delivery by
such parties of this Agreement shall not be a condition to the execution,
delivery or effectiveness of this Agreement as between Mergerco II and the
Agent.
IN WITNESS WHEREOF, each of the Guarantors has caused this
Subsidiary Guaranty to be executed as of the day and year first above written.
MHI ACQUISITION CORPORATION II
By: /s/ William A. Brosius
---------------------------------
Name:
Title:
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<PAGE> 15
MILESTONE HEALTHCARE MANAGEMENT,
INC.
By: /s/ William A. Brosius
------------------------------
Name:
Title:
TRUCARE HEALTH SYSTEMS, INC.
By: /s/ William A. Brosius
------------------------------
Name:
Title:
TRUCARE REHABILITATION SERVICES,
INC.
By: /s/ William A. Brosius
------------------------------
Name:
Title:
TRUCARE PHYSICAL THERAPY
SERVICES, INC.
By: /s/ William A. Brosius
------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.10
SUBSIDIARY PLEDGE AGREEMENT
THIS SUBSIDIARY PLEDGE AGREEMENT (this "Agreement"), dated as of May
31, 1995, between TRUCARE HEALTH SYSTEMS, INC., a Texas Corporation
("Trucare"), TRUCARE PHYSICAL THERAPY SERVICES, INC., a Texas corporation
("Trucare Physical") (Trucare and Trucare Physical are hereinafter referred to
individually as a "Subsidiary" and, collectively, as the "Subsidiaries") and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation
("ING"), as Agent (in such capacity, the "Agent") for itself and the other
lenders (ING and such other lenders, collectively, the "Lenders") as are, or
may become, parties to the Credit Agreement (as defined below).
W I T N E S S E T H:
RECITALS.
A. MHI Acquisition Corporation I, a Delaware corporation
("Mergerco I"), Milestone Healthcare, Inc., a Delaware corporation
("Milestone"), the Lenders and the Agent have entered into a Credit Agreement,
dated as of even date herewith (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the Lenders have
agreed to make a Term Loan to Mergerco I and make available Revolving Loans to
Mergerco I, all as more specifically set forth in the Credit Agreement; and
B. Immediately subsequent to the initial borrowing by Mergerco I
under the Credit Agreement, Mergerco I shall be merged with and into Milestone
(the "Merger") with Milestone surviving such Merger, assuming all of the
obligations of Mergerco I under the Credit Agreement, and thereafter becoming
the Borrower under the Credit Agreement (Mergerco I and Milestone,
collectively, the "Borrower"); and
C. The Borrower is the owner of one hundred percent (100%) of the
issued and outstanding capital stock of Trucare; and
D. Trucare is the owner of one hundred percent (100%) of the
outstanding capital stock of (i) Trucare Rehabilitation Services, Inc., a Texas
corporation ("Trucare Rehabilitation") and (ii) Trucare Physical; and
E. Trucare Physical is the owner of (i) a 50% partnership
interest in Toronto Associates, a Texas partnership ("Toronto Associates") and
(ii) a 25% partnership interest in Quebec Associates, a Texas partnership
("Quebec Associates"); and
<PAGE> 2
F. The Term Loan and the Revolving Loans (collectively, the
"Loans") will be made for the purpose of, among other things, paying the Merger
consideration and funding the ongoing working capital needs of the Borrower;
and
G. The extensions of credit to the Borrower will inure to the
benefit of the Subsidiaries, directly or indirectly; and
H. In connection with and as a condition precedent to the making
of the Loans under the Credit Agreement, the Lenders are requiring that (a) the
Subsidiaries execute and deliver a guaranty (the "Subsidiary Guaranty")
pursuant to which the Subsidiaries shall guaranty payment and performance of
the Obligations of the Borrower to the Agent and the Lenders and (b) the
Subsidiaries secure their respective obligations under the Subsidiary Guaranty
by granting to the Agent, for its benefit and the ratable benefit of the
Lenders, a continuing security interest in all of the Collateral (as defined
below) pursuant to this Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged by it, and in order to induce the Lenders to make
Loans to the Borrower pursuant to the Credit Agreement, each of the
Subsidiaries agrees with the Agent, for the ratable benefit of the Agent and
the Lenders, as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Certain Terms. In addition to the terms
defined in the preamble and recital paragraphs hereof, the following terms
(whether or not underscored) when used in this Agreement, including its
preamble and recitals, shall have the following meanings (such definitions to
be equally applicable to the singular and plural forms thereof):
"Collateral" means, collectively, (a) the Initial Pledged
Shares; (b) all Pledged Shares issued from time to time; (c) the Initial
Pledged Interests; (d) all Pledged Interests issued or acquired from time to
time; (e) all other Pledged Property, whether now or hereafter delivered to
the Agent in connection with this Agreement; and (f) all proceeds of any of
the foregoing.
"Default" means any Event of Default or any condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Distributions" mean all stock dividends, partnership
distributions (other than distributions made in cash), liquidating dividends,
shares of stock or partnership interests resulting from
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<PAGE> 3
stock splits, reclassifications, warrants, options, non-cash dividends and
other distributions (whether similar or dissimilar to the foregoing) on or with
respect to (i) any Pledged Shares or other shares of capital stock constituting
Collateral, or (ii) any Pledged Interests or other partnership interests
constituting Collateral, but shall not mean Dividends.
"Dividends" means cash dividends and cash distributions with
respect to any Pledged Shares made out of capital surplus or with respect to
any Pledged Interests made out of partnership income.
"Event of Default" means any event described in Section 5.1.
"Initial Pledged Interests" means the partnership interests of
Toronto Associates and Quebec Associates more particularly described in
Attachment 1 hereto.
"Initial Pledged Shares" means the capital stock of Trucare
Rehabilitation and Trucare Physical more particularly described in Attachment 2
hereto.
"Pledged Interests" means the Initial Pledged Interests and
all other partnership interests or ownership interests in Toronto Associates
and Quebec Associates, if any, which are pledged by Trucare Physical to the
Agent as Pledged Property hereunder.
"Pledged Property" means, collectively, (a) all Pledged Shares
and all Dividends, Distributions, securities, cash, instruments, interest
payments and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares, and (b) all Pledged Interests and all Dividends, Distributions,
securities, cash, instruments, interest payments and other payments property or
proceeds from time to time received, or otherwise distributed in respect of or
in exchange for any or all of the Pledged Interests, including without
limitation any additional partnership interests or ownership interests from
time to time acquired by Trucare Physical in any manner.
"Pledged Shares" means the Initial Pledged Shares and all
other shares of capital stock of Trucare Rehabilitation and Trucare Physical,
if any, which are delivered by Trucare to the Agent as Pledged Property
hereunder.
"ratable" or "ratably" means, in the context of a distribution
of Collateral or a distribution of proceeds of any of the Collateral, an
allocation of such Collateral or proceeds among the Lenders pro rata in
accordance with their respective portion
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<PAGE> 4
of the aggregate dollar amount of the Secured Obligations to which the
distribution is being applied.
"Secured Obligations" means, with respect to any Subsidiary,
the obligations of such Subsidiary under the Subsidiary Guaranty.
"U.C.C." means the Uniform Commercial Code as in effect in the
State of New York.
SECTION 1.2. Credit Agreement Definitions,
Cross-References, Etc. Capitalized terms used herein (including the preamble
and recitals hereof) shall have the meanings assigned to them in the Credit
Agreement, unless the context otherwise requires or unless otherwise defined
herein. References in this Agreement, the Credit Agreement, the Subsidiary
Guaranty or any other Loan Document to this "Agreement" or the "Subsidiary
Pledge Agreement" shall mean this Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to this Agreement as the same may be in effect at
the time such reference becomes operative. References in this Agreement to any
Section, unless otherwise specified, are references to such Section of this
Agreement, and references in such Section to any clause, unless otherwise
specified, are references to such clause of such Section.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Agreement, including its preamble and recitals,
with such meanings.
ARTICLE 2
PLEDGE
SECTION 2.1. Grant of Security Interest. Each of the
Subsidiaries hereby pledges, assigns, charges, mortgages, delivers and
transfers to the Agent, for its benefit and the ratable benefit of the Lenders,
and hereby grant to the Agent, for its benefit and the ratable benefit of the
Lenders, a continuing security interest in and to, all of the Collateral.
SECTION 2.2. Security for Secured Obligations. This
Agreement and the Collateral secure the payment in full and performance of all
Secured Obligations.
SECTION 2.3. Delivery of Pledged Property; Registration of
Pledge, Transfer, Etc. All certificates and instruments representing or
evidencing any Collateral, including without limitation all Pledged Shares and
any certificates evidencing Pledged Interests, shall be delivered to and held
by or on behalf
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<PAGE> 5
of the Agent pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank and, if the Agent shall so request, with
signatures guaranteed by a member of a registered national securities exchange
or the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States. Upon
an Event of Default, the Agent shall have the right, at any time without notice
to the Subsidiaries, to transfer to, or to register in the name of the Agent or
any of its nominees, any or all of the Pledged Shares and the Pledged Interests
(to the extent the Pledged Interests are certificated in registered form),
subject only to the revocable rights of the Subsidiaries specified in Section
4.6. In addition, the Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing any Pledged Shares or
Pledged Interests for certificates or instruments of smaller or larger
denominations to be issued in the same name as the shares being exchanged.
SECTION 2.4. Dividends on Pledged Shares or Pledged
Interests. In the event that any Dividend is to be paid on any Pledged Share
or Pledged Interest at a time when no Default or Event of Default has occurred
and is continuing or would result therefrom and such Dividend is otherwise
permitted by the Credit Agreement, such Dividend may be paid directly to the
respective Subsidiary.
SECTION 2.5. No Duty to Agent. The powers conferred on the
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Beyond reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
Agent shall be deemed to have exercised reasonable care in the custody of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and the Agent
shall not be liable or responsible for any loss or damage to any of the
Collateral, or from any diminution in the value thereof, by reason of the act
or omission of any carrier, forwarding agency, or other agent selected by the
Agent in good faith.
SECTION 2.6. Continuing Security Interest; Transfer of
Secured Obligation. This Agreement shall:
(a) create a continuing security interest in the Collateral;
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<PAGE> 6
(b) remain in full force and effect until the later of
the payment in full and performance of all Secured Obligations (other
than those Secured Obligations that are contingent and survive the
termination of the Credit Agreement as provided in Section 9.5
therein) or the termination of the Credit Agreement;
(c) be binding upon each of the Subsidiaries and their
respective administrators, successors and assigns, provided that the
Subsidiaries may not assign any of their respective rights or
obligations hereunder without the prior written consent of the Agent;
and
(d) inure to the benefit of the Agent and the Lenders and
their respective successors, transferees and assigns.
Without limiting the foregoing, any Lender may assign or otherwise transfer any
Note, Loan or other Secured Obligation, held by it to any other Person, in
accordance with the terms of the Credit Agreement, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted
herein. Upon the occurrence of the last event described in subsection 2.6(b)
above, the security interest granted herein shall terminate and all rights to
the Collateral shall revert to the respective Subsidiary. Upon any such
termination, the Agent will, at the expense of the Subsidiaries, deliver all
certificates and instruments representing or evidencing all Pledged Shares and
all Pledged Interests, together with all other Collateral held by the Agent
hereunder, and execute and deliver to the Subsidiaries, at the expense of the
Subsidiaries, such documents as the Subsidiaries shall reasonably request to
evidence such termination.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, Etc. Each of the Subsidiaries
represents and warrants unto the Agent and each Lender that as at the date of
each pledge hereunder (including each pledge of Pledged Shares and Pledged
Interests) by the Subsidiaries to the Agent of any Collateral:
(a) Such Subsidiary has full power and authority to enter
into and perform its obligations under this Agreement and to pledge
its Collateral hereunder.
(b) The execution, delivery and performance of this
Agreement by such Subsidiary, and the pledge of its Collateral
hereunder do not and will not conflict with, result in any violation
of, or constitute any default under,
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<PAGE> 7
any provision of any Instrument to which such Subsidiary is party or
any law or government regulation or court decree or order and will not
result in or require the creation or imposition of any Lien on any
property of such Subsidiary pursuant to the provisions of any such
Instrument. This Agreement is the legal, valid and binding obligation
of such Subsidiary, enforceable in accordance with its terms subject
to the effect of
(i) any applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally; and
(ii) general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
(c) Trucare is and will be at all times the legal and
beneficial owner of, and has and will have at all times good and
marketable title to (and has and will at all times have full right and
authority to pledge and assign) all Pledged Shares, free and clear of
all Liens or other charges or encumbrances, except the Lien granted
pursuant hereto in favor of the Agent.
(d) Trucare Physical is and will be at all times the legal
and beneficial owner of, and has and will have at all times good and
marketable title to (and has and will not at all times have full right
and authority to pledge and assign) all Pledged Interests, free and
clear of all Liens or other charges or encumbrances, except the Lien
granted pursuant hereto in favor of the Agent.
(e) The delivery of the Collateral (including the
delivery of the Initial Pledged Shares and, if applicable the Initial
Pledged Interests) to the Agent is effective to create a valid,
perfected, first priority security interest in such Collateral and all
proceeds thereof, securing the Secured Obligations, and no filing or
other action is necessary to perfect or protect such security
interest, except that the filing of a financing statement, the taking
of possession or some other action may be required under Section 9-306
of the U.C.C. to perfect a security interest in certain proceeds of
the Collateral that do not constitute Pledged Shares or other
instruments (as such term is defined in Article 9 of the U.C.C.).
(f) All of the Pledged Shares have been duly authorized
and validly issued, and are fully paid, and nonassessable, and all of
the Pledged Interests have been duly authorized and validly issued by
appropriate partnership action.
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<PAGE> 8
(g) Trucare Physical has the right and authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged
Interests to the Agent as provided herein under the respective
partnership agreements governing the Pledged Interests and under
applicable Texas partnership laws.
(h) The Initial Pledged Shares constitute, and at all
times hereafter the Pledged Shares will constitute, 100% of all of the
issued and outstanding shares of Stock of the Borrower.
(i) The Initial Pledged Interests constitute, and at all
times hereafter the Pledged Interests will constitute, 100% of the
partnership interests in Toronto Associates and Quebec Associates that
are owned by Trucare Physical.
(j) No authorization, approval, or other action by and no
notice to or filing with, any Governmental Authority is or will be
required either:
(i) for the pledge by such Subsidiary of any
Collateral pursuant to this Agreement or for the execution,
delivery, or performance of this Agreement by such Subsidiary,
or
(ii) for the exercise by the Agent of the voting
or other rights provided for in this Agreement, or (except,
with respect to any Pledged Shares or Pledged Interests, as
may be required in connection with a disposition of such
Pledged Shares or Pledged Interests by laws affecting the
offering and sale of securities generally) the remedies in
respect of the Collateral pursuant to this Agreement.
ARTICLE 4
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, Etc.
Each of the Subsidiaries will not sell, assign, transfer, pledge or encumber in
any other manner the Collateral (except in favor of the Agent hereunder). Each
of the Subsidiaries will warrant and defend the right, title and security
interest herein granted to the Agent in and to the Collateral (and all right,
title and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever. Each of the Subsidiaries agrees that at any
time, and from time to time, at the expense of the Subsidiaries, each of the
Subsidiaries will promptly execute and deliver all further Instruments, and
take all
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<PAGE> 9
further action, that may be necessary, or that the Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2. Issuance of Stock, Additional Partnership
Interests, Etc. Trucare will not, subsequent to the date of this Agreement,
without the prior written consent of the Required Lenders, cause or permit
either Trucare Rehabilitation or Trucare Physical to issue or grant any
warrants, stock options of any nature or other instruments convertible into
shares of any class of Stock or issue any additional shares of Stock or sell or
transfer any treasury Stock. Trucare Physical will not, subsequent to the date
of this Agreement, without the prior written consent of the Required Lenders,
cause or permit either of Toronto Associates or Quebec Associates to issue or
sell any additional partnership interests in Toronto Associates or Quebec
Associates, other than any such as are expressly permitted under the terms of
the respective partnership agreements of Toronto Associates and Quebec
Associates as in effect on the date hereof, and Trucare Physical shall not
subject the Pledged Interests to any rights of first refusal or preemptive
rights other than those in existence on the date hereof pursuant to the terms
of the respective partnership agreements of Toronto Associates and Quebec
Associates.
SECTION 4.3. Taxes. The Subsidiaries will pay all taxes,
assessments and charges levied, assessed or imposed upon the Collateral before
the same become delinquent or become Liens upon any of the Collateral except
where the same may be contested in good faith by appropriate proceedings and as
to which adequate reserves have been provided in accordance with GAAP.
SECTION 4.4. Stock Powers, Instruments of Assignment, Etc.
Each of the Subsidiaries agrees that all Pledged Shares (and all other shares
of Stock constituting Collateral) delivered by Trucare pursuant to this
Agreement will be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank and, if the Agent shall so request, with
signatures guaranteed by a member of a registered national securities exchange
or the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States.
Trucare will, from time to time upon the request of the Agent, promptly deliver
to the Agent such stock powers, instruments and similar documents, satisfactory
in form and substance to the Agent, with respect to the Collateral as the Agent
may reasonably request and will, from time to time upon the request of the
Agent after the occurrence of any Default, promptly transfer any Pledged Shares
or other shares of Stock constituting Collateral into the name of the Agent or
any nominee designated by the Agent.
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<PAGE> 10
SECTION 4.5. Continuous Pledge. Subject to Section 2.4,
each of the Subsidiaries will, at all times, keep pledged to the Agent pursuant
hereto all Pledged Shares, all Pledged Interests, all Dividends and
Distributions with respect thereto, and all other Collateral.
SECTION 4.6. Voting Rights; Dividends, Etc. Each of the
Subsidiaries agrees to deliver all Distributions at any time received by it to
the Agent to be held as Collateral hereunder and, in addition, to deliver
(properly endorsed where required hereby or requested by the Agent) to the
Agent:
(a) after any Default or an Event of Default shall have
occurred and be continuing or if any Default or Event of Default shall
occur as a result thereof, promptly upon receipt thereof by such
Subsidiary and without any request therefor by the Agent, all
Dividends (except for Dividends to the Subsidiaries for the payment of
federal and state income tax liability in respect to the net income of
the Person declaring such Dividend), all of which shall be held by the
Agent as additional Collateral for use in accordance with Section 5.5;
and
(b) after any Event of Default shall have occurred and be
continuing, promptly upon request of the Agent, such proxies and other
documents as may be necessary to allow the Agent to exercise the
voting power with respect to any share of Stock constituting
Collateral;
provided, however, that unless an Event of Default shall have occurred and be
continuing or result therefrom and such Subsidiary shall have received notice
from the Agent that it shall no longer be entitled to do so, such Subsidiary
shall be entitled to exercise, in its reasonable judgment, but in a manner not
inconsistent with the terms of the Credit Agreement or any other Loan Document
(including this Agreement) the voting powers and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of Stock of
Pledged Interests constituting Collateral (subject to such Subsidiary's
obligation to deliver to the Agent such Pledged Shares and other shares and
Pledged Interests in pledge hereunder); provided, further however, that unless
a Default or an Event of Default shall have occurred and be continuing or
result therefrom, such Subsidiary shall be entitled to the receipt of all
Dividends in accordance with Section 2.4 to the extent such Dividends were
permitted to be paid pursuant to the Credit Agreement.
All Dividends, Distributions, cash payments and proceeds which may at any time
and from time to time be held by such Subsidiary but which such Subsidiary is
then obligated to deliver to the Agent, shall, until delivery to the Agent, be
held by such Subsidiary separate and apart from its other property in trust for
the Agent.
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<PAGE> 11
The Agent agrees that unless an Event of Default shall have occurred and be
continuing, the Agent shall, upon the written request of either Subsidiary,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by such Subsidiary which are necessary to allow such
Subsidiary to exercise voting power with respect to any share of Stock
(including Pledged Shares) or Pledged Interest constituting Collateral;
provided, however, that no vote shall be cast, or consent, waiver or
ratification given, or action taken by such Subsidiary that would impair in any
material respect any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Agreement).
SECTION 4.7. Additional Information. The Subsidiaries will
furnish to the Agent and the Lenders written notice of the occurrence of any
event which would make any representation contained in Article 3 untrue at such
time.
ARTICLE ARTICLE 5
EVENTS OF DEFAULT; REMEDIES
SECTION 5.1. Events of Default. Each of the following
shall constitute an "Event of Default" hereunder:
(a) if there shall occur any Event of Default under the
Credit Agreement;
(b) if any of the Collateral shall be attached or levied
upon or seized in any legal proceeding, or held by virtue of any Lien
or distress; or
(c) if any representation or warranty of either of the
Subsidiaries set forth herein or in the Subsidiary Guaranty shall be
untrue in any material respect or if either of the Subsidiaries shall
default in the due performance and observance of any covenant
contained herein and such default shall continue unremedied for a
period of ten (10) days after notice thereof shall have been given to
the Subsidiaries by the Agent.
SECTION 5.2. Actions upon Event of Default. In addition to
its rights and remedies provided hereunder, whenever an Event of Default shall
have occurred and be continuing, the Agent shall have all rights and remedies
of a secured party upon default under the U.C.C. or other applicable law. Any
notification required by law of any intended disposition by the Agent of any of
the Collateral shall be deemed reasonably and properly given if given at least
ten (10) days before such disposition. Without limitation of the above, the
Agent may, or upon direction of the Required Lenders, shall, whenever an Event
of Default shall have
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<PAGE> 12
occurred and be continuing, without prior notice to the Subsidiaries, take all
or any of the following actions:
(a) transfer all or any part of the Collateral into the
name of the Agent or its nominee, without disclosing that such
Collateral is subject to the Lien hereunder;
(b) notify the parties of the obligation on any of the
Collateral to make payment to the Agent of any amount due or to
become due thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature of
any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
name of the Subsidiaries to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the
Subsidiaries) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or any of
the Collateral.
SECTION 5.3. Attorney-in-Fact. Each of the Subsidiaries
hereby irrevocably appoints the Agent its true and lawful attorney, with full
power of substitution, in the name of the respective Subsidiary, the Agent, the
Lenders or otherwise, for the sole use and benefit of the Agent and the
Lenders, but at the expense of the Subsidiaries, upon the occurrence and
during the continuation of an Event of Default to take any action and to
execute any Instrument which the Agent may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement.
SECTION 5.4. Private Sales. (a) Trucare recognizes that
the Agent may be unable, after the occurrence and during the continuance of any
Event of Default, to effect a public sale of any or all the Pledged Shares by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act") and applicable state securities law or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers that will be obligated to agree, among
other things, to acquire such securities for their own account for investment
and not with a view to the distribution or resale thereof. Trucare
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed
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<PAGE> 13
to have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay sale of any of the Pledged Shares for the period
of time necessary to permit Trucare Rehabilitation or Trucare Physical to
register such securities for public sale under the Securities Act, or under
applicable state securities law, even if the Borrower would agree to do so.
(b) Trucare further agrees to use its best efforts, after
the occurrence and during the continuance of an Event of Default, to
do or cause to be done all such acts as may be necessary to make such
sale or sales of all or any portion of the Pledged Shares pursuant to
this Section 5.4 valid and binding and in compliance with any and all
other applicable Requirements of Law.
SECTION 5.5. Application of Proceeds. All cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Agent, be held by the Agent as additional collateral security for, or then
or at any time thereafter be applied (after payment of any amounts payable to
the Agent pursuant to Section 9.3 of the Credit Agreement and Section 5.6 of
this Agreement) in whole or in part by the Agent against, all or any part of
the Secured Obligations in the following order:
(a) first, ratably, to the unpaid interest (including
post-petition interest) accrued and then due or owing on the Secured
Obligations and to the aggregate amount of fees described in Section
2.3 of the Credit Agreement which have accrued and are unpaid;
(b) second, ratably, among holders of the Notes, on
account of all principal of any Secured Obligations then due or owing;
and
(c) third, to any other Secured Obligations then due or
owing.
Any surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all the Secured Obligations, termination of the Commitments
shall be paid over to the Subsidiaries or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 5.6. Indemnity and Expenses. Each of the
Subsidiaries hereby indemnifies and holds harmless the Agent and the Lenders
from and against any and all claims, losses, and liabilities growing out of or
resulting from this Agreement (including enforcement of this Agreement), except
claims, losses, or liabilities resulting from the Agent's gross negligence or
willful misconduct. Upon demand, the Subsidiaries will pay, or cause to
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<PAGE> 14
be paid, to the Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Agent may incur in connection with:
(a) the administration of this Agreement;
(b) the custody, preservation, use, or operation of, or
the sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of
the Agent hereunder and any action taken by the Agent under Section
6.4; and
(d) the failure by either of the Subsidiaries to perform
or observe any of the provisions hereof.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1. Loan Document. This Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including Article 9 thereof.
SECTION 6.2. Amendments, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departures by either of the
Subsidiaries herefrom shall in any event be effective unless the same shall be
in writing, signed by the Agent and consented to in writing by the Required
Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 6.3. Obligations Not Affected. The obligations of
each of the Subsidiaries under this Agreement shall remain in full force and
effect without regard to, and shall not be impaired or affected by:
(a) any amendment or modification or addition or
supplement to the Credit Agreement, any Note, any other Loan Document,
any Instrument delivered in connection therewith or any assignment or
transfer thereof;
(b) any exercise, non-exercise or waiver by the Agent or
any Lender of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty or collateral provided
pursuant to, this Agreement, the Credit Agreement, or any other Loan
Document;
-14-
<PAGE> 15
(c) any waiver, consent, extension, indulgence or other
action or inaction in respect of this Agreement, the Credit Agreement
or any other Loan Document or any assignment or transfer of any
thereof; or
(d) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like, of
the Borrower, either of the Subsidiaries or any other Person, whether
or not the Subsidiaries shall have notice or knowledge of any of the
foregoing.
SECTION 6.4. Protection of Collateral. The Agent may from
time to time, at its option, perform any act which a Subsidiary agrees
hereunder to perform and which such Subsidiary shall fail to perform after
being requested in writing to so perform (it being understood that no such
request need be given after the occurrence and during the continuance of an
Event of Default) and the Agent may from time to time take any other action
which the Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 6.5. Addresses for Notices. All notices and other
communications provided for hereunder to any party hereto shall be given in the
manner provided in Section 9.4 of the Subsidiary Guaranty.
SECTION 6.6. Governing Law; Jurisdiction. (a) THIS
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (AND EACH SUBSIDIARY AGREES THAT SUCH
JURISDICTION WILL BE EXCLUSIVE WITH RESPECT TO CLAIMS BROUGHT BY SUCH
SUBSIDIARY AGAINST THE AGENT OR ANY LENDER), AND EACH HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING.
(c) Each of the Subsidiaries hereby irrevocably
designates, appoints and empowers CT Corporation System, whose present address
is 1633 Broadway, New York, New York 10019, as its authorized agent to receive,
for and on its behalf and on behalf of its property, service of process in the
State of New York when and as such legal actions or proceedings may be brought
in the courts of the State of New York or of the United States of America
sitting in the Southern District of New York, and such service of process
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<PAGE> 16
shall be deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to the such Subsidiary, or upon
the earliest of any other date permitted by applicable law. It is understood
that a copy of said process served on such agent will as soon as practicable be
forwarded to the such Subsidiary, at the address set forth below, but the
failure of such Subsidiary to receive such copy shall not affect in any way the
service of said process on said agent as the agent of such Subsidiary. Each of
the Subsidiaries irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
the copies thereof by certified mail, return receipt requested, postage
prepaid, to such Subsidiary at its address set forth below, such service to
become effective upon the earlier of (i) the date 10 calendar days after such
mailing or (ii) any earlier date permitted by applicable law. Each of the
Subsidiaries agrees that it will at all times continuously maintain an agent to
receive service of process in the State of New York on behalf of each of the
Subsidiaries and its properties and in the event that, for any reason, the
agent named above or its successor shall no longer serve as its agent to
receive service of process in the State of New York on its behalf, it shall
promptly appoint a successor so to serve and shall advise the Agent and the
Lenders thereof (and shall furnish to the Agent the consent of any successor
agent so to act). Nothing in this Section 6.6 shall affect the right of the
Agent or any Lender to bring proceedings against either of the Subsidiaries in
the courts of any other jurisdiction or to serve process in any other manner
permitted by applicable law.
SECTION 6.7. Waiver of Jury Trial, Etc. THE AGENT, THE
LENDERS AND EACH OF THE SUBSIDIARIES HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH
LENDERS, OR EITHER OF THE SUBSIDIARIES. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT AND SUCH LENDERS ENTERING INTO THE CREDIT AGREEMENT.
SECTION 6.8. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof, shall have any liability with respect
to, and EACH OF THE SUBSIDIARIES HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE
UPON, ANY CLAIM FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL
DAMAGES SUFFERED BY THE SUBSIDIARIES IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH.
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<PAGE> 17
SECTION 6.9. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be executed by the Subsidiaries and the Agent and be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of each of the Subsidiaries and each Lender (or notice
thereof satisfactory to the Agent) shall have been received by the Agent and
notice thereof shall have been given by the Agent to each of the Subsidiaries
and each Lender.
SECTION 6.10. Effectiveness of Execution and Delivery by
Certain Parties. This Agreement shall be deemed executed and delivered by
Trucare and Trucare Physical immediately upon effectiveness of the Merger.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
TRUCARE HEALTH SYSTEMS, INC.
By: /s/ William A. Brosius
----------------------------------
Name:
Title:
TRUCARE PHYSICAL THERAPY
SERVICES, INC.
By: /s/ William A. Brosius
----------------------------------
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S)
CAPITAL CORPORATION
By: /s/
----------------------------------
Name:
Title:
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<PAGE> 18
ATTACHMENT 1
(to Subsidiary Pledge Agreement)
INITIAL PLEDGED INTERESTS
<TABLE>
<CAPTION>
Name of Type of Percentage Capital
Partnership Interest Interest Investment Owner
- ----------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Toronto General 50% [$____] Trucare
Associates Partner Physical Therapy
Services,
Inc.
Quebec General 25% [$____] Trucare
Associates Partner Physical Therapy
Services,
Inc.
</TABLE>
-18-
<PAGE> 19
ATTACHMENT 2
(to Subsidiary Pledge Agreement)
INITIAL PLEDGED SHARES
<TABLE>
<CAPTION>
Class of Number of Certificate
Issuer Capital Stock Shares Number(s) Owner
------ ------------- ------ --------- -----
<S> <C> <C> <C> <C>
Trucare Physical Therapy [Common] 1,000 003 Trucare
Services, Inc. Health
Systems,
Trucare Rehabilitation [Common] 4,000 003 Trucare
Services, Inc. Health
Systems,
Inc.
</TABLE>
-19-
<PAGE> 20
ACKNOWLEDGMENT AND CONSENT
TRUCARE REHABILITATION SERVICES, INC., a Texas Corporation,
which is "Trucare Rehabilitation" referred to in the foregoing Subsidiary
Pledge Agreement hereby acknowledges receipt of a copy thereof and agrees to be
bound thereby and to comply with the terms thereof insofar as such terms are
applicable to it.
TRUCARE REHABILITATION SERVICES, INC.
By: /s/ William A. Brosius
----------------------------------
Name:
Title:
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<PAGE> 21
ACKNOWLEDGMENT AND CONSENT
TRUCARE PHYSICAL THERAPY SERVICES, INC., a Texas corporation,
which is "Trucare Physical" referred to in the foregoing Subsidiary Pledge
Agreement hereby acknowledges receipt of a copy thereof and agrees to be bound
thereby and to comply with the terms thereof insofar as such terms are
applicable to it.
TRUCARE PHYSICAL THERAPY SERVICES, INC.
By: /s/ William A. Brosius
-----------------------------------
Name:
Title:
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<PAGE> 22
ACKNOWLEDGMENT AND CONSENT
TORONTO ASSOCIATES, a Texas partnership, which is "Toronto
Associates" referred to in the foregoing Subsidiary Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it.
TORONTO ASSOCIATES
By:
------------------------------------
Name:
Title:
-22-
<PAGE> 23
ACKNOWLEDGMENT AND CONSENT
QUEBEC ASSOCIATES, a [Texas] partnership, which is "Quebec
Associates" referred to in the foregoing Subsidiary Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it.
QUEBEC ASSOCIATES
By: /s/ William A. Brosius
---------------------------------
Name:
Title:
-23-
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
Agreement made on May 31, 1995, between MHI Acquisition, Inc., a
Delaware corporation (the "Company"), and Charles L. Allen ("Executive").
RECITALS
A. The Company wishes to employ Executive as the President and
Chief Executive Officer of the Company.
B. The Company and Executive desire to enter into certain
agreements providing for Executive's continued employment with the Company.
The Company and Executive desire that Executive serve in an executive capacity
with the Company on the terms hereinafter set forth.
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment. The Company agrees to employ Executive and
Executive accepts such employment for the period beginning as of the date
hereof and ending upon the earlier of (i) termination pursuant to paragraph
1(d) or 1(e) hereof or (ii) the date five (5) years from the date of this
Agreement (the "Employment Period").
(a) Services. During the Employment Period, Executive
will render such services of an executive and administrative character to the
Company and its affiliates as the Board of Directors of the Company (the
"Board") may from time to time direct and will have the status of a senior
executive. Executive will devote his best efforts and substantially all of his
business time and attention (except for vacation periods and reasonable periods
of illness or other incapacity) to the business of the Company and its
affiliates and will faithfully and diligently carry out such duties and have
such responsibilities as are customary among persons employed in substantially
similar capacities for similar companies. Executive will report to the Board
of Directors and shall faithfully and diligently comply with all of its
reasonable and lawful directives. For purposes of this Agreement, the term
"affiliates" means any corporation, limited partnership, limited liability
company or other entity engaged in the same business as the Company or a
related business, which is controlled by or under common control with the
Company.
(b) Salary. During the Employment Period and thereafter
as provided in paragraph (d) below, the Company will pay Executive a base
salary at the rate of not less than $150,600 per annum (or such higher amount
as the Board may establish from time to time). Executive's base salary for any
partial year will be prorated based upon the number of days elapsed in such
year and will be payable in accordance with the Company's customary payroll
practices. In addition to his base salary, Executive shall be eligible to
receive cash bonuses based upon the performance of the Company. Such bonuses
shall be determined and paid in
<PAGE> 2
accordance with the Company's bonus plan administered by the Board, a copy of
which plan is attached hereto as Exhibit A, and as may be amended from time to
time.
(c) Benefits. In addition to the compensation described
above in this paragraph 1, Executive will be entitled during he Employment
Period to the following benefits:
(i) such health insurance and other benefits as
are available from time to time to the executive
officers employees generally;
(ii) vacation, sick leave and personal time in
accordance with the Company's vacation and absence
policies as in effect from time to time, provided
that Executive shall have no less than four weeks
vacation each year, with salary;
(iii) reimbursement, upon submission of
documentation in accordance with the Company's
regular expense policies, for reasonable business
expenses incurred on the Company's behalf by
Executive;
(iv) participation in any savings plan, 401(k)
plan, profit sharing plan or pension plan as is
available from time to time to the Company's salaried
employees generally; and
(v) such additional benefits as are set forth on
Exhibit B attached hereto.
(d) Termination. Executive's employment with the Company
will continue until terminated by Executive's death, disability, which cannot
be reasonably accommodated, or termination of Executive's employment pursuant
to any of the following provisions:
(i) Termination by the Company without Cause.
The Company may at any time terminate Executive's
employment without Cause (as defined below) by giving
Executive notice of the effective date of termination
(which effective date may be the date of such
notice). In the event of such termination, the
Company shall have the obligation to pay Executive
(A) an amount equal to the bonus the Executive would
have been entitled to had he been employed for a full
year prorated for the portion of the year the
Executive was actually employed (the "Bonus
Severance") and (B) continuing payments of base
salary in accordance with paragraph (b) above at the
rate in effect at the effective date of such
termination for a period of twelve (12) months
following the effective date of such termination (the
"Salary Severance"); provided that in the event that
Executive breaches any of the representations,
warranties and covenants set forth in paragraphs 2
and 4 below, the Company will have no further
obligation to make payments of the base salary
following knowledge of
<PAGE> 3
such breach and may pursue all other available
remedies, and the Executive shall be obligated to
repay the Company the amount of Bonus Severance and
Salary Severance within ten (10) days following
delivery by the Company to Executive of written
confirmation of such breach. A voluntary termination
by Executive within sixty (60) days after the Company
has materially reduced his responsibilities or
materially reduced his salary in a manner not applied
to all executive officers of the Company will be
deemed to be termination by the Company without
Cause.
(ii) Termination by the Company for Cause. A
majority of the Board shall have the right to
terminate Executive's employment at any time for any
of the following reasons (each of which is referred
to herein as "Cause") by giving Executive written
notice of the Cause and Executive shall have fifteen
days from the receipt of such notice to cure such
Cause, to the extent such cause is curable. If the
cause is not cured within fifteen days or the Cause
is not curable, the Company shall give Executive
written notice of the effective date of termination
(which effective date may be the date of such
notice):
(A) the willful breach of any provision
of paragraphs 1(a), 2 or 4 (including but not limited
to a refusal to follow reasonable and lawful
directives of the Board of Directors);
(B) any act of fraud or dishonesty with
respect to any aspect of the Company's or any
affiliate's business;
(C) continued use of illegal drugs;
(D) as a result of Executive's gross
negligence or willful misconduct, Executive shall
violate, or cause the Company to violate, any
applicable federal or state securities or banking law
or regulation and as a result of such violation,
shall become, or shall cause the company or any
affiliate to become the subject of any legal action
or administrative proceeding seeking an injunction
from further violations or a suspension of any right
or privilege;
(E) as a result of Executive's gross
negligence or willful misconduct, Executive shall
commit any act that causes, or shall knowingly fail
to take reasonable and appropriate action to prevent,
any material injury to the financial condition or
business reputation of the Company or any affiliate;
or
(F) indictment for a felony.
<PAGE> 4
If a majority of the Board terminates Executive's
employment for any of the reasons set forth above in this
paragraph 1(d)(ii), the Company shall have no further
obligations hereunder from and after the effective date of
termination and shall have all other rights and remedies
available under this or any other agreement and at law or in
equity.
(e) Voluntary Termination by Executive. In the event
that Executive's employment with the company is terminated by Executive (except
as set forth in paragraph 1(d)(i)), the Company shall have no further
obligations hereunder from and after the date of such termination.
2. Nondisclosure. Executive acknowledges that during the course
of his performance of services for the Company he has acquired and will acquire
technical knowledge with respect to the Company's business operations,
including, by way of illustration, the Company's investment plans or
strategies, trade secrets, customer lists, customer or consultant contracts and
the details thereof, pricing policies, operational methods, marketing and
merchandising plans or strategies, business acquisition plans, personnel
acquisition plans, and all other information pertaining to the business of the
Company or any affiliate that is not publicly available (all of such
information herein referenced to as the "Confidential Information"); provided,
however that the term "Confidential Information" shall not include (a) any
information which is or becomes publicly available otherwise than through
breach of this Agreement or (b) any information which is or becomes known or
available to Executive on a non-confidential basis and not in contravention of
applicable law from a source which is entitled to disclose such information to
Executive. Executive agrees that he will not, while he is employed by the
Company, divulge to any person, directly or indirectly, except to the Company
or its officers and agents or as reasonably required in connection with his
duties on behalf of the Company or to prevent fraud or illegal activities, or
use, except on behalf of the Company, any Confidential Information acquired by
Executive during the term of his employment. Executive agrees that he will not
at any time after his employment with the Company has ended, divulge to any
person directly or indirectly any Confidential Information in any way
detrimental to the Company. Executive further agrees that if his relationship
with the Company is terminated (for whatever reason) he shall not take with him
but will leave with the Company all records, papers and computer software and
data and any copies thereof relating to the Confidential Information, (or if
such papers, records, computer software and data or copies are not on the
premises of the Company, Executive agrees to return such papers, records and
computer software and data immediately upon his termination). Executive
acknowledges that all such papers, records, computer software and data or
copies thereof are and remain the property of the Company. The Company
acknowledges that the Executive has brought certain papers, records, computer
software and data or copies as listed and described on Exhibit C hereto (the
"Executive Records") to the premises of the Company, which Executive Records
were and remain property of the Executive and which Executive Records have been
used to create Confidential Information. The Company acknowledges that the
Executive is entitled to the return of the Executive Records upon termination
of Executive's relationship with the Company.
<PAGE> 5
3. Other Businesses. During the Employment Period, Executive
agrees that he will not, directly or indirectly except with the express written
consent of the Board, become engaged in, render services for, or permit his
name to be used in connection with, or directly or indirectly counsel or
consult with, any business other than the business of the Company and its
affiliates.
4. Noncompetition. Executive agrees that:
(a) During the term he performs services for the Company
and for a period of one (1) year after the termination thereof (for any
reason), he will not interfere with the relationship of the Company and any
employee, agent or representative.
(b) During the term he performs services for the Company
and for a period of one (1) year after the termination thereof (for any
reason), he will not directly or indirectly interfere with the relationships of
the Company with customers, dealers, distributors, vendors or sources of
supply.
(c) (i) Executive further agrees that during the term he
performs services for the Company and for a period of one (1) year after the
termination thereof (for any reason) he will not directly or indirectly own,
manage, operate, control, be employed by, participate in, or be connected in
any manner with the ownership, management, operation or control of, any
business or enterprise which is in the business of contract management and
management consulting for hospitals in the areas of acute rehabilitation units,
skilled/subacute units, outpatient rehabilitation units and contract therapy
services (the "Restricted Business") within the United States.
(ii) If the Company actively engages in any other
business (in addition to or in lieu of the Restricted Business), Executive
further agrees that during the term he performs services for the Company and
for a period of one (1) year after the termination thereof (for any reason) he
will not directly or indirectly own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of, any business or enterprise which competes with such
other business within the United States.
(iii) For purposes of this Section 4(c), the
reference to business or enterprise in line 5 of Section(c)(i) and line 6 of
Section(c)(ii) shall mean the specific business unit in which Executive is
employed or otherwise affiliated.
(d) After discussing the matter with Executive, the
Company shall have the right, subject to applicable law, to inform any other
third party that the Company reasonably believes to be, or to be contemplating,
participating with Executive or receiving from Executive assistance in
violation of this Agreement, of the terms of this Agreement and of the rights
of the Company hereunder, and that participation by any such third party with
Executive in activities in violation of this Section 4 may give rise to claims
by the Company against such third party.
<PAGE> 6
5. Termination of Agreement. This Agreement shall terminate on
the fifth anniversary of the date hereof.
6. General Provisions.
(a) Notices. Any notice provided for in this Agreement
must be in writing and must be either personally delivered, or mailed by first
class mail (postage prepaid and return receipt requested) or sent by reputable
overnight courier service, to the recipient at the address below indicated:
To the Company:
MHI Acquisition, Inc.
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 75201
Attn: Corporate Secretary
To Executive
At Executive's last known
address as listed with
the Company
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or if mailed, five days after so mailed.
(b) Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision in any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein
except that any court having jurisdiction shall have the power to reduce the
duration, area or scope of such invalid, illegal or unenforceable provision
and, in its reduced form, it shall be enforceable.
(c) Complete Agreement. This Agreement embodies the
complete agreement and understanding between the parties and supersedes and
preempts any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way. Any employment, benefit or bonus arrangements or agreements
between the Company and Executive that existed at any time prior to the
execution
<PAGE> 7
and delivery of this Agreement are hereby terminated by Executive; provided,
however, that Executive shall remain liable for any breach of such arrangements
or agreements occurring during the term of such arrangement or agreement. From
and after the date of this Agreement, Executive shall not be entitled to any
compensation from the Company on account of any such arrangement or agreement.
(d) Successors and Assigns. This Agreement is intended
to bind and inure to the benefit of and be enforceable by Executive and the
Company, except that Executive may not assign any of his rights or obligations
under this Agreement. The Company may assign its rights under this Agreement,
as security, to any lender to the Company, and in the event of a sale of the
stock, or substantially all of the stock, of the Company, or consolidation or
merger of the Company into another corporation or entity, or the sale of
substantially all of the operating assets of the Company to another
corporation, entity or individual, the Company may assign its rights and
obligations under this Agreement to its successor-in-interest, in which event
such successor-in-interest shall be deemed to have acquired all rights and
assumed all obligations of the Company hereunder.
(e) CHOICE OF LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY
THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
(f) Remedies. Each of the parties to this Agreement will
be entitled to enforce his or its rights under this Agreement specifically, to
recover damages (including, without limitation, reasonable fees and expenses of
counsel) by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in his or its favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any
breach or threatened breach of the provisions of this Agreement and that any
party may in his or its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(g) Amendments and Waivers. Any provision of this
Agreement may be amended or waived only with the prior written consent of
Executive and a majority of the Board.
(h) Absence of Conflicting Agreements. Executive hereby
warrants and covenants that his employment by the Company does not result in a
breach of the terms, conditions or provisions of any agreement to which
Executive is subject.
(i) Survival. No termination of Executive's employment
by either or both parties shall reduce or terminate Executive's covenants and
agreements in paragraphs 2 and 4.
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered on the day and year first above written.
MHI ACQUISITION, INC.
By:/s/ Charles L. Allen
------------------------------
Its: President
-----------------------------
EXECUTIVE
/s/ Charles L. Allen
---------------------------------
Charles L. Allen
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 78501
(EMPLOYMENT AGREEMENT SIGNATURE PAGE - CHARLES L. ALLEN)
<PAGE> 9
EXHIBIT A
MANAGEMENT BONUS PERCENTAGES
<TABLE>
<S> <C> <C>
Charles L. Allen President and CEO 100%
Roy W. Griffitts, Jr. Chief Operating Officer 70%
William A. Brosius Chief Financial Officer 50%
</TABLE>
<PAGE> 10
EXHIBIT B
ADDITIONAL BENEFITS
In addition to the other benefits Charles L. Allen ("Allen") is
entitled to pursuant to the terms of his attached Employment Agreement, the
Company shall pay Allen the following additional benefits until the termination
of the Employment Agreement:
(1) The Company shall pay for Allen's country club membership dues in
an amount not to exceed $3,500 per annum;
(2) The Company shall pay for an annual physical for Allen in an
amount not to exceed $1,000 per annum;
(3) The Company shall pay annual premiums on a supplemental term life
insurance policy for Allen with a death benefit amount of $250,000; provided
however, if the Company is not able to secure such a policy with reasonable
premiums (as determined by the Company's Board of Directors), the Company shall
not be obligated to provide this benefit to Allen.
(4) The Company shall pay the employee payment portion of the
premiums relating to the Company's standard health and fringe benefits for
Allen.
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
Agreement made on May 31, 1995, between MHI Acquisition, Inc., a
Delaware corporation (the "Company"), and Roy W. Griffitts, Jr. ("Executive").
RECITALS
A. The Company wishes to employ Executive as the Chief Operating
Officer of the Company.
B. The Company and Executive desire to enter into certain
agreements providing for Executive's continued employment with the Company.
The Company and Executive desire that Executive serve in an executive capacity
with the Company on the terms hereinafter set forth.
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment. The Company agrees to employ Executive and
Executive accepts such employment for the period beginning as of the date
hereof and ending upon the earlier of (i) termination pursuant to paragraph
1(d) or 1(e) hereof or (ii) the date five (5) years from the date of this
Agreement (the "Employment Period").
(a) Services. During the Employment Period, Executive
will render such services of an executive and administrative character to the
Company and its affiliates as the Board of Directors of the Company (the
"Board") may from time to time direct and will have the status of a senior
executive. Executive will devote his best efforts and substantially all of his
business time and attention (except for vacation periods and reasonable periods
of illness or other incapacity) to the business of the Company and its
affiliates and will faithfully and diligently carry out such duties and have
such responsibilities as are customary among persons employed in substantially
similar capacities for similar companies. Executive will report to the Chief
Executive Officer and shall faithfully and diligently comply with all of its
reasonable and lawful directives. For purposes of this Agreement, the term
"affiliates" means any corporation, limited partnership, limited liability
company or other entity engaged in the same business as the Company or a
related business, which is controlled by or under common control with the
Company.
(b) Salary. During the Employment Period and thereafter
as provided in paragraph (d) below, the Company will pay Executive a base
salary at the rate of not less than $127,364 per annum (or such higher amount
as the Board may establish from time to time). Executive's base salary for any
partial year will be prorated based upon the number of days elapsed in such
year and will be payable in accordance with the Company's customary payroll
practices. In addition to his base salary, Executive shall be eligible to
receive cash bonuses based upon the performance of the Company. Such bonuses
shall be determined and paid in
<PAGE> 2
accordance with the Company's bonus plan administered by the Board, a copy of
which plan is attached hereto as Exhibit A, and as may be amended from time to
time.
(c) Benefits. In addition to the compensation described
above in this paragraph 1, Executive will be entitled during he Employment
Period to the following benefits:
(i) such health insurance and other benefits as
are available from time to time to the executive
officers employees generally;
(ii) vacation, sick leave and personal time in
accordance with the Company's vacation and absence
policies as in effect from time to time, provided
that Executive shall have no less than four weeks
vacation each year, with salary;
(iii) reimbursement, upon submission of
documentation in accordance with the Company's
regular expense policies, for reasonable business
expenses incurred on the Company's behalf by
Executive; and
(iv) participation in any savings plan, 401(k)
plan, profit sharing plan or pension plan as is
available from time to time to the Company's salaried
employees generally.
(d) Termination. Executive's employment with the Company
will continue until terminated by Executive's death, disability, which cannot
be reasonably accommodated, or termination of Executive's employment pursuant
to any of the following provisions:
(i) Termination by the Company without Cause.
The Company may at any time terminate Executive's
employment without Cause (as defined below) by giving
Executive notice of the effective date of termination
(which effective date may be the date of such
notice). In the event of such termination, the
Company shall have the obligation to pay Executive
(A) an amount equal to the bonus the Executive would
have been entitled to had he been employed for a full
year prorated for the portion of the year the
Executive was actually employed (the "Bonus
Severance") and (B) continuing payments of base
salary in accordance with paragraph (b) above at the
rate in effect at the effective date of such
termination for a period of twelve (12) months
following the effective date of such termination (the
"Salary Severance"); provided that in the event that
Executive breaches any of the representations,
warranties and covenants set forth in paragraphs 2
and 4 below, the Company will have no further
obligation to make payments of the base salary
following knowledge of such breach and may pursue all
other available remedies, and the Executive shall be
obligated to repay the Company the amount of Bonus
<PAGE> 3
Severance and Salary Severance within ten (10) days
following delivery by the Company to Executive of
written confirmation of such breach. A voluntary
termination by Executive within sixty (60) days after
the Company has materially reduced his
responsibilities or materially reduced his salary in
a manner not applied to all executive officers of the
Company will be deemed to be termination by the
Company without Cause.
(ii) Termination by the Company for Cause. A
majority of the Board shall have the right to
terminate Executive's employment at any time for any
of the following reasons (each of which is referred
to herein as "Cause") by giving Executive written
notice of the Cause and Executive shall have fifteen
days from the receipt of such notice to cure such
Cause, to the extent such cause is curable. If the
cause is not cured within fifteen days or the Cause
is not curable, the Company shall give Executive
written notice of the effective date of termination
(which effective date may be the date of such
notice):
(A) the willful breach of any provision
of paragraphs 1(a), 2 or 4 (including but not limited
to a refusal to follow reasonable and lawful
directives of the Board of Directors);
(B) any act of fraud or dishonesty with
respect to any aspect of the Company's or any
affiliate's business;
(C) continued use of illegal drugs;
(D) as a result of Executive's gross
negligence or willful misconduct, Executive shall
violate, or cause the Company to violate, any
applicable federal or state securities or banking law
or regulation and as a result of such violation,
shall become, or shall cause the company or any
affiliate to become the subject of any legal action
or administrative proceeding seeking an injunction
from further violations or a suspension of any right
or privilege;
(E) as a result of Executive's gross
negligence or willful misconduct, Executive shall
commit any act that causes, or shall knowingly fail
to take reasonable and appropriate action to prevent,
any material injury to the financial condition or
business reputation of the Company or any affiliate;
or
(F) indictment for a felony.
-3-
<PAGE> 4
If a majority of the Board terminates Executive's
employment for any of the reasons set forth above in this
paragraph 1(d)(ii), the Company shall have no further
obligations hereunder from and after the effective date of
termination and shall have all other rights and remedies
available under this or any other agreement and at law or in
equity.
(e) Voluntary Termination by Executive. In the event
that Executive's employment with the company is terminated by Executive (except
as set forth in paragraph 1(d)(i)), the Company shall have no further
obligations hereunder from and after the date of such termination.
2. Nondisclosure. Executive acknowledges that during the course
of his performance of services for the Company he has acquired and will acquire
technical knowledge with respect to the Company's business operations,
including, by way of illustration, the Company's investment plans or
strategies, trade secrets, customer lists, customer or consultant contracts and
the details thereof, pricing policies, operational methods, marketing and
merchandising plans or strategies, business acquisition plans, personnel
acquisition plans, and all other information pertaining to the business of the
Company or any affiliate that is not publicly available (all of such
information herein referenced to as the "Confidential Information"); provided,
however that the term "Confidential Information" shall not include (a) any
information which is or becomes publicly available otherwise than through
breach of this Agreement or (b) any information which is or becomes known or
available to Executive on a non-confidential basis and not in contravention of
applicable law from a source which is entitled to disclose such information to
Executive. Executive agrees that he will not, while he is employed by the
Company, divulge to any person, directly or indirectly, except to the Company
or its officers and agents or as reasonably required in connection with his
duties on behalf of the Company or to prevent fraud or illegal activities, or
use, except on behalf of the Company, any Confidential Information acquired by
Executive during the term of his employment. Executive agrees that he will not
at any time after his employment with the Company has ended, divulge to any
person directly or indirectly any Confidential Information in any way
detrimental to the Company. Executive further agrees that if his relationship
with the Company is terminated (for whatever reason) he shall not take with him
but will leave with the Company all records, papers and computer software and
data and any copies thereof relating to the Confidential Information, (or if
such papers, records, computer software and data or copies are not on the
premises of the Company, Executive agrees to return such papers, records and
computer software and data immediately upon his termination). Executive
acknowledges that all such papers, records, computer software and data or
copies thereof are and remain the property of the Company. The Company
acknowledges that the Executive has brought certain papers, records, computer
software and data or copies as listed and described on Exhibit B hereto (the
"Executive Records") to the premises of the Company, which Executive Records
were and remain property of the Executive and which Executive Records have been
used to create Confidential Information. The Company acknowledges that the
Executive is entitled to the return of the Executive Records upon termination
of Executive's relationship with the Company.
-4-
<PAGE> 5
3. Other Businesses. During the Employment Period, Executive
agrees that he will not, directly or indirectly except with the express written
consent of the Board, become engaged in, render services for, or permit his
name to be used in connection with, or directly or indirectly counsel or
consult with, any business other than the business of the Company and its
affiliates.
4. Noncompetition. Executive agrees that:
(a) During the term he performs services for the Company
and for a period of one (1) year after the termination thereof (for any
reason), he will not interfere with the relationship of the Company and any
employee, agent or representative.
(b) During the term he performs services for the Company
and for a period of one (1) year after the termination thereof (for any
reason), he will not directly or indirectly interfere with the relationships of
the Company with customers, dealers, distributors, vendors or sources of
supply.
(c) (i) Executive further agrees that during the term he
performs services for the Company and for a period of one (1) year after the
termination thereof (for any reason) he will not directly or indirectly own,
manage, operate, control, be employed by, participate in, or be connected in
any manner with the ownership, management, operation or control of, any
business or enterprise which is in the business of contract management and
management consulting for hospitals in the areas of acute rehabilitation units,
skilled/subacute units, outpatient rehabilitation units and contract therapy
services (the "Restricted Business") within the United States.
(ii) If the Company actively engages in any other
business (in addition to or in lieu of the Restricted Business), Executive
further agrees that during the term he performs services for the Company and
for a period of one (1) year after the termination thereof (for any reason) he
will not directly or indirectly own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of, any business or enterprise which competes with such
other business within the United States.
(iii) For purposes of this Section 4(c), the
reference to business or enterprise in line 5 of Section(c)(i) and line 6 of
Section(c)(ii) shall mean the specific business unit in which Executive is
employed or otherwise affiliated.
(d) After discussing the matter with Executive, the
Company shall have the right, subject to applicable law, to inform any other
third party that the Company reasonably believes to be, or to be contemplating,
participating with Executive or receiving from Executive assistance in
violation of this Agreement, of the terms of this Agreement and of the rights
of the
-5-
<PAGE> 6
Company hereunder, and that participation by any such third party with
Executive in activities in violation of this Section 4 may give rise to claims
by the Company against such third party.
5. Termination of Agreement. This Agreement shall terminate on
the fifth anniversary of the date hereof.
6. General Provisions.
(a) Notices. Any notice provided for in this Agreement
must be in writing and must be either personally delivered, or mailed by first
class mail (postage prepaid and return receipt requested) or sent by reputable
overnight courier service, to the recipient at the address below indicated:
To the Company:
MHI Acquisition, Inc.
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 75201
Attn: President
To Executive
At Executive's last known
address as listed with
the Company
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or if mailed, five days after so mailed.
(b) Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision in any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein
except that any court having jurisdiction shall have the power to reduce the
duration, area or scope of such invalid, illegal or unenforceable provision
and, in its reduced form, it shall be enforceable.
-6-
<PAGE> 7
(c) Complete Agreement. This Agreement embodies the
complete agreement and understanding between the parties and supersedes and
preempts any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way. Any employment, benefit or bonus arrangements or agreements
between the Company and Executive that existed at any time prior to the
execution and delivery of this Agreement are hereby terminated by Executive;
provided, however, that Executive shall remain liable for any breach of such
arrangements or agreements occurring during the term of such arrangement or
agreement. From and after the date of this Agreement, Executive shall not be
entitled to any compensation from the Company on account of any such
arrangement or agreement.
(d) Successors and Assigns. This Agreement is intended
to bind and inure to the benefit of and be enforceable by Executive and the
Company, except that Executive may not assign any of his rights or obligations
under this Agreement. The Company may assign its rights under this Agreement,
as security, to any lender to the Company, and in the event of a sale of the
stock, or substantially all of the stock, of the Company, or consolidation or
merger of the Company into another corporation or entity, or the sale of
substantially all of the operating assets of the Company to another
corporation, entity or individual, the Company may assign its rights and
obligations under this Agreement to its successor-in-interest, in which event
such successor-in-interest shall be deemed to have acquired all rights and
assumed all obligations of the Company hereunder.
(e) CHOICE OF LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY
THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
(f) Remedies. Each of the parties to this Agreement will
be entitled to enforce his or its rights under this Agreement specifically, to
recover damages (including, without limitation, reasonable fees and expenses of
counsel) by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in his or its favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any
breach or threatened breach of the provisions of this Agreement and that any
party may in his or its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(g) Amendments and Waivers. Any provision of this
Agreement may be amended or waived only with the prior written consent of
Executive and a majority of the Board.
(h) Absence of Conflicting Agreements. Executive hereby
warrants and covenants that his employment by the Company does not result in a
breach of the terms, conditions or provisions of any agreement to which
Executive is subject.
-7-
<PAGE> 8
(i) Survival. No termination of Executive's employment
by either or both parties shall reduce or terminate Executive's covenants and
agreements in paragraphs 2 and 4.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.
MHI ACQUISITION, INC.
By:/s/ Charles L. Allen
----------------------------------------
Its President and Chief Executive Officer
EXECUTIVE
/s/ Roy W. Griffitts, Jr.
-------------------------------------------
Roy W. Griffitts, Jr.
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 78501
(EMPLOYMENT AGREEMENT SIGNATURE PAGE - ROY W. GRIFFITTS, JR.)
-8-
<PAGE> 9
EXHIBIT A
MANAGEMENT BONUS PERCENTAGES
Charles L. Allen President and CEO 100%
Roy W. Griffitts, Jr. Chief Operating Officer 70%
William A. Brosius Chief Financial Officer 50%
-9-
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
Agreement made on May 31, 1995, between MHI Acquisition, Inc., a
Delaware corporation (the "Company"), and William A. Brosius ("Executive").
RECITALS
A. The Company wishes to employ Executive as the Chief Financial
Officer of the Company.
B. The Company and Executive desire to enter into certain
agreements providing for Executive's continued employment with the Company.
The Company and Executive desire that Executive serve in an executive capacity
with the Company on the terms hereinafter set forth.
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment. The Company agrees to employ Executive and
Executive accepts such employment for the period beginning as of the date
hereof and ending upon the earlier of (i) termination pursuant to paragraph
1(d) or 1(e) hereof or (ii) the date five (5) years from the date of this
Agreement (the "Employment Period").
(a) Services. During the Employment Period, Executive
will render such services of an executive and administrative character to the
Company and its affiliates as the Board of Directors of the Company (the
"Board") may from time to time direct and will have the status of a senior
executive. Executive will devote his best efforts and substantially all of his
business time and attention (except for vacation periods and reasonable periods
of illness or other incapacity) to the business of the Company and its
affiliates and will faithfully and diligently carry out such duties and have
such responsibilities as are customary among persons employed in substantially
similar capacities for similar companies. Executive will report to the Chief
Executive Officer and shall faithfully and diligently comply with all of its
reasonable and lawful directives. For purposes of this Agreement, the term
"affiliates" means any corporation, limited partnership, limited liability
company or other entity engaged in the same business as the Company or a
related business, which is controlled by or under common control with the
Company.
(b) Salary. During the Employment Period and thereafter
as provided in paragraph (d) below, the Company will pay Executive a base
salary at the rate of not less than $84,500 per annum (or such higher amount as
the Board may establish from time to time). Executive's base salary for any
partial year will be prorated based upon the number of days elapsed in such
year and will be payable in accordance with the Company's customary payroll
practices. In addition to his base salary, Executive shall be eligible to
receive cash bonuses based upon the performance of the Company. Such bonuses
shall be determined and paid in
<PAGE> 2
accordance with the Company's bonus plan administered by the Board, a copy of
which plan is attached hereto as Exhibit A, and as may be amended from time to
time.
(c) Benefits. In addition to the compensation described
above in this paragraph 1, Executive will be entitled during he Employment
Period to the following benefits:
(i) such health insurance and other benefits as
are available from time to time to the executive
officers employees generally;
(ii) vacation, sick leave and personal time in
accordance with the Company's vacation and absence
policies as in effect from time to time, provided
that Executive shall have no less than four weeks
vacation each year, with salary;
(iii) reimbursement, upon submission of
documentation in accordance with the Company's
regular expense policies, for reasonable business
expenses incurred on the Company's behalf by
Executive; and
(iv) participation in any savings plan, 401(k)
plan, profit sharing plan or pension plan as is
available from time to time to the Company's salaried
employees generally.
(d) Termination. Executive's employment with the Company
will continue until terminated by Executive's death, disability, which cannot
be reasonably accommodated, or termination of Executive's employment pursuant
to any of the following provisions:
(i) Termination by the Company without Cause.
The Company may at any time terminate Executive's
employment without Cause (as defined below) by giving
Executive notice of the effective date of termination
(which effective date may be the date of such
notice). In the event of such termination, the
Company shall have the obligation to pay Executive
(A) an amount equal to the bonus the Executive would
have been entitled to had he been employed for a full
year prorated for the portion of the year the
Executive was actually employed (the "Bonus
Severance") and (B) continuing payments of base
salary in accordance with paragraph (b) above at the
rate in effect at the effective date of such
termination for a period of twelve (12) months
following the effective date of such termination (the
"Salary Severance"); provided that in the event that
Executive breaches any of the representations,
warranties and covenants set forth in paragraphs 2
and 4 below, the Company will have no further
obligation to make payments of the base salary
following knowledge of such breach and may pursue all
other available remedies, and the Executive shall be
obligated to repay the Company the amount of Bonus
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<PAGE> 3
Severance and Salary Severance within ten (10) days
following delivery by the Company to Executive of
written confirmation of such breach. A voluntary
termination by Executive within sixty (60) days after
the Company has materially reduced his
responsibilities or materially reduced his salary in
a manner not applied to all executive officers of the
Company will be deemed to be termination by the
Company without Cause.
(ii) Termination by the Company for Cause. A
majority of the Board shall have the right to
terminate Executive's employment at any time for any
of the following reasons (each of which is referred
to herein as "Cause") by giving Executive written
notice of the Cause and Executive shall have fifteen
days from the receipt of such notice to cure such
Cause, to the extent such cause is curable. If the
cause is not cured within fifteen days or the Cause
is not curable, the Company shall give Executive
written notice of the effective date of termination
(which effective date may be the date of such
notice):
(A) the willful breach of any provision
of paragraphs 1(a), 2 or 4 (including but not limited
to a refusal to follow reasonable and lawful
directives of the Board of Directors);
(B) any act of fraud or dishonesty with
respect to any aspect of the Company's or any
affiliate's business;
(C) continued use of illegal drugs;
(D) as a result of Executive's gross
negligence or willful misconduct, Executive shall
violate, or cause the Company to violate, any
applicable federal or state securities or banking law
or regulation and as a result of such violation,
shall become, or shall cause the company or any
affiliate to become the subject of any legal action
or administrative proceeding seeking an injunction
from further violations or a suspension of any right
or privilege;
(E) as a result of Executive's gross
negligence or willful misconduct, Executive shall
commit any act that causes, or shall knowingly fail
to take reasonable and appropriate action to prevent,
any material injury to the financial condition or
business reputation of the Company or any affiliate;
or
(F) indictment for a felony.
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<PAGE> 4
If a majority of the Board terminates Executive's
employment for any of the reasons set forth above in this
paragraph 1(d)(ii), the Company shall have no further
obligations hereunder from and after the effective date of
termination and shall have all other rights and remedies
available under this or any other agreement and at law or in
equity.
(e) Voluntary Termination by Executive. In the event
that Executive's employment with the company is terminated by Executive (except
as set forth in paragraph 1(d)(i)), the Company shall have no further
obligations hereunder from and after the date of such termination.
2. Nondisclosure. Executive acknowledges that during the course
of his performance of services for the Company he has acquired and will acquire
technical knowledge with respect to the Company's business operations,
including, by way of illustration, the Company's investment plans or
strategies, trade secrets, customer lists, customer or consultant contracts and
the details thereof, pricing policies, operational methods, marketing and
merchandising plans or strategies, business acquisition plans, personnel
acquisition plans, and all other information pertaining to the business of the
Company or any affiliate that is not publicly available (all of such
information herein referenced to as the "Confidential Information"); provided,
however that the term "Confidential Information" shall not include (a) any
information which is or becomes publicly available otherwise than through
breach of this Agreement or (b) any information which is or becomes known or
available to Executive on a non-confidential basis and not in contravention of
applicable law from a source which is entitled to disclose such information to
Executive. Executive agrees that he will not, while he is employed by the
Company, divulge to any person, directly or indirectly, except to the Company
or its officers and agents or as reasonably required in connection with his
duties on behalf of the Company or to prevent fraud or illegal activities, or
use, except on behalf of the Company, any Confidential Information acquired by
Executive during the term of his employment. Executive agrees that he will not
at any time after his employment with the Company has ended, divulge to any
person directly or indirectly any Confidential Information in any way
detrimental to the Company. Executive further agrees that if his relationship
with the Company is terminated (for whatever reason) he shall not take with him
but will leave with the Company all records, papers and computer software and
data and any copies thereof relating to the Confidential Information, (or if
such papers, records, computer software and data or copies are not on the
premises of the Company, Executive agrees to return such papers, records and
computer software and data immediately upon his termination). Executive
acknowledges that all such papers, records, computer software and data or
copies thereof are and remain the property of the Company. The Company
acknowledges that the Executive has brought certain papers, records, computer
software and data or copies as listed and described on Exhibit B hereto (the
"Executive Records") to the premises of the Company, which Executive Records
were and remain property of the Executive and which Executive Records have been
used to create Confidential Information. The Company acknowledges that the
Executive is entitled to the return of the Executive Records upon termination
of Executive's relationship with the Company.
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<PAGE> 5
3. Other Businesses. During the Employment Period, Executive
agrees that he will not, directly or indirectly except with the express written
consent of the Board, become engaged in, render services for, or permit his
name to be used in connection with, or directly or indirectly counsel or
consult with, any business other than the business of the Company and its
affiliates.
4. Noncompetition. Executive agrees that:
(a) During the term he performs services for the Company
and for a period of one (1) year after the termination thereof (for any
reason), he will not interfere with the relationship of the Company and any
employee, agent or representative.
(b) During the term he performs services for the Company
and for a period of one (1) year after the termination thereof (for any
reason), he will not directly or indirectly interfere with the relationships of
the Company with customers, dealers, distributors, vendors or sources of
supply.
(c) (i) Executive further agrees that during the term he
performs services for the Company and for a period of one (1) year after the
termination thereof (for any reason) he will not directly or indirectly own,
manage, operate, control, be employed by, participate in, or be connected in
any manner with the ownership, management, operation or control of, any
business or enterprise which is in the business of contract management and
management consulting for hospitals in the areas of acute rehabilitation units,
skilled/subacute units, outpatient rehabilitation units and contract therapy
services (the "Restricted Business") within the United States.
(ii) If the Company actively engages in any other
business (in addition to or in lieu of the Restricted Business), Executive
further agrees that during the term he performs services for the Company and
for a period of one (1) year after the termination thereof (for any reason) he
will not directly or indirectly own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of, any business or enterprise which competes with such
other business within the United States.
(iii) For purposes of this Section 4(c), the
reference to business or enterprise in line 5 of Section(c)(i) and line 6 of
Section(c)(ii) shall mean the specific business unit in which Executive is
employed or otherwise affiliated.
(d) After discussing the matter with Executive, the
Company shall have the right, subject to applicable law, to inform any other
third party that the Company reasonably believes to be, or to be contemplating,
participating with Executive or receiving from Executive assistance in
violation of this Agreement, of the terms of this Agreement and of the rights
of the
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<PAGE> 6
Company hereunder, and that participation by any such third party with
Executive in activities in violation of this Section 4 may give rise to claims
by the Company against such third party.
5. Termination of Agreement. This Agreement shall terminate on
the fifth anniversary of the date hereof.
6. General Provisions.
(a) Notices. Any notice provided for in this Agreement
must be in writing and must be either personally delivered, or mailed by first
class mail (postage prepaid and return receipt requested) or sent by reputable
overnight courier service, to the recipient at the address below indicated:
To the Company:
MHI Acquisition, Inc.
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 75201
Attn: President
To Executive
At Executive's last known
address as listed with
the Company
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or if mailed, five days after so mailed.
(b) Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision in any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein
except that any court having jurisdiction shall have the power to reduce the
duration, area or scope of such invalid, illegal or unenforceable provision
and, in its reduced form, it shall be enforceable.
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<PAGE> 7
(c) Complete Agreement. This Agreement embodies the
complete agreement and understanding between the parties and supersedes and
preempts any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way. Any employment, benefit or bonus arrangements or agreements
between the Company and Executive that existed at any time prior to the
execution and delivery of this Agreement are hereby terminated by Executive;
provided, however, that Executive shall remain liable for any breach of such
arrangements or agreements occurring during the term of such arrangement or
agreement. From and after the date of this Agreement, Executive shall not be
entitled to any compensation from the Company on account of any such
arrangement or agreement.
(d) Successors and Assigns. This Agreement is intended
to bind and inure to the benefit of and be enforceable by Executive and the
Company, except that Executive may not assign any of his rights or obligations
under this Agreement. The Company may assign its rights under this Agreement,
as security, to any lender to the Company, and in the event of a sale of the
stock, or substantially all of the stock, of the Company, or consolidation or
merger of the Company into another corporation or entity, or the sale of
substantially all of the operating assets of the Company to another
corporation, entity or individual, the Company may assign its rights and
obligations under this Agreement to its successor-in-interest, in which event
such successor-in-interest shall be deemed to have acquired all rights and
assumed all obligations of the Company hereunder.
(e) CHOICE OF LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY
THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
(f) Remedies. Each of the parties to this Agreement will
be entitled to enforce his or its rights under this Agreement specifically, to
recover damages (including, without limitation, reasonable fees and expenses of
counsel) by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in his or its favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any
breach or threatened breach of the provisions of this Agreement and that any
party may in his or its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(g) Amendments and Waivers. Any provision of this
Agreement may be amended or waived only with the prior written consent of
Executive and a majority of the Board.
(h) Absence of Conflicting Agreements. Executive hereby
warrants and covenants that his employment by the Company does not result in a
breach of the terms, conditions or provisions of any agreement to which
Executive is subject.
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<PAGE> 8
(i) Survival. No termination of Executive's employment
by either or both parties shall reduce or terminate Executive's covenants and
agreements in paragraphs 2 and 4.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.
MHI ACQUISITION, INC.
By:/s/ Charles L. Allen
-----------------------------------------
Its President and Chief Executive Officer
EXECUTIVE
/s/ William A. Brosius
--------------------------------------------
William A. Brosius
2501 Cedar Springs Road
Suite 600, LB 15
Dallas, Texas 78501
(EMPLOYMENT AGREEMENT SIGNATURE PAGE - WILLIAM A. BROSIUS)
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<PAGE> 9
EXHIBIT A
MANAGEMENT BONUS PERCENTAGES
Charles L. Allen President and CEO 100%
Roy W. Griffitts, Jr. Chief Operating Officer 70%
William A. Brosius Chief Financial Officer 50%
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<PAGE> 1
EXHIBIT 10.14
FORM OF
MHI ACQUISITION, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of this
31st day of May, 1995, by and between MHI ACQUISITION, INC., a Delaware
corporation (the "Company"), and _______________________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for its directors, officers, employees, agents
and fiduciaries, the significant increases in the cost of such insurance and
the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited;
WHEREAS, Indemnitee does not regard the current protection available
as adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not
be willing to continue to serve in such capacities without additional
protection;
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to continue to provide services to the
Company, wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified by the Company as set forth
herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall
indemnify Indemnitee to the fullest extent permitted by law if Indemnitee was
or is or becomes a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant in, any
threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other (hereinafter a "Claim")
by reason of (or arising in part out of) any event or occurrence related to the
fact that
<PAGE> 2
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action or inaction on the part of Indemnitee while serving in
such capacity (hereinafter an "Indemnifiable Event") against any and all
expenses (including attorneys' fees and all other costs, expenses and
obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in, any such action, suit, proceeding,
alternative dispute resolution mechanism, hearing, inquiry or investigation),
judgments, fines, penalties and amounts paid in settlement (if such settlement
is approved in advance by the Company, which approval shall not be unreasonably
withheld) of such Claim and any federal, state, local or foreign taxes imposed
on the Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement (collectively, hereinafter "Expenses"), including all
interest, assessments and other charges paid or payable in connection with or
in respect of such Expenses. Such payment of Expenses shall be made by the
Company as soon as practicable but in any event no later than five (5) days
after written demand by Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i)
the obligations of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(f) hereof) shall
not have determined (in a written opinion, in any case in which the Independent
Legal Counsel referred to in Section 1(c) hereof is involved) that Indemnitee
would not be permitted to be indemnified under applicable law, and (ii) the
obligation of the Company to make an advance payment of Expenses to Indemnitee
pursuant to Section 2(a) (an "Expense Advance") shall be subject to the
condition that, if, when and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be so indemnified under applicable
law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby
agrees to reimburse the Company) for all such amounts theretofore paid;
provided, however, that if Indemnitee has commenced or thereafter commences
legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expense Advance shall
be unsecured and no interest shall be charged thereon. If there has not been a
Change in Control (as defined in Section 10(c) hereof), the Reviewing Party
shall be selected by the Board of Directors, and if there has been such a
Change in Control (other than a Change in Control which has been approved by a
majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control), the Reviewing Party shall be the Independent
Legal Counsel referred to in Section 1(c) hereof. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or
in part under applicable law, Indemnitee
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<PAGE> 3
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by the Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and the Company
hereby consents to service of process and to appear in any such proceeding.
Any determination by the Reviewing Party otherwise shall be conclusive and
binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there
is a Change in Control of the Company (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control) then with respect to all
matters thereafter arising concerning the rights of Indemnitee to payments of
Expenses and Expense Advances under this Agreement or any other agreement or
under the Company's Certificate of Incorporation or Bylaws as now or hereafter
in effect, Independent Legal Counsel (as defined in Section 10(d) hereof) shall
be selected by Indemnitee and approved by the Company (which approval shall not
be unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(d) Establishment of Trust. In the event of a Potential
Change in Control (as defined in Section 10(e) hereof), the Company shall, upon
written request by Indemnitee, create a trust for the benefit of Indemnitee
and, from time to time upon written request of Indemnitee, shall fund such
trust in an amount sufficient to satisfy any and all Expenses reasonably
anticipated at the time of each such request to be incurred in connection with
investigating, preparing for and defending any Claim relating to an
Indemnifiable Event, and any and all judgments, fines, penalties and settlement
amounts of any and all Claims relating to an Indemnifiable Event from time to
time actually paid or claimed, reasonably anticipated or proposed to be paid,
provided that in no event shall more than $_______ be required to be deposited
in any trust created hereunder in excess of amounts deposited in respect of
reasonably anticipated Expenses. The amount or amounts to be deposited in the
trust pursuant to the foregoing funding obligation shall be determined by the
Reviewing Party, in any case in which the Independent Legal Counsel referred to
above is involved. The terms of the trust shall provide that upon a Change of
Control (i) the trust shall not be revoked or the principal thereof invaded,
without the written consent of Indemnitee, (ii) the trustee shall advance,
within five (5) business days of a request by Indemnitee, any and all Expenses
to Indemnitee (and Indemnitee hereby agrees to reimburse the trust under the
circumstances under which Indemnitee would be required to reimburse the Company
under Section 1(b) of this Agreement), (iii) the trust shall continue to be
funded by the Company in accordance with the funding obligation set forth
above, (iv) the trustee shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such trust shall revert to the
Company upon a final determination by the Reviewing Party or a court of
competent
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<PAGE> 4
jurisdiction, as the case may be, that Indemnitee has been fully indemnified
under the terms of this Agreement. The trustee shall be chosen by Indemnitee.
Nothing in this Section 1(d) shall relieve the Company of any of its
obligations under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any
other provision of this Agreement other than Section 9 hereof, to the extent
that Indemnitee has been successful on the merits or otherwise, including,
without limitation, the dismissal of an action without prejudice, in defense of
any action, suit, proceeding, inquiry or investigation referred to in Section
(1)(a) hereof or in the defense of any claim, issue or matter therein,
Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in
connection therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance
all Expenses incurred by Indemnitee. The advances to be made hereunder shall
be paid by the Company to Indemnitee as soon as practicable but in any event no
later than five (5) days after written demand by Indemnitee therefor to the
Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall,
as a condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of
this Agreement, the termination of any Claim by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief
or that a court has determined that indemnification is not permitted by
applicable law. In addition, neither the failure of the Reviewing Party to
have made a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual determination
by the Reviewing Party that Indemnitee has not met such standard of conduct or
did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by the Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
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<PAGE> 5
(d) Notice to Insurers. If, at the time of the receipt
by the Company of a notice of a Claim pursuant to Section 2(b) hereof, the
Company has liability insurance in effect which may cover such Claim, the
Company shall give prompt notice of the commencement of such Claim to the
insurers in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all necessary or desirable action
to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable
as a result of such action, suit, proceeding, inquiry or investigation in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall
be obligated hereunder to pay the Expenses of any Claim the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee, upon the delivery to Indemnitee of written notice of
its election so to do. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same Claim; provided
that, (i) Indemnitee shall have the right to employ Indemnitee's counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of counsel by
Indemnitee has been previously authorized by the Company, (B) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, employee, agent or fiduciary, such change, to
the extent not otherwise required by such law, statute or rule to be applied to
this Agreement, shall have no effect on this Agreement or the parties' rights
and obligations hereunder except as set forth in Section 8(a) hereof.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested directors, the General
Corporation Law of the State of Delaware, or otherwise. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while
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<PAGE> 6
serving in an indemnified capacity even though Indemnitee may have ceased to
serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, Certificate of Incorporation, Bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors, officers, employees,
agents or fiduciaries under this Agreement or otherwise. Indemnitee
understands and acknowledges that the Company has undertaken or may be required
in the future to undertake with the Securities and Exchange Commission to
submit the question of indemnification to a court in certain circumstances for
a determination of the Company's right under public policy to indemnify
Indemnitee.
7. Liability Insurance. To the extent the Company maintains
liability insurance applicable to directors, officers, employees, agents or
fiduciaries, Indemnitee shall be covered by such policies in such a manner as
to provide Indemnitee the same rights and benefits as are accorded to the most
favorably insured of the Company's directors, if Indemnitee is a director; or
of the Company's officers, if Indemnitee is not a director of the Company but
is an officer; or of the Company's key employees, agents or fiduciaries, if
Indemnitee is not an officer or director but is a key employee, agent or
fiduciary.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify
Indemnitee for acts, omissions or transactions from which Indemnitee may not be
relieved of liability under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except (i) with respect to
actions or proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other agreement or insurance policy
or under the Company's Certificate of Incorporation or Bylaws now or hereafter
in effect relating
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<PAGE> 7
to Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise as required under Section 145 of the Delaware General Corporation
Law, regardless of whether Indemnitee ultimately is determined to be entitled
to such indemnification, advance expense payment or insurance recovery, as the
case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted
by Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee
for expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two-year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if Indemnitee is or was a director,
officer, employee, agent or fiduciary of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, agent or fiduciary of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had
continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent or fiduciary of
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<PAGE> 8
the Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries; and if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than 20% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's stockholders
was approved by a vote of at least two thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total
voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all of substantially all of the
Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 1(c) hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last three years
(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Potential Change
in Control" shall be deemed to have occurred if: (i) the Company enters into an
agreement, the consummation of which would result in the occurrence of a Change
in Control, (ii) any person (including the Company) publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control, or (iii) any person, other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company acting in such
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<PAGE> 9
capacity or a corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of stock
of the Company, who is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 9.5% or more of the combined voting
power of the Company's then outstanding Voting Securities, increases his
beneficial ownership of such securities by five percentage points (5%) or more
over the percentage so owned by such person; or (iv) the Board of Directors
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(f) For purposes of this Agreement, a "Reviewing Party"
shall mean any appropriate person or body consisting of a member or members of
the Company's Board of Directors or any other person or body appointed by the
Board of Directors who is not a party to the particular Claim for which
Indemnitee is seeking indemnification, or Independent Legal Counsel.
(g) For purposes of this Agreement, "Voting Securities"
shall mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause
any successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director and/or officer of the Company or of any other enterprise at the
Company's request.
13. Attorneys' Fees. In the event that any action is instituted
by Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action were not made
in good faith or were frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of
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<PAGE> 10
this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred
by Indemnitee in defense of such action (including costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), and shall be entitled to the advancement Expenses with respect to such
action, unless as a part of such action a court having jurisdiction over such
action determines that each of Indemnitee's material defenses to such action
were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
duly given (i) if delivered by hand and signed for by the party addressed, on
the date of such delivery, or (ii) if mailed by domestic certified or
registered mail with postage prepaid, on the third business day after the date
postmarked. Addresses for notice to either party are as shown on the signature
page of this Agreement, or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be commenced, prosecuted and continued only in the
Court of Chancery of the State of Delaware in and for New Castle County, which
shall be the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the provisions
of this Agreement (including, without limitations, each portion of this
Agreement containing any provision held to be invalid, void or otherwise
unenforceable, that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into and
to be performed entirely within the State of Delaware, without regard to the
conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Company effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless it is
in writing signed by both the parties
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<PAGE> 11
hereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth
the entire understanding between the parties hereto and supercedes and merges
all previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MHI ACQUISITION, INC.
By: /s/ William A. Brosius
-------------------------------
William A. Brosius
Chief Financial Officer
Address: 2501 Cedar Springs Road
Suite 600, LB15
Dallas, TX 75201
AGREED TO AND ACCEPTED
INDEMNITEE:
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
(address)
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<PAGE> 1
EXHIBIT 10.15
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT, dated as of May 31, 1995, (this
"Agreement") is entered into by and among MHI ACQUISITION, INC., a Delaware
corporation ("Company"), with its principal executive office at 2501 Cedar
Springs Road, Suite 600, LB 15, Dallas, Texas 75201, and THE PERSONS AND
ENTITIES LISTED ON THE SCHEDULE OF PURCHASERS attached hereto as Exhibit A
(each a "Purchaser", and collectively, the "Purchasers").
RECITALS
A. Company and its subsidiaries, MHI Acquisition Corporation I
("Mergerco I") and MHI Acquisition Corporation II ("Mergerco II") have entered
into a Plan and Agreement of Reorganization (the "Merger Agreement") with
Healthtrust, Inc. - The Hospital Company, Coralstone Management, Inc.,
Milestone Healthcare, Inc. ("Milestone") and Milestone Healthcare Management,
Inc. ("Management") pursuant to which Mergerco I will be merged with and into
Milestone and Mergerco II will be merged with and into Management. As part of
the financing of the transactions contemplated under the Merger Agreement,
Company proposes to issue subordinated indebtedness in the amount of
$9,000,000. The proceeds of such subordinated indebtedness will be contributed
to Mergerco I to provide part of the consideration to be paid in connection
with the Merger Agreement.
B. On the terms and subject to the conditions set forth herein,
each Purchaser is willing to purchase from Company, and Company is willing to
sell to such Purchaser, a subordinated promissory note in the principal amount
set forth opposite such Purchaser's name on Schedule 1 hereto.
C. Capitalized terms not otherwise defined herein shall have the
meaning set forth in the form of Note (as defined below) attached hereto as
Exhibit A.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, and the
representations, warranties, and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. THE NOTES.
(a) Issuance of Notes. At the Closing (as defined
below), Company agrees to issue and sell to each of the Purchasers, and,
subject to all of the terms and conditions hereof, each of the Purchasers
agrees to purchase a Senior Subordinated Note Due 2000 in the form of Exhibit A
hereto (each, a "Note", and collectively, the "Notes") in the principal amount
set forth opposite the respective Purchaser's name on Schedule I hereto. The
obligations the Purchasers to purchase Notes are several and not joint.
(b) Delivery. The sale and purchase of the Notes shall
take place at a closing (the "Closing") to be held at such place and time as
Company and the Purchasers may determine (the "Closing Date"). At the Closing,
Company will deliver to each of the Purchasers the respective Note to be
purchased by such Purchaser, against receipt by Company of the corresponding
purchase price
<PAGE> 2
set forth on Schedule I hereto (the "Purchase Price"). Each of the Notes will
be issued to the Purchaser thereof and registered in such Purchaser's name in
Company's records.
(c) Use of Proceeds. The proceeds of the sale and
issuance of the Notes shall be contributed by Company to the capital of
Mergerco I for use as part of the consideration to be paid in connection with
the Merger Agreement.
(d) Payments. The Company will make all cash payments
due under the Notes in immediately available funds by 11:00 A.M. New York City
time on the date such payment is due in the manner and at the address for such
purpose specified below each Purchaser's name on Schedule I hereto, or at such
other address as a Purchaser or other registered holder of a Note may from time
to time direct in writing.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents
and warrants to each Purchaser that:
(a) Due Incorporation, Qualification, etc. Each of Company and
its Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation; (ii) has the power
and authority to own, lease and operate its properties and carry on its
business as now conducted; and (iii) is duly qualified, licensed to do business
and in good standing as a foreign corporation in each jurisdiction where the
failure to be so qualified or licensed could reasonably be expected to have a
Material Adverse Effect.
(b) Authority. The execution, delivery and performance by Company
of each Transaction Document to be executed by Company and the consummation of
the transactions contemplated thereby (i) are within the power of Company and
(ii) have been duly authorized by all necessary actions on the part of Company.
(c) Enforceability. Each Transaction Document executed, or to be
executed, by Company has been, or will be, duly executed and delivered by
Company and constitutes, or will constitute, a legal, valid and binding
obligation of Company, enforceable against Company in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Company of
the Transaction Documents executed by Company and the performance and
consummation of the transactions contemplated thereby do not and will not (i)
violate the Articles or Certificate of Incorporation or Bylaws of the Company
or any material judgment, order, writ, decree, statute, rule or regulation
applicable to Company; (ii) violate any provision of, or result in the breach
or the acceleration of, or entitle any other Person to accelerate (whether
after the giving of notice or lapse of time or both), any material mortgage,
indenture, agreement, instrument or contract to which Company is a party or by
which it is bound; or (iii) result in the creation or imposition of any Lien
upon any property, asset or revenue of Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization or approval applicable to Company, its business or operations, or
any of its assets or properties.
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<PAGE> 3
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority or
other Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Transaction
Documents executed by Company and the performance and consummation of the
transactions contemplated thereby.
(f) No Violation or Default. None of Company or Company's
Subsidiaries is in violation of or in default with respect to (i) its Articles
or Certificate of Incorporation or Bylaws or any material judgment, order,
writ, decree, statute, rule or regulation applicable to such Person; (ii) any
material mortgage, indenture, agreement, instrument or contract to which such
Person is a party or by which it is bound (nor is there any waiver in effect
which, if not in effect, would result in such a violation or default), where,
in each case, such violation or default, individually, or together with all
such violations or defaults, could reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing, none of
Company or Company's Subsidiaries (A) has violated any Environmental Laws, (B)
has any liability under any Environmental Laws or (C) has received notice or
other communication of an investigation or is under investigation by any
Governmental Authority having authority to enforce Environmental Laws, where
such violation, liability or investigation could reasonably be expected to have
a Material Adverse Effect. For purposes of this Section 2(f), "Environmental
Laws" means all judgements, orders, writs, decrees, statutes, rules or
regulations relating to the protection of human health or the environment,
including, without limitation, (i) all judgements, orders, writs decrees,
statutes, rules or regulations, pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or
threatened releases of hazardous materials, chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials or wastes whether
solid, liquid, or gaseous in nature, into the air, surface water, groundwater,
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials, or
wastes, whether solid, liquid, or gaseous in nature; and (ii) all judgements,
orders, writs, decrees, statutes, rules or regulations pertaining to the
protection of the health and safety of employees or the public. No Event of
Default or default, which after the giving of notice or the lapse of time or
both would constitute an Event of Default, has occurred and is continuing.
(g) Litigation. Except as set forth (with estimates of the dollar
amounts involved) in Item 2(g) of Schedule II hereto (the "Disclosure
Schedule"), no actions (including, without limitation, derivative actions),
suits, proceedings or investigations are pending or, to the knowledge of
Company, threatened against Company or Company's Subsidiaries at law or in
equity in any court or before any other governmental authority which if
adversely determined (i) would (alone or in the aggregate) have a Material
Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by Company of the Transaction Documents or
the transactions contemplated thereby.
(h) Title. Company and Company's Subsidiaries own and have good
and marketable title in fee simple absolute to, or a valid leasehold interest
in, all their respective real properties and good title to their other
respective assets and properties as reflected in the most recent Financial
Statements delivered to Purchasers (except those assets and properties disposed
of in the ordinary course of business since the date of such Financial
Statements) and all respective assets and properties acquired by Company and
Company's Subsidiaries since such date (except those disposed
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<PAGE> 4
of in the ordinary course of business). Such assets and properties are subject
to no Lien, except for Permitted Liens.
(i) Intellectual Property. To the best of their knowledge,
Company and Company's Subsidiaries own or possess sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, processes and other intellectual property rights
necessary for its business as now conducted and as proposed to be conducted
without any conflict with, or infringement of the rights of, others.
(j) Financial Statements. Except as set forth in Item 2(j) of the
Disclosure Schedule, the Financial Statements of Company which have been
delivered to the Purchasers, (i) are in accordance with the books and records
of Company and its Subsidiaries, which have been maintained in accordance with
good business practice; (ii) have been prepared in conformity with GAAP; and
(iii) fairly present the consolidated financial position of Company as of the
dates presented therein and the results of operations, changes in financial
positions or cash flows, as the case may be, for the periods presented therein.
None of Company or any of Company's Subsidiaries has any contingent
obligations, liability for taxes or other outstanding obligations which are
material in the aggregate, except as disclosed in the unaudited Financial
Statements dated August 31, 1994, furnished by Company to Purchasers prior to
the date hereof.
(k) Equity Securities. Company's total authorized and issued
capitalization is as set forth in Item 2(k) of the Disclosure Schedule. The
Equity Securities of Company have the respective rights, preferences and
privileges set forth in Company's Articles or Certificate of Incorporation in
effect on the date hereof. All of the outstanding Equity Securities of the
Company have been duly authorized and are validly issued, fully paid and
nonassessable. Except as expressly referenced herein or as set forth in Item
2(k) of the Disclosure Schedule, there are as of the date of this Agreement no
options, warrants or rights to purchase Equity Securities authorized, issued or
outstanding, nor is Company obligated in any other manner to issue shares of
its Equity Securities. Except as set forth in Item 2(k) there are no
restrictions on the transfer of Equity Securities of Company, other than those
imposed by Company's Certificate or Articles of Incorporation and Bylaws as of
the date hereof, or relevant state and federal securities laws, and no holder
of any Equity Security of Company is entitled to preemptive or similar
statutory or contractual rights, either arising pursuant to any agreement or
instrument to which Company is a party or that are otherwise binding upon
Company. The offer and sale of all Equity Securities of Company issued before
the Closing Date complied with or were exempt from registration or
qualification under all applicable federal and state securities laws. Except
as expressly referenced herein or as set forth in Item 2(k) of the Disclosure
Schedule, no Person has the right to demand or other rights to cause Company to
file any registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), relating to any Equity Securities of Company presently
outstanding or that may be subsequently issued, or any right to participate in
any such registration statement.
(l) No Agreements to Sell Assets. None of Company or Company's
Subsidiaries has any legal obligation, absolute or contingent, to any Person to
sell the assets of Company or Company's Subsidiaries (other than sales in the
ordinary course of business), or to effect any merger, consolidation or other
reorganization of Company or to enter into any agreement with respect thereto.
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<PAGE> 5
(m) Employee Benefit Plans.
(i) Neither Company nor any Person (each, an "ERISA
Affiliate") which is treated as a single employer with Company under section
414 of the Internal Revenue Code of 1986, as amended (the "Code") has an
employee benefit plan (an "Employee Benefit Plan") within the meaning of the
Employee Retirement Income Security Act of 1974 (as the same may from time to
time be amended or supplemented, and including any rules or regulations issued
in connection therewith, "ERISA") that is an "employee pension benefit plan"
(within the meaning of section 3(2) of ERISA). Neither Company nor any ERISA
Affiliate has any liability with respect to any post-retirement benefit under
any Employee Benefit Plan which is a welfare plan (as defined in section 3(1)
of ERISA), other than liability for health plan continuation coverage described
in Part 6 of Title I(B) of ERISA, which liability for health plan continuation
coverage cannot reasonably be expected to have a Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and the Code, and no
condition exists or event has occurred with respect to any such Employee
Benefit Plan which would result in the incurrence by either Company or any
ERISA Affiliate of any material liability, fine or penalty. Each Employee
Benefit Plan, related trust agreement, arrangement and commitment of Company or
any ERISA Affiliate is legally valid and binding and in full force and effect.
No Employee Benefit Plan is being audited or investigated by any governmental
authority or is subject to any pending or threatened claim or suit. Neither
Company nor any ERISA Affiliate nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under section 406 of ERISA or section
4975 of the Code.
(iii) Except as set forth in Item 2(m) of the Disclosure
Schedule, neither Company nor any ERISA Affiliate contributes to any
multiemployer plan within the meaning of ERISA (a "Multiemployer Plan").
Neither Company nor any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under section 4201
of ERISA or as a result of a sale of assets described in section 4204 of ERISA.
Neither Company nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within the
meaning of section 4241 or section 4245 of ERISA or that any Multiemployer Plan
intends to terminate or has been terminated under section 4041A of ERISA.
(n) Other Regulations. None of Company or its Subsidiaries is
subject to regulation under the Investment Company Act of 1940, the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code or to any federal or state
statute or regulation limiting its ability to incur Indebtedness.
(o) Governmental Charges and Other Indebtedness. Each of Company
and its Subsidiaries has filed or caused to be filed all tax returns which are
required to be filed by it. Company and Company's Subsidiaries have paid, or
made provision for the payment of, all taxes and other levies, assessments,
fees, claims or other charges imposed by any governmental authority which have
or may have become due pursuant to said returns and all other Indebtedness,
except such taxes, levies, assessments, fees, claims or other charges or
Indebtedness, if any, which are being contested in good faith and as to which
adequate reserves (determined in accordance with generally accepted
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<PAGE> 6
accounting principles) have been provided or which could not reasonably be
expected to have a Material Adverse Effect if unpaid.
(p) Subsidiaries, etc. Except as set forth in Item 2(p) of the
Disclosure Schedule (setting forth the jurisdiction of incorporation, capital
structure and percentage ownership of each shareholder), Company has no
Subsidiaries, is not a partner in any partnership or a joint venturer in any
joint venture.
(q) Solvency, Etc. Company is Solvent (as defined below) and,
after the execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby, each of Company and its
Subsidiaries will be Solvent. "Solvent" shall mean, with respect to any Person
on any date, that on such date (a) the fair value of the property of such
Person is greater than the fair value of the liabilities (including, without
limitation, contingent liabilities) of such Person, (b) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature and (d) such Person is not
engaged in business or a transaction, and is not about in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital.
(r) Catastrophic Events; Labor Disputes. None of Company or
Company's Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or other casualty that could
reasonably be expected to have a Material Adverse Effect. There are no
disputes presently subject to grievance procedure, arbitration or litigation
under any of the collective bargaining agreements, employment contracts or
employee welfare or incentive plans to which Company or Company's Subsidiaries
is a party, and there are no strikes, lockouts, work stoppages or slowdowns,
or, to the best knowledge of Company, jurisdictional disputes or organizing
activity occurring or threatened which could reasonably be expected to have a
Material Adverse Effect.
(s) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a Material Adverse
Effect since August 31, 1994.
(t) Accuracy of Information Furnished. None of the Transaction
Documents and none of the other certificates, statements or information
furnished to Purchasers by or on behalf of Company or Company's Subsidiaries in
connection with the Transaction Documents or the transactions contemplated
thereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Purchasers recognize that all financial projections furnished
to the Purchasers by or on behalf of Company or Company's Subsidiaries in
connection with the Transaction Documents or the transactions contemplated
thereby are not to be viewed as facts and that actual results during the period
or periods covered by such projections may differ from the projected or
forecasted results.
(u) Certain Agreements of Officers, Employees and Consultants.
-6-
<PAGE> 7
(i) No officer, employee or consultant of Company or
Company's Subsidiaries is, or is now expected to be, in violation of any term
of any employment contract, proprietary information agreement, nondisclosure
agreement, noncompetition agreement, or any other contract or agreement or any
restrictive covenant relating to the right of any such officer, employee or
consultant to be employed by Company or Company's Subsidiaries because of the
nature of the business conducted or to be conducted by Company or Company's
Subsidiaries or relating to the use of trade secrets or proprietary information
of others, and to the best of Company's knowledge, after due inquiry, the
continued employment of Company's and Company's Subsidiaries' officers,
employees and consultants do not subject Company or its Subsidiaries to any
liability for any claim or claims arising out of or in connection with any such
contract, agreement, or covenant.
(ii) To the knowledge of Company, no officers of Company,
and no employee or consultant of Company or Company's Subsidiaries whose
termination, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, has any present intention of
terminating his or her employment or consulting relationship with Company or
Company's Subsidiaries.
(v) Contracts or Commitments; Indebtedness. None of Company or
Company's Subsidiaries and none of their properties is subject to any material
judgment, order, writ, decree, statute, rule or regulation, or any material
mortgage, indenture, agreement, instrument or contract which could reasonably
be expected to have a Material Adverse Effect. Except for this Agreement, the
Notes and the other Transaction Documents, and except as set forth in Item 2(v)
of the Disclosure Schedule, neither Company nor any of its Subsidiaries is a
party to any contracts or commitments (or group of related contracts or
commitments) involving more than Fifty Thousand Dollars ($50,000) or having a
term (including renewals or extensions optional with another party) of more
than one (1) year from the date thereof. Company and its Subsidiaries have no
Indebtedness other than Permitted Indebtedness.
(w) Transactions with Affiliates; Investments. There are no
loans, leases, royalty agreements or other continuing transactions between
Company or its Subsidiaries and any Affiliate of Company or its Subsidiaries,
except transactions in the ordinary course of business and on terms at least as
favorable to Company or its Subsidiaries as would be the case in an arms-length
transaction with an unaffiliated Person. Company and its Subsidiaries have no
Investments other than Permitted Investments.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser,
for that Purchaser alone, represents and warrants to Company upon the
acquisition of the Note as follows:
(a) Binding Obligation. Such Purchaser has full legal
capacity, power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Each of this Agreement and the Note issued
to such Purchaser is a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and general principles of equity.
(b) Securities Law Compliance. Such Purchaser has been
advised that the Notes have not been registered under the Securities Act, or
any state securities laws and, therefore, cannot
-7-
<PAGE> 8
be resold unless they are registered under the Securities Act and applicable
state securities laws or unless an exemption from such registration
requirements is available. Such Purchaser is aware that Company is under no
obligation to effect any such registration with respect to the Notes or to file
for or comply with any exemption from registration. Such Purchaser has not
been formed solely for the purpose of making this investment and is purchasing
the Notes to be acquired by such Purchaser hereunder for its own account for
investment, not as a nominee or agent, and not with a view to, or for resale in
connection with, the distribution thereof. Such Purchaser has such knowledge
and experience in financial and business matters that such Purchaser is capable
of evaluating the merits and risks of such investment, is able to incur a
complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time. Such Person is an accredited
investor as such term is defined in Rule 501 of Regulation D under the
Securities Act.
(c) Access to Information. Such Purchaser acknowledges
that Company has given such Purchaser access to the corporate records and
accounts of Company and to all information in its possession relating to
Company, has made its officers and representatives available for interview by
such Purchaser, and has furnished such Purchaser with all documents and other
information required for such Purchaser to make an informed decision with
respect to the purchase of the Notes.
4. CONDITIONS TO CLOSING OF THE PURCHASERS. The Purchaser's
obligations at the Closing are subject to the fulfillment, on or prior to the
Closing Date, of all of the following conditions, any of which may be waived in
whole or in part by the Purchasers:
(a) Representations and Warranties. The representations
and warranties made by Company in Section 2 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any
notices required or permitted to be filed after the Closing Date with certain
federal and state securities commissions, Company shall have obtained all
governmental approvals required in connection with the lawful sale and issuance
of the Notes.
(c) Legal Requirements. At the Closing, the sale and
issuance by Company, and the purchase by the Purchasers, of the Notes shall be
legally permitted by all laws and regulations to which the Purchasers or
Company are subject.
(d) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
in connection with the Merger Agreement and the Credit Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers.
(e) Conditions Related to Merger Agreement. The Merger
Agreement shall have been executed and delivered by all parties thereto and
shall be in full force and effect and all conditions to closing thereunder
shall have been satisfied or waived.
(f) Conditions Related to Senior Indebtedness. The
Credit Agreement shall have been duly executed and delivered by all parties
thereto and shall be in full force and effect and all
-8-
<PAGE> 9
conditions to the making of loans thereunder (other than those related to the
consummation of the transactions under the Merger Agreement and the purchase of
Notes pursuant to this Agreement) shall have been satisfied or waived.
(g) Opinion of Counsel. There shall have been delivered
to the Purchasers a favorable written opinion of Wilson, Sonsini, Goodrich &
Rosati, counsel to Borrower, in the form of Exhibit B hereto, dated as of the
Closing Date.
(h) Corporate Documents. Borrower shall have delivered
to the Purchasers each of the following:
(i) The Certificate of Incorporation of Company,
certified as of a recent date prior to the Closing Date by the
Secretary of States of Delaware;
(ii) A Certificate of Good Standing or comparable
certificate as to Company, certified as of a recent date prior to the
Closing Date by the Secretary of State of Delaware;
(iii) A certificate of the Secretary of Company,
dated the Closing Date, certifying (a) that the Certificate of
Incorporation of Company, delivered to Purchasers pursuant to Section
4(h)(i) hereof, is in full force and effect and has not been amended,
supplemented, revoked or repealed since the date of such
certification; (b) that attached thereto is a true and correct copy of
the Bylaws of Company as in effect on the Closing Date; (c) that
attached thereto are true and correct copies of resolutions duly
adopted by the Board of Directors of Company and continuing in effect,
which authorize the execution, delivery and performance by Company of
this Note Purchase Agreement and the Notes and the consummation of the
transactions contemplated hereby and thereby; and (d) that there are
no proceedings for the dissolution or liquidation of Company
(commenced or threatened); and
(iv) A certificate of the Secretary of Company,
dated the Closing Date, certifying the incumbency, signatures and
authority of the officers of Company authorized to execute and deliver
this Note Purchase Agreement and the Notes on behalf of Company and
perform the Company's obligations thereunder on behalf of Company.
5. CONDITIONS TO OBLIGATIONS OF COMPANY. Company's obligation to
issue and sell the Notes at the Closing is subject to the fulfillment, on or
prior to the Closing Date, of the following conditions, any of which may be
waived in whole or in part by Company:
(a) Representations and Warranties. The representations
and warranties made by the Purchasers in Section 3 hereof shall be true and
correct when made, and shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any
notices required or permitted to be filed after the Closing Date with certain
federal and state securities commissions, Company shall have obtained all
governmental approvals required in connection with the lawful sale and issuance
of the Notes.
-9-
<PAGE> 10
(c) Legal Requirements. At the Closing, the sale and
issuance by Company, and the purchase by the Purchasers, of the Notes shall be
legally permitted by all laws and regulations to which the Purchasers or
Company are subject.
(d) Purchase Price. Each Purchaser shall have delivered
to Company the Purchase Price in respect of the Note being purchased by such
Purchaser referenced in Section 1(b) hereof.
6. MISCELLANEOUS.
(a) Waivers and Amendments. Any provision of this
Agreement may be amended, waived or modified upon the written consent of
Company and holders of more than fifty percent (50%) of all then outstanding
Notes issued pursuant to this Agreement.
(b) Governing Law. This Agreement and all actions
arising out of or in connection with this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law provisions of the State of New York or of any other
state.
(c) Survival. The representations, warranties, covenants
and agreements made herein shall survive the execution and delivery of this
Agreement.
(d) Successors and Assigns. Subject to the restrictions
on transfer described in Sections 6(e) and 6(f) below, the rights and
obligations of Company and the Purchasers of the Notes shall be binding upon
and benefit the successors, assigns, heirs, administrators and transferees of
the parties.
(e) Registration, Transfer and Replacement of the Notes.
The Notes issuable under this Agreement shall be registered notes. Company
will keep, at its principal executive office, books for the registration and
registration of transfer of the Notes. Prior to presentation of any Note for
registration of transfer, Company shall treat the Person in whose name such
Note is registered as the owner and holder of such Note for all purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall
not be affected by notice to the contrary. Subject to any restrictions on or
conditions to transfer set forth in any Note, the holder of any Note, at its
option, may in person or by duly authorized attorney surrender the same for
exchange at Company's chief executive office, and promptly thereafter and at
Company's expense, except as provided below, receive in exchange therefor one
or more new Note(s), each in the principal requested by such holder, dated the
date to which interest shall have been paid on the Note so surrendered or, if
no interest shall have yet been so paid, dated the date of the Note so
surrendered and registered in the name of such Person or Persons as shall have
been designated in writing by such holder or its attorney for the same
principal amount as the then unpaid principal amount of the Note so
surrendered. Upon receipt by Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
and (a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it; or (b) in the case of mutilation, upon surrender thereof,
the Company, at its expense, will execute and deliver in lieu thereof a new
Note executed in the same manner as the Note being replaced, in the same
principal amount as the unpaid principal amount of such Note and dated the date
to which interest shall have been paid on such Note or, if no interest shall
have yet been so paid, dated the date of such Note.
-10-
<PAGE> 11
(f) Assignment by Company. Neither the Notes nor any of
the rights, interests or obligations hereunder may be assigned, by operation of
law or otherwise, in whole or in part, by Company without the prior written
consent of the Purchaser except in connection with an assignment in whole to a
successor corporation to Company by merger or otherwise, provided that such
successor corporation succeeds to or acquires all or substantially all of
Company's property and assets and Purchaser's rights hereunder are not
impaired.
(g) Entire Agreement. This Agreement together with the
Notes constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
(h) Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered or certified
mail, postage prepaid, or by recognized overnight courier or personal delivery,
addressed (i) if to a Purchaser, at such Purchaser's address set forth in the
Schedule of Purchasers attached as Schedule I, or at such other address as such
Purchaser shall have furnished Company in writing, or (ii) if to Company, at
its address set forth at the beginning of this Agreement, or at such other
address as Company shall have furnished to the Purchasers in writing.
(i) Separability of Agreements; Severability of this
Agreement. Company's agreement with each of the Purchasers is a separate
agreement and the sale of the Notes to each of the Purchasers is a separate
sale. Unless otherwise expressly provided herein, the rights of each Purchaser
hereunder are several rights, not rights jointly held with any of the other
Purchasers. Any invalidity, illegality or limitation on the enforceability of
the Agreement or any part thereof, by any Purchaser whether arising by reason
of the law of the respective Purchaser's domicile or otherwise, shall in no way
affect or impair the validity, legality or enforceability of this Agreement
with respect to other Purchasers. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
(j) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall be deemed to constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
MHI ACQUISITION, INC.,
a Delaware corporation
By: /s/William A. Brosius
-------------------------------------------
Name: William A. Brosius
-----------------------------------------
Title: Chief Financial Officer
---------------------------------------
PURCHASERS:
MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
By: Morgan Stanley Venture Partners II, L.P.,
its General Partner
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
-------------------------------------------
Name: Debra Abramovitz
-----------------------------------------
Title: Vice President
-------------------------------------
[SIGNATURES CONTINUE]
-12-
<PAGE> 13
MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
By: Morgan Stanley Venture Partners II, L.P.,
its Investment General Partner
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
-------------------------------------------
Name: Debra Abramovitz
-----------------------------------------
Title: Vice President
----------------------------------------
MORGAN STANLEY VENTURE INVESTORS, L.P.
By: Morgan Stanley Venture Partners II, L.P.,
its General Partner
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
-------------------------------------------
Name: Debra Abramovitz
-----------------------------------------
Title: Vice President
----------------------------------------
-13-
<PAGE> 14
SCHEDULE I
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Name and Address Note Amount
------------------------------------------ ----------------------
<S> <C>
MORGAN STANLEY VENTURE CAPITAL FUND II, L.P. $5,965,504.61
(1) All payments on account of the Notes shall be
made by bank wire transfer of immediately
available funds to:
Morgan Guaranty Trust
ABA No. 021-000-238
Account No. 001-58-844
Reference: Morgan Stanley Venture Capital Fund II, L.P.
(2) Address for all notices:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Attn: Guy de Chazal
Tel.: (212) 703-8535
Fax: (212) 703-8957
With copies to:
Morgan Stanley Venture Partners, Inc.
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Attention: Scott S. Halsted
Tel.: (415) 233-2600
Fax: (415) 233-2626
(3) Deliver Note to:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas, 33rd Floor
New York, New York 10020
Attn: Richard Schultz
Tel.: (212) 703-8752
Fax: (212) 703-8957
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
MORGAN STANLEY VENTURE CAPITAL FUND II, C.V. $1,486,228.07
(1) All payments on account of the Notes shall be
made by bank wire transfer of immediately
available funds to:
Morgan Guaranty Trust
ABA No. 021-000-238
Account No. 001-60-461
Reference: Morgan Stanley Venture Capital Fund II, C.V.
(2) Address for all notices:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Attn: Guy de Chazal
Tel.: (212) 703-8535
Fax: (212) 703-8957
With copies to:
Morgan Stanley Venture Partners, Inc.
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Attention: Scott S. Halsted
Tel.: (415) 233-2600
Fax: (415) 233-2626
(3) Deliver Note to:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas, 33rd Floor
New York, New York 10020
Attn: Richard Schultz
Tel.: (212) 703-8752
Fax: (212) 703-8957
</TABLE>
-2-
<PAGE> 16
<TABLE>
<S> <C>
MORGAN STANLEY VENTURE INVESTORS, L.P. $1,548,267.32
(1) All payments on account of the Notes shall be
made by bank wire transfer of immediately
available funds to:
Morgan Guaranty Trust
ABA No. 021-000-238
Account No. 001-58-866
Reference: Morgan Stanley Venture Investors, L.P.
(2) Address for all notices:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Attn: Guy de Chazal
Tel.: (212) 703-8535
Fax: (212) 703-8957
With copies to:
Morgan Stanley Venture Partners, Inc.
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Attention: Scott S. Halsted
Tel.: (415) 233-2600
Fax: (415) 233-2626
(3) Deliver Note to:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas, 33rd Floor
New York, New York 10020
Attn: Richard Schultz
Tel.: (212) 703-8752
Fax: (212) 703-8957
</TABLE>
-3-
<PAGE> 17
SCHEDULE II AND EXHIBITS
Omitted.
-4-
<PAGE> 1
EXHIBIT 10.16
NOTE PURCHASE AND SALE AGREEMENT
This Note Purchase and Sale Agreement (the "AGREEMENT") is entered
into as of May 6, 1996 by and among Morgan Stanley Venture Capital Fund II L.P.
("MSVCF II LP"); Morgan Stanley Venture Capital Fund II CV ("MSVCF II CV") and
Morgan Stanley Investors, L.P. ("MSVI LP") (each individually a "SELLER" and
collectively the "SELLERS"), and Alan Gerry ("GERRY") and SV Capital Partners,
L.P., ("SV") (each individually a "PURCHASER" and collectively the
"PURCHASERS") and MHI Acquisition, Inc., a Delaware corporation with its
principal executive office at 2501 Cedar Springs Road, Suite 600, LB15, Dallas,
Texas 75201 (the "COMPANY").
RECITALS
A. Sellers are the owners and holders of record of senior
subordinated notes due 2000 (the "NOTES") of the Company representing in the
aggregate the principal amount of $9,000,000 of subordinated indebtedness held
individually by MSVCF II LP in the principal amount of $5,965,504.61, by MSVCF
II CV in the principal amount of $1,486,228.07 and by MSVI LP in the principal
amount of $1,548,267.32 all as purchased pursuant to a Note Purchase Agreement
entered into with Company dated May 31, 1995 (the "Original Note Agreement").
B. On the terms and subject to the conditions set forth herein,
the Purchasers are willing to purchase from the Sellers and the Sellers are
willing to sell to Purchasers the Notes in such number and for the prices set
forth in Schedule I Part A hereof.
C. In consideration of the Purchasers purchasing the Notes,
Sellers are willing to issue to Purchasers, Warrants (as defined below) for the
purchase by Purchasers of in the aggregate 270,270 Series A Preferred Stock of
the Company in the number set forth in Schedule 1 Part B hereof.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the parties hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
(a) Purchase and Sale of Notes. At the Closing (as
defined below) Sellers shall sell, convey, transfer and deliver to Purchasers
all of Sellers' right, title and interest in and to the Notes, in accordance
with Schedule I Part A hereof and Purchasers shall purchase such Notes from the
Sellers. In consideration of the transfer and sale of the Notes to each
Purchaser, Purchasers shall pay Sellers the total purchase price of
$10,440,534, such price to include all accrued interest on the Notes as of the
Closing Date (as defined below) in the amount of $1,440,534. The principal
amount of the Notes to be sold by each Seller and the amounts to be paid by the
Purchasers and to be received by the Sellers in respect thereof are as set
forth in Schedule I Part A hereof. The obligations of the Purchasers to
purchase the Notes are several and not joint; provided, however, that Sellers
<PAGE> 2
shall not be required to sell and the Purchasers shall not be obligated to
purchase, any of the Notes unless all of the Notes shall be purchased upon the
Closing.
The sale and purchase of the Notes shall take place at a closing (the
"CLOSING") to be held at the offices of Morgan Stanley Venture Capital, 3000
Sand Hill Road, Menlo Park, CA 94125 at 5:00 PM, Pacific Standard Time on May
6, 1996 or such other time and/or place as the parties may mutually determine
(the "CLOSING DATE"). Against receipt by Sellers of the purchase price for the
respective Notes, at the Closing, Sellers shall surrender the Notes to the
Company in exchange for the issuance of new notes due 2000 in the form of
Exhibit A hereof (the "New Notes") dated the date of the Notes so surrendered,
such New Notes to be registered in the names of each of the Purchasers in the
principal amount of $4,500,000 each.
(b) Issuance of Warrants. Simultaneously at the Closing,
and in consideration of the purchase by a Purchaser of the Notes to be
purchased by it, each Seller shall issue to each Purchaser one warrant for the
purchase by each such Purchaser of a total aggregate amount of 135,135 shares
of Series A Preferred Stock of the Company at $1.00 per share or any stock,
other securities, money and property received or receivable into or for which
such Series A Preferred Stock may hereafter be converted or exchanged, as the
case may be (collectively, the "Shares") subject to the terms and conditions of
such warrants which shall be in the form of Exhibit B hereto (the "Warrants")
and the Sellers shall issue and Purchasers shall each take delivery of, the
Warrants in accordance with Schedule 1 Part B hereof.
(c) Assignment of Rights Under Original Note Agreement.
At the Closing the Sellers shall assign to the Purchasers all of their rights
under the Original Note Agreement pursuant to an instrument of assignment in
form and substance satisfactory to the Purchasers.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS. The Sellers hereby
represent and warrant to each Purchaser that:
(a) Ownership.
(i) The Notes to be sold by the Sellers pursuant
to this Agreement have been validly issued by the Company to the Sellers and
the outstanding principal balance of and accrued and unpaid interest on the
Notes as of the Closing Date is as set forth in Schedule 1 Part A hereof.
(ii) The shares of capital stock to be purchased
by Purchasers upon exercise of the Warrants (the "Warrant Shares") have been or
will have been validly issued by the Company to the Sellers and are or will be
fully paid and non assessable, and except for those certain restrictions set
forth in the Company Stockholders' Agreement, the Series A Preferred Stock
Purchase Agreement (both as hereinbelow defined) and the Company's Restated
Certificate of Incorporation, will not be subject to any voting or other
restrictions, liens, claims or encumbrances.
-2-
<PAGE> 3
(b) Power to Transfer. The Sellers have the absolute and
unrestricted right, power and authority to sell, transfer and assign the Notes
and issue the Warrants and sell, transfer and assign the Warrant Shares upon
exercise of the Warrants to the Purchasers pursuant to this Agreement and the
Warrants and all action on the part of Sellers' partners, board of directors,
and stockholders as applicable, necessary for the authorization, execution,
delivery and performance of this Agreement, issuance of the Warrants and the
sale of the Warrant Shares has been taken prior to Closing and any and all
rights held by the Company, the stockholders of the Company, or others which
might otherwise limit the right or power of Sellers to transfer the Notes,
issue the Warrants and sell the Warrant Shares to the Purchasers in the manner
contemplated by this Agreement and the Warrants have been duly complied with or
waived and each person or entity holding such right has consented to the
transfers effected hereby.
(c) Binding Obligation of Sellers. This Agreement and
the Warrants have been duly executed and delivered by the Sellers and
constitute valid and binding obligations of Sellers, enforceable in accordance
with their terms, subject to laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
(d) Effective Title.
(i) The sale of the Notes to Purchasers as
contemplated by this Agreement will transfer to Purchasers good, valid and
absolute title to, and beneficial ownership of the New Notes, free and clear of
all liens, claims and encumbrances whatsoever, except those that may be created
by the Purchasers themselves.
(ii) The delivery of the Warrant Shares to
Purchasers upon exercise of the Warrants will transfer to Purchasers good,
valid and absolute title to, and beneficial ownership of the Warrant Shares,
free and clear of all liens, claims and encumbrances whatsoever, provided,
however, that the Warrant Shares shall remain subject to the provisions of the
Company's Stockholders' Agreement dated May 31, 1995 (the "Company's
Stockholders Agreement") and the Series A Preferred Stock Purchase Agreement
dated May 31, 1995 (the "Series A Preferred Stock Purchase Agreement"), a true
and complete copy of which shall be delivered to Purchasers at Closing.
(iii) Subject to Section 2a.(ii) above, the rights,
preferences, privileges and restrictions granted to or imposed upon the Warrant
Shares and the holders thereof are as set forth in the Warrants and the
Company's Restated Certificate of Incorporation, a true and complete copy of
which is attached to the Warrants.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser,
for that Purchaser alone, represents and warrants to Sellers upon the
acquisition of the Notes as follows:
(a) Binding Obligation. Such Purchaser has full legal
capacity, power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement is a valid and binding
obligation of the Purchaser, enforceable in accordance with its
-3-
<PAGE> 4
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
(b) Securities Law Compliance. Such Purchaser has been
advised that neither the Notes, the Warrants nor the Warrant Shares have been
registered under the Securities Act, or any state securities laws and therefore
cannot be resold unless they are registered under the Securities Act and
applicable state securities laws or an exemption from such registration
requirements is available. Such Purchaser is aware that Company is under no
obligation to effect any such registration with respect to the Notes or the
Warrants or to file for or comply with any exemption from registration. The
rights of the Warrant Shares to registration are as set forth in the Company's
Registration Rights Agreement dated May 31, 1995 (the "Company's Registration
Rights Agreement"). Such Purchaser has not been formed solely for the purpose
of making this investment and is purchasing the Notes, Warrants and Warrant
Shares to be acquired by such Purchaser hereunder for its own account for
investment, not as a nominee or agent, and not with a view to, or for resale in
connection with, the distribution thereof. Such Purchaser has such knowledge
and experience in financial and business matters that such Purchaser is capable
of evaluating the merits and risks of such investment, is able to incur a
complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time. Such Person is an accredited
investor as such term is defined in Rule 501 of Regulation D under the
Securities Act.
(c) Access to Information. Such Purchaser acknowledges
that Sellers have given such Purchaser access to such of the corporate records
and accounts of Company and such other information in their possession relating
to Company as the Purchasers have requested, that Sellers have arranged for the
availability of officers and representatives of the Company for interview by
such Purchaser, and have furnished such Purchaser with all documents and other
information as Purchasers have requested in order for such Purchaser to make an
informed decision with respect to the purchase of the Notes, the Warrants and
the Warrant Shares.
4. SELLERS' COVENANTS.
(a) Repayment of Notes upon IPO. In the event that the
Company successfully completes a Qualified IPO (as such term is defined in the
Warrants), the Sellers shall use their reasonable efforts to see that the
principal amount of the New Notes together with all accrued but unpaid interest
thereon will be repaid by the Company as soon as is reasonably practicable
following the completion of such Qualified IPO; provided, however, that any
such repayment shall be subject to such restrictions as the Company and the
underwriters representing the Company may deem fit to impose for the successful
completion of the Qualified IPO.
(b) Participation by Sellers in IPO. The Sellers shall
not be entitled to sell any of their shares in the Company in a Qualified IPO
unless the Company shall have repaid, or become obligated to repay the
outstanding principal amount of the New Notes together with all accrued but
unpaid interest prior to, on or as soon as is reasonably practicable following
the closing of the Qualified IPO.
-4-
<PAGE> 5
(c) Participation by Sellers in Follow-on Offerings. In
the event that the Company decides to carry out one or more follow-on offerings
subsequent to closing of a Qualified IPO, Sellers' participation in each such
follow-on offering shall be limited to the sale of up to fifty percent (50%) in
the aggregate of their entire shareholding in the Company if the New Notes have
not already been repaid.
(d) Minimum Ownership of Sellers Prior to IPO. Prior to
the closing of a Qualified IPO, without the prior written approval of the
holders of the majority of the outstanding principal amount of the New Notes,
Sellers shall not: (i) sell, transfer, convey or dispose of any of their Shares
in the Company to a third party if at the conclusion of any such transaction,
Sellers would own in the aggregate Shares representing less than forty percent
(40%) of the outstanding share capital of the Company on a fully diluted basis
or (ii) transfer, convey or exchange any of their Shares in the Company
pursuant to a merger or consolidation or vote in favor of a merger,
consolidation, acquisition or other corporate transaction, unless, after giving
effect thereto, the Sellers would continue to own Shares representing at least
thirty-three percent (33%) of the outstanding share capital of the Company on a
fully diluted basis.
(e) Sale of Company's Assets. In the event of a proposed
sale of all or substantially all of the Company's assets to a third party
purchaser, Sellers shall not, without the written consent of the holder(s) of
the majority of the outstanding principal amount of the New Notes vote in favor
of such proposed asset sale unless the third party purchaser has formerly
agreed that on the closing of the purchase of the Company's assets it will
repay the New Notes and all accrued but unpaid interest thereon. In the event
of a proposed sale of all or substantially all of the Company's assets to a
third party purchaser, Sellers shall duly and timely inform Purchasers of the
same and of all decisions to be taken and procedures arising thereafter leading
up to the sale of the Company's assets.
(f) Preservation of certain Company Stockholders'
Agreement Rights. Sellers undertake to use their best reasonable efforts to
ensure that the Company Stockholders' Agreement shall not be modified in any
material respect and in particular, with respect to the Co-sale rights set
forth in Section 3 and the Preemptive right on Company issues set forth in
Section 4 thereof, unless such modification shall have equal effect with
respect to all of the parties to such Company Stockholders' Agreement, in which
event Sellers will duly and timely notify Purchasers of the same.
(g) Rights to Purchase Shares Acquired from Founders. In
the event that pursuant to a Founder Performance Stock Purchase Agreement as
entered into between the Company and each of the Founders (Charles L. Allen,
Ray W. Griffitts, Jr. and William A. Brosius) each dated as of May 31, 1995, (a
"Founder Performance Stock Purchase Agreement"), the Company is unwilling or
unable to exercise its Repurchase Option (as described in Section 3 thereunder)
with respect to a Founder's Unreleased Shares (as described in Section 3
thereunder), and Sellers choose to exercise the Repurchase Option in place of
the Company, Sellers shall immediately notify Purchasers of the same and
Purchasers shall thereafter have fifteen (15) days from the receipt of such
notification to demand a right to purchase from Sellers, following Sellers'
exercise of the Repurchase Option, a percentage of the shares thereby acquired
by Sellers, which shall be based on a pro rata calculation
-5-
<PAGE> 6
of the number of shares of the Company held by each Purchaser in aggregate with
Sellers following exercise of all or part of Purchasers' Warrants in view of
such transaction.
(h) Lapse of Certain Covenants upon Repayment of the New
Notes. In the event that the principal amount of the New Notes together with
all interest thereon shall have been fully repaid, the provisions of Section 4
a), b), c), d) and e) shall lapse and the Sellers shall not have further
obligations thereunder.
5. CONDITIONS TO CLOSING OF THE PURCHASERS. The Purchaser's
obligations at the Closing are subject to the fulfillment, on or prior to the
Closing Date, of all of the following conditions, any of which may be waived in
whole or in part by the Purchasers:
(a) Representations and Warranties.
(i) The representations and warranties made by
Sellers in Section 2 hereof shall be true and correct on the Closing Date.
(ii) The representations and warranties made by
the Company as set forth in Exhibit B (the "Company-Purchasers Agreement"),
hereof shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any
notices required or permitted to be filed after the Closing Date with certain
federal and state securities commissions, Sellers shall have obtained all
approvals required in connection with the lawful sale and transfer of the Notes
and Company shall have obtained all governmental approvals required in
connection with the issuance of the New Notes.
(c) Legal Requirements. At the Closing, the sale and
transfer by Sellers, and the purchase by the Purchasers, of the Notes, the
issuance by Company of New Notes and the issuance of the Warrants by Sellers,
shall be legally permitted by all laws and regulations to which the Sellers,
Purchasers or Company are subject.
(d) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers.
6. CONDITIONS TO OBLIGATIONS OF SELLERS. Sellers' obligation to
sell and transfer the Notes and issue the Warrants at the Closing is subject to
the fulfillment, on or prior to the Closing Date, of the following conditions,
any of which may be waived in whole or in part by Sellers:
-6-
<PAGE> 7
(a) Representations and Warranties. The representations
and warranties made by the Purchasers in Section 3 hereof shall be true and
correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any
notices required or permitted to be filed after the Closing Date with certain
federal and state securities commissions, Company shall have obtained all
governmental approvals required in connection with the lawful issuance of the
New Notes to Purchasers.
(c) Legal Requirements. At the Closing, the sale and
transfer by Sellers, and the purchase by the Purchasers, of the Notes, the
issuance by Company of the New Notes and the issuance of the Warrants by
Sellers, shall be legally permitted by all laws and regulations to which the
Purchasers or Company are subject.
(d) Purchase Price. Each Purchaser shall have delivered
to each respective Seller the purchase price in respect of the Notes being
purchased by such Purchaser from such Seller referenced in Schedule 1 Part A
hereof.
7. CONDITION TO CLOSING OF COMPANY. The Company's obligation to
accept the surrender of the Notes, deliver the New Notes and execute and
deliver the Memorandum of Representations and Warranties at the Closing are
subject to the fulfillment, on or prior to the Closing Date, of delivery to the
Company, at Sellers' expense, of an unqualified written opinion of legal
counsel, who shall be and whose legal opinion shall be reasonably satisfactory
to the Company, addressed to the Company, to the effect that subject to the
accuracy of the Purchasers' representations made hereunder and under the
Warrants at the time of exercise thereof, the proposed offer and sale of the
Notes, the issuance of the Warrants and, upon exercise of such Warrants, the
transfer of the Warrant Shares may be effected without registration under the
Securities Act.
8. MISCELLANEOUS.
(a) Waivers and Amendments. Any provision of this
Agreement may only be amended, waived or modified upon the written consent of
the Sellers, the Company and holder(s) of the majority of the outstanding
principal amount of the New Notes issued pursuant to this Agreement.
(b) Governing Law. This Agreement and all actions
arising out of or in connection with this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law provisions of the State of New York or of any other
state.
(c) Survival. The representations, warranties, covenants
and agreements made herein shall survive the execution and delivery of this
Agreement.
(d) Successors and Assigns. Subject to the restrictions
on transfer described in Sections 8(e) and 8(f) below, the rights and
obligations of Company and the Purchasers of the New
-7-
<PAGE> 8
Notes shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
(e) Registration, Transfer and Replacement of the New
Notes. The New Notes issuable under this Agreement shall be registered notes.
Company will keep, at its principal executive office, books for the
registration and registration of transfer of the New Notes. Prior to
presentation of any New Note for registration of transfer, Company shall treat
the Person in whose name such New Note is registered as the owner and holder of
such New Note for all purposes whatsoever, whether or not such New Note shall
be overdue, and the Company shall not be affected by notice to the contrary.
Subject to any restrictions on or conditions to transfer set forth in any New
Note, the holder of any New Note, at its option, may in person or by duly
authorized attorney surrender the same for exchange at Company's chief
executive office, and promptly thereafter and at Company's expense, except as
provided below, receive in exchange therefor one or more new Note(s), each in
the principal requested by such holder, dated the date to which interest shall
have been paid on the note so surrendered or, if no interest shall have yet
been so paid, dated the date of the note so surrendered and registered in the
name of such Person or Persons as shall have been designated in writing by such
holder or its attorney for the same principal amount as the then unpaid
principal amount of the note so surrendered. Upon receipt by Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any New Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; or (b) in the case of
mutilation, upon surrender thereof, the Company, at its expense, will execute
and deliver in lieu thereof a new Note executed in the same manner as the New
Note being replaced, in the same principal amount as the unpaid principal
amount of such New Note and dated the date to which interest shall have been
paid on such New Note or, if no interest shall have yet been so paid, dated the
date of such New Note.
(f) Assignment by Company. Neither the New Notes nor any
of the rights, interests or obligations hereunder may be assigned, by operation
of law or otherwise, in whole or in part, by Company without the prior written
consent of the Purchaser thereof except in connection with an assignment in
whole to a successor corporation to Company by merger or otherwise, provided
that such successor corporation succeeds to or acquires all or substantially
all of Company's property and assets and Purchaser's rights hereunder are not
impaired.
(g) Entire Agreement. This Agreement together with the
New Notes and the Warrants constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
(h) Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered or certified
mail, postage prepaid, or by recognized overnight courier or personal delivery,
addressed (i) if to a Purchaser, at such Purchaser's address set forth in the
Schedule of Purchasers attached as Schedule II Part B, or at such other address
as such Purchaser shall have furnished to the other parties in writing, or (ii)
if to Company, at its address set forth at the beginning of this Agreement, or
at such other address as Company shall have furnished to the other parties
-8-
<PAGE> 9
in writing, or (iii) if to a Seller, at such Seller's address set forth in the
Schedule of Sellers attached as Schedule II, Part A, or at such other address
as such Seller shall have furnished in writing to the other parties.
(i) Separability of Agreements; Severability of this
Agreement. Each Seller's agreement with each of the Purchasers is a separate
agreement and the sale of the Notes and issuance of the Warrants to each of the
Purchasers is a separate sale and issuance. Company's agreement with each of
the Purchasers is a separate agreement and the issuance of the New Notes to
each Purchaser hereunder is a separate issuance. Unless otherwise expressly
provided herein, the rights of each Purchaser hereunder are several rights, not
rights jointly held with any of the other Purchasers. Any invalidity,
illegality or limitation on the enforceability of the Agreement or any part
thereof, whether arising by reason of the law of the respective Purchaser's
domicile or otherwise, shall in no way affect or impair the validity, legality
or enforceability of this Agreement with respect to other Purchasers. If any
provision of this Agreement shall be judicially determined to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
(j) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall be deemed to constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
MHI ACQUISITION, INC.,
a Delaware corporation
By:/s/Charles L. Allen
-----------------------------------------------
Name:Charles L. Allen
---------------------------------------------
Title:President and CEO
--------------------------------------------
SELLERS:
MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
By: Morgan Stanley Venture Partners II, L.P.
its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/ Debra Abramovitz
-----------------------------------------------
Name: Debra Abramovitz
---------------------------------------------
Title: Vice President
--------------------------------------------
[SIGNATURES CONTINUE]
-10-
<PAGE> 11
MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
By: Morgan Stanley Venture Partners II, L.P.,
its Investment General Partner
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
-----------------------------------------------
Name: Debra Abramovitz
---------------------------------------------
Title: Vice President
--------------------------------------------
MORGAN STANLEY VENTURE INVESTORS, L.P.
By: Morgan Stanley Venture Partners II, L.P.
its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
-----------------------------------------------
Name: Debra Abramovitz
---------------------------------------------
Title: Vice President
--------------------------------------------
[SIGNATURES CONTINUE]
-11-
<PAGE> 12
PURCHASERS:
ALAN GERRY
By: /s/Allen Gerry
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
SV CAPITAL PARTNERS, L.P.
By: SV Capital Management, Inc.,
its General Partner
By: /s/Eric Foultz
-----------------------------------------------
Name: Eric Foultz
---------------------------------------------
Title: Vice-President
--------------------------------------------
-12-
<PAGE> 13
SCHEDULE I
Part A
SALE AND PURCHASE OF NOTES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
MSVCF II MSVCF II
SELLERS LP CV MSVI LP Totals ($)
- -------------------------------------------------------------------------------------------------------------
Purchase
PURCHASERS Principal Amount of Notes ($) Notes Price
- -------------------------- ----------------------------------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Gerry 4,500,000 4,500,000 5,220,267.00
- -------------------------------------------------------------------------------------------------------------
SV 1,465,505 1,486,228 1,548,267 4,500,000 5,220,267.00
- -------------------------------------------------------------------------------------------------------------
5,965,505 1,486,228 1,548,267 9,000,000
- -------------------------------------------------------------------------------------------------------------
TOTAL PURCHASE PRICE 6,920,339 1,724,113 1,796,082 $10,440,534
(including interest)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
*(of which 5,220,267.00 is payable by Alan Gerry and 1,700,072.00 is payable by
SV respectively to MSVCF II LP)
<PAGE> 14
SCHEDULE I
Part B
ISSUANCE OF WARRANTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
MSVCF II MSVCF II
SELLERS LP CV MSVI LP
- -------------------------------------------------------------------------------------------------------------
PURCHASERS Warrant Shares Total*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerry (i) 89,595 (iii) 22,297 (v) 23,243 135,135
- -------------------------------------------------------------------------------------------------------------
SV (ii) 89,594 (iv) 22,298 (vi) 23,243 135,135
- -------------------------------------------------------------------------------------------------------------
TOTAL* 179,189 44,595 46,486 270,270
- -------------------------------------------------------------------------------------------------------------
</TABLE>
*(amount of Warrant Shares and Purchase Price in $ upon exercise)
<PAGE> 15
SCHEDULE II
Part A
SCHEDULE OF SELLERS
Name and Address
----------------
MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
(1) Payment of purchase price for the Notes sold by MSVCF II LP
shall be made by bank wire transfer of immediately
available funds to:
Morgan Guaranty Trust
ABA No. 021-000-238
Account No. 001-58-844
Reference: Morgan Stanley Venture Capital Fund II, L.P.
(2) Address for all notices:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Attn: Guy de Chazal
Tel.: (212) 703-8535
Fax: (212) 703-8957
With copies to:
Morgan Stanley Venture Partners, Inc.
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Attention: Scott S. Halsted
Tel.: (415) 233-2600
Fax: (415) 233-2626
<PAGE> 16
MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
(1) Payment for the purchase price of the Notes sold by
MSVCF II CV shall be made by bank wire transfer
of immediately available funds to:
Morgan Guaranty Trust
ABA No. 021-000-238
Account No. 001-60-461
Reference: Morgan Stanley Venture Capital Fund II, C.V.
(2) Address for all notices:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Attn: Guy de Chazal
Tel.: (212) 703-8535
Fax: (212) 703-8957
With copies to:
Morgan Stanley Venture Partners, Inc.
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Attention: Scott S. Halsted
Tel.: (415) 233-2600
Fax: (415) 233-2626
-2-
<PAGE> 17
MORGAN STANLEY VENTURE INVESTORS, L.P.
(1) Payment of the purchase price for the Notes sold
by MSVI LP shall be made by bank wire transfer of
immediately available funds to:
Morgan Guaranty Trust
ABA No. 021-000-238
Account No. 001-58-866
Reference: Morgan Stanley Venture Investors, L.P.
(2) Address for all notices:
Morgan Stanley Venture Partners, Inc.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Attn: Guy de Chazal
Tel.: (212) 703-8535
Fax: (212) 703-8957
With copies to:
Morgan Stanley Venture Partners, Inc.
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Attention: Scott S. Halsted
Tel.: (415) 233-2600
Fax: (415) 233-2626
-3-
<PAGE> 18
SCHEDULE II
Part B
SCHEDULE OF PURCHASERS
Name and Address
- --------------------------------
ALAN GERRY
Address for all notices:
c/o Granite Associates, L.P.
Cablevision Center
Liberty, New York 12754
Attn: Keith Suehnholz
Tel.: (914) 295-2750
Fax: (914) 295-2741
with copies to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Paul A. Gajer
Tel.: (212) 698-7783
Fax: (212) 698-7825
SV CAPITAL PARTNERS, L.P.
Address for all notices:
SV Capital Partners L.P.
200 Concord Plaza
Suite 620
San Antonio, TX 78216
Attn: Eric Foultz
Tel.: (210) 930-1251 X12
Fax: (210) 930-2482
<PAGE> 1
EXHIBIT 10.17
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
AMENDED AND RESTATED
SENIOR SUBORDINATED NOTE
DUE 2000
---------------
$5,275,330.50 July 25, 1996
FOR VALUE RECEIVED, MHI ACQUISITION, INC., a Delaware corporation
("Company") promises to pay to Alan Gerry ("Holder"), or its registered
assigns, the principal sum of Five Million Two Hundred Seventy-Five Thousand
Three Hundred Thirty and 50/100 Dollars ($5,275,330.50) plus any accrued
interest amounts added to the principal balance pursuant to the terms of this
Note, or such lesser amount as shall then equal the outstanding principal
amount hereof, together with interest from the date of this Note on the unpaid
principal balance at a rate equal to sixteen and one-half percent (16.5%) per
annum payable in the manner set forth in Section 2 of this Note. All unpaid
principal, together with any then unpaid and accrued interest and other amounts
payable hereunder, shall be due and payable on the earlier of (i) November 30,
2000, or (ii) when such amounts are declared or made automatically due and
payable upon or after the occurrence of an Event of Default as set forth in
Section 6 hereof. This Note amends and restates that certain promissory note
dated June 1, 1995 in the original principal amount of $4,500,000 made payable
by the Company to Holder (the "Existing Note"), which note was one of the
"Notes" issued pursuant to the Note Purchase and Sale Agreement dated as of May
6, 1996, (as amended, modified or supplemented, the "Note Purchase and Sale
Agreement") between Company, Morgan Stanley Venture Capital Fund II, L.P.,
Morgan Stanley Venture Capital Fund II, C.V., and Morgan Stanley Venture
Investors, L.P. (the "Sellers" as defined in such Agreement) and Alan Gerry and
SV Capital Partners, L.P. (the "Purchasers" as defined in such Agreement), in
replacement of those certain promissory notes of the Company, dated June 1,
1995 issued to the Sellers pursuant to that certain Note Purchase and Sale
Agreement, dated as of May 31, 1995 among the Sellers and the Company (the
"Original Note Purchase Agreement").
The following is a statement of the rights of Holder and the
conditions to which this Note is subject, and to which Holder, by the
acceptance of this Note, agrees:
1. DEFINITIONS. As used in this Note, the following capitalized
terms have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person,
any other Person which, directly or indirectly, controls or is controlled by or
under common control with such Person
<PAGE> 2
(excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power (i) to vote ten percent (10%) or more of the securities
having ordinary voting power for the election of directors of such Person; or
(ii) to direct or cause the direction of the management or policies of such
Person whether by contract or otherwise; provided, that the holding by any
holder of Senior Indebtedness of a warrant to purchase securities of the
Company (or the securities into which such warrant is convertible) shall not be
deemed to constitute such holder an Affiliate of Company.
(b) "Cash Equivalents" shall mean the Investments set
forth in clauses (i), (ii) (iii) and (x) of the definition of "Permitted
Investments."
(c) "Change of Control Event" shall mean the occurrence
of either of the following: any Person, or a group of related Persons, shall
acquire (i) beneficial ownership in excess of 50% of the outstanding voting
stock of Company or (ii) all or substantially all of the assets of Company.
(d) "Company" includes the corporation initially
executing this Note and any Person which shall succeed to or assume the
obligations of Company under this Note.
(e) "Credit Agreement" shall mean the Credit Agreement,
dated as of May 31, 1995, among MHI Acquisition Corporation I, a Delaware
corporation and wholly-owned Subsidiary of Company, various Lenders and
Internationale Nederlanden (U.S.) Capital Corporation, as the Agent for the
Lenders, as amended, restated, supplemented or otherwise modified, from time to
time.
(f) "EBITDA" shall have the meaning set forth in the
Credit Agreement.
(g) "Equity Securities" of any Person shall mean (a) all
common stock, preferred stock, participations, shares, partnership interests or
other equity interests in and of such Person (regardless of how designated and
whether or not voting or non-voting) and (b) all warrants, options and other
rights to acquire any of the foregoing.
(h) "Financial Statements" shall mean, with respect to
any accounting period for any Person, statements of operation, retained
earnings and cash flow of such Person for such period, and balance sheets of
such Person as of the end of such period, setting forth in each case in
comparative form figures for the corresponding period in the preceding fiscal
year if such period is less than a full fiscal year or, if such period is a
full fiscal year, corresponding figures from the preceding fiscal year, all
prepared in reasonable detail and in accordance with GAAP. Unless otherwise
indicated, each reference to Financial Statements of any Person shall be deemed
to refer to Financial Statements prepared on a consolidated basis.
(i) "Fixed Charge Coverage Ratio," as determined with
respect to any Payment Date, shall mean the ratio of (i) consolidated EBITDA of
Operating Subsidiary for the nine month period ended on the last day of the
fiscal quarter of Operating Subsidiary preceding the fiscal quarter ending on
such Payment Date, minus repayments of the Term Loan pursuant to clause (c) of
Section 3.3.1 of the Credit Agreement during such period, minus Operating
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Subsidiary Interest Expense during such period, minus cash income taxes
actually paid during such period, minus increases in Operating Subsidiary's
consolidated working capital (excluding changes in cash, Cash Equivalents and
current maturities of Indebtedness) for such period, plus decreases in
Operating Subsidiary's consolidated working capital (excluding changes in cash,
Cash Equivalents and current maturities of Indebtedness) for such period, minus
expenditures for fixed or capital assets which are capitalized pursuant to
Operating Subsidiary's capitalization policy (excluding capitalized lease
obligations and any insurance proceeds which are received as a result of damage
to or loss of a capital asset and are used to repair or replace such capital
asset) during such period to (ii) 1.5 times the Subordinated Note Cash Interest
Expense determined for the six month period ending on such Payment Date. For
purposes of calculating the Fixed Charge Coverage Ratio, Section 3.3.1 of the
Credit Agreement shall be deemed to be as set forth in the Credit Agreement as
in effect on the date of this Note notwithstanding any subsequent amendment
thereof.
(j) "GAAP" shall mean generally accepted accounting
principles and practices as in effect in the United States of America from time
to time, consistently applied.
(k) "Guaranty Obligations" shall mean, with respect to
any Person, any direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"), including any
obligation of that Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation, or (ii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item,
level of income or financial condition of the primary obligor, or (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof.
(l) "Holder" shall mean the Person specified in the
introductory paragraph of this Note or any Person who shall at the time be the
registered holder of this Note.
(m) "Indebtedness" shall mean and include the aggregate
amount of, without duplication (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes or other similar instruments,
(c) all obligations to pay the deferred purchase price of property or services
(other than accounts payable incurred in the ordinary course of business
determined in accordance with GAAP), (d) all obligations with respect to
capital leases, (e) all Guaranty Obligations; (f) all obligations created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, (g) all reimbursement and other
payment obligations, contingent or otherwise, in respect of letters of credit.
(n) "Investment" of any Person shall mean any loan or
advance of funds by such Person to any other Person (other than advances to
employees of such Person for moving and travel expense, drawing accounts and
similar expenditures in the ordinary course of business), any purchase or other
acquisition of any Equity Securities or Indebtedness of any
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other Person, any capital contribution by such Person to or any other
investment by such Person in any other Person (including, without limitation,
any Indebtedness incurred by such Person of the type described in clauses (a)
and (b) of the definition of "Indebtedness" on behalf of any other Person);
provided, however, that Investments shall not include accounts receivable or
other indebtedness owed by customers of such Person which are current assets
and arose from sales in the ordinary course of such Person's business.
(o) "Lien" shall mean, with respect to any property, any
security interest, mortgage, pledge, lien, claim, charge or other encumbrance
in, of, or on such property or the income therefrom, including, without
limitation, the interest of a vendor or lessor under a conditional sale
agreement, capital lease or other title retention agreement, or any agreement
to provide any of the foregoing, and the filing of any financing statement or
similar instrument under the Uniform Commercial Code or comparable law of any
jurisdiction.
(p) "Majority in Interest" shall mean more than 50% of
the aggregate outstanding principal amount of the Notes issued pursuant to the
Note Purchase and Sale Agreement.
(q) "Merger Agreement" shall mean the Plan and Agreement
of Reorganization, dated as of May 15, 1995, among Healthtrust, Inc. - The
Hospital Company, Coralstone Management, Inc., Milestone Healthcare, Inc.,
Milestone Healthcare Management, Inc., MHI Acquisition Corporation I, MHI
Acquisition Corporation II and Company.
(r) "Note Purchase and Sale Agreement" has the meaning
set forth in the introductory paragraph of this Note.
(s) "Operating Subsidiary" shall mean MHI Acquisition
Corporation I, and, after MHI Acquisition Corporation I is merged with and into
Milestone Healthcare, Inc., Milestone Healthcare, Inc.
(t) "Operating Subsidiary Interest Expense" shall mean,
for any period, interest expense accrued during such period in respect of
Indebtedness of Operating Subsidiary or any of its Subsidiaries.
(u) "Payment Date" shall mean each May 31 and November
30.
(v) "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint stock company,
a limited liability company, an unincorporated association, a joint venture or
other entity or a governmental authority.
(w) "Permitted Additional Subordinated Indebtedness"
shall mean Indebtedness of Company subordinated in right of payment to the
payment of this Note and the other Notes issued under the Note Purchase and
Sale Agreement and which does not provide for (i) a maturity date or any
amortization of principal of such subordinated indebtedness earlier than
ninety-one (91) days after November 30, 2000; (ii) the payment of interest
except at maturity or in kind; or (iii) any covenants or restrictions on
Company (other than a covenant to pay principal and interest when due).
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(x) "Permitted Indebtedness" shall mean (i) Senior
Indebtedness; (ii) Permitted Additional Subordinated Indebtedness in an
aggregate principal amount not exceeding $2,000,000 at any time, (iii)
Indebtedness of any Subsidiary owing to Company or of Company owing to any
Subsidiary; (iv) other Indebtedness incurred after June 1, 1998, not included
in clauses (i), (ii) and (iii) of this definition in an aggregate amount
outstanding not exceeding ten percent (10%) of Company's consolidated net worth
as of the last day of Company's previous fiscal year.
(y) "Permitted Investments" shall mean and include: (i)
Deposits with commercial banks organized under the laws of the United States or
a state thereof to the extent such deposits are fully insured by the Federal
Deposit Insurance Corporation; (ii) Investments in marketable obligations
issued or fully guaranteed by the United States and maturing not more than one
(1) year from the date of issuance; (iii) Investments in open market commercial
paper rated at least "A1" or "P1" or higher by a national credit rating agency
and maturing not more than one (1) year from the creation thereof; (iv)
Investments pursuant to or arising under currency agreements or interest rate
agreements entered into in connection with bona fide hedging arrangements; (v)
Investments consisting of deposit accounts of Company and its Subsidiaries
maintained in the ordinary course of business; (vi) Investments by Company in
its Subsidiaries; (vii) Investments by Subsidiaries of Company in Company and
Investments by Subsidiaries in Subsidiaries; (viii) Investments consisting of
loans to employees, officers or directors relating to the purchase of Equity
Securities of Company not exceeding $250,000 at any time outstanding; (ix)
Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; (x) any Investments permitted by
Company's or Operating Subsidiary's investment policy, as amended from time to
time, provided such investment policy (and any such amendment thereto) has been
approved by a Majority in Interest and the requisite holders of Senior
Indebtedness under the Credit Agreement; and (xi) other Investments incurred
after June 1, 1998, in an aggregate amount outstanding not exceeding ten
percent (10%) of Company's consolidated net worth as of the last day of
Company's previous fiscal year.
(z) "Permitted Liens" shall mean and include: (i) Liens
for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith, provided
provision is made to the reasonable satisfaction of Holder for the eventual
payment thereof if subsequently found payable; (ii) Liens of carriers,
warehousemen, mechanics, materialmen, vendors, and landlords incurred in the
ordinary course of business for sums not overdue or being contested in good
faith, provided provision is made to the reasonable satisfaction of Holder for
the eventual payment thereof if subsequently found payable; (iii) deposits
under workers' compensation, unemployment insurance and social security laws or
to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory obligations of
surety, appeal, indemnity, performance or other similar bonds in the ordinary
course of business; (iv) Liens securing obligations under a capital lease if
such lease is permitted under this Note and such Liens do not extend to
property other than the property leased under such capital lease; (v) Liens
upon any equipment acquired or held by Company or any of its Subsidiaries to
secure the purchase price of such equipment or Indebtedness incurred solely for
the purpose of financing the acquisition of such equipment so long as such
financing is permitted under this Note; (vi) easements,
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reservations, rights of way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances affecting real property in a
manner not materially or adversely affecting the value or use of such property;
(vii) Liens with respect to judgments to the extent such judgments do not
constitute an Event of Default described in Section 5(g); (viii) Leases and
subleases granted to others in the ordinary course of business not interfering
in any material respect with any business of Company or any of its
Subsidiaries; (ix) Liens which constitute rights of set-off of a customary
nature or bankers' liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with banks in the ordinary
course of business; (x) Liens securing financed annual insurance premiums so
long as such liens are confined solely to the proceeds of the insurance
purchased with such premiums; and (xi) Liens in favor of holders of Senior
Indebtedness.
(aa) "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint stock company,
a limited liability company, an unincorporated association, a joint venture or
other entity or a governmental authority.
(bb) "Qualified Sale" shall mean a transaction which
results in net proceeds to the holders of Common Stock of Company (assuming a
distribution of sale proceeds to such stockholders, if applicable) of at least
$2.40 per share (as such price may be appropriately adjusted for any stock
combinations, stock splits, stock dividends, recapitalizations and the like),
and which consists of (i) the sale by the stockholders of Company in a single
arms- length transaction of one hundred percent (100%) of the capital stock of
Company or the sale by Company in a single arms-length transaction of one
hundred percent (100%) of the capital stock of Operating Subsidiary, in either
case, to a Person not an Affiliate of Company; (ii) the merger or consolidation
of Company or Operating Subsidiary or any acquisition of Company or Operating
Subsidiary by means of a share exchange, in either case, in a single
arms-length transaction with or into any other Person not an Affiliate of
Company; (iii) the sale by Company in a single arms-length transaction of all
or substantially all of the assets of Company to a Person not an Affiliate of
Company and the subsequent distribution of the proceeds of such sale to the
holders of capital stock of Company, after payment of or provision for the
liabilities of Company; or (iv) the sale by Operating Subsidiary in a single
arms-length transaction of all or substantially all of the assets of Operating
Subsidiary to a Person not an Affiliate of Company.
(cc) "Senior Indebtedness" shall mean, unless expressly
subordinated to or expressly made on a parity with the amounts due under this
Note, the principal of (and premium, if any), unpaid interest on and amounts
reimbursable, fees, expenses, costs of enforcement and other amounts due in
connection with, (i) indebtedness incurred under the Credit Agreement, provided
that the Merger (as defined in Section 3(d) hereof) occurs on or before August
31, 1996, (ii) Indebtedness incurred under that certain Guaranty and that
certain Pledge Agreement, each dated as of May 31, 1995, and each executed by
Company in favor of Internationale Nederlanden (U.S.) Capital Corporation, as
Agent for various Lenders under the Credit Agreement, and (iii) all extensions,
refinancings, renewals, replacements, refundings, modifications, amendments and
restatements of the foregoing (including, without limitation, any Indebtedness
incurred from time to time under any revolving credit facility in favor of
Company or any guaranty by Company of any such revolving credit facility in
favor of Operating Subsidiary, in either case, that refinances, replaces or
refunds, in whole or in part, Indebtedness incurred by Operating Subsidiary
under the Credit Agreement and/or the commitments of the
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holders of Senior Indebtedness thereunder) so long as the scheduled maturity of
such extensions, renewals, replacements, refinancings, modifications,
amendments and restatements is not to occur after the maturity date of this
Note.
(dd) "Subordinated Note Cash Interest Expense" shall mean,
for any period, Company's interest expense accrued under this Note and the
other Notes issued pursuant to the Note Purchase and Sale Agreement, minus the
portion of such accrued interest expense which is not payable in cash under any
circumstances on the next succeeding Payment Date (i.e., the interest referred
to in Section 2(a)(i) of this Note and the five and one-half percent (5.5%) per
annum interest referred to in clause (B) of Section 2(a)(ii) of this Note.)
(ee) "Subsidiary" shall mean (a) any corporation of which
more than 50% of the issued and outstanding equity securities having ordinary
voting power to elect a majority of the Board of Directors of such corporation
is at the time directly or indirectly owned or controlled by Company, (b) any
partnership, joint venture, or other association of which more than 50% of the
equity interest having the power to vote, direct or control the management of
such partnership, joint venture or other association is at the time directly or
indirectly owned and controlled by Company (c) any other entity included in the
financial statements of Company on a consolidated basis.
(ff) "Transaction Documents" shall mean this Note, each of
the other Notes issued under the Note Purchase and Sale Agreement, the Note
Purchase and Sale Agreement, the Original Note Purchase Agreement and the
Company - Purchasers Agreement (as such is defined in the Note Purchase and
Sale Agreement).
2. INTEREST PAYMENTS; PREPAYMENTS.
(a) Interest Payments.
(i) All interest accrued under the Existing Note
in respect of the period from May 31, 1996 through the date hereof as well as
all interest accrued from the date hereof until and including May 31, 1997
shall not be paid in cash, but shall accrue and, on each successive Payment
Date, be added to the principal amount due under this Note.
(ii) Commencing on June 1, 1997, and continuing
until the outstanding principal amount hereof is paid in full, interest on the
outstanding principal amount of this Note shall (A) accrue at the rate of
eleven percent (11.0%) per annum and such interest shall be payable in arrears
in cash on each successive Payment Date, and (B) accrue at the rate of five and
one-half percent (5.5%) per annum and such interest shall be added to the
principal amount due under this Note on each successive Payment Date; provided,
however, that, if the Fixed Charge Coverage Ratio determined with respect to a
Payment Date is less than 1.0:1.0, then the payment of interest scheduled to be
made on such Payment Date as set forth in clause (A) of this Section 2(a)(ii)
shall not be paid in cash, but shall be added to the principal amount of this
Note on such Payment Date. Subject to the foregoing proviso, the first such
interest payment in cash shall occur on November 30, 1997.
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(iii) If at any time, the proviso set forth in
Section 2(a)(ii) shall prevent the payment of cash interest on this Note,
Company shall deliver to Holder prior to the relevant Payment Date a
certificate (A) stating that such payment of interest shall not be paid in
cash, but shall be added to the principal amount of the Note and (B) setting
forth in reasonable detail the calculation of the Fixed Charge Coverage Ratio
as of the end of the preceding fiscal quarter.
(iv) The accrued interest which has been added to
the principal payable under this Note on each Payment Date shall after such
Payment Date bear interest at the rate and in the manner set forth in this
Note.
(b) Prepayments.
(i) Upon five (5) days' prior written notice to
Holder (except as set forth in Section 2(b)(ii)), Company may prepay this Note
in whole or in part; provided, that: (i) any prepayment of this Note may only
be made in connection with the prepayment of all Notes issued under the Note
Purchase and Sale Agreement on a pro rata basis, based on the respective
aggregate outstanding principal amounts of each such Note, (ii) any such
prepayment will be made together with interest accrued (but which has not been
previously added to the principal amount of this Note) on the amount to be
prepaid, and (iii) with respect to any prepayment made prior to June 1, 1997,
except in the case of a prepayment made simultaneously with the closing of (A)
an initial public offering of the common stock of Company or Operating
Subsidiary or (B) a Qualified Sale, Company shall pay to Holder a premium equal
to ten percent (10%) of the principal amount prepaid.
(ii) If a prepayment is to be made in connection
with an offering of securities by Company or Operating Subsidiary, the notice
required to be given prior to such prepayment shall be as follows: (A) Company
shall give written notice to Holder within one (1) business day following the
filing of the preliminary prospectus or similar statement in connection with
such securities offering which notice shall provide Holder with Company's
estimate of the date of prepayment, and (B) Company shall give an additional
written notice to Holder on the day on which such securities offering becomes
effective, which notice shall provide Holder with the date of prepayment
(provided that such date shall not be less than one (1) business day after the
date of the notice provided in this clause (B)).
3. CERTAIN COVENANTS. While any amount is outstanding under the
Note, without the prior written consent of a Majority in Interest:
(a) Indebtedness. Neither Company nor any of its
Subsidiaries shall create, incur, assume or permit to exist any Indebtedness
except Permitted Indebtedness.
(b) Liens. Neither Company nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or hereafter
acquired, except for Permitted Liens.
(c) Asset Dispositions. Neither Company nor any of its
Subsidiaries shall sell, lease, transfer, license or otherwise dispose of
(collectively, a "Transfer") any of its assets or property, whether now owned
or hereafter acquired, except Transfers in which cash is received
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in respect of such transfer and (A) in which such Transfer is in the ordinary
course of business and consists of the sale of inventory, (B) in which such
Transfer is in the ordinary course of business and consists of sales of
worn-out or obsolete equipment, or (C) in which the net book value of the asset
to which the Transfer applies does not exceed $500,000, and together with the
net book value of all other assets with respect to which a Transfer has been
made by Company or any Subsidiary does not exceed, during any fiscal year, ten
percent (10%) of the consolidated net worth of Company as of the last day of
the previous fiscal year of Company.
(d) Mergers, Acquisitions, Etc. Except in connection
with the transactions contemplated under the Merger Agreement, neither Company
nor any of its Subsidiaries shall consolidate with or merge into any other
Person or permit any other Person to merge into it, or acquire all or
substantially all of the assets or capital stock of any other Person, except
that any such Subsidiary may liquidate or dissolve voluntarily into and may
merge with and into Company or any other wholly-owned Subsidiary (so long as
Company or such wholly-owned Subsidiary is the surviving Corporation).
Notwithstanding the foregoing, the merger of MHI Acquisition, Inc. with and
into its wholly-owned subsidiary, Milestone Healthcare, Inc., with Milestone
Healthcare, Inc. as the surviving corporation (the "Merger") shall not require
the prior written consent of a Majority in Interest, provided that the Merger
occurs on or before August 31, 1996.
(e) Investments. Neither Company nor any of its
Subsidiaries shall make any Investment except for Permitted Investments.
Neither Company nor any of its Subsidiaries shall create, acquire or permit to
exist any Subsidiary other than MHI Acquisition Corporation I, MHI Acquisition
Corporation II, Milestone Healthcare, Inc., Milestone Healthcare Management,
Inc., TruCare Rehabilitation Services, Inc. and TruCare Physical Therapy
Services, Inc.
(f) Dividends, Redemptions, Etc. Neither Company nor any
of its Subsidiaries shall (i) pay any dividends or make any distributions on
its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; (iii) return any capital to any
holder of its Equity Securities; (iv) make any distribution of assets, Equity
Securities or obligations to any holder of its Equity Securities; or (v) set
apart any sum for any such purpose; provided, however, that (A) Company may
make distributions on its Equity Securities in the form of common stock, (B)
any Subsidiary may pay cash dividends to Company or any Subsidiary of Company
which is the parent corporation of such Subsidiary, (C) Company or its
Subsidiaries may repurchase Equity Securities of any officer or employee whose
employment with Company or any Subsidiary has terminated pursuant to the terms
of an agreement between Company or any Subsidiary and such officer or employee,
(D) Company may, in connection with the Put and Call Agreement, dated as of May
31, 1995, among Company, MHI Acquisition Corporation I and Internationale
Nederlanden (U.S.) Capital Corporation, purchase, redeem, retire or otherwise
acquire for value its Equity Securities; and (E) Company may repurchase its
Equity Securities pursuant to the terms of each Founder Performance Stock
Purchase Agreement, dated as of May 15, 1995, entered into by Company with each
of Charles L. Allen, Roy Griffitts, Jr. and William A. Brosius.
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(g) No Amendment. Company shall not amend, modify or
otherwise change the terms of the Senior Indebtedness in an manner which would
(i) increase the aggregate principal amount which may be borrowed thereunder to
more than $17,000,000; or (ii) amend the scheduled maturity date thereof to a
date that is earlier than May 31, 2000.
4. INFORMATION RIGHTS; NOTICES. Company shall furnish to Holder
the following:
(a) Quarterly Financial Statements. Within forty-five
(45) days after the last day of each fiscal quarter of Company, a copy of the
Financial Statements of Company for such quarter and for the fiscal year to
date, certified by the chief financial officer or controller of Company to
present fairly the financial condition, results of operations and other
information presented therein and to have been prepared in accordance with GAAP
consistently applied, subject to normal year end adjustments and except that no
footnotes need be included with such Financial Statements;
(b) Annual Financial Statements. Within ninety (90) days
after the close of each fiscal year of Company, (i) copies of the audited
Financial Statements of Company (including, without limitation, consolidated
and consolidating Financial Statements for Company and its Subsidiaries) for
such year, audited by independent certified public accountants reasonably
acceptable to Lender, (ii) copies of the unqualified opinions and management
letters delivered by such accountants in connection with such Financial
Statements, (iii) certificates of such accountants to Company stating that its
has reviewed the provisions of this Agreement and the most recent two
calculations of the Fixed Charge Coverage Ratio used in determining whether
cash interest shall be paid under this Note and is not aware of any
miscalculation of such Fixed Charge Coverage Ratio, and (iv) a report
containing a description of projected business prospects (including capital
expenditures) and management's discussion and analysis of financial condition
and results of operation of Company and its Subsidiaries;
(c) SEC Reports. As soon as possible and in no event
later than five (5) Business Days after they are sent, made available or filed,
copies of all registration statements and reports filed by Company with the
Securities and Exchange Commission and all reports, proxy statements and
financial statements sent or made available by Company to its shareholders
generally;
(d) Business Plan. Not less than ten (10) days prior to
the commencement of each fiscal year of Company, a copy of the business plan
and operating budget (prepared on a monthly basis) of Company and its
Subsidiaries for such fiscal year; and
(e) Notice of Defaults. Promptly upon the occurrence
thereof, written notice of the occurrence of any Event of Default hereunder or
any event of default with respect to any Senior Indebtedness.
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5. EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "Event of Default" under this Note and the other
Transaction Documents:
(a) Failure to Pay. Company shall fail to pay when due
(i) any principal under this Note; or (ii) any interest or other amount payable
under this Note and such failure to pay interest or other amount payable shall
remain unremedied for five (5) days; or
(b) Breaches of Certain Covenants. Company or any of its
Subsidiaries shall fail to observe or perform any covenant, obligation,
condition or agreement set forth in Section 3 of this Note, or Company shall
fail to observe or perform any covenant, obligation, condition or agreement set
forth in Section 4 of this Note and such failure shall remain unremedied for
ten (10) days (or if such default is not reasonably susceptible to cure within
ten (10) days, such longer period as is reasonably needed to effect such cure,
but in no event longer than thirty (30) days from the date notice is given, so
long as Company promptly commences and diligently pursues such cure); or
(c) Representations and Warranties. Any representation
or warranty made by Company in any Transaction Document shall have been false,
incorrect or misleading in any material respect when made; or
(d) Other Payment Obligations. Company or any of its
Subsidiaries shall (i)(A) fail to make any payment when due under the terms of
any bond, debenture, note or other evidence of Indebtedness, including the
Senior Indebtedness, to be paid by such Person (excluding this Note and the
other Transaction Documents) and such failure shall continue beyond any period
of grace provided with respect thereto, or (B) default in the observance or
performance of any other agreement, term or condition contained in any such
bond, debenture, note or other evidence of Indebtedness, and (ii) the effect of
such failure or default has been to cause the holder or holders thereof to
declare or otherwise cause Indebtedness in an aggregate amount of One Million
Dollars ($1,000,000) or more to become due prior to its stated date of
maturity; or
(e) Voluntary Bankruptcy or Insolvency Proceedings.
Company or any of its Subsidiaries shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself or of all
or a substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated in full or in part, (v) become insolvent (as such term may be
defined or interpreted under any applicable statute), (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or
(f) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Company or any of its Subsidiaries or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Company or any of
its
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Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
sixty (60) days of commencement; or
(g) Judgments. A final judgment or order for the payment
of money in excess of One Million Dollars ($1,000,000) (exclusive of amounts
covered by insurance issued by an insurer not an Affiliate of Company) shall be
rendered against Company or any of its Subsidiaries and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not
be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a
substantial part of the property of Company or any of its Subsidiaries and such
judgment, writ, or similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy.
(h) Change of Control. A Change of Control Event shall
occur.
6. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or
existence of any Event of Default (other than an Event of Default referred to
in Paragraphs 4(d) and 4(e)) and at any time thereafter during the continuance
of such Event of Default, Holder may, with the consent of a Majority in
Interest of the holders of the Notes issued under the Note Purchase and Sale
Agreement, by written notice to Company, state its intention to declare all
outstanding principal and accrued interest payable by Company hereunder to be
immediately due and payable, and, after a period of not less than five (5)
business days after delivery of such notice to Company, Holder may declare all
outstanding principal and accrued interest payable by Company hereunder to be
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the other Transaction Documents to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in Sections 5(e) or 5(f), immediately and without notice, all
outstanding principal and accrued interest payable by Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Holder may exercise any other
right, power or remedy granted to it by the Transaction Documents or otherwise
permitted to it by law, either by suit in equity or by action at law, or both.
7. SUBORDINATION. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full in cash of all of
Company's Senior Indebtedness.
(a) Insolvency Proceedings. If there shall occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy
(voluntary or involuntary), reorganization, or arrangements with creditors
(whether or not pursuant to bankruptcy or other insolvency laws), sale of all
or substantially all of the assets, dissolution, liquidation, or any other
marshalling of the assets and liabilities of Company, (i) the holder(s) of
Senior Indebtedness shall be entitled to receive payment in full in cash of all
Senior Indebtedness (including any interest thereon accruing at the contract
rate after the commencement of any such proceedings, but only to the
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extent allowed as a claim in such proceedings) then outstanding before Holder
shall be entitled to receive any payment or distribution, whether in cash,
securities or other property, in respect of the principal of, interest on or
other amounts due with respect to this Note at the time outstanding, and (ii)
any payment or distribution, whether in cash, securities or other property,
(other than securities of Company or any other corporation provided for by a
plan of reorganization or readjustment, the payment of which is subordinated,
at least to the extent provided in this Section 7, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for this Section 7) be payable or deliverable in respect of the
amounts due under this Note shall be paid or delivered directly to the
holder(s) of the Senior Indebtedness (ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held by each) or
to a trustee or other representative for holder(s) of Senior Indebtedness.
(b) Permitted Payments; Default on Senior Indebtedness.
Notwithstanding any provision to the contrary contained in this Note, so long
as there shall not have occurred and be continuing an event of default which
has been declared in writing with respect to any Senior Indebtedness, as
defined therein, or in the instrument under which it is outstanding, permitting
the holder to accelerate the maturity thereof (a "Senior Default"), Company
shall be permitted to make, and Holder to accept and receive, regularly
scheduled payments of accrued interest under this Note. Notwithstanding
anything to the contrary contained in this Section 7, Company shall not make
and Holder shall not receive any payment of any kind of amounts payable under
this Note during any period (a "Payment Blockage Period"):
(i) of 180 days after delivery by a holder of
Senior Indebtedness to Company and Holder of written notice that a Senior
Default has occurred (unless such default shall have been cured or waived or
cease to exist or all amounts owing with respect to the Senior Indebtedness
have been discharged); provided, that not more than one notice of a Senior
Default may be given to Holder during any period of 360 consecutive days; or
(ii) in which written notice of acceleration of
the maturity of any Senior Indebtedness shall have been delivered to Company
and Holder in respect of such Senior Default and such notice remains in effect.
For purposes of this Section 7(b), no Senior Default which is not a default in
the making of any payment when due with respect to Senior Indebtedness (a
"Senior Non-Payment Default") which existed or was continuing on the date such
notice was given shall be, or be made, the basis for the commencement of a
second Payment Blockage Period by the holder(s) of such Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such Senior
Non-Payment Default shall have been cured or waived for a period of not less
than 120 consecutive days.
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<PAGE> 14
(c) Turnover of Payments. Except for payments permitted
under Section 7(b), should any payment or distribution, whether in cash,
securities or other property, be received by Holder upon or with respect to the
amounts payable under this Note by any means, including, without limitation,
setoff, prior to the payment in full of the Senior Indebtedness, Holder shall
receive and hold the same in trust, as trustee, for the benefit of the
holder(s) of the Senior Indebtedness, and shall forthwith deliver the same to
the holder(s) of the Senior Indebtedness (ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held by each) or
to a trustee or other representative for holder(s) of Senior Indebtedness in
precisely the form received for application to the Senior Indebtedness (whether
or not it is then due).
(d) Further Assurances. By acceptance of this Note,
Holder agrees to execute and deliver customary forms of subordination agreement
requested from time to time by holder(s) of Senior Indebtedness, and as a
condition to Holder's rights hereunder, Company may require that Holder execute
such forms of subordination agreement; provided that such forms shall not
impose on Holder terms less favorable than those provided herein.
(e) Other Indebtedness. No Indebtedness which does not
constitute Senior Indebtedness shall be senior in any respect to the
indebtedness represented by this Note.
(f) Subrogation. Subject to the payment in full in cash,
of all Senior Indebtedness, Holder shall be subrogated to the rights of the
holder(s) of such Senior Indebtedness (to the extent of the payments or
distributions made to the holder(s) of such Senior Indebtedness pursuant to the
provisions of this Section 7) to receive payments and distributions of assets
of Company applicable to the Senior Indebtedness. No such payments or
distributions applicable to the Senior Indebtedness shall, as between Company
and its creditors, other than the holder(s) of Senior Indebtedness and Holder,
be deemed to be a payment by Company to or on account of this Note; and for
purposes of such subrogation, no payments or distributions to the holder(s) of
Senior Indebtedness to which the Holder would be entitled except for the
provisions of this Section 7 shall, as between Company and its creditors, other
than the holder(s) of Senior Indebtedness and Holder, be deemed to be a payment
by Company to or on account of the Senior Indebtedness.
(g) No Impairment. Subject to the rights, if any, of the
holder(s) of Senior Indebtedness under this Section 7 to receive cash,
securities or other properties otherwise payable or deliverable to Holder and
the other restrictions set forth in this Section 7, nothing contained in this
Section 7 shall impair, as between Company and Holder, the obligation of
Company, subject to the terms and conditions hereof, to pay to Holder the
principal hereof and interest hereon as and when the same become due and
payable or shall prevent Holder, upon the occurrence of an Event of Default
hereunder from exercising all rights, powers and remedies provided herein or by
applicable law.
(h) Reliance of Holder(s) of Senior Indebtedness.
Holder, by its acceptance hereof, shall be deemed to acknowledge and agree that
the foregoing subordination provisions are, and are intended to be, an
inducement to and a consideration of each holder of Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
creation of the indebtedness evidenced by this Note, and each such holder of
Senior Indebtedness
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<PAGE> 15
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
8. WAIVER AND AMENDMENT. Any provision of this Note may be
amended, waived or modified upon the written consent of Company and holders of
a Majority in Interest of all then outstanding Notes issued pursuant to the
Note Purchase and Sale Agreement.
9. PARI PASSU NOTES. Holder acknowledges and agrees that the
payment of all or any portion of the outstanding principal amount of this Note
and all interest hereon shall be pari passu in right of payment and in all
other respects to the other Notes issued pursuant to the Note Purchase and Sale
Agreement or pursuant to the terms of such Notes. In the event Holder receives
payments in excess of its pro rata share of Company's payments to the holders
of all of the Notes, then Holder shall hold in trust all such excess payments
for the benefit of the holders of the other Notes and shall pay such amounts
held in trust to such other holders upon demand by such holders.
10. SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer described in Sections 11 and 12 below, the rights and obligations of
Company and Holder shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
11. REGISTRATION AND TRANSFER OF THIS NOTE. With respect to any
offer, sale or other disposition of this Note, Holder will give written notice
to Company prior thereto, describing briefly the manner thereof, together with
a written opinion of such Holder's counsel, to the effect that such offer, sale
or other distribution may be effected without registration or qualification
(under any federal or state law then in effect). Unless the Company shall
notify such Holder, within 15 days after receiving such written notice, that a
determination has been made pursuant to this Section 11 that the opinion of
counsel for Holder is not reasonably satisfactory to Company, such Holder may
sell or otherwise dispose of this Note, all in accordance with the terms of the
notice delivered to Company. Each Note thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Act, unless in the opinion of counsel for Company such legend is not
required in order to ensure compliance with the Act. Subject to the foregoing,
transfers of this Note shall be registered upon registration books maintained
for such purpose by or on behalf of Company as provided in the Note Purchase
and Sale Agreement. Prior to presentation of this Note for registration of
transfer, Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon and for all other purposes whatsoever, whether or not this Note
shall be overdue and Company shall not be affected by notice to the contrary.
12. ASSIGNMENT BY COMPANY. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation of law
or otherwise, in whole or in part, by Company without the prior written consent
of Holder except in connection with an assignment in whole to a successor
corporation to Company by merger or otherwise, provided that such successor
corporation succeeds to or acquires all or substantially all of Company's
property and assets and Holder's rights hereunder are not impaired.
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<PAGE> 16
13. NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or mailed by registered or certified mail,
postage prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Note Purchase and Sale
Agreement or on the register maintained by Company. Any party hereto may by
notice so given change its address for future notice hereunder. Notice shall
conclusively be deemed to have been given when received.
14. OTHER PAYMENT MATTERS; PAST-DUE RATE; SAVINGS CLAUSE. Payment
shall be made in lawful tender of the United States. Whenever any payment due
hereunder shall fall due on a day other than a business day, such payment shall
be made on the next succeeding business day, and such extension of time shall
be included in the computation of interest or fees, as the case may be. If all
or a portion of the principal amount hereof or any interest or other amount due
and payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), then any such overdue amounts shall
bear interest at a rate per annum equal to eighteen percent (18%) payable on
demand. If Company shall have paid any interest on this Note in excess of that
permitted by law, then it is the express intent of Company and Holder that all
excess amounts previously paid by Company be applied to reduce the principal
balance of this Note, and the provisions hereof immediately be deemed reformed
and the amounts thereafter collectable as interest hereunder be reduced,
without the necessity of the execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder.
15. EXPENSES; WAIVERS. If action is instituted to collect
this Note, Company promises to pay all costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred in connection with
such action. Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.
16. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York or of any other state.
17. CERTAIN ADDITIONAL PROVISIONS.
(a) Acquisition of Notes. The Company will not, and will
not permit any of its subsidiaries or affiliates to, purchase, redeem or
otherwise acquire any of the Notes except upon the payment or prepayment
thereof in accordance with the terms of such Note; provided, however, that the
Company may purchase all or any portion of the Notes outstanding so long as the
Company offers to purchase Notes from each Holder of Notes on a pro rata basis
and on the same terms. Any Note paid or prepaid in full, shall be surrendered
to the Company and canceled, shall not be reissued and shall not be deemed to
be outstanding, and no Note shall be issued in lieu of any principal amount of
any Note that has been paid or prepaid.
(b) Additional Permitted Transfers. With respect to any
Holder who is an individual, the Note held by such Holder may also be
transferred, assigned or conveyed to any
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<PAGE> 17
of such Holder's spouse, children (including adopted children), siblings or
descendants, any trust for the benefit of such Holder and/or any of such family
members, or to any entity, substantially all of the beneficial interests of
which are owned (directly or indirectly) by such Holder, his family members
and/or trusts, or the executor or personal representative of such Holder
(collectively, the "Additional Permitted Transferees").
(c) Additional Mandatory Prepayments. Upon or following
the sale of all or substantially all of its assets, if the Company shall have
repaid all of its outstanding Senior Indebtedness (as such term is defined in
the Notes), or the Company shall have sufficient cash on hand to enable it to
repay all of its outstanding Senior Indebtedness, the Company shall use any
remaining funds available to make a pro rata prepayment of up to all of the
outstanding balance of the Notes.
(d) Restriction on New Senior Indebtedness of Company.
Upon expiration of the Term Loan of the Company's subsidiary, MHI Acquisition
Corporation I, under the Credit Agreement dated as of May 31, 1995, entered
into by it with the various Lenders thereunder and Internationale Nederlanden
(U.S.) Capital Corporation, any new senior indebtedness to be incurred by the
Company or any of its subsidiaries either must be approved by written consent
of the holder(s) of the majority of the outstanding principal amount of the New
Notes or provide for effective cancellation of the provisions relating to the
operation of the Fixed Charge Coverage Ratio (as defined under the Notes).
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Company has caused this Note to be issued
as of the date first written above.
MHI ACQUISITION, INC.
a Delaware corporation
By: /s/William A. Brosius
-----------------------------------
Name: William A. Brosius
---------------------------------
Title: Chief Financial Officer
--------------------------------
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<PAGE> 1
EXHIBIT 10.18
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
AMENDED AND RESTATED
SENIOR SUBORDINATED NOTE
DUE 2000
-------------------------
$5,275,330.50 July 25, 1996
FOR VALUE RECEIVED, MHI ACQUISITION, INC., a Delaware corporation
("Company") promises to pay to SV Capital Partners, L.P. ("Holder"), or its
registered assigns, the principal sum of Five Million Two Hundred Seventy-Five
Thousand Three Hundred Thirty and 50/100 Dollars ($5,275,330.50) plus any
accrued interest amounts added to the principal balance pursuant to the terms
of this Note, or such lesser amount as shall then equal the outstanding
principal amount hereof, together with interest from the date of this Note on
the unpaid principal balance at a rate equal to sixteen and one-half percent
(16.5%) per annum payable in the manner set forth in Section 2 of this Note.
All unpaid principal, together with any then unpaid and accrued interest and
other amounts payable hereunder, shall be due and payable on the earlier of (i)
November 30, 2000, or (ii) when such amounts are declared or made automatically
due and payable upon or after the occurrence of an Event of Default as set
forth in Section 6 hereof. This Note amends and restates that certain
promissory note dated June 1, 1995 in the original principal amount of
$4,500,000 made payable by the Company to Holder (the "Existing Note"), which
note was one of the "Notes" issued pursuant to the Note Purchase and Sale
Agreement dated as of May 6, 1996, (as amended, modified or supplemented, the
"Note Purchase and Sale Agreement") between Company, Morgan Stanley Venture
Capital Fund II, L.P., Morgan Stanley Venture Capital Fund II, C.V., and Morgan
Stanley Venture Investors, L.P. (the "Sellers" as defined in such Agreement)
and Alan Gerry and SV Capital Partners, L.P. (the "Purchasers" as defined in
such Agreement), in replacement of those certain promissory notes of the
Company, dated June 1, 1995 issued to the Sellers pursuant to that certain Note
Purchase and Sale Agreement, dated as of May 31, 1995 among the Sellers and the
Company (the "Original Note Purchase Agreement").
The following is a statement of the rights of Holder and the
conditions to which this Note is subject, and to which Holder, by the
acceptance of this Note, agrees:
1. DEFINITIONS. As used in this Note, the following capitalized
terms have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person,
any other Person which, directly or indirectly, controls or is controlled by or
under common control with such Person
<PAGE> 2
(excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power (i) to vote ten percent (10%) or more of the securities
having ordinary voting power for the election of directors of such Person; or
(ii) to direct or cause the direction of the management or policies of such
Person whether by contract or otherwise; provided, that the holding by any
holder of Senior Indebtedness of a warrant to purchase securities of the
Company (or the securities into which such warrant is convertible) shall not be
deemed to constitute such holder an Affiliate of Company.
(b) "Cash Equivalents" shall mean the Investments set
forth in clauses (i), (ii) (iii) and (x) of the definition of "Permitted
Investments."
(c) "Change of Control Event" shall mean the occurrence
of either of the following: any Person, or a group of related Persons, shall
acquire (i) beneficial ownership in excess of 50% of the outstanding voting
stock of Company or (ii) all or substantially all of the assets of Company.
(d) "Company" includes the corporation initially
executing this Note and any Person which shall succeed to or assume the
obligations of Company under this Note.
(e) "Credit Agreement" shall mean the Credit Agreement,
dated as of May 31, 1995, among MHI Acquisition Corporation I, a Delaware
corporation and wholly-owned Subsidiary of Company, various Lenders and
Internationale Nederlanden (U.S.) Capital Corporation, as the Agent for the
Lenders, as amended, restated, supplemented or otherwise modified, from time to
time.
(f) "EBITDA" shall have the meaning set forth in the
Credit Agreement.
(g) "Equity Securities" of any Person shall mean (a) all
common stock, preferred stock, participations, shares, partnership interests or
other equity interests in and of such Person (regardless of how designated and
whether or not voting or non-voting) and (b) all warrants, options and other
rights to acquire any of the foregoing.
(h) "Financial Statements" shall mean, with respect to
any accounting period for any Person, statements of operation, retained
earnings and cash flow of such Person for such period, and balance sheets of
such Person as of the end of such period, setting forth in each case in
comparative form figures for the corresponding period in the preceding fiscal
year if such period is less than a full fiscal year or, if such period is a
full fiscal year, corresponding figures from the preceding fiscal year, all
prepared in reasonable detail and in accordance with GAAP. Unless otherwise
indicated, each reference to Financial Statements of any Person shall be deemed
to refer to Financial Statements prepared on a consolidated basis.
(i) "Fixed Charge Coverage Ratio," as determined with
respect to any Payment Date, shall mean the ratio of (i) consolidated EBITDA of
Operating Subsidiary for the nine month period ended on the last day of the
fiscal quarter of Operating Subsidiary preceding the fiscal quarter ending on
such Payment Date, minus repayments of the Term Loan pursuant to clause (c) of
Section 3.3.1 of the Credit Agreement during such period, minus Operating
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<PAGE> 3
Subsidiary Interest Expense during such period, minus cash income taxes
actually paid during such period, minus increases in Operating Subsidiary's
consolidated working capital (excluding changes in cash, Cash Equivalents and
current maturities of Indebtedness) for such period, plus decreases in
Operating Subsidiary's consolidated working capital (excluding changes in cash,
Cash Equivalents and current maturities of Indebtedness) for such period, minus
expenditures for fixed or capital assets which are capitalized pursuant to
Operating Subsidiary's capitalization policy (excluding capitalized lease
obligations and any insurance proceeds which are received as a result of damage
to or loss of a capital asset and are used to repair or replace such capital
asset) during such period to (ii) 1.5 times the Subordinated Note Cash Interest
Expense determined for the six month period ending on such Payment Date. For
purposes of calculating the Fixed Charge Coverage Ratio, Section 3.3.1 of the
Credit Agreement shall be deemed to be as set forth in the Credit Agreement as
in effect on the date of this Note notwithstanding any subsequent amendment
thereof.
(j) "GAAP" shall mean generally accepted accounting
principles and practices as in effect in the United States of America from time
to time, consistently applied.
(k) "Guaranty Obligations" shall mean, with respect to
any Person, any direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"), including any
obligation of that Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation, or (ii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item,
level of income or financial condition of the primary obligor, or (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof.
(l) "Holder" shall mean the Person specified in the
introductory paragraph of this Note or any Person who shall at the time be the
registered holder of this Note.
(m) "Indebtedness" shall mean and include the aggregate
amount of, without duplication (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes or other similar instruments,
(c) all obligations to pay the deferred purchase price of property or services
(other than accounts payable incurred in the ordinary course of business
determined in accordance with GAAP), (d) all obligations with respect to
capital leases, (e) all Guaranty Obligations; (f) all obligations created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, (g) all reimbursement and other
payment obligations, contingent or otherwise, in respect of letters of credit.
(n) "Investment" of any Person shall mean any loan or
advance of funds by such Person to any other Person (other than advances to
employees of such Person for moving and travel expense, drawing accounts and
similar expenditures in the ordinary course of business), any purchase or other
acquisition of any Equity Securities or Indebtedness of any
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<PAGE> 4
other Person, any capital contribution by such Person to or any other
investment by such Person in any other Person (including, without limitation,
any Indebtedness incurred by such Person of the type described in clauses (a)
and (b) of the definition of "Indebtedness" on behalf of any other Person);
provided, however, that Investments shall not include accounts receivable or
other indebtedness owed by customers of such Person which are current assets
and arose from sales in the ordinary course of such Person's business.
(o) "Lien" shall mean, with respect to any property, any
security interest, mortgage, pledge, lien, claim, charge or other encumbrance
in, of, or on such property or the income therefrom, including, without
limitation, the interest of a vendor or lessor under a conditional sale
agreement, capital lease or other title retention agreement, or any agreement
to provide any of the foregoing, and the filing of any financing statement or
similar instrument under the Uniform Commercial Code or comparable law of any
jurisdiction.
(p) "Majority in Interest" shall mean more than 50% of
the aggregate outstanding principal amount of the Notes issued pursuant to the
Note Purchase and Sale Agreement.
(q) "Merger Agreement" shall mean the Plan and Agreement
of Reorganization, dated as of May 15, 1995, among Healthtrust, Inc. - The
Hospital Company, Coralstone Management, Inc., Milestone Healthcare, Inc.,
Milestone Healthcare Management, Inc., MHI Acquisition Corporation I, MHI
Acquisition Corporation II and Company.
(r) "Note Purchase and Sale Agreement" has the meaning
set forth in the introductory paragraph of this Note.
(s) "Operating Subsidiary" shall mean MHI Acquisition
Corporation I, and, after MHI Acquisition Corporation I is merged with and into
Milestone Healthcare, Inc., Milestone Healthcare, Inc.
(t) "Operating Subsidiary Interest Expense" shall mean,
for any period, interest expense accrued during such period in respect of
Indebtedness of Operating Subsidiary or any of its Subsidiaries.
(u) "Payment Date" shall mean each May 31 and November
30.
(v) "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint stock company,
a limited liability company, an unincorporated association, a joint venture or
other entity or a governmental authority.
(w) "Permitted Additional Subordinated Indebtedness"
shall mean Indebtedness of Company subordinated in right of payment to the
payment of this Note and the other Notes issued under the Note Purchase and
Sale Agreement and which does not provide for (i) a maturity date or any
amortization of principal of such subordinated indebtedness earlier than
ninety-one (91) days after November 30, 2000; (ii) the payment of interest
except at maturity or in kind; or (iii) any covenants or restrictions on
Company (other than a covenant to pay principal and interest when due).
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<PAGE> 5
(x) "Permitted Indebtedness" shall mean (i) Senior
Indebtedness; (ii) Permitted Additional Subordinated Indebtedness in an
aggregate principal amount not exceeding $2,000,000 at any time, (iii)
Indebtedness of any Subsidiary owing to Company or of Company owing to any
Subsidiary; (iv) other Indebtedness incurred after June 1, 1998, not included
in clauses (i), (ii) and (iii) of this definition in an aggregate amount
outstanding not exceeding ten percent (10%) of Company's consolidated net worth
as of the last day of Company's previous fiscal year.
(y) "Permitted Investments" shall mean and include: (i)
Deposits with commercial banks organized under the laws of the United States or
a state thereof to the extent such deposits are fully insured by the Federal
Deposit Insurance Corporation; (ii) Investments in marketable obligations
issued or fully guaranteed by the United States and maturing not more than one
(1) year from the date of issuance; (iii) Investments in open market commercial
paper rated at least "A1" or "P1" or higher by a national credit rating agency
and maturing not more than one (1) year from the creation thereof; (iv)
Investments pursuant to or arising under currency agreements or interest rate
agreements entered into in connection with bona fide hedging arrangements; (v)
Investments consisting of deposit accounts of Company and its Subsidiaries
maintained in the ordinary course of business; (vi) Investments by Company in
its Subsidiaries; (vii) Investments by Subsidiaries of Company in Company and
Investments by Subsidiaries in Subsidiaries; (viii) Investments consisting of
loans to employees, officers or directors relating to the purchase of Equity
Securities of Company not exceeding $250,000 at any time outstanding; (ix)
Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; (x) any Investments permitted by
Company's or Operating Subsidiary's investment policy, as amended from time to
time, provided such investment policy (and any such amendment thereto) has been
approved by a Majority in Interest and the requisite holders of Senior
Indebtedness under the Credit Agreement; and (xi) other Investments incurred
after June 1, 1998, in an aggregate amount outstanding not exceeding ten
percent (10%) of Company's consolidated net worth as of the last day of
Company's previous fiscal year.
(z) "Permitted Liens" shall mean and include: (i) Liens
for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith, provided
provision is made to the reasonable satisfaction of Holder for the eventual
payment thereof if subsequently found payable; (ii) Liens of carriers,
warehousemen, mechanics, materialmen, vendors, and landlords incurred in the
ordinary course of business for sums not overdue or being contested in good
faith, provided provision is made to the reasonable satisfaction of Holder for
the eventual payment thereof if subsequently found payable; (iii) deposits
under workers' compensation, unemployment insurance and social security laws or
to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory obligations of
surety, appeal, indemnity, performance or other similar bonds in the ordinary
course of business; (iv) Liens securing obligations under a capital lease if
such lease is permitted under this Note and such Liens do not extend to
property other than the property leased under such capital lease; (v) Liens
upon any equipment acquired or held by Company or any of its Subsidiaries to
secure the purchase price of such equipment or Indebtedness incurred solely for
the purpose of financing the acquisition of such equipment so long as such
financing is permitted under this Note; (vi) easements,
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reservations, rights of way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances affecting real property in a
manner not materially or adversely affecting the value or use of such property;
(vii) Liens with respect to judgments to the extent such judgments do not
constitute an Event of Default described in Section 5(g); (viii) Leases and
subleases granted to others in the ordinary course of business not interfering
in any material respect with any business of Company or any of its
Subsidiaries; (ix) Liens which constitute rights of set-off of a customary
nature or bankers' liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with banks in the ordinary
course of business; (x) Liens securing financed annual insurance premiums so
long as such liens are confined solely to the proceeds of the insurance
purchased with such premiums; and (xi) Liens in favor of holders of Senior
Indebtedness.
(aa) "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint stock company,
a limited liability company, an unincorporated association, a joint venture or
other entity or a governmental authority.
(bb) "Qualified Sale" shall mean a transaction which
results in net proceeds to the holders of Common Stock of Company (assuming a
distribution of sale proceeds to such stockholders, if applicable) of at least
$2.40 per share (as such price may be appropriately adjusted for any stock
combinations, stock splits, stock dividends, recapitalizations and the like),
and which consists of (i) the sale by the stockholders of Company in a single
arms- length transaction of one hundred percent (100%) of the capital stock of
Company or the sale by Company in a single arms-length transaction of one
hundred percent (100%) of the capital stock of Operating Subsidiary, in either
case, to a Person not an Affiliate of Company; (ii) the merger or consolidation
of Company or Operating Subsidiary or any acquisition of Company or Operating
Subsidiary by means of a share exchange, in either case, in a single
arms-length transaction with or into any other Person not an Affiliate of
Company; (iii) the sale by Company in a single arms-length transaction of all
or substantially all of the assets of Company to a Person not an Affiliate of
Company and the subsequent distribution of the proceeds of such sale to the
holders of capital stock of Company, after payment of or provision for the
liabilities of Company; or (iv) the sale by Operating Subsidiary in a single
arms-length transaction of all or substantially all of the assets of Operating
Subsidiary to a Person not an Affiliate of Company.
(cc) "Senior Indebtedness" shall mean, unless expressly
subordinated to or expressly made on a parity with the amounts due under this
Note, the principal of (and premium, if any), unpaid interest on and amounts
reimbursable, fees, expenses, costs of enforcement and other amounts due in
connection with, (i) indebtedness incurred under the Credit Agreement, provided
that the Merger (as defined in Section 3(d) hereof) occurs on or before August
31, 1996, (ii) Indebtedness incurred under that certain Guaranty and that
certain Pledge Agreement, each dated as of May 31, 1995, and each executed by
Company in favor of Internationale Nederlanden (U.S.) Capital Corporation, as
Agent for various Lenders under the Credit Agreement, and (iii) all extensions,
refinancings, renewals, replacements, refundings, modifications, amendments and
restatements of the foregoing (including, without limitation, any Indebtedness
incurred from time to time under any revolving credit facility in favor of
Company or any guaranty by Company of any such revolving credit facility in
favor of Operating Subsidiary, in either case, that refinances, replaces or
refunds, in whole or in part, Indebtedness incurred by Operating Subsidiary
under the Credit Agreement and/or the commitments of the
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holders of Senior Indebtedness thereunder) so long as the scheduled maturity of
such extensions, renewals, replacements, refinancings, modifications,
amendments and restatements is not to occur after the maturity date of this
Note.
(dd) "Subordinated Note Cash Interest Expense" shall mean,
for any period, Company's interest expense accrued under this Note and the
other Notes issued pursuant to the Note Purchase and Sale Agreement, minus the
portion of such accrued interest expense which is not payable in cash under any
circumstances on the next succeeding Payment Date (i.e., the interest referred
to in Section 2(a)(i) of this Note and the five and one-half percent (5.5%) per
annum interest referred to in clause (B) of Section 2(a)(ii) of this Note.)
(ee) "Subsidiary" shall mean (a) any corporation of which
more than 50% of the issued and outstanding equity securities having ordinary
voting power to elect a majority of the Board of Directors of such corporation
is at the time directly or indirectly owned or controlled by Company, (b) any
partnership, joint venture, or other association of which more than 50% of the
equity interest having the power to vote, direct or control the management of
such partnership, joint venture or other association is at the time directly or
indirectly owned and controlled by Company (c) any other entity included in the
financial statements of Company on a consolidated basis.
(ff) "Transaction Documents" shall mean this Note, each of
the other Notes issued under the Note Purchase and Sale Agreement, the Note
Purchase and Sale Agreement, the Original Note Purchase Agreement and the
Company - Purchasers Agreement (as such is defined in the Note Purchase and
Sale Agreement).
2. INTEREST PAYMENTS; PREPAYMENTS.
(a) Interest Payments.
(i) All interest accrued under the Existing Note
in respect of the period from May 31, 1996 through the date hereof as well as
all interest accrued from the date hereof until and including May 31, 1997
shall not be paid in cash, but shall accrue and, on each successive Payment
Date, be added to the principal amount due under this Note.
(ii) Commencing on June 1, 1997, and continuing
until the outstanding principal amount hereof is paid in full, interest on the
outstanding principal amount of this Note shall (A) accrue at the rate of
eleven percent (11.0%) per annum and such interest shall be payable in arrears
in cash on each successive Payment Date, and (B) accrue at the rate of five and
one-half percent (5.5%) per annum and such interest shall be added to the
principal amount due under this Note on each successive Payment Date; provided,
however, that, if the Fixed Charge Coverage Ratio determined with respect to a
Payment Date is less than 1.0:1.0, then the payment of interest scheduled to be
made on such Payment Date as set forth in clause (A) of this Section 2(a)(ii)
shall not be paid in cash, but shall be added to the principal amount of this
Note on such Payment Date. Subject to the foregoing proviso, the first such
interest payment in cash shall occur on November 30, 1997.
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<PAGE> 8
(iii) If at any time, the proviso set forth in
Section 2(a)(ii) shall prevent the payment of cash interest on this Note,
Company shall deliver to Holder prior to the relevant Payment Date a
certificate (A) stating that such payment of interest shall not be paid in
cash, but shall be added to the principal amount of the Note and (B) setting
forth in reasonable detail the calculation of the Fixed Charge Coverage Ratio
as of the end of the preceding fiscal quarter.
(iv) The accrued interest which has been added to
the principal payable under this Note on each Payment Date shall after such
Payment Date bear interest at the rate and in the manner set forth in this
Note.
(b) Prepayments.
(i) Upon five (5) days' prior written notice to
Holder (except as set forth in Section 2(b)(ii)), Company may prepay this Note
in whole or in part; provided, that: (i) any prepayment of this Note may only
be made in connection with the prepayment of all Notes issued under the Note
Purchase and Sale Agreement on a pro rata basis, based on the respective
aggregate outstanding principal amounts of each such Note, (ii) any such
prepayment will be made together with interest accrued (but which has not been
previously added to the principal amount of this Note) on the amount to be
prepaid, and (iii) with respect to any prepayment made prior to June 1, 1997,
except in the case of a prepayment made simultaneously with the closing of (A)
an initial public offering of the common stock of Company or Operating
Subsidiary or (B) a Qualified Sale, Company shall pay to Holder a premium equal
to ten percent (10%) of the principal amount prepaid.
(ii) If a prepayment is to be made in connection
with an offering of securities by Company or Operating Subsidiary, the notice
required to be given prior to such prepayment shall be as follows: (A) Company
shall give written notice to Holder within one (1) business day following the
filing of the preliminary prospectus or similar statement in connection with
such securities offering which notice shall provide Holder with Company's
estimate of the date of prepayment, and (B) Company shall give an additional
written notice to Holder on the day on which such securities offering becomes
effective, which notice shall provide Holder with the date of prepayment
(provided that such date shall not be less than one (1) business day after the
date of the notice provided in this clause (B)).
3. CERTAIN COVENANTS. While any amount is outstanding under the
Note, without the prior written consent of a Majority in Interest:
(a) Indebtedness. Neither Company nor any of its
Subsidiaries shall create, incur, assume or permit to exist any Indebtedness
except Permitted Indebtedness.
(b) Liens. Neither Company nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or hereafter
acquired, except for Permitted Liens.
(c) Asset Dispositions. Neither Company nor any of its
Subsidiaries shall sell, lease, transfer, license or otherwise dispose of
(collectively, a "Transfer") any of its assets or property, whether now owned
or hereafter acquired, except Transfers in which cash is received
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in respect of such transfer and (A) in which such Transfer is in the ordinary
course of business and consists of the sale of inventory, (B) in which such
Transfer is in the ordinary course of business and consists of sales of
worn-out or obsolete equipment, or (C) in which the net book value of the asset
to which the Transfer applies does not exceed $500,000, and together with the
net book value of all other assets with respect to which a Transfer has been
made by Company or any Subsidiary does not exceed, during any fiscal year, ten
percent (10%) of the consolidated net worth of Company as of the last day of
the previous fiscal year of Company.
(d) Mergers, Acquisitions, Etc. Except in connection
with the transactions contemplated under the Merger Agreement, neither Company
nor any of its Subsidiaries shall consolidate with or merge into any other
Person or permit any other Person to merge into it, or acquire all or
substantially all of the assets or capital stock of any other Person, except
that any such Subsidiary may liquidate or dissolve voluntarily into and may
merge with and into Company or any other wholly-owned Subsidiary (so long as
Company or such wholly-owned Subsidiary is the surviving Corporation).
Notwithstanding the foregoing, the merger of MHI Acquisition, Inc. with and
into its wholly-owned subsidiary, Milestone Healthcare, Inc., with Milestone
Healthcare, Inc. as the surviving corporation (the "Merger") shall not require
the prior written consent of a Majority in Interest, provided that the Merger
occurs on or before August 31, 1996.
(e) Investments. Neither Company nor any of its
Subsidiaries shall make any Investment except for Permitted Investments.
Neither Company nor any of its Subsidiaries shall create, acquire or permit to
exist any Subsidiary other than MHI Acquisition Corporation I, MHI Acquisition
Corporation II, Milestone Healthcare, Inc., Milestone Healthcare Management,
Inc., TruCare Rehabilitation Services, Inc. and TruCare Physical Therapy
Services, Inc.
(f) Dividends, Redemptions, Etc. Neither Company nor any
of its Subsidiaries shall (i) pay any dividends or make any distributions on
its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; (iii) return any capital to any
holder of its Equity Securities; (iv) make any distribution of assets, Equity
Securities or obligations to any holder of its Equity Securities; or (v) set
apart any sum for any such purpose; provided, however, that (A) Company may
make distributions on its Equity Securities in the form of common stock, (B)
any Subsidiary may pay cash dividends to Company or any Subsidiary of Company
which is the parent corporation of such Subsidiary, (C) Company or its
Subsidiaries may repurchase Equity Securities of any officer or employee whose
employment with Company or any Subsidiary has terminated pursuant to the terms
of an agreement between Company or any Subsidiary and such officer or employee,
(D) Company may, in connection with the Put and Call Agreement, dated as of May
31, 1995, among Company, MHI Acquisition Corporation I and Internationale
Nederlanden (U.S.) Capital Corporation, purchase, redeem, retire or otherwise
acquire for value its Equity Securities; and (E) Company may repurchase its
Equity Securities pursuant to the terms of each Founder Performance Stock
Purchase Agreement, dated as of May 15, 1995, entered into by Company with each
of Charles L. Allen, Roy Griffitts, Jr. and William A. Brosius.
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<PAGE> 10
(g) No Amendment. Company shall not amend, modify or
otherwise change the terms of the Senior Indebtedness in an manner which would
(i) increase the aggregate principal amount which may be borrowed thereunder to
more than $17,000,000; or (ii) amend the scheduled maturity date thereof to a
date that is earlier than May 31, 2000.
4. INFORMATION RIGHTS; NOTICES. Company shall furnish to Holder
the following:
(a) Quarterly Financial Statements. Within forty-five
(45) days after the last day of each fiscal quarter of Company, a copy of the
Financial Statements of Company for such quarter and for the fiscal year to
date, certified by the chief financial officer or controller of Company to
present fairly the financial condition, results of operations and other
information presented therein and to have been prepared in accordance with GAAP
consistently applied, subject to normal year end adjustments and except that no
footnotes need be included with such Financial Statements;
(b) Annual Financial Statements. Within ninety (90) days
after the close of each fiscal year of Company, (i) copies of the audited
Financial Statements of Company (including, without limitation, consolidated
and consolidating Financial Statements for Company and its Subsidiaries) for
such year, audited by independent certified public accountants reasonably
acceptable to Lender, (ii) copies of the unqualified opinions and management
letters delivered by such accountants in connection with such Financial
Statements, (iii) certificates of such accountants to Company stating that its
has reviewed the provisions of this Agreement and the most recent two
calculations of the Fixed Charge Coverage Ratio used in determining whether
cash interest shall be paid under this Note and is not aware of any
miscalculation of such Fixed Charge Coverage Ratio, and (iv) a report
containing a description of projected business prospects (including capital
expenditures) and management's discussion and analysis of financial condition
and results of operation of Company and its Subsidiaries;
(c) SEC Reports. As soon as possible and in no event
later than five (5) Business Days after they are sent, made available or filed,
copies of all registration statements and reports filed by Company with the
Securities and Exchange Commission and all reports, proxy statements and
financial statements sent or made available by Company to its shareholders
generally;
(d) Business Plan. Not less than ten (10) days prior to
the commencement of each fiscal year of Company, a copy of the business plan
and operating budget (prepared on a monthly basis) of Company and its
Subsidiaries for such fiscal year; and
(e) Notice of Defaults. Promptly upon the occurrence
thereof, written notice of the occurrence of any Event of Default hereunder or
any event of default with respect to any Senior Indebtedness.
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<PAGE> 11
5. EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "Event of Default" under this Note and the other
Transaction Documents:
(a) Failure to Pay. Company shall fail to pay when due
(i) any principal under this Note; or (ii) any interest or other amount payable
under this Note and such failure to pay interest or other amount payable shall
remain unremedied for five (5) days; or
(b) Breaches of Certain Covenants. Company or any of its
Subsidiaries shall fail to observe or perform any covenant, obligation,
condition or agreement set forth in Section 3 of this Note, or Company shall
fail to observe or perform any covenant, obligation, condition or agreement set
forth in Section 4 of this Note and such failure shall remain unremedied for
ten (10) days (or if such default is not reasonably susceptible to cure within
ten (10) days, such longer period as is reasonably needed to effect such cure,
but in no event longer than thirty (30) days from the date notice is given, so
long as Company promptly commences and diligently pursues such cure); or
(c) Representations and Warranties. Any representation
or warranty made by Company in any Transaction Document shall have been false,
incorrect or misleading in any material respect when made; or
(d) Other Payment Obligations. Company or any of its
Subsidiaries shall (i)(A) fail to make any payment when due under the terms of
any bond, debenture, note or other evidence of Indebtedness, including the
Senior Indebtedness, to be paid by such Person (excluding this Note and the
other Transaction Documents) and such failure shall continue beyond any period
of grace provided with respect thereto, or (B) default in the observance or
performance of any other agreement, term or condition contained in any such
bond, debenture, note or other evidence of Indebtedness, and (ii) the effect of
such failure or default has been to cause the holder or holders thereof to
declare or otherwise cause Indebtedness in an aggregate amount of One Million
Dollars ($1,000,000) or more to become due prior to its stated date of
maturity; or
(e) Voluntary Bankruptcy or Insolvency Proceedings.
Company or any of its Subsidiaries shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself or of all
or a substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated in full or in part, (v) become insolvent (as such term may be
defined or interpreted under any applicable statute), (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or
(f) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Company or any of its Subsidiaries or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Company or any of
its
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<PAGE> 12
Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
sixty (60) days of commencement; or
(g) Judgments. A final judgment or order for the payment
of money in excess of One Million Dollars ($1,000,000) (exclusive of amounts
covered by insurance issued by an insurer not an Affiliate of Company) shall be
rendered against Company or any of its Subsidiaries and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not
be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a
substantial part of the property of Company or any of its Subsidiaries and such
judgment, writ, or similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy.
(h) Change of Control. A Change of Control Event shall
occur.
6. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or
existence of any Event of Default (other than an Event of Default referred to
in Paragraphs 4(d) and 4(e)) and at any time thereafter during the continuance
of such Event of Default, Holder may, with the consent of a Majority in
Interest of the holders of the Notes issued under the Note Purchase and Sale
Agreement, by written notice to Company, state its intention to declare all
outstanding principal and accrued interest payable by Company hereunder to be
immediately due and payable, and, after a period of not less than five (5)
business days after delivery of such notice to Company, Holder may declare all
outstanding principal and accrued interest payable by Company hereunder to be
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the other Transaction Documents to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in Sections 5(e) or 5(f), immediately and without notice, all
outstanding principal and accrued interest payable by Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Holder may exercise any other
right, power or remedy granted to it by the Transaction Documents or otherwise
permitted to it by law, either by suit in equity or by action at law, or both.
7. SUBORDINATION. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full in cash of all of
Company's Senior Indebtedness.
(a) Insolvency Proceedings. If there shall occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy
(voluntary or involuntary), reorganization, or arrangements with creditors
(whether or not pursuant to bankruptcy or other insolvency laws), sale of all
or substantially all of the assets, dissolution, liquidation, or any other
marshalling of the assets and liabilities of Company, (i) the holder(s) of
Senior Indebtedness shall be entitled to receive payment in full in cash of all
Senior Indebtedness (including any interest thereon accruing at the contract
rate after the commencement of any such proceedings, but only to the
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extent allowed as a claim in such proceedings) then outstanding before Holder
shall be entitled to receive any payment or distribution, whether in cash,
securities or other property, in respect of the principal of, interest on or
other amounts due with respect to this Note at the time outstanding, and (ii)
any payment or distribution, whether in cash, securities or other property,
(other than securities of Company or any other corporation provided for by a
plan of reorganization or readjustment, the payment of which is subordinated,
at least to the extent provided in this Section 7, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for this Section 7) be payable or deliverable in respect of the
amounts due under this Note shall be paid or delivered directly to the
holder(s) of the Senior Indebtedness (ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held by each) or
to a trustee or other representative for holder(s) of Senior Indebtedness.
(b) Permitted Payments; Default on Senior Indebtedness.
Notwithstanding any provision to the contrary contained in this Note, so long
as there shall not have occurred and be continuing an event of default which
has been declared in writing with respect to any Senior Indebtedness, as
defined therein, or in the instrument under which it is outstanding, permitting
the holder to accelerate the maturity thereof (a "Senior Default"), Company
shall be permitted to make, and Holder to accept and receive, regularly
scheduled payments of accrued interest under this Note. Notwithstanding
anything to the contrary contained in this Section 7, Company shall not make
and Holder shall not receive any payment of any kind of amounts payable under
this Note during any period (a "Payment Blockage Period"):
(i) of 180 days after delivery by a holder of
Senior Indebtedness to Company and Holder of written notice that a Senior
Default has occurred (unless such default shall have been cured or waived or
cease to exist or all amounts owing with respect to the Senior Indebtedness
have been discharged); provided, that not more than one notice of a Senior
Default may be given to Holder during any period of 360 consecutive days; or
(ii) in which written notice of acceleration of
the maturity of any Senior Indebtedness shall have been delivered to Company
and Holder in respect of such Senior Default and such notice remains in effect.
For purposes of this Section 7(b), no Senior Default which is not a default in
the making of any payment when due with respect to Senior Indebtedness (a
"Senior Non-Payment Default") which existed or was continuing on the date such
notice was given shall be, or be made, the basis for the commencement of a
second Payment Blockage Period by the holder(s) of such Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such Senior
Non-Payment Default shall have been cured or waived for a period of not less
than 120 consecutive days.
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<PAGE> 14
(c) Turnover of Payments. Except for payments permitted
under Section 7(b), should any payment or distribution, whether in cash,
securities or other property, be received by Holder upon or with respect to the
amounts payable under this Note by any means, including, without limitation,
setoff, prior to the payment in full of the Senior Indebtedness, Holder shall
receive and hold the same in trust, as trustee, for the benefit of the
holder(s) of the Senior Indebtedness, and shall forthwith deliver the same to
the holder(s) of the Senior Indebtedness (ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held by each) or
to a trustee or other representative for holder(s) of Senior Indebtedness in
precisely the form received for application to the Senior Indebtedness (whether
or not it is then due).
(d) Further Assurances. By acceptance of this Note,
Holder agrees to execute and deliver customary forms of subordination agreement
requested from time to time by holder(s) of Senior Indebtedness, and as a
condition to Holder's rights hereunder, Company may require that Holder execute
such forms of subordination agreement; provided that such forms shall not
impose on Holder terms less favorable than those provided herein.
(e) Other Indebtedness. No Indebtedness which does not
constitute Senior Indebtedness shall be senior in any respect to the
indebtedness represented by this Note.
(f) Subrogation. Subject to the payment in full in cash,
of all Senior Indebtedness, Holder shall be subrogated to the rights of the
holder(s) of such Senior Indebtedness (to the extent of the payments or
distributions made to the holder(s) of such Senior Indebtedness pursuant to the
provisions of this Section 7) to receive payments and distributions of assets
of Company applicable to the Senior Indebtedness. No such payments or
distributions applicable to the Senior Indebtedness shall, as between Company
and its creditors, other than the holder(s) of Senior Indebtedness and Holder,
be deemed to be a payment by Company to or on account of this Note; and for
purposes of such subrogation, no payments or distributions to the holder(s) of
Senior Indebtedness to which the Holder would be entitled except for the
provisions of this Section 7 shall, as between Company and its creditors, other
than the holder(s) of Senior Indebtedness and Holder, be deemed to be a payment
by Company to or on account of the Senior Indebtedness.
(g) No Impairment. Subject to the rights, if any, of the
holder(s) of Senior Indebtedness under this Section 7 to receive cash,
securities or other properties otherwise payable or deliverable to Holder and
the other restrictions set forth in this Section 7, nothing contained in this
Section 7 shall impair, as between Company and Holder, the obligation of
Company, subject to the terms and conditions hereof, to pay to Holder the
principal hereof and interest hereon as and when the same become due and
payable or shall prevent Holder, upon the occurrence of an Event of Default
hereunder from exercising all rights, powers and remedies provided herein or by
applicable law.
(h) Reliance of Holder(s) of Senior Indebtedness.
Holder, by its acceptance hereof, shall be deemed to acknowledge and agree that
the foregoing subordination provisions are, and are intended to be, an
inducement to and a consideration of each holder of Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
creation of the indebtedness evidenced by this Note, and each such holder of
Senior Indebtedness
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<PAGE> 15
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
8. WAIVER AND AMENDMENT. Any provision of this Note may be
amended, waived or modified upon the written consent of Company and holders of
a Majority in Interest of all then outstanding Notes issued pursuant to the
Note Purchase and Sale Agreement.
9. PARI PASSU NOTES. Holder acknowledges and agrees that the
payment of all or any portion of the outstanding principal amount of this Note
and all interest hereon shall be pari passu in right of payment and in all
other respects to the other Notes issued pursuant to the Note Purchase and Sale
Agreement or pursuant to the terms of such Notes. In the event Holder receives
payments in excess of its pro rata share of Company's payments to the holders
of all of the Notes, then Holder shall hold in trust all such excess payments
for the benefit of the holders of the other Notes and shall pay such amounts
held in trust to such other holders upon demand by such holders.
10. SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer described in Sections 11 and 12 below, the rights and obligations of
Company and Holder shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
11. REGISTRATION AND TRANSFER OF THIS NOTE. With respect to any
offer, sale or other disposition of this Note, Holder will give written notice
to Company prior thereto, describing briefly the manner thereof, together with
a written opinion of such Holder's counsel, to the effect that such offer, sale
or other distribution may be effected without registration or qualification
(under any federal or state law then in effect). Unless the Company shall
notify such Holder, within 15 days after receiving such written notice, that a
determination has been made pursuant to this Section 11 that the opinion of
counsel for Holder is not reasonably satisfactory to Company, such Holder may
sell or otherwise dispose of this Note, all in accordance with the terms of the
notice delivered to Company. Each Note thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Act, unless in the opinion of counsel for Company such legend is not
required in order to ensure compliance with the Act. Subject to the foregoing,
transfers of this Note shall be registered upon registration books maintained
for such purpose by or on behalf of Company as provided in the Note Purchase
and Sale Agreement. Prior to presentation of this Note for registration of
transfer, Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon and for all other purposes whatsoever, whether or not this Note
shall be overdue and Company shall not be affected by notice to the contrary.
12. ASSIGNMENT BY COMPANY. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation of law
or otherwise, in whole or in part, by Company without the prior written consent
of Holder except in connection with an assignment in whole to a successor
corporation to Company by merger or otherwise, provided that such successor
corporation succeeds to or acquires all or substantially all of Company's
property and assets and Holder's rights hereunder are not impaired.
-15-
<PAGE> 16
13. NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or mailed by registered or certified mail,
postage prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Note Purchase and Sale
Agreement or on the register maintained by Company. Any party hereto may by
notice so given change its address for future notice hereunder. Notice shall
conclusively be deemed to have been given when received.
14. OTHER PAYMENT MATTERS; PAST-DUE RATE; SAVINGS CLAUSE. Payment
shall be made in lawful tender of the United States. Whenever any payment due
hereunder shall fall due on a day other than a business day, such payment shall
be made on the next succeeding business day, and such extension of time shall
be included in the computation of interest or fees, as the case may be. If all
or a portion of the principal amount hereof or any interest or other amount due
and payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), then any such overdue amounts shall
bear interest at a rate per annum equal to eighteen percent (18%) payable on
demand. If Company shall have paid any interest on this Note in excess of that
permitted by law, then it is the express intent of Company and Holder that all
excess amounts previously paid by Company be applied to reduce the principal
balance of this Note, and the provisions hereof immediately be deemed reformed
and the amounts thereafter collectable as interest hereunder be reduced,
without the necessity of the execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder.
15. EXPENSES; WAIVERS. If action is instituted to collect this
Note, Company promises to pay all costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred in connection with
such action. Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.
16. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York or of any other state.
17. CERTAIN ADDITIONAL PROVISIONS.
(a) Acquisition of Notes. The Company will not, and will
not permit any of its subsidiaries or affiliates to, purchase, redeem or
otherwise acquire any of the Notes except upon the payment or prepayment
thereof in accordance with the terms of such Note; provided, however, that the
Company may purchase all or any portion of the Notes outstanding so long as the
Company offers to purchase Notes from each Holder of Notes on a pro rata basis
and on the same terms. Any Note paid or prepaid in full, shall be surrendered
to the Company and canceled, shall not be reissued and shall not be deemed to
be outstanding, and no Note shall be issued in lieu of any principal amount of
any Note that has been paid or prepaid.
(b) Additional Permitted Transfers. With respect to any
Holder who is an individual, the Note held by such Holder may also be
transferred, assigned or conveyed to any
-16-
<PAGE> 17
of such Holder's spouse, children (including adopted children), siblings or
descendants, any trust for the benefit of such Holder and/or any of such family
members, or to any entity, substantially all of the beneficial interests of
which are owned (directly or indirectly) by such Holder, his family members
and/or trusts, or the executor or personal representative of such Holder
(collectively, the "Additional Permitted Transferees").
(c) Additional Mandatory Prepayments. Upon or following
the sale of all or substantially all of its assets, if the Company shall have
repaid all of its outstanding Senior Indebtedness (as such term is defined in
the Notes), or the Company shall have sufficient cash on hand to enable it to
repay all of its outstanding Senior Indebtedness, the Company shall use any
remaining funds available to make a pro rata prepayment of up to all of the
outstanding balance of the Notes.
(d) Restriction on New Senior Indebtedness of Company.
Upon expiration of the Term Loan of the Company's subsidiary, MHI Acquisition
Corporation I, under the Credit Agreement dated as of May 31, 1995, entered
into by it with the various Lenders thereunder and Internationale Nederlanden
(U.S.) Capital Corporation, any new senior indebtedness to be incurred by the
Company or any of its subsidiaries either must be approved by written consent
of the holder(s) of the majority of the outstanding principal amount of the New
Notes or provide for effective cancellation of the provisions relating to the
operation of the Fixed Charge Coverage Ratio (as defined under the Notes).
[Remainder of page intentionally left blank]
-17-
<PAGE> 18
IN WITNESS WHEREOF, Company has caused this Note to be issued
as of the date first written above.
MHI ACQUISITION, INC.
a Delaware corporation
By: /s/William A. Brosius
-----------------------------------
Name: William A. Brosius
---------------------------------
Title: Chief Financial Officer
--------------------------------
-18-
<PAGE> 1
EXHIBIT 10.19
AGREEMENT entered into May 6 , 1996 by and among Alan Gerry
("Gerry") and SV Capital Partners L.P. ("Silver") (each individually a
"Purchaser" and collectively the "Purchasers") and MHI Acquisition, Inc., a
Delaware corporation with its principal executive office at 2501 Cedar Springs
Road, Suite 600, LB15, Dallas, Texas 75201 (the "Company").
WHEREAS, the Purchasers and the Company have entered into a
Note Purchase and Sale Agreement, dated as of the date hereof (the "Sellers
Note Purchase Agreement) with Morgan Stanley Venture Capital Fund II L.P.
("MSVCFIILP"), Morgan Stanley Venture Capital Fund II CV ("MSVCFIICV") and
Morgan Stanley Investors, L.P. ("MSVILP") (each individually a "Seller" and
collectively the "Sellers"), pursuant to which, among other things, the Sellers
are to sell to the Purchasers the Notes referred to in the Sellers Note
Purchase Agreement and are to assign to the Purchasers all of the Sellers'
respective right, title and interest in, to and under that certain Note
Purchase Agreement, dated as of May 31, 1995, among the Sellers and the Company
pursuant to which the Notes were originally purchased from the Company by the
Sellers (the "Original Note Purchase Agreement");
WHEREAS, pursuant to the Sellers Note Purchase Agreement and
concurrently with the sale of the Notes to the Purchasers thereunder, the
Sellers are separately issuing to each Purchaser warrants to purchase
(collectively, the "Seller Warrants") certain of the shares of Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred Stock")
acquired by the Sellers from the Company pursuant to and under that certain
Series A Preferred Stock Purchase Agreement, dated as of May 31, 1995, among
the Sellers, the Company and the other Purchasers named therein (the "Preferred
Stock Purchase Agreement"); and
WHEREAS, in order to induce the Purchasers to purchase the
Notes and Warrants pursuant to the Sellers Note Purchase Agreement, the Company
has agreed to execute this Agreement and to make certain representations and
warranties to the Purchaser, to confirm certain matters to the Purchaser
including matters under certain related agreements, and to agree to certain
changes with respect to certain provisions contained in the Notes.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINED TERMS.
All terms used herein, and not otherwise defined
herein, shall have the meanings ascribed thereto in the Sellers Note Purchase
Agreement.
2. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to each of the Purchasers as follows:
2.1 THE NOTES. The outstanding principal balance
and accrued interest on each of the Notes as of the date hereof is set forth on
Exhibit A attached hereto. Each of the Notes, this
<PAGE> 2
Agreement, the Sellers Note Purchase Agreement and the Original Note Purchase
Agreement represents, and the New Notes, when issued and delivered as
contemplated pursuant to the Sellers Note Purchase Agreement, will represent,
the legal, valid and binding obligations of the Company and are not subject, as
of the date hereof, to any defense, counterclaim or right of offset on behalf
of the Company. The Company's obligations under and in respect of the Notes,
the New Notes, the Original Note Purchase Agreement, this Agreement and the
Sellers Note Purchase Agreement are enforceable against the Company in
accordance with their terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
2.2 RESTATEMENT OF CERTAIN REPRESENTATIONS. The
Company hereby incorporates into this Agreement by this reference and restates,
as of the date hereof, the representations of the Company (except that the term
"Transaction Documents" as used therein shall also include the New Notes and
this Agreement) set forth in Sections 2(a)-(e), 2(f) (first sentence only),
2(g), 2(i), 2(l) and 2(n)-(s) of the Original Note Purchase Agreement (the
"Specified Representations"), and represents and warrants that, except as set
forth on Schedule 2.2, the Specified Representations continue to be true and
correct in all material respects as of the date hereof whether as applied to
the Notes or as deemed modified and applied to the New Notes, except for
changes therein in the ordinary course of the business of the Company, which
changes are not materially adverse, either individually or in the aggregate, to
the business, operations, financial condition, results of operation or future
prospects of the Company.
2.3 CAPITALIZATION. The authorized and issued
capital stock of the Company is as set forth in Exhibit B attached hereto. In
addition, Exhibit B also sets forth all options, warrants or other rights to
purchase any of the Company's authorized and unissued capital stock which are
outstanding or which the Company has an obligation to issue as of the date
hereof.
3. COMPANY COVENANTS. The Company covenants and agrees
with each of the Purchasers as follows:
3.1 So long as any Purchaser shall hold any
Warrants issued to such Purchasers by the Sellers under the Sellers Note
Purchase Agreement, the Company shall provide to such Purchaser a copy of all
notices, documents, instruments, or other communications provided or required
to be provided by the Company to any holder of the Series A Preferred Stock of
the Company pursuant to or under Delaware law, the certificate of incorporation
of the Company or the Preferred Stock Purchase Agreement, at the time that such
is being provided to any stockholder of the Company.
3.2 FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company shall provide to each of the Purchasers copies of any financial
statements or other financial information provided or to be provided pursuant
to Section 7.1 of the Preferred Stock Purchase Agreement (as originally
executed) to the Purchasers thereunder.
-2-
<PAGE> 3
3.3 INSPECTION RIGHTS. The Company will permit
any representative designated by a Purchaser upon reasonable notice and during
normal business hours, to visit and inspect any of the properties of the
Company and its subsidiaries, examine the corporate and financial records of
the Company and its subsidiaries and make copies thereof or extracts therefrom,
and discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with the directors, officers, key employees and independent
accountants of the Company or its subsidiaries.
3.4 SPECIAL PROCEDURE FOR EXERCISE OF WARRANTS.
The Company agrees with each Purchaser that, notwithstanding the provisions of
Article IV(C)2(b) of the Restated Certificate of Incorporation of the Company,
any Purchaser may simultaneously exercise any or all of the Warrants held by it
and convert the shares of Series A Preferred Stock issuable on such exercise
into shares of Class A Common Stock by delivering to the Company a copy of the
Notice of Exercise, in the form attached as Exhibit A-1 to the Warrant,
together with the original Warrant, and by causing the Sellers to deliver to
the Company the certificate(s) representing the number of shares of Series A
Preferred Stock issuable on such exercise. Such exercise and conversion shall
be deemed effective upon receipt by the Company of such Notice of Exercise and
Warrant, or on such later date as is specified therein, and, at the election of
the Purchaser transmitting the same, may be made contingent upon the closing of
the Sale of the Company's Common Stock to the public in a public offering
pursuant to a Registration Statement under the Act or upon the consummation of
the sale by the Company of all or substantially all of its assets or upon the
merger of the Company with or into any other entity, and, in any such case,
such exercise and conversion shall be deemed to occur immediately prior to such
event. The Company shall promptly deliver to the Purchasers the certificate
representing the shares of Class A Common Stock issuable on such exercise and
conversion.
4. CERTAIN AMENDMENTS TO TERMS OF NOTES. The Company
agrees that it shall cause there to be included in each of the New Notes the
following provisions:
4.1 PRO RATA TREATMENT. The Company will agree
that all payments to be made with respect to any of the New Notes (whether in
respect of principal, interest, prepayment penalties or otherwise) shall be
made on a pro rata basis with respect to all outstanding New Notes, allocated
based on the respective outstanding principal amounts thereof.
4.2 ACQUISITION OF NOTES. The Company will not,
and will not permit any of its subsidiaries or affiliates to, purchase, redeem
or otherwise acquire any New Note except upon the payment or prepayment thereof
in accordance with the terms of such New Note; provided, however, that the
Company may purchase all or any portion of the New Notes outstanding so long as
the Company offers to purchase New Notes from each holder of New Notes on a pro
rata basis and on the same terms. Any New Note paid or prepaid in full, shall
be surrendered to the Company and cancelled, shall not be reissued and shall
not be deemed to be outstanding, and no New
-3-
<PAGE> 4
Note shall be issued in lieu of any principal amount of any New Note that has
been paid or prepaid.
4.3 ADDITIONAL PERMITTED TRANSFERS. With respect
to any Purchaser who is an individual, the New Note held by such Purchaser may
also be transferred, assigned or conveyed to any of such Purchaser's spouse,
children (including adopted children), siblings or descendants, any trust for
the benefit of such Purchaser and/or any of such family members, or to any
entity, substantially all of the beneficial interests of which are owned
(directly or indirectly) by such Purchaser, his family members and/or trusts,
or the executor or personal representative of such Purchaser (collectively, the
"Additional Permitted Transferees").
4.4 PREPAYMENTS. Upon or following the sale of
all or substantially all of its assets, if the Company shall have repaid all of
its outstanding Senior Indebtedness (as such term is defined in the New Notes),
or the Company shall have sufficient cash on hand to enable it to repay all of
its outstanding Senior Indebtedness, the Company shall use any remaining funds
available to make a prepayment of up to all of the outstanding balance of the
New Notes, in a manner consistent with Section 4.1 above.
5. STOCKHOLDERS AGREEMENT. The Company, the Sellers and
each of the other Stockholders of the Company that executes this Agreement in
the space provided at the foot hereof (the "Other Stockholders") hereby agrees
that upon the issuance of the Warrants to a Purchaser and so long as such
Purchaser (or any permitted successor or assign thereof) shall thereafter hold
such Warrants or any shares of Series A Preferred Stock issued on exercise
thereof or any shares of Class A Common Stock issued on conversion of any such
Series A Preferred Stock (collectively, "Underlying Shares"), such Purchaser
shall be deemed a party to and an "Investor" as defined in that certain
Stockholders Agreement, dated as of May 31, 1995, by and among the Company and
the other Investors party thereto (the "Stockholders Agreement"). By its
execution hereof, such Purchaser shall be deemed to have executed and become a
party to the Stockholders Agreement. In addition, Section 6.3(a) of the
Stockholders Agreement shall be deemed amended to permit thereunder, the
Transfer of Shares (as defined in the Stockholders Agreements) to any
Additional Permitted Transferee that agrees to be bound by the provisions of
the Stockholders Agreement, and the Company, the Sellers and the Other
Stockholders confirm that the issuance and sale of the Warrants to the
Purchasers and the issuance of Underlying Shares on exercise and/or conversion
shall all be deemed transactions falling within the scope of the exemption
provided in Section 6.3(b) of the Stockholders Agreement.
6. REGISTRATION RIGHTS AGREEMENT. The Company, the
Sellers and the Other Stockholders hereby agree that the Registration Rights
Agreement, dated as of May 31, 1995 (the "Registration Agreement"), among the
Company, the Sellers and the Other Stockholders is hereby amended as follows:
-4-
<PAGE> 5
6.1 There shall be included as "Registrable
Securities" for all purposes of the Registration Rights Agreement, the shares
of Class A Common Stock issued or issuable on conversion of Series A Preferred
Stock issued or issuable pursuant to or in connection with the exercise of any
of the Warrants.
6.2 Each Purchaser (and any permitted successor
and assign, including any Additional Permitted Transferee that agrees to be
bound by the provisions of the Registration Rights Agreement), shall be deemed
a "Promissory Note Purchaser" for purposes of Section 11 of the Registration
Rights Agreement and shall, upon the issuance and delivery of the Warrants, be
a party to the Registration Rights Agreement for all purposes.
6.3 Clause (ii) of Section 13 of the Registration
Rights Agreement is amended and restated to read in full as follows:
"(ii) with respect to a Promissory Note Purchaser, this
Agreement shall not terminate with respect to such Promissory
Note Purchaser (and its permitted successors and assigns)
until the time such Promissory Note Purchaser and its
permitted successors and assigns (including Additional
Permitted Assigns) holds or controls less than the number of
Registrable Securities received by the Original Purchaser upon
the purchase by it of Promissory Notes pursuant to the Sellers
Note Purchase Agreement (except as a consequence of the
exercise of Warrants, including exercise pursuant to Section 8
of the Warrants, and except as a result of the operation of
the anti-dilution adjustment provisions set forth in the
Warrant or the Certificate of Incorporation of the Company)"
7. MISCELLANEOUS.
7.1 WAIVERS AND AMENDMENTS. Any provision of
this Agreement may be amended, waived or modified upon the written consent of
the Company and holders of more than fifty percent (50%) of the then
outstanding principal balance of the New Notes.
7.2 GOVERNING LAW. This Agreement and all
actions arising out of or in connection with this Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to the conflicts of law provisions of the State of New York or of any
other state.
7.3 SURVIVAL. The representations, warranties,
covenants and agreements made herein shall survive the execution and delivery
of this Agreement.
7.4 ASSIGNMENT BY COMPANY. Neither the New Notes
nor any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, in whole or in part, by Company without the
prior written consent of the Purchasers except in connection with an assignment
in whole to a successor corpora-
-5-
<PAGE> 6
tion to Company by merger or otherwise, provided that such successor
corporation succeeds to or acquires all or substantially all of Company's
property and assets and Purchasers' rights hereunder and thereunder are not
impaired.
7.5 NOTICES. Any notices, request or other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or mailed by registered
or certified mail, postage prepaid, or by recognized overnight courier or
personal delivery, addressed (i) if to a Purchaser, at such Purchaser's address
set forth in the Schedule of Purchasers attached Schedule I hereto, or at such
other address as such Purchaser shall have furnished to the other parties in
writing, or (ii) if to Company, at its address set forth at the beginning of
this Agreement, or at such other address as Company shall have furnished to the
other parties in writing.
7.6 COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall be deemed to constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the date and year first written above.
COMPANY
MHI ACQUISITION, INC.
a Delaware corporation
By:/s/Charles L. Allen
------------------------------------
Name: Charles L. Allen
--------------------------------
Title: President and CEO
-------------------------------
PURCHASERS:
/s/ Alan Gerry
---------------------------------------
Alan Gerry
SV CAPITAL PARTNERS, L.P.
By: SV Capital Management, Inc.
its General Partner
By: /s/ Eric Foultz
------------------------------------
Name: Eric Foultz
----------------------------------
Title: Vice President
---------------------------------
-6-
<PAGE> 7
Agreed to for purposes of
Sections 5 and 6 only:
MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
----------------------------------------
MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
----------------------------------------
MORGAN STANLEY VENTURE INVESTORS, L.P.
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By: /s/Debra Abramovitz
----------------------------------------
/s/ Charles L. Allen
- -------------------------------------------------
Charles L. Allen
/s/ Roy W. Griffitts
- -------------------------------------------------
Roy W. Griffitts
/s/ William A. Brosius
- -------------------------------------------------
William A. Brosius
-7-
<PAGE> 8
EXHIBIT A
Set forth below is the outstanding principal balance and accrued
interest, as of the date hereof, of the notes issued by MHI Acquisition, Inc.
and held by certain affiliates of Morgan Stanley.
<TABLE>
<CAPTION>
OUTSTANDING
NAME OF HOLDER PRINCIPAL BALANCE ACCRUED INTEREST TOTAL
-------------- ----------------- ---------------- -----
<S> <C> <C> <C>
Morgan Stanley Venture
Capital Fund II L.P. $5,965,505 $954,834 $6,920,339
Morgan Stanley Venture
Capital Fund II CV 1,486,228 237,885 1,724,113
Morgan Stanley Venture
Investors, L.P. 1,548,267 247,815 1,796,082
</TABLE>
<PAGE> 1
EXHIBIT 10.20
Lease of Office Space
in
THE 2501 CEDAR SPRINGS BUILDING
Between
2501 CEDAR SPRINGS INVESTORS
as Landlord
and
Milestone Health Care, Inc.
as Tenant
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I. Basic Lease Provisions and Definitions
Section 1.1 Building
Section 1.2 Premises
Section 1.3 Lease Term
Section 1.4 Base Rental
Section 1.5 Tenant's Share of Operating Costs
Section 1.6 Permitted Uses by Tenant
Section 1.7 Security Deposit
Section 1.8 Commitment Deposit
Article II. Premises
Section 2.1 Work Letter
Section 2.2 Net Rentable Area
Section 2.3 Agreed Square Footage
Article III. Commencement Date
Section 3.1 Commencement Date
Article IV. Rental
Section 4.1 Payment
Section 4.2 Base Rental
Section 4.3 Adjustment to Base Rental
Section 4.4 Tenant's Share of Operating Costs
Section 4.5 Tenant's Share of Real Estate Taxes
Section 4.5 Rental Definition
Article V. Landlord's Services
Section 5.1 Electricity
Section 5.2 Air Conditioning
Section 5.3 Heat
Section 5.4 Water
Section 5.5 Janitorial Services
Section 5.6 Elevator Service
Section 5.7 No Liability
Article VI. Other Impositions
Section 6.1 Other Impositions
Article VII. Assignment and Sublease
Section 7.1 Limitations
Section 7.2 Right of First Refusal
Article VIII. Compliance with Laws
Section 8.1 Compliance with Laws
Article AYES. Quiet Enjoyment
Section 9.1 Quiet Enjoyment
Article X. Signs
Section 10.1 Signs
Article XI Tenant's Care of Premises
Section 11.1 Waste
Section 11.2 Alterations, Additions or Improvements
Section 11.3 Flammables, Explosives or Toxic Substances
Section 11.4 Property and Improvements at Tenant's Risk
Section 11.5 Hazardous Materials Defined
Section 11.6 Environmental Regulations Defined
Section 11.7 Environmental Compliance
Section 11.8 Termination, Cancellation, Surrender
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Article XII. Waiver of Claims and Indemnification
Section 12.1 Waiver of Claims
Section 12.2 Indemnification
Section 12.3 Definition of Landlord and Tenant
Article XIII. Damage and Destruction
Section 13.1 Damage and Destruction
Article XIV. Waiver of Subrogation
Section 14.1 Waiver of Subrogation
Article XV. Insurance
Section 15.1 General Provisions with Regard to Insurance
Article XVI. Eminent Domain
Section 16.1 Eminent Domain
Article XVII. Access to Premises
Section 17.1 Access to Premises
Article XVIII. Communications
Section 18.1 Communications
Section 18.2 Notice Addresses
Article XIX. Failure to Perform, Defaults, Remedies
Section 19.1 Defaults
Section 19.2 Remedies
Section 19.3 Deficiency
Section 19.4 Breach by Tenant
Article XX. Condition of the Premises
Section 20.1 Condition of the Premises
Article XXI. Landlord's Title
Section 21.1 Landlord's Title
Article XXII. Landlord's Right to Perform for Account of
Tenant and Attorneys' Fees
Section 22.1 Landlord's Right to Perform for Account of
Tenant and Attorneys' Fees
Article XXIII. Successors and Assigns
Section 23.1 Successors and Assigns
Article XXIV. Reservations by Landlord
Section 24.1 Reservations by Landlord
Article XXV. Rules and Regulations
Section 25.1 Rules and Regulations
Article XXVI. Non-Waiver
Section 26.1 Non-Waiver
Article XVII. Other Tenants
Section 27.1 Other Tenants
Article XXVIII. Miscellaneous Provisions
Section 28.1 No Constructive Eviction
Section 28.2 Landlord's Lien
Section 28.3 Subordination
Section 28.4 Tenant Estoppel Certificates
Section 28.5 Relocation
Section 28.6 Brokerage Fees
Section 28.7 Unenforceability/Joint and Several Liability
Section 28.8 Headings, Miscellaneous
Section 28.9 Holding Over
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 28.10 Payments
Section 28.11 Force Majeure
Section 28.12 Overload
Section 28.13 Liability of Landlord
Section 28.14 Entire Agreement
Section 28.15 Governing Law
Section 28.16 Recordation of Lease
Section 28.17 Not Binding Lease
Section 28.18 Guarantors
</TABLE>
-iii-
<PAGE> 5
List of Exhibits
[S] [C]
EXHIBIT A - Delineation of Premises
EXHIBIT B - Rules and Regulations
EXHIBIT C - Work Letter
EXHIBIT D - Statement Specifying Commencement Date and Termination Date
EXHIBIT E - Spears & Riley Space
EXHIBIT F - Southwest Side of Sixth Floor (2,058 contiguous square feet)
EXHIBIT G - Southwest Side of Sixth Floor (2,494 contiguous square feet)
-iv-
<PAGE> 6
THE 2501 CEDAR SPRINGS BUILDING
THIS LEASE AGREEMENT, made as of the _____ day of
____________________, 19__, by and between 2501 Cedar Springs Investors,
hereinafter referred to as "Landlord", and Milestone Health Care, Inc. a
Delaware Corporation, hereinafter referred to as "Tenant".
W I T N E S S E T H:
WHEREAS, Landlord desires to lease to Tenant certain premises
located in its office building (as hereinafter defined) and Tenant desires to
lease the same upon the terms and conditions and for the good and valuable
consideration described in this lease agreement, hereinafter sometimes referred
to as the "Lease";
NOW, THEREFORE, the parties hereto agree as follows:
I
BASIC LEASE PROVISIONS AND DEFINITIONS
1.1 (a) Building. 2501 Cedar Springs, consisting of
approximately 110,923 square feet of Net Rentable Area (as hereinafter
defined), located at 2501 Cedar Springs in the City of Dallas, Texas.
(b) Parking Garage. Adjacent to the Building consisting
of six (6) floors and approximately 346 parking spaces.
1.2 Premises. The Premises, designated as Suite #600, are located
on the 6th floor(s) of the Building, consist of approximately 6,166 square feet
of Net Rentable Area and are separately outlined and shown on Exhibit "A"
attached hereto.
1.3 Lease Term. The Lease Term is for a period of Five (5) years,
commencing on the 1st day of May, 1992, (the "Commencement Date"), unless
otherwise defined in Article III, and ending at midnight on the 30th day of
April, 1997, (the "Termination Date") or at such earlier date as this Lease may
be terminated as hereinafter provided.
1.4 Base Rental. The Base Rental for the entire term of the Lease
shall be 359,169.50. The Base Rental shall be at the annual rental rate of
$64,743.00 from May 1, 1992 through april 30, 1993; $69,984.10 from may 1, 1993
through April 30, 1994; and $73,992.00 from May 1, 1994, through April 30,
1995; $77,999.90 from May 1, 1995 through April 30, 1996; $83,241.00 from May
1, 1996 through April 30, 1997; payable monthly in advance in the amount of
$5,395.25 per month from July 1*, 1992 through April 30, 1993; $5,832.01 per
month from May 1, 1993 through April 30, 1994; $6,166.00 per month from May 1,
1994 through April 30, 1995; $6,500.00 per month from May 1, 1995 through April
30, 1996; $6,936.75 per month from May 1, 1996 through April 30, 1997. To the
Base Rental shall be added any applicable sales tax which Tenant hereby agrees
to pay. Base Rental shall be adjusted in accordance with Article IV of this
Lease.
1.5 Tenant's Share of Operating Costs. Tenant's share of Building
Operating Costs and Real Estate Taxes shall be 5.6% of such costs as provided
for in Sections 4.4 and 4.5.
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* May, and June of 1992 or the first two (2) months of occupancy to
be specified in Exhibit "D" shall be rent free. Tenant shall begin
fifty-eight (58) months of payment thereafter as scheduled.
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1.6 Permitted Uses by Tenant. The Premises shall be fully occupied
and used by Tenant exclusively, solely for the following purposes: General
Office Use and for no other purpose.
1.7 Security Deposit. Tenant is depositing with Landlord a
security deposit in the amount of $6,166.00 (the "Security Deposit"), to be
held by Landlord as security for the performance of Tenant's covenants and
obligations under this Lease, it being expressly understood that such deposit
shall not be considered an advance payment of Rental or a measure of Landlord's
damages in case of Default (as hereinafter defined) by Tenant. Upon the
occurrence of a Default by Tenant, Landlord may, without prejudice to any other
remedy, use the Security Deposit to the extent necessary to make good any
arrearages of Rental and any other damage, injury, expense or liability caused
to Landlord by such Default. Following any such application of the Security
Deposit, Tenant shall pay to Landlord, on demand, the amount so applied in
order to restore the Security Deposit to its original amount. If Tenant is not
then in Default hereunder, any remaining balance of the Security Deposit shall
be returned to Tenant upon termination of this Lease and after delivery of the
Premises in accordance with this Lease.
1.8 Commitment Deposit. Omitted.
II
PREMISES
2.1 Work Letter. Landlord leases, demises and lets to Tenant the
Premises and Tenant hereby leases from Landlord the Premises complete with
improvements as set forth under the terms of the Work Letter, Exhibit "C",
attached hereto and executed between Landlord and Tenant in connection with
this Lease.
2.2 Net Rentable Area. The term "Net Rentable Area" as used herein
shall refer to the sum of: (1) the Net Useable Area which is computed by
measuring to the inside finish of the Building's exterior glass line, to the
exterior side of partitions which separate the Premises from the Building's
interior nonrentable areas which are not within the Premises, and to the center
of partitions that separate the Premises from adjoining rentable areas; plus
(2) a pro rata portion of the Building's floor area used for corridors,
elevator lobbies, ground floor lobbies, vestibules, service and freight areas,
restrooms, elevator and mechanical machine rooms, telephone and electrical
closets, and other similar facilities provided for the benefit of all tenants
of the Building, visitors to the Building, or Landlord (such areas collectively
defined as "Common Areas"). No deduction shall be made for columns or
projections necessary to the Building.
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2.3 Agreed Square Footage. It is agreed between the parties
hereto that the square footage of the Premises shall be as stated in Section
1.2 hereof and shall be considered final for all purposes under this Lease.
III
COMMENCEMENT DATE
3.1 Commencement Date. The Commencement Date shall be as set
forth in Section 1.3. If Landlord is unable to give possession of the Premises
on the Commencement Date of the term of this Lease by reason of the holding
over of any tenant or because construction, repairs, or improvements being made
or to be made by Landlord are not substantially completed, Rental shall abate
for the period that possession by Tenant is delayed unless Tenant caused (in
whole or in part) such delay in which case Rental shall not abate, but under no
circumstances shall Landlord be responsible for direct or consequential damages
because of its inability to furnish possession to Tenant by any particular
date. Should Tenant occupy the Premises prior to the Commencement Date of this
Lease, with such early occupancy being in all respects fully approved in
writing by Landlord, all terms of this Lease shall then commence and the term
of this Lease and the Rental provided herein shall go into effect (being
prorated if necessary on an actual daily basis for the first month if the
Commencement Date is other than the first day of a calendar month). It is
mutually agreed that the Commencement Date of the term under such early
occupancy shall be the date Tenant takes occupancy of the Premises and that the
Termination Date stated above shall remain in effect. When the Commencement
Date of the Lease Term has been determined as provided herein, Landlord shall
deliver and Tenant shall execute a statement specifying the Commencement Date
and the Termination Date of the Lease Term, in the form of Exhibit "D" attached
hereto.
IV
RENTAL
4.1 Payment. Tenant shall pay to Landlord in advance in legal
tender of the United States of America, without any demand, setoff or deduction
whatsoever, at the office of Landlord in Dallas, Texas or at such place or to
such agent as Landlord may from time to time designate in writing, Rental
comprised of a Base Rental as provided in Section 1.4 and Additional Rental as
defined in Section 4.6. Landlord may accept partial payment of any of the
payments enumerated in this Section 4.1 without prejudice to any of Landlord's
rights or remedies.
4.2 Base Rental. The Base Rental as provided in Section 1.4 shall
be paid in advance, promptly upon the first day of every month of the term
hereof. If the initial or final month is less than a full calendar month, the
Base Rental for such month shall be reduced proportionately.
4.3 Adjustment to Base Rental. Omitted.
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4.4 Tenant's Share of Operating Costs.
(a) Landlord shall pay, in the first instance, all Operating Costs
incurred by Landlord in the maintenance and operation of the
Building. For these purposes, "Operating Costs" shall mean,
for any calendar year, the sum of all expenses, costs and
disbursements of every kind and nature which Landlord shall
pay or become obligated to pay because of or in connection
with the ownership, management, operation and maintenance of
the Building, parking facilities, grounds and land upon which
it is situated including but not limited to the following: all
management office expenses; all applicable sales tax and use
taxes; expenses incurred for heat, cooling and other
utilities; cost of insurance; cost of janitorial and cleaning
service, trash collection services, pest control and security
service; salaries, wages and other personnel costs of
engineers, superintendents, watchpersons, and all other
employees of the Building; charges under maintenance and
service contracts for elevators, chillers, boilers and/or
controls; window cleaning; building and grounds maintenance;
parking lot maintenance; management fees; permits and
licenses; all maintenance and repair expenses and supplies
including replacement of fluorescent light bulbs and ballasts
in building standard lighting fixtures; amortization,
depreciation and replacement costs, interest and other debt
costs with respect to equipment or machinery purchased to
replace existing equipment, equipment or capital items
purchased which are labor saving or energy conserving devices
used in the maintenance and operation of the Building, or
equipment, systems or other capital expenditures purchased to
comply with the wishes or directives of a governing agency or
body; and all other costs and expenses properly incurred in
the operation and maintenance of an office building. Operating
Costs shall exclude the following: Real Estate taxes as
defined in Section 4.5; cost of alterations of all rentable
premises; real estate brokers' lease commissions; payment of
principal and interest on mortgages; cost to Landlord of any
work or service performed for any tenant at the cost of such
tenant; and capital expenditures except those qualifying for
inclusion as listed above.
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(b) The Base Year for Operating Costs shall be 1992.
(c) In determining the amount of Operating Costs for the Base Year
or for any subsequent year, (1) if less than 95% of the Net
Rentable Area contained in the Building shall have been
occupied by tenants and used by them, at any time during the
year, Operating Costs shall be deemed for the purposes of this
paragraph to be increased to an amount equal to the like
Operating Cost which would normally be expected to be incurred
had such occupancy been 95% and had such full utilization been
made during the entire period, or (2) if Landlord is not
furnishing any particular work or service (the cost of which,
if performed by Landlord, would constitute an Operating Cost)
to a tenant who has undertaken to perform such work or service
in lieu of the performance thereof by Landlord, Operating
Costs shall be deemed for the purposes of this paragraph to be
increased by an amount equal to the additional Operating Cost
which would reasonably have been incurred during such period
by Landlord if it had, at its own expense, furnished such work
or service to such tenant.
(d) For each calendar year subsequent to the Base Year, Tenant
agrees to pay, as Additional Rental, Tenant's pro rata share,
as set forth in Section 1.5, of the amount by which the
Operating Costs for such calendar year exceeds the Operating
Costs for the Base Year (such excess hereinafter referred to
as "Excess Operating Costs"). Notwithstanding anything to the
contrary contained herein, the controllable portion of
Tenant's Share of Excess Operating Costs shall not increase
more than a cumulative total of seven and one half percent (7
1/2%) per annum throughout the Lease Term (i.e. the maximum
amount in any Calendar Year shall be 107.5% of the maximum
annual amount that Landlord could have charged Tenant in the
previous year, without regard to the actual charged in such
previous year). Tenant shall pay said Additional Rental in
the following manner:
(i) Prior to the last day of each calendar year falling
within the Lease Term, Landlord shall provide Tenant
with a statement of estimated Excess Operating Costs
for the upcoming calendar year. Said statement shall
be based upon Landlord's reasonable estimate of
anticipated costs. Beginning January 1 of the
upcoming calendar year, Tenant shall pay, as
Additional Rental, its pro rata share (as set forth
in Section 1.5) of said estimated Excess Operating
Costs in twelve (12) equal monthly installments,
payable in advance promptly upon the first day of
each month during the term hereof. If Landlord
determines that the Excess Operating Costs are
greater than the amount estimated prior to the last
day of the calendar year, then Landlord may deliver
to Tenant on the first day of March, June, September
or December as appropriate, the revised amount of
Additional Rental and Tenant shall pay to Landlord
within twenty (20) days of Tenant's notification of
the revised amount, the difference between the amount
estimated prior to the last day of the calendar year
and the revised estimate for the portion of the
current calendar year which has expired. Monthly
installments of Additional Rental will be increased
for the months following the receipt by Tenant of the
revised estimate of Excess Operating Costs to
Tenant's pro rata share of the annual revised Excess
Operating Costs divided by twelve (12).
(ii) Not more than one hundred eighty (180) days following
the last day of each calendar year, Landlord shall
provide Tenant with a written
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statement comparing the amount of estimated Excess
Operating Costs paid by Tenant in and for the
calendar year or part thereof just ended with
Tenant's pro rata share, as set forth in Section 1.5,
of the Excess Operating Costs actually incurred for
said period. If the amount of estimated Excess
Operating Costs paid by Tenant for such prior
calendar year or part thereof exceeds the amount
Tenant should have paid for said period, Landlord
shall give Tenant a credit against current payments
of Additional Rental. If, however, the amount of
estimated Excess Operating Costs paid by Tenant for
such prior calendar year or part thereof is less than
the amount Tenant should have paid for said period,
Tenant shall pay Landlord, as Additional Rental, the
difference within twenty (20) days following Tenant's
receipt of written notice thereof. Any delay or
failure of Landlord in billing any Operating Cost
escalation hereinabove provided shall in no way
constitute a waiver of or in any way impair the
continuing obligation of Tenant to pay such
escalation hereunder.
4.5 Tenant's Share of Real Estate Taxes.
(a) "Real Estate Taxes" means all general and special real estate
taxes, special assessments and other ad valorem taxes, levies
and assessments (net of any refund) paid upon or in respect of
the Building or the land upon which the Building is located
(the "Land") and all taxes or other charges imposed in lieu of
any such taxes including fees of counsel and experts which are
reasonably incurred by, or reimbursable by, Landlord in
seeking any reduction in the assessed valuation of the
Building and/or the Land or a judicial review thereof. If any
such application or review results in a refund on account of
any prior assessment, Landlord shall, after payment of
reasonable expenses incurred in connection therewith (whether
by Landlord, Tenant or other tenants of the Building),
reimburse Tenant its pro rata share of such refund.
Notwithstanding the foregoing, the term "Real Estate Taxes"
shall under no circumstances include any interest or penalties
paid by Landlord as a result of Landlord's not paying Real
Estate Taxes when due and payable, any net income, franchise
or capital gains tax, inheritance tax or estate tax imposed or
constituting a lien upon Landlord or all or any part of the
Real Property.
(b) The Base Year for Real Estate Taxes shall be 1992.
(c) For each calendar year subsequent to the Base Year, Tenant
agrees to pay, as Additional Rental, Tenant's pro rata share,
as set forth in Section 1.5, of the amount by which the Real
Estate Taxes for such calendar year exceeds the Real Estate
Taxes for the Base Year (such excess hereinafter referred to
as "Excess Real Estate Taxes"). Tenant shall pay said
Additional Rental in the following manner:
(i) Prior to the last day of each calendar year falling
within the Lease Term, Landlord shall provide Tenant
with a statement of estimated Excess Real Estate
Taxes for the upcoming
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calendar year. Said statement shall be based upon
Landlord's reasonable estimate of anticipated Real
Estate Taxes. Beginning January 1 of the upcoming
calendar year, Tenant shall pay as Additional Rental,
its pro rata share, as set forth in Section 1.5, of
said estimated Excess Real Estate Taxes in twelve
(12) equal monthly installments, payable in advance
promptly upon the first day of each month during the
term hereof. If Landlord determines that the Excess
Real Estate Taxes are greater than the amount
estimated prior to the last day of the calendar year,
then Landlord may deliver to Tenant on the first day
of March, June, September or December, as
appropriate, the revised amount of Additional Rental
and Tenant shall pay to Landlord within twenty (20)
days of Tenant's notification of the revised amount,
the difference between the amount estimated prior to
the last day of the calendar year and the revised
estimate for the portion of the current calendar year
which has expired. Monthly installments of Additional
Rental will be increased for the months following the
receipt by Tenant of the revised estimate of Excess
Real Estate Taxes to the Tenant's pro rata share of
the annual revised Excess Real Estate Taxes divided
by twelve (12).
(ii) Not more than one hundred eighty (180) days following
the last day of each calendar year, Landlord shall
provide Tenant with a written statement comparing the
amount of estimated Excess Real Estate Taxes paid by
Tenant in and for the calendar year or part thereof
just ended with Tenant's pro rata share, as set forth
in Section 1.5, of the Real Estate Taxes actually
incurred for said period. If the amount of estimated
Excess Real Estate Taxes paid by Tenant for such
prior calendar year or part thereof exceeds the
amount Tenant should have paid for said period,
Landlord shall give Tenant a credit against current
payments of Additional Rental. If, however, the
amount of estimated Excess Real Estate Taxes paid by
Tenant for such prior calendar year or part thereof
is less than the amount Tenant should have paid for
said period, Tenant shall pay Landlord, as Additional
Rental, the difference within twenty (20) days
following Tenant's receipt of written notice thereof.
Any delay or failure of Landlord in billing any tax
escalation hereinabove provided shall in no way
constitute a waiver of or in any way impair the
continuing obligation of Tenant to pay such tax
escalation hereunder.
4.6 Rental Definition. For all purposes with respect to this
Lease and the remedies available to Landlord under the terms hereof and under
the laws of Texas, the term "Rental" shall include, without limitation, (a)
Base Rental as well as all Adjustments to Base Rental made during the term of
this Lease; (b) Tenant's share of Operating Costs and Real Estate Taxes; and
(c) sundry charges and reimbursable costs. Items (b) and (c) above may
sometimes herein be referred to as "Additional Rental". Any Rental payment due
hereunder shall be deemed delinquent if not received by Landlord on the date on
which it first became due.
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V
LANDLORD'S SERVICES
5.1 Electricity. Landlord, as long as Tenant is not in Default
under any of the terms of this Lease, shall furnish or cause to be furnished,
electricity for normal business usage during normal business hours. Tenant's
use of electric energy in the Premises shall not at any time exceed the
capacity of any of the electrical conductors and equipment in or otherwise
serving the Premises. To ensure that such capacity is not exceeded and to avert
possible adverse effects upon the Building electric service, Tenant shall not,
without Landlord's prior written consent in each instance, which consent shall
not be unreasonably withheld (i) connect: reproducing equipment; electronic
data processing equipment; heating or air-conditioning equipment; special
lighting in excess of the building standard specifications nor any other item
of electrical equipment which (singly) consumes more than permitted by the
building standard specifications and/or (ii) make any alteration or addition to
the electric system of the Premises existing on the Commencement Date of this
Lease. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof,
including twenty percent (20%) of direct cost for Landlord's overhead expense,
shall be paid by Tenant upon Landlord's demand. As a condition to granting such
consent, Landlord may require Tenant to agree to an increase in the Base Rental
in an amount which will reflect the value to Tenant of the additional service
to be furnished by Landlord; that is, the potential additional electrical
energy to be made available to Tenant based upon the estimated additional
capacity of such additional risers or other equipment. Where Tenant occupies a
full floor, Tenant shall have a separate electric meter and shall contract
directly with the local utility company servicing the Building. If Tenant
occupies less than a full floor, Tenant shall pay to Landlord, as Additional
Rental, Tenant's share of the cost of electricity servicing such floor.
Tenant's proportionate share being the proportion which the floor area of the
Premises bears to the total rentable floor area on such floor.
5.2 Air Conditioning. Landlord, as long as Tenant is not in
Default under any of the terms of this Lease, shall furnish or cause to be
furnished, air-conditioning to provide a temperature condition required for the
reasonably comfortable occupancy of the Premises under normal business
conditions, Monday through Friday from 8:00 a.m. to 6:00 p.m. and on Saturdays
from 8:00 a.m. to 1:00 p.m., Sundays, legal holidays at reasonable temperatures
as determined by Landlord. Further, the foregoing refers to air-conditioning
under normal use and does not include any areas which develop excessive heat
from machines, lights, sun, overcrowding or other sources. The system shall be
capable of maintaining reasonably comfortable temperatures if and only if these
performance requirements are maintained:
(a) One person per 100 square feet average occupancy per floor.
(b) Four (4) watts per square foot for Tenant lighting and power
use average per floor.
(c) Light-colored blinds, fully drawn with slats at a 45degrees
angle coincident with peak sun load; or other equivalent solar
barrier.
The equipment installation and energy consumption for air-conditioning and
heating all such areas which require special treatment shall, upon Landlord's
written consent, be
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installed and/or paid for by Tenant. If Tenant requires air-conditioning
outside the hours and days specified above, Landlord shall, upon reasonable
advance notice furnish such service. Tenant agrees to pay Landlord for such
service at an hourly rate as established from time to time by Landlord, unless
Tenant shall occupy a full floor, in which event Tenant shall pay the utility
company directly.
5.3 Heat. Landlord, as long as Tenant is not in Default under any
of the terms of this Lease, shall furnish or cause to be furnished, heat to the
Premises, Monday through Friday from 8:00 a.m. to 6:00 p.m. and on Saturdays
from 8:00 a.m. to 1:00 p.m., Sundays, legal holidays during those portions of
each year that heating may be necessary, so as to provide a temperature
condition required for the reasonably comfortable occupancy of the Premises
under normal business conditions. If Tenant requires heat outside the hours and
days specified above, Landlord shall, upon reasonable advance notice furnish
such service. Tenant agrees to pay Landlord for such service at an hourly rate
as established from time to time by Landlord, unless Tenant shall occupy a full
floor, in which event Tenant shall pay the utility company directly.
5.4 Water. Landlord, as long as Tenant is not in Default under any
of the terms of this Lease, shall furnish or cause to be furnished, water from
the City of Dallas mains for use in the Common Areas for drinking, lavatory and
toilet purposes, drawn through fixtures installed by Landlord, or by Tenant
with Landlord's written consent, and warm water for lavatory purposes from
regular Building supply at reasonable temperatures as determined by Landlord.
For water furnished for any other purposes, Tenant shall pay Landlord therefor
at the same rates as would have been charged Tenant by the City of Dallas plus
a fifteen percent (15%) administrative fee. Tenant shall not waste or permit
the waste of water. If within thirty (30) days, Tenant fails to pay Landlord's
charges for water, Landlord, upon not less than ten (10) days' written notice
thereafter, may discontinue furnishing water services and no such
discontinuance shall be deemed an eviction or disturbance of Tenant's use of
the Premises or render Landlord liable for damages or relieve from any
obligation hereunder. Tenant shall not install any equipment which uses water
without the prior express written consent of Landlord, which consent shall not
be unreasonably withheld. Landlord's consent to the installation of water
equipment shall not relieve Tenant from the obligation to use no more water
than the safe capacity.
5.5 Janitorial Services. Landlord, as long as Tenant is not in
Default under any of the terms of this Lease, shall furnish or cause to be
furnished, janitorial services, subject to work limitations as may be set forth
in any applicable union or other collective bargaining agreement with Landlord.
In no event shall such services include washing dishes, cups and/or similar
items. Landlord reserves the right to charge for extra services over and above
the building standard specifications.
5.6 Elevator Service. Landlord, as long as Tenant is not in
Default under any of the terms of this Lease, shall furnish or cause to be
furnished without additional charge, normal passenger elevator service in
common with Landlord, to tenants of and visitors to the Building. Normal
passenger elevator service shall consist of operatorless automatically operated
elevator service from 7:00 a.m. to 10:00 p.m. except Saturdays, Sundays and
national holidays, with two elevators subject to call at all other times,
including Saturdays, Sundays and national holidays.
5.7 No Liability. Interruption or malfunction of the above
utilities, services and/or telephone service shall not constitute an eviction
or disturbance of Tenant or a breach by
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Landlord. Nor shall such temporary interruption or malfunction render Landlord
liable for damages (whether consequential or otherwise), release Tenant from
any obligation under this Lease, or grant Tenant any right of offset,
deduction, recoupment or rent abatement.
VI
OTHER IMPOSITIONS
6.1 Other Impositions. In addition to the Rental provided
hereunder, Tenant agrees to pay each and all license and permit fees and all
taxes and increase in taxes levied and assessed by any governmental body by
virtue of any leasehold improvements or by virtue of Tenant conducting its
described use, business or operation on the Premises, the employment of agents,
servants, or other third parties, the bringing, keeping or selling of personal
property or chattels of whatsoever nature from the Premises. The foregoing is
intended to bind Tenant to pay, and promptly discharge, all taxes and/or
levies, together with related interest and penalties, whether assessed by
Federal or State authority or any political subdivision thereof, directly or
indirectly related to its business, improvements, functioning, employment,
assets, existence, sales, entertainment, or the like. Tenant specifically
agrees to reimburse Landlord for any increase in ad valorem taxes resulting
from use of fixtures or improvements by Tenant which Landlord becomes obligated
to pay.
VII
ASSIGNMENT AND SUBLEASE
7.1 Limitations. Notwithstanding anything set forth in this Lease
to the contrary, Tenant shall not assign this Lease or any interest therein nor
sublet the Premises or any portion thereof without the prior written consent of
Landlord, provided however, that Tenant shall have the right to assign this
Lease or any interest therein, or sublet the Premises or any portion thereof
without the consent of Landlord:
(1) to any subsidiary or any parent or any subsidiary of any
parent of Tenant;
(2) to any corporation with which Tenant may merge or consolidate;
or
(3) to any corporation acquiring all or substantially all of the
assets and/or stock of Tenant provided such corporation after
the purchase has a net worth of at least Three Million and
No/100 Dollars ($3,000,000.00);
With respect to those assignments or subleases requiring Landlord's
prior permission, Landlord shall not unreasonably withhold its consent or
permission; provided, however, that it shall not be deemed unreasonable for
Landlord to require the perspective assignee or sublessee to:
(1) have a net worth equal to or better than that of Tenant on the
date this Lease was executed;
(2) have a good reputation in the business community; and
(4) have no prior unpleasant relationship with Landlord such that
Landlord or its affiliates have made a corporate decision not
to lease space in one of its properties to the proposed
assignee or sublessee or an affiliate of proposed assignee or
sublessee.
If an assignment or sublease is permitted by this Lease or by
Landlord, Tenant shall remain liable for all obligations under the Lease and
the proposed assignee or sublessee must operate the Premises subject to the
requirements of the use clause contained in the Lease. Landlord shall be
entitled to all reasonable legal fees incurred by virtue of each request for
assignment and/or sublease.
Tenant shall not make or permit any assignment or sublease (by
operation of law or otherwise) of this Lease or mortgage this Lease without the
prior express written consent of Landlord on a form approved by Landlord.
Except as elsewhere provided herein, Landlord may withhold its consent in its
sole discretion for any reason or no reason at all. Tenant shall not permit the
use or occupancy of the Premises, or any portion thereof, by anyone other than
Tenant and shall not make any transfer of any nature whatsoever of its right
under this Lease or of Tenant's interest set forth in this Lease without the
prior written consent of Landlord. Any such assignment or subletting, whether
approved by Landlord or not, or whether any such assignment or subletting is a
permitted assignment or sublease under this Article VII hereof, shall not
relieve Tenant of any liability for the total agreed Rental due hereunder nor
from Tenant's obligation to perform all the covenants herein contained
including but not limited to compliance with the use set forth in Section 1.6,
and if the rent specified in any such assignment or subletting documents
exceeds the rent specified to be paid by Tenant under this Lease, and/or in the
event additional consideration is paid or is payable to Tenant on account of
such assignment or subletting, the rent specified herein shall be thereupon
deemed to be increased in an amount equal to such excess and/or such additional
consideration, as the case may be, and Tenant shall thereafter be responsible
for the prompt payment to Landlord of
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such increased rent. Likewise, any payment made to Tenant on account or in
consideration for such assignment or sublease shall be payable promptly as
Additional Rental to Landlord. It is further understood and agreed that any
such request for Landlord's approval of a proposed subletting or assignment
shall be accompanied by a true and complete copy of the sublease or assignment
which Tenant proposes to execute. Any written consent which may in any specific
instance or circumstance be given by Landlord shall not imply or be deemed to
be consent in any other instance or circumstance.
If Tenant is a corporation or partnership, and if at any time during
the term of the Lease the person or persons which, on the date of this Lease,
own or owns a majority of such corporation's shares or the general partner's
interests, voluntarily or by operation of law transfers control and/or
ownership of such shares or general partner's interest or any portions thereof
as the case may be, any such event shall be deemed to be an assignment of this
Lease as to which event Landlord's prior written consent shall have been
required, and in case of any such event Tenant shall so notify Landlord and
Landlord shall have the right, at its option, to terminate this Lease by notice
to Tenant given within thirty (30) days thereafter or within ninety (90) days
after Landlord shall have received other notice thereof, except that this
provision shall not be applicable to any corporation, all the outstanding
voting stock of which is listed on a national securities exchange (as defined
in the Securities Exchange Act of 1934, as amended). For the purposes of this
Section, stock ownership shall be determined in accordance with the principles
set forth in Section 544 of the Internal Revenue Code of 1986, and the term
"voting stock" shall refer to shares of stock regularly entitled to vote for
the election of directors of the corporation.
7.2 Right of First Refusal. In addition to the prohibition on
transfers or assignments without Landlord's prior written consent set forth
this Section 7.1 hereof, and not in modification or diminution thereof, if at
any time, and from time to time, during this Term, Tenant shall receive an
acceptable bona fide offer for the proposed assignment, sublease, sale or other
transfer of Tenant's interest in and to this Lease and/or the Premises or any
portion thereof, for which Landlord's prior written consent must first be had
and obtained, Tenant shall, at or prior to the time request is made for such
consent in written form, offer to Landlord the right of first refusal to
purchase Tenant's interest in and to this Lease and to the Premises or any
portion thereof at the same price and on the same terms and conditions as are
being offered to Tenant as consideration for the proposed assignment, sublease,
sale or other transfer, as the case may be. Tenant's written notice of such
offer shall set forth the name and address of the prospective assignee and the
price and other terms of such offer. Upon receipt of Tenant's notice as
aforesaid, Landlord shall thereupon have the prior right to purchase Tenant's
interest in and to the Lease and to the Premises at the price and on the terms
and conditions contained in the bona fide offer which right Landlord must
exercise, if at all, by giving Tenant written notice thereof not later than
twenty (20) days after receipt of Tenant's written notice of the offer. In the
event Landlord shall not elect to exercise its right of first refusal as
aforesaid, such election shall not under any circumstances be deemed a consent
to the proposed assignment, sublease, sale or other transfer of Tenant's
interest in and to this Lease and/or the Premises; it being expressly
understood that Tenant must still obtain the prior written consent of Landlord
in each and every instance to any
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proposed assignment, sublease, sale or other transfer, as the case may be.
Notwithstanding the foregoing provisions of this Section 7.2, Landlord's right
of first refusal as contained herein shall not be applicable in the event of
any proposed assignment, sublease, sale or other transfer of Tenant's interest
in and to this Lease and/or to the Premises to any parent corporation,
subsidiary corporation of Tenant, if Tenant shall be a corporation, or to any
general partner (or members of their immediate family) of Tenant, if Tenant
shall be a partnership, or to members of the immediate family of Tenant, if
Tenant shall be an individual or individuals.
VIII
COMPLIANCE WITH LAWS
8.1 Compliance with Laws. Tenant agrees to strictly comply with
all pertinent laws, ordinances, statutes and regulations whatsoever, of any
governmental body or subdivision, incident to its occupancy of the Building and
its use thereof. Notwithstanding the foregoing, Tenant shall not be required
to make changes to the Premises which involve the structure of the Building.
IX
QUIET ENJOYMENT
9.1 Quiet Enjoyment. As long as Tenant is not in Default under
the terms of this Lease, Tenant shall have peaceful and quiet possession of the
Premises against all parties claiming adversely thereto by or under Landlord.
Any purchaser of the Premises shall accept the attornment of Tenant and
recognize Tenant as the Tenant under the Lease so long as Tenant is not in
default.
X
SIGNS
10.1 Signs. Tenant shall not erect or install any sign or other
type display whatsoever, either upon the exterior of the Building, upon or in
any window, or in any lobby, hallway or door therein located, without the prior
express written consent of Landlord. All signs or lettering shall conform to
the sign and lettering criteria established by Landlord. At Landlord's option,
Landlord may provide suite signage at Tenant's expense. Landlord agrees to
provide a directory of the names and locations of its tenants and to maintain
the same at a convenient location in the lobby of the Building. The initial
listing of the name and room number of Tenant may be furnished without charge
to Tenant. The listings of additional names or room numbers and changes or
revisions of listings shall be made by Landlord at the cost of Tenant.
XI
TENANT'S CARE OF PREMISES
11.1 Waste. Tenant shall commit no waste with respect to the
Premises and shall keep the Premises in good repair along with the fixtures
therein and, at the expiration or earlier termination, or cancellation of this
Lease, shall surrender the Premises and fixtures therein in the same condition
as when initially received by Tenant subject to any changes to the Premises
approved by Landlord, and to reasonable wear and tear resulting from normal
use. During the term of this Lease, Tenant shall pay for unstopping any drains
or water closets on
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the Premises. If Tenant fails to make repairs to the Premises, Landlord may
make the repairs and Tenant shall reimburse Landlord for the cost of said
repairs, plus 20% overhead within ten (10) days of receipt of Landlord's bill
for said repairs. At the termination of this Lease (including termination
through Default of Tenant), Tenant shall surrender all keys, electronic ID
cards, access devices and other building ID's, if applicable, for the Premises
to Landlord at the place then fixed for the payment of rent and shall remove
all Tenant's property before surrendering the Premises and shall surrender the
Premises in "broom clean" condition.
11.2 Alterations, Additions or Improvements. Tenant shall not make
any alterations, improvements, door lock changes or other modifications of any
kind to the Premises without the prior express written consent of Landlord.
Requests to Landlord for same shall be in writing and shall be detailed to
Landlord's reasonable satisfaction. All alterations, additions or improvements
upon or affixed to or in the Premises (including, but not limited to carpets,
drapes and anything bolted, nailed or otherwise secured in a manner customarily
deemed to be permanent) shall be deemed to be a fixture inuring to the
Building, and shall not be subject to attachment of a mechanic's, materialman's
or similar lien, and shall in any event be and become the property of Landlord
and remain upon the Premises and be surrendered at the end of this Lease.
11.3 Flammables, Explosives or Toxic Substances. Tenant shall not
use or permit to be brought into the Premises or the Building any flammable or
explosive material, toxic substances environmentally hazardous materials (as
defined below) or other articles deemed hazardous to persons or property.
Tenant shall not use the Premises in any manner which shall (i) invalidate or
be in conflict with fire, insurance, life safety or other policies covering the
Building or the Premises, or (ii) increase the rate of fire or other insurance
on the Building or the Premises. If any insurance premium should be higher than
it otherwise would be by any reason of failure of Tenant to comply with
provisions of this paragraph, Tenant shall reimburse Landlord as Additional
Rental hereunder for that part of all insurance premiums thereafter paid by
Landlord, which shall have been charged because of such failure by Tenant and
Tenant shall make such reimbursement upon the first day of the month following
such payment by Landlord.
11.4 Property and Improvements at Tenant's Risk. Notwithstanding
the provisions of Section 11.2 or any other provisions of this Lease, it is
understood and agreed that all personal property, betterments and improvements
in the Premises, of whatever nature, whether owned, leased or installed by
Landlord, Tenant or any other person, shall be and remain at Tenant's sole risk
and Landlord shall not assume any liability or be liable for any damage to or
loss of such personal property, betterments or improvements, arising from any
cause whatsoever including but not limited to casualty, overflowing or leaking
of the roof, the bursting of water, sewer or steam pipes, or from heating or
plumbing fixtures.
11.5 Hazardous Materials Defined. For purposes of this Lease, the
term "Hazardous Materials" shall mean: (1) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et
seq.) ("RCRA"), as amended from time to time, and regulations promulgated
thereunder; (2) any "hazardous substance" being "released" in "reportable
quantity" as such terms are defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et
seq.) ("CERCLA"), as amended from time to time, and regulations promulgated
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thereunder; (3) asbestos; (4) polychlorinated biphenyls: (5) urea formaldehyde
insulation; (6) "hazardous chemicals" or "extremely hazardous substances", in
quantities sufficient to require reporting, registration, notification and/or
special treatment or handling under the Emergency Planning and Community
Right-to-Know Act of 1986 (42 U.S.C. Sections 11001, et seq.) ("EPCRA"), as
amended from time to time and regulations promulgated thereunder; (7) any
"hazardous chemicals" in levels that would result in exposures greater than
those allowed by permissible exposure limits established pursuant to the
Occupational Safety and Health Act of 1970 (29 U.S.C. Sections 651, et seq.)
("OSHA"), as amended from time to time and regulations promulgated thereunder;
(8) any substance which requires reporting, registration, notification,
removal, abatement and/or special treatment, storage, handling or disposal
under Sections 6, 7 or 8 of the Toxic Substances Control Act (15 U.S.C.
Sections 2601 et seq.) ("TSCA") as amended from time to time and regulations
promulgated thereunder; (9) any toxic or hazardous chemicals described in (29
C.F.R. 1910/1000-1047) in levels which would result in exposures greater than
those allowed by the permissible exposure limits pursuant to such regulations;
(10) the contents of any storage tanks, whether above or below ground; (11)
materials related to those described in subparagraphs (1) and (10) hereof; and
(12) anything defined as hazardous or toxic under any now existing or
hereinafter enacted statute.
11.6 Environmental Regulations Defined. For purposes of this
Article XI, the term "Environmental Regulations" shall mean any law, statute,
regulation, order or rule now or hereafter promulgated by any Governmental
Authority, whether local, state or federal, relating to air pollution, water
pollution, noise control and/or transporting, storing, handling, discharge,
disposal or recovery of on-site or off-site hazardous substances or materials,
as same may be amended from time to time, including without limitation, the
following: (i) the Clean Air Act (42 U.S.C. Sections 7401 et seq.); (ii)
Marine Protection, Research and Sanctuaries Act (33 U.S.C. Sections 1401-1445);
(iii) the Clean Water Act (33 U.S.C. Sections 1251 et seq.); (iv) RCRA, as
amended by the Hazardous and Solid waste Amendments of 1984 (42 U.S.C. Sections
6901 et seq.); (v) CERCLA, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (42 U.S.C. Sections 9601 et seq.); (vi) TSCA;
(vii) the Federal Insecticide, Fungicide and Rodenticide Act, as amended (7
U.S.C. Sections 135 et seq.); (viii) the Safe Drinking Water Act (42 U.S.C.
Sections 300(f) et seq.); (ayes) OSHA; (x) the Hazardous Liquid Pipeline Safety
Act (49 U.S.C. Sections 2001 et seq.); (xi) the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seq.); (xii) the Noise Control
Act of 1972 (42 U.S.C. Sections 4901 et seq.): (xiii) EPCRA; (xiv) National
Environmental Policy Act (42 U.S.C. Sections 4321-4347).
11.7 Environmental Compliance. Tenant represents, warrants, and
covenants to Landlord that Tenant shall at no time use or permit the Premises
to be used in violation of any Environmental Regulations. Tenant shall assume
sole and full responsibility for, and shall remedy at its sole cost and
expense, all such violations, provided that Landlord's approval of any remedial
actions shall first be obtained, in writing, which approval shall not be
unreasonably withheld. Tenant shall at no time use, generate, release, store,
treat, dispose of, or otherwise deposit, in, on, under or about the Premises,
any Hazardous Materials; or permit or allow any third party to do so, without
Landlord's express, prior, written consent. Tenant's compliance with the terms
of this Section 11.7 and with all Environmental Regulations shall be at
Tenant's sole cost and expense. With regard to this Section 11.7, Tenant shall
pay or reimburse Landlord for any costs or expenses incurred by Landlord,
including
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reasonable attorneys', engineers', consultants' and other experts' fees and
disbursements incurred or payable to determine, review, approve, consent to or
monitor the requirements for compliance with Environmental Regulations,
including, without limitation, above and below ground testing. Landlord is
hereby authorized to enter upon the Premises for such purposes.
Tenant will supply Landlord with historical and operational information
regarding the Premises, including without limitation, all reports required to
be filed with governmental agencies, as may be reasonably requested by Landlord
to facilitate site assessment, and will make available for meetings with
Landlord, appropriate personnel having knowledge of such matters.
If Tenant fails to comply with the provisions of this Section 11.7 of if there
is imminent danger such that delay in compliance might result in increased
hazard, Landlord shall have the right, but not the obligation, without in any
way limiting Landlord's other rights and remedies, to enter upon the Premises
or to take such other actions as Landlord deems necessary or advisable to clean
up, remove, resolve, or minimize the impact of, or otherwise deal with, any
Hazardous Materials on or affecting the Premises following the receipt of any
notice or information asserting the existence of any Hazardous Materials. All
reasonable costs and expenses paid or incurred by Landlord in the exercise of
any such rights shall be payable by Tenant to Landlord upon demand plus default
interest pursuant to Section 28.10. Tenant shall provide Landlord with written
notification, immediately upon the discovery or notice (from a governmental
authority or other entity) or reasonable grounds to suspect, by Tenant, its
successors, assigns, licensees, invitees, employees, agents, and/or partners
the presence in the Premises and/or the Shopping Center of any Hazardous
Materials or conditions that result in a violation or could reasonably be
expected to violate this Article XI, together with a full description thereof.
It shall be a Default under this Lease, entitling Landlord to exercise any of
its rights and remedies under this Lease, if any provision of this Article XI
is not strictly complied with at all times. Landlord's election to conduct
inspections of the Premises shall not be construed as approval of Tenant's use
of the Premises or any activities conducted thereon, and shall in no way
constitute an assumption by Landlord of any responsibility whatsoever regarding
Tenant's use of the Premises or Hazardous Materials.
11.8 Termination, Cancellation, Surrender. In the event this Lease
is terminated, cancelled or surrendered for any reason whatsoever, Tenant shall
deliver the Premises to Landlord free of any and all Hazardous Materials so
that the condition of the Premises shall conform with all Environmental
Regulations affecting the Premises.
11.9 Removal of Hazardous Materials. If any governmental authority
requires the removal of Hazardous Materials, Landlord shall do so without any
expense to Tenant, so long as said Hazardous Materials were not placed in the
Premises by or on behalf of Tenant or Tenant's agents.
XII
WAIVER OF CLAIMS AND INDEMNIFICATION
12.1 Waiver of Claims. To the extent permitted by law, Landlord
shall not be liable for and Tenant releases Landlord from, and waives all
claims for damage to person or property sustained by Tenant or any occupant of
the Building or Premises resulting from the Building or Premises or any part of
either or any equipment or appurtenances becoming out of repair, or resulting
from any accident in or about the Building, or
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resulting directly or indirectly from any act or neglect of Tenant or occupant
of the Building or of any other person, including Landlord. If any damage,
whether to the Premises or to the Building, results from any act or neglect oL.
Tenant, Landlord may, at Landlord' s option, repair such damage and Tenant
shall, upon demand by Landlord, reimburse Landlord for the total cost of such
repairs . Tenant hereby releases Landlord from any and all claims or demands
for damages, loss, expense or in jury to the Premises, or to the other property
of Tenant in, about or upon the Premises, as the case may be, which may be
caused by or result from perils, events or happenings which are the subject of
insurance required to be carried by Tenant and in force at the time of any such
loss. All property of any kind belonging to Tenant that is in the Building or
the Premises shall be there at the sole risk of Tenant, and Landlord shall not
be liable for damage thereto or theft or misappropriation thereof. Landlord
shall not be liable for any injury, loss or damage to any persons or property
on or about the Premises from any other cause of whatsoever nature, unless the
same is directly and solely caused by negligence or willful misconduct of
Landlord and there is not fault or negligence of Tenant, and Tenant shall
defend and save Landlord harmless and indemnified against such injury, loss or
damage, or liability or claim thereof arising from any act, omission or
negligence of Tenant Landlord shall not be liable to Tenant for any
inconvenience, interference, annoyance, loss or damage resulting from work done
in or upon the Premises or any portion of the Building or adjacent grounds.
Under no circumstances shall Landlord be responsible for direct or
consequential damages for any failure to furnish or any delay or interruption
in furnishing any service of any nature to be provided by Landlord under the
terms of this Lease . Tenant shall employ counsel satisfactory to Landlord, or
at Landlord's option, Landlord may retain its own counsel at the expense of
Tenant, to prosecute, negotiate and defend any such claim, action or cause of
action. Landlord shall have the right to compromise or settle any such claim,
action or cause of action without admitting actual liability and without
Tenant's consent. Tenant shall pay any indebtedness arising under said
indemnity to Landlord together with interest thereon at the default rate set
forth in Section 28.10 of this Lease, from the date such indebtedness arises
until paid. Tenant's duty to indemnify Landlord shall survive the termination
or expiration of this Lease.
12.2 Indemnification. Tenant covenants and agrees to defend,
indemnify and hold Landlord harmless from any loss, cost or expense whatsoever,
directly or indirectly resulting or occasioned to, or imposed upon, Landlord
(i) by injury to or destruction of life or property resulting from the use and
occupancy of the Building by Tenant, or (ii) by damage to or destruction of the
Building structure, or any part thereof, or of any abutting real property
caused by or attributable to the negligent act or acts or omission or omissions
to act of Tenant or caused by or attributable to Tenant's failure to perform
its obligations under this Lease.
12.3 Definition of Landlord and Tenant. As used in this Lease, the
term "Landlord" shall be deemed to include any agent, managing agent,
affiliate, contractor, employee, director, officer or servant of Landlord, or
any corporate entity affiliated with Landlord, or third party operator and
owner of the Building and the term "Tenant" shall be deemed to include Tenant,
his or its agents, officers, employees, servants, partners, independent
contractors, licensees, invitees, or visitors.
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XIII
DAMAGE AND DESTRUCTION
13.1 Damage and Destruction. In the event that the Building should
be totally destroyed by fire, tornado or other casualty or in the event the
Premises or the Building should be so damaged that rebuilding or repairs cannot
be completed within ninety (90) days after the date of such damage, Landlord
may at its option terminate this Lease, in which event Base Rental shall be
abated during the unexpired portion of this Lease effective as of the date of
such damage . In the event the Building or the Premises should be damaged by
fire, tornado or other casualty covered by Landlord's insurance, but only to
such extent that rebuilding or repairs can be completed within ninety (90) days
after the date of such damage, or if the damage should be more serious and
Landlord does not elect to terminate this Lease, in either such event Landlord
shall within sixty (60) days after the date of such damage commence to rebuild
or repair the Building and/or the Premises and shall proceed with reasonable
diligence to restore the Building and/or Premises to substantially the same
condition which existed immediately prior to the happening of the casualty,
except that Landlord shall not be required to rebuild, repair or replace any
part of the improvements, betterments, furniture, equipment, fixtures and other
improvements which may have been placed by Tenant, Landlord or any other person
within the Building or the Premises and Tenant at its sole expense shall be
obligated to restore the same to substantially the same condition which existed
immediately prior to the happening of the casualty. Landlord shall allow Tenant
a fair diminution of Base Rental during the time and to the extent that the
Premises are unfit for use by Tenant in the ordinary conduct of Tenant's
business. The abatement shall continue only until the earlier of (a) sixty (60)
days following the completion of Landlord's Work or (b) the completion of
Tenant's repairs. In the event any mortgagee under a deed of trust, security
agreement or mortgage on the Building should require that the insurance
proceeds be used to retire the mortgage debt, Landlord shall have no obligation
to rebuild, and this Lease shall terminate upon notice to Tenant. Any insurance
which may be carried by Landlord or Tenant against loss or damage to the
Building or to the Premises shall be for the sole benefit of the party carrying
such insurance and under its sole control, and Landlord's entire obligation to
rebuild or restore hereunder shall be limited to the extent of any recoverable
insurance proceeds available therefor.
XIV
WAIVER OF SUBROGATION
14.1 Waiver of Subrogation. Each party hereby waives any and every
right or cause of action for the events which occur or accrue during the term
of this Lease or any extension or renewal thereof for any and all loss of, or
damage to, any of its property (whether or not such loss or damage is caused by
the fault or negligence of the other party or anyone for whom said other party
may be responsible), which loss or damage is covered by valid and collectible
fire, extended coverage, "All Risk" or similar policies or self-insurance
covering real property, personal property or business interruption insurance
policies, to the extent that such loss or damage is recovered under said
insurance policies or self-insurance. Said waivers shall be in addition to, and
not in limitation or derogation of, any other waiver or release
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contained in this Lease with respect to any loss or damage to property of the
parties hereto. Written notice of the terms of said mutual waivers shall be
given to each insurance carrier and said insurance policies shall be properly
endorsed, if necessary, to prevent the invalidation of said insurance coverages
by reason of said waivers.
XV
INSURANCE
15.1 General Provisions with Regard to Insurance.
(a) Tenant shall provide and maintain a Broad Form Commercial
General Liability Policy of insurance with respect to the
Premises. Landlord, its managing agent and any designee of
Landlord shall be named as additional insureds. The liability
insurance policy shall protect Landlord, its managing agent,
Tenant and any designee of Landlord against any liability
which arises from any occurrence on or about the Premises or
any appurtenance of the Premises, or which arises from any of
the Claims indicated in Article XII against which Tenant is
required to indemnify Landlord and its managing agent. It is
understood and agreed that the liability coverage provided
herein shall extend beyond the Premises to portions of the
Common Areas (including the Parking Garage) which Tenant shall
use from time to time.
(b) The policy is to be written by a good and solvent insurance
company satisfactory to Landlord. The coverage limits of the
policy shall be at least $1,000,000 per occurrence, combined
single limit, and shall include contractual liability insuring
the indemnity provisions of this Lease.
(c) If it becomes customary for a significant number of tenants of
office buildings to be required to provide liability insurance
policies to their landlords with coverage limits higher than
the foregoing limits, within thirty (30) days after Landlord's
request therefor Tenant shall provide Landlord with an
insurance policy whose limits are not less than the then
customary limits.
(d) Tenant shall carry fire and all-risk coverage, vandalism and
malicious mischief insurance covering all improvements, stock
in trade, fixtures, furniture, furnishings, removable floor
coverings, trade equipment, signs and all other decorations in
the Premises to the extent of one hundred percent ( 100%) of
their full insurable value and replacement cost without
deduction for depreciation. In the event of casualty loss
hereunder, the proceeds of such policies shall be applied
solely to the replacement, restoration and refurbishment of
such damaged items.
(e) On or before Tenant enters the Premises for any reason, and
again before any insurance policy shall expire, Tenant shall
deliver to Landlord the policy or a renewal thereof, as the
case may be, together with evidence of payment of applicable
premiums. Any insurance required to be carried under this
Lease may be carried under a blanket policy covering the
Premises and other locations of Tenant. If Tenant
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includes the Premises in blanket coverage, Tenant may deliver
to Landlord a duplicate original of the blanket insurance
policy. Tenant may request that Landlord accept a certificate
evidencing such insurance instead of the original of the
policy, however, Landlord shall have the right to insist upon
receipt of an original or duplicate original of the policy.
(f) All insurance policies required to be carried under this Lease
by or on behalf of Tenant shall provide (and any certificate
evidencing the existence of any insurance policies, shall
certify) that: unless Landlord shall be given thirty (30)
days' written notice of any cancellation or failure to renew,
or material change to, the policies, as the case may be, (i)
the insurance shall not be cancelled and shall continue in
full force and effect, (ii) the insurance carrier shall not
fail to renew the insurance policies for any reason and (iii)
no material change may be made in an insurance policy. As used
in this Lease, the term "insurance policy" shall include any
extensions or renewals of an insurance policy.
(g) If Tenant fails to comply with any of the insurance
requirements stated in this Lease, Landlord may obtain such
insurance and keep the same in effect, and Tenant shall pay
Landlord the premium cost thereof upon demand.
(h) For the first twenty-four months of the Lease, Tenant in lieu
of providing the insurance required in Section 15.1, may
self-insure so long as Tenant agrees not to hold Landlord, its
officers, agents, contractors, affiliates or employees liable
for any losses resulting to property to be insured by Tenant.
Under this Lease, Tenant hereby expressly waives all right of
recovery against Landlord, its officers, agents, contractors,
affiliates or employees for damage which would otherwise be
covered by an "All Risk" policy of insurance on the Premises.
Further, if Tenant self-insures in lieu of carrying a Broad
Form Commercial General Liability Policy, the effect of the
applicable provisions of this Lease shall be the same as if
Tenant maintained the insurance required herein.
If Tenant opts to self-insure, any references contained in
this Lease which impose obligations upon Tenant's insurance
company shall apply to Tenant.
Beginning with the twenty-fifth month of this Lease, Tenant
will not be permitted to self-insure unless prior to the end
of the twenty-fourth month of the Lease Term:
(1) Tenant's Guarantor has extended the term of the
Guaranty of Lease for the remainder of the Lease Term
plus any option period with regard to Sections 12 and
15 of the Lease; or
(2) Tenant has furnished Landlord with financial
information satisfactory to Landlord evidencing
Tenant's ability to self-insure.
Absent the occurrence of (1) or (2) above prior to the end of
the twenty-fourth month of the Lease Term, Tenant (no later
than the first day of the twenty-fifth month of the Lease
Term) must furnish to Landlord certificates of insurance from
companies licensed to do business in the State of Texas
evidencing the coverage required in this Lease. Failure to do
so shall be a Default under the Lease .
XVI
EMINENT DOMAIN
16.1 Eminent Domain. If the whole of the Premises shall be taken or
condemned, or purchased in lieu thereof, by any government authority for any
public or quasi-public use or purpose, then, in that event, the term of this
Lease shall cease and terminate from the time when the possession shall be
required for such use or purpose. The Rental shall in such case be apportioned
to the date when the possession shall be required. In the event of a partial
taking only of the Premises, Landlord shall notify Tenant in writing and Tenant
shall have the option to cancel this Lease, by giving Landlord written notice
within twenty (20) days after receipt of such notice from Landlord; provided
the balance of the Premises remaining cannot be suitably used by Tenant for its
purposes heretofore stated. If Tenant is entitled to exercise said option to
cancel and does so, then such cancelling shall be effective and the Rental
shall in such case be apportioned to the date when the possession shall be
required. In the event Tenant is not entitled to cancel the Lease or, if it is
entitled to do so, but does not exercise its option, then Tenant will be
responsible for the Rental apportioned to the date when the possession shall be
required. The Rental herein reserved shall be reduced and Tenant shall be
required to pay that proportion of the Rental herein reserved that the Net
Rentable Area contained in the remaining Premises bears to the Net Rentable
Area contained in the Premises before such possession was required.
Landlord and Tenant hereby agree that any award of proceeds resulting
from a condemnation or sale in lieu thereof of the whole or part of the
Premises shall belong solely to Landlord and Tenant hereby waives any right to
make any claim
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therefore as the result of this Lease. Provided, however, that Landlord shall
not be entitled to any award specifically made to Tenant for relocation
expenses and the taking of Tenant' s fixtures, furniture or leasehold
improvements (exclusive of that portion paid for by Landlord), less
depreciation computed from the date of said improvements to the expiration of
the original term of this Lease.
XVII
ACCESS TO PREMISES
17.1 Access to Premises. Landlord or Landlord's agents shall have
the right to enter the Premises at all reasonable times to examine the same and
to show them to prospective purchasers, mortgagees, lessees or tenants of
Landlord, or to public officials lawfully having an interest therein, or to
make such decorations, repairs, alterations, improvements or additions as
Landlord may reasonably deem necessary or desirable or to close entrances,
doors, corridors, elevators or other facilities. Landlord, Tenant and all other
tenants in the Building and their respective guests, invitees and employees
shall have ingress and egress to and from all common public areas of the
Building, provided that (i) Landlord has the right, under reasonable
regulations, to regulate and control such guests, invitees and employees with
respect to such access and the days and hours of access, and (ii) all Common
Areas and facilities not within the Premises, which Tenant may be permitted to
use and occupy, are to be used and occupied under a revocable license, and iL.
the amount of such areas is diminished, Landlord shall not be subject to any
liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such diminution of such areas be deemed
constructive or actual eviction. Landlord shall provide reasonable notice to
Tenant prior to entering premises, if possible.
XVIII
COMMUNICATIONS
18.1 Communications: No notice, request, consent, approval, waiver
or other communication under this Lease shall be effective unless the same is
in writing and is hand delivered or mailed by registered or certified mail,
postage prepaid, addressed as follows:
(a) If intended for Landlord, a communication shall be effective
if mailed to the address designated as Landlord's Notice
Address in Section 18.2 or to such other address as Landlord
designates by giving notice to Tenant, with a copy to the
address designated as Landlord's Notice Copy Address in
Section 18.2, or to such other person or party as Landlord
shall designate by notice to Tenant.
(b) If intended for Tenant, a communication shall be effective if
mailed to the address designated as Tenant's Notice Address in
Section 18.2 or to such other address as Tenant shall
designate by giving notice thereof to Landlord with a copy to
the address designated as Tenant's Notice Copy Address in
Section 18.2, or to such other person or party as Tenant shall
designate by giving a notice thereof to Landlord. Notice may
be given to Tenant by Landlord or Landlord's attorney acting
as Landlord's authorized agent.
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18.2 Notice Addresses:
----------------
(a) Landlord's Notice Address:
-------------------------
Lehndorff USA Group
----------------------------------
2250 Lakeside Boulevard, Suite 130
----------------------------------
Richardson, Texas 75082
----------------------------------
(b) Landlord's Notice Copy Address:
------------------------------
Spears & Riley
2501 Cedar Springs
Suite 600
Dallas, Texas 75201
(c) Tenant's Notice Address:
-----------------------
Milestone HealthCare, Inc.
----------------------------------
2501 Cedar Springs, Suite 610
----------------------------------
Dallas, Texas 75201
----------------------------------
(d) Tenant's Notice Copy Address:
----------------------------
EPIC Healthcare Management Company
----------------------------------
3333 Lee Parkway, Suite 900
----------------------------------
Dallas, Texas 75216
----------------------------------
ATTN: Law Department
----------------------------------
XIX
FAILURE TO PERFORM, DEFAULTS, REMEDIES
19.1 Defaults.
(a) Any one of the following events shall be deemed to be
a Default by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of
Rental or other sum hereby reserved and such failure shall
continue for a period of five (5) business days after delivery
of written notice to Tenant.
(ii) Tenant shall fail to comply with any
provision (including the Rules and Regulations attached hereto
as Exhibit "B") of the Lease, other than the payment of rent,
and shall not cure such failure within fifteen (15) business
days after delivery of written notice to Tenant.
(iii) The filing or execution or occurrence of: a
petition in bankruptcy or other insolvency proceeding by or
against Tenant or any guarantor of Tenant's obligations; or
petition or answer seeking relief under any provision of the
Bankruptcy Act; or an assignment for the benefit of creditors
or composition; or a petition or other proceeding by or
against Tenant or any guarantor of Tenant's obligations for
the appointment of a trustee, receiver or liquidator of Tenant
or any guarantor of Tenant's obligations or any of Tenant's or
such guarantor's property; or a proceeding by any governmental
authority for the dissolution or liquidation of Tenant or any
guarantor of Tenant's obligations.
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<PAGE> 27
(iv) Tenant shall abandon, desert or vacate any
substantial portion of the Premises.
(v) Tenant shall default under any other lease
with Landlord, now existing or hereafter entered into.
(b) This Lease is subject to the limitation that, if a
Default shall occur, Landlord may give to Tenant a notice of intention
to terminate Tenant's right to possession of the Premises at the
expiration of five business (5) days from the date of service of the
notice. At the expiration of the five (5) business days, Tenant's
right to possession of the Premises shall expire, and all of the right
title and interest of Tenant to possession of the Premises shall end.
Tenant's liability under all of the provisions of this Lease shall
continue notwithstanding any expiration and surrender, and
notwithstanding any re-entry, repossession or dispossession under the
terms of this Lease. Further, any legal fees and costs and expenses
incurred by Landlord as a result of Tenant's Default shall be paid by
Tenant to Landlord upon demand.
19.2 Remedies. Upon the occurrence of any such Default, Landlord
shall have the option to pursue any one or more of the following remedies
without any notice or demand whatsoever, except as elsewhere provided herein,
(Tenant hereby waiving notice to quit), together with any other remedies
available to Landlord at law or in equity:
(a) Change the locks of the Premises without Tenant's
consent. Landlord shall post a notice on the door of the Premises
informing Tenant where a new key may be obtained. However, Landlord is
under no obligation to furnish Tenant with a new key for the Premises
unless and until Tenant has cured its Default.
(b) Terminate Tenant's right to possession oL. the
Premises, in which event Tenant shall immediately surrender the
Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession
or arrearages in rent, enter upon and take possession and expel or
remove Tenant and any other person who may be occupying the Premises
or any part thereof, by force if necessary, without being liable for
prosecution or any claim of damages therefor; and Tenant agrees to pay
to Landlord on demand the amount of all loss and damage which Landlord
may suffer by reason of such termination, whether through inability to
relet the Premises on satisfactory terms or otherwise.
(c) Enter upon and take possession of the Premises and
expel or remove Tenant and any other person who may be occupying the
Premises or any part thereof, by force if necessary, without being
liable for prosecution or any claim for damages therefor; Landlord
may, but is under no obligation to relet the Premises and receive the
rent therefor under terms and conditions acceptable to Landlord in its
sole discretion and judgment; Tenant agrees to pay to Landlord ten
(10) days after written notice by Landlord, as liquidated damages,
sums equivalent to
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the monthly rent reserved hereunder less the avails of reletting, if
any. Tenant shall also pay within ten (10) days after written notice,
any additional amounts expended and/or incurred by Landlord including
but not limited to amounts expended in renovating, repairing and
altering the Premises for a new tenant, including leasing commissions
and inducements reasonably necessary to relet the Premises.
Notwithstanding any reletting hereunder, Landlord shall have the right
at its option to terminate the Lease.
(d) Enter upon the Premises, by force if necessary,
without being liable for prosecution or any claim for damages
therefor, and do whatever Tenant is obligated to do under the terms of
this Lease; and Tenant agrees to reimburse Landlord, on demand, as
Additional Rental, for any expenses which Landlord may incur in thus
effecting compliance with Tenant's obligations under this Lease, and
Tenant further agrees that Landlord shall not be liable for any
damages resulting to Tenant from such action, whether caused by the
negligence of Landlord or otherwise.
Pursuit of any of the foregoing remedies shall not constitute a
forfeiture or waiver of any Rental due to Landlord hereunder or of any damages
accruing to Landlord by reason of the violation of any of the provisions herein
contained. All Rental and Additional Rental hereunder shall be paid by Tenant
to Landlord without any set-off or counterclaim whatsoever.
Any property belonging to Tenant or to any person holding by, through
or under Tenant, or otherwise found upon the Premises at the time of re-entry
or termination of Tenant's right to the Premises by Landlord, may be removed
therefrom and stored in any warehouse, at the cost of and for the account of
Tenant, or, in Landlord's sole discretion, deemed to be abandoned by Tenant and
disposed of accordingly.
The foregoing rights and remedies given to Landlord are and shall be
deemed to be cumulative, and the exercise of any of them shall not be deemed to
be an election excluding the exercise by Landlord at any time of a different or
inconsistent remedy, and shall be deemed to be given to Landlord in addition to
any other and further rights granted to Landlord by the terms hereof, or by
law, and the failure of Landlord at any time to exercise any right or remedy
herein granted or established by law shall not be deemed to operate as a waiver
of its right to exercise such right or remedy at any other future time.
Further, Tenant waives its right to trial by jury in any action concerning this
Lease.
19.3 Deficiency. If Tenant's right to possession of the Premises is
terminated under Subsection 19.1(b), Tenant shall remain liable (in addition to
accrued liabilities) to the extent legally permissible for the Rental as
defined in Section 4.6 and all other charges Tenant would have been required to
pay until the date this Lease would have expired had such right not been
terminated. It is expressly agreed herein that Landlord shall have the right,
at its option, to recover sums due hereunder through litigation or otherwise
from time to time on one or more occasions without the Landlord being
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<PAGE> 29
obligated to wait until the expiration of the term of this Lease before filing
suit. All attorneys' fees and costs and expenses incurred by Landlord under
this Section 19.3 shall be paid by Tenant.
19.4 Breach by Tenant. In the event of any breach or threatened
breach by Tenant of any covenants, agreements, terms or conditions made in this
Lease, Landlord shall be entitled to enjoin such breach or threatened breach
and, in addition to the rights and remedies provided hereunder, shall have any
other right or remedy allowed at law or equity by statute or otherwise. THE
PROVISIONS OF THIS ARTICLE SHALL BE CONSTRUED CONSISTENT WITH THE LAW OF TEXAS
SO THAT REMEDIES OF LANDLORD HEREIN DESCRIBED SHALL BE AVAILABLE TO LANDLORD TO
THE FULL EXTENT BUT ONLY TO THE EXTENT THAT THEY ARE NOT INVALID OR
UNENFORCEABLE UNDER THE LAW OF TEXAS.
XX
CONDITION OF THE PREMISES
20.1 Condition of the Premises. It is agreed that, by occupying the
Premises, Tenant acknowledges that it has had full opportunity to examine the
Building, including the Premises, and is fully informed, independently of
Landlord, as to the character, construction and structure of the Building and
the Premises. It is agreed that by occupying the Premises Tenant formally
accepts the same and acknowledges that Landlord has complied with all
requirements imposed upon it under the terms of this Lease. This Lease does not
grant any right to light or air over or about the Premises or Building. Upon
delivery of possession, Tenant shall inspect the Premises and give Landlord
immediate written notice of contended defects in the Work (as defined in
Exhibit "C"), if any, and of any contended variances of the Work from the
requirements of this Lease. Any defect or variance not so set forth shall be
deemed waived by Tenant. If Tenant shall fail to give such notice, it shall be
deemed to waive all rights with respect to such defects or variances.
XXI
LANDLORD'S TITLE
21.1 Landlord's Title. Tenant recognizes and agrees that
Landlord's title is and always will be paramount to the title of Tenant and
under no circumstances shall Tenant do or be empowered to do any act which can,
shall or may encumber Landlord's title or subject the Premises or the Building
or any part of either to any lien or encumbrance. Tenant shall immediately
remove any and all liens or encumbrances which are filed against the Premises
or the Building by any person, firm, corporation or entity as a result of any
act or omission of Tenant. In the event Tenant fails to remove any such lien
within ten (10) days of receipt of notice thereof then Landlord may, but shall
not be obligated to, remove such lien at the cost and expense of Tenant.
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<PAGE> 30
XXII
LANDLORD'S RIGHT TO PERFORM FOR ACCOUNT OF
TENANT AND ATTORNEYS' FEES
22.1 Landlord's Right to Perform for Account of Tenant and
Attorneys' Fees:
(a) If Tenant shall be in Default under this Lease, Landlord may
cure the Default at any time for the account and at the expense of Tenant. If
Landlord cures a Default on the part of Tenant, Tenant shall reimburse Landlord
for any amount expended by Landlord in connection with the cure plus default
interest pursuant to Section 28.10.
(b) In the event of litigation concerning this Lease if Landlord
is the prevailing party therein, it shall be entitled to reimbursement of its
costs respecting such suit, or settlement thereof, including reasonable
attorney's fees.
XXIII
SUCCESSORS AND ASSIGNS
23.1 Successors and Assigns. This Lease shall be binding upon and
inure to the respective parties herein, their heirs, executors, administrators,
successors and permitted assigns whomever.
XXIV
RESERVATIONS BY LANDLORD
24.1 Reservations by Landlord. In addition to other rights
conferred by this Lease or by law, Landlord reserves the right, to be exercised
in Landlord's sole discretion, to: (a) change the name of the Building; (b)
change entrances and exits to the Building and to the parking lot adjacent to
the Building; (c) install and maintain a sign or signs on the exterior or
interior of the Building; (d) change the street address of the Building; (e)
designate all sources furnishing signs, sign painting and lettering; (f) take
all measures as may be necessary or desirable for the safety and protection of
the Premises or of the Building: (g) sell or mortgage the Building; (h) have
pass keys to the Premises; (i) repair, alter, add to, improve, build additional
stories on, or build adjacent to the Building; (j) run necessary pipes,
conduits and ducts through the Premises; and (k) carry on any work, repairs,
alterations or improvements in, on or about the Building or in the vicinity
thereof. Tenant hereby waives any claim to damage or inconvenience caused by
such work, except as provided herein. This paragraph shall not be construed to
diminish the obligations of Tenant provided herein, nor shall it be construed
to create or increase any obligation on the part of Landlord with respect to
repairs or improvements. In connection with the exercise of any of the rights
of this paragraph, Landlord shall reimburse Tenant for Tenant's out-of-pocket
expenses for moving, disconnecting and reinstalling Tenant's computers and
other electronic equipment, furniture, equipment, supplies, telephones and
other communication equipment, for reprinting Tenant's stationery of the same
quality and quantity as that on hand at the time of the exercise of the right,
and for additional space planning consultation if configuration of the Premises
is altered. Any upgrading of Tenant's improvements, stationery or printing
will be at sole cost of Tenant.
XXV
RULES AND REGULATIONS
25.1 Rules and Regulations. The Rules and Regulations attached
hereto and marked Exhibit "B" are
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<PAGE> 31
made a part of this Lease as if fully herein set forth. Tenant, its employees,
agents and visitors, shall observe and abide by them and by such other and
further reasonable Rules and Regulations as Landlord may prescribe which, in
its judgment, are needed for the reputation, safety, care or cleanliness of the
Building or Premises, or the operations and maintenance thereof and the
equipment therein, or for the comfort of Tenant and the other tenants of the
Building. Landlord, however, shall have the right to change said Rules and
Regulations and waive in writing any or all of said Rules and Regulations in
the case of any one or more tenants. All such Rules and Regulations are of the
essence hereof without which this Lease would not have been entered into by
Landlord, and any breach of any provision of these Rules and Regulations by
Tenant shall at Landlord's option constitute a Default hereunder.
XXVI
NON-WAIVER
26.1 Non-waiver. The failure of Landlord to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of the Lease or of any of the Rules and Regulations incorporated
herein or hereafter adopted by Landlord, shall not prevent a subsequent act,
which would have originally constituted a violation, from having all the force
and effect of an original violation. The receipt by Landlord of Rental with
knowledge of the breach of any covenant of this Lease, or breach of the Rules
and Regulations, shall not be deemed a waiver of such breach. The failure of
Landlord to enforce any of the Rules and Regulations as incorporated herein or
hereafter adopted against Tenant and/or any other tenant in the Building shall
not be deemed a waiver of any such Rules and Regulations.
XXVII
OTHER TENANTS
27.1 Other Tenants. Landlord shall not be liable to Tenant for
failure to enforce or for violation of any of said Building Rules and
Regulations or the breach of any covenant or condition in any lease by any
other tenant in the Building.
XXVIII
MISCELLANEOUS PROVISIONS
28.1 No Constructive Eviction. Omitted
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28.2 Landlord's Lien. In consideration of the mutual benefits
arising under this Lease, Tenant hereby grants to Landlord a lien and security
interest in and on all property of Tenant now or hereafter placed in or upon
the Premises, and such property shall be and remain subject to such lien and
security interest of Landlord for payment of all Rental and other sums agreed
to be paid by Tenant herein. Said lien and security interest shall be in
addition to and cumulative of Landlord's liens existing or to exist under
statute in law or in equity to secure same, none of which are waived by
Landlord. The provisions of this paragraph relating to said lien and security
interest shall constitute a security agreement under the Uniform Commercial
Code so that Landlord shall have and may enforce a security interest on all
property of Tenant now or hereafter placed in or on the Premises, including but
not limited to all fixtures, machinery, equipment, furnishings, and other
articles of personal property now or hereafter placed in or upon the Premises
by Tenant. Tenant agrees to execute as debtor such financing statement or
statements as Landlord may now or hereafter reasonably request in order that
such security interest or interests may be protected pursuant to said Code.
Landlord may at its election at any time file a copy of this Lease as a
financing statement. Landlord, as secured party, shall be entitled to all of
the rights and remedies afforded a secured party under said Uniform Commercial
Code, which rights and remedies shall be in addition to and cumulative of
Landlord's liens and rights provided by law or by the other terms and
provisions of this Lease.
28.3 Subordination. It is understood and agreed that this Lease
(including all rights of Tenant hereunder) is subject and subordinate to any
ground lease or underlying lease (hereinafter called "ground lease") which may
now or hereafter affect the Land or the Building of which the Premises form a
part and is further subject and subordinate to any mortgage or deed of trust or
trust indenture (hereinafter called "mortgage") which may now or hereafter
affect any such lease or the real property of which the Premises form a part,
and to any and all advances made under any such mortgage and to the interest
thereon, and all renewals, replacements and extensions thereof. This section
shall be self-operative and no further instrument or subordination shall be
required, but Tenant shall nevertheless at any time hereafter, on the demand of
Landlord, execute any instruments, releases or other documents that may be
required by any such mortgage holder or ground lessor or any of their
respective successors in interest to evidence such subordination. If in
connection with the financing (existing or future financing) of the Building,
the holder of any such mortgage, or with respect to any bond financing, the
trustee for any such bond holders, shall request reasonable modifications in
this Lease as a condition of approval of such financing, Tenant will not
unreasonably withhold, delay or defer making such modifications, provided that
they do not unreasonably increase the obligations of Tenant hereunder or
materially and adversely affect the leasehold interest created by this Lease.
In the event of termination of this Lease through foreclosure of any mortgage
to which this Lease is subordinated, or if the ground lease is terminated,
Tenant will upon the demand of the purchaser of the Premises at the foreclosure
sale thereof, or of the lessor under the ground lease, attorn to and accept
such purchaser or ground lessor as landlord under this Lease or, upon
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<PAGE> 33
demand, enter into a new lease agreement with such purchaser or ground lessor
for the unexpired term of this Lease at the same rent and under the same
provisions of this Lease. It is further agreed by Tenant that this Lease shall
be subject and subordinate at all times to any other arrangement or right to
possession under which Landlord is in control of the Premises, and to the
rights of the owner or owners of the Premises, the Building, and the Land of
which the Building is a part.
28.4 Tenant Estoppel Certificates. Tenant agrees, at any time and
from time to time, upon not less than five (5) days prior written notice by
Landlord, to execute, acknowledge and deliver to Landlord a written statement
containing all information requested by Landlord including but not limited to
(a) certification that this Lease is unmodified and in full force and effect
(or if there have been modifications, that the Lease is in full force and
effect as modified and stating the modifications), (b) a statement regarding
the dates to which the rent and other charges hereunder have been paid by
Tenant, (c) a statement as to whether to the best of Tenant's knowledge,
Landlord is in Default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, a specification of each such
Default of which Tenant may have knowledge, (d) a statement of the amount of
monthly rent plus rent bumps, if any, (e) a statement of the amount of the
Security Deposit, if any, and (f) a statement of the address to which notices
to Tenant should be sent. Any such statement delivered pursuant hereto may be
relied upon by any owner of the Building, any prospective purchaser of the
Building, and any present or prospective mortgage, deed of trust holder or
trustee for bond holders with respect to the Building or of Landlord's
interest.
28.5 Relocation. Landlord reserves the right to relocate the
Premises to space within the Building which (i) is on either floors 3, 4, 5, 6
or 7; (ii) is facing Cedar Springs; (iii) has approximately the same elevator
exposure as the Premises; and (iv) has at least the same square footage as the
Premises (including any options to expand); by giving Tenant prior written
notice of such intention to relocate. If within thirty (30) days after receipt
of such notice, Landlord and Tenant have not agreed on a space to which the
Premises are to be relocated and the timing oL. such relocation, this Lease
shall terminate on that date which is sixty (60) days after Tenant's receipt of
such notice. If Landlord and Tenant do so agree, then effective on the date of
such relocation, this Lease shall be amended through a Lease Amendment to be
executed by both Landlord and Tenant by deleting the description of the
original premises and substituting therefor the description of the new space.
Landlord agrees to pay the reasonable cost of moving Tenant to such other space
within the Building.
In the event Tenant is relocated to another space in the Building
pursuant to this Section 28.5, Landlord agrees to buildout the new premises to
substantially the same condition as that of the Premises on the Commencement
Date of this Lease. Also, Landlord shall reimburse Tenant for the reasonable
documented costs of moving (such as those items listed in Section 24.1 hereof).
28.6 Brokerage Fees. Except as stipulated herein, Tenant represents
and warrants to Landlord that Tenant has not incurred and will not incur any
liability for brokerage fees, finder's fees, agent's commissions or similar
compensation to third parties in connection with this Lease transaction. In the
event Tenant has incurred any other such fees, commissions or compensation,
said fees, commissions and compensation so incurred shall be charged solely
against Tenant and Tenant agrees to indemnify Landlord against and hold
Landlord harmless L.rom any and all liabilities arising from any claims for
such fees, commissions or compensation, including, without limitations, the
cost of counsel fees and costs and expenses in connection therewith. Broker(s)
if any Gwin Real Estate Company. Cushman & Wakefield of Texas
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<PAGE> 34
28.7 Unenforceability/Joint and Several Liability. The invalidity
or unenforceability of any provision hereof shall not affect or impair any
other provision. Where Tenant hereunder consists of more than one party, the
obligations of each such party will be joint and several hereunder.
28.8 Headings, Miscellaneous. The headings of the several
articles, paragraphs and sections contained herein are for convenience only and
do not define, limit or construe the contents of such articles, paragraphs and
sections. All negotiations, considerations, representations and understandings
between the parties are incorporated herein and are superseded hereby. There
are no terms, obligations, covenants, statements, representations, warranties
or conditions relating to the subject matters hereof other than those
specifically contained herein. This Lease may not be amended or modified by any
act or conduct of the parties or by oral agreements unless reduced and agreed
to in writing signed by both Landlord and Tenant. No waiver of any of the terms
of this Lease by Landlord shall be binding upon Landlord unless reduced to
writing and signed by Landlord.
28.9 Holding Over. In the event Tenant remains in possession of the
Premises after the expiration or termination of the term, and without the
execution of a new lease, Tenant, at the option of Landlord, shall be deemed to
be occupying the Premises as a Tenant from month to month at 125% the Base
Rental due for the last full calendar month during the term of the Lease in
which rent was paid plus all other sums due under this Lease and subject to all
other provisions and obligations of the Lease that are applicable to a
month-to-month tenancy. The holding over period may be cancelled by Landlord
upon thirty (30) days notice to Tenant.
28.10 Payments. Except as elsewhere provided herein, all amounts
owed by Tenant to Landlord hereunder shall be paid within twenty (20) business
days from the date that Landlord renders statements of account therefor. All
amounts not paid when due shall be subject to a late payment fee which shall be
an amount equal to $50.00 times the number of days such payment is late to
cover Landlord's cost for administrative fees and expenses incurred in
conjunction with collection of the late payments. If Tenant fails to pay four
(4) Rental payments or other payments as required hereby on or before the
respective due dates specified herein, during any twelve month period, Landlord
may terminate the Lease. Time is of the essence in Tenant's payment of Rental
and Tenant's performance of each and every term, covenant, and condition of
this Lease incumbent on Tenant. All sums due and payable to Landlord by Tenant
by virtue of Tenant's Default under this Lease shall bear interest at the
lesser of: (i) a rate per annum equal to the prime rate of the Chase Manhatten
Bank of New York on the date as of which the interest in question commences to
accrue plus two percent (2%); or (ii) the highest rate which may be lawfully
charged.
28.11 Force Majeure. In the event Landlord is prevented or delayed
in the performance of any of its covenants or obligations hereunder by
circumstances beyond its control (including, but not limited to governmental
regulations or prohibitions) such delay or nonperformance shall not be deemed a
Default hereunder and shall be deemed waived and accepted by Tenant.
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<PAGE> 35
28.12 Overload. Tenant shall not overload the floors of the
Premises.
28.13 Liability of Landlord. To the extent permitted by law
Landlord, and in case Landlord shall be a joint venture, partnership,
tenancy-in-common, pension fund, association or other form of joint ownership,
all members of any such joint venture, pension fund, partnership,
tenancy-in-common, association or other form of joint ownership, shall have no
personal liability with respect to any provision of this Lease or any
obligation or liability arising from this Lease or in connection with this
Lease in the event of a breach or default by Landlord of any of its
obligations. Tenant shall look solely to the equity of the owner of the
Building at the time of the breach or default (or if the interest of the
Landlord is a leasehold interest at that time, Tenant shall look solely to such
leasehold interest) for the satisfaction of any remedies of Tenant.
28.14 Entire Agreement. This Lease Agreement, the Exhibits and any
Rider or Addendum attached hereto set forth all the covenants, promises,
agreements, conditions or understandings, between Landlord and Tenant
concerning the Premises and there are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them, other than
as herein set forth. All prior communications, negotiations, arrangements,
representations, agreements and understandings, whether oral, written or both,
between the parties hereto, and their representatives, are merged herein and
extinguished, this Lease superseding and cancelling the same.
28.15 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
28.16 Recordation of Lease. Neither party hereto may record this
Lease without the prior written consent of the other party.
28.17 Not Binding Lease. This instrument is not effective as a
Lease or otherwise unless and until executed by and distributed to both
Landlord and Tenant.
28.18 Guarantors. The following person(s) shall personally
guarantee this Lease and shall execute a Guaranty provided by Landlord: Epic
Healthcare Management Company, a Delaware Corporation.
XXIX
MASTER LEASE
29.1 Master Lease. The existing mortgage on the Land and the
Building is secured in part by that certain Master Lease by and between 2501
Cedar Springs Investors, as Landlord and 2501 Cedar Springs Investors, as
Tenant dated May 1, 1990 (the "Master Lease"). From time to time during the
term of this Lease when the Master Lease is in effect pursuant to the terms of
said mortgage, this Lease shall be subordinate to the Master Lease and this
Lease shall be deemed a sub-lease.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as a sealed instrument by their respective representatives thereunto
duly authorized, as of the date first above written.
Landlord:
2501 CEDAR SPRINGS INVESTORS,
a Texas joint venture
By: U.S. Investors, Services, Inc., a
Texas corporation, venturer manager
of 2501 Cedar Springs Investors
ATTEST:
By: /s/Elaine Pachlhofer By: /s/Joseph W. Dingman
----------------------- ----------------------------------------
Joseph W. Dingman
Sr. Vice President
-30-
<PAGE> 36
TENANT:
ATTEST: MILESTONE HEALTHCARE, INC.,
---------------------------------
a Delaware corporation
By: /s/Lew Lefko By: /s/Charles Allen
------------------------- ------------------------------
Name: /s/Lew Lefko Name: Charles Allen
-------------------- ----------------------------
Title: Vice President Title: President
------------------- ---------------------------
-31-
<PAGE> 37
EXHIBIT A
DELINEATION OF PREMISES
This is a floor plan of 6,166 square feet in 2501 Cedar Springs
building to be leased by Milestone Health Care, Inc.
A-1
<PAGE> 38
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is entered into as a part of that
certain office building lease (the "Lease") by and between 2501 CEDAR SPRINGS
INVESTORS (as "Landlord") and MILESTONE HEALTHCARE, INC., a Delaware
corporation (as "Tenant"). The provisions of this Addendum shall prevail in
the event of any conflict between the terms of the Lease and the terms of this
Addendum. All capitalized terms not otherwise defined herein shall have the
meanings attributed to them in the Lease.
For and in consideration of the terms and premises contained in the
Lease, the parties hereby further agree as follows:
1. Must Take Space. No later than May 1, 1993, Tenant must lease
from Landlord approximately 1,661 square feet of space on the
sixth floor as shown on Exhibit E attached hereto, commonly
known as the former Spears & Riley space (the "S&R Space").
Tenant shall accept the S&R Space in its "as is" condition.
During the terms of the Lease, Tenant shall pay the same
rental rate for the S&R Space as the rental rate Tenant is
then paying for the Premises. Landlord shall provide Tenant a
finish-out allowance on the S&R Space of Three Dollars ($3.00)
per square foot.
Unless otherwise agreed upon by Landlord and Tenant, the lease
of the S&R Space shall terminate on the same day as this Lease
and shall be upon the same terms and conditions as this Lease,
except Base Rental and any charges under the Lease based upon
square footage shall be adjusted as appropriate. Upon the
taking of the S&R Space, Landlord and Tenant shall execute an
amendment hereto incorporating the S&R Space into the terms of
this Lease.
2. Right of First Refusal. Provided Tenant is not in default at
the time such right is exercised, and upon the terms and
conditions hereinafter set forth, Tenant shall have a Right of
First Refusal (the "Refusal Right") to the following spaces:
(i) approximately 2,058 contiguous square feet of space
located on the southeast side of the sixth floor as shown on
Exhibit F attached hereto; and (ii) approximately 2,494
contiguous square feet of space on the northwest side of the
sixth floor as shown on Exhibit G attached hereto. The spaces
described in (i) and (ii) above and depicted on Exhibits F and
G respectively shall hereinafter be referred to as the "Option
Space".
When Landlord determines that all or any portion of the Option
Space is available, Landlord shall deliver written notice (the
"Option Space Notice") to Tenant setting forth the terms under
which Landlord is willing to lease such space (the "Option
Space Offer"). Once Landlord has sent the Option Space
Notice, if Tenant elects to exercise said Refusal Right in
accordance with the terms of the Option Space Offer, Tenant
shall do so by giving Landlord written notice of such election
within ten (10) business days after receiving the Option Space
Notice. In the event Tenant rejects the Option Space Offer or
fails to respond to the Option Space Notice within said ten
(10) business day period, Tenant shall be deemed to have
waived its Refusal Right with respect to such space and
Landlord may extend the Option Space Offer to third parties;
however, if the terms of the Option Space Offer change
materially, Landlord must re-offer such Option Space Offer to
Tenant on such changed terms, and Tenant again shall have ten
(10) business days to respond thereto.
<PAGE> 39
Landlord and Tenant hereby agree that notwithstanding the
foregoing, if the Option Space Offer is for a longer term than
the remaining term of this Lease, Tenant may exercise its
Refusal Right for a term equal to the remaining term of this
Lease; provided, however, that any concessions (including
finish out allowances) shall be reduced proportionately to
reflect that portion of the lease term actually accepted by
Tenant as opposed to the lease term contained in the Option
Space Offer:
By way of example only: If the Option Space Offer
was for a period of ten (10) years and concessions
were $10.00 per square foot and Tenant's remaining
lease term was for only three (3) years, Tenant could
accept the Option Space Offer for a term of three (3)
years, but the concessions would be reduced
proportionately to $3.00 per square foot.
Unless otherwise agreed upon by Landlord and Tenant, the Lease
of the Option Space shall terminate on the terms and
conditions as this Lease, and shall be upon the same terms and
conditions as this Lease, except that Base Rental shall be as
set forth in the Option Space Offer and any charges under this
Lease based on square footage shall be adjusted, as
appropriate. Upon exercise by Tenant of the Refusal Right,
Landlord and Tenant shall execute an amendment hereto
incorporating the Option Space into the terms of this Lease.
3. Moving Allowance. As additional consideration for executing
this Lease, Landlord shall provide Tenant with a Moving
Allowance in the amount of $6,166.00. Said Moving Allowance
shall be paid to Tenant no later than thirty (30) days after
Tenant takes occupancy of the Premises.
4. Guarantor. For the period of time from the Commencement Date
of this Lease until the last day of the twenty-fourth month
following Commencement Date, Epic Healthcare Management
Company, a Delaware corporation shall act as Guarantor of this
Lease, thereby guaranteeing for said twenty-four month period
all of Tenant's obligations under the Lease for the full term
of the Lease. This Lease is subject to the requirement that
Tenant's Guarantor execute a Guaranty of Lease prepared by
Landlord. Tenant's failure to furnish said Guaranty of Lease
shall be, at Landlord's option, a Default under this Lease.
5. Lease Cancellation. At the end of the third lease year,
Tenant shall have the right to terminate this Lease, subject
to the following conditions:
(i) Tenant must give Landlord written notice of its
intention to vacate the Premises six months prior to
the end of the third lease year; and
(ii) Along with Tenant's written notice, Tenant must
submit a payment of twenty-five thousand and no/100
($25,000.00) to Landlord.
6. Parking. During the primary term of this Lease, Tenant shall
be entitled to the use of one, non-assigned parking space per
324 square feet of space leased by Tenant in the Building, at
no cost to Tenant. Said parking spaces shall be located in
the Parking Garage.
<PAGE> 40
7. Right to Renew. Provided Tenant is not in default at the time
such right is exercised, Tenant shall have one five-year
option to renew this Lease for the entire Premises at the
greater of (i) Market Rate or (ii) the Rental (as defined in
this Lease) in effect for the previous year of the Lease.
Said option to renew must be exercised, if at all, by giving
Landlord written notice of its intent no later than six months
prior to the expiration of the Lease Term.
8. Market Rate. For purposes of paragraph 7 above, Market Rate
shall mean the rates then being paid by new tenants for space
in comparable buildings within a one mile radius of the
Building (the "Market Rate"). If Landlord and Tenant are
unable to agree upon the Market Rate, Landlord and Tenant
shall each promptly appoint a real estate appraiser who is a
member of the American Institute of Real Estate Appraisers (or
its equivalent) to assist in the determination of the Market
Rate, and the two appraisers shall appoint a third appraiser
who is also a member of the American Institute of Real Estate
Appraisers (or its equivalent). The determination of the
Market Rate by the agreement of any two (2) of such three (3)
appraisers shall be accepted by and binding upon Landlord and
Tenant as the Market Rate. Landlord and Tenant will use all
reasonable diligence to cause their appointed appraisers to
perform in good faith and in a timely manner in order to make
the determination of the Market Rate on or before the date on
which the Market Rate is to become effective. In the event
such appraisers shall not make such determination prior to the
date on which the Market Rate is to become effective, this
Lease shall nevertheless continue in full force and effect
until such determination is made (but in no event longer than
90 days), and the rental for such period shall be payable at
the rate otherwise payable hereunder. Upon the determination
by such appraisers of the Market Rate, the payment of the
Market Rate shall commence on the first day of the month
following the date of such determination, and in addition to
such monthly installment of rental, Tenant shall pay to
Landlord the increase in the rental payable hereunder, if any,
applicable to the period from the date on which the Market
Rate was scheduled to become effective to the payment of the
first installment at the Market Rate. Landlord and Tenant
shall each bear the costs and fees of their respective
appraisers and shall share equally the cost of the third
appraiser. If said appraisers cannot agree upon the Market
Rate within the aforementioned 90 days, Tenant's right to
renew pursuant to Section 7 of this Addendum shall expire.
Initials:
/s/ JWD Landlord
---------
/s/ CA Tenant
---------
<PAGE> 41
EXHIBIT B
RULES AND REGULATIONS
------------------------------------
1. Landlord may refuse admission to the Building outside of
ordinary business hours to any person not known to the watchman in charge or
not properly identified, and may require all persons admitted to or leaving the
Building outside of ordinary business hours to register. Any person whose
presence in the Building at any time shall, in the judgment of Landlord, be
prejudicial to the safety, character, reputation and interests of the Building
or its tenants may be denied access to the Building or may be ejected
therefrom. In case of invasion, riot, public excitement or other commotion,
Landlord may prevent all access to the Building during the continuance of the
same, by closing the doors or otherwise, for the safety of the tenants, the
Building and protection of property in the Building. Landlord may require any
person leaving the Building with any package or other object to exhibit a pass
from the tenant from whose Premises the package or object is being removed, but
the establishment and enforcement of such requirement shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the Premises of Tenant. The Landlord shall in no way be
liable to any tenant for damages or loss arising from the admission, exclusion
or ejection of any person to or from Tenant's Premises or the Building under
the provisions of this rule.
2. Landlord reserves the right to exclude or expel from the
Building any person who in the judgment of Landlord is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in violation
of these Rules and Regulations.
3. Tenant shall not do or permit anything to be done in the
Premises or bring or keep anything therein which will in any way obstruct or
interfere with the rights of other tenants, or do, or permit anything to be
done in the Premises which shall, in the judgment of Landlord or its manager,
in any other way injure or annoy them, or conflict with the laws relating to
fire, or with the regulations of the fire department or with any insurance
policy upon the Building or any part thereof or any contents therein or
conflict with any of the Rules and Ordinances of the public building or health
authorities.
4. Tenant shall not sell or permit the sale, at retail or
wholesale, of newspapers, magazines, periodicals or theatre tickets, in or from
the Premises; nor shall Tenant carry on or permit or allow any employee or
other person to carry on the business of stenography, typewriting, telephone
answering service, or any similar business in or from the Premises for the
service or accommodation of the occupants of any other portion of the Building,
or the business of a barber shop, beauty shop, tobacco or pipe shop, liquor
store, employment bureau, or a manicuring or chiropodist business, except with
the prior written approval of Landlord. Tenant shall not occupy or permit any
portion of the Premises to be occupied as an office or facility for the
possession, storage, manufacture or sale of narcotics of any form or kind,
without the prior written approval of Landlord.
5. Tenant shall not manufacture any commodity or prepare or
dispense any goods or beverages in the Premises or use the same as sleeping
apartments, unless the Premises are expressly leased for such purposes.
B-1
<PAGE> 42
6. Tenant shall not conduct directly or indirectly any auction
upon the Premises, or permit any other person to conduct an auction upon the
Premises. Tenant shall not conduct malodorous activities in or about the
Premises or the Building. Tenant will not permit gambling to be conducted in
or upon the Premises.
7. No noise, including the playing of any musical instruments,
radio or television, which, in the judgment of Landlord, might disturb other
tenants in the Building, shall be made or permitted by Tenant, and no cooking
shall be done in the Premises or the Building, except as expressly approved by
Landlord. If cooking is permitted by Landlord, Tenant shall not permit any
cooking or food odors emanating within the Building to seep into other portions
of the Building. All electrical equipment used by Tenant shall be U.L.
approved. Nothing shall be done or permitted in the Premises, and nothing
shall be brought into or kept in the Premises which would impair or interfere
with any of the Building services or the proper and economic heating, cooling,
cleaning or other servicing of the Building or the Premises, or the use or
enjoyment by any other tenant within the Building, nor shall there be installed
by Tenant any ventilating, air-conditioning, electrical or other equipment of
any kind, which, in the judgment of Landlord, might cause any such impairment
or interference.
8. Tenant shall not install or operate any steam or gas engine or
boiler, or carry on any mechanical business, in the Building. The use of oil,
gas or inflammable liquids for heating, lighting or any other purposes is
expressly prohibited. Explosives or other articles deemed extra hazardous
shall not be brought into the Building. Tenant shall not use any other method
of heating than that supplied by Landlord.
9. Tenant shall not leave water running in any bathroom, kitchen
or elsewhere in the Building or the Premises and Tenant shall be responsible
for any damage caused by the failure to shut off any water faucet, tap, etc.,
whether to the Building or to other occupants of same, and their furniture and
fixtures.
10. Tenant must observe strict care not to leave its Premises
exposed to the elements, and for any default or carelessness in this respect,
Tenant shall make good all injuries or damages sustained by other tenants in
the Building and by Landlord. In this regard, it is Tenant's responsibility to
see that all windows of the Premises, if applicable, are closed prior to
leaving each day.
11. Tenant shall give Landlord prompt notice of all accidents to
or defects in air-conditioning equipment, plumbing, electric facilities or any
part or appurtenances of the Premises.
12. Tenant shall not cause unnecessary labor by reason of
carelessness and indifference to the preservation of good order and cleanliness
in the Premises and in the Building. Waste and unnecessary use of electricity
and other utilities is prohibited.
13. Tenant shall use electric, gas and any other form of energy
only from such sources of supply as is furnished in the Building. Use of
extension cords and portable heaters are strictly prohibited without the prior
written consent of Landlord.
B-2
<PAGE> 43
14. All deliveries to the Building for or by Tenant shall be made
through the service entrance to the Building as designated by Landlord, unless
special permission is granted by Landlord for the use of other Building
entrances. Landlord reserves the right to inspect all freight to be brought
into the Building and to exclude from the Building all freight which violates
any of these Rules and Regulations or the lease which these Rules and
Regulations are a part. Landlord further reserves the right to change the
Building entrance to be utilized for deliveries.
15. Furniture, equipment or supplies shall be moved in or out of
the Building only upon the elevator designated by Landlord and then only during
such hours and in such manner as may be prescribed by Landlord. Landlord shall
have the absolute right to approve or disapprove the movers or moving company
employed by Tenant and Tenant shall cause said movers to use only the loading
facilities and elevator designated by Landlord.
16. Should Tenant desire to place in the Building any unusually
heavy equipment, including, but not limited to, large files, safes and
electronic data processing equipment, it shall first obtain written approval of
Landlord to place such items within the Building for the use of the Building
elevators, and for the proposed location in which such equipment is to be
installed. Landlord shall have the power to prescribe the weight and position
of any equipment that may exceed the weight load limits of the Building
structure, and may further require, at Tenant's expense, the reinforcement of
any flooring on which such equipment may be placed, and/or to have an
engineering study performed, also at Tenant's expense, to determine such weight
and position of equipment, to determine added reinforcement required, and/or
determine whether or not such equipment can be safely placed within the
Building. Landlord shall not be responsible for the loss or damage to such
furniture or equipment from any cause. There shall not be used in any space,
or in public halls or stairways of the Building, either by Tenant or by jobbers
or others, in the delivery or receipt of merchandise, any hand trucks, except
those equipped with rubber tires and side guards.
17. Tenant shall not place additional locks or bolts of any kind
upon any of the doors or windows of the Premises and no lock on any door
therein shall be changed or altered in any respect. Duplicate keys for the
Premises and restrooms (if applicable) shall be procured only from Landlord,
which may make a reasonable charge therefor. Upon the termination of Tenant's
lease, all keys of the Premises and restrooms shall be delivered to Landlord.
18. At the option of Landlord, the workers of Landlord must be
employed by Tenant for repairs, remodeling, renovation, lettering, interior
moving of furniture and equipment, and other similar work that may be done on
or in the Premises, such work being performed by Landlord or Landlord's
contractors at Tenant's expense, including a reasonable mark-up of twenty
percent (20%) for Landlord's overhead expense and profit for work of service
performed.
19. Tenant shall permit the janitor of Landlord to clean the
Premises. Tenant shall not employ any person or persons other than the janitor
of Landlord for the purpose of cleaning or taking care of the Premises without
the prior written consent of Landlord. Included in Landlord's normal
janitorial work performed within the Premises is normal vacuuming of carpets.
Other carpet cleaning is the responsibility of
B-3
<PAGE> 44
Tenant. Tenant shall reimburse Landlord for all cost incurred by Landlord in
such other carpet cleaning, other than normal vacuuming, including a reasonable
mark-up of twenty percent (20%) for Landlord's overhead expense for work
performed. Any person or persons employed by Tenant for the purpose of
cleaning or taking care of the Premises, with the written consent of Landlord,
must be subject to and under the control and direction of Landlord in all
things in the Building and outside of the Premises. Landlord will not be
responsible for lost or stolen personal property, equipment, money or any
article taken from the Premises or Building, regardless of how or when loss
occurs.
20. The requirements of Tenant will be attended to only upon
application at Landlord's management office for the Building. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties, unless under special instruction from the office of Landlord.
21. Only persons authorized by Landlord will be permitted to (a)
perform construction work on the Building, (b) function as a locksmith in the
Building, or (c) perform security guard services in the Building. Such
services shall be furnished only at such hours, in such places within the
Premises and under such regulations, as may be fixed by Landlord.
22. In the event Tenant must dispose of crates, boxes, etc., which
will not fit into office wastepaper baskets, it will be the responsibility of
Tenant to dispose of same or at Landlord's option, Landlord may dispose of said
waste and charge Tenant for such services. In no event shall Tenant leave any
refuse in the public hallways, stairways or other areas of the Building for
disposal unless Landlord has designated certain areas of the Building for the
short term collections of refuse prior to its prompt disposal.
23. Tenant shall not place showcases or other articles in front of
or affixed to any part of the exterior of the Building, nor place any objects
in the hall, corridors or vestibules without the prior written consent of
Landlord.
24. If the Premises become infested with vermin, Tenant, at its
sole expense, shall cause the Premises to be exterminated, from time to time,
to the satisfaction of Landlord, and shall employ such exterminators therefor
as shall be approved by Landlord.
25. Landlord shall have the right to prohibit any advertising by
Tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building or office; upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising. Tenant
shall not be permitted to distribute written materials such as handbills or
leaflets.
26. If Tenant employs laborers or others outside of the Building,
Tenant shall not have its employees paid in the Building, but shall arrange to
pay their payrolls elsewhere. Tenant shall not advertise for laborers, giving
an address at the Building.
27. Bicycles or other vehicles shall not be permitted in the
offices, halls, corridors, lobbies and elevators of the Building, nor shall any
obstruction of sidewalks or entrances of the Building by such be permitted.
B-4
<PAGE> 45
28. The sidewalks, entries, passages, elevators and staircases
shall not be obstructed or used by Tenant, its servants, agents or visitors for
any purpose other than ingress and egress to and from the respective offices.
29. Canvassing, soliciting and peddling in the Building is
prohibited and Tenant shall cooperate to prevent the same.
30. No animals, birds, or pets of any kind shall be allowed in the
Premises or Building.
31. The water closets, urinals, waste lines, vents or flues of the
Building shall not be used for any purpose other than those for which they were
constructed, and no rubbish, acids, vapors, newspapers or other such substances
of any kind shall be thrown into them. The expense caused by any breakage,
stoppage or damage resulting from a violation of this rule by Tenant, its
employees, visitors, guests or licensees, shall be paid by Tenant.
32. All contractors and/or technicians performing work for Tenant
within the Building shall be referred to Landlord for approval before
performing such work. This shall apply to all work including but not limited
to, installation of telephone or telegraph equipment, electrical devices and
attachments, and all installations affecting floors, walls, windows, doors,
ceilings, equipment or any other physical feature of the Building. None of
this work shall be done by Tenant without Landlord's prior written approval.
33. If Tenant desires radio signal, communication, alarm or other
utility or service connection installed or changed, such work shall be done at
the expense of Tenant, with the prior written approval and under the direction
of Landlord. No wiring shall be installed in any part of the Building without
Landlord's approval and direction. Landlord reserves the right to disconnect
any radio, signal or alarm system when, in Landlord's opinion, such
installation or apparatus interferes with the proper operation of the Building
or systems within the Building.
34. Except as permitted by Landlord, Tenant shall not mark upon,
paint signs upon, cut, drill into, drive nails or screws into, or in any way
deface the walls, ceilings, partitions or floors of the Premises or of the
Building and the cost and repair cost of any defacement, damage or injury
caused by Tenant, its agents or employees, shall be paid for by Tenant. Tenant
shall be responsible for any damage to carpeting and flooring including but not
limited to change as a result of rust or corrosion of file cabinets, post
holders, roller chairs and metal objects.
35. All glass, lighting fixtures, locks and trimmings in or upon
the doors and windows of the Premises shall be kept whole and whenever any part
thereof shall be broken through cause attributable to Tenant, its agents,
guests or employees, the same shall immediately be replaced or repaired at
Tenant's expense, and put in order under the direction and to the satisfaction
of Landlord and shall be left whole or in good repair, together with the same
number and kind of keys as may be received by Tenant on entering upon
possession of any part of the Building, or during the tenancy.
36. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with
other tenants, caused by Tenant or the employees, licensees, agents or invitee
of Tenant, shall be paid by Tenant.
B-5
<PAGE> 46
37. Any painting or decorating as may be agreed to be done by and
at the expense of Landlord shall be done during regular weekday working hours;
should Tenant desire such work to be done on Saturdays, Sundays, holidays or
outside or regular working hours, Tenant shall pay for the extra cost thereof.
All decorating, carpentry work, or any labor required for the installation of
Tenant's equipment, furnishings or other property shall be performed at
Tenant's expense by Landlord's employees or at Landlord's option and consent by
persons or contractors authorized in writing by Landlord.
38. Tenant shall not install any resilient tile or floor covering
in the Premises except in a manner approved by Landlord. Tenant shall not
remove any carpet, or wall coverings, window blinds, or window draperies in the
Premises without the prior written approval from Landlord.
39. No awnings or other projections shall be attached to the
outside walls of the Building or on or around the windows of the Premises by
Tenant without the prior written consent of Landlord. No curtains, blinds,
draperies, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises by Tenant, without the
prior written consent of Landlord. Such awnings, projections, curtains,
blinds, draperies, shades, screens or other fixtures must be of a quality,
type, materials and color, and attached in the manner approved by Landlord.
40. The sashes, sash doors, windows, side glass, glass floors and
any lights or skylights that reflect or admit light into halls or other places
of the Building shall not be covered or obstructed by Tenant without the prior
written approval from Landlord.
41. No carpet, rug or other article shall be placed, hung or
shaken on or in any perimeter opening of the Premises, nor shall anything be
thrown or allowed to drop by Tenant out of such opening or down the passages,
courts, light wells or atrium of the Building, or from balconies, and Tenant
shall not sweep or throw or permit to be swept or thrown from the Premises any
dirt, refuse or other similar substances upon the sidewalks or into any of the
corridors or halls, elevators, lobbies, courts of stairways, light wells or
areaways of Building.
42. Tenant shall not walk upon the roof of the Building, nor make
any installations upon or through the roof or walls of the Building, without
the prior written consent of Landlord.
43. Landlord may at any time within one hundred eighty (180) days
before the application date of Tenant's lease, enter the Premises at all
reasonable hours for the purpose of offering the same for rent; but Landlord
will give Tenant ample notice of its intended time of showing the Premises.
44. Tenant shall cooperate fully with the life safety plans of the
Building as established and administered by Landlord. This includes
participation by Tenant and employees of Tenant in exit drills, fire
inspections, life safety orientations and other programs relating to safety
that may be promulgated by Landlord.
45. Tenant recognizes Landlord's interest in being free from labor
difficulties, strikes, picketing, or handbilling on or near the Premises in
which Landlord has a possessory or reversionary interest. Should such
difficulties, strikes,
B-6
<PAGE> 47
picketing, or handbilling be engaged in by Tenant's employees or the employees
of Tenant's contractors, subcontractors, or agents, or be caused by the actions
or presence of Tenant's employees, contractors, subcontractors, agents, or
their employees, Tenant will take all reasonable steps to restore harmony.
Furthermore, Tenant will be liable for all damages to Landlord occurring as a
result of such difficulties, strikes, picketing, or handbilling.
B-7
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EXHIBIT C
WORK LETTER
THIS WORK LETTER Agreement, entered and agreed to this _____ day of
____________, 19___, by and between 2501 Cedar Springs Investors, hereinafter
referred to as "Landlord", and Milestone Health Care, Inc., a Delaware
corporation, hereinafter referred to as "Tenant";
W I T N E S S E T H:
WHEREAS, Landlord and Tenant, in conjunction with this Work Letter,
have entered into a certain Lease, dated the ________ day of ___________,
19___, for the "Premises," located in the 2501 Cedar Springs Building
("Building"), for a lease term commencing on the 1st day of May, 1992; and
ending at midnight of the 30th day of April, 1997; or at such earlier date as
provided in the Lease; and
WHEREAS, Landlord and Tenant desire to enter into certain agreements
regarding the work required to ready the Premises for Tenant's "Business"
operations;
NOW, THEREFORE, in consideration with said Lease, Landlord and Tenant
hereby agree to the following:
1. Landlord agrees, at its expense, to deliver the Premises to
Tenant with Landlord's work described in Attachment A hereto (the "Work")
completed in accordance with the Building Standard Specifications. The initial
space plans, drawings and specifications (herein called the "Plans") for the
Work will be prepared by Landlord's architect (the "Architect"), at the expense
of Landlord subject to the approval of Landlord. It shall be Tenant's
responsibility to furnish Landlord with complete information concerning
Tenant's special requirements with respect to the Work and to ensure that such
information is furnished to Landlord on or before March 21, 1992, the
"Submission Date".
2. Landlord has not agreed to perform any other work in the
Premises other than the Work, and all other work necessary to complete the
Premises shall be done at Tenant's sole cost and expense, and shall be
completed in accordance with Tenant's plans as prepared by the Architect and/or
Landlord's designer at the expense of Tenant and subject to the prior written
approval of Landlord. Approval of plans and specifications by Landlord shall
not constitute the assumption of any responsibility by Landlord for their
accuracy or sufficiency or compliance with governmental codes and regulations,
Tenant being solely responsible for all of the foregoing, Tenant agrees that
Landlord's right of approval is exercised solely to determine whether Tenant's
planned alterations or improvements conform to the general aesthetic character
of the Building and Landlord's standards therefor, and that, by approval,
Landlord assumes no responsibility for any of Tenant's alterations and
improvements work thereon. If at Tenant's request, Landlord agrees to do any
other work in connection with the completion of the Premises, such other work
shall be done at Tenant's sole cost and expense as an extra, in accordance with
plans, drawings and expense, as an extra, in accordance with plans, drawings
and specifications furnished by Tenant to Landlord on the Submission Date and
subject to the approval of Landlord. If Landlord elects to perform any work
for Tenant other than the Work, prior to commencing any additional work,
Landlord shall submit to Tenant written estimates of the cost thereof and if
Tenant shall fail to approve such estimates within seven
C-1
<PAGE> 49
days from the receipt thereof, the same shall be deemed to be disapproved and
Landlord shall not be authorized to proceed with such additional work. If such
additional work is approved, Landlord shall proceed with such additional work
and Tenant shall pay Landlord the cost of such additional work, plus twenty
percent (20%) of said cost for Landlord's overhead, upon being billed therefor
at any time and from time to time.
3. Notwithstanding anything to the contrary contained herein, if
Tenant shall fail to comply with the Submission Date as set forth in paragraph
1 and/or if within ninety (90) days after such Submission Date Landlord and
Tenant have not agreed as to Landlord's cost estimates for the additional work
required for Tenant, Landlord may proceed with the work in accordance with
Building Standard Specifications as necessary for occupancy as "open space" and
completion of such work shall be deemed to be substantial completion of the
Premises in accordance with the provisions of the Lease; completion in such
manner shall be deemed full compliance with this Work Letter, and Landlord
shall be released of all further obligations under this Work Letter.
4. The "Commencement Date" for the Term of the Lease shall be as
set forth in Section 1.3 of the Lease, provided that such Commencement Date
shall be extended until Landlord shall have substantially completed all of the
Work in accordance with the provisions of paragraph 1 hereof. Notwithstanding
the preceding sentence, the Commencement Date shall not be extended by reason
of delays in completing the work as a result of any of the following:
(a) Tenant's failure to furnish the Architect special
requirements with respect to the Work by the Submission Date as
required under paragraph 1 hereof;
(b) Tenant's request for materials, finishes or
installations other than Building Standard;
(c) Changes in the Plans or in the Work made by Tenant
notwithstanding Landlord's approval of such changes);
(d) Any other delay caused by the act or omission of
Tenant or its employees or agents.
Landlord, in its sole discretion, may permit Tenant and Tenant's
employees and agents to enter the Premises prior to the Commencement Date so
that Tenant may do such other work as may be required to make the Premises
ready for Tenant's use and occupancy. If Landlord permits such entry prior to
the Commencement Date, it will be upon the condition that Tenant and its
employees, agents, contractors and suppliers shall work in harmony with
Landlord and its employees, agents, contractors and suppliers and will not
interfere with the performance of the Work by Landlord or with Landlord's work,
or with the work of any other tenant or occupant, in the remainder of the
Building. If at any time such entry shall cause or threaten to cause such
disharmony or interference, Landlord shall have the right to withdraw such
license upon 12 hours written notice to Tenant. Tenant agrees that any such
entry or occupation of the Premises shall be governed by all of the terms,
covenants, conditions and provisions of the Lease, except the covenant for the
payment of Rental and further agrees that Landlord shall not be liable in any
way for injury, loss or damage which may occur to any of Tenant's work or
installation made in such Premises, or to any personal property placed therein,
the same being at Tenant's sole risk.
C-2
<PAGE> 50
5. If Landlord permits Tenant and/or Tenant's employees, agents,
contractors and subcontractors to enter the Premises prior to the Commencement
Date so that Tenant may do such other work as may be required to make the
Premises ready for Tenant's use and occupancy, Tenant and/or Tenant's
contractors, when applicable, shall be required to provide the following types
of insurance in the following minimum amounts, which shall, at Landlord's
option name Landlord and any other persons having an interest in the Building
as additional insured as their interest may appear, issued by companies
approved by Landlord.
(a) Workers' Compensation coverage, with limits of at
least $500,000 for the employers' liability coverage thereunder,
and/or statutory limits as whichever is greater.
(b) Broad Form Commercial General Liability Policy to
include Products/completed Operations, Broad Form Property Damage and
Contractual Liability.
(c) Automobile Liability coverage, with bodily injury
limits of at least $100,000 per person, $300,000 per accident and
$50,000 per accident for property damage.
Original or duplicate policies for all of the foregoing insurance
coverages shall be delivered to Landlord before Tenant's Work is started and
before any contractor's equipment is moved onto any part of the Building or
area adjacent to the Building.
6. Each contractor and subcontractor participating in Tenant's
Work shall guarantee that their work will be free from any and all defects in
workmanship and materials for the period of time which customarily applies in
good contracting practice, but in no event for less than one (1) year after the
acceptance of the work by Tenant and Landlord. The aforesaid guarantees of
each such contractor and subcontractor shall include the obligation to repair
or replace in a thoroughly first-class and workmanlike manner, and without any
additional charge, all defects in workmanship and materials. All warranties or
guarantees as to materials or workmanship on or with respect to Tenant's Work,
shall be contained in the contracts and subcontracts for performance of
Tenant's Work and shall be written so that they shall inure to the benefit of
Landlord and Tenant as their respective interests may appear. Such warranties
and guarantees shall be so written that they can be directly enforced by either
and Tenant shall give to Landlord any assignment or other assurance necessary
to effectuate the same.
7. Tenant shall not employ any contractor unless previously
approved in writing by Landlord. Tenant shall not be required to contract with
anyone to whom Tenant has a reasonable objection. Contracts between Tenant and
contractors shall (1) require each contractor, to the extent of the Work to be
performed by the contractor, to be bound to Tenant by the terms of the Lease
and this Work Letter, and to assume toward Tenant all of the obligations and
responsibilities which Tenant, by the Lease, assumes toward Landlord, and (2)
allow to the Owner (as a third party beneficiary) the benefit of all rights,
remedies and redress afforded to Tenant by the contract with the contractor as
agent, the contractor directly without Owner being required to first proceed
against Tenant.
8. Each contractor and subcontractor participating in Tenant's
Work shall obtain prior written approval from Landlord for any space within the
Building which such contractor or subcontractor desires to use for storage,
handling and moving
C-3
<PAGE> 51
of his materials and equipment; in no event shall this paragraph be considered
as a commitment of Landlord to provide Tenant, its contractors or
subcontractors, any storage facilities outside of the Premises.
9. Each contractor and subcontractor participating in Tenant's
Work shall make prior arrangements with Landlord for connections to the
Building's utility systems and services, with such connections being made
during the time of day or night and on such a day as Landlord may reasonably
determine.
10. It shall be Tenant's responsibility to cause each of Tenant's
contractors and subcontractors participating in Tenant's Work to remove and
dispose of, at least once a week or more frequently as Landlord may direct, all
debris and rubbish caused by or resulting from the construction of Tenant's
Work and, upon completion of Tenant's Work, to remove all temporary structures,
surplus materials, debris and rubbish of whatever kind remaining in the
Building, which has been brought in or credited by the contractors and
subcontractors in the construction of Tenant's Work at a time designated by
Landlord.
11. Tenant's contractors and subcontractors shall cause their
employees and agents to enter and exit the Building via the entrance and
elevators designated by Landlord. All materials, supplies and equipment shall
be brought into the Building at times reasonably approved by Landlord.
12. It shall be Tenant's responsibility to cause each of Tenant's
contractors and subcontractors to maintain continuous protection of adjacent
premises in the Building in such manner as to prevent any damage to such
adjacent property by reason of the performance of Tenant's Work or any repairs
to the Premises.
13. Tenant's Work shall be coordinated with all work being
performed or to be performed by Landlord and other tenants of the Building, to
such extent that Tenant's Work will not interfere with or delay the completion
of any such work in the Building. The contractor or subcontractor shall not at
any time damage, injure, interfere with or delay the completion of the Building
or any other construction within the project, and they and each of them shall
comply with all procedures and regulations prescribed by Landlord, for
integration of Tenant's Work with the work to be performed in connection with
the construction of the Building, and all other construction within the
Building.
14. In connection with Tenant's Work, Tenant or Tenant's
contractor shall file all drawings, plans and specifications, pay all fees and
obtain all permits and applications from the City of Dallas Building
Department, the Department of Labor and any other authorities which may have
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Work Letter to
be executed by their respective representatives thereunto duly authorized, as
of the date first above written.
Landlord:
2501 CEDAR SPRINGS INVESTORS,
a Texas joint venture
ATTEST: By: U.S. INVESTORS SERVICES INC.,
venture manager
By: /s/ Elaine Pachlhofer By: /s/ Joseph W. Dingman
------------------------ -------------------------------
Elaine Pachlhofer Joseph W. Dingman
Assistant Secretary Sr. Vice President
C-4
<PAGE> 52
TENANT:
Milestone Health Care, Inc.
a Delaware Corporation
ATTEST:
By: /s/ Lew Lefko By: /s/ Charles Allen
------------------------- --------------------------
Name: Lew Lefko Name: Charles Allen
------------------- --------------------
Title: Vice President Title: President
------------------ -------------------
C-5
<PAGE> 53
EXHIBIT D
STATEMENT SPECIFYING COMMENCEMENT DATE
AND TERMINATION DATE
It is agreed between the parties herein that notwithstanding anything
to the contrary contained in the Lease, the actual Commencement Date of the
Lease is ___________________, 19___ and the Termination Date of the Lease is
___________________, 19___.
LANDLORD TENANT
2501 Cedar Springs Investors, Milestone Health Care, Inc.
a Texas Joint Venture a Delaware Corporation
D-1
<PAGE> 54
EXHIBIT E
"S & R SPACE"
This is a floor plan showing approximately 1,661 square feet of
additional space in 2501 Cedar Springs building to be added to the leased
premises.
E-1
<PAGE> 55
EXHIBIT F
"OPTION SPACE"
This is a floor plan showing 2,058 contiguous square feet of space in
2501 Cedar Springs building located on southeast side of sixth floor.
F-1
<PAGE> 56
EXHIBIT G
"OPTION SPACE"
This is a floor plan showing 2,494 contiguous square feet of space on
northwest side of sixth floor.
G-1
<PAGE> 57
GUARANTY OF LEASE
THIS GUARANTY, effective as of April 7, 1992, is made by EPIC
HEALTHCARE MANAGEMENT COMPANY, a Delaware corporation whose address is 3333 Lee
Parkway, Suite 900, Dallas, Texas 75219.
PRELIMINARY STATEMENT
EPIC HEALTHCARE MANAGEMENT COMPANY is hereinafter called "Guarantor".
2501 CEDAR SPRINGS INVESTORS is hereinafter called "Landlord". MILESTONE
HEALTHCARE, INC., a Delaware corporation, is hereinafter called "Tenant".
Landlord proposes to enter into a lease concerning space located at 2501 Cedar
Springs in Dallas, Texas (the "Lease"). Said space is more particularly
described in the Lease. Landlord is unwilling to enter into the Lease with
Tenant unless Guarantor executes and delivers to Landlord this Guaranty;
therefor, Guarantor executes and delivers this Guaranty to Landlord in order to
induce Landlord to enter into the Lease with Tenant. Guarantor has received a
copy of the Lease, has examined the Lease and is familiar with all the terms,
covenants and provisions contained therein.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the foregoing and in further
consideration of the sum of TEN and NO/100 DOLLARS ($10.00) paid to Guarantor,
the receipt and sufficiency of which is hereby expressly acknowledged, and for
other good and valuable consideration, Guarantor hereby agrees with Landlord as
follows:
1. Guarantor unconditionally guarantees the payment of all sums,
costs, expenses, charges, payments and deposits (including sums payable as
damages upon a default under the Lease) which are at any time payable by Tenant
under the Lease (whether on their stated due dates or by acceleration or
otherwise) in the Lease (whether on their stated due dates or by acceleration
or otherwise) in accordance with the Lease, and the Performance of each
covenant and condition of the Lease to be performed or observed by Tenant from
the Commencement Date of the Lease until the last day of the twenty-fourth
month following the Commencement Date of the Lease.
2. The Guaranty is an unconditional, irrevocable and absolute
guarantee of payment and performance. If for any reason any provision of the
Lease shall not be faithfully performed or observed by Tenant as required
thereby, or if the annual rental or any other sums, costs, expenses, charges,
payments or deposits, or any part thereof, payable under the Lease shall not be
paid when due in accordance with the provisions of the Lease, Guarantor will
promptly perform or observe, or cause the performance or observance of each
such provision, and will immediately pay such annual rental or other sums,
costs, expenses, charges, payments or deposits to the person entitled thereto
pursuant to the provisions of the Lease, together with interest at the rate per
annum of the prime rate being charged by the Chase Manhattan Bank on the date
as of which the interest in question commence to accrue; provided, however, if
such interest rate exceeds that permitted to be charged by law, then the
interest rate shall be the highest rate the law shall allow at the time. Said
interest shall accrue from the due date thereof to the date of payment, in all
cases regardless of whether Landlord shall have taken any steps to enforce any
rights against Tenant and/or Guarantor or any other person to compel any such
performance or observance or to collect any such annual rental or any other
sum, cost, expense, charge, payment or deposit, or any part thereof, either
pursuant to the provisions of the Lease or this Guaranty, or at law or in
equity, and regardless of any other condition or contingency. Guarantor also
agrees to pay to such person the costs and expenses of
<PAGE> 58
collecting any such annual rental or any other sum, cost, expense, charge,
payment or deposit at any time payable by Tenant under the Lease, and waives
notice of the breach or non-performance of any provision of the Lease.
Landlord shall have the right to enforce this Guaranty regardless of the
receipt by Landlord of additional security or the enforcement of any remedies
against such security or the release of such security.
3. Guarantor's obligations under this Guaranty shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following with respect either to the Lease or to this Guaranty, even without
notice to or the further consent of Guarantor:
(a) the waiver by Landlord or its successors or assigns of the
performance or observance by Tenant of any provision of the
Lease;
(b) the taking or the omission of any actions referred to in the
Lease;
(c) the failure, omission or delay of Landlord to enforce, assert
or exercise any right, power or remedy conferred on Landlord
in the Lease or by law or any action on the part of Landlord
granting indulgence or extension in any form;
(d) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets,
marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or
readjustment of, or other similar proceeding affecting Tenant
or any of its assets, or the disaffirmance of the Lease in any
such proceeding;
(e) the receipt and acceptance by Landlord of notes, checks or
other instruments for the payment of money made by Tenant, or
any extensions or renewals thereof; or
(f) any other cause, whether similar to or dissimilar from the
foregoing.
The above deletions shall in no way infer that Guarantor is released
from Guarantor's obligations under the Lease as originally executed, but only
pertain to Guarantor's desire to have notice and to consent to the deleted
events.
4. Notice of acceptance of this Guaranty and any obligations or
liabilities contracted or incurred by Tenant are all hereby waived by
Guarantor.
2
<PAGE> 59
5. This Guaranty shall be governed by and construed in accordance
with the laws of the State of Texas.
6. This Guaranty may not be modified or amended except by written
agreement executed by Guarantor with the consent in writing of Landlord and any
attempted modification or amendment without such consent by Landlord shall be
void and without force and effect.
7. No waiver by Landlord of the payment by Guarantor of any of
its obligations contained in this Guaranty, nor any extension of time for the
payment by Guarantor of any such obligations, shall affect or impair this
Guaranty or constitute a waiver or relinquishment of any rights of Landlord
hereunder for the future. No action brought under this Guaranty against
Guarantor and on recovery had in pursuance thereof shall be any bar or defense
to any further action or recovery which may be brought or had under this
Guaranty by reason of any further default or default of Tenant.
8. All of the provisions of this Guaranty shall inure to the
benefit of Landlord and its grantees, successors and assigns, and shall inure
to the benefit of any future owner of the fee title of which the Demised
Premises (as defined in the Lease) are a part and shall inure to the benefit of
any tenant to whom said fee title shall have been leased contemporaneously with
a transfer of said fee title (a so-called "sale and leaseback transaction");
and all of the provisions of this Guaranty shall be binding upon the Guarantor
and his heirs, legal representatives, successors and assigns.
9. Any notice sent by Guarantor to Landlord or by
Landlord to Guarantor shall be sufficient if sent by United States Registered
or Certified Mail, Return Receipt Requested to the address of such party
hereinabove specified, or to such other address as such party shall have
designated by similar written notice; and such notice shall be deemed to have
been given as of the date postmarked on the envelope containing said notice.
10. If this Guaranty is signed by more than one Guarantor, each
such Guarantor shall be jointly and severally liable hereunder.
11. The liability of Guarantor is coextensive with that of Tenant
and also joint and several, and action may be brought against Guarantor and
carried to final judgment either with or without making Tenant a party thereto.
12. All of Landlord's rights and remedies under the Lease and
under this Guaranty shall be distinct, separate and cumulative and no such
right or remedy shall be exclusive of or a waiver of any of the others.
13. Guarantor will pay to Landlord all of Landlord's expenses,
including, but not limited to, attorneys' fees incurred in enforcing this
Guaranty.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed
by its officers thereunto duly authorized, as of the day and year first above
written.
EPIC Healthcare Management Company
/s/ Thomas T. Schleck
----------------------------------
By: Thomas T. Schleck
------------------------------
Its: CFO and Treasurer
------------------------------
3
<PAGE> 60
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Thomas T. Schleck, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 7th day of April, 1992.
/s/ E. Marina Hicks
------------------------------------
Notary Public, State of Texas
My Commission Expires: E. Marina Hicks
------------------------------------
5/14/94 (Print Name of Notary)
- --------------------------
4
<PAGE> 61
FIRST AMENDMENT TO LEASE
This First Amendment to Lease (the "First Amendment") is made
effective as of the 1st day of May, 1993, by and between 2501 CEDAR SPRINGS
INVESTORS ("Landlord") and MILESTONE HEALTHCARE, INC., a Delaware corporation
("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into a certain undated lease
executed on or around April 7, 1992, (the "Lease") for certain space in the
building commonly known as 2501 Cedar Springs, Dallas, Texas, as more
particularly described in the Lease (the "Premises"); and
WHEREAS, pursuant to the Lease, Tenant is to lease the S & R Space (as
defined in the Lease) effective May 1, 1993; and
WHEREAS, Landlord and Tenant now mutually desire to amend the Lease;
NOW, THEREFORE, for and in consideration of the premises and the
mutual promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged by the parties, Landlord and Tenant hereby agree as follows:
1. Effective May 1, 1993, Tenant shall add the S & R Space to the
Premises, thus making the new square footage of the Premises a total of 7827
square feet and Section 1.2 of the Lease is hereby amended accordingly.
2. Effective May 1, 1993, Base Rental shall be increased in
proportion to the increase of square footage of the Premises and Section 1.4 of
the Lease is hereby amended accordingly.
3. Effective May 1, 1993, Tenant's pro rata Share of Operating
Costs and Real Estate Taxes shall be 7% and Section 1.5 of the Lease is hereby
amended accordingly.
4. Effective May 1, 1993, the space shown on Exhibit E of the
Lease is a part of the Demised Premises.
5. Except as set forth specifically herein, all the terms and
conditions of the Lease shall remain in full force and effect,
1
<PAGE> 62
and all initial-capped words in this First Amendment shall have the same
definition given to them in the Lease.
6. All of the covenants of the Lease, as amended hereby, shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective heirs, personal representatives, successors and assigns, to the
extent that any such transfer of interest may be allowed under the terms of the
Lease.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
effective as of the date and year first above written.
LANDLORD:
2501 CEDAR SPRINGS INVESTORS
By: L&B INSTITUTIONAL PROPERTY MANAGERS
INC., a Delaware corporation, its
property manager
ATTEST:
By: /s/ Daniel L. Plumlee By: /s/ Joseph W. Dingman
---------------------- ------------------------------------
Name: Daniel L. Plumlee Joseph W. Dingman
-------------------- Executive Vice President
Title: President and COO
-------------------
TENANT:
MILESTONE HEALTHCARE, INC., A DELAWARE
CORPORATION
ATTEST:
By: /s/ William A. Brosius By: /s/ Charles L. Allen
-------------------------- ------------------------------------
Name: William A. Brosius Name: Charles L. Allen
------------------------ ------------------------------------
Title: Chief Financial Officer Title: President
----------------------- ------------------------------------
7
<PAGE> 1
EXHIBIT 10.21
STONE
TOWER
==============================
LEASE AGREEMENT
1. PARTIES: THIS LEASE, dated the 11 day of June, 1992, between Stone
Tower, Inc., Dallas, Texas (hereinafter called "Landlord") and TruCare Health
Systems, Inc. (hereinafter called "Tenant").
WITNESSETH:
2. CONSIDERATION: That each of the aforesaid parties acknowledges receipt
of a valuable consideration from the other and that they and each of them act
herein in further consideration of the covenants of the other as herein stated.
ARTICLE I.
Landlord and Tenant agree as follows:
3. PREMISES: That Landlord does hereby grant, demise and lease unto
Tenant the premises or space in the Stone Tower, 13760 Noel Road building
(hereinafter referred to as "Building") Dallas, Texas, as outlined in red on
the floor plan attached hereto, (hereinafter referred to as "Exhibit A") on the
second (2nd) Floor, Suite 200 of Building, consisting of 6,224 net usable
square feet (hereinafter referred to as "Premises").
The term "net rentable area", as used herein, shall refer to (i) in the case of
a single tenancy floor, all floor area measured from the plane set by the
inside surface of the outer glass of the Building to the inside surface of the
opposite outer wall, excluding only the areas ("service areas") within the
outside walls used for elevator mechanical rooms, building stairs, fire towers,
elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts but
including any such areas which are for the specific use of the particular
tenant such as special stairs or elevators, and (ii) in the case of a partial
floor, all floor areas within the plane set by the inside surface of the outer
glass enclosing the tenant occupied portion of the floor and measured to the
mid-point of the walls separating areas leased by or held for lease to other
tenants or from areas devoted to corridors, elevator foyers, restrooms,
mechanical rooms, janitor closets, vending areas and other similar facilities
for the use of all tenants on the particular floor (hereinafter sometimes
called "common areas"), but including a proportionate part of the common areas
located on such floor based upon the ratio which the tenant's net rentable area
on such floor bears to the aggregate net rentable area on such floor. No
deductions from net rentable area are made for columns or projections necessary
to the Building. The net rentable area in the leased premises has been
calculated on the basis of the foregoing definition and is hereby stipulated
for all purposes hereof to be 7,127 square feet, whether the same should be
more or less as a result of minor variations resulting from actual construction
and completion of the leased premises for occupancy so long as such work is
done in accordance with the terms and provisions hereof.
4. USE OF PREMISES: That Premises are to be used and occupied
continuously throughout the term hereof for general office purposes
exclusively, and no other.
5. TERM OF LEASE: TO HAVE AND TO HOLD Premises unto Tenant for a period
of six (6) years, commencing on the date on which Premises are ready for
occupancy by Tenant as certified to by the architect for Building, and a
certificate of occupancy issued by the City of Dallas. In this connection, the
parties agree to execute a subsequent agreement setting forth the specific
commencing and ending dates of the Lease as soon as the commencing date has
been established.
6. RENTAL: That Tenant is to pay Landlord as rental for Premises for the
term hereinabove specified, adjusted as hereinafter provided, the total sum of
Four hundred seventy eight thousand one hundred dollars 00/100 DOLLARS
($478,100.00), commencing with an initial annual rental of Seventy five
thousand one hundred thirty and 00/100 DOLLARS ($75,130.00), which rental is to
be paid in equal monthly installments of Six thousand eight hundred thirty and
00/100 DOLLARS ($6,830.00), payable in advance on the first day of each month
throughout said term of this lease. If rent has not been paid by the 10th of
the month in which it is due, 5% of the monthly payment will be assessed as a
late charge. [See paragraph 1). on Exhibit D.] If occupancy of Premises
begins before the commencement date stated above, rental for the period before
the commencement date shall be paid based on a daily rate of 1/30th of the
stated monthly rate.
In the event the operating expenses (as defined in Exhibit "D") of Lessor for
the building and/or project of which the leased premises are a part shall, in
any calendar year during the term of this Lease, exceed the sum of $(see
Exhibit "D") per square foot, Lessee agrees to pay as additional rental
Lessee's pro rata share of such excess operating expenses. Lessor shall, within
nine months following the close of any calendar year for which additional
rental is due under this paragraph, invoice Lessee for the additional rental.
The invoice shall include in reasonable detail all computations of the
additional rental, and Lessee agrees to pay the additional rental within ten
days following receipt of the invoice. If this Lease shall terminate on a day
other than the last day of a year, the amount of any additional rental payable
by Lessee applicable to the year in which such termination shall occur shall be
prorated on the ratio that the number of days from the commencement of such
year to and including such termination date bears to 365. If at any time during
the term of this Lease, Lessor has reason to believe the per square foot
operating expenses for the calendar year will exceed the sum set forth above,
Lessor may by invoice direct Lessee to prepay monthly one-twelfth of an amount
equal to the additional rental paid in the previous year. If the invoice
delivered within nine months following the close of a calendar year in
accordance with this paragraph shows an amount owing by Lessee that is less
than the sum of the monthly payments made by Lessee in the previous calendar
year, the invoice shall be accompanied by a refund of the excess by Lessor to
Lessee. If such invoice shows an amount owing by Lessee which is more than the
sum of the monthly payments made by lessee in the previous calendar year,
Lessee shall pay such deficiency to Lessor within ten days after receipt of the
invoice. During the year in which this Lease terminates, Lessor shall have the
option to invoice Lessee for Lessee's pro rata share of the excess operating
expenses based upon the previous year's excess operating expenses; Lessor shall
invoice Lessee under this option within thirty days prior to the termination of
this Lease or at any time thereafter. Lessee shall have the right, at its own
expenses and at a reasonable time, to audit Lessor's books relevant to the
additional rentals due under this paragraph. See Paragraph 2). on Exhibit D.
7. SECURITY: That Landlord acknowledges receipt of Tenant's [See
Paragraph 3). on Exhibit D]. Upon failure of Tenant to make any payments or
performance provided for herein, Landlord may apply said deposit for the
payment of the last monthly rental payment hereinabove provided for, but shall
not be obligated to do so. The provisions of this paragraph shall not be
construed as liquidated damages, and shall not operate in any manner to reduce
or release the obligations of Tenant hereunder, except insofar as the
application of this money may reduce or satisfy an obligation to make payment
of money. If this lease is renewed or extended, then such deposition shall be
retained by Landlord under the same conditions for the period of such extension
or renewal. If Tenant is not in default hereunder, any remaining balance of
such deposit shall be returned by Landlord to Tenant within thirty (30) days
after termination of this Lease or any extension hereof, without interest.
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ARTICLE II.
Landlord further agrees as follows:
8. FINISH BY LANDLORD (BUILDING STANDARDS): That Landlord shall furnish,
as per Exhibit "D", in accordance with plans approved by Tenant, that work
described in Exhibit B which is attached to and by reference made a part of
Lease.
9. SERVICES TO BE FURNISHED BY LANDLORD: That Landlord shall furnish at
no cost except as provided herein to Tenant while occupying Premises the
following services on all days excepting Sundays, holidays, and otherwise
stated:
(a) Water, including cold water from mains for drinking, lavatory and toilet
purposes drawn through fixtures installed by Landlord, or by Tenant with
Landlord's written consent, and hot water for lavatory purposes from regular
Building supply at the prevailing temperature. Tenant shall not waste or
permit the waste of water. If Tenant fails to promptly pay Landlord's proper
charge for water. Landlord, upon not less than ten business days written
notice, may discontinue furnishing that service and no such discontinuance
shall be deemed an eviction or disturbance of Tenants use of Premises or render
Landlord liable for damages or relieve Tenant from any obligation.
(b) Heating and air conditioning for normal comfort in Premises from 8:00 a.m.
to 6:00 p.m. Monday through Friday (and on Saturdays which are not holidays
from 9:00 a.m. to 1:00 p.m.). Wherever heat generating machines or equipment
are used in Premises which affect the temperature otherwise maintained by the
air conditioning system, Landlord reserves the right to install supplementary
air conditioning units in Premises and the cost, operation and maintenance
thereof shall be paid by Tenant to Landlord at reasonable rates. All other
electrical consumption by Tenant in Premises, including consumption for air
conditioning and heating beyond normal building standards or building hours,
shall be paid for by Tenant to landlord at reasonable rates, which as used
herein shall mean $15.00/hr.
(c) Nightly housekeeping and janitor service Monday through Friday in and about
Premises. Tenant shall not provide any janitor services without Landlord's
prior written consent and then only subject to supervision of Landlord and at
Tenant's sole responsibility and by janitor contractor or employees at all
times satisfactory to Landlord.
(d) Electrical current for standard Building lighting fixtures provided by
Landlord and for ordinary purposes connected with the aforesaid use of
Premises. All other electrical consumption by Tenant in Premises including
consumption for lighting fixtures beyond normal building standards or building
hours shall be paid for by Tenant to Landlord at reasonable rates, which as
used herein shall mean the actual charges by TU Electric with no increases.
(e) Electrical lighting services and heating and air conditioning for all
public areas and special service areas of Building in the manner and to the
extent deemed by Landlord to be standard.
(f) Passenger elevator service in common with Landlord and other Tenants, daily
from 8:00 a.m. to 6:00 p.m. (Saturday to 1:00 p.m.), Sundays and holidays
excepted, and freight elevator service in common with Landlord and other
Tenants daily; Saturdays, Sundays and holidays excepted, at hours to be
determined by Landlord. Such normal elevator service, passenger or freight, if
furnished at other times, shall be deemed optional with Landlord and shall
never be deemed a continuing obligation. Landlord, however, shall provide
limited passenger elevator service daily at all times when normal passenger
service is not furnished. Automatic elevator service shall be deemed "elevator
service" within the meaning of this paragraph.
Landlord does not warrant that any service will be free from interruptions
caused by repairs, renewals, improvements, changes of service, alterations,
strikes, lockouts, labor controversies, civil commotion, riot, accidents,
inability to obtain electrical power fuel, steam, water, supplies or labor or
other cause beyond the reasonable control of Landlord. No such interruption of
service shall be deemed an eviction or disturbance of Tenant's use and
possession of Premises or any part thereof, or render Landlord liable to Tenant
for damages, by abatement of rent of otherwise, or relieve Tenant from
performance of Tenant's obligations under this Lease. [See Paragraph 4). on
Exhibit D.] Tenant hereby waives and releases all claims against Landlord for
damages for interruption or stoppage of service, except for gross negligence by
Landlord of Landlord's agents. In the event that by agreement with Tenant,
Landlord furnishes extra or additional services to be paid for by Tenant, a
failure to pay for such services within five (5) business days after written
notice shall, ipso facto, authorize Landlord, in Landlord's discretion and
without further notice, to discontinue such services and terminate any
agreement for services. The money due for services shall be deemed additional
rental due hereunder and the same shall be subject to all of the provisions
pertaining to the payment of rental.
Any additional service charges paid by Tenant to Landlord for extra or
additional services pursuant to this paragraph 9 shall not be subject to
adjustment in the same manner as the Base Rent as provided for in paragraph 6
hereof.
10. QUIET POSSESSION: Tenant shall keep and perform all of its covenants
of this Lease on the part of Tenant to be performed, and Landlord shall
guarantee to Tenant the quiet, peaceful and uninterrupted possession of
Premises.
ARTICLE III.
Tenant further agrees as follows:
11. LAWFUL USES: That Premises during the term of this Lease shall be
used for the purpose of office space and only and exclusively for lawful
purposes, and no part of Premises or improvements thereon shall be used in any
manner whatsoever for any purposes in violation of laws of the United States,
the State of Texas, or the ordinances and the laws of the City of Dallas.
12. MAINTENANCE OF PREMISES: That Tenant shall keep and maintain
Premises in a state of good repair and tenable condition at Tenant's expense,
except for reasonable wear and tear over term of the Lease.
13. INDEMNITY: That Tenant is or shall become familiar with Premises,
acknowledges that the same are received by Tenant in good state of repair,
accepted by Tenant in the condition in which they are now or shall be when
ready for occupancy, subject to punch list items and latent defects and that
Landlord shall not be liable to Tenant or Tenant's agents, employees, invitees
or visitors for any injuries, death or damage to persons or property due to
condition, design, or defect in building or its mechanical systems or elsewhere
in Premises or building which may now exist or hereafter occur except where due
to Landlord's negligence. Tenant accepts Premises as suitable for the purposes
for which the same are leased and assumes all risks of injury, death or damage
to persons or property for which Tenant may become legally liable, and agrees
that no representations except such as are contained herein or endorsed hereon
have been made to tenant respecting the condition of Premises.
Tenant agrees to save and hold Landlord harmless from Tenant's violations of
the laws and regulations of the United States, of the States of Texas, and the
ordinances and laws of the City of Dallas.
Tenant further agrees that Tenant, at all times, will indemnify and hold
harmless Landlord from all claims, damages, liabilities and expenses which may
arise or be claimed against Landlord by any person, firm or corporation for any
injuries, death or damages to the person or property of any person, firm or
corporation for which Tenant may become liable consequent upon or arising from
the use or occupancy of Premises by Tenant, or consequent upon or arising from
any wrongful acts, omissions, neglect, or fault of Tenant (his agents,
servants, employees, licensees, customers, or invitees) or consequent upon or
arising from Tenant's failure to comply with the aforesaid laws, statutes,
ordinances, or regulations; and that Landlord shall not be liable to Tenant for
any injuries, death or damages to the persons or property of tenant which may
be caused by acts, neglect, omissions, or faults of any person, firm, or
corporation, and that tenant will release, indemnify and save harmless Landlord
from all such damages, liabilities, losses, death, injuries or expenses, except
where due to Landlord's negligence. [See Paragraph 5). on Exhibit D.]
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<PAGE> 3
* 14. WASTE: That Tenant shall not commit or permit any waste to be
committed whatsoever.
15. NUISANCES: That Tenant shall not create or allow any nuisances to
exist in Premises, and that it shall abate promptly and free of expense to
Landlord any nuisance that may arise.
16. INVALIDATION OF INSURANCE: That Tenant shall not suffer anything to
be or remain upon or about Premises which will invalidate any policy of
insurance which Landlord may now or hereafter have upon Building.
17. INCREASED PREMIUMS: That Tenant shall not suffer anything to be or
remain upon or about Premises nor carry on nor permit upon Premises any trade
or occupation or suffer to be done anything which may render an increased or
extra premium payable for the insurance of Premises or Building against fire,
casualty, liability or any other insurable causes, unless consented to in
writing by Landlord and if so consented to Tenant shall pay such increased or
extra premium within ten days after Tenant shall have been advised of the
amount thereof.
18. ALTERATIONS: That Tenant shall not have the right to make changes,
alterations, floor covering, or additions in Premises until it has first
obtained Landlord's approval in writing, which approval shall not be
unreasonably withheld. Such changes, alterations, floor covering or additions,
when made to Premises by Tenant shall at once become the property of Landlord
and shall be surrendered to Landlord upon the termination in any manner of this
Lease; but this clause shall not apply to movable fixtures, equipment or
furniture of Tenant.
19. USE OF BUILDING NAME: That Tenant shall not, except to designate the
Tenant's business address (and then only in a conventional manner and without
emphasis or display) use the name "The Stone Tower Building," or any simulation
or abbreviation of such name for any purpose whatsoever. That Landlord shall
have the right to change the name of the Building at any time. That Tenant
will discontinue using any such name and any simulation or abbreviation thereof
for the purpose of designating Tenant's business address within 30 days after
the Landlord will notify Tenant that Building is no longer known by such name.
[See Paragraph 6). on Exhibit D.]
20. SIGNS: That Tenant shall not paint, display, inscribe, maintain or
affix any sign, picture, advertisement, notice, lettering or direction on any
part of the outside, except on hallway doors of Premises, and then only such
name or names or matter and in such color, size, style, character and materials
as may first be approved by Landlord in writing, which approval shall not be
unreasonably withheld. That Landlord shall have the right to remove, at
Tenant's expense, all matter other than that above provided for without notice
to Tenant.
21. DEFACING PREMISES AND OVERLOADING: That Tenant shall not place
anything or allow anything to be placed near the glass of any door, partition,
wall or window which may be unsightly from outside Premises, and Tenant shall
not place or permit to be placed any article of any kind on any window ledge or
on the exterior walls. That blinds, shades, awnings, or other forms of inside
or outside window coverings, or window ventilators or similar devices, shall
not be placed in or about the outside windows in Premises except to the extent
that the character, shape, color, material and make thereof is approved by the
Landlord, and Tenant shall not do any painting or decorating in the Premises or
make, paint, cut or drill into, or in any way deface any part of the Premises
or Building without the written consent of Landlord, which approval shall not
be unreasonably withheld. That Tenant shall not overload any floor or part
thereof in Premises, or any facility in Building or any public corridors or
elevators therein while bringing in or removing any large or heavy articles,
and Landlord may direct and control the locations of safes and all other heavy
articles. That furniture and other large or heavy articles may not be brought
into Building, removed therefrom or moved from place to place within any
portion of Premises or other portion of the Building or its equipment that
would exceed the allowable load limits as set forth in the rules of the
Building.
22. REPAIRS: That Tenant shall at its cost and expense, repair and
replace any damage or injury done to Premises, or Building or any part thereof
caused by Tenant negligence, or its agents, employees, invitees, or visitors;
and should Tenant fail to make such repairs or replacement within 15 business
days of occurrence, Landlord may, following three (3) business days after
written notice to Tenant, at its option, make such repairs and replacements and
Tenant shall pay the cost thereof to Landlord upon demand.
23. SUBLETTING: That Tenant shall not assign or sublet Premises or any
part thereof without the prior written consent of Landlord. Notwithstanding
any assignment or subletting, Tenant and any guarantor of Tenant's obligation
under this Lease shall at all times remain fully responsible and liable for the
payment of the rent herein specified and for compliance with all of Tenant's
other obligations under this Lease. (See, also, Exhibit "D" [7])
24. ATTORNEY FEES: That Tenant shall pay all costs of collection,
including reasonable attorney fees, if all or any part of the rent reserved
herein is collected after maturity with the aid of any attorney; and also that
Tenant shall pay reasonable attorney fees in the event it becomes necessary for
Landlord to employ an attorney to force Tenant to comply with any of the
covenants, obligations, or conditions imposed by this Lease.
25. RULES OF BUILDING: The Tenant shall comply, and cause Tenant's
agents, employees, invitees and visitors to comply fully with all requirements
of the rules of Building which may be made by Landlord, and any amendments or
modifications thereto. The Rules and Regulations of Building are attached
hereto as Exhibit C and made part of this Lease.
26. ENTRY FOR REPAIRS, ETC.: The Landlord, its officers, agents or
representatives shall have the right to enter into and upon Premises at all
reasonable times to inspect same or make such repairs or alterations as
Landlord may deem necessary or desirable. Tenant shall permit Landlord at any
time to inspect, erect, use and maintain, pipes, ducts, conduits and similar
devices in and through Premises, and to make any necessary repairs or
alterations. Landlord shall be allowed to take all material into and upon
Premises that may be required therefor without the same constituting an
eviction of tenant in whole or in part and the rent reserved shall in no wise
abate while said repairs and maintenance are being made, by reason of loss or
interruption of business of tenant, or otherwise. [See Paragraph 7). on
Exhibit D]
27. SURRENDER OF PREMISES: That, upon any termination of this Lease, by
expiration, lapse of time or otherwise:
(a) Tenant shall immediately vacate Premises and surrender Premises to Landlord
in good order, condition and repair, reasonable wear and tear and casualty
damage to be repaired by Landlord pursuant to paragraph 37 hereof excepted.
(b) Tenant shall surrender all keys of Premises to Landlord.
(c) Tenant grants to Landlord full authority and license to enter Premises and
take possession thereof.
(d) All installations, decorations, additions, partitions, hardware, light
fixtures, non-trade fixtures and improvements, temporary or permanent, except
movable furniture and equipment belonging to Tenant, in or upon Premises,
whether placed there by Tenant or Landlord, shall be Landlord's property and
shall remain upon Premises, all without compensation, allowance or credit to
Tenant.
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ARTICLE IV.
Landlord and Tenant further agree as follows:
28. RIGHTS RESERVED TO LANDLORD: Landlord shall have the following rights
exercisable without notice and without liability to Tenant for damage or injury
to property, person or business (all claims for damage therefor being hereby
released by Tenant), and without effecting an eviction or disturbance of
Tenant's use of possession or giving rise to any claim for setoffs, or
abatement of rent:
(a) To name the building and change the name or street address of the building.
[See Paragraph 8). on Exhibit D.]
(b) To install and maintain signs on the exterior and interior of the building.
(c) To designate all sources furnishing sign painting and lettering, ice,
foods, towels, vending machines, or toilet supplies used or consumed on
Premises, and Tenant shall not place any vending or dispensing machines of any
kind in or about Premises without the prior written consent of Landlord.
(d) To retain at all times, and to use in appropriate instances, keys to all
doors within and into Premises, and Tenant shall not replace any locks without
the prior written consent of Landlord.
(e) To decorate, remodel, repair, alter or otherwise prepare Premises for
re-occupancy during the last six months of the term hereof, if during or prior
to such time tenant vacates the Premise, or at any time after Tenant abandons
Premises.
(f) To enter Premises at reasonable hours to make inspections, or during the
last six (6) months of the Lease term, to exhibit Premises to prospective
tenants, purchasers or others, or for other reasonable purposes.
(g) To have access to all mail chutes according to the rules of the United
States Post Office.
(h) To require all persons entering or leaving the Building, during such hours
as Landlord may from time to time reasonably determine, to identify themselves
to a watchman by registration or otherwise and to establish their right to
enter or leave, and to exclude or expel any peddler, solicitor or beggar at any
time from Premise or Building.
(i) To approve the weight, size and location of safes, computers and other
heavy articles in and about Premises and Building and to require all such items
and other office furniture and equipment to be moved in and out of Building and
Premises only at such times and in such manner as Landlord shall direct and in
all events at Tenant's sole risk and responsibility.
(j) To decorate and to make at any time or times, at its own expense, repairs,
alterations, additions and improvements, structural or otherwise, in and to
premises, Building or part thereof as Landlord may deem necessary or desirable
and to perform any acts related to the safety, protection or preservation
thereof, and during such operations to take into and through Premises or any
part of Building all material and equipment required; and to close or
temporarily suspend operation of entrances, doors, corridors, elevators or
other facilities, provided that Landlord shall cause only such inconvenience or
annoyance to Tenant as is reasonably necessary in the circumstances.
(k) To do or permit to be done any work in or about Premises or Building or
any adjacent or nearby building, land, street or alley.
(l) To grant to anyone the exclusive right to conduct any business or render
any service in Building.
(m) To close Building at 6:00 p.m. or at such other reasonable time as Landlord
may determine, subject, however, to Tenant's right to admittance under such
regulations as shall be prescribed from time to time by Landlord.
(n) To designate and approve, prior to installation, all types of window
shades, blinds, drapes, awnings, window ventilators and other similar
equipment, and to control all internal lighting that may be visible from the
exterior of Building.
(o) To have and retain a paramount title to Premises free and clear of any act
of Tenant.
29. DEFAULT: The following events shall be deemed to be events of default
by Tenant under this Lease:
(a) Tenant shall fail to pay any installment of rent hereby reserved an such
failure shall continue for a period of ten business days.
(b) Tenant shall fail to comply with any term, provision or covenant of this
Lease, other than the payment of rent, and shall not cure such failure within
thirty (30) days after written notice thereof to Tenant.
(c) Tenant or any guarantor of Tenant's obligations shall make an assignment
for the benefit of creditors.
(d) Tenant or any guarantor of Tenant's obligations shall file a petition under
any section or chapter of the National Bankruptcy Act, as amended, or under any
similar law or statute of the United States or any state thereof: or Tenant or
any guarantor of Tenant's obligations shall be adjudged bankrupt or insolvent
in proceedings filed against Tenant or any guarantor of Tenant's obligations
thereunder and such adjudication shall not be vacated or set aside or stayed
within the time permitted by law.
(e) A receiver or trustee shall be appointed for all or substantially all of
the assets of Tenant or any guarantor of Tenant's obligations and such
receivership shall not be terminated or stayed within the time permitted by
law.
Upon the occurrence of any of such events of default, Landlord shall have the
option to pursue any one or more of the following remedies without any notice
or demand whatsoever:
(1) Terminate this Lease, in which even Tenant shall immediately surrender the
Premises to Landlord, and if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent peacefully enter upon and take possession and expel or remove Tenant and
any other person who may be occupying Premises or any part thereof, by force if
necessary, without being liable for prosecution or amount of all loss and
damage which Landlord may suffer by reason of such termination, whether through
liability to relet Premises on satisfactory terms or otherwise.
(2) Peacefully enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying Premises or any part
thereof, without terminating this Lease, make such alterations and repairs as
may be necessary in order to relet the Premises, and relet the Premises or any
part thereof for such term and at such rental and upon such other terms and
conditions as Landlord in its sole discretion may deem advisable; upon each
such reletting all rentals received by Landlord from such reletting shall be
applied; first, to the payment of any indebtedness other than rent hereunder
due from Tenant to Landlord; second, to the payment of any costs and expenses
of such reletting including brokerage fees and attorney's fees and costs of
such alterations and repairs; third, to the payment of any rent due and unpaid
hereunder: and the residue, if any, shall be held by Landlord and applied in
payment of future rent as the same may become due and payable hereunder. If
such rentals received from such reletting during any months shall be less than
the rent to be paid during that month by Tenant hereunder, Tenant shall pay any
such deficiency to Landlord upon demand. No such re-entry or taking possession
by Landlord shall be construed as an election on its part to terminate this
lease unless a written notice of such intention shall be given to Tenant; and
any attempt by Landlord to mitigate its claim for damages against Tenant by
reletting the Premises shall not be construed as a waiver of its right to
damages under this section.
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(3) Peacefully enter upon Premises without being liable for prosecution or any
claim for damages therefor, and do whatever Tenant is obligated to do under the
terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any
reasonable expenses Landlord may incur in thus effecting compliance with
Tenant's obligations under this Lease, and Tenant further agrees that Landlord
shall not be liable for any damages resulting to the Tenant from such action,
whether caused by gross negligence of Landlord, or its agents, or otherwise.
(4) Upon any event of default by the Tenant all unpaid rent payments due under
the terms of the Lease are due and payable immediately upon demand by the
Landlord.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided, or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver
of any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and convenants herein
contained. No waiver by Landlord of any violation or breach of any of the
terms, provisions and convenants contained in this Lease shall be deemed or
construed to constitute a waiver of any other or succeeding violation or breach
of any of the terms, provisions, and covenants herein contained. Forbearance
by Landlord to enforce one or more of the remedies herein provided upon an
event of default shall not be deemed or construed to constitute a waiver of
such default.
Tenant does hereby grant Landlord a security interest in and lien upon all
furniture, fixtures, chattels and other items of personal property located in
or on Premises to secure the performance of all convenants contained herein.
This lien shall be in addition to all other liens provided by law excluding
personal property of individuals employed by Tenant.
30. ESTOPPEL CERTIFICATE BY TENANT: From time to time, upon not less than
ten (10) days prior request by Landlord, Tenant shall execute and deliver to
Landlord a statement in writing certifying (a) that Tenant is in possession of
leased Premises as defined in paragraph 3, (b) that this Lease is unmodified
and in full force and effect (or if there have been modifications that the same
is in full force and effect as modified and certifying the modifications), (c)
the commencement and ending dates of the lease and the dates to which the rent
and other charges have been paid, and (d) that so far as the person making the
certificate knows, Landlord has completed preparation of the space and is not
in default under any provision of this Lease.
31. SUBORDINATION OF LEASE: The rights of Tenant under this Lease shall
be and are hereby made subject and subordinate at all times to the lien of any
mortgage or mortgages (or trust indentures) now or hereafter in force against
the land, Building, the fee or the underlying leasehold estate, if any, and to
all renewals, modifications, consolidations, replacements and extensions
thereof, and to all advances made or hereafter to be made upon the security
thereof, and Tenant shall execute such further instruments subordinating this
Lease to such liens as shall be requested by Landlord. Tenant agrees in the
event any proceedings are brought for the foreclosure of any such mortgage to
attorn to the purchaser upon any such foreclosure sale and to recognize such
purchaser as landlord under this Lease. Tenant agrees to execute and deliver
at any time and from time to time upon the request of Landlord any instrument
which may be necessary or appropriate in any such event to evidence such
attornment. Tenant further waives the provisions of any statute or law now or
hereafter in effect which may give or purport to give Tenant any right to
terminate or otherwise adversely affect this Lease in the event any such
foreclosure procceding is brought. [See Paragraph 9). on Exhibit D]
32. REAL ESTATE BROKER: Tenant represents that Tenant has dealt directly
with (and only with) The Swearingen Company, c/o Daniel T. Patterson as broker
in connection with this lease, and that insofar as Tenant knows, no other
broker negotiated or participated in the negotiations of this lease or
submitted or showed Premises or is entitled to any commission in connection
therewith.
33. RENEWAL OR AMENDMENT: No renewal or amendment of this Lease shall be
binding on either party unless it is in writing and signed by Landlord and
Tenant.
34. HOLDING OVER: Should Tenant or any of its successors in interest hold
over the demised Premises, or any part thereof, after the expiration of the
term of this Lease, such holding over shall constitute and be construed as
tenancy from month to month only. Tenant will pay as liquidated damages each
month during the first six (6) months of the hold- over period, an amount equal
to 125% the rent paid or due to be paid during the last month of the term of
this lease and 150% thereafter. No receipt of money by Landlord from Tenant
after termination of this Lease shall reinstate or extend this Lease or affect
any prior notice given by Landlord to Tenant. Any extension of this Lease
shall be in writing signed by Landlord and Tenant.
35. WAIVER OF LIABILITY: As part of the consideration for this Lease,
Tenant hereby releases Landlord from al liability for damage to any property of
Tenant located in or upon Building which results from the gross negligence of
Landlord, to the extent any such loss or damage is covered by insurance
maintained by Tenant. Also, as part of the consideration for this Lease,
Landlord hereby releases Tenant from all liability for damage to any property
of Landlord located in or upon Building which results from the negligence of
Tenant, to the extent any such loss or damage is covered by insurance
maintained by Landlord. Tenant and Landlord further convenant that any
insurance maintained by either party shall contain an appropriate provision
whereby the insurance company or companies consent to the foregoing mutual
release of liability and so waive insurance subrogation rights to the extent of
the agreement contained in this paragraph.
36. COVENANTS TO RUN TO HEIRS, ETC.: All covenants, conditions,
agreements, and undertakings in this Lease contained shall extend and inure to
the benefit of Landlord and its successors and assigns, and, with the written
consent of Landlord, to the heirs, executors, administrators, successors and
assigns of Tenant the same as if they were in every case named and expressed;
and except as herein otherwise provided, all said covenants, conditions and
agreements shall be binding upon the successors and assigns, heirs, executors,
and administrators of the respective parties.
37. DAMAGE BY FIRE OR OTHER CASUALTY: If any part of Premises or a
material portion of building in which Premises are located which affects
Tenant's occupancy is rendered untenable by fire or other casualty, Landlord
may elect (a) to terminate this Lease as of the date of the fire or casualty by
notice to tenant within sixty (60) days after the date, or (b) to repair,
restore or rehabilitate Building or Premises at Landlord's expense, in which
event this Lease shall not terminate but rent shall be abated on a per diem
basis while Premises are untenable, prorated for that protion of Tenant's
premises that are untenable. If such damage is due to act or omission of
Tenant, Landlord shall have such rights as are set forth herein at tenant's
cost and expense. If Landlord elect so to repair, restore, or rehabilitate
Building or Premises, said work shall be undertaken and prosecuted with all due
diligence and speed. In the event of termination of the Lease pursuant to this
paragraph, rent shall be apportioned on a per diem basis and paid to the date
of the fire or casualty.
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<PAGE> 6
38. CONDEMNATION: If the land or Building, or any part thereof, or any
interest therein, be taken by virtue of eminent domain or for any public or
quasi-public use or purpose, Landlord shall have the right to terminate this
Lease at the date of such taking or within six months thereafter by giving the
Tenant thirty (30) days' prior notice of the date of such termination. Any
interest which Tenant may have or claim to have in any award resulting from any
condemnation proceedings shall be limited to the unamortized value of any
permanent improvements to the structure of Building paid for by Tenant and any
claim for furniture or fixtures of any nature whatsoever shall be excluded.
39. SUBSTITUTION OF SPACE: DELETED IN ORIGINAL.
40. NOTICES: Any notice required or desired to be given in connection
with this Lease shall be in writing sent by certified or registered mail,
postage prepaid. Such notice to Landlord shall be sent to T. F. Stone
Companies, Inc., as agent at the current address in Dallas, Texas, or any other
person designated in writing by Landlord to Tenant. Such notices sent to
Tenant by Landlord shall be sent to Tenant at its mailing address in Building,
or any other person designated in writing by Tenant to Landlord.
41. OTHER ARRANGEMENTS: This Lease contains the entire agreement of the
parties hereto with respect to the matters contained herein and no other
representations, promises or agreements, oral or otherwise, have been made
between the parties. Submission of this Lease for examination does not
constitute a reservation of or option for Premises. Lease becomes effective
only upon execution and delivery by both Landlord and Tenant and approval by
Landlord's mortgagee where such approval is required. All exhibits and riders
attached to this lease and initialed by Landlord and Tenant are incorporated
into and made a part of this Lease.
42. TIME: Time is of the essence of this Lease.
43. CAPTIONS: The captions used in this Lease are for convenience only
and do not in any way limit or amplify the terms and provisions hereof.
44. The following Exhibits and Addenda which are attached hereto are
incorporated herein by reference and are a part of this Lease:
Exhibit "A" - Floor Plan of Premises
Exhibit "B" - Building Standards
Exhibit "C" - Building Rules and Regulations
Exhibit "D" - Lease Addendum
Exhibit "E" - Operating Expense Definition
Exhibit "F" - Inserts to Lease Agreement
IN TESTIMONY WHEREOF, the above named Landlord and the above named Tenant have
executed this instrument on the day and year set forth in paragraph 1 of this
Lease.
STONE TOWER, INC.
------------------------------------
LANDLORD
By /s/ Tommy F. Stone
------------------------------------
Tommy F. Stone, President
TRUCARE HEALTH SYSTEMS, INC.
------------------------------------
TENANT
By /s/ William J. Kellagher
------------------------------------
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<PAGE> 7
LANDLORD'S ACKNOWLEDGEMENT
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, a Notary Public in and for said
Dallas County, Texas, on this day personably appeared Tommy F. Stone, known to
me to be the person and officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that the same was the act of said Stone
Tower, Inc. and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the capacity therein
stated, with full authority to do so.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 11 day of June, 1992.
/s/ Barbara L. Knight
------------------------------------------
Notary Public in and for Dallas County,
Texas
My Commission expires: 11-7-95
------------------
INDIVIDUAL TENANT'S ACKNOWLEDGEMENT
THE STATE OF _________________
COUNTY OF ________________
BEFORE ME, the undersigned authority, a Notary Public in and for said
County, on this day personally appeared ___________________________________,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OFFICE this ________ day of _____________________,
19____.
------------------------------------------
Notary Public in and for
My Commission expires:
--------------------
CORPORATE TENANT'S ACKNOWLEDGEMENT
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, a Notary Public in and for said
County, on this day personally appeared William J. Kellagher, known to me to be
the person and officer whose name is subscribed to the foregoing instrument,
and acknowledged to me that the same was the act of the said TruCare Health
Systems, a corporation, and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated, with full authority to do so.
GIVEN UNDER MY HAND AND SEAL OFFICE this 11th day of June, 1992.
/s/ Shirley Cole
------------------------------------------
Notary Public in and for
My Commission expires: 1-23-96
-------------------
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<PAGE> 8
EXHIBIT "A"
This is a floor plan of Stone Tower showing 6,224 net usable square feet on
2nd Floor, Suite 200, to be leased by TruCare Health Systems, Inc.
<PAGE> 9
EXHIBIT "B"
This is a floor plan of the 2nd floor of Stone Tower.
<PAGE> 10
EXHIBIT "C"
RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and similar areas
shall not be obstructed by tenants or used for any purpose other than ingress
and egress to and from the leased premises and for going from one to another
part of the building.
2. Plumbing fixtures and appliances shall be used only for purposes for
which constructed, and no sweepings, rubbish, rags or other unsuitable material
shall be thrown or placed therein. Damage resulting to any such fixture or
appliances from misuse by a tenant shall be paid by him, and Landlord shall not
in any case be responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or other part of the building, except of such color,
size and style and in such places, as shall be first approved in writing by
Landlord. No nails, hooks or screws shall be driven or inserted in any part of
the building, except by the building maintenance personnel, nor shall any part
be defaced by tenants.
4. Directories will be placed by Landlord, at its own expense, in
conspicuous places in the building. No other directories shall be permitted,
unless previously consented to by Landlord in writing.
5. Tenants shall not do, or permit anything to be done in or about the
building, or bring or keep anything therein that will in any way increase the
rate of fire or other insurance on the building, or on property kept therein,
or obstruct or interfere with the rights of, or otherwise injure or annoy,
other tenants, or do anything in conflict with the valid pertinent laws, rules
or regulations of any government authority.
6. Landlord shall have the power to prescribe the weight and positions of
iron safes or other heavy equipment, which shall in all cases, to distribute
weight, stand on plank strips at least two inches thick. All damage done to
the building by taking in or putting out any property of a tenant, or done by a
tenant's property while in the building, shall be repaired at the expense of
such tenant.
7. A tenant shall notify the building manager when safes or other heavy
equipment are to be taken in or out of the building, and the moving shall be
done under the supervision of the building manager, after written permit from
the Landlord. Persons employed to move such property shall be acceptable to
Landlord.
8. Corridor doors, when not in use, shall be kept closed at all times.
9. No furniture, packages, or bulky material of any kind will be received
in the building or carried up or down stairs or in the elevators, except in the
manner and at the times specified by Landlord.
10. Should a tenant require telegraphic, telephonic, annunciator or other
communication service, Landlord will direct the electricians where and how
wires are to be introduced and placed, and none shall be introduced or placed
except as Landlord shall direct. Electric heaters shall not be used without
Landlord's prior written permission.
11. Landlord shall, at reasonable hours, have the right to enter premises
leased to tenants, to examine same or to make such alterations and repairs as
may be deemed necessary, or to exhibit same to prospective tenants.
12. Tenant shall not make or permit any improper noises in the building,
or otherwise interfere in any way with other tenants, or persons having
business with them.
13. Nothing shall be swept or thrown into or stored in the corridors,
halls, elevator shafts or stairways. No birds or animals shall be brought into
or kept in or about the building.
14. No machinery of any kind shall be operated on leased premises without
the prior written consent of Landlord, nor shall a tenant use or keep in the
building any inflammable or explosive fluid or substance, or any illuminating
material, except candles in case of electric failure.
15. Tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval and control before performance of any
contractual service. This provision shall apply to all work performed in
building, including installations of telephones, telegraph equipment,
electrical devices and attachments, and installations of any nature affecting
floors, walls, woodwork, trim, windows, ceilings, equipment or any other
physical portion of building.
16. Movement in or out of building of furniture or office equipment, or
dispatch or receipt by Tenant of any merchandise or materials which requires
use of elevators or stairways, or movement through building entrances or lobby
shall be restricted to hours designated by Landlord. All such movement shall
be under supervision of Landlord and in the manner agreed between Tenant and
Landlord by prearrangement before performance. Such prearrangement initiated
by Tenant will include determination by Landlord and shall be subject to his
decision and control of the time, method, and routing of movement, limitations
imposed by safety or other concerns which may prohibit any article, equipment
or any other item from being brought into the building. Tenant is to assume
all risk as to damage to articles moved and injury to persons or public engaged
or not engaged in such movement, including equipment, property and personnel of
Landlord. If damaged or injured as a result of acts in connection with
carrying out this service for Tenant from time of entering property to
completion of work; and Landlord shall not be liable for acts of any person
engaged in, or any damage or loss to any of said property or persons resulting
from any act in connection with such service performed for Tenant.
17. No draperies, shutters, or other window covering shall be installed on
exterior windows or walls or windows and doors facing public corridors without
Landlord's prior written approval. Landlord shall have the right to require
installation and continued use of uniform window covering for such windows.
18. No portion of Tenant's area or any other part of building shall at any
time be used or occupied as sleeping or lodging quarters.
19. Landlord will not be responsible for lost or stolen property,
equipment, money or jewelry from Tenant's area or public rooms, regardless of
whether such loss occurs when area is locked against entry or not.
20. Employees of Landlord shall not receive or carry messages for or to
any Tenant or other person nor contract with or render free or paid services to
any Tenant or Tenant's agent, employees, or invitees.
21. Landlord reserves the right to rescind any of these rules and make
sure other further policies, rules and regulations as in its judgment shall
from time be needful for the safety, protection, care and cleanliness of the
building, the operation thereof, and preservation of good order therein, and
the protection and comfort of its tenants, their agents, employees, and
invitees, which rules when made and notice thereof given to a tenant shall be
binding upon him in like manner as if originally herein prescribed.
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<PAGE> 11
EXHIBIT "D"
A D D E N D U M
BY THIS ADDENDUM, the Lease Agreement executed June 11, 1992, by and between
Stone Tower, Inc., as Landlord, and Trucare Health Systems, Inc., as Tenant, is
hereby amended and supplemented in the following respects:
1) OPERATING EXPENSES: "Operating Expenses" (except as excluded or limited by
other terms of this Lease) means all reasonable costs, charges, and
expenses incurred by Landlord in connection with owning, operating,
maintaining, repairing, insuring and managing the Building, and the
Building's portion of the common areas and service areas, computed on an
accrual basis, consistently applied, and including, without limitation,
costs, charges and expenses incurred with respect to the items enumerated
in Paragraph A on Exhibit "E" to this Lease. Operating Expenses do not
include those items enumerated as "Operating Expense Exclusions" in
Paragraph B on Exhibit "E" to this Lease.
"Rentable Square Feet of the Building" shall mean two hundred fifty
thousand six hundred and six (250,606) square feet for the purposes hereof.
"Base Year" shall mean the fiscal year ending twelve months following the
Commencement Date of the Lease. The term "Lease Year" shall mean the
calendar year.
"Variable Costs" shall mean the cost of waste removal, janitorial services,
management fees and utilities. Utilities shall be limited to the costs
associated with providing additional electrical service to interior light
fixtures and wall outlets only.
"Gross Up Adjustment" shall mean with respect to any Lease Year during the
term of this Lease in which the Building is not occupied to the extent of
ninety-five percent (95%) of the rentable area thereof, the Operating
Expenses for such period shall, for purposes hereof, be adjusted to
allocate the actual cost of the Variable Costs only by multiplying the
Variable Cost by a fraction, the numerator of which is ninety-five and the
denominator of which is the percentage of the Building's total Rentable
Square Feet occupied during such period. For example, if the occupancy is
80% of Rentable Square Feet of the Building, then the Variable Costs would
be "gross up" by 95/80 to determine the Operating Expenses for the purposes
hereof.
"Excess Operating Expenses" is computed as the difference between i) the
Operating Expenses for the Lease Year adjusted by the Gross Up Adjustment
minus ii) the Operating Expenses for the Building for the Base Year
adjusted by the Gross Up Adjustment provided, however, the calculation of
Tenant's pro rata share of Excess Operating Expenses shall be subject to
the provisions of Paragraph 6.
The Excess Operating Expenses as computed herein shall be limited to a
maximum of six (6%) per cent increases per annum over the prior year for
the purposes of the calculation of additional Base Rental in the Lease.
2) SPACE PLANNING: Landlord shall pay $.60 per rentable square foot of the
Premises to the Architect selected by Tenant on terms consistent with the
Landlord's contract with the Architect for the costs of space planning and
construction documents. Such documents shall be in such detail and format
as to allow for the required permitting and construction of the Premises.
Landlord shall pay the costs of any Mechanical Electrical Plans, if
required.
3) IMPROVEMENT ALLOWANCE: For modifications to the existing second (2nd)
floor, Landlord shall provide an allowance of up to twelve ($12.00) dollars
per rentable square foot below a "Building Standard" finished ceiling
("Improvement Allowance") to construct the Tenant Improvements to the
Premises in accordance with the plans approved by Tenant and Landlord.
"Building Standard" shall mean the following: LIGHTING: 1 2 x 4 parabolic
fixture per 90 usable square feet; FIRE SPRINKLER: 1 recessed head per 225
usable square feet; HVAC: slot diffusers provided along building perimeter
and flush mounted supply grilles mounted 1 per 300 usable square feet;
CEILING: 2 x 2 acoustical lay in tile. Premises will be delivered to
Trucare prior to finish construction in a "shell" condition. Shortages,
- 1 -
<PAGE> 12
if any, in "Building Standard" quantities of "above ceiling" items will be
provided by Landlord, at its sole cost, and specifically excluded from the
Improvement Allowance. Such allowance shall include the costs of all
taxes, fees, permits and governmental assessments related to the
construction of the Premises. Relocation of any existing "Building
Standard" above ceiling items will be allocated 50% to the Tenant's
Improvement Allowance. Any Telecommunication costs shall be a part of the
Improvement Allowance. Further, it is understood that up to $1.00 of the
Improvement Allowance may be returned to the Tenant as a rental abatement,
if available after deducting all costs herein provided from the Improvement
Allowance. Landlord agrees that if the Tenant's total Improvement costs
exceed the Improvement Allowance, Landlord will, if requested by Tenant,
amortize (using an imputed interest factor of ten and 1/2 per cent (10.5%))
the excess cost over the term of the Lease up to a maximum total cost of
fifteen ($15.00) dollars per square foot.
Landlord will provide, at its sole cost, construction coordination
services. Tenant retains the right to require there to be a competitive
bid of the Improvements to a minimum of five (5) mutually approved
contractors. Landlord shall select the contractor subject to the Tenant's
consent, such consent not to be unreasonably withheld or delayed.
4) MOVING ALLOWANCE: Tenant shall be provided an abatement of Tenant's first
and thirteenth months' rent to assist Tenant in moving into the Premises.
5) PARKING: Landlord shall provide Tenant the greater of: a) forty (40)
parking spaces (Based on a minimum Premises of 7,600 rentable square feet)
or b) a ratio of 1 space per 280 square feet of rentable area. Such
parking spaces shall be on an unreserved basis in common with other tenants
in the covered parking garage in the building and shall be at no cost for
the Initial Term. Landlord will allow Tenant to use additional spaces,
subject to availability, on a month to month basis at no cost for the
Initial Term. Any additional parking from expansion will be provided on a
ratio of 1 space per 280 square feet of rentable area.
6) RENEWAL OPTION: Tenant shall have the option to renew with six (6) months
written notification to Landlord this Lease for one term of five (5) years
at the lower of: a) ninety five (95%) of the then prevailing market rate
for space of similar size, condition and quality in buildings in the
competing market of similar age, size, quality and condition to the
Building or b) 130% of the current Base Rental. Upon exercising its
renewal option, the Base Year (as defined above) shall be modified to be
the calendar year of the renewal. A refurbishment allowance of five
dollars ($5.00) per rentable square feet will be provided at the end of the
lease term should Tenant elect to renew its lease under this option.
7) SUBLEASE: Notwithstanding the anything contained herein, Landlord's
consent shall not be required if the Tenant, after fifteen (15) days
written notice to the Landlord, subleases to an Affiliated Party.
"Affiliated Party" shall mean any entity that is directly controlled by or
majority ownership held by Trucare Health Systems, Inc. or a company having
a majority ownership of Tenant. Further, Landlord's consent for any
sublease of the premises by Tenant to a company of comparable use of the
premises shall not be unreasonably withheld or delayed.
9) ONGOING RIGHT OF FIRST REFUSAL: Tenant shall have a continuing Right of
First Refusal on all space contiguous to the Premises not occupied by
Tenant. The lease term for all expansion space shall be coterminous with
term of this Lease and shall be no less than one (1) year in length.
Construction allowance for any expansion space shall be equal to
$2.00/r.s.f. per year remaining on the lease term. Landlord shall, in each
instance, notify Tenant in writing that Landlord has received a written
letter of intent to lease such "first refusal space" (the "First Refusal
Space") and shall provide Tenant with the rental terms therefor. Tenant
shall within ten (10) business days after the receipt of such notice,
notify Landlord, in writing, as to whether Tenant elects to exercise such
right of first refusal. If the Tenant exercises its right hereunder or to
expand during the first eighteen (18) months of the Lease term, then the
terms of this Lease including the rate, terms and conditions shall govern
the First Refusal Space except as expressly provided in this paragraph. If
the Tenant elects to exercise this right after the initial eighteen (18)
months of the term of this Lease, the terms for the First Refusal Space
shall be equal to the rate offered by the letter of intent. If Tenant
elects not to exercise such right of first refusal, and if (a) Landlord
fails to lease the First Refusal Space pursuant to such offer or (b)
Landlord does lease the First Refusal Space pursuant to such offer but
First Refusal Space again becomes available for lease prior to the
expiration of this Lease, then Tenant's right of first refusal to such
First Refusal Space shall be deemed revived.
- 2 -
<PAGE> 13
10) CANCELLATION: Provided Tenant is not then in monetary and/or material
default hereunder and is current in the payment of all Rental and other
sums due by Tenant under this Lease, Tenant shall have the right to a
cancellation of the Lease ("Cancellation Space"), any time after the forty
eighth (48th) month of the Lease term by delivering to Landlord a) a one
hundred and eighty (180) days prior written notice of cancellation and b) a
payment, made payable to Landlord, equal to seven and one half (7 1/2)
months of the Base Rental due under the original Lease.
11) LANDLORD'S ADDITIONAL REPRESENTATIONS, COVENANTS AND WARRANTIES: In
addition to any other representations, warranties and covenants of Landlord
contained in this Lease, Landlord represents, warrants (as of date hereof)
and covenants to Tenant as follows:
(a) Landlord is the owner of the Building and has the right and power
to lease the Premises to Tenant, and the execution of this Lease by
Landlord will not result in or create a default under any loan, lease or,
to the best of Landlord's knowledge, any other agreement to which Landlord
is a party;
(b) To the best of Landlord's knowledge, the Building is in compliance
with all governmental laws, rules, regulations and building codes,
including the American Disability Act (ADA), and Landlord shall continue to
own, operate and maintain the Building in compliance with all governmental
laws, rules, regulations and building codes;
(c) Landlord shall keep and maintain in good order, condition and
repair the structural portions of the Building, all common areas and all
building equipment and machinery used for the Building such as heating and
air conditioning equipment;
(d) Landlord shall keep and maintain the Premises in a state of good
repair and tenantable condition at Landlord's expense, save and except
normal wear and tear and damage to the Premises caused by Tenant or its
agents, servants, employees, guests or invitees;
(e) The qualitative standards applicable under this Lease shall be
those prevailing for buildings of similar age, size, quality and condition
to the Building in the competing market area; and
(f) Landlord shall keep and maintain the level of security services in
the Building, at a level consistent with the current operations throughout
the Tenant's occupancy.
AGREED TO AND ACCEPTED THIS 11 day of June, 1992.
STONE TOWER, INC. TRUCARE HEALTH SYSTEMS, INC.
"Landlord" "Tenant"
By: /s/ Tommy F. Stone By: /s/ William J. Kellagher
---------------------------------- -----------------------------
Title: President Title: CEO
------------------------------- --------------------------
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<PAGE> 14
EXHIBIT "E"
ATTACHED TO AND MADE A PART
OF
LEASE AGREEMENT
OPERATING EXPENSES
A. OPERATING EXPENSES: The following are, but not limited to, costs included
in the computation of Operating Costs:
(1) all taxes, assessments, and other governmental charges, whether
federal, state, county or municipal, and whether they be by taxing districts or
authorities presently taxing the Premises and Building or by others,
subsequently created or otherwise, and any other taxes and assessments levied
or assessed against the Land, the Building and other associated improvements
situated on the Land, and the Building Facilities, including interest on
installment payments, and including all costs and fees (including attorney's
fees) incurred by Landlord in contesting or negotiating with taxing
authorities;
(2) all reasonable costs and expenses of operating, maintaining and
repairing (including replacing components of) Building Facilities, including
elevators, escalators, heat, ventilation, and air conditioning systems, and all
other mechanical or electrical systems serving the Building;
(3) all reasonable costs and expenses incurred in cleaning the Building;
(4) costs incurred by Landlord for (i) any and all forms of fuel or energy
utilized in connection with the operation, maintenance, and use of the
Building, Common Areas and Service Areas, (ii) sales, use, excise and other
taxes assessed by Governmental authorities on energy sources, and (iii) other
reasonable costs of providing energy to the Building, Common Areas and Service
Areas and costs of all other utilities for the Building, such as the cost of
water, gas, and sewer rents or charges, for the Building;
(5) all supplies and materials reasonably used in the operation and
maintenance of the Building;
(6) costs of all insurance relating to the Building, including the cost of
casualty and liability insurance applicable to the Building and Landlord's
personal property used in connection therewith;
(7) amortization of costs of or rental expenses for any machinery,
equipment or other improvements installed by Landlord to conform to any law,
ordinance, rule, regulation, or order of any governmental authority having
jurisdiction over the Building which was enacted or promulgated after
construction on the Building began, or for the purpose and in reasonable
anticipation of reducing energy costs in the Building or other Operating
Expenses;
(8) expenses and fees (including attorney's fees) incurred in contesting
the validity or applicability of any governmental enactments that may affect
Operating Expenses;
(9) general maintenance costs and expenses reasonably incurred in
connection with the Building (including, but not limited to, security,
maintenance of all exterior and interior landscaping, garbage and other waste
removal, non-tenant alterations and decorations, heating and air conditioning
repairs and all labor utilized and supplies consumed with respect to any
general Building maintenance);
(10) janitorial service and window cleaning for the Building, including
the Common Areas (including materials, supplies, Building standard light bulb,
equipment and tools therefor and rental and appreciation costs related to the
foregoing), or contracts with third parties to provide the same;
(11) the cost of providing security to the Building and Parking Garage;
(12) reasonable management costs of the Building (including, but not
limited to, any management fee payable by Landlord with respect to the
Building, audit and accounting expenses and legal fees), the Landlord's
overhead expenses directly attributable to Building Management; and
(13) wages, salaries, fees, pension benefits, taxes, unemployment and
disability insurance, worker's compensation insurance, social security benefits
and any other expenses reasonably incurred with respect to all personnel
engaged in the operation, maintenance, leasing or security of the Building.
The term "personnel" shall include, but not be limited to, employees such as
superintendents, engineers, electricians, clerks, mechanics, helpers, security
officers, porters, cleaners, window washers, as well as contract laborers
performing services with respect to the Building.
<PAGE> 15
B. OPERATING EXPENSE EXCLUSIONS. The following are, without limitation, costs
excluded from the computation of Operating Expenses:
(1) leasing commissions, attorney's fees, costs and disbursements and
other expenses incurred in leasing, renovating or improving space for tenants
or prospective tenants of the Building;
(2) costs (including permit, license and inspection fees) incurred in
renovating or otherwise improving or decorating, painting or redecorating space
for tenants of vacant space;
(3) Landlord's costs of any services sold to tenants for which Landlord is
entitled to be reimbursed by such tenants as an additional charge or rental
over and above the Base Rental and Operating Costs payable under the lease with
the tenant or other occupant;
(4) any depreciation and amortization on the Building, except as expressly
permitted herein;
(5) interest on debt or amortization payments on any mortgages or deeds of
trust or any other debt for borrowed money;
(6) all items and services for which Tenant reimburses Landlord outside of
Operating Expenses or pays third persons or which Landlord provides selectively
to one or more tenants or occupants of the Building (other than Tenant) without
reimbursement;
(7) repairs or other work occasioned by fire, windstorm or other work paid
for through insurance or condemnation proceeds.
Exhibit "E" - 1 /s/ WJK /s/ TFS
--------------- ------- -------
Initials Initials
<PAGE> 16
EXHIBIT "F"
ATTACHED AND MADE PART OF
LEASE AGREEMENT
INSERTS TO LEASE AGREEMENT
The following provisions are inserts to, and a part of, the indicated
paragraphs in the printed form part of the Lease Agreement by and Between Stone
Tower, Inc., as Landlord, and Trucare Health Systems, Inc., as Tenant,
concerning lease space in Stone Tower. The number of the paragraph in this
Exhibit corresponds to the numbered insert to the applicable paragraph in the
printed form part of said Lease Agreement.
1. To Paragraph 6: Landlord shall provide a written notice to Tenant
notifying the Tenant of the rental delinquency and the late charges due
hereunder for the first two (2) violations during the calendar year.
2. To Paragraph 6: However, if such audit reveals that the amount of
Operating Expenses upon which Tenant's pro rata share was based and charged was
five (5%) or more greater than actual Operating Expenses as revealed by such
audit, Landlord shall pay for the cost of such audit.
3. To Paragraph 7: Irrevocable and transferable Letter of Credit ("deposit"),
to be held as security for the performance of Tenant's covenants herein
contained, designating Landlord as beneficiary of the deposit, in the face
amount of Seven thousand seven hundred fifty five and 00/100 dollars
($7,755.00), having a term of not less than one (1) year from the date of the
deposit, and containing, as the stated conditions precedent for funding of the
proceed of the deposit, that beneficiary shall effect presentation of the
deposit to the issuer, accompanied by beneficiary's sight draft and sworn
affidavit of the beneficiary stating, as applicable, (i) that Tenant has
defaulted in the performance of the terms and conditions of this Lease and
failed to cure such default within the applicable cure period therefor, if any,
or (ii) that Tenant has failed, as of thirty (30) days prior to the then stated
expiration date of the deposit, to obtain an extension of such then stated
expiration date of the deposit for an additional term of one (1) year.
4. To Paragraph 9(f): Notwithstanding the provisions of the immediately
preceding sentence, if such interruption materially or substantially effects
Tenant's use and continues for six (6) consecutive business days, then rent
shall abate in proportion to the space that is untenable. Tenant may, at
Tenant's sole option, vacate the entire premises if greater than forty (40%)
per cent of the premises is untenable. If Tenant makes such election, Landlord
shall abate 100% of the Base Rental hereunder until such time as Premises is
available for occupancy. If Tenant continues to occupy any portion of the
Premises, then Tenant shall pay the Base Rental due in proportion to the
Premises occupied. If such interruption continues for thirty (30) days,
consecutively, Tenant may relocate to other space, the cost of such relocation
and return shall be paid by Landlord. If such interruption continues for one
hundred fifty (150) days, consecutively, Tenant may, after thirty (30) days
written notice to Landlord, at Tenant's option terminate this Lease.
5. To Paragraph 13: Landlord shall give Tenant written notification of any
claim covered by Tenant's indemnification within sixty (60) days after Landlord
becomes aware of such claim, or threatened claim; provided, however, the
failure to give notice within such sixty (60) day period shall relieve Tenant
from its indemnity hereunder.
Landlord agrees to save and hold Tenant harmless from damages actually incurred
by Tenant directly attributable to Landlord's violations of the laws and
regulations of the United States, of the State of Texas, and the ordinances and
laws of the City of Dallas. Provided, this indemnity shall not limit or impair
Tenant's liability for reimbursement of its pro rata share of operating
expenses incurred by Landlord to comply with such laws, regulations and
ordinances hereafter enacted to the extent authorized hereunder.
Landlord further agrees that Landlord, at all times, will indemnify and hold
harmless Tenant from all claims, damages, liabilities and expenses which may
arise or be claimed against Tenant by any person, firm or corporations for any
injury, death or damages to the person or property of any person, firm or
corporations for which Landlord may become liable consequent upon or arising
from the management of the common areas of the Building, or consequent upon or
arising from any negligence or wilful misconduct of Landlord (its agents,
servants or employees) or consequent upon or arising from Landlord's failure to
comply with the aforesaid laws, statutes, ordinances or regulations; and that
Tenant shall not be liable to Landlord for any injury, death or damages to the
persons or property of Landlord which may be caused by the acts, neglect,
omissions, or faults of any person, firm or corporation, and that Landlord will
release, indemnify and save harmless Tenant from all such damages, liabilities,
losses, death, injuries or expenses, except where due to Tenant's negligence or
wilful misconduct. Tenant shall give Landlord written notification of any
claim covered
-1-
<PAGE> 17
by Landlord's indemnification within sixty (60) days after Tenant becomes aware
of such claim, or threatened claim; provided, however, the failure to give
notice within such sixty (60) day period shall relieve Landlord from its
indemnity hereunder.
6. To Paragraph 19: In the event Landlord causes a change in the address of
the Building, Landlord shall pay for an alteration of the Tenant's letterhead,
business cards and stationary.
7. To Paragraph 26: If such repairs result in an interruption that materially
or substantially effects Tenant's use and continues for six (6) consecutive
business days, then rent shall abate in proportion to the space that is
untenable. Tenant may, at Tenant's sole option, vacate the entire premises if
greater than forty (40%) per cent of the premises is untenable. If Tenant
makes such election, Landlord shall abate 100% of the Base Rental hereunder
until such time as Premises is available for occupancy. If Tenant continues to
occupy any portion of the Premises, then Tenant shall pay the Base Rental due
in proportion to the Premises occupied. If such interruption continues for
thirty (30) days, consecutively, Tenant may relocate to other space, the cost
of such relocation and return shall be paid by Landlord. If such interruption
continues for one hundred fifty (150) days, consecutively, Tenant may, after
thirty (30) days written notice to Landlord, at Tenant's option terminate this
Lease.
8. To Paragraph 28: With thirty (30) days prior written notice to Tenant. If
the Landlord causes a change in the address only of the Building, Landlord
shall pay for an alteration of the Tenant's letterhead, business cards and
stationary.
9. To Paragraph 31: In addition, Landlord shall provide a Non Disturbance and
Attornment Agreement with any current or future mortgage holders of the
Building.
-2-
<PAGE> 18
STONE TOWER, INC.
NOTICE TO TENANT
September 10, 1993
TO: TruCare Health Systems, Inc.
13760 Noel Road, Suite 200
Dallas, Texas 75240
Re: SUITE NO. 200 OF STONE TOWER, DALLAS, TEXAS (the "Property")
Dear Tenant:
Please be advised that effective as of September 10, 1993, Stone Tower,
Inc. ("Seller") has sold and conveyed the Property to North Dallas Tower, Ltd.
("Purchaser")[, but that T.F. Stone Companies, Inc. will manage the Property
for Purchaser on and subject to the terms of the management agreement between
them.] After this date, you should make your rental payments to the following
address:
North Dallas Tower, Ltd.
c/o T.F. Stone Companies, Inc.
13760 Noel Road, #100
Dallas, Texas 75240
Re: Stone Tower, Dallas, Texas
Purchaser hereby acknowledges receipt of your security deposit in the sum
of $0.00 from the Seller, and Purchaser does hereby specifically acknowledge to
you that Purchaser is now responsible for your security deposit. Purchaser
also acknowledges that Purchaser has been assigned your lease agreement and all
rights, interests and obligations thereunder.
Very truly yours,
STONE TOWER, INC. (Seller) NORTH DALLAS TOWER, LTD. (Purchaser)
By: /s/ Tommy F. Stone By: /s/ William M. Nabors
----------------------------- -------------------------------------
Name: Tommy F. Stone Name: William M. Nabors
Title: President Title: Vice President of Windmere
Properties, Inc., General Partner
13760 Noel Rd. / Suite 100 / Dallas, Texas 75240
214-931-9911
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State of Organization
---------------------
<S> <C>
Trucare Health Systems, Inc. Texas
Trucare Physical Therapy Services, Inc. Texas
Trucare Rehabilitation Services, Inc. Texas
</TABLE>
